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Application: Value Added Tax (VAT)

I. True or False (numbers 1 to 10)

1. For a person to be subjected to any business tax, it is necessary that he is regularly engaged in the conduct
or pursuit of an economic activity. (False, non-resident who rendered services in the Philippines,
importers, consumers not engaged in business, government and cooperatives are also subject to VAT.)
2. A non-resident foreign person performing isolated transaction in the Philippines shall be liable to VAT.
(True)
3. Non-stock and non-profit private organizations which sell exclusively to their members in the regular
conduct or pursuit of commercial or economic activity are exempt from value-added tax. (False, they are
not exempt unless otherwise provided by law.)
4. Government entities engaged in commercial or economic activity are generally exempt from value added
tax. (False)
5. A tax payer whose annual gross receipts or sales exceed P 3,000,000 shall pay VAT even if not VAT
registered. (True, this is mandatory VAT registration).
6. A taxpayer whose annual receipts or sales do not exceed P 3,000,000 but who is VAT registered shall pay
VAT. (True, this is optional VAT registration.)
7. The non-resident lessor or foreign licensor who is not VAT-registered is subject to VAT. (True, this is an
exception to “regularity principle.)
8. An individual whose gross sales or receipts do not exceed P 100,000 is exempt from VAT provided he pays
the 3% other percentage tax. (False, marginal income earners are exempt from business tax, either OPT
or VAT.)
9. On January 1, 2018, company A, a newly established business is expecting to generate a revenue for year
2018 amounting to P 3,500,000, thus mandatorily liable to VAT. (True)
10. On January 31, 2018, Company B, a non-VAT registered person issues a vatable invoice amounting to P
20,000, thus not liable to VAT. (False, a non-VAT registered person cannot issue VAT invoice, otherwise,
he is liable to VAT.)
11. In 2018, Mr. Chris gross receipts from his practice of profession is P 1,600,000 while her wife has gross
sales of P 1,200,000 derived from her trading business. Assuming that they are not VAT-registered person,
will they be subject to VAT? Why? (No, because husband and wife are separate taxpayers.)
12. In 2018, the following gross receipts/ sales were recorded by Nora.
Gross receipts from practice of profession P 850,000.00
Gross receipts from transport of goods and services 2,450,000.00
Gross sales from trading activities 675,000.00
Assuming Nora is a non-VAT registered, will she be liable to VAT? Why? (Yes, she is subject to
mandatory VAT registration because her sales or receipts exceeds P 3M.
13. Taxpayers who are qualified to optionally register may apply for VAT registration not later than how many
days before the beginning of the calendar quarter? (10 days before the beginning of the calendar quarter.)
14. If a radio or television broadcasting company who is not mandatorily required to register under the VAT
system chose to be a Vat taxpayer. What is the consequence of its choice? (irrevocable lifetime)
15. CLD made the following sales during the 12-month period:
Sales, VAT taxable transactions P 2,500,000.00
Sales, VAT zero-rated transactions 400,000.00
Sales, VAT exempt transactions 100,000.00
Total P 3,000,000.00
Based on the above facts, Is CLD liable to VAT? Why? (No, because the sales of CLD excluding VAT
exempt transactions do not exceed P 3M.)
16. Sales during the year of 2018:
Subject to: Chris Princess Nora Cora
12% VAT 900,000 1,950,000 1,200,000 2,000,000
0% VAT 1,000,000 965,000 650,000 1,000,000
Exempt 1,200,000 785,000 550,000 250,000
Who is subject to VAT? Justify. (No one is liable to VAT because sales or receipts excluding VAT do not
exceed P 3M.)

Exercises (VAT Exemptions)


II. Multiple Choices:

1. D’ Tiger Transport Corporation has land, sea and air transport operations. To improve its services, which of the
following importation is subject to VAT?
I. 20 units of air – conditioned buses
II. 12 units of life-saving, safety and rescue equipment for shipping transport operation
III. 12 airplanes
IV. 8 ships

Which of the following importation is subject to VAT?


A. I only c. I and II only
B. II only d. All of the above

• See Sec. 109 (T) of the Tax Code, it provides that sale, importation or lease of passengers or cargo
VESSEL and AIRCRAFT, including engine, spare parts and equipment thereof for domestic or
international transport operations.

2. An importer of flowers from abroad:


a. Is liable to VAT, if it registers as a VAT person
b. Is exempt from VAT, because the goods are treated as agricultural products
c. Is exempt from VAT, provided that his total importation of flowers does not exceed P 3,000,000.
d. Is liable to VAT, despite the fact that it did not register as a VAT person and his total annual sales of
flowers do not exceed P 3,000,000.

• It depends. If the flowers are not for human consumption, it is liable to VAT, however, if it is for
human consumption is exempt from VAT.
• But for the purpose of this problem, the answer is D, though in its original state, it is not for human
consumption.
• See Sec. 109 (A) of the Tax Code. It provides that agricultural and marine food products in their
original state and for human consumption are exempt from VAT.

3. Which of the following are exempt from VAT?


a. Services of banks
b. Services of money changers and pawnshops
c. Services of credit cooperatives
d. all of the above
• See Sec. 109 (V) and 109 (E) of the Tax Code. It provides that the service of bank, non-banks
performing quasi-banking functions are exempt from VAT. They are liable under OPT.
• See Sec. 109 (M) of the Tax Code. It provides that gross receipts of credit cooperatives from its
members and non-members are not taxable provided that the said cooperatives are registered
with CDA. However, its importation is subject to VAT.

4. Which of the following transactions is exempt from VAT?


a. Medical services such as dental and veterinary services rendered by professionals.
b. Legal services
c. Services arising from employee-employer relationship
d. Services rendered by domestic air transport companies

• Medical, dental and veterinary services are exempt from VAT except those rendered by doctors
(See. 109G of the Tax Code).
• Services rendered from employer-employee relationships are exempt from VAT (Sec. 109I of the
Tax Code).

5. Farmers Products (FP) is a buyer and miller of agricultural products. During the first quarter, its transactions are
recorded as follows:

Units Cost/ Kg
Purchase of Palay 500,000 kg 15
Purchase of Corn 200,000 kg 8
Milling of Palay of customers 4,000,000 kg 2
Milling corns of customers 3,000,000 kg 2

FP milled its purchase for productions of rice and corn grits with an output of 80% and sold the products to various
retailers for P 30 per kilo of palay and P 20 per kilo of corn grits.
How much is the VAT payable of FP during the quarter?
a. 1,680,000 c. 384,000
b. 1,440,000 d. 0

• Services by agricultural contract growers and milling for others of palay into rice, corn into grits,
and sugar cane into raw sugar are exempt from VAT (Sec. 109F of the Tax Code).
• Likewise, purchases of agricultural products (e.g. palay and corn) in their original state and for
human consumption are also exempt (Sec. 109A of the Tax Code).

6. Which of the following sale or importation of goods shall be exempt from VAT?

a. Fertilizers
b. seeds, seedlings, and fingerlings
c. Fish, prawn, livestock, and poultry feeds, including ingredients, whether locally or imported, used
in the manufacture of finished feeds
d. Specialty feeds

• Sale or importation of fertilizers; seeds, seedlings, and fingerlings; fish, prawn, livestock, and
poultry feeds, including ingredients, whether locally produced or imported, used in the
manufacture of finished feeds (except feeds for pets) are exempt from VAT (Sec. 109B of the Tax
Code)

7. Which of the following transactions is exempt from value added tax?

a. Sales by an art gallery of literary works, musical composition, work of art and similar creations, or
devices performed for the production of such works.
b. Medical, dental, hospital and veterinary professional services.
c. sale of cotton and cotton seeds in their original state.
d. Sales of books and any newspaper, magazine, review or bulletin, which appears at regular intervals
with fixed prices for subscription and sale which is not devoted principally to the publication of paid
advertisements.

• Letter (a) is not included in the list of VAT exemptions.


• Letter (b) pertains to the services of medical, dental, veterinary doctors, hence vatable.
• Letter (c) is vatable due to the presence of cotton. It is not in its original state, and it was already
processed.
• Letter (d) is exempt. See Sec. 109 (R) of the Tax Code that provides sales, importation, printing, or
publication of books and any newspaper, magazine, review or bulletin which appears at regular
intervals with fixed prices for subscription and sale and which is not devoted principally to the
publication of paid advertisement;

8. Statement 1: Sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer
of the agricultural products sold is the cooperative itself. If the cooperative is not the producer (e.g. trader), then
only those sales to its members shall be exempted from VAT.

Statement 2: Sale or importation of agricultural food products in their original state is exempt from VAT
irrespective of the seller and buyer thereof.
a. true, true c. false, false
b. true, false d. false, true

• See Sec. 109 (L) of the Tax Code: The agricultural cooperative must be registered with CDA;
• Produce – sold to members or non-members are exempt;
• Not produce – sold to members is exempt; to non-members is vatable.
• Importation in relation to their agricultural produce is exempt, otherwise vatable.
• See Sec. 109 as a reference for statement 2.

9. Determine the business taxes of the following: Ans: C

a. Leases of residential units with a monthly rental per unit not exceeding P 15,000 (regardless aggregate
annual gross rentals)
b. Leases of residential units with a monthly rental per unit exceeding P 15,000 but the aggregate of such
rentals of during the year do not exceed P 3,000,000
c. Lease of commercial units regardless of monthly rental per unit, but the aggregate value of such rentals
during the year exceed P 3,000,000.
A B C D
None None None VAT
VAT OPT OPT VAT
VAT OPT VAT VAT

• See Sec. 109 (P) of the Tax Code. It provides for the following rules:
o Lease of residential lot not exceeding P 15,000 is not liable to VAT and OPT, regardless of
the receipts for the taxable year.
o Lease of residential lot exceeding P 15,000 is liable to either VAT or OPT depending on the
receipts for the taxable year.
o Lease of commercial unit regardless of the value of the lease is liable either VAT or OPT
depending on the receipts for the taxable year.

10. In cases where a lessor has several residential units for lease, some are leased out for a monthly rental per
unit not exceeding P 15,000 while others are leased out for more than P 15,000 per unit, his tax liability will be:
a. The gross receipts from rentals not exceeding P 15,000 per month per unit shall be exempt from VAT
regardless of the aggregate annual gross receipts.
b. The gross receipts from rentals exceeding P 15,000 per month per unit shall be subject to VAT if the
annual gross receipts from said units including the gross receipts from units leased out for not more than
P 15,000 exceed P 3,000,000.
c. Both statements are correct.
d. Both statements are incorrect

• Still, under Sec. 109(P), a lessor who has several residential units for lease, some are leased out
for a monthly rental per unit not exceeding P 15,000 while others are leased out for more than P
15,000 per unit, his tax liability will be:
o Not exceeding P 15,000, exempt regardless of the receipts for the whole year.
o Exceeding P 15,000, either VAT or OPT depending on the receipts for the whole year.

11. A real estate dealer sold 2 adjacent residential lots in the city for a price of P 1,000,000 each, or a total price
of P 2,000,000 to a vendee who intends to erect his residential house thereon. The sale shall be classified as a:

a. 12% VAT transactions


b. 0% VAT transactions
c. VAT exempt transactions
d. None of the foregoing

• If two adjacent lots bought by the same buyer from the same seller, for purposes of VAT, the value
of each lot shall be combined.

12. A subdivision developer sold five residential house and lots, each to different vendees, for P 3,000,000 per lot,
or a total sale of P 15,000,000 for the taxable period. These sales shall be classified as:

a. 12% VAT transactions


b. 0% VAT transactions
c. VAT exempt transactions
d. None of the foregoing

• If two adjacent lots bought NOT by the same buyer from the same seller, for purposes of VAT, the
value of each lot shall NOT be combined.
13. Camella Realty corporation sold the following real properties during the taxable year:
2 units of residential house and lot at P 3,000,000 each P6,000,000
4 residential lots at P 2,000,000 each 8,000,000
1 commercial lot at P 3,000,000 each 3,000,000
How much is the total transactions subject to VAT?
a. P 6,000,000 c. P 11,000,000
b. P 8,000,000 d. P 17,000,000

Solution:
2 units Residential house and lot (3M each) P 6,000,000
4 units Residential lots (2M each) 8,000,000
1 commercial lot (3M each) 3,000,000
Total P 17,000,000

• All exceeds the threshold value as provided by law for purposes of determining whether subject
to VAT or not.
o Residential lot – 1.5M
o Residential house and lot – 2.5M

Exercises (Sales of Goods or Properties)

III. Multiple Choice

1. Which of the following transactions of a VAT – registered seller is NOT subject to VAT?

a. Remaining inventory upon retirement from business


b. Sales of company’s used car to its officers
c. Sale of goods or services to the national government
d. Sale of residential lot amounting to P 1,000,000

• (d) VAT exempt because the value of the sale is less than P 1,500,000.

2. Gross selling price includes all of the following except one? Which one?
a. Total amount which the purchaser pays to the seller
b. Total amount which the purchaser is obligated to pay to the seller.
c. Excise tax
d. Value added tax

• VAT is an indirect tax, the one who pays it is the buyer, hence, the selling price is exclusive of VAT.

3. Which of the following is NOT deductible from Gross Selling Price for VAT purposes?
a. Discounts determined and granted at the time of sale, which are expressly indicated in the invoice,
the amount thereof forming part of the gross sales duly recorded in the books of accounts.
b. Discounts determined and granted after the agreed sales quota is met by the buyer.
c. Sales discounts indicated in the invoice at the time of sale, the grant of which is not dependent
upon the happening of a future event deductible within the same month or quarter given.
d. Sales returns and allowances for which a proper credit or refund was made during the month or
quarter to the buyer for sales previously recorded as taxable sales.

• Discounts to be deducted shall not be subject to the happening of future events.

4. On January 5, 2018, Towel Co., VAT-registered person, sold on account goods for P 112,000. The term was:
2/10, n/30. Payment was made on January 10, 2018. The total amount due is:
a. P 110,000 c. P 112,000
b. P 107,800 d. P 109,760
Solution:
The taxpayer avails the cash discount. Discount shall be computed based on the gross selling price, that is
exclusive of VAT. Thus,
Sales, net of VAT (112,000/1.12) 100,000
Discount (100,000 x 2%) 2,000
Receivables 112,000
Less: Sales discount 2,000
Collection 110,000

5. Mr. Andres, VAT-registered real estate dealer, transferred a parcel of land held for sale to his son as gift on
account of his graduation. For VAT purposes, the transfer is:
a. Not subject to VAT because it is a gift
b. Subject to VAT because it is deemed sale transaction
c. Not subject to VAT because it is subject to gift tax
d. Subject to VAT because it is considered as an actual sale

• See transactions deemed sales in PPT-VAT.

6. One of the following is not a transaction deemed sale:


a. Transfer, use, or consumption not in the course of business of goods or properties originally
intended for sale or for use in the course of business.
b. Distribution or transfer to shareholders or investors of goods or properties as share in the profits
of a VAT-registered person or creditors in payment of debt.
c. Retirement from or cessation from business with respect to all goods on hand as of the date of
such retirement or cessation.
d. Consignment of goods if actual sale is made within 60 days following the date such goods were
consigned.

• Consignment not sold beyond 60 days is a transaction deemed sales.

7. Genson Distribution Inc., a VAT taxpayer, had the following data in a month:
Cash sales P 200,000
Open account sales 500,000
Consignment:
0 to 30 days old (on which there were remittances from consignees of P 200,000)
600,000
31 to 60 days old 700,000
61 days old and above 900,000

How much is the Output tax?


a. P 348,000 c. P 264,000
b. P 216,000 d. P 108,000

Solution:
Cash sales P 200,000
Open account sales 500,000
Consignment (61 days old) 900,000
Consignment (30 days) 200,000
Total P 1,800,000
VAT (1,800,000 x 12%) P 216,000

8. The following are the data of Davao Appliances Marketing Co., VAT registered person for the last quarter of
2018:
Sales up to December 15, total invoice value P 380,800
Purchases up to December 15, net of input taxes 150,000

Additional information:
On December 16, 2018, the company retired from its business and the inventory valued at P 190,000
remained unsold. There is deferred input tax from the third quarter of P 3,500

How much is the total value-added taxes payable by Davao Appliances Marketing Co.?
a. P 42,100 c. P 22,800
b. P 21,500 d. P 19,300

Solution:
Output tax on regular sales (380,000/1.12 x 12%) P 40,800
Output tax on transaction deemed sales (190,000 x 12%) 22,800
Input tax on purchases (150,000 x 12%) (18,000)
Deferred input tax (3,500)
Vat payable P 42,100

9. Evelyn, a trader of appliances, a VAT registered person made the following sales of goods during the month of
March 2018, exclusive of VAT:
Cash sales P 200,000
Open account sales 100,000
Installment sales 100,000
Note: Receipt from installment sales is P 20,000
Consignment made: (net of VAT)
January 15, 2018 100,000
February 15, 2018 100,000
March 15, 2018 100,000
Output tax is:
a. P 60,000 c. P 72,000
b. P 40,800 d. P 64,800

Solution:
Output tax on cash sales (200,000 x 12%) P 24,000
Output tax on open account sales (100,000 x 12%) 12,000
Output tax on Installment sales (100,000 x 12%) 12,000
Output tax on consignment (100,000 x 12%) 12,000
Total P 60,000

10. Kaktus Realty Inc. developed a condominium in Manila. During the month of January 2018, it had the following
data (VAT included, if applicable):
Cash sale of a 3-bedroom unit P 5,040,000
Sale of parking lot 560,000
Installment sale of 2-bedroom unit (initial payment
exceed 25% of the selling price) 3,920,000

The 3-bedroom unit sold for cash had a zonal value of P 5,000,000 and the 2-bedroom unit had a fair market value
per tax declaration of P 3,000,000. How much is the output tax for the month?

a. P 920,000 c. P 1,020,000
b. P 900,000 d. P 1,080,000

Solution:
Cash sale of a 3-bedroom unit (5,000,000 x 12%) 600,000
Sale of parking lot (560,000/1.12 x 12%) 60,000
Installment sale (3,920,000/1.12 x 12%) 420,000
Total output tax 1,080,000

11. Bahay Kubo Inc. is a real estate dealer. Details of its sales during the year showed the following:
Date of sale June 2, 2018
Consideration in the deed of sale P 5,000,000
Fair market value in the assessment 4,800,000
Zonal value 5,200,000
Schedule of Payments:
June 2, 2018 1,000,000
June 2, 2019 2,000,000
June 2, 2020 2,000,000

How much is the output tax to be recognized for the June 2, 2020 payment?
a. P 0 c. P 249,600
b. P 24,000 d. P 625,000

Solution:
Ratio of Initial Payment/ Selling Price = 1,000,000/ 5,000,000 = 20% (Installment)
VAT (5,200,000 x 12%) 624,000
Payment (2M/5M x 624,000) 249,600
12. Assuming that the scheduled payment on June 2, 2018 is P 2,000,000, how much is the output tax to be
recognized for the June 2, 2020 payments?
a. P 0 c. P 249,600
b. P 24,000 d. P 624,000

• Ratio of IP/SP = 40%, hence, deferred payment. VAT shall be paid in full in year 2018.

13. JJ is a real estate dealer. During the month of October 2018, he sold three (3) commercial lots under the
following terms:
Lot 1 Lot 2 Lot 3
Selling Price P 250,000 P 200,000 P 300,000
Cost 150,000 130,000 175,000
Gain/loss P 100,000 P 70,000 P 125,000
Terms:
Down, Oct. 5 25,000 20,000 40,000
Due:
12/05/2018 25,000 50,000 20,000
Year 2019 200,000 130,000 240,000
Zonal Value 350,000 260,000 250,000

How much is the output tax for the month of October?


a. P 26,500 c. P 31,800
b. 34,800 d. 40,200

Solution:
Test: Deferred or Installment (IP/SP)
Lot 1: (50,000/ 250,000) = 20% (installment)
Lot 2: (70,000/ 200,000) = 35% (deferred)
Lot 3: (60,000/ 300,000) = 20% (installment)

Payment:
Lot 1: (350,000 x 12%) x 25/250 = 4,200
Lot 2: (260,000 x 12%) = 31,200
Lot 3: (300,000 x 12%) x 40/300 = 4,800
Total: 40,200

14. The Output tax for December is


a. P5,400 c. P 6,600
b. 4,500 d. O

Solution:
Lot 1: (350,000 x 12%) x 25/250 = 4,200
Lot 2: 0
Lot 3: (300 x 12%) x 20/300 = 2,400
Total: 6,600
Exercises (VAT on Importation)

IV. Multiple Choice:

1. The Vat on importation of goods which are subsequently used or sold in the course of trade or business by a
VAT registered importer shall be treated as
I. tax credit
II. Inventoriable cost
III. Expense
a. I only c. III only
b. II only d. none of the above

• VAT on importation is a n input tax which can be credited to output tax.

2. Which of the following statement is incorrect?


a. The vat on importation is paid to the Bureau of Customs before the imported goods are released from its
custody.
b. When a person who enjoys a tax exemption on his importation subsequently sells in the Philippines such
imported articles to non-exempt persons, the purchaser-non-exempt person shall pay the VAT on such
importation.
c. Expenses incurred after the goods are released from Customs custody are disregarded in computing VAT
on importation
d. Imported which are subject to excise tax are no longer subject to value-added tax.

• VAT on importation is based on landed cost with excise tax, if any.

3. Bryan, VAT registered person, imported machines from Australia as follows:


Machine Acquisition Cost Purpose
A P 100,000 Personal use
B 200,000 Business use
C 300,000 For sale

The importations were subjected to 50% excise tax based on purchase price. Machine C was sold for P 1,000,000
exclusive of VAT. How much is the vat paid to the BOC?

a. 108,000 c. 54,000
b. 90,000 d. 36,000

Solution:
Machine A P 100,000
Machine B 200,000
Machine C 300,000
Total importation P 600,000
Excise Tax (600,000 x 50%) 300,000
Cost P 900,000
VAT (900,000 x 12%) P 108,000
4. Using the same data in Q2, the amount of VAT to be remitted to the BIR is?
a. 12,000 c. 106,000
b. 30,000 d. 84,000

Solution:
Output tax (1,200,000 x 12%) P 120,000
Less: Input tax (500,000 x 1.50 x 12%) 90,000
VAT payable P 30,000

5. World Power Corp. imported an article from Japan. The invoice value of imported articles was $7,000 (1$ - P
50). The following were incurred in connection with the importation:
Insurance P 15,000
Freight from Japan 10,000
Postage 5,000
Wharfage 7,000
Arrastre 8,000
Brokerage Fees 25,000
Facilitation Fee 3,000
The imported article was imposed P 50,000 customs duty and P 30,000 excise tax.
The company spent P 5,000 for trucking from the customs warehouse to its warehouse in QC. The carrier
is not subject to VAT.

The VAT on importation:


a. 60,000 c. 60,600
b. 42,000 d. 80,000

Solution:
Purchase Price ($7,000 x 50) P 350,000
Insurance 15,000
Freight from Japan 10,000
Postage 5,000
Wharfage 7,000
Arrastre 8,000
Brokerage Fees 25,000
Custom duty 50,000
Excise Tax 30,000
Total P 500,000
VAT (500,000 x 12%) P 60,000

6. Based on the preceding number, if the imported article was sold for P 800,000, VAT exclusive, the VAT payable
is:
a. 24,000 c. 36,000
b. 12,000 d. 11,040

Solution:
Output tax (800,000 x 12%) P 96,000
Input tax 60,000
VAT payable P 36,000
Exercises (Tax Credits)

V. Multiple Choice:

1. Any input tax attributable to zero-rated sales by a VAT-registered person may at his option be:
a. deducted from output tax
b. refunded
c. applied for tax credit certificate which may be used in payment of internal revenue taxes.
d. all of the above

2. Tax credit for input taxes shall be allowed if:


a. Both the seller and the purchaser is VAT registered.
b. Either one of the seller or the purchaser is VAT registered as long as VAT invoice is issued.
c. Neither one of the seller or the purchaser is VAT registered as long as VAT invoice is issued.
d. The seller is VAT registered regardless of whether the purchaser is VAT registered or not.

3. Which statement is not correct?


a. the excess input taxes of a taxable month arising from domestic sales may be carried over the to the
succeeding month.
b. the excess input taxes of a taxable quarter arising from domestic sales may be carried over to the
succeeding quarter.
c. The excess input taxes of a taxable period arising from domestic sales may be refunded.
d. The excess input taxes of a payable period arising from export sales may be refunded.

4. Magnifico Corp. is a vat-registered dealer of appliances. The following data are for the last quarter of the year:
Sales, total invoice value P 6,920,000
Purchases, net of input taxes 5,500,000
Sales return, total invoice value 200,000
Purchase return, net of VAT 300,000
Deferred input taxes (carried over from the third
quarter of the year) 12,000

The value added tax payable for the last quarter of the year by Magnifico Corp. is :
a. 84,000 c. P 108,000
b. 96,000 d. 130,500

Solution:
Output tax (6,920,000 – 200,000/ 1.12 x 12%) P 720,000
Purchases (5,500,000 – 300,000) x 12% (624,000)
Deferred taxes (12,000)
VAT Payable P 84,000

5. CG Corp. is a VAT registered entity with the following data for a taxable month:
Domestic Sales P 500,000
Transactions deemed sales 500,000
Export Sales 500,000
Sales to DEF, an export-oriented enterprise
(2/3 of DEF’s annual output is actually exported) 500,000
Purchases (invoice cost from vat registered entities) 224,000
Purchases (invoice cost from non-VAT registered entities) 100,000

The VAT payable of CG should be


a. P 180,000 c. P 120,000
b. 156,000 d. 108,000

Solution:
Domestic sales P 500,000
Transactions deemed sales 500,000
Sales to DEF, export enterprise 500,000
Total sales P 1,500,000

Output tax (1,500,000 x 12%) P 180,000


Input tax (224,000/1.12 x 12%) (24,000)
VAT Payable P 156,000

6. Sofia had the following data for the month of June (all amount is vat exclusive):
CASE 1 CASE 2
Sales 1,900,000 1,800,000
Purchase of Goods 1,260,000 1,600,000
Purchases of machines 1,440,000 900,000
Machine Life 6 years 3 years
The amount of vat payable (excess tax) shall be:
a b c d
Case 1 54,000 73,920 73,290 None
Case 2 (84,000) (84,000) 20,000 None

Solution:
Case 1: Output tax (1,900,000 x 12%) 228,000
Input tax – goods (1,260,000 x 12%) (151,200)
Capital goods (1,440,000 x 12% / 60 mos.) (2,880)
VAT Payable 73,920
Case 2: Output tax (1,800,000 x 12%) 216,000
Input tax – goods (1,600,000 x 12%) (192,000)
Capital goods (900,000 x 12%) (108,000)
VAT Payable (excess) (84,000)

7. Maymay, VAT registered, made the following purchases during the month of January of this year:
Goods for sale, inclusive of VAT 246,400
Supplies, exclusive of VAT 20,000
Packaging materials, total invoice amount 56,000
Home appliance for residence, gross of VAT 17,920
Office machines (5 pcs), 8 years useful life, net
of VAT 2,000,000
Repair of store amounted to P 20,000, no supporting official receipt. Creditable input taxes are:
a. 38,800 c. 37,440
b. 34,800 d. 35,520

Solution:
Input tax, goods for sale (246,400/1.12 x 12%) (26,400)
Input tax, supplies (20,000 x 12%) (2,400)
Input tax, packaging materials (56,000/1.12 x 12%) (6,000)
Input tax, office machines (2,000,000 x 12% / 60 mos.) (4,000)
Total creditable input tax (38,800)

Exercises (Presumptive, transitional and other provisions on input taxes)

1. All of the following are allowed presumptive input tax, except for one.
a. Processor of sardines, mackerel, and milk
b. Manufacturer of refined sugar and cooking oil
c. Producers/ manufacturer of packed noodles
d. Supplier of books and other school supplies

• Presumptive input tax is applicable ONLY to sardines, mackerel, milk, instant packed noodles, refined
sugar and cooking oil. The tax is 4% of the purchases of the materials necessary to produce these said
products.

2. Mantika Corp., a VAT-registered Corp., is a producer of cooking oil from coconut and corn. It had the
following data for the month of January this year:

Sales, gross of VAT P 784,000


Corn & Coconut, last year 50,000
Purchases of Corn & Coconut 330,000
Corn & Coconut, January of this year 20,000
Purchases from VAT suppliers, VAT
Included:
Packaging materials 56,000
Supplies 16,800

The value added tax payable for the month of January of this year:

a. P 56,060 c. P 60,650
b. P 54,900 d. 63,000

Solution:

Output tax (784,000/1.12 x 12%) 84,000


Presumptive Input tax, corn and coconut (330,000 x 4%) (13,200)
Input tax, packaging and supplies (72,800/1.12 x 12%) (7,800)
VAT payable 63,000
3. Taxpayers who became VAT registered persons upon exceeding the minimum turn-over of P 3,000,000
in any 12-month period, or who voluntarily register even if their turnover does not exceed P 3,000,000
shall be entitled to a transitional input tax on the inventory on hand as of the effectivity of their VAT
registration on the following, except:
a. Supplies for use in the course of taxpayer’s trade or business
b. Goods which have been manufactured by the taxpayer
c. Goods in process for sale
d. Capital goods being used in the operation of the business.

• Transitional input tax is applicable to taxpayer who shifted from NON – VAT to VAT system. The input
tax is 2% of the inventory on hand as of the effectivity of the VAT registration or the actual value of VAT
paid to those said inventories, whichever is higher.

4. Transitional input tax can be claimed as deduction from the output tax. Which of the following
statements is correct?
a. It can be claimed by a VAT registrable person
b. It can be claimed by a taxpayer who registered as VAT taxpayer from the inception of the
business.
c. It can be claimed by a taxpayer who is initially subject to VAT and subsequently cancelled his
VAT registration.
d. It can be claimed by a taxpayer who is initially paying percentage tax as VAT taxpayer

5. Which of the following shall be included in the beginning inventory for purposes of determining the
transitional input VAT?
a. Goods purchased for resale in the ordinary course of business or trade.
b. Materials purchased for further processing which have not yet undergone processing.
c. Goods which have been manufactured by the taxpayer
d. All of the above

6. A taxpayer registered under the VAT system on January 1, 2019. Value of inventory as of December 31,
2018 purchased from VAT – registered persons, P 112,000; VAT paid on inventory as of December 31,
2018, P 12,000; Value of inventory as of December 31, 2018 purchased, from non-VAT persons, P
518,000; Sales, net of VAT, P 240,000; Sales, gross of VAT, P 45,920; Purchases, net of VAT, P 70,000;
Purchases of VAT exempt goods, P 50,000.

VAT PAYABLE IS:

a. P 23,080 c. P 12,720
b. P 25,320 d. P 12,230

Solution:
Output tax:
Sales, net of VAT (240,000 x 12%) 28,800
Sales, gross of VAT (45,920/1.12 x 12%) 4,920
Total output tax 33,720
Input tax:
Purchases, net of VAT (70,000 x 12%) (8,400)
Transitional input tax (112,000 + 518,000) x 2% 12,600
Actual value of VAT 12,000 (12,600)
VAT payable 12,720

• Take note of the amount subject to transitional input tax; it is based on the amount of inventory
regardless of the source of purchases (VAT or NON-VAT). The law provides only the word “inventory”, it
does not distinguish whether the purchases must be from VAT or NON – VAT suppliers. However, VAT
exempt inventories are excluded under the list of “inventories”.

7. Carlito, a VAT-registered grocery and sugar dealer submitted the following data as of Dec. 31,2018 to
the Revenue District Officer:

Grocery items, total value P 350,000

Raw sugar cane, total value 150,000

During the month of January 2019, first month as a VAT-registered taxpayer, he had the following sales
and purchases:

Sales Purchases

Grocery, total invoice value P 1,195,040 P 708,400

Raw sugar cane, exc. VAT 570,000 320,000

The VAT payable for the first month is:

a. P 29,400 c. P 45,140
b. P 47,400 d. P 36,500

Solution:
Output tax (1,195,040/1.12 x 12%) P 128,040
Input tax (708,400/1.12 x 12%) (75,900)
Transitional input tax (350,000 x 2%) (7,000)
VAT Payable P 45,140

• Sales and purchases of raw sugar are VAT exempt transactions because they are items in their original
state and for human consumption.

8. Dong Inc., a manufacturer had the following data for the first month of 2019: (First year as a VAT
taxpayer)

Sales – Exports, P 2,000,000; Domestic (without VAT), P 1,000,000; Purchases, excluding VAT – raw
materials, P 300,000; Services, P 100,000; Machinery (estimated useful life 2 years), P 400,000.

On January 1, 2019, the company had inventories and taxes paid thereon as follows:

Raw Materials – Cost, P 120,000; VAT Paid, P 2,000


Supplies – Cost, P 40,000; VAT Paid, P 4,000

During the month, raw materials were purchased from another enterprise with a total invoice value of P
61,600, not included above.

The VAT payable by Dong Inc. is:

a. P 72,000 c. P 11,000
b. P 57,000 d. P 66,000

Solution:

Output tax (1,000,000 x 12%) 120,000


Input tax, raw mats and services (400,000 x 12%) (48,000)
Input tax, capital goods (400,000 x 12%) (48,000)
Input tax, supplies (61,600/1.12 x 12%) ( 6,600)
Transitional input tax (120,000 x 2%) 2,400 vs. 2,000 (2,400)
Transitional input tax (40,000 x 2%) 800 vs. 4,000 (4,000)
VAT payable 11,000

• If the amount of capital goods purchased is less than 1 million, the input tax thereto shall be deducted in
full on the taxable month. If the amount of purchased is more than 1 million the input tax shall be
amortized over 5 years or the economic life of the capital goods whichever is shorter.

9. What institution is required to deduct and withhold a final VAT of 5% on the purchase of goods or
services subject to VAT?
a. National government or any political subdivisions thereof
b. Government-owned or controlled enterprises
c. Both a and b
d. Neither a nor b

10. The withholding agent of creditable value added tax is required to remit the amount of value added tax
withheld within
a. 25 days following the end of month the withholding is made.
b. 20 days following the end of month the withholding is made.
c. 15 days following the end of month the withholding is made.
d. 10 days following the end of month the withholding is made.

11. A VAT-registered supplier sold goods amounting to P 500,000 to a government-controlled corporation


during a particular quarter. Which of the following statements is incorrect in relation to the sale of
goods?
a. The sale is subject to final withholding VAT
b. The government-controlled corporation will withhold VAT of P 25,000
c. The government-controlled corporation shall remit the withholding VAT to the BIR within 10
days following the end of the month the withholding is made.
d. The VAT-registered supplier may refuse the withholding of VAT as long as it willing to pay the
full 12% VAT.
• Sale to Government and its GOCC and instrumentalities is not exempt from VAT. However, the
government will withhold 5% of the sales to be remitted to the BIR within 10 days following the end of
the month the withholding is made.

For numbers 12 to 15, use the following data:

A VAT registered trader has the following transactions:

Sales of good to private entities, net of VAT P 2,500,000

Purchases of goods sold to private entities, gross of 12% VAT 896,000

Sales to a government owned corporation (GOCC), net of VAT 1,000,000

Purchases of goods sold to GOCC, net of 12% VAT 700,000

12. How much is the output tax?


a. P 300,000 c. P 420,000
b. P 120,000 d. nil
13. How much is the standard input tax?
a. P 20,000 c. P 50,000
b. P 70,000 d. nil
14. How much is the creditable input tax?
a. P 166,000 c. P 70,000
b. P 96,000 d. P 180,000
15. How much is the input tax closed to expense (income)?
a. P 14,000 c. P (14,000)
b. P 34,000 d. P (34,000)
16. How much is the VAT payable to the BIR?
a. P 404,000 c. P 204,000
b. P 390,000 d. nil

Solution:

Output tax:
Sales to private entities (2,500,000 x 12%) P 300,000
Sales to government (1,000,000 x 12%) 120,000
Total output tax P 420,000
Standard input tax:
Sales to government (1,000,000 x 7%) P 70,000
Creditable input tax:
Purchases, for private entities (896,000/1.12 x 12%) P 96,000
Standard input tax 70,000
Total creditable input tax P 166,000
Input tax closed to income/expense:
Input tax on purchases for sale to govt. (700,000 x 12%) P 84,000
Standard input tax 70,000
Closed to expense P 14,000
VAT payable:
Output tax P 420,000
Input tax (166,000)
VAT payable P 254,000
Withholding VAT (1,000,000 x 5%) (50,000)
VAT still due P 204,000

A Vat- registered trader has the following transactions for the month of July 2018:

Sale of goods to private entities, net of VAT P 2,500,000


Purchases of goods sold to private entities, gross of 12% VAT 896,000
Sales to a government owned corporation (GOCC), net of VAT 1,500,000
Purchases of goods sold to GOCC, net of 12% VAT 700,000
Purchases of Machineries, gross of VAT, useful life is 6 years 11,200,000

17. How much is the VAT payable to the BIR?


a. P 280,000 c. P 191,500
b. P 224,000 d. P 300,000

18. Based on the preceding number, how much is the input tax closed to expense (income)?
a. P 13,500 c. P (13,500)
b. P 21,000 d. P (21,000)

Solution:

Output tax, sales to private entities (2,500,000 x 12%) 300,000


Output tax, sales to GOCC (1,500,000 x 12%) 180,000
Total Output tax 480,000
Input tax, purchases for private entities (896,000/1.12 x 12%) (96,000)
Input tax, purchases for GOCC (1,500,000 x 7%) (105,000)
Input tax, machineries (11,200,000/1.12 x 12%/60 months) * (12,500)
VAT Payable 266,500
5% withholding VAT (1,500,000 x 5%) (75,000)
VAT still due 191,500

*allocation
Private: 2.5M/4M x 20,000 = 12,500
GOCC: 1.5M/4M x 20,000 = 7,500

Actual input tax on purchases for sale to GOCC (700,000 x 12%) 84,000
Actual input tax on machinery (see allocation) * 7,500
Total input tax 91,500
Standard input tax 105,000
Income or expense 13,500
PISC, a VAT – registered government owned or controlled corporation (GOCC), sold goods to Alpha Corporation,
a private company. Selling price is P 1,000,000 while the cost (all purchased from vat-registered suppliers) is P
800,000.

19. How much is the VAT payable by PISC?


a. P 120,000 c. P 24,000
b. P 50,000 d. P 0
Solution: 1,000,000 – 800,000 = 200,000 x 12% = 24,000

20. Based on the preceding number, suppose B is also a GOCC, how much is VAT payable by PISC to the BIR?
a. P 120,000 c. P 24,000
b. P 50,000 d. P 0

Solution: Both are government agencies.

Alpha Corporation (VAT registered) has the following data for the month:

Sales to private entities 2,000,000


Sales – Vat exempt goods 1,000,000
Sales – government 1,000,000

The following input taxes were passed-on by VAT suppliers to Alpha Corporation during the month:

Input VAT on taxable goods 80,000


Input Vat on sale of exempt goods 20,000
Input VAT on sale to government 40,000
Input tax on depreciable capital goods not directly attributable
to any specific activity (monthly amortization for 60 mos) 160,000

21. The VAT payable for the month is:


a. P 40,000 c. P 160,000
b. P 80,000 d. nil

Solution:

Output tax, goods (3M x 12%) 360,000


Input tax, goods for private (80,000)
Input tax, goods for govt. (1M x 7%) (70,000)
Input tax, capital goods (160,000 x2/4) (80,000)
VAT payable 130,000
5% withholding VAT (50,000)
VAT still due 80,000

22. The amount of input VAT not available for tax credit but may be recognized as cost or expense is:
a. P 60,000 c. P 80,000
b. P 70,000 d. P 140,000

Solution:
Input tax, government (70,000 – 120,000) * 50,000
Input tax, VAT exempt 20,000
Total 70,000

*details:
Input VAT on sale to govt. 40,000
Input VAT, machinery (allocated to VAT exempt and sale to govt.)160,000 x 2/4 80,000
Total 120,000

Leomar, a VAT-registered person has the following data:

Export sales, total invoice amount P 3,000,000


Domestic sales, total invoice amount 6,720,000
Purchases used to manufacture goods for export and domestic sales:
Raw materials, VAT inclusive 616,000
Supplies, VAT inclusive 448,000
Equipment, VAT exclusive 300,000

23. The amount of input tax which can be refunded or converted into tax credit certificates at the option of
Leomar is:

a. P120,000 c. P 39,600
b. 118,800 d. 50,000

Solution:
Input tax on raw materials (616,000/1.12 x 12%) 66,000
Input tax on supplies (448,000/1.12 x 12%) 48,000
Input tax on equipment (300,000 x 12%) 36,000
Total input tax 150,000

Allocation:
Export sales: (zero rated) 3,000,000 3/9 x 150,000 = 50,000
Domestic sales: (6,720,000/1.12) 6,000,000 6/9 x 150,000 = 100,000
Total sales, without VAT 9,000,000

• Input taxes against output tax on export sales can be converted into tax credit certificate or be refunded
at the option of the taxpayer.
• It can also be claimed as a tax credit or input taxes to be deducted from output taxes on other form of
sales.

24. Based on the preceding number, if the refundable input taxes were not refunded but used as tax credit
(input tax), the VAT due is:
a. P 576,000 c. P 666,888
b. P 697,888 d. P 570,000

Solution:
Output tax (6,720,000/1.12 x 12%) P 720,000
Input tax (150,000)
VAT payable P 570,000

25. But assuming further that the taxpayer opted to claim them as refund, the VAT due is:
a. P 576,000 c. P 746,888
b. P 697,888 d. P 620,000

Solution:
Output tax P 720,000
Input tax (100,000)
VAT payable P 620,000

26. Rommel is an operator of taxi cabs. During a particular month, he purchased from Mahindra, a Vat
registered car dealer, 10 sedan type units for a total selling price of 5 million pesos. The estimated useful
life of each vehicle is four years. How much will be the amount due from Rommel?
a. P 5,600,000 c. P 5,000,000
b. P 5,150,000 d. P 4,480,000

Solution: 5,000,000 x 1.12 = 5,600,000

27. Based on the preceding number, how much input tax can be claimed by Rommel?
a. P 600,000 c. P 150,000
b. P 12,500 d. P 0

• Rommel is an operator of taxi cabs. He is subject to OPT. The VAT shall be formed part of the
expenses or cost of the business.

28. Data from the books of accounts of a VAT taxpayer for a month:
Domestic Exports
Sales P 2,000,000 P 8,000,000
Purchases:
From VAT suppliers:
Goods for sale P 600,000 P 2,400,000
Supplies and service 90,000 360,000
From suppliers paying percentage tax
Good for sale 100,000 1,500,000
Supplies and service 20,000 80,000

If the input taxes attributable to zero rated sales are claimed as tax credit, the net value added tax
refundable is:

a. P 136,000 c. P 145,000
b. P 203,924.70 d. P 174,000
Solution:
Output tax (2,000,000 x 12%) 240,000
Less: Input Tax
Domestic (690,000 x 12%) 82,800
Export (2,760,000 x 12%) 331,200 414,000
VAT payable/ excess (174,000)

29. Data for a trader with one line of business is subject to value added tax and another line of business not
subject to value added tax (amounts presented are gross of VAT if applicable).
Sales, vat business P 896,000
Sales, not-vat business 200,000
Purchases of goods, vat business 224,000
Purchases of goods, non-VAT business 33,600
Purchases of depreciable asset, for use in VAT and non-VAT 112,000
Purchases of supplies, for VAT and non-VAT business 2,240
Rental of premises, for VAT and non-VAT business, from non-VAT lessor 22,400

The VAT payable is:


a. P 59,808 c. P 82,608
b. P 62,208 d. P 86,208

Solution:

Output tax (896,000/1.12 x 12%) P 96,000


Input tax (224,000/ 1.12 x 12%) (24,000)
Allocated input tax for Vat business *(91,392/1.12 x 12%) (9,792)
VAT payable P 62,208

*allocation:
Sales (VAT business, 896,000/1.12) 800,000 8/10 x 114,240 = 91,392**
Sales (Non-VAT business) 200,000
Total sales 1,000,000

**Subject to allocated Input taxes:

Purchases of depreciable 112,000


Purchases of supplies 2,240
Total 114,240

30. Tore Inc., a building contractor, showed to you the following data for the month of August 2019:
Cash received, gross of VAT P 2,240,000
Receivables, net of VAT 3,000,000
Advances on other contracts still unearned (w/o VAT) 1,000,000

Unpaid Purchases:
For materials, VAT excluded 500,000
For supplies, VAT excluded 100,000
For services, sub-contractors (VAT included) 1,848,000
Payments for purchases made in July:
Materials, gross of VAT 369,600
Services of subcontractors, net of VAT 495,000

How much is the VAT Payable?


a. P 360,000 c. P 330,000
b. P 228,600 d. P 90,000

Solution:

Output tax:
Cash received, gross of VAT (P 2,240,000/1.12 x 12%) P 240,000
Advances on other contracts still unearned (1,000,000 x 12%) 120,000
Total output tax P 360,000

Input tax:

For materials, VAT excluded (500,000 x 12%) 60,000


For supplies, VAT excluded (100,000 x 12%) 12,000
Services of subcontractors (495,000 x 12%) 59,400
Total input tax 131,400

VAT payable P 228,600

31. Cebu Airlines is a corporation organized in the Philippines. It has the following data for the taxable year
in 2019:
Passengers Fare (net of VAT):
Flights from the Philippines to Hongkong P 1,000,000
Flights from Hongkong to Philippines 1,500,000
Domestic flights (gross of 2% withholding tax) 3,000,000
Fares from cargoes and mails (net of VAT):
Flights from Philippines to Hongkong P 1,000,000
Flights from Hongkong to Philippines 1,500,000
Domestic Flights (gross of 2% WT) 800,000
Other Income:
Interest Income from bank deposits 800,000
Rent Income 500,000

How much is the output tax?


a. P 456,000 c. P 420,000
b. P 516,000 d. P 0

Solution:

Domestic flights, passengers (3,000,000 x 12%) 360,000


Domestic flights, cargoes (800,000 x 12%) 96,000
Rent income (500,000 x 12%) 60,000
Total output tax 516,000

32. If a dealer in securities sold shares in the local stock exchange, what business tax will apply to such
transactions?
a. VAT based on gross selling price
b. VAT based on gain
c. Capital gains tax
d. Stock transaction tax of 6/10 of 1%

33. First statement: Unused input tax of persons whose registration had been cancelled may be converted
into tax credit certificate which may be used in payment of taxes.
Second statement: Refund or tax credit certificate shall be granted within 25 days from the date of
submission of complete documents.
a. Both statements are correct.
b. Both statements are incorrect.
c. Only the first statement is correct.
d. Only the second statement is correct.

34. Monthly valued added tax declaration is filed on or before the


a. 10th day from the end of each month.
b. 20th day from the end of each month.
c. 25th day from the end of each month.
d. 30th day from the end of each month.

35. The Commissioner or its authorized representative is empowered to suspend the business operations
and temporarily close the business establishment of any person for:
a. Failure to issue receipts or invoices of a VAT-registered entity.
b. Failure to file a VAT return for VAT registered person as required by the tax code.
c. Understatement of taxable sales or receipts by thirty percent or more of his correct taxable sales
or receipts for the taxable quarter.
d. All of the above.

Special Laws (Senior Citizens and PWD)

36. Lola Lita, a senior citizen, bought a medicine with a selling price of P 9,520 inclusive of VAT. How much is
the net amount to be paid by Lola?
a. P 8,500 c. P 6,916
b. P 7,616 d. P 6,800

Solution:

9,520/1.12 x 80% = 6,800


37. Lola Sot, a senior citizen went to Jollibee to treat his 4 grandchildren on account of his retirement. They
consumed goods and beverages with gross amount of P 1,120 inclusive of VAT. How much is amount to
be paid by Lolo Sot?
a. P 896 c. P 1,056
b. P 920 d. P 1,100

Solution:

1,120/5 persons = 224

224/1.12 x 80% = 160 + (224 x 4 persons) = 1,056

38. Lola Trining brought her granddaughter to Jollibee for a treat. Her granddaughter requested that they
both order kiddie meals so that the latter will have two (2) new toys since each meal have a free one.
The price of each meal is P 120, net of VAT. How much is the amount due from Lola Trining?
a. P 268.80 c. P 240
b. P 230.40 d. P 192

Solution: 120 x 2 = 240 x 1.12 = 268.80

39. The ABC Corporation, a vat registered taxpayer sold to Lolo Sot, a senior citizen and to his wife, Ana, a
person with disability, as follows:
Lolo Sot Ana

Grilled blue marin P 150 P 150


Tokwat baboy 128
Pinaputok na tilapia 134
Seafood Soup 100 100
Pineapple juice 64
Buko Pandan 70
Total 448 448

The prices above are based on menu prices inclusive of VAT. The output tax due is
a. P 38.40 c. P 96
b. P 48 d. nil

40. The total amount to be paid by the spouses is:


a. P 640 c. P 800
b. P 758.40 d. P 896

Solution: 448 x 2 = 896/ 1.12 x 80% = 640

41. Statement 1: Persons with disability shall be entitled to claim at least twenty percent (20%) discount
from the purchase of certain goods or services for their exclusive use or enjoyment as provided for
under RA2277/RR-1-2009 as amended.
Statement 2: Persons with disability, like senior citizens, shall likewise be entitled to vat exemption.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

42. Gabriana Clinic, a VAT registered entity, performed a prosthetic surgery on the legs of Loyd, a person
with disability. The total cost of medical operation inclusive of VAT was P 560,000. Being a disabled
person, Loyd received a 20% discount from Gabriana. How much is the total amount to be paid by Loyd?
a. P 400,000 c. P 500,000
b. P 448,000 d. P 560,000

Solution: 560,000/1.12 x 80% = 400,000

For the next two questions: Alpha Corporation (vat registered) has the following data for the month:

Sales – private entities and P 2,000,000 individuals (10% to sen. Cit.) 2,000,000
Sales – vat exempt goods 1,000,000
Sales – government 1,000,000

The following input taxes were passed-on by vat suppliers to Alpha Corporation during the month:

Input vat on goods sold to private entities and individuals P 120,000


Input vat on sale of exempt goods 20,000
Input vat on sale to government 100,000

43. The VAT payable for the month is:


a. P 216,000 c. P 96,000
b. P 108,000 d. P 36,000

Solution:
Output tax, private entities (2,000,000 x 90% x 12%) 216,000
Output tax, government (1,000,000 x 12%) 120,000
Input tax, private (120,000 x 90%) (108,000)
Input tax, government (1,000,000 x 7%) (70,000)
VAT payable 158,000
Withholding VAT (1,000,000 x 5%) (50,000)
VAT still due 108,000

44. The amount of input vat not available for tax credit but may be recognized as cost or expense is:
a. P 20,000 c. P 62,000
b. P 50,000 d. nil
Solution:
Input tax, government (100,000 – 70,000) 30,000
Input tax, VAT exempt 20,000
Input tax, senior citizen (120,000 x 10%) 12,000
Total 62,000