TERUEL, MARIA NICOLE VAT Tax Model

TAX301 – MIDTERM REVIEWER Output VAT P xxx

Less: Input VAT Xxx
Chapter 6 VAT Due Xxx
Less: Tax credits Xxx
Value Added Tax
VAT still due xxx
- It covers all vatable sales of goods,
properties, services, or lease of properties
Output VAT
by VAT taxpayers.
- It is the VAT on the vatable sales or receipts.
Vatable sales or receipts are from sources other
It is presumed passed on by the seller on his
than:
sales or receipts.
1. Exempt Sales
Types of Output VAT
2. Receipts from services specifically subject to
1. Regular Output VAT – 12% vat imposed on
percentage tax.
domestic sales or receipts.
2. Zero Output VAT – 0% vat imposed on export and
VAT Taxpayers
other zero-rated sales.
a. VAT-registered persons
- a person subject to VAT even if its annual
Input VAT
sales do not exceed the VAT threshold.
- VAT paid by the taxpayer on domestic
b. VAT-registrable persons
purchases from VAT suppliers
- sales or receipts exceed the VAT threshold
- May be allowed by law as incentives to the
without registering as VAT taxpayers;
taxpayer such as in the case of presumptive
without a benefit of an input tax credit.
input VAT
- Not ALL paid input vat in creditable. Only
VAT Threshold
claimable input vat, allowable input vat, or
VAT Threshold Amount Covered Taxpayers
creditable input vat.
General Threshold P3M All taxpayers except
VAT Due
franchise grantees
of radio or tv. At the end of each month, the input VAT is offset
Special Threshold P10M Only franchise with the output VAT. A positive output VAT is due to
grantees of radio or BIR. A negative output VAT is normally non-
tv. refundable but is carried over to the next months or
quarter.
Optional VAT Registration
Taxpayers below the threshold can voluntarily VAT Reporting
register as VAT Taxpayers. It is subject to 3 year lock- Period covered BIR Form Deadline
in period. st
1 month of 2550M 20 days from the end
the quarter of the month
VAT Taxpayers with Mixed Transactions 2nd month of 2550M 20 days from the end
- VAT shall apply only to the vatable sales or the quarter of the month
receipts. For the quarter 2550Q 25 days from the end
of the quarter
- Non-vatable sales or receipts remains
exempt from VAT.
Sales subject to special VAT rules
- Sales or receipts specifically subject to
a. Sales to the government
percentage tax are subject to their specific
b. Zero-rated sales
percentage tax rates.
c. Exempt Sales
Types of Sales What is unique? Other zero-rated sales
Sales to the government Limited to claimable - Sales to economic zones and persons
input VAT engaged international transport operations.
Zero-rated Sales No output VAT but with - International Rice Research Institute (IRRI)
claimable input VAT
and Asian Development Bank – effectively
Exempt sales No output vat and no
zero-rated sales
claimable input VAT
Exempt Sales
Sales to government including GOCCs a. Exempt sales of goods, services, or properties
Normally, it is 12% but the law requires the b. Services specifically subject to percentage tax
government agencies to withhold 5% final VAT on
their purchases. It is not subject to output VAT and is not allowed to
- There would be no VAT payable credit input VAT.

Output VAT 12% of sales or receipts Comparison of zero-rated sales and exempt sales
Less: Input VAT Limited to 7% Zero-rated sales Exempt sales
Final VAT due 5% of sales or receipts Output VAT None None
Input VAT Creditable Non-creditable
Types of sales Export or Domestic
The 7% claimable input VAT is referred to as
domestic
standard input VAT. Taxpayers VAT Taxpayers VAT or non-VAT
only taxpayers
Note: There is no VAT due and payable on sales to
the government. Classification of sales or receipts for VAT purposes
1. Sales to the government
Zero-rated sales 2. Zero-rated sales
In our current tax laws, they are subject to 0% vat. 3. Exempt sales
With a zero output vat and a claimable input VAT, 4. Regular sales
the VAT due would be negative.
Regular sales are subject to 12% VAT and are
The law allows taxpayer the privilege to claim the allowed full credit of actual input VAT. It covers all
input VAT as: sales of goods, properties or services except the (3)
a. taxrefund; or mentioned above.
b. tax credit against
Summary of VAT rules for each type of sales
If tax refund = cash Types of Output Claimable VAT due
If tax credit = reduce other internal revenue tax sales VAT input VAT
(prepaid tax) Exempt None None None
NOTE: prepaid tax (TCC) can be used to settle any Zero-rated Zero Actual (if Negative
not refund
internal revenue tax obligations such as income tax,
or credit)
excise tax, donor’s tax, documentary stamp tax and
GOCCs 12% of 7% of sales None
others. sales receipts
receipts
If none above = deductible against output VAT on Regular 12% of Actual Positive or
other vatable sales. sales input VAT negative
receipts paid
Classification Rules Sale of vatable goods
1. The sale of goods destined to a non-resident buyer -12% vat based on gross selling price unless
abroad is zero-rated sale even if it involves exempt unreasonably lower.
goods.
2. Sale of vatable goods in the PH is usually 12% Unreasonably lower price
except when the sales are made to the GOCCs and - If the selling price is unreasonably lower,
PEZA locators. the VAT shall be based on the fair value of
3. Sale of exempt goods and services to the GOCCs is the goods sold.
still exempt sales. - When it is lower more than 30% of the
actual market value of the goods sold. The
Summary of rules on sales of goods fair value shall be determined by the
Domestic Sales Export Sales Commissioner of Internal Revenue
Taxable VAT- Any person - Nonetheless, if one of the parties is
exempt government, the output VAT shall be based
Exempt 12% VAT 0% VAT 0% VAT on actual selling price.
goods
Timing of Output VAT Reporting
Vatable 12% VAT 0% VAT 0% VAT
goods -reported in the month of sale

Other sales subject to VAT Sale of Vatable Services

1. Sales of registrable persons -12% vat based on gross receipts. Gross receipts are
2. Sales of Non-VAT taxpayers who issues VAT a collection of income.
invoice or receipt – subject to vat without the
benefit of input vat plus the 50% surcharge and the Timing of Output VAT Reporting
usual 3% percentage tax -reported in the month of sale
3. Exempt sales billed by VAT taxpayers as regular
sales Sale of Vatable Properties
-The sale, barter or exchange of vatable real
Chapter 7 properties is subject to VAT on the gross selling
Regular Output VAT price.

Sources of regular output VAT Under the regulations, gross selling price means the
1. Sale of vatable goods higher of the:
2. Sale of vatable services a. Consideration or Selling price
3. Sale of vatable properties b. Fair value of the property
4. Transactions deemed sales
Under the NIRC, the fair value of the real property is
Tax basis of the VAT the higher between the:
Taxable Transaction Tax basis a. Zonal Value
Sale of goods Gross selling price unless b. Fair Value per Assessor’s office
unreasonably lower
Sale of services Gross receipts In the absence of zonal value, gross selling price
Sale of properties Gross selling price as shall mean the fair value per assessment or
defined by the BIR consideration stated in the sales document,
Transaction deemed Fair value of the whichever is higher.
sales property deemed sold
If the gross selling price is based on the zonal value Installment reporting of Output VAT on real
or assessor’s fair value of the property, the zonal properties
value or assessed value shall be presumed exclusive The output VAT on the sale of real properties may be
from VAT. reported in installment if the initial payment from
such sale does not exceed 25% of the selling price.
If the fair market value is higher than the selling
price, the output VAT must be separately billed with The sale of property by a realty dealer on a
a specific mention that the VAT billed separately is deferred payment basis
based on the market value of the property. - The sale of property by a realty dealer on a
deferred payment basis, not on installment
If the gross selling price is based on the plan, shall be treated as a CASH SALE.
consideration appearing in the document of sale, the - The fair value or gross selling price,
same is presumed to be inclusive of VAT. whichever is higher is subject to VAT in the
month of sale.
The sale of residential lot is exempt if sold at a price - Subsequent collections from the sale shall
not exceeding 1,919,500. The sale of residential no longer be subject to VAT.
dwelling is also exempt if the selling price does not
exceed 3,199,200.

Comparison of the VAT on goods and VAT on

properties
The term “selling price” or consideration on the sale
of the property is legally presumed VAT inclusive but
this is not the case on the sale of goods.

If the fair And the The output vat on the

value is selling sale of
price is Goods Real
property
100,000 120,000 120,000 x 120,000 x
12% 12/112
100,000 80,000 80,000 x 100,000 x
12% 12%
100,000 60,000 100,000 x 100,000 x
12% 12%

The concept of unreasonably lower does not apply in

the sale of property. The higher of the fair value and
selling price is always the basis of the VAT.

Timing of Output VAT Reporting

-reported in the month of sale or by installment
period