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NO. The house and lot, which are residential properties are non-business assets. The sale thereof
is an isolated, non-business transaction. To be subject to VAT, the sale (or lease) must be in the
course of trade or business.
#5: X, imported the latest model of a foreign car for 2M. The car is for personal use, is he subject
to VAT on the importation?
YES. The importation shall be subject to VAT, whether or not in the course of trade or business
regardless of the amount.
Transactions subject to VAT:
a. Every sale, barter, exchange, lease or similar transaction made in the course of trade or
business
b. Transactions deemed sale for VAT purposes
c. Importation of goods whether in the course of trade or business or not
d. Every sale of service made in the course of trade or business other than services rendered
by persons subject to other percentage taxes.
Transactions that are deemed sale for VAT purposes:
a. The transfer, use or consumption not in the course of business of (1) goods or properties
for sale (2) goods to be used in the course of business.
b. Distribution or transfer to shareholders or investors as share in the profits of the business
c. Transfer to creditors in payment of debt or obligation
d. Goods consigned and not sold within 60 days from date of consignment. Consigned goods
returned by the consignee within the 60 day period are not deemed sold.
e. Retirement from or cessation of business with respect to inventories of taxable goods
(including capital goods) then existing, whether or not the business is continued by the
new owner or successor.
f. Change of ownership of business
g. Incorporation of a single proprietorship
h. Dissolution of a partnership and creation of a new partnership that takes over the business
i. Death of an individual who is a VAT registered person even if the estate or heir of the
decedent shall continue to operate the business.
Q: X Corporation is a VAT-registered business entity. Its employees are allowed to buy directly
from the company with 20% discount once every quarter. Is the sale vatable?
Yes. It is VATable because it is an ordinary sale of goods to customers. The sale should be
included in the gross sales of the corporation in computing the VAT due to the government.
X decided to purchase new motor vehicles and sell old ones to its employees, is the sale VATable?
The vehicles are considered ordinary assets of the corporation; the sale to its own employees is
considered incidental sale in the course of business and trade. Hence, it is VATable. (CS Garment
vs. CIR)
Options available to the seller or producer under the VAT system:
a. The seller or producer may claim tax credit within a 12% ceiling, he may choose to absorb
the VAT and not pass it on to the consumer; or
b. The seller or producer may choose to pass it on to his buyers