Chapter 7

Business Taxes

 Onerous transfers
 “in the course of trade or business” – regular conduct or pursuit of a commercial or an
economic activity except isolated transactions
 Services rendered by a nonresident foreign person in the Phil is considered being
rendered in the course of trade or business
 If for subsistence or livelihood with receipts not exceeding 100k for any 12-month
aggregated is not subject to business taxes (marginal income earners)
 Based on gross sales or receipts irrespective of the result of the operation
Types of Business Taxes

 VAT
 OPT
 Excise Tax
VAT
Tax on the value added by every seller to the purchase price or cost in the sale or lease of
goods, property or services in the ordinary course o trade or business as well as on importation
of goods into the Philippines, whether for persona or business use.

 Sale, barter, exchange or lease of goods or properties and services in the Philippines
 “Cross border doctrine” no VAT, only those consumed in the Phil

VAT on sales of goods or properties

VAT on importation of goods
VAT on sales of services and use or lease of properties
Goods or properties are tangible and intangible objects capable of pecuniary estimation
Sale of Services
Sale of Real Properties
Characteristics of VAT
1. Indirect tax where tax shifting is always presumes
 Statutory liable to pay
 Tax burden is on the final consumers
 In case of importation, importer is liable for vat
2. It is consumption based
3. Imposed on the value added in each stage of production and distribution process
  Credit Invoice Method- adopted in computing VAT payable
Output vat-Input Vat
If the input tax inclusive of input tax carried over from the previous quarter exceeds the output
tax, the excess input tax shall be carried over to the succeeding quarter or quarters, provided
however, that any input tax attributable to zero-rated sales by a VAT registered person may at
his option be refunded or applied for a tax credit certificate which may be used in the payment
of internal revenue taxes
Basis
VAT reform act RA9337 passed by congress in May 2015 amended by RA 9361 implemented on
November 1, 2005.
Sales of goods or properties Gross selling price (Gross sales less any SDRA)
Sale of services Gross receipts
Importation Total landed cost
Dealers in securities Gross Income

Deductions from gross selling price

a. Discounts determined and granted at the time of sale, expressly indicated in the invoice
that form part of the gross sales, should not be dependent upon the happening of a
future event
b. SRA with proper credit or refund, or with issued credit memo
Gross Selling Price
The total amount of money or its equivalent which the purchaser pays or is obligated to pay to
the seller in consideration of the sale, barter or exchange of the goods or properties, excluding
VAT.
Real property sales subject to VAT, GSP is consideration stated in the sales document or
the FMV (higher between determined by commissioner or provincial and city assessors),
whichever is higher. If the gross selling price is based on the zonal or market value of the
property, the zonal or market value shall be deemed exclusive of VAT.
Gross Receipts
Constructive receipts occur when the money consideration or its equivalent is placed at the
control of the person who rendered the service without restrictions by the payor.
Advance Payment
 registration
A. Mandatory Registration
 January 1, 2018 (TRAIN Law)
a. Aggregate amount of actual gross sales or receipts exceed 3,000,000 (previously
1,919,500) or there are reasons to believe that it will happen.
 In case of non-registration, liable to VAT but cannot avail input tax credit
b. Radio and/or broadcasting companies, gross receipts of the preceding year
exceed 10M
c. Taxpayer required to register but failed to.
B. Optional registration
Those elect themselves as VAT registered
Any person who elects to register under optional registration shall not be
allowed to cancel his registration for the next three years.
VAT registered entered into exempt transactions
Franchise grantees of radio and/or television broadcasting with GR of 10M may elect to
be VAT registered, once exercised shall be irrevocable.

May apply not later than 10 days before the beginning of the calendar quarter
Shall pay the registration fee
Once registered, liable to output tax and be entitled to input tax credit beginning on the
first day of the month following the registration.

C. Cancellation or registration
1. Written application with demonstration of GR/GS for the following 12 months will
not exceed 3M
2. If he has ceased to carry on his business.
Beginning on the first day of the following month the cancellation was approved.
Power of Commissioner to suspend business operations
Not less than 5 days
1. Failure to issue receipts or invoices
2. Failure to file vat return
3. Understatement of taxable sales or receipts, 30%
4. Failure to register
VAT is an ad valorem tax payable by the customer
Advance payment of VAT is required with raw and refined sugar.
Applicabl base price of 1,400 per 50 kg bag