ACCOUNTING ED. 10.

Or gross value in money of the goods or

HANDOUT NO. 1-VAT APRIL 6, properties sold, bartered or exchanged,
2020 such tax to be paid by the SELLER or
TRANSFEROR. In case of sale of service
BY: MA. DARIA N. LABALAN, CPA, the base is GROSS RECEIPTS and in case
MBA of importation the base is LANDED COST.

1. HOW TO COMPUTE VAT? Transaction Tax Base

Output Vat xxx
Less: Input Vat xxx Sale of goods Gross Selling Price
VAT PAYABLE xxx
Sale of services Gross Receipts
2. WHAT IS OUTPUT VAT? Importation Landed Cost
Means the VAT due on the sale or
leased of taxable goods or properties or
services by any person registered as a 7. WHAT ARE THE TWO TYPES OF
VAT entity. OUTPUT VATABLE TRANSACTIONS?
a. Those sale, barter of exchange
3. WHAT IS INPUT VAT? subject to 12%
Means the VAT due from or paid b. That sale, barter or exchange
by a VAT registered entity in the course of subject to (0%) zero-rate.
trade or business on purchase,
importation, lease or use of goods of
Kind of transaction Tax consequences
properties or services from a VAT supplier.
a. taxable
4. WHAT IS VAT PAYABLE? transactions
Output tax minus input tax to
arrive at VAT payable on a monthly VAT 1. Sales or a. Seller is subject
declaration and the quarterly VAT returns. leases taxed at to VAT at 12%;
12% b. Seller is entitled
5. WHAT IS EXCESS INPUT OVER to input tax credit;
OUTPUT? c. Seller pays
If the amount of input is excess of output
GREATER THAN the amount of output tax over input tax
tax, the resulting amount is treated as Tax to the BIR.
Credit (deferred asset). 2. Sales or leases a. Seller is subject
a. If the excess input over output taxed at 0% to VAT at 0%
arises from a quarter return it may be (Zero-rated sale);
carried over the next month or quarter b. Seller is entitled
return. to input tax credit;
b. If the excess input over output c. Seller can claim
arises from a monthly return it can be refund of tax credit
carried over the next month’s return. for input tax on
zero-rated sales.
6. WHAT IS THE RATE AND BASE OF
OUTPUT VAT?.
There shall be levied, assessed 8. WHAT ARE 12% VATABLE
and collected on every sale, barter or TRANSACTIONS?
exchange of goods or properties, a value
added tax equivalent to 12% of the A. SALE OF GOODS
gross selling price

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 i. Sale of real properties primarily
held for sale;
ii. Sale of right or privilege to use
patent, copyright, design or model plan,
secret formula, or process, goodwill,
trademark, trade brand, or like property or
right;
iii. The right or privilege to use in
the Philippines of any industrial,
commercial, or scientific equipment;
iv. The right or privilege to use
motion pictures films, tapes and discs;
v. Radio, television, satellite
transmission and cable transmission time.
B. SALE OF SERVICES
i. Means the performance of all
kinds of service in the Philippines for
others for a fee remuneration of
consideration, whether in kind or cash.
Inclusion of sale of electricity by
generation companies, transmission by
any entity, and distribution companies,
including electric cooperatives.
C. IMPORATION OF GOODS
i. VAT is imposed on goods
brought into the Philippines, whether for
use in business or not. The tax shall be
based on the total value used by the BOC
in determining tariff and customs duties,
plus customs duties, excise tax, if any,
and other charges such as postage,
commission and similar charges (landed
cost), prior to the release of the goods
from customs custody (warehouse).
D. DEEMED SALE TRANSACTIONS
i. Transfer, use consumption not in
the course of business of goods originally
intended for sale.
ii. Distribution to shareholders as
share in the profits.
iii. Distribution to creditors as
payment of debt.
iv. Consignment of goods if actual
sale not made within 60 days.
v. Retirement or cessation of
business with respect to ending
inventories.
9. WHAT IS ZERO (0%) RATED
TRANSACTIONS?
A. SALE OF GOODS AT 0%
i. Export sale;
ii. Sale of person entities which is
VAT exempt under special laws or
international agreements to which the
Philippine is a signatory;
iii. Sale of power or fuel generated
through renewable sources of energy.
B. SALE OF SERVICES AT 0%
i. Processing, manufacturing or
repacking of goods for other persons doing
business outside the Philippines, which
goods are subsequently exported, where
the service are paid for an acceptable
foreign currency and accounted for in
accordance with the rules and regulations
of the BSP;
ii. Service rendered to person
covered by special laws;
iii. Service rendered to persons
engaged in international shipping or air
transport operations;
iv. Service performed by
subcontractors or contractors in
processing, converting or manufacturing
goods for an enterprise whose export
sales exceed 70% of the total annual
production.
v. Transport of passengers and
cargo by domestic air or sea carriers from
the Philippines to a foreign country;
Note: Items i to iv above mentioned
will be subject to 12% VAT upon
implementation of the enhanced VAT
refund system beginning January 1,
2020.
10. WHAT IS EXPORT SALE?
A. The sale and actual shipment of
goods from the Philippines to a foreign
country paid for in acceptable foreign
country and accounted for by the BSP.
B. The sale of raw materials or
packaging materials to non-resident buyer
for delivery to resident local export
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oriented enterprise, paid for in acceptable
foreign currency and accounted by the
BSP.
C. Sale of raw materials or
packaging materials to an export-oriented
enterprise whose export sales exceed 70%
of the total production.
D. Those export sale under the
Omnibus Investment Code.
E. Sale of goods, suppliers,
equipment and fuel to persons engaged in
international shipping or international air
transport operations provided such goods,
supplies and equipment shall be
exclusively used for international
transport.
Note: Items B, C and D above
mentioned will be subject to 12% VAT
upon implementation of the enhanced
VAT refund system beginning January
1, 2020.
11. WHAT IS SALE UNDER SPECIAL
LAW?
Sales of goods or property to
persons or entities who are tax-exempt
under special laws or international
agreements to the Philippines is a
signatory, such as Asian Development
Bank, International Rice Research
Institute, PEZA, CDA, SBMA, shall be
effectively subject to zero-rate.
12. WHAT IS EFFECTIVE-ZERO-RATED
TRANSACTIONS.
Refers to the local sale of service
by a VAT-registered person to a person or
entity who was granted indirect exemption
under special laws or international
agreement.
a. Sale to ADB.
b. Sale to International Rice Research
Institute
c. Sale to duly registered and accredited
enterprises with Subic Bay Metropolitan
Authority (SBMA);
d. Sale to duly registered and accredited
enterprises with Clark Development
Authority.
e. Sale to duly registered and accredited
enterprises with. Philippine Economic Zone
Authority (PEZA)
13. WHAT INPUT TAXES MAY BE
CREDITED?
a. Purchases evidenced by VAT invoice
from VAT registered supplier;
b. Vat paid in course of trade or business
on the purchase or importation of goods:
i. for sale;
ii. for conversion into or intended
to form part of finished goods;
iii. for supplies
iv. for purchase of capital goods
for which deductions for depreciation is
allowed;
c. VAT paid on the purchase of real
property;
d. Vat paid on purchase of services;
e. Transaction deemed sale/ purchase;
f. Transitional input VAT;
g. Presumptive input VAT.
14. HOW TO TREAT INPUT VAT FROM
ZRO-RATED TRANSACTIONS?
The input taxes on zero-rated
sales of goods or property or services,
may at the option of the VAT-registered
person be:
a. Refunded (two-year pre-emptory
period applies); or
b. Converted into tax credit
certificates which may be used in paying
other NIRC taxes (two-year preemptory
period applies); or
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 c. Carried over to the next
quarter.
UNUSED INPUT TAXES of persons
whose registration has been cancelled due
to retirement from or cessation of the
business may be converted into tax credit
certificate which may be used in payment
of other NIRC taxes ( two-year preemptory
period applies).
15. HOW TO CLAIM A REFUND OR
AVAIL OF TAX WARRANTS?
A refund or conversion of tax credit
certificate (warrant) must be availed of by
the VAT registered within 2 years from
purchase and shall be granted within 90
days (decision period) from the date of
submission of complete documents.
Refunds shall be made upon
warrants drawn by the Commissioner of
Internal Revenue or by his authorized
representative without the necessity of
being countersigned by the COA
Chairman.
In case the CIR denies the refund,
the remedy is to appeal within 30 days to
the Court of Tax Appeals.
In case of inaction of
Commissioner of Internal Revenue or its
employees within90 days (decision period)
a penalty shall be imposed upon such
misfeasance.
16. What is INPUT-VAT ALLOCATION?
When a taxpayer with a VAT
business and a NON-VAT business makes
a purchase during the month from a VAT-
registered person, for use in his VAT and
non-VAT business, the input tax on the
purchase shall be allocated between the
VAT and NON-VAT business on the basis of
sales during the taxable month pro-rata
Purchases/Transactio Treatment
ns
Ordinary 12% vatable Creditable
purchase
Zero-rated purchases Creditable or
convertible or
refundable
Exempt purchases Cost or expense
17. WHAT IS TRANSITIONAL INPUT
VAT?
When a taxpayer who is not subject
to VAT becomes subject to the VAT due to
a. The gross sales of the preceding
year exceeded the P3,000,000 or
b. The taxpayer being exempt from
Vat system, OPTED TO BE REGISTERED
UNDER THE VAT SYSTEM, shall be allowed
an INPUT TAX on his inventory on the
transition date, of goods or properties,
materials and supplies, equivalent to TWO
PERCENT (2%) OF THE INVENTORY VALUE
OR THE VAT ACTUALLY PAID WHICHEVER
IS HIGHER.
18. What is PRESUMPTIVE INPUT VAT?
Persons or firms engaged in the
processing of sardines, packed noodles,
mackerel, milk, refined sugar, and cooking
oil shall be allowed a PRESUMPTIVE INPUT
VAT, equivalent to four percent (4%) of
the gross value in money of their
PURCHASES OF PRIMARY AGRICULTURAL
PRODUCTS which are used as INPUTS to
their production.
19. WHAT IS WITHHOLDING OF
CREDITABLE INPUT VAT?
The government , or any f its
political subdivision, instrumentalities or
agencies, including government owned or
controlled corporations, shall before
making any payment on its purchases of
goods or services from sellers subject to
VAT, deduct and withhold the VAT at a
rate of five percent (5%) of the gross
payment, which shall be creditable against
the VAT liability of the SELLERS.
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