chapter 3 Flashcards
What is Value-added Tax (VAT)?
A tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines.
Is VAT an indirect tax?
Yes, VAT is an indirect tax that may be passed on to the buyer.
Who is liable for VAT payment?
The VAT registered seller is legally liable for the payment of VAT.
What is the annual gross income threshold for VAT registration?
Php3,000,000.
How is VAT treated from the buyer’s perspective?
It is added on the purchase price of goods or services payable to the VAT-registered seller.
How is VAT treated from the seller’s perspective?
It is added on the value of product or service sold collectible from the buyer.
What is the formula to calculate VAT Payable?
Output VAT - Input VAT = VAT Payable.
What are the characteristics of VAT?
- Imposed on business transactions
- Follows consumption/destination principle
- Indirect tax
- Cumulative
- Employs tax credit method
- No double taxation
What is one rationale for implementing VAT?
Higher Government Revenue.
What objects are subject to VAT?
- Sales of goods or properties related to business or trade
- Sales of services or lease of properties within the Philippines
- Importation
What is Output VAT?
The VAT on sales of goods or services passed on to the buyers.
What are the sources of Regular Output VAT?
- Sale of vatable goods
- Sale of vatable services
- Sales of vatable properties
- Transactions deemed sales
What are the two methods of VAT presentation?
- VAT Exclusive Method
- VAT Inclusive Method
What is Input VAT?
The value-added tax due from or paid by a VAT registered person in the course of his ordinary trade or business.
When is Input VAT creditable?
When both seller and buyer are VAT-registered, with exceptions (When the purchase was transacted by a non-VAT taxpayer issuing a VAT invoice, and
Purchase on imported goods or services)
What are the functions of Input VAT?
- Tax credit against output VAT
- Input VAT carry-over
- Tax refund
- Tax credit certificate
What is required for proper documentation of Input VAT?
A VAT Invoice or VAT official receipt issued in the name of the service recipient.
Are delivery receipts allowed for Input VAT claims?
No, delivery receipts are not allowed.
Is double input tax credit allowed?
No, double input tax credit is not allowed.
What happens if the output tax exceeds the input tax at the end of a taxable quarter?
The excess shall be paid by the VAT-registered person.
VAT is a sales tax designed to be borne by the consumers, with sellers acting merely as tax collectors.
Tax burden
The VAT registered seller is legally liable for the payment of VAT; however, he can shift the burden of VAT to the buyer
Legal Liability
Rationale of VAT
*Simplified Tax Administration
*Fostering Honesty
*Higher Government Revenue
*Fostering National Progress.
The amount of VAT is presumed not yet included in the tax base amount.
VAT Exclusive Method
