Value Added Tax Flashcards
Persons liable
- He undertakes taxable transactions (SELBRI) in goods, properties, or services which is not exempt
- Such is consumed or destined to be consumed within the Phils
- Such transactions are entered into in the course of trade or business
- Amount of his gross sales or receipts exceed the threshold
- 1919500 for sale of residential lot
- 3199200 for sale of residential house and lot and other dwelling
- 12800 for rental
In the course of TRADE OR BUSINESS
Means regular conduct or pursuit of a commercial or an economic activity, including transactions incident thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.
Cross border doctrine
The destination of goods determines taxation or exemption from tax. Exports are zero rated since the consumption of such will be made outside the phils while imports are subject to 12% since they are consumed within the country.
As to services, consumption takes place where the service is performed following the “situs of service principle”
Aggregation rule
For vat purposes, husband and wife shall be treated as separate taxpayers.
However, under this rule, the taxable sales of goods, properties and services by each spouse shall be added together to determine whether he/she has exceeded the gr threshold set by law.
Condominium corporations
Association dues, membership fees and other assessment charges by member/tenants are part of the gross income of CC subject to income as well as VAT because it furnishes it member/tenants with beneficial services.
As long as the entity provides service for a fee, renumeration or compensation then the service is considered subject to vat.
Subdivisions and homeowners association
- The homeowners’ association must be a duly constituted “Association” as defined under Section 3(b) of RA 9904;
- The local government unit having jurisdiction over the homeowners’ association must issue a certification identifying the basic services being rendered by the homeowners’ association and therein stating its lack of resources to render such services notwithstanding its clear mandate under applicable laws, rules, and regulations. Provided further, that such services must fall within the purview of the “basic community services and facilities” which is defined under Section 3(d) of RA 9904 as those referring to services and facilities that redound to the benefit of all homeowners and from which, by reason of practicality, no homeowner may be excluded such as, but not limited to: security; street and vicinity lights; maintenance, repairs, and cleaning of streets; garbage collection and disposal; and other similar services and facilities; and
- The homeowners’ association must present proof (i.e. financial statements) that the income and dues are used for the cleanliness, safety, security, and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions or villages.
Religious organization
Exempt from taxes, includes the ff:
- Sale of bibles and other religious articles (all reading materials) on a non profit basis to church members.
- Receipts in the form of voluntary offerings.
- Small sums of money received by priest for praying the soul of the dead is a religious activity not considered as taxable trade or business.
Goods subject to VAT
- Actual or deemed sale of goods or properties for a valuable consideration.;2. Undertaken in the course of trade or business;
- For use and consumption in the Phils;
- Not exempt from VAT under the tax code, special law or international agreement.
Real properties subject to VAT
- Seller executes a deed of sale, barter, exhange, assignment or conveyance or contract to sell of real property;
- The RP is located in Phils;
- The seller or transferor is engaged in real estate business either as a RE dealer, developer or lessor;
- RP is held primarily for sale or lease in the course of his T and B or at least an ordinary asset of a VAT taxpayer as an incident to his Vat taxable activity;
- Not exempt
Transactions Deemed Sale
(1) Transfer, use or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business;
(2) Distribution or transfer to:
(a) Shareholders or investors as share in the profits of the VAT-registered persons; or
(b) Creditors in payment of debt;
(3) Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned; and
(4) Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.
Zero‐rated transaction
Zero-rated sale of goods or properties by a VAT‐registered person is a taxable transaction for VAT purposes but the sale does not result in any output tax.
However, the input tax on the purchases of goods, properties or services related to such zero-‐rated sale shall be available as tax credit or refund.
Requisites of a foreign currency denominated sale
- The buyer must be a non-resident;
- The goods sold must be assembled or manufactured in the Philippines; 3. Goods sold are to be delivered to a resident;
- and Paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP
Tax treatment of Commissions
If EE-ER relationship exist then its a commisions subject to income tax. No vat or percentage tax. Usually termed insurance agent.
If no EE-ER relationship, the commission is subject to VAT or percentage tax and CWT of 10/15%. Usually termed broker and the place of service is the tax situs.
Doctrine of constructive receipt
CR occurs when the money inconsideration or its equivalent is placed under the control of the person who rendered the service without restrictions by the payor.
Actual or constructive receipt of the contract price, compensation, remuneration or fee makes the seller of the service liable to VAT, even of no service has yet been performed by him.
Vat Exempt transactions
Subject to the provisions of subsection (2) hereof, the following transactions shall be exempt from the value-added tax:
- “Sale or importation of:
Ø agricultural and marine food products in their original state,
Ø livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor.
“Products classified under this paragraph (such as meat, fruits and vegetables) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping. Polished and/or husked rice, corn grits, raw cane sugar and molasses, ordinary salt, and copra shall be considered in their original state;
Examples of Agricultural & Marine Food Products @ their original state Agricultural Marine Livestock Poultry Polished/husked rice Fish Cows Fowls Corn grits Crustaceans such as: Bulls Ducks Raw cane sugar & molasses Eels Trout Lobster Shrimps Prawns Oysters Mussels Clams Calves Geese Ordinary salt Pigs Turkey Copra Sheep Goats Rabbits
NOTE:
§ Livestock or poultry does not include fighting cocks, race horses, zoo animals and other animals generally considered as pets
- “Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds.
(except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets).
Ø Note: Importation of raw materials are taxable. i.e.; importation of diatomaceous earth which is used for the formulation fertilizers are subject to VAT. - “Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines;
- “Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects.
Except:
Any vehicle, vessel, aircraft, machinery, other goods for use in the manufacture and merchandise of any kind in commercial quantity belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner, that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide; - “Services subject to percentage tax under Title V;
- “Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar;
Ø Agricultural contract growers refer to those persons producing for others’ poultry, livestock or other agricultural and marine food products in their original state.
Ø i.e.; a contract for a package of services of receiving eggs from breeder farm, sorting, fumigating, setting, hatching, sexing of day-old broilers, sorting and delivering them to other contract grower. - “Medical, dental, hospital and veterinary services except those rendered by professionals;
Ø Laboratory services are exempted. If the hospital or clinic operates a pharmacy or drugstore, the sale of drugs and medicines are subject to VAT.
Ø Hospital bills constitute medical services. The sales made by the drugstore to the in-patients which are included in the hospital bills are part of medical bills (not subject to vat).
Ø The sale of the drug store to the out-patients are taxable because they are NOT PART of medical services of the hospital.
Professional Practitioners Professional Practitioners (PPs) are formerly classified as non-VAT taxpayers and were exempt from the Value-Added Tax and Percentage taxes under Section 109 of the National Internal Revenue Code (hereinafter referred to as the Code), until December 31, 2002. Prior to this date, they were subject only to Income Tax under Section 24 of the Code. Effective January 1, 2003, however, by virtue of Republic Act Nos. 7716 and 9010, which were implemented by Revenue Regulation Nos. 1-2003 and 3-2003, services of PPs are also subject to either VAT or 3% Percentage Tax.
Pursuant to Revenue Regulations No. 16-2005, services of Professional Practitioners are subject to VAT if gross professional fees exceed P1,919,500 for a 12-month period and subject to 3% Percentage Tax if gross professional fees total P1,919,500 and below for a 12-month period.
“Professional Practitioners” include the following:
· Certified Public Accountants
· Insurance Agents (Life & Non-life)
· Other Professional Practitioners required to pass the government examination
· Others
- “Educational services rendered by private educational institutions, duly accredited by the Department of Education (DEPED), the Commission on Higher Education (CHED), the Technical Education And Skills Development Authority (TESDA) and those rendered by government educational institutions;
- “Services rendered by individuals pursuant to an employer-employee relationship;
- “Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines;
- “Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529 (Petroleum Exploration Concessionaires under the petroleum act of 1949.
- “Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce, whether in its original state or processed form, to non-members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce.
Agricultural Cooperative
Sale to Members
Sale to Non-Members
Sale of cooperative’s own produce
Exempt
Exempt
Other than the cooperative’s own produce (i.e., from Traders)
Exempt
Subject to Vat
- “Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the Cooperative Development Authority;
Ø Exemption is not only limited to the gross receipts on loans extended to its members but also to other persons who are not members. - “Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with the Cooperative Development Authority: Provided, That the share capital contribution of each member does not exceed Fifteen thousand pesos (P15,000) and regardless of the aggregate capital and net surplus ratably distributed among the members;
Ø Importation by non-agricultural, non-electric and noncredit cooperatives of machineries and equipment including spare parts thereof, to be used by them are subject to vat. - “Export sales by persons who are not VAT-registered;
- “Sale of real properties
Ø not primarily held for sale to customers or held for lease in the ordinary course of trade or business,
· Only sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to vat.
Ø Residential lot valued at P1,919,500 & below (formerly P1.5M). If two or more adjacent residential lots are sold or disposed in favor of one buyer, for the purpose of utilizing the lots as one residential lot, the sale shall be exempt from vat only if the aggregate value of the lots do not exceed P1,919,500. Adjacent residential lots, although covered by separate titles and/or separate tax declarations, when sold to one and the same buyer, whether covered by one separate Deed of Conveyance, shall be presumed as sale of one residential lot. (RR 16-2011)
Ø House & Lot, and Other Residential Dwellings valued at P3,199,200 and below.
Ø real property utilized for low-cost housing (ceiling price per unit does not exceed P2,000,000) and socialized housing (ceiling price per unit does not exceed P300,000) as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws,
Provided, that every three (3) years thereafter, the amounts herein stated shall be adjusted to their present values using the Consumer Price Index, as published by the National Statistics Office (NSO);
- “LEASE of a RESIDENTIAL UNIT with a monthly rental not exceeding Ten thousand pesos (P12,800) regardless of the amount of aggregated rentals received by the lessor during the year. Provided, That not later than January 31, 2009 and every three (3) years thereafter, the amount herein stated shall be adjusted to its present value using the Consumer Price Index as published by the National Statistics Office (NSO); (RR 16-2011).
Ø LEASE of RESIDENTIAL UNITS where the monthly rental per unit exceeds P12,800 but the aggregate of such rentals of the lessor during the year do not exceed P1,919,500 shall likewise be exempt from VAT, however, the same shall be subjected to the 3% percentage tax.
Ø In cases where a lessor has SEVERAL RESIDENTIAL UNITS for LEASE, some are leased out for a monthly rental per unit of not exceeding P12,800 while others are leased out for more than P12,800 per unit, his tax liability will be:
v The gross receipts from rentals not exceeding P12,800 per month per unit shall be exempt from vat regardless of the aggregate annual gross receipts.
v The gross receipts from rentals exceeding P12,800 per month per unit shall be subject to vat if the annual gross receipts (from said units only – not including the gross receipts from units leased out for not more than P12,800) exceed P1,919,500.
RESIDENTIAL UNIT shall refer to:
ü Apartments and houses and lots used for residential purposes;
ü Buildings or parts or units thereof used solely as dwelling places (i.e., dormitories, rooms, bed spaces) except motels, motel rooms, hotels and hotel rooms.
UNIT shall refer to: ü Apartment unit in case of apartments ü House in case of residential houses ü Per person in case of dormitories, boarding houses and bed spaces; and ü Per room in case of rooms for rent
- “Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements;
- “Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare parts thereof for domestic or international transport operations;
Provided, that the exemption from vat on the importation and local purchase of passenger and/or cargo vessels shall be limited to those of 150 tons and above, including engine and spareparts of said vessel; and the vessel to be imported shall comply with the age limit requirement as follows:
Ø Passenger and/or cargo – 15 years old
Ø Tankers – 10 years old
Ø High speed passenger crafts – 5 years old
Provided, finally, that the exemption shall be subject to the provisions of Sec. 4 of RA 9295, otherwise known as “The Domestic Shipping Development Act of 2004”
Sale of vessels with age of more than 15 years is subject to vat
- “Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations;
Provided that the:
Ø Fuel, goods and supplies shall be exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port without stopping at any other port in the Philippines.
Ø Fuel, goods or supplies is used for the purposes other than that mentioned in the preceding paragraph, such portion of fuel, goods and supplies shall be subject to 12% vat. - Importation of life-saving equipment, safety and rescue equipment and communication and navigation safety equipment, steel plates and other metal plates including marine-grade aluminum plates used for shipping transport operations; Provided, that the exemption shall be subject to the provisions of Sec. 19 of RA 9295, otherwise known as “The Domestic Shipping Development Act of 2004” (RR 4-2007).
- Importation of capital equipment, machinery and spare parts, life-saving and navigational safety equipment, steel plates and other metal plates including marine-grade aluminum plates used in the construction, repair, renovation or alteration of any merchant marine vessel operated or to be operated in the domestic trade. Provided, that the exemption shall be subject to the provisions of Sec. 19 of RA 9295, otherwise known as “The Domestic Shipping Development Act of 2004” (RR 4-2007).
- “Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries (i.e.; money changers and pawnshops); and
- “Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of P1,919,500; Provided, That not later than January 31, 2009 and every three (3) years thereafter, the amount herein stated shall be adjusted to its present value using the Consumer Price Index as published by the National Statistics Office (NSO);
- Vat on Purchase of SPECIFIED Goods and Services by a Senior Citizen and PWDs.
