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TAXATION - Review > VALUE ADDED TAX > Flashcards

VALUE ADDED TAX Flashcards

1
Q

What is the scope of VAT?

A

VAT covers all sales of goods/properties/services/lease of properties other than:

a. VAT exempt sales
b. Services specifically subject to percentage tax

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2
Q

What is a VAT-registrable person/business?

A

It refers to any person or entity who, in the course of business, has exceeded the VAT threshold of 3,000,000 for the past 12 months, unless exempt.

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3
Q

Who are subject to mandatory VAT registration?

A
  1. Any person or entity who, in the course of business, has exceeded the VAT threshold of aggregate actual gross sales/ receipts of 3,000,000 for the past 12 months, unless exempt, OR when there are reasons to believe that the gross sales or receipts for the next 12 months will exceed 3,000,000.
  2. Radio/TV broadcasting companies whose annual gross receipts OF THE PRECEDING YEAR exceeds 10,000,000.
  3. A person required to register as VAT taxpayer but failed to register.
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4
Q

What is the penalty for non-registration for those mandatorily required to register as VAT?

A

He shall be liable to the same tax as if he were a VAT-registered taxpayer, BUT HE CANNOT AVAIL THE BENEFITS OF INPUT TAX CREDIT FOR THE PERIOD HE WAS NOT PROPERLY REGISTERED.

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5
Q

T or F
Radio/TV broadcasting who registered VAT even though the gross receipts of the preceding year did not exceed 10,000,000 can cancel the VAT registration.

A

False. Franchise grantees of radio/TV broadcasting who voluntarily registered as VAT, cannot revoke it anymore.

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6
Q

When must persons/entities intending to voluntarily register as VAT apply for such registration?

When are they entitled to input tax?

A

Not later than 10 days before the beginning of the calendar quarter and shall pay the registration fees.

They shall be entitled to input tax credit beginning on the first day of the month following registration.

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7
Q

Explain the instances wherein a VAT-registered person may cancel his VAT registration.

A
  1. If he makes a WRITTEN APPLICATION and can DEMONSTRATE to the commissioner’s satisfaction that his GROSS SALES OR RECEIPTS, OTHER THAN THOSE THAT ARE EXEMPT, WILL NOT EXCEED 3,000,000.
  2. If he has ceased to carry on his trade or business, and does not expect to recommence any trade or business within the next 12 months - the cancellation for registration will be effective from the FIRST DAY OF THE FOLLOWING MONTH THE CANCELLATION WAS APPROVED.
  3. Sec 115 - POWER OF THE COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE TO SUSPEND BUSINESS OPERATIONS of a business establishment for a period of NOT LESS THAN 5 DAYS for any of the following violations:
    a. Failure to issue receipts
    b. Failure to file VAT return
    c. Understatement of taxable sales/receipts BY 30% OR MORE of the correct taxable sales/receipts for the quarter
    d. Failure of any person to register as required under the law
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8
Q

Abdul, VAT-registered, is closing down his shop for good. He applied for the cancellation of VAT registration on May, and such application was approved in June. When is the cancellation of VAT effective?

A

July 01, since the cancellation for registration will be effective from the first day of the following month the cancellation was approved.

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9
Q

T or F
Mixed VAT registration is also a classification of registration of VAT taxpayers, along with mandatory and optional registrations.

A

False.

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10
Q

T or F
Lease of commercial spaces are generally subject to VAT regardless of the amount of monthly rental per unit.

A

True.

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11
Q

T or F
Importation of drugs and medicines for diabetes, hypertension and high cholesterol are exempt from VAT.

A

TRUE

Sale or importation by the manufacturers, distributors, wholesalers and retailers of prescription drugs and medicines included on the list of approved drugs and medicines by the Department of Health (DOH) for diabetes, high cholesterol, and hypertension shall be VAT-exempt beginning January 27, 2020.

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12
Q

Who are the persons liable for VAT?

A

Any person who, IN THE ORDINARY COURSE OF BUSINESS:

a. Sells/barters/exchanges goods or properties
b. Leases goods or properties
c. Renders services

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13
Q

What is the formula for computing VAT?

A

Output Tax xxx
Input Tax (xxx)
VAT payable or (excess input tax) xxx or (xxx)

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14
Q

Differentiate Net of VAT and Gross of VAT

A

Net of VAT - no vat yet/ VAT not included
Gross of VAT - VAT already included

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15
Q

What are the sources of Output VAT?

A
  1. Sale of Goods
  2. Sale of Services
  3. Sale of Properties
  4. Transaction deemed sales
  5. Export Sales
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16
Q

Explain the sale of goods as a source of output VAT.

A

VAT is computed based on the Gross Selling Price. Gross Selling Price means the total amount of money or its equivalent which the purchaser pays the seller in consideration of the sale/barter/exchange of goods EXCLUDING VAT.

Excise tax, if any, shall form part of the gross selling price

Banggawan: If gross selling price is LESS THAN 70% of the fair market value, the tax basis shall be the FMV, since the GSP is unreasonable, UNLESS THE BUYER IS THE GOVERNMENT.

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17
Q

Explain the sale of services as a source of output VAT.

A

VAT shall be computed based on the Gross Receipts on all collections.

Banggawan: notes are excluded.

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18
Q

Explain the sale of properties as a source of output VAT.

A
  1. If CASH SALE - VAT shall be computed based on:
    a. Gross Selling Price
    b. Fair Market Value
    c. Zonal Value
    WHICHEVER IS HIGHER
  2. If DEFERRED PAYMENT BASIS (Initial payments in the year of sale EXCEED 25% of the GSP) - VAT shall be computed based on:
    a. Gross Selling Price
    b. Fair Market Value
    c. Zonal Value
    WHICHEVER IS HIGHER
  3. If INSTALLMENT PLAN (Initial payment in the year of sale IS 25% OR LESS of the GSP) - VAT shall be computed based on:
    a. (Collection/GSP) x GSP
    b. (Collection/GSP) x FMV
    c. (Collection/GSP) x ZV
    WHICHEVER IS HIGHER

Note: INTERESTS AND PENALTIES ARE ALSO SUBJECT TO VAT.

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19
Q

How is Gross Selling Price determined?

A

Gross sales xxx
Less: Sales discount (xxx)
Sales returns and allowance (xxx)

Net Sales xxx
Add: Excise Tax xxx

TAX BASE XXX

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20
Q

In Deferred Payment Basis and installment plan in the sale of real properties, how is initial payments determined?

A

Down payment xxx
Other collections in the year of sale xxx
Excess of unpaid mortgage over cost xxx

Initial Payments XXX

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21
Q

What are transaction deemed sales? What are considered transaction deemed sales?

A

These are transactions which are consumptions in nature but are not coursed through a purchase transaction by the consumer. Even so, these transactions are forms of taxable consumptions and are deemed sales for VAT purposes. It includes:

a. Transfer/use/consumption not in the course of business of goods or properties ORIGINALLY INTENDED FOR SALE or USE IN THE COURSE OF BUSINESS.

b. Distribution or transfer to:
1. Shareholders or investor’s share in the profits of VAT-
registered persons
2. Creditors in payment of debt

c. Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned
d. Retirement from or cessation of business with respect to all goods on hand whether capital goods, stock in trade, supplies or materials as of the date of cessation, whether or not the business is continued by the new owner or successor
e. Cessation of status as a VAT-registered person

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22
Q

Abdul bought land from a realty company. He was charged with interests and penalties because of late payments. Are the interests and penalties subject to Output VAT?

A

Banggawan: YES

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23
Q

Abdul, a wealthy businessman dealing in real estate transferred to his son a piece of land which was part of his inventory, with a cost of 2M and a FMV of 2.5M. How shall this gift be treated?

A

This is a transaction deemed sale. The 2.5M FMV is the tax basis in computing VAT.

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24
Q

T or F
Commission income on goods sold for consignors are also subject to Output VAT.

A

Banggawan: True

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25
Q 
Abdul, VAT-registered, ceased his business operations and assets at the time of termination included the following:
Cash 100,000
Accounts Receivable 200,000
Investments 300,000
Inventories 200,000
PPE 800,000

What is his Output VAT on cessation of his business?

A

Only ordinary assets are subject to Output VAT upon cessation/retirement of business, therefore:

Inventories - 200,000
PPE - 800,000

1,000,000 x 12% = 120,000 Output VAT

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26
Q

What is the general rule for transaction deemed sales?

A
  1. The property transferred must be AN ORDINARY ASSET (used in business)
  2. The property transferred is a VATable PROPERTY
  3. The person/business involved is a VAT-REGISTERED
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27
Q

Abdul Corp, primarily involved in real estate, declared as dividends its investment in XYZ corp. Is the dividends subject to Output VAT?

A

No, since the dividends are capital assets. Had Abdul declared real property as dividends, it would’ve been subject to output VAT.

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28
Q

Abdul, VAT taxpayer, closed his business. He had in his inventory 100 sacks of rice and 200 sacks of pet food. Is he subject to Output VAT?

A

He is subject to Output VAT only on the 200 sacks of pet food, since the sacks of rice are business tax-exempt.

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29
Q

What is the rule if VAT is not separately billed?

A

The selling price or consideration shall be deemed inclusive of VAT.

30
Q

What happens when there is incorrect billing of VAT?

A

The total amount billed shall be deemed inclusive of VAT.

31
Q

Abdul made a mistake in the invoice with VAT as follows:
Selling price 100,000
Output VAT 10,000

Invoice 110,000

What must be done to correct this?

A

The output VAT should have been 12,000 (100,000x 12%)

Since it has already been invoiced, the 110,000 shall be deemed inclusive of VAT.

110,000 x (12/1.12) = 11,785 OUTPUT VAT

32
Q

What is the percentage for creditable withholding tax for rental income?

A

5%

33
Q

What are the rules on export sales?

A

GR: Sale of goods is subject to 12% VAT.
EX: EXPORT SALES (ZERO-RATED)
a. Sale and actual shipment of goods and shipment from PH to a foreign country paid for in acceptable currency and accounted for in accordance with the rules and regulations of the BSP

b. Services other than processing/manufacturing or repacking of goods for other persons engaged in business who is outside the PH when the services are performed, paid for in acceptable currency and accounted for in accordance with the rules and regulations of the BSP
c. Sale of raw materials or packaging materials to a non-resident buyer for manufacturing/processing/ packing/repacking in the PH of the said buyer’s goods, paid for in acceptable currency, and accounted for in accordance with the rules and regulations of BSP. (PRE-TRAIN)
d. Sale of raw materials or packaging materials to AN EXPORT-ORIENTED ENTERPRISE WHOSE EXPORT SALES EXCEED 70% OT TOTAL ANNUAL PRODUCTION (PRE-TRAIN)

e. Transactions considered export sales under E.O 226
(PRE-TRAIN)

  1. sales to bonded manufacturing warehouses of export-oriented manufacturers
  2. sales to export processing zones
  3. sales to registered export traders operating bonded trading warehouses supplying raw materials used in the manufacture of export products under guidelines
  4. sales to foreign military bases, diplomatic missions and others granted tax immunity
  5. sales of locally manufactured goods to Filipinos abroad.

C, D and E above are now subject to 12% VAT under TRAIN law upon satisfaction of the following:
a. Successful establishment and implementation of an ENHANCED REFUND SYSTEM that grants refunds and creditable input tax within 90 days from the filing of the VAT refund application with the BIR; provided that al applications filed from January 1, 2018 shall be processed and decided within 90 days from the filing of the VAT refund application.

34
Q

What other sales are zero-rated aside from export sales?

A
  1. Sale of services, goods, supplies, equipment, fuel to persons engaged in international shipping or international air transport operations PROVIDED that the said items shall be EXCLUSIVELY USED FOR INTERNATIONAL SHIPPING OR AIR TRANSPORT OPERATIONS.
  2. Sales to persons/entities deemed tax-exempt under Special Law or International Agreement (Effectively zero-rated)
    a. PEZA (Philippine Economic Zone Authority)
    b. SBMA (Subic Bay Metropolitan Area)
    c. Asian Development Bank
    d. International Rice Research Institute
  3. Sale of gold to BSP (VAT EXEMPT UNDER TRAIN!!!)
  4. Outgoing transport of passengers and cargo by sea or air carriers from PH to abroad by domestic carriers.
  5. Sale of power/fuel generated through renewable sources of energy such as: biomass/solar/wind/ hydropower/geothermal/steam.
35
Q

What is the effect of a zero-rated sale?

A

It is still a taxable transaction for VAT purposes, but shall not result in any output tax. The input tax on purchases related to such zero-rated sale, shall be available as tax credit or refund.

36
Q

What is input VAT? What are the requisites of a valid Creditable Input VAT?

A

Input VAT is the VAT due and paid by a VAT-registered entity in the ordinary course of business. The requisites of a valid creditable input VAT are:

  1. Paid for in the ordinary course of business
  2. Evidenced by VAT invoice/OR
  3. Issued by a VAT-registered person
  4. Incurred in relation to VATable sales.
37
Q

What are the options of a VAT-registered entity when it has input tax attributed to zero-rated sales?

A

He may at his option:

  1. Have input tax deducted from output tax
  2. Refunded
  3. Applied for a tax credit certificate (TCC) which may be used in payment of internal revenue taxes.
38
Q

What are the kinds of Input VAT?

A
  1. Transitional
  2. Regular
  3. Amortization of Deferred
  4. Presumptive
  5. Standard/Final Withholding VAT
  6. Input VAT Carryover
  7. Input VAT on Importation
39
Q

Explain Transitional Input VAT.

A

It is an Input VAT granted to persons who became VAT-registered. It is simply 2% of beginning inventory and supplies or actual VAT paid on the inventory and supplies WHICHEVER IS HIGHER FOR EACH CATEGORY (Supposing it has both supplies and inventory, transitional input VAT shall be computed separately for inventory and the supplies.)

40
Q

Suppose a newly VAT-registered person has 112,000 worth of goods with VAT included and goods costing 518,000 from non-VAT persons. How is transitional input VAT computed?

A

Compare Transitional Input allowable versus Actual paid.

Actual is 12,000 (112,000 x 3/28)

Transitional is ((518,000+112,000) x 2%) = 12,600

12600 is the applicable input tax since it is higher.

INVENTORY OR SUPPLIES GROSS OF VAT IS USED IN COMPUTING TRANSITIONAL INPUT TAX.

41
Q

Explain Presumptive Input tax.

A 
It is a 4% input VAT granted for those engaged in the PROCESSING OF:
a. Sardines
b. Mackerel
c. Milk
d. Cooking Oil
e. Packed Noodles
f. Refined Sugar
ONLY ON THE PURCHASES OF PRIMARY AGRICULTURAL INGREDIENT.

See Tabag page 608 #98. There is no presumptive input tax on beginning month inventory of the primary agricultural ingredient.

42
Q

Explain Regular Input VAT.

A

It is the 12% VAT paid on:

a. Domestic purchases of goods/services/properties
b. Importation

43
Q

Explain the Amortization of Deferred Input VAT.

A

Amortization of Deferred Input VAT occurs when there is:
A. PURCHASE OF “DEPRECIABLE CAPITAL” GOOD OR PROPERTY
B. “MONTHLY AGGREGATE ACQUISITION COST” EXCEEDS 1,000,000, EXCLUDING VAT.
C. Has useful life of more than 1 year.

If the above conditions are met, the Input VAT shall be deferred and AMORTIZED OVER 60 MONTHS OR USEFUL LIFE WHICHEVER IS SHORTER.

If acquisition cost does not exceed 1,000,000 the input VAT is claimable in the month of purchase.

“MONTHLY AGGREGATE ACQUISITION COST” REFERS TO TOTAL PRICE EXCLUDING VAT AGREED UPON ONE OR MORE ASSETS ACQUIRED AND NOT THE PAYMENTS OR INSTALLMENTS MADE.

44
Q

Explain Standard/Final Withholding VAT.

A

It pertains to Input VAT on sales to the government or any of its political subdivisions, instrumentalities or agencies including GOCCs. Before making payment on account of each purchase of goods and or services taxed at 12% VAT, deduct and withhold a FINAL VAT due at the rate of 5% of the gross payment.

The 5% withheld final VAT shall be deemed the actual VAT payable of the seller.

The 7% difference is the Input VAT claimable by the seller and this is called the STANDARD INPUT VAT.

45
Q

Explain Input VAT Carryover.

A

See Index Card for example.

  1. Excess Input VAT from prior quarter is deductible in first month of current quarter
  2. Excess Input VAT from 1st month of current quarter is deductible in second month of current quarter
  3. Excess Input VAT from 2nd month of current quarter is NOT DEDUCTIBLE in 3rd month of current quarter
  4. Excess Input VAT from prior quarter is deductible in 3rd month quarterly balance of current quarter
46
Q

Abdul made a 112,000 sales to the government, inclusive of VAT. The goods sold was purchased by Abdul at 100,800, inclusive of VAT. Explain what happens in the withholding of input VAT before TRAIN and AFTER TRAIN

A

The government will withhold 5% of the 100,000 (sale exclusive of VAT) or 5,000, and release only 107,000 to Abdul. The 5,000 withheld is the presumed actual VAT payable of the seller.

The following are the entries (PRE-TRAIN):

A. To record the purchase of goods
Purchase 90,000
Input VAT 10,800
Cash 100,800

B. To record the sale to the government
Cash 107,000
Final VAT withheld 5,000
Sales 100,000
Output VAT 12,000

C. To close the VAT accounts
Output VAT 12,000
Income Summary 3,800
Input VAT 10,800
Final VAT withheld 5,000

Post-TRAIN - only the entries under A and B (exclude C)

47
Q

Abdul made a 112,000 sales to the government, inclusive of VAT. The goods sold was purchased by Abdul at 100,800, inclusive of VAT. Explain what happens in the withholding of input VAT.

A

The government will withhold 5% of the 100,000 (sale exclusive of VAT) or 5,000, and release only 107,000 to Abdul. The 5,000 withheld is the presumed actual VAT payable of the seller.

The following are the entries:

A. To record the purchase of goods
Purchase 90,000
Input VAT 10,800
Cash 100,800

B. To record the sale to the government
Cash 107,000
Final VAT withheld 5,000
Sales 100,000
Output VAT 12,000

C. To close the VAT accounts
Output VAT 12,000
Income Summary 3,800
Input VAT 10,800
Final VAT withheld 5,000

48
Q

Determine the treatment of excess input tax for each kind of input tax.

A

KINDS OF INPUT TAX TREATMENT

A. Related to sales subject to Carry-over only
12% IV

B. Related to 0% VAT

a. Carry over
b. Refund
c. Tax credit certificate

C. In case of cancellation of VAT registration

a. Tax credit certificate
b. If no other tax liability, REFUND

49
Q

What happens when a capital good/property whose Input Tax upon purchase is amortized, is subsequently sold before the input tax has been fully amortized?

A

If the capital good is sold or disposed within 5 years prior to exhaustion of input vat thereon, the ENTIRE UNAMORTIZED INPUT VAT THEREON CAN BE CLAIMED AS INPUT TAX CREDIT DURING THE MONTH OR QUARTER WHEN THE SALE OR DISPOSAL WAS MADE.

50
Q

Government units making payments to VAT registered businesses are required to withhold the estimated tax corresponding to its payment which is how many percent of gross payment?

A

5%.

51
Q

The withholding agent of creditable value added tax is required to remit the amount of value added tax withheld within?

A

10 days following the end of the month the withholding was made.

52
Q

Abdul, VAT-registered, sold laptop and cellphone covers to the City of Marawi on April 1. City of Marawi shall remit the 5% final VAT to the BoC on or before?

A

May 10th of the same year.

53
Q

How is creditable input VAT computed when there are sales to both the government and private entities?

A

Input VAT from regular purchases plus 7% standard input VAT.

54
Q

What transactions are subject to special rules on Output Tax/Input Tax Credit?

A
  1. Non-depreciable vehicles
  2. Construction in progress
  3. Purchase of real property on installment
  4. Purchase of goods or properties deemed sold
55
Q

Explain the Input VAT rules on Construction in Progress.

A

Construction in progress for VAT purposes is viewed as a purchase of service, not as capital goods. Hence, the creditable Input Tax is upon PAYMENT of each progress billings of the contractor and is NEITHER:

a. Credited upon completion of the construction
b. Amortized over a period not more exceeding 60months

If the taxpayer purchases the materials to be used in construction and the contractor only bills the labor, the input VAT on construction in progress shall be claimed upon payment of the billings. The input VAT on the purchases of materials shall be claimed upon purchase.

The same rules apply on the Output tax from the seller’s perspective.

56
Q

Explain the Input VAT purchase of real property on installments.

A

If the seller of real property is subject to VAT on the sale on a deferred-payment basis(INITIAL PAYMENTS EXCEED 25% of the GSP) NOT ON THE INSTALLMENT PLAN, the input VAT shall be claimable by the buyer at the time of the execution of the instrument of sale, subject to the amortization rule on depreciable properties.

If the purchase is BY INSTALLMENT(INITIAL PAYMENTS DO NOT EXCEED 25% of the GSP) and the seller is allowed to bill the output VAT in installment, the buyer can also claim input VAT in the same period the seller recognizes output VAT. It must be noted that there is also INPUT VAT ON INTERESTS AND PENALTIES FOR LATE PAYMENTS.

The same rules apply on the Output tax from the seller’s perspective.

57
Q

T or F
On sales of real property by a real estate dealer, where the VAT is computed based on the HIGHER MARKET VALUE OR ZONAL VALUE, the same must be specifically mentioned upon billing the VAT.

A

True.

58
Q

Who are considered senior citizens?

A

Senior citizens/elderly refers to any Filipino who is:

a. A resident of the Philippines and
b. Aged 60 or above.

Senior citizens with dual citizenship status must prove their PH citizenship and have at least 6 months residency in the PH.

59
Q

What are the VAT-exempt sales to senior citizens?

A

The following items sold to senior citizens are VAT-EXEMPT and will entitle the senior citizen to a minimum 20% discount:

a. Medicine and drug purchases
b. Professional fees of attending physicians in all hospitals/medical facilities/clinics/home health services
c. Professional fees of licensed health workers providing home health care services
d. Medical/dental/diagnostic/laboratory fees
e. Actual fare for land transportation travel
f. Actual fare for domestic air transport and sea shipping vessels
g. Utilization of services in hotels/lodging/restaurants/recreation centers
h. Admission fees in cinemas/theaters/concert halls/circuses/carnivals/other places of leisure and amusement
i. Funeral and burial services of senior citizens.

60
Q

How is the billing of sales for senior citizens computed?

A

Total bill inclusive of VAT XXX
Less: VAT (XXX)
Total bill exclusive of VAT XXX
Less 20% discount (XXX)
Total Amount due XXX

For sales involving non-senior citizens, try to isolate the senior citizen’s portion.

61
Q

Explain the grant of 5% special discounts for senior citizens.

A

A special discount of 5% OF THE REGULAR RETAIL PRICE shall be granted TO SENIOR CITIZENS on BASIC AND PRIME COMMODITIES. The purchases should be for the PERSONAL AND EXCLUSIVE CONSUMPTION of said senior citizen.

Basic commodities include:

a. Rice/corn/bread(excluding cakes and pastries)
b. Fish and marine products
c. Pork/beef/poultry meat and eggs
d. Milk
e. Vegetables
f. Coffee and creamer
g. Sugar
h. Cooking oil
i. Salt
j. Soap
k. Firewood/charcoal
l. candles

Prime commodities include:

a. Fresh fruits
b. Flour
c. Dried/processed pork/beef/poultry meat and eggs
d. Dairy products
e. Canned goods
f. Noodles
g. Onions
h. Garlic
i. Geriatric Diapers
j. Herbicides
k. Poultry/swine/cattle feeds and other veterinary products for said animals
l. Nipa shingles/plyboard/construction nails
m. Batteries
n. Electrical supplies and light bulbs
o. Steel wire

62
Q

Who are considered persons with disabilities?

A

It shall refer to an individual suffering from restriction or different abilities as a result of mental/physical/sensory impairment to perform an activity in a manner considered normal for a human being.

63
Q

Explain the discounts and exemptions available to PWDs.

A

PWDs shall be entitled to:
A. AT LEAST 20% DISCOUNT AND EXEMPTION FROM THE VAT IF APPLICABLE ON:

a. Medicine and drug purchases in all drugstores
b. Professional fees of attending physicians in all
hospitals/medical facilities/clinics/home health services
c. Professional fees of licensed health workers providing
home health care services
d. Medical/dental/diagnostic/laboratory fees
e. Actual fare for land transportation travel
f. Actual fare for domestic air transport and sea shipping
vessels
g. Utilization of services in
hotels/lodging/restaurants/recreation centers
h. Admission fees in cinemas/theaters/concert
halls/circuses/carnivals/other places of leisure and
amusement
i. Funeral and burial services of PWDs, excluding the
obituary publication and cost of memorial lot

B. Educational assistance to PWDs, provided the same shall meet the minimum admission requirements

C. GSIS, SSS, and Pag-IBIG

64
Q

Explain the administrative provisions and invoicing requirements for Value Added Tax.

A
  1. VAT registered persons shall issue:
    a. A VAT invoice for every transaction
    b. VAT official receipts for every lease of goods/properties for every transaction
  2. Zero-rated and VAT-exempt sales must be printed prominently in the invoice or receipt.
  3. There must be proper segregation of VAT exemption and discounts for sales to senior citizens
  4. Consequences of issuing an erroneous invoice or official receipt:
    a. If a person who is not a VAT registered person issues an invoice or receipt showing his TIN followed by VAT, the non-VAT person shall be liable to:
    1. OPT applicable to the transaction
    2. VAT due on the transaction without the benefit of
      input tax
    3. A 50% surcharge

b. If a VAT registered person issues a VAT invoice/receipt for a VAT-exempt transaction but fails to display prominently on the invoice or receipt the term “VAT EXEMPT SALE”, the issuer shall be liable for the VAT.

65
Q

When is the due date for filing percentage and VAT returns?

A

Monthly percentage and VAT returns - 20th day of the following month

Quarterly Percentage tax return - 20th day of the month following the end of the taxable quarter

Quarterly VAT return - 25th day of the month following the end of the taxable quarter.

Withholding VAT return - on or before the 10th day following the end of the month.

66
Q

Suppose Abdullah derives income from multiple sources; his practice of profession as a CPA, his taxi operating franchise, and bakery. Explain how the aggregation rule applies to Abdullah in computing business tax.

A

The AGGREGATION RULE for each taxpayer shall apply. The aggregation rule states that if a taxpayer derives revenue from other lines of businesses, which are otherwise subject to VAT, the same shall be combined for purposes of determining whether the 3M threshold has been exceeded.

If Abdullah’s receipts from his practice of profession and bakery exceeds 3M, she shall be subject to VAT. Taxi operations shall be subject to OPT under SEC 117.

67
Q

In transaction deemed sales, when there is a retirement or cessation of business with respect to all goods on hand when there is a change in ownership of business or dissolution, how shall the output VAT be determined?

A

The Output VAT shall be based on THE LOWER BETWEEN:

  1. ACQUISITION COST
  2. CURRENT MARKET PRICE

of the goods or properties involved.

68
Q

Abdul has 2 businesses; one is subject to VAT while the other is specifically subject to OPT. The 2 businesses uses the same kind of inventory in its daily operations, to which Abdul pays input VAT. Can Abdul claim the entire input VAT on its operations subject to VAT?

A

No. Abdullah must allocate the input taxes between the VAT and non-VAT businesses on the basis of their respective sales during the taxable month.

69
Q

What kind of sugar is VAT-exempt?

A

ONLY MUSCOVADO SUGAR (RAW CANE SUGAR) under SEC 109.

Brown and white sugar have undergone many processes and is therefore VATable.

70
Q

Explain how national athletes and coaches are subjected to VAT and discounts.

A

National athletes and coaches are entitled to 20% discount on the selling price but are subjected to VAT.

For example, an athlete bought an item worth 336 inclusive of VAT.
Price gross of VAT 336
Remove VAT 36
Price net of VAT 300
Less 20% discount 60
Total 240
Add back VAT 36
Total Payable 276

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