VAT and OPT Flashcards
by definition VAT is imposed on the following transactions:
- sale, barter, or exchange of goods or properties
- lease of goods or properties
- sale or rendition of services in the course of trade or businesses
- importation of goods whether or not in the course of trade or business
in the course of trade or business means
the business transaction or series of transactions must be coupled with regularity or habituality
1. as opposed to a remote transaction
2. NOT for personal consumption
importations that are purely for personal consumption or use are subject to
customs duties and VAT
VAT is an
indirect tax, a national tax, and a proportional tax
A proportional tax is
a type of tax where the tax rate remains the same regardless of the amount being taxed. For example, a 10% sales tax means everyone pays 10% tax on whatever they purchase.
A progressive tax is
a tax where the tax rate increases as the amount subject to taxation increases. Higher income or wealth levels are taxed at a higher rate than lower levels.
Input VAT is the VAT component
in every purchase of goods by a VAT-registered entity to another VAT-registered entity
Output VAT is the VAT component
in every sale of goods by a VAT registered entity regardless if the sale is made to a VAT registered entity or not
PISO
PI (PURCHASE - INPUT), SO (SALE - OUTPUT)
VAT taxable transaction may be subject to a rate of
12% or 0%
Who would be required to register in the VAT system?
any person engaged in business whose annual gross sales for the past 12 months exceed 3 million pesos or have reasonable grounds to believe that his gross sales for the next 12 months shall exceed 3 million pesos
Certificate of Registration:
registers name, registered address, tax identification number, different type of taxes required to file and pay
still deemed sale, despite no actual sale took place, and is subject to VAT (1)
transfer, use or consumption, not in the course of trade or business of goods or properties originally intended for sale or for use in the course of business
still deemed sale, despite no actual sale took place, and is subject to VAT (2)
distribution, or transfer of goods to:
shareholders or investors as share in the profits of the VAT registered;
still deemed sale, despite no actual sale took place, and is subject to VAT (3)
consignment of goods if actual sale is not made within 60 days following the date such goods were consigned and not returned by the consignee to the VAT-registered consignor
still deemed sale, despite no actual sale took place, and is subject to VAT (4)
retirement from or cessation from business with respect to all goods on hand
1. change of ownership
2. dissolution of a partnership and creation a new partnership
3. change from sole proprietorship to a corporation (as if the goods were sold from the sole proprietorship to a corporation, an exchange of goods between hands)
How to compute for VAT payable?
- output vat = 120,000 (amount remitted to the BIR)
- LESS input vat = (80,000)
- VAT Payable = 40,000
if input > output vat,
VAT payable, it will be called VAT refundable/creditable which can be used for the succeeding term
one distinction between zero-rated and VAT exempt transaction is that
the prior may avail of input tax credit or refund from VAT purchases
the broad examples of zero-rated sale transactions
export sales, foreign currency denominated sale and effectively zero-rated sales
if not VAT then it will be subject to
3% OPT for business
OPT - crediting system
NO crediting system similar to VAT, the crediting system is unique to VAT
3% OPT is
ALSO AN INDIRECT TAX - it can be shifted to the consumers
an excise/privilege tax and a proportionate tax
VAT-registered persons subjected to 0% rate
- Export sale; or
- Sales to persons or entities whose exemption under special laws, or international agreements to which the Philippines is a signatory (effectively-zero rated sales)
What is VAT-exempt transactions
refer to the sale of goods or properties and/or services and the use or lease of properties that are not subject to VAT (output tax), and the seller is not allowed any tax credit of VAT (input tax) on purchases.
A VAT-registered person shall issue:
- A VAT invoice for every sale, barter, or exchange of goods or properties; and
- A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services
Percentage taxes are based on
business taxes based on gross sales or receipts.
Generally, if a taxpayer is exempt from VAT, he or she is liable
for 3% percentage tax.
Who are people exempt from VAT?
persons who annual sales/receipts do not exceed 3,000,000
common carrier
persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods or both by land, water, or air for compensation, offering their services to the public and shall include transportation contractors
what is the tax base in transaction deemed sale?
For 1, 2, 3, it shall be based on selling price unless the selling price is unreasonably lower than the market value of the goods (more than 30%), the CIR or his representative will determine the tax base
(1) Transfer, use, or consumption not in the course of trade or business
(2) distribution or transfer of goods to shareholders
(3) consignment of goods if actual sale is not made within 60 days
in case of retirement or cessation of business the tax base shall be the acquisition cost or the current market price of the goods whichever is lower
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 amount of output tax because the rate is zero
What is a foreign currency denominated sale (FCDS)
a sale of goods to a non-resident except those mention in sections 149 (excise tax on automobiles) and 150 (excise tax on non-essential goods), assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and account for in accordance with the rules and regulations of the BSP
Effectively-zero rated transaction
- Refers to the local sale of goods and properties by a VAT registered person to a person or entity who was grated indirect tax exemption under special law or international agreement
- Since the buyer is exempt from indirect tax, the seller cannot pass on the VAT and therefore, the exemption enjoyed the buyer shall extend to the seller, making the sale effectively zero-rated
a special kind of OPT imposed in the gross revenue of various amusement activties
Amusement Tax
Jai alai and race tracks
30%
Cabarets, night and day clubs
18%
Cockpits
18%
Professional Basketball games
15%
Boxing exhibitions
10%
Boxing exhibitions in any division whether for world or oriental
championships is exempt from amusement tax if the following
conditions exist:
One of the contenders for the said championship is a citizen of the
Philippines;
The promoter is a Filipino citizen or a corporation at least 60% owned
by Filipino citizen/s
in the initial public offering or IPO of newly publicly listed corporation, what is also imposed
OPT is also imposed
Up to 25%
Over 25% but not over 33 and 1/3
Over 33 and 1/3%
4%
2%
1%
Percent of IPO to O/S - Tax Rate
The tax shall be based on the higher amount of gross selling price or gross value in money of the shares of stock sold, bartered or exchanged. It shall be paid by the issuing corporation in primary offering within 30 days from the date of listing or by the seller within 5 days from the date of collection in secondary offering.
OPT for sale of shares of stock listed and traded in the local stock exchange
is 6/10 of 1% of the gross selling price or gross value in money of the shares sold, bartered or exchanged
OPT for horse race winnings is
10% for the owner of the winning horse and this amount shall be withheld before paying the winnings to the owner
For bettors, the OPT for horse race winnings is
10% on the amount of winnings after deducting the cost of the ticket
The “value” contemplated in Value added tax
is the value being added to a product as it transfers from one entity to another
