Divine Word College of Legazpi

School of Business, Mgt. & Accountancy

Legazpi City

ACCOUNTING ED.04 (BUSINESS & TRANSFER TAXES) MA. DARIA N. LABALAN, CPA, MBA
TF-7:20-8:55
DRILL IN VAT-SUBJECT TRANSACTIONS

TRUE OR FALSE: Write the word TRUE when the statement is correct and the word FALSE when the statement is incorrect.
When your answer is FALSE, underline the word or phrase that makes the statement false.

Example: FALSE 1. Sale of food and drinks by a restaurant is considered sale of goods.

1. Any person who, in the course of trade or business, sells, barters, exchange goods or properties, or engages in the sale of
service subject to VAT shall register and pay an annual registration fee in the amount of P500 for every separate and distinct
establishment or place of business (save warehouse without sale transactions) before the start of such business and every year
thereafter on or before January 31.

2. The term “gross selling price “means the total amount or its equivalent which the purchaser pays or is obligated to pay to
the seller in consideration of the sale, barter or exchange of the goods or properties, excluding VAT, but including excise tax.

3. Gross receipts do not include those amounts earmarked for payment to unrelated third party or received as reimbursement
for advance payment on behalf of another which do redound to the benefit of the payor.

4. There must be a sale, barter, or exchange of goods or property before VAT may be levied.

5. The sale of personal car is considered done in the course of trade or business and therefore subject to VAT.

6. A tax-exempt entity that sells VAT- subject goods shall be exempt from VAT.

7. The gross receipts of recreational clubs, including but not limited to membership fees, assessment dues, rental income and
service fees are subject to VAT.

8. The term “goods or properties” shall include real properties held primarily for sale to customers or held for lease in the
ordinary course of trade or business.

9. Sale or exchange of services, for VAT purposes ,means the performance of all kinds of services in the Philippines and in
foreign countries for others for a fee, remuneration, or consideration, whether in kind or in cash.

10. Services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental
faculties shall be subject to VAT.
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 11. Sales discount given at the time of sale and is not dependent upon future event shall be allowed as deduction from gross
sales for VAT purposes.

12. Sale of real property on deferred payment plan is subject VAT based on selling price stated in the sales documents or fair
market value, whichever is higher.

13. If the gross selling price is based on the zonal value or market value shall be deemed exclusive of VAT.

14. Gross receipts on the sale of electricity by generation, transmission and distribution companies shall refer to total amount
charged and related ancillary/electric services.

15. When output VAT is greater than the input tax, the difference is VAT payable which shall be classified as current
liability.

16. Zero-rated sales of goods and/or services shall not be subject to VAT.

17. According to the Destination Principle, goods and services are taxed only in the country where these are consumed.

18. It is only the sale of gold (not silver or other metallic minerals) to BSP, which is considered an export sale.

19. The input tax on purchases of goods, properties or services, related to zero-rated sale, shall be available as tax credit or
refund.

20. Transport passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country shall be subject
to the regular 12% VAT.

21. Sales of export products to another producer or to an export trader shall only be deemed export sales when actually
exported by the latter, as evidenced by landing certificates or similar commercial documents and if such export trader is registered
with the BOI and required to actually export more than 70% of its annual production.

22. Sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured,
assembled or repacked products whether paid for in foreign currency or not is considered export sales under Executive Order No. 226
and shall be exempt from VAT.

23. Sales of locally manufactured or assembled goods for household and personal use to Filipinos abroad and other non-
residents of the Philippines as well as returning Overseas Filipinos under the Internal Export Program of the government paid for in

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convertible foreign currency and accounted for in accordance with the rules and regulations of the BSP shall also be considered export
sales.

24. For the effective zero-rating of certain transactions, the taxpayer has to be VAT-registered and must comply with
invoicing requirements.

25. VAT on importation is imposed on all importations regardless of who the importer is and whether or not the importer is
VAT-registered.

26. In case the valuation used by the Bureau of Customs in computing customs duties is based on volume or quantity of the
imported goods, the landed cost shall be the basis for computing VAT.

27. The same rule applies to technical importation of goods by a person located in the Special Economic Zone to a customer
located in a custom’s territory.

28. The VAT on importation shall be paid by the importer prior to the release of such goods from customs custody.

29. Retirement from or cessation from business with respect to all goods on hand, whether capital goods, stock in trade,
supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new owner or
successor shall be subject to VAT.

30. The Commissioner of Internal Revenue shall determine the appropriate tax base where the gross selling is unreasonably
lower than the actual market value (lower by more than 30% of the actual market value.)

Note: The following is the format to be used for the answers.

No. Word/phrase that made the statement FALSE Correction

1. Sale of goods Sale of services
to
30

KEEP SAFE EVERYONE!!!!

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