PRE- BAR REVIEW

VALUE-ADDED TAX

BY:

PROF. CARMENCITA C. DABU

 VALUE-ADDED

TAX (VAT) Concept and nature a. imposed only on increase in the worth, merit or importance of goods and services and not on the total value.

b. uniform tax levied on every importation of goods, limited only to the value added to such G, P, S by the seller or transferor.

 c.

A tax on spending or consumption.

d.

Tax on the value added by the seller with an aggregate annual sales exceeding P1.5M.

 Purpose

of VAT system

Principally aimed at realizing the systemof taxing goods and services simplifying tax administration Make the tax system more equitable.

Vat law history 1. EO No. 273 Jan. 1, 1988 amended

several provisions of old NIRC

2. RA 7716- Jan. 1, 1998 EVAT law Expanding the tax base and enhancing its adminsitration 3. Vat provisions in NIRC )RA8424 4. RA 9337 amended VAT system and increased rate from 10% to 12% 5. RA 9361 amended Title IV-VAT of NIRC

Nature Indirect

Tax on consumption
Percentage tax

Imposition
a) who are liable?

b) requisites for application of VAT 1) covered transactions 2) in the course of trade or business;

Exceptions:
a) services rendered by NRA in the Philippines b) importation c) incidental to business d) transactions deemed sale although isolated -Sec.106 (B), NIRC

Sale of Goods or Properties tangible or intangible, real or personal capable of pecuniary estimation

Gross selling price total amount paid for goods, excluding the VAT, but including the excise tax, if any.

the

Transactions deemed sale

a) transfer, use or consumption not in the course of business b) Distribution or transfer to: 1) shareholders, investors-share in the profit 2) creditors-payment of debt

c) Consignment of goods 1) no actual sale 2) within 60 days from consignment d) Retirement from or cessation of business- inventories on hand

Sale of Goods or Properties subject to VAT: 1. Primarily for sale to customers or lease Sec. 106 (A)(1)(a) Who is liable under this vatable transaction?
Exceptions to Sec. 106 (A)(1)(a):

2. right or privilege to use patent, copyright, etc.

3. to use in the Phils. of any industrial, commercial, or scientific equipment;

4. use motion picture films, tapes, discs 5. radio TV, satellite transmission and cable TV time

Zero-rated transactions: (a) export sales- Sec. 106(A)(2) (b) foreign currency denominated sale (c) sale to persons/entities exempts or subjects such sale by special law or international agreement to which the Phils. is a signatory (d) transactions under Sec. 108 (B)

Sale or exchange of services performance of all kinds of services for others in the Philippines for a fee or remuneration or consideration; include lease of property. Gross receipts total amount paid, actually or constructively received

Zero-rated services under Sec. 108 (B)

Requisites: 1. services are performed in the Philippines 2. performed by VAT-registered persons

Distinction between:

Zero-rated sale of goods/properties and

Effectively zero-rated sale of goods/properties

Transfer of goods by tax-exempt persons Sec. 107(B) Tax-exempt transactions Sec. 109

Tax-exempt importationimporter is exempt; but purchaser, transferee or recipient considered importer liable to VAT.

Sec. 109(1)(A) and (L)

sale of agricultural and marine products compared

Sec. 109 (1)(V) - options

Is the limitation of P1.5M gross receipts under Sec. 109(1)(V) applicable to all enumerations? P1.5M residential lot

P2.5M residential house and lot and other residential dwellings

Sec. 109 (1)(P) Vat not applicable, but see Sec. 106(1)(A)
Sec. 109(1)(Q) Lease of residential unit wd monthly rental not exceed P10,000 regardless of annual rentals (RR-16-2005)

1. Can lessor shift the burden to lessee? Requirements: 2. Rules on rental of residential unit 3. Effect of vat-exempt lessor issues vat receipts-

COMPUTATION OF VAT Formula : Output Tax less - Input Tax VAT payable

Formula: Computation of Taxable Income: Gross Receipts less Vat due (output tax) Income net of VAT less exemptions/deductions/exclusions Taxable income

Input > output - claim for tax credit/refund Input < output pay VAT Input = out no Vat payable

Output tax- VAT due on the sale or lease of taxable goods/properties/services by any person registered or required to be registered under Sec. 236, NIRC

Input tax -VAT due from and paid by a VAT registered person in the course of his trade or business.

Sources of input tax

1.Purchase or importation of goods 2.Purchase of real properties and services 3. Transactions deemed sale-

4. Transitional input tax 2% of the value of such inventory or the actual VAT paid, whichever is higher
5. Presumptive input tax- 4% of gross value of primary agri prod. used in their production

Persons who can avail of input tax credit

VAT-registered person whether or not engaged in transactions subject to VAT

Refund or tax credit of excess input tax

Who may claim for refund/apply for issuance of tax credit certificate: VAT-registered person whose sales are zero-rated or effectively zero-rated

Period to file claim/apply for issuance of tax credit certificate 2 years after the close of the quarter when the sale was made.

Period when CIR refund/issue of TCC - within 120 days from date of submission of complete documents by TP

Manner of giving refund:

Warrants drawn by CIR or his duly authorized representative; but subject to post-audit by COA (Sec. 112, amended by RA 8424)

Remedy of TP if claim is denied 30 days from receipt of decision or 30 days from expiration of 120 days appeal to CTA.

Compliance requirements: 1. registration 2. Invoicing requirements a. Issuance of VAT invoice or OR b. Invoice or OR should state TP VAT or non-VAT with TIN c. Date of transaciton d. Total amount paid includes 12% VAT

e Name and address of buyer wd TIN f. Show the amount of 12% VAT Return and Payment of VATfile return and pay monthly every 20th of the month; 25th of the quarter

Withholding of Final VAT by the government purchase of goods 5% lease or use of property or property rights to NR owner 10% withholding agent payor or in control of the payment remit within 10 days/ following the end of the month withheld

END GOOD LUCK!