Business and Transfer Tax

VAT ON SALES OF GOODS OR PROPERTIES

 VAT TAXPAYER

 Any person who sells, barters or exchanges goods or

properties in the course of trade or business will be
subject to the value-added tax.
 SALE and BARTER

A sale is the transfer or ownership of

property in consideration of money
received or to be received (includes
‘deemed sale’)

A barter or exchange is the transfer of

ownership of property in consideration
of property received or to be received.

Isolated transaction of sale or exchange of private property is not in the

course of trade or business and is not subject to VAT.
 Transactions deemed Sale

a) Transfer, use or consumption, not in the ordinary course of

business, of goods or properties ordinarily intended for sale
or in the course of business
b) Distribution or transfer of inventory to shareholder or
investors for their share of the profits of a VAT-registered
person.
c) Distribution or transfer of inventory to creditors in payment
of debt
d) Consignment of goods if actual sale is not made within sixty
days following the date such goods were consigned.
e) Retirement from or cessation of business, with respect to
inventories of taxable goods as of the date of such
retirement or cessation.
 Goods or Properties

 Goods or properties are all tangible and intangible

objects which are capable of pecuniary (money)
estimation.

 Goods are movable properties.

 Properties are real properties.
 Tax Base

 Tax base is Gross Selling Price (GSP)

 GSP means the total amount of money or its

equivalent which the purchaser pays or is obligated
to pay to the seller in consideration of the sale,
barter, or exchange, excluding the VAT.

 Excise tax if any, will form part of the GSP

 Tax Base

 In an actual sale, the selling price of the seller is:

a) Recovery of cost and expenses

b) Desired profit

 The Commissioner of Internal Revenue will

determine the appropriate tax base in cases where
the transactions are deemed sales
 Tax Rates

a) 12% if Domestic sale

b) 5% if sales to the Government (and certain entities)
c) 0% if export sales

 Goods exported are taxed at 0%, whether title to

the goods passed to the buyer in the Philippines or
abroad, but paid in acceptable foreign currency.
 TAX FORMULA

Output Tax Less: Input Tax Equals: VAT Payable of seller

Input VAT includes local purchases from VAT-registered persons, and on

importation of goods
a) For Sale
b) For conversion into or intended to form part of a finished product or sale,
including packaging materials
c) For use as supplies
d) For use in trade or business, for which depreciation (or amortization) is
allowed for income tax purposes (capital goods) except automobiles, aircraft
and yachts
e) VAT paid on purchases of real property
f) VAT paid on purchases of services
g) Transitional Input tax
h) Presumptive Input Tax
 Accounting Treatment of VAT

 Output tax and Input tax do not go into the

computation of income tax
 Not treated as expenses since these are creditable
with each other
 Any excess of Input or Output VAT will be Deferred
Input Tax or VAT Payable in the next taxable period.
 Real Estate Dealer

 Real Estate Dealer is any person engaged in the

business of buying, developing, selling or exchanging
real property as principal and holding himself out as
a full or part-time dealer of the estate
 The tax base is the consideration stated in the deed
of sale, or the zonal value or the FMV in the
assessment rolls, whichever is the highest
 Installment sale by the Real Estate Dealer

 Installment payments of the VAT is allowed if the

initial payments do not exceed 25% of selling price in
the deed of sale.

 When the initial payments do not exceed 25% of the

selling price:
1. Compute the VAT at 12% on the tax base (whichever the
highest of three values)
2. Determine the VAT on the installment payment as follows:
Collection on the selling price, exclusive of VAT x Computed VAT in #1
Agreed Selling Price, exclusive of VAT
 Presumptive Input Tax

 Persons or firms engaged in processing sardines,

mackerel, and milk, and in manufacturing refined
sugar and cooking oil, and packed noodle-based
instant meals will be allowed presumptive input tax,
equivalents to 4% of the gross value in money
of their purchases of primary agricultural products
which are used as inputs to their production.