Reviewer: Business and Transfer
Exempt from Registration Fee
Tax
1. Individuals earning purely CHAPTER 7: Business Taxes
Business as defined in the local government code, pertains to trade or commercial activity “regularly engaged in” as means of livelihood to
Transaction Subject to Business Tax 1. It is commercial Activity 2. Serviced is rendered by a non-resident foreign person Casual Sale – is an occasional sale of goods or
compensation income 2. Overseas workers 3. Self-employed individuals where the gross sales or receipts did not exceed P100,000 per year 4. Cooperatives VAT or Non- VAT Registration 1. Mandatory VAT-Registration a. Annual gross sales exceed 1,919,500
services by a person who is not engaged in
b. Tax Payer has realized gross
business or sale sale assets that are not used in
receipts/sales of more than
business. It involves involves selling of personal personal
P1,919,500
properties or belongings not used in business.
2. Optional VAT-Registration Person with taxable transaction
Business Taxes 1. Value Added Tax – a general consumption tax that requires a 12% additional tax on the sales price of goods by VAT registered seller or se ller required by the law under the VAT system. 2. OPT – these are the general consumption taxes imposed to non-vatregistered business.
that do not exceed P1,919,500 per year has the option to register under VAT system 3. Non- VAT-Registration Tax payer who did not opt to register under VAT system must register under non-VAT system when he is a VAT exempt exem pt person subject to OPT. Cancellation OF VAT Registration
3. Excise Taxes – these are the taxes imposed on products that are harmful
Once a person registered his business under
to health,goods that are non-essential
VAT system, such VAT Registration shall be
and products that deplete natural
irrevocable for 3 years from from the quarter the
resources that are manufactured or
VAT registration was made.
produce in the Phil. Business Registration A business requires to be registered first before the commencement of its economic eco nomic activities. Noncompliance to business registration renders the business illegal
CHAPTER 8: BUSINESS TRANSACTION
Rationale of VAT
BUSINESS TRANSACTION – refer to the
1. Simplified Tax Administration
regularity of undertaking for profit purposes.
2. Fostering Honesty
Classification of Business Transaction 1. VAT Transactions: a. Allowed with Input VAT- these are the transactions of a VAT-registered business on items other than those which are VAT exempt and other than
3. High Government Revenues 4. Fostering National Progress Characteristics of VAT 1. It is imposed on business transactions – Not all sales are subject to VAT. 2. It follows the destination principle
those which are subject to specific OPT a.
12% VAT will be imposed on
b. NOT allowed with Input VAT -
transactions of goods and
- these are the transactions of a
services intended to be
Non VAT-registered business
consumed in the Philippines
with annual sales exceeding the
Goods or services sold outside
adjusted threshold amount of
the Philippines are either Zero
P1,919,500
VAT Rated or VAT Exempt
2. Zero VAT Rated Transactions – these
Transactions, while
are sales that are subject to output VAT
importations are subject to
rate of 0%. These are mainly export
VAT.
sales by VAT-registered persons which will generates the needed reserves of foreign currencies
3. IT is an indirect tax, a privilege tax and ad valorem tax 4. It is cumulative
3. VAT Exempt Transactions
5. It employs a tax credit method and
a. Exempt from OPT
basically a tax on gross margin
b. Subject to OPT 4. Transaction with the government units
Rates of VAT 1. For Output VAT a.
CHAPTER 9: Value Added Tax
Value Added Tax is a form of consumption tax imposed on each sale, barter, exchange or lease of goods, properties, or services in the course of trade or business in the Philippines and importation of goods into the Philippines whether or not in the course of trade or business.
Regular VAT rate of 12%
b. ZERO percent rate 2. For Input VAT a.
Regular VAT rate of 12%
b. ZERO percent rate c.
Transitional input VAT rate of 2%
d. Presumptive input VAT rate of 4% e. Final withholding VAT of 5% on sales of goods and services to the government
f.
Standard input VAT of 7% allowed on sales of goods and services to the government.
Taxable Base is the amount on which the VAT
Mergers and Consolidation
Transfer of assets as a result of merger or consolidation are not considered
rate will be applied in computing the output tax
DEEMED SALE TRANSACTIONS . VAT Taxable Person – individual, trust, estate, partnership,corporation, joint venture or
Inventory used for PROMOTIONS and OFFICE
cooperative or association who makes, or
SUPPLIES
intends to enter into the transaction subject to
VAT.
Goods given for free in the c ourse of business in order to promote sales are NOT considered DEEMED SALE TRANSACTIONS
CHAPTER 10: VAT on GOODS OR
PROPERTIES
Office Supplies which are not primarily for sale in the course of business but are consumed for business purposes
Goods or Properties include all tangible
are NOT considered DEEMED SALE
and intangible objects that are capable o f
TRANSACTIONS
monetary estimation. To be subject to business tax, the sale must be related to business or
Sale of REAL PROPERTY classified as capital
trade.
asset is not subject to VAT . Such transactions The sale should be consummated in the
Philippines regardless the term of payments made between the contracting parties. DEEMED SALE TRANSACTIONS 1. Consumption of Inventory. Goods originally intended for sale, but used for personal used by the seller tax payer. 2. Distribution as profit share. Transfer of inventory to shareholders as share in the profits of a VAT-registered person 3. Payments to Creditors. Transfer of
are subject to capital gains tax o f 6% based on sales price or FMV, whichever is higher. CHAPTER 12: INPUT VAT CREDITS and REFUNDS
INPUT VAT CREDITS are value added taxes due from or paid by a VATregistered person in the course of trade or business on local purchase of goods or services including lease or used of property of a VAT- registered person.
Funtions of Input VAT
inventory in payment of debts 4. Consigned goods not sold within 60 days 5. Retirement from Business. The merchandise inventory left at the retirement of business
The Input VAT is primarily intended to reduce the amount of output VAT in computing the VAT payable for the taxable period.
depreciable capital asset and
RULES FOR CREDITABLE Input VAT
depreciated
1. Proper Documentations 2. Delivery Receipts not allowed
Input VAT on Purchases of Services
3. No double input tax credit is allowed 4. Ignore erroneous VAT rate
An input VAT can be derived by a VAT person purchasing from a VAT
5. Allowed by law as creditable Input VAT
registered service provider Input VAT on Importation SOURCES of Input VAT
1. Purchases of goods/properties or
All importations in the Philippines are subject to VAT, whether or not
services to other VAT registered
intended for business, except those
business
mentioned under section 109 of NIRC
2. Purchases of goods/properties or services which are otherwise exempt from VAT, but the seller issued a VAT invoice or receipt 3. Importation of goods 4. Transitional Input VAT 5. Presumptive input VAT 6. Standard input VAT on the sales to the government Input VAT on Depreciable Capital Goods
Capital goods or properties are “goods or properties with an estimated useful life greater than one year and which are treated as depreciable assets.
Input VAT on Construction in Progress
Tax Free Importation
Sale or exchange of tax free goods to a non-exempt person in the Philippines is taxable with ITR against purchaser, transferee or recipient who shall be considered as an importer.
Transitional Input VAT - is allowed on the inventory on hand of a person who,for the first time becomes liable to VAT or elects to be VAT registered. Presumptive input VAT – is an amount allowed by the Tax Code as input tax o n purchases of a VAT registered person despite that there is no actual VAT payment made on VAT exempt transactions
CIP is the cost of construction work which is not yet completed. CIP is not depreciated until the asset is placed in serviced.
Once the Input tax has already bee n claimed while the construction is still in progress, no additional input tax can be claimed upon completion of the asset when it already reclassified as
