TAXATION SIA/TABAG

TAX 2905. VALUE ADDED TAX OCT 2020

LECTURE NOTES

A. Nature and Characteristics of VAT a. residents of the Philippines returning from

v It is a business tax levied on the value-added abroad; and
on certain goods, properties and services in b. Non-resident citizens coming to resettle
the domestic market and/or importer of in the Philippines.
goods.
NOTE: Such goods must be exempt from
v It is imposed not on the goods or services as customs duties.
such but on the privilege of selling or
importing goods or rendering services for a 4) Importation of professional instruments and
fee, remuneration or consideration. implements, tools of trade, occupation or
employment, wearing apparel, domestic animals,
v It is an indirect tax and the amount of tax and personal household effects, provided:
may be shifted or passed on to the buyer, a. It belongs to persons coming to settle in the
transferee or lessee of the goods, properties Philippines, or Filipinos or their families and
or services. descendants who are now residents or citizens
of other countries such parties herein referred
v The party directly liable for the payment of to as overseas Filipinos;
the tax is the seller, importer or the service b. In quantities and of the class suitable to the
provider, although the burden of the tax may profession, rank or position of the persons
be shifted or passed on to the consumer. importing said items;
c. For their own use and not for sale, barter or
B. EXEMPT TRANSACTIONS exchange;
d. Accompanying such persons, or arriving within
This means the sale of goods, properties or a reasonable time.
services and the use or lease of properties are
not subject to VAT (Output Tax) and the seller or Provided, that the Bureau of Customs may,
lessor is not allowed to any tax credit on VAT upon the production of satisfactory evidence
(Input Tax) on purchases. that such persons are actually coming to settle
in the Philippines and that the goods are
The following are VAT exempt transactions as brought from their former place of abode,
amended under TRAIN Law: exempt such goods from payment of duties
1) Sale or importation of: and taxes: Provided, further, vehicles, vessels,
a. agricultural and marine food product in aircrafts and machineries and other similar
their original state; goods for use in manufacture, shall not fall
b. livestock and poultry used as, or within this classification and shall therefore be
producing foods for human consumption; subject to duties, taxes and other charges.
c. breeding stock and genetic materials.
5) Services subject to percentage tax
Products that will be considered in their
original state: 6) Services by agricultural contract growers and
a. products which undergone simple milling for others of palay into rice, corn into grits
processes of preparation or preservation and sugar cane into raw sugar;
for the market (freezing, drying, salting,
broiling, roasting, smoking or stripping) 7) Medical, dental, hospital and veterinary services
b. polished or husked rice except those rendered by professionals;
c. corn grits
d. raw cane sugar and molasses NOTE:
e. ordinary salt ü Laboratory services are exempted. If the
f. copra hospital or clinic operates a pharmacy or
drugstore, the sale of drugs and medicines
NOTE: Livestock or poultry does not include are subject to VAT.
fighting cocks, race horses, zoo animals and ü Hospital bills constitute medical services. The
other animals generally considered as pets. sales made by the drugstore to the in-
patients which are included in the hospital
2) Sale or importation of: bills are part of medical bills (not subject to
a. Fertilizers vat).
b. Seeds, seedlings and fingerlings ü The sales of the drug store to the out-
c. Fish, prawn, livestock and poultry feeds patients are taxable because they are NOT
d. Ingredients used in the manufacture of PART of medical services of the hospital.
finished feeds (except specialty feeds for
race horses, fighting cocks, aquarium 8) Educational services rendered by:
fish, zoo animals and other animals a. private educational institutions, duly
generally considered as pets). accredited by:
i. Department of Education (DepEd)
3) Importation of personal and household effects ii. Commission on Higher Education (CHED)
belonging to the: iii. Technical Education and Skills
Development Authority (TESDA)

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 otherwise known as the “Urban
b. Government Educational Institutions Development and Housing Act of 1992”
and other related laws.
9) Services rendered by individuals pursuant to an “Low-cost housing” refers to housing
employer-employee relationship projects intended for homeless low-
income family beneficiaries, undertaken
10) Services rendered by regional or area by the Government or private developers,
headquarters which may either be a subdivision or a
condominium, registered and licensed by
11) Transactions which are exempt under the Housing and Land Use Regulatory
international agreements to which the Board/Housing (HLURB) under BP Blg.
Philippines is a signatory or under special 220, PD 957, or any other similar law,
laws wherein the unit selling price is within the
selling price per unit as set by the
12) For agricultural cooperatives: Housing and Urban Development
Coordinating Council (HUDCC) pursuant
a. Sales to their members to RA 7279, otherwise known as the
b. Sales to non-members if the cooperative “Urban Development and Housing Act of
is the producer (if not, subject to VAT) 1992” and other laws.
c. Importation of:
- direct farm inputs, machineries and c. Real property utilized for “socialized
equipment, including spare parts housing” as defined by Republic Act No.
thereof 7279, and other related laws such as RA
- to be used directly and exclusively in No. 7835 and RA No. 8763, wherein the
the production and/or processing of price ceiling per unit is P450,000 or as
their produce. may from time to time be determined by
HUDCC and the NEDA and other related
Type of Product Sale to Sale to laws.
Members Non-
Members “Socialized housing” refers to housing
Sale of cooperative’s programs and projects covering houses
own produce Exempt Exempt and lots or home lots only that are
undertaken by the government or the
Other than the Exempt Subject private sector for the underprivileged and
cooperative’s own to Vat homeless citizens, which shall include
produce (i.e., from sites and services development, long-tem
Traders) financing, liberalized terms on interest
payments, and as such other benefits in
13) Gross receipts from lending activities by accordance with the provisions of
credit or multi-purpose cooperatives Republic Act 7279, otherwise known as
the “Urban Development and Housing Act
NOTE: of 1992” and RA No. 7835 and RA No.
Exemption is not only limited to the gross 8763. “Socialized Housing” shall also
receipts on loans extended to its members refer to projects intended for the
but also to other persons who are not underprivileged and homeless wherein
members. the housing package selling price is within
the lowest interest rates under the
14) Sales by non-agricultural, non-electric and Unified Home Lending Program (UHLP) or
non-credit cooperatives, provided, that the any equivalent housing program of the
share capital contribution of each member Government, the private sector or non-
does not exceed P15,000 government organizations.

NOTE: d. Real properties primarily held for sale to

Importation by non-agricultural, non-electric customers or held for lease in the
and noncredit cooperatives of machineries ordinary course of trade or business, if:
and equipment including spare parts thereof, i. Residential lot valued at P1,500,000;
to be used by them are subject to VAT. ii. House and lot, and other residential
dwellings valued at P2,500,000
15) Export sales by persons who are not VAT-
registered NOTE:
ü If two or more adjacent residential lots
16) Sale of: are sold or disposed in favor of one
a. Real properties not primarily held for sale buyer, for the purpose of utilizing the lots
to customers or held for lease in the as one residential lot, the sale shall be
ordinary course of trade or business. exempt from vat only if the aggregate
However, even if the real property is not value do not exceed P1,500,000 (as
primarily held for sale to customers or amended). Adjacent residential lots,
held for lease in the ordinary course of although covered by separate titles
trade or business but the same is used in and/or separate tax declarations, when
trade or business of the seller, the sale sold to one and the same buyer, whether
thereof shall be subject to vat being a covered by one separate Deed of
transaction incidental to the taxpayer’s Conveyance, shall be presumed as sale of
main business. one residential lot.
b. Real property utilized for low-cost
housing as defined under RA No. 7279,

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 ü Provided, that beginning January 1, 2021, the exemption from vat on the importation and
the vat exemption shall only apply to sale local purchase of passenger and/or cargo vessels
of real properties not primarily held for shall be subject to the requirements on restriction
sale to customers or held for lease in the on vessel importation and mandatory vessel
ordinary course of trade or business, sale retirement program of MARINA (RR 15-2015).
of real property utilized for socialized
housing as defined under RA No. 7279, 21) "Importation of fuel, goods and supplies by
sale of house and lot and other residential persons engaged in international shipping or air
dwellings with selling price of not more transport operations; Provided that/the:
than two million pesos (P2,000,000); § Fuel, goods and supplies shall be
Provided, further, that every three (3) exclusively or shall pertain to the
years thereafter, the amounts stated transport of goods and/or passenger from
herein shall be adjusted to its present a port in the Philippines directly to a
value using the Consumer Price Index, as foreign port, or vice versa, without
published by the Philippine Statistics docking or stopping at any other port in
Authority (PSA). the Philippines unless the docking or
stopping at any other Philippine port is for
17) Lease of a residential unit with a monthly rental the purpose of unloading of passengers
not exceeding P15,000, regardless of the amount and/or cargoes that originated from
of aggregated rentals received by the lessor abroad , or to load passengers and/or
during the year. cargoes bound for abroad;
§ If fuel, goods or supplies is used for
NOTES: purposes other than that mentioned in
ü LEASE of RESIDENTIAL UNITS where the the preceding paragraph, such portion of
monthly rental per unit exceeds P15,000 but fuel, goods and supplies shall be subject
the aggregate of such rentals of the lessor to 12% vat.
during the year do not exceed P3,000,000
shall likewise be exempt from VAT, however, 22) "Services of banks, non-bank financial
the same shall be subjected to three (3%) intermediaries performing quasi-banking
percentage tax (RR 16-2011; RR 13-2018). functions, and other non-bank financial
intermediaries such as money changers and
ü In cases where a lessor has SEVERAL pawnshops, subject to percentage tax under
RESIDENTIAL UNITS for LEASE, some are Sections 121 and 122, respectively, of the Tax
leased out for a monthly rental per unit of not Code.
exceeding P15,000 while others are leased
out for more than P15,000 per unit, his tax 23) Sale or lease of goods and services to senior
liability will be: citizens and persons with disabilities, as provided
under RA No. 9994 (Expanded Senior Citizens Act
- The gross receipts from rentals not of 2010) and RA No. 10754 (An Act Expanding
exceeding P15,000 per month per unit the Benefits and Privileges of Persons with
shall be exempt from VAT regardless of Disability (PWD), respectively.
the aggregate annual gross receipts.
24) Transfer of property pursuant to Section 40(C)(2)
- The gross receipts from rentals exceeding of the Tax Code, as amended (Upon effectivity of
P15,000 per month per unit shall be RA10963-TRAIN Law on January 1, 2018; new
subject to VAT if the annual gross provision).
receipts (from said units only – not
including the gross receipts from units 25) Association dues, membership fees, and other
leased out for not more than P15,000 assessments and charges collected on a purely
exceed P3,000,000. Otherwise, the gross reimbursement basis by homeowners’
receipts shall be subject to three percent associations and condominium corporations
(3%) percentage tax under section 116 of established under RA No. 9904 (Magna Carta for
the tax code (RR 16-2011; RR 13-2018). Homeowners’ and Homeowners Association) and
RA No. 4726 (Condominium Act), respectively.
18) Sale, importation, printing or publication of books This provision shall take effect only beginning
and any newspaper, magazine, review or bulletin January 1, 2018 or upon the effectivity of
which: RA10963-TRAIN Law (new provision).
a. Appears at regular intervals;
b. With fixed prices for subscription and sale; 26) Sale of Gold to the Bangko Sentral ng Pilipinas
c. Not devoted principally to the publication of (BSP). This provision shall take effect only
paid advertisements. beginning January 1, 2018 or upon the effectivity
of RA10963-TRAIN Law (new provision).
19) Transport of passengers by international carriers
doing business in the Philippines. The same shall 27) Sale of drugs and medicines prescribed for
not be subject to Other Percentage Taxes as diabetes, high cholesterol, and hypertension
amended under RA10378 and Transport of cargo beginning January 1, 2019 (new provision)
by international carriers doing business in the
Philippines, as the same is subject to 3% 28) "Sale or lease of goods or properties or the
common carrier’s tax (Other Percentage Taxes) performance of services other than the
as amended under RA10378. transactions mentioned in the preceding
paragraphs, the gross annual sales and/or
20) "Sale, importation or lease of passenger or cargo receipts do not exceed the amount of
vessels and aircraft, including engine, equipment P3,000,000, as amended (previously
and spare parts thereof for domestic or P1,919,500).
international transport operations, provided, that

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C. VAT REGISTRATION 2. If he has ceased to carry on his trade or
business, and does not expect to
1) MANDATORY REGISTRATION recommence any trade or business within the
next twelve (12) months.
The following persons are required to register:
a. Any person or entity who, in the course of his 3. POWER OF THE COMMISSIONER TO SUSPEND
trade or business, sells, barters, exchanges, BUSINESS OPERATIONS:
leases goods or properties and renders services v The Commissioner of the Internal Revenue or
subject to VAT, if the aggregate amount of actual his authorized representative may order
gross sales or receipts exceed P3,000,000 (as suspension or closure of business
amended) in the current year (other than establishment for a period of not less than 5
those that are exempt). days for any of the following violations:
1. Failure to issue receipts or invoices
b. Radio and/or television broadcasting companies 2. Failure to file vat return
whose annual gross receipts of the preceding 3. Understatement of taxable sales or
year exceeds P10,000,000. receipts by 30% or more of the
correct taxable sales or receipts for
the taxable quarter.
Penalty for non-registration of those 4. Failure of any person to register as
required to register as VAT? required under the law.
He shall be liable to pay the tax as if he were
a VAT-registered person but he cannot avail D. VAT FOR SELLER OF GOODS, PROPERTIES AND
the benefits of input tax credit for the period SERVICES
he was not properly registered.
v PERSONS LIABLE - Any person who, in the course of
2) OPTIONAL REGISTRATION his trade or business:
1. Sells, barters or exchanges goods or properties
Any person who is VAT-exempt or not (Seller of Goods or Properties)
required to register for VAT, in relation to 2. Leases goods or properties (Lessor)
B.28 above may, elect to be VAT-registered by 3. Renders services (Service Provider)
registering with the RDO that has jurisdiction
over the head office of that person, and pay the v MEANING OF “IN THE COURSE OF TRADE OR
annual registration fee of P500.00 for every BUSINESS” – the regular conduct or pursuit of a
separate and distinct establishment. Any person commercial or economic activity, including
who elects to register under optional registration transactions incidental thereto, by any person
shall not be allowed to cancel his registration for regardless of whether or not the person engaged
the next three (3) years. therein is a non-stock, non-profit private organization
(irrespective of the disposition of its net income and
Any person who is VAT-registered but enters into whether or not it sells exclusively to members or
transactions which are exempt from VAT (mixed their guests), or government entity.
transactions) may opt that the VAT apply to his
transactions which would have been exempt. The rule of regularity, to the contrary
notwithstanding, services rendered in the Philippines
Franchise grantees of radio and/or by a non-resident foreign persons shall be considered
television broadcasting whose annual gross as being rendered in the course of trade or business.
receipts of the preceding year do not exceed ten
million pesos (P10,000,000.00) derived from the v FORMULA:
business covered by the law granting the
franchise may opt for VAT registration. This Output Tax PXXX
option, once exercised, shall be irrevocable. Input Tax (XX)
(Sec. 119, Tax Code). VAT Payable (Excess Input Tax) PXXX

The above-stated taxpayers may apply for VAT E. OUTPUT TAX OF SELLER OF GOODS OR
registration not later than ten (10) days before PROPERTIES
the beginning of the calendar quarter and shall
pay the registration fee unless they have already v KINDS OF SALE OF GOODS OR PROPERTIES SUBJECT
paid at the beginning of the year. In any case, TO VAT:
the Commissioner of Internal Revenue may, for 1. Actual Sale
administrative reason deny any application for 2. Transactions deemed sale:
registration. Once registered as a VAT person, a) Transfer, use or consumption not in the
the taxpayer shall be liable to output tax and be course of business of goods or properties
entitled to input tax credit beginning on the first originally intended for sale or for use in the
day of the month following registration. course of business. Transfer of goods or
properties not in the course of business can
3) CANCELLATION OF VAT REGISTRATION take place when VAT-registered person
withdraws goods from his business for his
Instances when a VAT-registered person personal use;
may cancel his VAT registration: b) Distribution or transfer to:
1. If he makes a written application and can i. Shareholders or investors share in the
demonstrate to the commissioner's profits of VAT-registered person;
satisfaction that his gross sales or receipts for ii. Creditors in payment of debt;
the following twelve (12) months, other than c) Consignment of goods if actual sale is not
those that are exempt, will not exceed made within 60 days following the date such
P3,000,000; or goods were consigned; and

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 d) Retirement from or cessation of business with Installment Plan – means sale of real property, the initial
respect to all goods on hand, whether capital payment of which in the year of sale do not exceed 25%
goods, stock-in-trade, supplies or materials of the gross selling price.
as of the date of such retirement or
cessation, whether or not the business is
continued by the new owner or successor. COMPONENTS OF INITIAL PAYMENT:

v FORMULA IN COMPUTING OUTPUT TAX Down payment PXXX

Other collections in the year of sale XXX
Tax Base PXXX Excess of unpaid mortgage over cost XXX
Rate XX% Initial Payments PXXX
Output Tax PXXX
v RATE - As a general rule, the rate of value-added tax
v TAX BASE for the sale of goods or properties is 12% (Local
Sales). However, the following transactions are
Actual Sale subject to 0% (ZERO-RATED SALES):
Personal property GSP
Real Property 1) Export Sales:
1. Cash Sale GSP vs. FMV vs. ZV a. Sale and actual shipment of goods from the
2. Deferred w/c ever is the highest Philippines to a foreign country, paid for in
Payment Basis acceptable currency, and accounted for in
3. Installment Plan [(Collection/GSP) x accordance with the rules and regulations of
GSP vs. FMV vs. ZV the BSP;
w/c ever is the highest] b. Sale of raw materials or packaging materials
Transaction Deemed Sale to a non-resident buyer for delivery to a
1. (a), (b) and (c) FMV resident local export oriented enterprise to be
above used in manufacturing, processing, packing
2. (d) above AC vs. NRV (w/c ever or repacking in the Philippines of the said
buyer’s goods, paid for in acceptable
is lower)
currency, and accounted for in accordance
with the rules and regulations of the BSP;
GSP – Gross Selling Price
c. Sale of raw materials or packaging materials
FMV – Fair market value
to an export-oriented enterprise whose
ZV – Zonal Value
export sales exceed 70% of total annual
NRV – Net realizable value
production;
AC – Acquisition Cost
d. Transactions considered export sales under
E.O. No. 226;
Gross Selling Price – means the total amount of money
or its equivalent which the purchaser pays or is obligated
ART. 23 EO 226
to pay to the seller in consideration of the sale, barter or
That without actual exportation the following
exchange of the goods or properties, excluding VAT.
shall be considered constructively
The excise tax, if any, on such goods or properties shall
exported for purposes of this provision:
form part of the gross selling price.
ü sales to bonded manufacturing
warehouses of export-oriented
NOTE: The following shall be allowed as deductions from
manufacturers;
gross selling price;
ü sales to export processing zones;
a) Sales discount indicated in the invoice at the time
ü sales to registered export traders
of sale, the grant of which is not dependent upon
operating bonded trading warehouses
the happening of a future event; and
supplying raw materials used in the
b) Sales returns and allowances for which a proper
manufacture of export products under
credit or refund was made for sales previously
guidelines to be set by the Board in
recorded as taxable sales.
consultation with the Bureau of Internal
Revenue and the Bureau of Customs;
DEFINITION OF GROSS SELLING PRICE EXPRESSED IN A
ü sales to foreign military bases, diplomatic
FORMULA:
missions and other agencies and/or
instrumentalities granted tax immunities,
Gross Sales PXXX
of locally manufactured, assembled or
Less: Sales discount XX
repacked products whether paid for in
Sales returns & allowances XX XX
foreign currency or not: Provided, further,
Net Sales PXXX
that export sales of registered export
Add: Excise tax XX
traders may include commission income:
Tax Base PXXX
and Provided, finally, that exportation of
goods on consignment shall not be
Fair Market Value – means fair market value as shown in
deemed export sales until the export
the schedule of values of the Provincial and City
products consigned are in fact sold by the
Assessors (real property tax declaration).
consignee.
ü Sales of locally manufactured or
Zonal Value – means fair market value as determined by
assembled goods for household and
the BIR Commissioner.
personal use to Filipinos abroad and other
non-residents of the Philippines as well as
Deferred Payment Basis - means sale of real property,
returning Overseas Filipinos under the
the initial payments of which in the year of sale exceed
Internal Export Program of the
25% of the gross selling price.
government and paid for in convertible
foreign currency inwardly remitted

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 through the Philippine banking systems the pronouncement by the DOF, the vat zero-
shall also be considered export sales. rating incentive being enjoyed by PEZA locators
or entities shall remain in full force and effect.
Items 1(b), 1(c) and 1(d) above will be
subject to 12% vat under Sec. 31 of RA10963 F. OUTPUT TAX OF SELLER OF SERVICES AND
(TRAIN Law) upon satisfaction of the LESSOR OF GOODS OR PROPERTIES
following:
v FORMULA IN COMPUTING OUTPUT TAX
§ Successful establishment and Gross Receipts PXXX
implementation of an enhance refund Rate XX%
system that grants refunds of creditable Output Tax PXXX
input tax within 90 days from the filing of
the vat refund application with the BIR; v Gross Receipts – refers to the total amount of money
Provided that, all applications filed from or its equivalent representing the contract price,
January 1, 2018 shall be processed and compensation, service fee, rental or royalty, including
decided within 90 days from the filing of the amount charged for materials supplied with the
the vat refund application. services and deposits applied as payments for
services rendered and advance payments actually or
The ninety (90) day period to process and constructively received for the services performed or
decide, pending the establishment of the to be performed for another person, excluding VAT.
enhanced VAT Refund System shall only
be up to the date of approval of the Advance Payments. In a lease contract, advance
Recommendation Report on such payment by the lessee may be:
application for VAT refund by the 1. A loan to the lessor from the
Commissioner or his duly authorized lessee.
representative; Provided; that all claims 2. An option money for the NOT
for refund/tax credit certificate filed prior property. subject to
to January 1, 2018 will be governed by 3. A security deposit to insure the VAT
the one-hundred (120)-day processing faithful performance of certain
period. and obligations of the lessee to the
§ All pending vat refund claims as of Dec. lessor.
31, 2017 shall be fully paid in cash by
Dec. 31, 2019. 4. Prepaid rental Subject
to VAT
e. Sale of goods, supplies, equipment and fuel
to persons engaged in international shipping
or international air transport operations. DEFINITION OF GROSS RECEIPTS EXPRESSED IN A
FORMULA:
2) Sales to Persons or Entities Deemed Tax-exempt
under Special Law or International Agreement: Cash received (actually and constructively) PXXX
a. Sales of goods or property to persons or Advance payments XXX
entities who are tax-exempt under special Materials charged for services XXX
laws, such as: Gross receipts PXXX
- Subic Bay Metropolitan Authority (SBMA)
- Philippine Economic Zone Authority NOTE:
(PEZA) 1. For Dealer in Securities, the term “gross receipts”
means gross selling price less cost of
b. Sales of goods or property to persons or securities sold.
entities who are tax-exempt under
international agreements to which the 2. “Constructive receipt” occurs when the money
Philippines is a signatory, such as: consideration or its equivalent is placed at the
- Asian Development Bank (ADB) control of the person who rendered the service
- International Rice Research Institute without restrictions by the payor. The following
(IRRI) are examples of constructive receipts:
a) Deposits in banks which are made available
NOTE: A zero-rated sale of goods or properties is to the seller of services without restrictions;
a taxable transaction for VAT purposes, but shall b) Issuance by the debtor of a notice to offset
not result in any output tax. However, the input any debt or obligation and acceptance thereof
tax on purchases of goods, properties or services, by the seller as payment for services
related to such zero-rated sale, shall be available rendered; and
as tax credit or refund. c) Transfer of the amounts retained by the
payor to the account of the contractor.
STATUS QUO ON VAT ZERO-RATING OF
SALES TO PEZA ENTITIES v RATE - As a general rule, the rate of value-added tax
for the sale of services and lease of goods or
DOF Memorandum Circular No. 2018-003 properties is 12%. However, the following
declared “status quo” on vat-zero rating incentive transactions are subject to 0% (ZERO-RATED
on the sale of goods/services to separate customs SALES):
territories. It further provides that Section 8 of
the PEZA Law, which provides that special 1. Processing, manufacturing or repacking goods for
economic zones are to be operated and managed other persons doing business outside the
as a separate customs territory, was not Philippines, which goods are subsequently
amended or repealed by TRAIN Law. exported, where services are paid for in
Consequently, until a law or revenue regulation is acceptable foreign currency and accounted for in
passed or issued contrary to or incompatible with

Page 6 of 20 TAX.2905
 accordance with the rules and regulations of the
BSP; v REQUISITES:
1. The taxpayer is a VAT-registered person; and
2. Services performed by subcontractors and/or 2. The input tax is related to business subject to VAT
contractors in processing, converting, or (12% or 0%).
manufacturing goods for an enterprise whose
export sales exceed 70% of the total annual v KINDS OF INPUT TAX
production; 1. Input tax on local purchases of goods or
properties other than capital goods;
Transactions #1 and #2 above will be subject 2. Input tax on importation of goods or properties
to 12% vat from the effectivity of RA10963 upon other than capital goods;
satisfaction of the following: 3. Input tax on local purchases or importation of
capital goods;
§ Successful establishment and 4. Input tax on local purchases of services;
implementation of an enhanced refund 5. Creditable withholding VAT
system that grants refunds of creditable 6. Transitional input tax
input tax within 90 days from the filing of 7. Presumptive input tax
the vat refund application with the BIR;
Provided that, all applications filed from v INPUT TAX ON LOCAL PURCHASES OR IMPORTATION
January 1, 2018 shall be processed and OF CAPITAL GOODS
decided within 90 days from the filing of
the vat refund application. Capital Goods – refer to depreciable properties in
which the useful life is more than one (1) year.
The ninety (90) day period to process and
decide, pending the establishment of the When is amortization required?
enhanced VAT Refund System shall only
be up to the date of approval of the Purchases or importation of capital goods, the
Recommendation Report on such aggregate acquisition cost of which (net of VAT) in a
application for VAT refund by the calendar month exceeds P1,000,000, regardless of
Commissioner or his duly authorized the acquisition cost of each capital good, shall be
representative; Provided; that all claims amortized.
for refund/tax credit certificate filed prior
to January 1, 2018 will be governed by Amount Deductible = Input Tax/Amortization period
the one-hundred (120)-day processing
period. and NOTE:
1. Amortization period is the shorter period of the
§ All pending vat refund claims as of Dec. following:
31, 2017 shall be fully paid in cash by a) 60 months
Dec. 31, 2019. b) Useful life in months

3. Services other than processing, manufacturing or 2. If the 1M threshold is not breached, no need for
repacking goods for other persons engaged in amortization (Input Tax is 100% deductible).
business who is outside the Philippines when the
services are performed, the consideration for 3. If the CAPITAL GOOD IS SOLD within the five (5)
which is paid for in acceptable foreign currency year period or prior to exhaustion of Input Vat
and accounted for in accordance with the rules thereon, the ENTIRE UNAMORTIZED INPUT TAX
and regulations of the BSP; on the capital goods sold can be claimed as input
tax credit during the month or quarter when the
4. Services rendered to persons or entities whose sale is made.
exemption under special laws or international
agreements to which the Philippines is a 4. Construction in Progress is a purchase of service.
signatory effectively subjects the supply of Input taxes will be recognized in the month
services to zero percent (0%) rate; payment was made on the progress billing. In
the case where labor will be furnished by the
5. Services rendered to persons engaged in contractor and materials will be purchased by the
international shipping or air transport operations, contractee from other suppliers, input taxes will
including leases of property for use thereof; be recognized on labor when payment is made on
the progress billings while input taxes will be
6. Transport of passengers and cargo by domestic recognized on materials at the time the materials
air or sea carriers from the Philippines to a are purchased.
foreign country; and
v CREDITABLE WITHHOLDING VAT
7. Sale of power or fuel generated through
renewable sources of energy such as, but not Non-resident persons who perform services in the
limited to: Philippines are deemed to be making sales in the
a) Biomass course of trade or business, even if the performance
b) Solar of services is not regular.
c) Wind
d) Hydropower The recipient of the service is the one required to
e) Geothermal and Steam withhold and remit the VAT to the BIR. Such VAT can
f) Ocean energy be claimed by the recipient as input tax.
g) Other emerging sources using technologies
such as fuel cells and hydrogen fuels. v TRANSITIONAL INPUT TAX

G. INPUT TAX Persons Covered:

Page 7 of 20 TAX.2905
 Taxpayers who became VAT-registered persons I. FINAL WITHHOLDING VAT
(previously non-VAT) shall be entitled to a
transitional input tax. v The government or any of its political
subdivisions, instrumentalities or agencies,
Amount Deductible: including GOCCs shall, before making payment on
Beginning Inventory PXXX account of each purchase of goods and or
Rate 2% services taxed at 12% VAT, deduct and withhold
PXXX a Final VAT due at the rate of five percent (5%)
Actual Input VAT, Inventory beg. XXX of the gross payment.
Transitional Input Tax (Higher Amount) PXXX
v The 5% final VAT shall represent the net VAT
NOTE: Beginning inventory will include all inventories payable to the seller. The remaining 7%
related to business subject to VAT regardless of effectively accounts for the standard input VAT of
whether or not it was purchased from VAT or non- the seller, in lieu of the actual input VAT.
VAT supplier.
v The difference between actual input VAT and
v PRESUMPTIVE INPUT TAX standard input VAT must be closed to expense or
cost.
Persons Covered:
Persons or firms engaged in: J. MIXED BUSINESS TRANSACTIONS
1. Processing of sardines, mackerel and milk; and
2. Manufacturing refined sugar, cooking oil and Refer to a situation wherein the taxpayer is engaged
packed noodle-based instant meals. in transactions subject to VAT (12% and/or 0%) as
well as not subject to VAT (exempt). The main
Amount Deductible: concern in such a case is the determination of input
tax that can be claimed for VAT purposes.
Purchases of Primary Agricultural Products PXXX
Rate 4% A Vat registered person who is also engaged in
Presumptive Input Tax PXXX transactions not subject to Vat shall be allowed of
Input tax credit as follows:
H. VAT ON IMPORTATION 1. Total input tax which can be directly attributed
to transactions subject to vat (except vat taxable
v PERSONS LIABLE: sales of goods and services to the government or
1. Any person who bring goods into the Philippines, GOCCs); and
whether or not made in the course or his trade or 2. Ratable Portion of any input tax which cannot be
business. directly attributed to either activity. (allocation
2. It includes non-exempt persons or entities who shall be on the basis of sales volume.)
acquire tax-free imported goods from exempt
persons, entities or agencies. K. EXCESS INPUT TAX

NOTE: In case of goods imported into the Philippines KINDS OF INPUT TAX TREATMENT
by VAT-exempt persons, entities or agencies which Related to sales subject Carry-over
are subsequently sold, transferred or exchanged in to 12% VAT
the Philippines to non-exempt persons or entities, the
latter shall be considered the importers thereof and Related to 0% VAT a) Carry-over
shall be liable for VAT due on such importation b) Refund
c) Convert into tax credit
v FORMULA: certificate

a) Customs duties is ad valorem (based on value): In case of cancellation of a) Convert into tax credit
VAT registration certificate only.
Dutiable Value PXXX b) In case it has no other
Customs duties XXX tax liability, refund.
Excise tax XXX
Other charges w/in BOC XXX
Tax Base PXXX v RULE ON CARRY-OVER OF EXCESS INPUT TAX
Rate 12%
VAT on Importation PXXX 1. Excess input tax in the 1st month of the quarter can
be carried over to the 2nd month.
b) Customs duties is specific (based on quantity or
volume): 2. Excess input tax in the 2nd month CANNOT be carried
over to the 3rd month (Quarterly VAT).
Invoice amount PXXX
Customs duties XXX 3. Excess input tax in the 3rd month may be carried over
Freight XXX to the:
Insurance XXX a) 1st month of the subsequent quarter; and
Other charges w.in BOC XXX b) 3rd month of the subsequent quarter
Landed Cost PXXX
Excise tax XXX v RULE ON REFUND OR CONVERSION TO TAX
Total or Tax Base PXXX CREDIT CERTIFICATE
Rate 12%
VAT on Importation PXXX 1. Zero-Rated Sales - File application with the BIR
within 2 years from the end of the taxable
quarter.

Page 8 of 20 TAX.2905
 2. Cancellation of VAT registration – File reside therein, and whose immigrant visa has been
application with the BIR within 2 years from date surrendered to the foreign government.
of cancellation.

NOTE: Refund shall be granted within 90 days

from the date of submission of complete
documents.
VAT Exempt Sales to Senior Citizens (Section 4,
L. ADVANCE PAYMENT OF VAT RR 7-2010)

Raw sugar and refined sugar under RR 6-2015, shall The following items sold to a senior citizen are vat-
be subject to advance payment of VAT, by the exempt and will entitle the latter to a minimum
owner/seller before the sugar is withdrawn from any discount of 20%:
sugar refinery/mill. a) Medicine and Drug Purchases including influenza
and pneumococcal vaccines and such other
v BASE PRICE: essential medical supplies, accessories and
equipment.
The amount of advance vat payment shall be b) Professional fees of attending physicians in all
determined by applying the vat rate of twelve private hospitals, medical facilities, outpatient
percent (12%) on the applicable base price of clinics and home health care services.
P1,400 per 50 kg. bag for refined sugar and c) Professional fees of licensed health workers
P1,000 per 50 kg. bag for all other types of providing home health care services in all private
sugar. hospitals, medical facilities, outpatient clinics, and
home health care services
v EXEMPT FROM ADVANCE VAT PAYMENT d) Medical and dental services, diagnostic and
§ Withdrawal of raw cane sugar laboratory fees
§ Withdrawal of sugar by duly accredited and e) On actual fare for land transportation travel
registered agricultural cooperative of good f) In actual fare for domestic air transport and sea
standing shipping vessels and the like
§ Withdrawal of sugar by duly accredited and g) On the utilization of services in hotels and similar
registered agricultural cooperative which is lodging establishments, restaurants, recreation
sold to another agricultural cooperative centers
h) On admission fees charged by theaters, cinema
v WITHDRAWAL OR TRANSFER houses and concert halls, circuses, carnivals and
other similar places of culture, leisure and
The proprietor of a sugar refinery/mill shall not amusement.
allow the issuance of quedan/warehouse receipts i) On funeral and burial services of senior citizens.
or other evidence of ownership or allow any
withdrawal of sugar from its premises without RULE FOR RESTAURANTS
proof of payment of advance vat.
The discount shall be for the sale of food, drinks,
v CREDIT FOR ADVANCE PAYMENT dessert and other consumable items served by the
establishments, including value meals and
In addition to input tax credits under Section 110 promotional meals, offered for the consumption of
of the Tax Code, the amount of advance payment the general public. Condiments and side products fall
of vat made by sellers of sugar under revenue within the ambit of “other consumable items served
regulations 6-2015 shall be allowed as credit by the establishments”.
against the output tax based on the actual gross
selling price of sugar. The corresponding liability The 20% discount and vat exemption for restaurants
on value added tax shall therefore be computed shall apply to:
as follows: § Dine in, take-out, take-home, drive-thru,
delivery orders (excluding bulk orders),
Output Vat Pxx called-in or phoned-in orders. Bulk orders
Less: Input Vat on Purchases (xx) are within the context of pre-contracted or
Advance Vat Payment (xx) pre-arranged group meals or packages, and
Vat Payable (Excess input vat) Pxx hence, not entitled to 20% discount and VAT
exemption.

M. VAT and DISCOUNTS FOR SENIOR CITIZENS § Set meals, group meals or group walk-ins
including purchase of a whole cake and pizza
Senior citizen or Elderly - refers to any Filipino citizen orders.
who is a resident of the Philippines, sixty (60)
years old or above. It may apply to senior citizens § “Pasalubong” food items which are single-
with “dual citizenship” status provided they prove serving/solo meal for the personal and
their Filipino citizenship and have at least six (6) exclusive consumption of the Senior Citizen.
months residency in the Philippines (RA 9994 However, other “pasalubong” food items
otherwise known as “Expanded Senior Citizens Act of (e.g. box of biscocho, bottles or jars of
2010” and its related revenue regulations/ circulars ginamos, several packets of mango
RR7-2010, RR 8-2010, RMC 38-2012). preserves, etc) which are not for the
personal and exclusive consumption of the
Resident Citizen — a Filipino Citizen with permanent/ Senior Citizen are NOT entitled to 20%
legal residence in the Philippines, and shall include discount and VAT exemption. This limitation
one, who, having migrated to a foreign country, has extends to “novelty items” or non-
returned to the Philippines with a definite intention to consumables sold in restaurants.

Page 9 of 20 TAX.2905
 FORMULAs: § Herbicides
§ Disct. = (Total Billing Amount – VAT) x 20% § Poultry, swine and cattle feeds
§ Veterinary products for poultry, swine
§ Amount Due: and cattle
Total bill inclusive of vat Pxx § Nipa shingle, plyboard and
Less: vat (xx) construction nails
Total bill exclusive of vat Pxx § Batteries
Less: 20% discount (xx)** § Electrical supplies and light bulbs
Total Amount Due Pxx § Steel wire

Total Billing Amt. Retailers – shall mean any natural or juridical

**Dsct.= No. of customers Less VAT x 20% person engaged in the business of selling
consumer products directly to consumers, which
**Use the above formula in the following cases: shall include among others, supermarkets,
§ The bill is for a group of individuals grocery/convenience stores and shops but
involving non-senior citizens and a senior excluding stalls in food courts, food carts and
citizen sari-sari stores with a capitalization of less than
§ In case of set meal(s) not limited to a P100,000, public and private wet markets,
single serving and is shared with Non- talipapa and cooperative stores.
Senior Citizens.
§ For group of diners composed of Senior Purchase of basic necessities and prime
Citizens who ordered for group meals or commodities are not exempt from vat. The
food items for sharing in restaurants and total amount of purchases shall not exceed
not all the Senior Citizens have their valid P1,300 per calendar week without carry-over of
Senior Citizen’s ID cards (including unused amount. A purchase booklet issued by
purchase of whole cake and pizza). OSCA shall be presented to the retailer upon
purchase of basic necessities and prime
I. Grant of 5% Special Discount (Section 5, RR commodities.
7-2010 as amended by RR 8-2010 and RMC
38-2012). NOTE:
§ The input tax attributable to the exempt sale
A special discount of five percent (5%) of the shall not be allowed as an input tax credit
regular retail price of basic necessities and and must be closed to cost or expense
prime commodities as defined under Section 2 account by the seller (Sec. 10, RR 7-2010).
of the joint DTI-DA Administration Order No. 10-
02, series of 2010, shall be granted to Senior § While RA 9994 expressly provides for the VAT
Citizens on their purchases thereof, taking into exemption of Senior Citizens on their
consideration that said purchases shall be for the purchase of certain goods and services, the
personal and exclusive consumption and/or law does not include exemption from the
enjoyment of the Senior Citizen (Section 3, Joint payment of Percentage Tax.
DTI-DA Administrative Order No. 10-02, Series of
2010). § In the purchase of goods and services which
are on promotional discount, the Senior
a) Basic Necessities Citizen shall avail of either the promotional
§ Rice discount or the 20%/5% discount, whichever
§ Corn is higher. However, the discount that must be
§ Bread excluding pastries and cakes given to the Senior Citizen shall in no case be
§ Fresh, dried and canned fish and less than 20%/5%. Moreover, the sale of
other marine products goods and services on promotional discount is
§ Fresh pork, beef and poultry meat still exempt from VAT (except sale of basic
§ Fresh eggs necessities and prime commodities).
§ Fresh and processed milk
§ Fresh vegetables including root crops § Meals primarily prepared and intentionally
§ Coffee and coffee creamer marketed for children and not for Senior
§ Sugar Citizen’s personal consumption are not
§ Cooking oil entitled to 20% discount. (Rule IV, Article 7,
§ Salt Section 3(d) of the Rules and Regulations
§ Powdered, liquid, bar laudry and implementing RA No. 9994; Section 6 of RR
detergent soap No. 7-2010).
§ Firewood
§ Charcoal § Generally, alcoholic beverages are not subject
§ Candles to the 20% discount and VAT exemption
especially if purchased “in bulk”, “in buckets”
b) Prime Commodities or “in cases”. However, if served as a single
§ Fresh fruits serving drink, its purchase by a Senior Citizen
§ Flour is entitled to the 20% discount and VAT
§ Dried, processed and canned pork, exemption. However, alcoholic beverages
beef and poultry meat purchased in a bar, club or cabaret are
§ Dairy products not falling under basic exempt from VAT but subject to amusement
necessities tax of 18% under Section 125 of the NIRC, as
§ Canned sardines, tuna amended. A Senior Citizen may still avail of
§ Noodles the 20% discount on the purchase of an
§ Onions alcoholic drink but the discount shall be
§ Garlic limited only to a single serving of an alcoholic
§ Geriatric diapers beverage.

Page 10 of 20 TAX.2905
 origin, but shall exclude obituary publication and
§ Cigarettes/cigars are not the food or essential the cost of the memorial lot.
items entitled to the 20% discount.
(b) Educational assistance to PWD, for them to
§ Toll fees are not the same as “fares”. Hence, pursue primary, secondary, tertiary, post tertiary,
it is not subject to the 20% Senior Citizen as well as vocational or technical education, in
Discount. both public and private schools, through the
provision of scholarships, grants, financial aids,
N. PERSONS WITH DISABILITY (RA7277-Magna subsidies and other incentives to qualified PWD,
Carta for Persons with Disability as amended including support for books, learning materials,
under RA 9442 and RA10754;) and uniform allowance to the extent feasible:
Provided, That PWD shall meet the minimum
A person with disability shall refer to an individual admission requirements;
suffering from restriction or different abilities, as a
result of mental, physical or sensory impairment to (c) To the extent practicable and feasible, the
perform an activity in a manner or within the range continuance of the same benefits and privileges
considered normal for human being (RR 1-2009). given by the Government Service Insurance
System (GSIS), Social Security System (SSS),
Persons with disability shall be entitled to: and Pag-IBIG, as the case may be, as are
(a) At least twenty percent (20%) discount and enjoyed by those in actual service;
exemption from the value-added tax (VAT), if
applicable, on the following sale of goods and (d) To the extent possible, the government may
services for the exclusive use and enjoyment or grant special discounts in special programs for
availment of the PWD: PWD on purchase of basic commodities, subject
to the guidelines to be issued for the purpose by
(1) On the fees and charges relative to the the Department of Trade and Industry (DTI) and
utilization of all services in hotels and similar the Department of Agriculture (DA); and
lodging establishments; restaurants and
recreation centers; “(e) Provision of express lanes for PWD in all
commercial and government establishments; in
(2) On admission fees charged by theaters, the absence thereof, priority shall be given to
cinema houses, concert halls, circuses, carnivals them.
and other similar places of culture, leisure and
amusement; The abovementioned privileges are available only to PWD
who are Filipino citizens upon submission of any of the
(3) On the purchase of medicines in all following as proof of his/her entitlement thereto:
drugstores;
(i) An identification card issued by the city or
(4) On medical and dental services including municipal mayor or the barangay captain of the
diagnostic and laboratory fees such as, but not place where the PWD resides;
limited to, x-rays, computerized tomography
scans and blood tests, and professional fees of (ii) The passport of the PWD concerned; or
attending doctors in all government facilities,
subject to the guidelines to be issued by the (iii) Transportation discount fare Identification
Department of Health (DOH), in coordination with Card (ID) issued by the National Council for the
the Philippine Health Insurance Corporation Welfare of Disabled Persons (NCWDP).
(PhilHealth);
The privileges may not be claimed if the PWD claims a
(5) On medical and dental services including higher discount as may be granted by the commercial
diagnostic and laboratory fees, and professional establishment and/or under other existing laws or in
fees of attending doctors in all private hospitals combination with other discount program/s.
and medical facilities, in accordance with the
rules and regulations to be issued by the DOH, in “The establishments may claim the discounts granted in
coordination with the PhilHealth; subsection (a), paragraphs (1), (2), (3), (5), (6), (7),
and (8) as tax deductions based on the net cost of the
(6) On fare for domestic air and sea travel; goods sold or services rendered: Provided, however, That
the cost of the discount shall be allowed as deduction
(7) On actual fare for land transportation travel from the gross income for the same taxable year that the
such as, but not limited to, public utility buses or discount is granted: Provided, further, That the total
jeepneys (PUBs/PUJs), taxis, asian utility vehicles amount of the claimed tax deduction net of value-added
(AUVs), shuttle services and public railways, tax, if applicable, shall be included in their gross sales
including light Rail Transit (LRT), Metro Rail receipts for tax purposes and shall be subject to proper
Transit (MRT) and Philippine National Railways documentation and to the provisions of the National
(PNR); and Internal Revenue Code (NIRC), as amended.

(8) On funeral and burial services for the death of O. Grant of 5% Special Discount to PWDs (RR 9-2019).
the PWD: Provided, That the beneficiary or any “Every PWD shall enjoy a special discount of five percent
person who shall shoulder the funeral and burial (5%) of the regular retail price, without exemption from the value-
expenses of the deceased PWD shall claim the added tax (VAT) of basic necessities and prime commodities”. The
discount is limited to purchases not exceeding to P1,300 “per
discount under this rule for the deceased PWD
calendar week without carry-over of the unused amount”. Provided
upon presentation of the death certificate. Such
that said amount shall be spent on basic necessities and prime
expenses shall cover the purchase of casket or
commodities commensurable to his/her personal exclusive
urn, embalming, hospital morgue, transport of consumption and or enjoyment within the calendar week. Provided,
the body to intended burial site in the place of further that said amount shall be spent on at least four kinds of items
listed as basic necessities and prime commodities.

Page 11 of 20 TAX.2905
 Basic necessities refer to goods “vital to the needs of P. ADMINISTRATIVE PROVISIONS
consumers, for their sustenance and existence” while prime 1. INVOICING REQUIREMENTS
commodities are goods that are “essential” to them. Necessities
include rice, corn, root crops, bread, fresh, dried or canned fish and v A VAT registered person shall issue:
other marine products; fresh pork, beef and poultry meat; fresh eggs, a) A VAT invoice for every sale, barter or
potable water in bottles and containers; fresh and processed milk;
exchange of goods or properties; and
fresh vegetables and fruits; locally manufactured instant noodles;
b) A VAT official receipt for every lease of
coffee, coffee creamer; sugar, cooking oil, salt, laundry soap,
detergent, firewood, charcoal, candles, household liquefied petroleum
goods or properties and for every sale,
gas and kerosene. barter or exchange of services.

Basic necessities shall include: v Single invoice/ receipt involving VAT and Non-
1. All kinds and variants of rice VAT transactions
2. Corn
3. All kinds of bread (pastries and cakes not included) A Vat registered taxpayer may issue a single
4. Fresh, dried and canned fish and other marine products invoice/ receipt involving VAT and non-VAT
(including frozen and in various modes of packaging) transactions provided that the invoice or
5. Fresh pork, beef and poultry meat receipt shall clearly indicate the break-down of
6. All kinds of fresh eggs (excluding quail eggs) the sales price between its taxable, exempt
7. Potable water in bottles and containers and zero-rated components and the calculation
8. Fresh and processed milk (excluding milk labelled as food of the Value-Added Tax on each portion of the
supplement) sale shall be shown on the invoice or receipt.
9. Fresh vegetables including root crops
10. Fresh fruits v Separate invoices/ receipts involving VAT and
11. Locally manufactured instant noodles Non-VAT transactions
12. Coffee and coffee creamer
13. All kinds of sugar (excluding sweetener) A VAT registered person may issue separate
14. All kinds of cooking oil invoices/ receipts for the taxable, exempt, and
15. Salt zero-rated component of its sales provided
16. Powdered liquid, bar laundry and detergent soap that if the sales is exempt from value-added
17. Firewood
tax, the term "VAT-EXEMPT SALE" shall be
18. Charcoal
written or printed prominently on the invoice
or receipt and if the sale is subject to zero
19. All kinds of candles
percent (0%) VAT, the term "ZERO-RATED
20. Household liquefied petroleum gas, not more than 11kgs,
SALE" shall be written or printed prominently
LPG content once very five (5) months bought for LPG
on the invoice or receipt.
dealers
21. Kerosene, not more than 2 liters per month
v SALE TO SENIOR CITIZENS. The amount of
Prime commodities are goods not considered as basic
sales that must be reported for tax purposes is
necessities but are essential to consumers. Prime commodities shall the undiscounted selling price and not the
include flour, dried, processed or canned pork, beef and poultry amount of sales net of the discount. The gross
meat; dairy products not falling under basic necessities; onions, selling price and the sales discount must be
garlic, vinegar, patis, soy sauce, toilet soap, fertilizer, pesticides and separately indicated in the official receipt or
herbicides; poultry, livestock and fishery feeds and veterinary sales invoice issued by the establishment for
products; paper, school supplies, nipa shingles, sawali, cement, the sale of goods or services to the Senior
clinker, GI sheets, hollow blocks, plywood, plyboard, construction Citizen. With regard to the VAT exemption, the
nails, batteries, electrical supplies, light bulbs and steel wires. machine tape must properly segregate the
VAT exempt sales from the taxable sales
Prime commodities shall include: (Sections 7 and 10 of RR No. 7-2010).
1. Flour
2. Dried, processed and canned pork, beef and poultry meat The business establishment giving sales
3. Dairy products not falling under the definition of basic discounts to qualified Senior Citizens is
necessities required to keep a separate and accurate
4. Onions and garlic record of sales, which shall include the name
5. Vinegar, patis and soy sauce of the Senior Citizen-purchaser, OSCA ID,
6. Toilet/ bath soap gross sales/receipts, sales discounts granted,
7. Fertilizer dates of transactions and invoice/OR number
8. Pesticides for every sale transaction to Senior Citizens.
9. Herbicides The invoicing requirements in Section 4.113-1
10. Poultry feeds, livestock feeds and fishery feeds of Revenue Regulations No. 16-2005 must also
11. Veterinary products be complied with (Sections 7 and 10 of RR No.
12. Paper, school supplies 7-2010).
13. Nipa Shingle
14. Sawali v CONSEQUENCES of issuing an erroneous
15. Cement, clinker, GI sheets invoice or official receipt
16. Hollowblocks a) If a person who is not a VAT registered
17. Plywood person issues an invoice or receipt
18. Plyboard showing his TIN followed by the word VAT,
19. Construction nails the non-VAT person shall be liable to:
20. Batteries (excluding cellphone and automotive batteries) i. The percentage taxes applicable to his
21. Electrical supplies and light bulbs transactions.
22. Steel wires ii. The VAT due on the transactions without
the benefit of any tax credit; and
iii. A 50% surcharge.

Page 12 of 20 TAX.2905
 b) If a VAT registered person issues a VAT 2. RETURN & PAYMENT OF VAT (MANUAL FILING)
invoice or official receipt for a VAT-exempt
transaction but fails to display prominently a) Monthly VAT Returns (First 2 months of the
on the invoice or receipt the term “VAT Quarter) – on or before the 20th day following
EXEMPT SALE”, the issuer shall be liable to the end of the month.
VAT.
b) Withholding VAT Return – on or before the
NOTE: In both cases, the VAT shall, if other 10th day following the end of the month.
requisite information required is shown on the
invoice or receipt, be recognized as an input c) Quarterly VAT (Last month of the Quarter) –
tax credit to the purchaser. on or before the 25th day following the end of
the quarter.

MULTIPLE CHOICE
1. Statement 1: For a person to be subjected to VAT, it
is necessary that he is regularly engaged in the 5. If a radio and/or television broadcasting company
conduct or pursuit of an economic activity. who is not mandatorily required to register under the
Statement 2: A non-resident foreign person VAT system chose to be a VAT taxpayer. Its choice
performing isolated service in the Philippines shall be is:
liable to VAT. a. Revocable after 2 years
A. B. C. D. b. Revocable after 3 years
Statement 1 True True False False c. Revocable after 5 years
Statement 2 True False True False d. Irrevocable

2. Statement 1: Nonstock and nonprofit private Use the following data for the next two (2) questions:
organizations which sell exclusively to their members In 2019, Pedro signified his intention to be taxed at 8%
in the regular conduct or pursuit of commercial or income tax rate on gross sales in his 1st quarter income
economic activity are exempt from value-added tax. tax return. His total gross sales during the year
Statement 2: Government entities engaged in exceeded the vat threshold of P3M. The following
commercial or economic activity are generally exempt quarterly data were provided by Pedro:
from value-added tax Q1 Q2 Q3 Q4/Annual
Sales P500,000 P500,000 P2,000,000 P3,500,000
a. Both statements are correct.
Cost of (300,000 (300,000 (1,200,000 (1,200,000
b. Both statements are incorrect. sales ) ) ) )
c. Only the first statement is correct. Gross 200,000 200,000 800,000 2,300,000
d. Only the second state statement is correct. Income
Operatin (120,000 (120,000 (480,000) (720,000)
3. In 2019, Mr. Uro’s gross receipts from his practice of g ) )
profession is P2,600,000 while his wife has gross expenses
sales of P2,200,000 derived from her trading Net P80,000 P80,000 P320,000 P1,580,000
business. Assuming they are not vat registered, will taxable
income
they be subject to vat?
a. Yes, because their aggregate gross
receipts/sales exceeded the vat threshold of 6. How much is Pedro’s total business tax due for the
P3,000,000. year?
b. No, because for purposes of vat threshold, a. P90,000 c. P510,000
husband and wife shall be considered as b. P195,000 d. nil
separate taxpayers.
c. Yes, because their gross receipts/sales are not 7. Assuming the 3M threshold was breached on the
specifically exempt from vat as provided in the month of October, Pedro shall register under the vat
Tax Code. system not later than:
d. None of the above a. September 30, 2019
b. October 31, 2019
c. November 30, 2019
4. In 2019, the following gross receipts/sales were
d. December 31, 2019
recorded by Apol B:
Gross receipts from practice of P1,850,000
8. Which of the following shall be exempt from vat?
profession
a. Services of banks.
Gross receipts from transport of 1,450,000
b. Services of money changers and pawnshops.
goods and cargoes
c. Services of credit cooperatives
Gross sales from trading activities 675,000
d. All of the above
Assuming Apol B is non-vat registered, will he be
subject to vat? 9. Which of the following transactions is exempt from
a. No, because his gross receipts/sales in each value-added-tax?
business do not exceed the vat threshold of a. Medical services such as dental and veterinary
P3,000,000. services rendered by professionals.
b. Yes, because if a professional, aside from the b. Legal services.
practice of his profession, also derives c. Services arising from employee-employer
revenue from other lines of business which relationship.
are otherwise subject to VAT, the same shall d. Services rendered by domestic air transport
be combined for purposes of determining companies.
whether the threshold has been exceeded.
c. No, because he is not vat registered 10. Which of the following sale or importation of goods
d. None of the above shall not be exempt from VAT?

Page 13 of 20 TAX.2905
 a. Fertilizers a. 12% VAT transactions
b. Seeds, seedlings and fingerlings b. 0% VAT transactions
c. Fish, prawn, livestock and poultry feeds, including c. VAT exempt transactions
ingredients, whether locally produced or d. None of the foregoing
imported, used in the manufacture of finished
feeds 16. A subdivision developer sold five (5) residential house
d. Specialty feeds. and lots, each to different vendees, for P2,400,000
per lot, or a total sales of P12,000,000 during 2020
11. Which of the following transactions is exempt from taxable year. These sales shall be:
value added tax. a. Subject to 12% VAT transactions
a. Sale by an art gallery of literary works, musical b. Classified as zero-rated transactions
composition, work of art and similar creations, or c. Under VAT exempt transactions
devices performed for the production of such d. None of the foregoing
works.
b. Medical, dental hospital and veterinary 17. Camella realty corporation sold the following real
professional services. properties during the 2019 taxable year:
c. Sale of cotton and cotton seeds in their original 2 units of residential house and lot P6,000,000
state. at P3,000,000 each
d. Sale of books and any newspaper, magazine, 4 residential lots at P2,000,000 each 8,000,000
review or bulletin, which appears at regular 1 commercial lot at P3,000,000 3,000,000
intervals with, fixed prices for subscription and
sale which is not devoted principally to the How much is the total amount of transactions subject
publication of paid advertisements. to VAT?
a. P6,000,000 c. P11,000,000
12. Statement 1: Sale by agricultural cooperatives to b. P8,000,000 d. P17,000,000
non-members can only be exempted from VAT if the
producer of the agricultural products sold is the 18. Which of the following transactions of a VAT-
cooperative itself. If the cooperative is not the registered seller is not subject to VAT?
producer (e.g. trader), then only those sales to its a. Remaining inventory upon retirement from
members shall be exempted from VAT. business
Statement 2: Sale or importation of agricultural food b. Sale of company’s used car to its officers
products in their original state is exempt from VAT c. Sale of goods or services to the national
irrespective of the seller and buyer thereof. government
a. true, true c. false, false d. Sale of residential lot amounting to P1,000,000
b. true, false d. false, true
19. The value added tax due on the sale of taxable
13. Determine the business taxes in 2019 of the goods, property and services by any person whether
following: or not he has taken the necessary steps to be
I.Lease of residential units with a monthly rental per registered.
unit not exceeding P15,000 (regardless aggregate a. input tax c. excise tax
annual gross rentals). b. output tax d. sales tax
II.Lease of residential units with a monthly rental per
unit exceeding P15,000 but the aggregate of such 20. Gross selling price includes all of the following,
rentals during the year do not exceed except:
P3,000,000. a. Total amount which the purchaser pays to the
III.Lease of commercial units regardless of monthly seller.
rental per unit. b. Total amount which the purchaser is obligated to
A B C D pay to the seller.
c. Excise tax.
I None None None Vat
d. Value-added tax.
II Vat OPT OPT Vat
III Vat OPT Vat Vat 21. Which of the following is not deductible from Gross
Selling Price for vat purposes?
14. In cases where a lessor in 2018 taxable year has a. Discounts determined and granted at the time of
several residential units for lease, some are leased sale, which are expressly indicated in the invoice,
out for a monthly rental per unit not exceeding the amount thereof forming part of the gross
P15,000 while others are leased out for more than sales duly recorded in the books of accounts.
P15,000 per unit, his tax liability will be: b. Discount determined and granted after the
a. The gross receipts from rentals not exceeding agreed sales quota is met by the buyer.
P15,000 per month per unit shall be exempt from c. Sales discount indicated in the invoice at the time
vat regardless of the aggregate annual gross of sale, the grant of which is not dependent upon
receipts. the happening of a future event, deductible within
b. The gross receipts from rentals exceeding the same month or quarter given.
P15,000 per month per unit shall be subject to d. Sales returns and allowances for which a proper
vat if the annual gross receipts from said units credit or refund was made during the month or
including the gross receipts from units leased out quarter to the buyer for sales previously recorded
for not more than P15,000 exceed P3,000,000. as taxable sales.
c. Both statements are correct.
d. Both statements are incorrect 22. On January 5, 2018, Towell Co., VAT-registered, sold
on account goods for P112,000, gross of VAT. The
15. In 2020, a real estate dealer sold two (2) adjacent term was: 2/10, n/30. Payment was made on
residential lots in the city for a price of P1,000,000 January 10, 2018. The total amount due is:
each, or a total price of P2,000,000, to a vendee who a. P110,000 c. P112,000
intends to erect his residential house thereon. b. P107,800 d. P109,760
The sale shall be classified as a:

Page 14 of 20 TAX.2905
23. Mr. Andres, VAT-registered real estate dealer, b. P40,800 d. P64,800
transferred a parcel of land held for sale to his son as
gift on account of his graduation. For VAT purposes, 28. Construction by Mikee-Mega Builders (MMB) of
the transfer is: concrete barrier for the Asian Development Bank
a. Not subject to VAT because it is a gift (ADB) in Ortigas Center to prevent car bombs from
b. Subject to VAT because it is a deemed sale ramming the ADB gates along ADB avenue in
transaction Mandaluyong City is subject to what business tax?
c. Not subject to VAT because it is subject to gift tax a. 12% vat c. exempt from vat
d. Subject to VAT because it is considered an actual b. 0%vat d. 3% OPT
sale
29. Any input tax attributable to zero-rated sales by a
24. One of the following is not a transaction deemed VAT-registered person may at his option be:
sale: a. Deducted from output tax
a. Transfer, use or consumption not in the course of b. Refunded
business of goods or properties originally c. Converted into tax credit certificate which may be
intended for sale or for use in the course of used in payment of internal revenue taxes.
business. d. All of the above
b. Distribution or transfer to shareholders or
investors of goods or properties as share in the 30. Tax credit for input taxes shall be allowed if:
profits of a VAT-registered person or creditors in a. Both the seller and the purchaser are VAT-
payment of debt. registered
c. Retirement from or cessation from business with b. Either one of the seller or the purchaser is VAT-
respect to all goods on hand as of the date of registered.
such retirement or cessation. c. Neither one of the seller or the purchaser is VAT-
d. Consignment of goods if actual sale is made registered as long as VAT invoice is issued.
within 60 days following the date such goods d. The seller is VAT-registered regardless of whether
were consigned. the purchaser is VAT-registered or not.

25. Genson Distribution Inc., a VAT taxpayer, had the 31. Which statement is not correct?
following data in a month: a. The excess input taxes of a taxable month arising
Cash sales P200,000 from domestic sales may be carried over to the
Open account sales 500,000 succeeding month.
Consignment: b. The excess input taxes of a taxable quarter
0 to 30 days old (on which arising from domestic sales may be carried over
there were remittances from to the succeeding quarter.
consignees of P200,000) 600,000 c. The excess input taxes of a taxable period arising
31 to 60 days old 700,000 from domestic sales is refundable.
61 days old and above 900,000 d. The excess input taxes of a payable period arising
from exports sales may be refunded.
How much is the output tax?
a. P348,000 c. P264,000 32. Magnifeco Corp. is a VAT-registered dealer of
b. P216,000 d. P108,000 appliances. The following data are for the last quarter
of 2019:
26. The following are the data of Davao Appliances Sales (inclusive of vat) P6,920,000
Marketing Co. for the last quarter of 2018: Purchases, net of input taxes 5,500,000
Sales up to December 15, total Sales return (incl. of vat) 200,000
invoice value P380,800 Purchase return, net of VAT 300,000
Purchases up to December 15, net Deferred input taxes (carried over from the
of input taxes 150,000 third quarter of 2019) 12,000

Additional information: The value added tax payable for the last quarter of
On December 16, 2018, the Company retired from its 2019 by Magnifeco Corp. is:
business and the inventory valued at P190,000 a. P84,000 c. P108,000
remained unsold. There is a deferred input tax from b. P96,000 d. P130,500
the third quarter of P3,500.
33. The vat on importation of goods which are
How much is the total value-added taxes payable by subsequently used or sold in the course of trade or
Davao Appliances Marketing Co.? business by a vat registered importer shall be treated
a. P42,100 c. P22,800 as
b. P21,500 d. P19,300 I. Tax credit
II. Inventoriable cost
27. Evelyn, a trader of appliances, made the following III. Expense
sales of goods during the month of March 2018, a. I only c. III only
exclusive of VAT: b. II only d. none of the above
Cash sales P 200, 000
Open account sales 100, 000 34. Which of the following statements is incorrect?
Installment sales 100, 000 a. VAT on importation is paid to the Bureau of
Note: Receipt from installment Customs before the imported goods are released
sales is P20,000 from its custody.
Consignment made: (net of VAT) b. When a person who enjoys tax-exemption on his
January 15, 2018 100, 000 importation subsequently sells in the Philippines
February 15, 2018 200, 000 such imported articles to non-exempt persons,
March 15, 2018 300, 000 the purchaser-non-exempt person shall pay the
Output tax is: VAT on such importation.
a. P60,000 c. P72,000

Page 15 of 20 TAX.2905
 c. Expenses incurred after the goods are released gross of VAT 17,920
from Customs custody are disregarded in Office machines (5 pcs.), 8 years 2,000,000
computing VAT on importation. useful life, net of VAT
d. Imported goods which are subject to excise tax
are no longer subject to value-added tax. Repair of store amounted to P20,000, no supporting
official receipt. Creditable Input taxes are:
35. Bryan, vat registered person, imported machines a. P38,800 c. P37,440
from Australia as follows: b. P34,800 d. P35,520
Machine Acquisition Cost Purpose
A P100,000 Personal use 41. All of the following are allowed presumptive input tax,
B 200,000 Business use except for one.
C 300,000 For sale a. Processor of sardines, mackerel and milk.
b. Manufacturer of refined sugar and cooking oil.
The importations were subjected to 50% excise c. Producers/manufacturers of packed noodles.
tax based on purchase price. Machine C was sold d. Supplier of books and other school supplies.
for P1,000,000 exclusive of vat. How much is the
vat paid to the BOC? 42. Mantika Corp., a VAT-registered Corp., is a producer
a. P108,000 c. P54,000 of cooking oil from coconut and corn. It had the
b. P90,000 d. P36,000 following data for the month of January 2019:

36. Using the above data, the amount of vat to be Sales, gross of VAT P784,000
remitted to the BIR should be Corn & Coconut, 12-31-18 50,000
a. P12,000 c. P106,000 Purchases of Corn & Coconut 330,000
b. P30,000 d. P84,000 Corn & Coconut, 1-31-19 20,000
Purchases from VAT suppliers, VAT
37. World Power Corp. imported an article from Japan. included:
The invoice value of the imported articles was $7,000 Packaging Materials 56,000
($1- P50). The following were incurred in connection Supplies 16,800
with the importation:
Insurance P 15,000 The value-added tax payable for the month:
Freight from Japan 10,000 a. P56,060 c. P60,650
Postage 5,000 b. P54,900 d. P63,000
Wharfage 7,000
Arrastre charges 8,000 43. Taxpayers who became VAT registered persons upon
Brokerage fee 25,000 exceeding the minimum turn-over of P3,000,000 in
Facilitation fee 3,000 any 12-month period, or who voluntarily register
even if their turnover does not exceed P3,000,000
The imported article was imposed P50,000 customs shall be entitled to a transitional input tax on the
duty and P30,000 excise tax. inventory on hand as of the effectivity of their vat
registration on the following, except;
The Company spent P5,000 for trucking from the a. Supplies for use in the course of taxpayer’s trade
customs warehouse to its warehouse in Quezon City. or business
The carrier is not subject to VAT.
b. Goods which have been manufactured by the
The VAT on importation is: taxpayer
a. P60,000 c. P60,600 c. Goods in process for sale
b. P42,000 d. P80,000
d. Capital goods being used in the operation of the
business
38. Based on the preceding number, if the imported
article was sold for P800,000, VAT exclusive, the VAT
payable is: 44. Transitional input tax can be claimed as deduction
a. P24,000 c. P36,000 from output tax. Which of the following statements is
b. P12,000 d. P11,040 correct?
a. It can be claimed by a vat registrable person.
39. Sofia had the following data for the month of June b. It can be claimed by a taxpayer who registered
(all amounts are vat exclusive): as vat taxpayer from the inception of business.
CASE 1 CASE 2 c. It can be claimed by a taxpayer who is initially
Sales P1,900,000 P1,800,000 subject to vat and subsequently cancelled his vat
Purchases of goods 1,260,000 1,600,000 registration.
for sale d. It can be claimed by a taxpayer who is initially
Purchases of 1,440,000 900,000 paying percentage tax and subsequently
machines registered as vat taxpayer.
Machine life 6 years 3 years
45. Which of the following shall be included in the
The amounts of vat payable(excess tax) shall be: beginning inventory for purposes of determining the
(a) (b) (c) (d) transitional input vat?
CASE 1 P54,000 P73,920 P73,920 None a. Goods purchased for resale in the ordinary course
CASE 2 (84,000) (84,000) 20,000 None of trade or business.
b. Materials purchased for further processing which
40. Maymay, VAT-registered, made the following have not yet undergone processing
purchases during the month of January, 2018: c. Goods which have been manufactured by the
Goods for sale, inclusive of VAT P 246,400 taxpayer
Supplies, exclusive of VAT 20, 000 d. All of the above
Packaging materials, total invoice
amount 56, 000 46. A taxpayer registered under the VAT system on
Home appliances for residence, January 1, 2019. His records during the month show:

Page 16 of 20 TAX.2905
 Value of inventory as of December 31, d. The VAT-registered supplier may refuse the
2018 purchased from VAT-registered P112,000 withholding of VAT as long as it is willing to pay
persons the full 12% VAT.
VAT paid on inventory as of December
31, 2018 12,000 Use the following data for the next two questions:
Value of inventory as of December 31, A VAT-registered trader has the following transactions:
2018 purchased, from non-VAT persons 518,000 Sales of good to private entities, P2,500,000
Sales, net of VAT 240,000 net of VAT
Sales, gross of VAT 45,920 Purchases of goods sold to 896,000
Purchases, net of VAT 70,000 private entities, gross of 12%
Purchases of VAT exempt goods 50,000 VAT
Sales to a government owned 1,000,000
VAT payable is: corporation (GOCC), net of VAT
a. P23,080 c. P12,720 Purchases of goods sold to 700,000
b. P25,320 d. P12,320 GOCC, net of 12% VAT

47. Dong Inc., a manufacturer, had the following data for 51. How much is the output tax?
the first month of 2018: (First year as a VAT a. P300,000 c. P420,000
Taxpayer) b. P120,000 d. nil
Sales:
Exports P2,000,000 52. How much is the standard input tax?
Domestics (Without VAT) 1,000,000 a. P20,000 c. P50,000
Purchases, excluding VAT: b. P70,000 d. nil
Raw Materials 300,000
Services 100,000 53. How much is the creditable input tax?
Machinery a. P166,000 c. P70,000
(estimated useful life 2 years) 400,000 b. P96,000 d. P180,000

On January 1, 2018, the company had inventories 54. How much is the input tax closed to (expense)
and taxes paid thereon as follows: income?
Cost VAT Paid a. P14,000 c. (P14,000)
Raw Materials P120,000 P2,000 b. P34,000 d. (P34,000)
Supplies 40,000 4,000
55. How much is the VAT payable to the BIR?
During the month, raw materials were purchased a. P404,000 c. P204,000
from another enterprise with a total invoice value of b. P390,000 d. nil
P61,600, not included above.
56. A VAT-registered trader has the following
The VAT payable by Dong Inc. is: transactions for the month of July 2019:
a. P72,000 c. P11,000 Sale of goods to private entities, P2,500,000
b. P57,000 d. P66,000 net of VAT
Purchases of goods sold to 896,000
48. What institution is required to deduct and withhold a private entities, gross of 12%
final VAT of 5% on the purchase of goods or services VAT
subject to VAT? Sales to a government owned 1,500,000
a. National government or any political subdivision corporation (GOCC), net of VAT
thereof Purchases of goods sold to 700,000
b. Government-owned or controlled corporations GOCC, net of 12% VAT
c. Both (a) and (b) Purchases of Machineries, gross 11,200,000
d. Neither (a) nor (b) of VAT, useful life is 6 years

49. The withholding agent of creditable value added tax How much is the VAT payable to the BIR?
is required to remit the amount of value added tax a. P280,000 c. P191,500
withheld within b. P224,000 d. P300,000
a. 25 days following the end of month the
withholding was made 57. Based on the preceding number, how much is the
b. 20 days following the end of month the input tax closed to (expense) income?
withholding was made a. (P13,500) c. P13,500
c. 15 days following the end of month the b. P21,000 d. (P21,000)
withholding was made
d. 10 days following the end of month the Use the following data for the next two questions:
withholding was made Alpha Corporation (vat registered) has the following data
for the month:
50. A VAT-registered supplier sold goods amounting to Sales – private entities P2,000,000
P500,000 to a government-controlled corporation Sales – vat exempt goods 1,000,000
during a particular quarter. Which of the following Sales – government 1,000,000
statements is incorrect in relation to the sale in
relation to the sale of goods? The following input taxes were passed-on by vat suppliers
a. The sale is subject to final withholding VAT. to Alpha Corporation during the month:
b. The government-controlled corporation will Input vat on taxable goods P80,000
withhold P25,000 withholding VAT. Input vat on sale of exempt goods 20,000
c. The government-controlled corporation shall Input vat on sale to the government 40,000
remit the withholding of VAT to the BIR within 10 Input tax on depreciable capital 160,000
days following the end of the month the goods not directly attributable to any
withholding was made. specific activity (monthly amortization

Page 17 of 20 TAX.2905
 for 60 months)
65. Assuming that the scheduled payment on June 2,
58. The vat payable for the month is 2018 is P2,000,000, how much is the output tax to
a. P40,000 c. P160,000 be recognized for the June 2, 2020 payment?
b. P80,000 d. nil a. P0 c. P249,600
b. P24,000 d. P624,000
59. The amount of input vat not available for tax credit
but may be recognized as cost or expense is: Use the following data for the next two (2) questions:
a. P60,000 c. P80,000 JJ is a real estate dealer. During the month of October
b. P70,000 d. P140,000 2019, he sold three (3) commercial lots under the
following terms:
60. Leomar, a VAT-registered person has the following Lot 1 Lot 2 Lot 3
data: Selling Price P250,000 P200,000 P300,000
Cost 150,000 130,000 175,000
Export sales, total invoice amount P3,000,000 Gain/Loss 100,000 70,000 125,000
Domestic sales, total invoice amount 6,720,000 Terms:
Purchases used to manufacture Goods Down, Oct. 5 25,000 50,000 40,000
for export and domestic sales: Due:
Raw Materials, VAT inclusive 616,000 12/05/ 2019 25,000 20,000 20,000
Supplies, VAT inclusive 448,000 Year 2020 200,000 130,000 240,000
Equipment, VAT exclusive 300,000 Zonal Value 350,000 260,000 250,000

The amount of input tax which can be refunded or 66. How much is the Output tax for the month of
converted into tax credit certificates at the option of October?
Leomar is: a. P26,500 c. P31,800
a. P120,000 c. P39,600 b. P34,800 d. P40,200
b. P118,800 d. P50,000
67. The Output tax for December is
61. Based on the preceding number, if the refundable c. P5,400 c. P6,600
input taxes were not refunded but used as tax credit, d. P4,500 d. none
the VAT due is:
a. P576,000 c. P666,888 68. Data for a trader with one line of business subject to
b. P697,888 d. P570,000 value added tax and another line of business not
subject to value added tax (amounts presented are
62. But assuming further that the taxpayer opted to gross of vat if applicable):
claim them as refund, the VAT due is: Sales, vat business P896,000
a. P576,000 c. P746,888 Sales, non-vat business 200,000
b. P697,888 d. P620,000 Purchases of goods, vat business 224,000
Purchases of goods, nonvat 33,600
63. Kaktus Realty Inc. developed a condominium in business
Manila. During the month of January 2019, it had the Purchase of depreciable asset, for 112,000
following data (VAT included,if applicable): use in vat and non vat business
Purchases of supplies, for vat and 2,240
Selling Price non vat business
Cash sale of a 3 bedroom unit P5,040,000 Rental of premises, for vat and non 22,400
Sale of parking lot 560,000 vat business, from non vat lessor
Installment sale of 2 bedroom
unit (initial payments exceed The value added tax payable is
25% of the selling price) 3,920,000 a. P59,808 c. P82,608
b. P62,208 d. P86,208
The 3 bedroom unit sold for cash had a zonal value of
P5,000,000 and the 2 bedroom unit had a fair market 69. Tore Inc., a building contractor, showed to you the
value per Tax Declaration of P3,000,000. following data for the month of August 2015:
Cash received, gross of VAT 2,240,000
How much is the output tax for the month? Receivables, net of VAT 3,000,000
a. P920,000 c. P1,020,000 Advances on other contracts still 1,000,000
b. P900,000 d. P1,080,000 unearned (w/o VAT)

64. Bahay Kubo Inc. is a real estate dealer. Details of its Unpaid Purchases:
sales during the year showed the following: For materials, VAT excluded 500,000
For supplies, VAT excluded 100,000
Date of sale June 2, 2018 For services of sub-contractors 1,848,000
Consideration in the deed of sale P5,000,000 (VAT included)
Fair market value in the assessment 4,800,000
rolls Payments for purchases made in
Zonal Value 5,200,000 July:
Schedule of payments: Materials, gross of VAT 369,600
June 2, 2018 1,000,000 Services of subcontractors, net of 495,000
June 2, 2019 2,000,000 VAT
June 2, 2020 2,000,000
How much is the value added tax payable?
How much is the output tax to be recognized for the a. P360,000 c. P330,000
June 2, 2020 payment? b. P228,600 d. P90,000
a. P0 c. P249,600
b. P24,000 d. P624,000

Page 18 of 20 TAX.2905
70. Cebu Airlines is a corporation organized in the Sales – vat exempt goods 1,000,000
Philippines. It has the following data for the taxable Sales – government 1,000,000
year 2018:
The following input taxes were passed-on by vat suppliers
Passengers Fare (Net of VAT): to Alpha Corporation during the month:
Flights from Philippines to P8,000,000 Input vat on goods sold to private P120,000
Hongkong entities and individuals
Flights from Hongkong to 8,000,000 Input vat on sale of exempt goods 20,000
Philippines Input vat on sale to the government 100,000
Domestic Flights (gross of 2% 3,000,000
withholding tax) 76. The vat payable for the month is
a. P216,000 c. P96,000
Fares from cargoes & mails (Net b. P108,000 d. P36,000
of VAT):
Flights from Philippines to P1,000,000 77. The amount of input vat not available for tax credit
Hongkong but may be recognized as cost or expense is:
Flights from Hongkong to 1,500,000 a. P20,000 c. P62,000
Philippines b. P50,000 d. nil
Domestic Flights (gross of 2% 800,000
withholding tax) Items 88 to 91
Other Income: The Wash Corporation, a VAT-registered company, is
Interest income from bank 800,000 engaged in the laundry business. During the second
deposits quarter of 2018, the following information were made
Rent income 500,000 available:

How much is the Output Tax? Net revenues 2M

a. P456,000 c. P420,000 Receivables from customers, April 1, 2018 448,000
b. P516,000 d. P0 Receivables from customers, June 30, 2018 672,000
Creditable VAT withheld 10,000
71. If a dealer in securities sold shares in the local stock VAT purchases, other than capital goods 600,000
exchange, what business tax will apply to such VAT purchases, capital goods (all in April 2018) 2.4M
transaction?
a. VAT based on Gross Selling Price Receivable balances are all income related and are
b. VAT based on gain inclusive of VAT. Revenues and purchases are VAT
c. Capital Gains Tax exclusive. Capital goods are estimated to have a useful
d. Stock Transaction Tax of 6/10 of 1% life of 10 years.

72. Lola Lita, a senior citizen, bought a medicine with a 78. Compute item 19B of BIR Form No. 2550Q.
selling price of P9,520 inclusive of VAT. How much is a. P216,000 c. P213,120
the net amount to be paid by Lola? b. P264,000 d. P240,000
a. P8,500 c. P6,916
b. P7,616 d. P6,800 Net revenues P2,000,000
Add: Receivables, beg. (net of vat) 400,000
73. Lolo Sot, a senior citizen went to Jollibee to treat his Less: Receivables, end. (net of vat) (600,000)
4 grandchildren on account of his retirement. They Gross receipts or collections for the quarter P1,800,000
consumed food and beverages with gross amount of x vat rate 12%
P1,120 inclusive of VAT. How much is amount to be Output vat P216,000
paid by lolo Sot?
a. P896 c. P1,056
b. P920 d. P1,100 79. Compute item 22 of BIR Form No. 2550Q
a. P86,400 c. P360,000
74. Lola Trining brought her granddaughter to Jollibee for b. P72,000 d. P370,000
a treat. Her granddaughter requested that they both
order kiddie meals so that the latter will have two (2) Vat purchases, other than capital goods P72,000
new toys since each meal have a free one. The price (P600,000 x 12%)
of each meal is P120, net of VAT. How much is the Vat purchases, capital goods, (all in April) 288,800
amount due from Lola Trining? P2,400,000 x 12%
a. P268.8 c. P240 Total available input vat P360,000
b. P230.4 d. P192
80. Compute the deferred input tax as of March 31,
75. Gabriana Clinic, a VAT-registered entity, performed a 2018:
prosthetic surgery on the legs of Loyd, a person with a. P280,000 c. P283,200
disability. The total cost of medical operation b. P273,600 d. None
inclusive of vat was P560,000 . Being a disabled
person, Loyd received 20% discount from Gabriana. Input Vat NOT directly attributable to sale to the
How much is the total amount to be paid by Loyd? Government:
a. P400,000 c. P500,000
b. P448,000 d. P560,000 Total Input vat on purchases of capital goods P288,000
=P2,400,000 x 12%
Use the following data for the next two questions:
Alpha Corporation (vat registered) has the following data CREDITABLE Input vat on purchases of capital (P14,400)
for the month: goods for the 2nd Quarter
Sales – private entities and P2,000,000 =P2,400,000 x 12% / 60 mos. x 3 mos.
individuals (10% to senior Deferred input vat P273,600
citizens)

Page 19 of 20 TAX.2905
 81. Compute item 23B of BIR Form No. 2550Q
a. P26,000 closed to expense
b. P22,000 closed to expense
c. P4,400 closed to income
d. P5,360 closed to income

Input Vat NOT directly attributable to sale to the

Government:
Input vat on purchases other than capital goods P8,000
=P600,000 x 12% x 200/1800
Vat purchases of capital goods 1,600
= P2,400,000 x 12% / 60 mos.
x 3 mos. x 200/1800
TOTAL ALLOCATED INPUT VAT P9,600
VS.
STANDARD Input Vat
(P200,000 x 7%) (14,000)
Input Vat closed to income (P4,400)

Page 20 of 20 TAX.2905