This document discusses value-added tax (VAT) coverage and classifications under Philippine law. It states that VAT applies to the sale, lease, or import of goods and services in the course of business, unless exempt or zero-rated, at a 12% rate. Sales are classified as exempt, zero-rated, or taxable. The law requires those engaged in trade to collect VAT on taxable transactions. Specific transactions like property dividends or goods transfers out of business are considered "deemed sales" subject to VAT. Formulas are provided for calculating VAT using exclusive or inclusive tax base methods.
8. SECURITY GUARD CREED, CODE OF CONDUCT, COPE.pptx
Value Added Tax (Taxable Sales) Philippines
1. COVERAGE OF
THE VALUE-ADDED TAX
I. VAT on sales or lease of goods,
properties and services;
a) Sales on goods and properties
b) Transactions deemed sale
c) Sales of Services and use or lease of
properties
3. “What does the law says?”
• The NIRC under section 105 provides that any
person who, in the course of his trade or
business, sells, barters, exchanges, leases
goods or properties, renders services, and any
person who imports goods (unless their
transactions are VAT exempt or zero-rated)
shall be liable to the 12% VAT rate imposed in
Sections 106, 107 and 108 of the NIRC.
6. Computation of VAT on Sale of goods
• Tax Exclusive Method
the VAT is presumed not yet included in the
tax base amount. Such amount representing the
taxable base (exclusive of vat), whether gross
sales price or gross sales receipts, is multiplied by
12% vat rate. The resulting product is the VAT due
or output tax, as the case maybe. This is normally
the method adopted by the seller when it
prepares the sales invoice on its sales
transactions.
7. Computation of VAT on Sale of goods
• Tax Inclusive Method
the VAT is presumed to be already included in
the tax base amount. Such amount representing
the taxable base (inclusive of vat), whether
invoice sales price or invoice gross receipts, is
multiplied (12/112) vat factor. The resulting
product is the vat due or output tax as the case
maybe. This is usually the method adopted by the
BIR in its tax audits/examinations.
8. Computation of VAT on Sale of goods
• VAT Exclusive Method Formula:
Gross Sales/Gross Sales Receipt (excluding VAT) x 12% = VAT
e.g. Gross Sales of a restaurant in a day
P50,000 x .12 = P6,000
• VAT Inclusive Method Formula:
Invoice Price/Invoice Receipts (including VAT) x (12/112) = VAT
e.g. (ditto)
P56,000 x (12/112) = P6,000
9. b) Transactions “deemed sale”
• Transfer, use or consumption not in the course of business of
goods or properties originally intended for sale or for use in
the course of business.
*Transfer of goods or properties not in the course of business
can take place when the VAT-registered person withdraws
goods from his business for his personal use.
• Distribution or transfer to:
(a) shareholders as share in the profits of the VAT-registered
person.
*Property Dividends which are distributed by the company to
its shareholders and declared out of retained earnings shall
be subject to VAT (12%)
(b) Creditors in payment of debt or obligation
10. b) Transactions “deemed sale”
• Consignment of goods if actual sale is not made within 60
days following the date such goods were consigned.
*Consigned goods returned by the consignee within the 60-
day period is not deemed sold.
• Retirement from or cessation of business with respect to
inventories of taxable goods (all goods on hand, whether
capital goods, stock-in-trade, supplies or materials) existing as
of the date of such retirement.
(a) Change of ownership of the business. There is a change in
the ownership of the business when a sole proprietorship
incorporates; or the proprietor sells his entire business.
(b) Dissolution of a partnership and creation of a new
partnership which takes over the business.
*tax base shall be the acquisition cost/current market price
whichever is lower.
11. b) Transactions “deemed sale”
Formula:
Gross Value of Goods “deemed sold” (excluding VAT) x 12% = VAT
e.g. A at the time of retirement has 1,000 pcs of merchandise which was
deemed sold at a