1. Taxation 2 │
BUSINESS TAXES
FLABERT VILLASENCIO, CPA
Notre Dame of Dadiangas University
2. Transaction Subject to Business Tax
1. It is a commercial activity- involves sales of goods and
services related to trade, profession or business (not an
exempt transaction)
Example:
a) Sale of goods
b) Sale of ordinary asset used in business
2. Services rendered by a Nonresident foreign person
(regardless of regularity)
Example:
Pha Hiram, an Indian national, leased his vessel to a Filipino
citizen. He is not regularly engaged in a leasing business.
He is deemed to engage in a leasing business even if it is not
regularly engaged in leasing in the Philippines.
3. Non-business Transaction
The following are Non-business Transactions that are
subject to Business Tax:
1.Sale of shares of stock through the stock exchange
subject to ½ of 1% Other Percentage Tax
2.Oversees dispatch, communication originating
from the Philippines subject to 10% OPT
3.Horse racing winning subject to 10% OPT; Jai-Alai
subject to 30% OPT
4. Casual Sale
An occasional sale of goods or services by a person
who is not engaged in the business or sale of assets
that are not used in business
Example:
1. Sale of personal properties not used in the
business.
6. Business Taxes
Taxes imposed on ONEROUS transfers in the ordinary
course of business:
1.Value-Added Tax (VAT) – a general consumption tax
with a 12% additional tax on the sales price of the
goods or services by VAT-registered seller or by those
required to be under the VAT-system.
2.Other Percentage Tax (OPT) – general consumption
tax to Non-VAT- registered
• With several rates but the common is 3%
1.Excise Tax (ET) – taxes imposed on products that are
harmful to health, non-essential and those that
deplete natural resources
7. Business Registration
For regulation purposes, a business must be
registered before it starts its economic activities so
as not to render it business illegal.
1.Initial Registration – filed with the RDO to where the
principal place of business
2.Annual Registration – every before the start of the
business, it has to be registered. Annually, the
registration has to be renewed.
• Annual fee of P500 for every separate distinct
establishment or place of business.
8. Business Registration
Exempt from Registration Fee:
1.Individuals earning purely compensation income
2.Overseas workers
3.Self-employed individuals where the gross sales or
receipts do not exceed P100,000 per year
4.Cooperatives (but still have to register with BIR)
9. Summary Application
Seller (Business Registration)
VAT-Registered
>P1,919,500/
year
Non-VAT-Registered
<P1,919,500/
year
VAT-Registered
VAT Sales
Invoice for sale
of goods
VAT Receipts
For sale of
services
Non-VAT Registered
Issues Sales Invoice for
sales of goods
Issues Receipts for Sale of
Services
10. VAT or Non-VAT Registration
▪ VAT-Registered- subject to 12% business tax
▪ Non-VAT- Registered- generally subject to 3% Other
Percentage Tax
1. Mandatory VAT-Registration- VAT-Registration becomes
compulsory when:
a. Expected annual gross sales or receipts exceed P1,919,500
b. A taxpayer has realized gross sales or receipts of more than
P1,919,500
2.Optional VAT-Registration – persons with taxable business
transactions that do not exceed P1,919,500 per year has the
option to register under VAT system.
3.Non-VAT Registration – a person registers to a Non-VAT system
who is subject to Other Percentage Tax
– Still subject to 12%
– Cannot shift the burden to customers
– Cannot claim creditable input VAT on its purchases
11. VAT vs Non-VAT Business
VAT-Registered
Allowed to collect
Output VAT from
customers
Allowed to claim
creditable Input VAT
on purchases from
VAT-registered
suppliers
Non-VAT
Registered
No Output VAT is
allowed. The business
tax is charged as
Operating Expense
No Input VAT is
allowed. The Input VAT
is charged as part of
Cost of Purchases
12. VAT vs Non-VAT Business
1. Purchased goods from non-VAT supplier amounting to P5,000
Purchases 5,000
Purchases 5,000
• Cash 5,000
Cash 5,000
2. Purchased goods from a VAT-registered supplier amounting to P10,000 plus P1,200 VAT
Purchases 10,000
Purchases 11,200
Input VAT 1,200
• Cash 11,200
• Cash 11,200
3. Sold 12,000 worth of goods for 30,000
Cash 33,600
• Sales 30,000
• Output VAT 3,600
Cash 30,000
Sales 30,000
4. Paid the Business tax for the month
Output Vat 3,600
Input Vat 1,200
VAT Payable 2,400
OPT Expense 900
OPT Payable 900
VAT Payable 2,400
Cash 2,400
OPT Payable 900
Cash 900
13. Cancellation of VAT Registration
▪ VAT-Registration is irrevocable for a period of 3 years from the
quarter the registration was made
▪ Liability to pay VAT is valid until revoked by the BIR
Non-VAT Person Collecting VAT
▪ Other Percentage Taxes applicable to the transaction
▪ VAT due on the transaction without the benefit of any Input Tax Credit
▪ 50% surcharge
14. Non-VAT Person Collecting VAT
Illustration:
Manda Raya, a non-VAT person, collected P112,000 from Tangaka
Sy for the sale of goods amounting to 100,000 plus 12,000 VAT.
She was about to pay the 3% percentage tax but the BIR found
out her violation. Raya’s tax liability would be:
Other percentage tax (100,000 x 3%) 3,000
Add: VAT Collected 12,000
Surcharge (50%) 6,000 18,000
Total Tax Liability 21,000
15. Invoices and Receipts
▪ General Requirements
oApply for Authority to Print with the BIR
oInvoices and Receipts shall be registered with BIR
oCash register machines and sales book are to be
registered with BIR
oInvoices are to be issued for sale of goods while
receipt is to be issued for the amount of cash
received
oContents of the cash register receipts
oBusiness name
oBusiness address
oVAT or Non-VAT number
oAmount and Date of the transaction
oAmount of Tax (for VAT invoice)
16. Invoicing and Accounting for VAT-Registered
Persons
A. A VAT-registered person shall issue:
1. A VAT invoice for sale of goods or properties
2. VAT Official Receipt for sale of services or lease of goods or
properties
B. The following information shall appear in the VAT invoice or
VAT Official receipt
1. A statement that the seller is a VAT-registered person followed by
the TIN.
2. The amount of tax shown as a separate item.
3. The word “VAT-exempt Sale” is written or printed prominently if sale
is VAT-exempt.
4. The word “Zero-Rated Sale” is written or printed prominently if sale
in subject to zero percent.
5. An option to issue combined or separate invoices receipts of sale
on a combination of VAT-liable and VAT-exempt sale
6. Date of transaction, quantity, unit cost, and description of the
goods or properties or the nature of the service.
7. For sale of VAT-registered persons amounting to P1,000 or more
indicate the name, business style, address and TIN of the
purchaser.
17. S E A T W O R K : ( 1 / 2 C W )
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