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MODULE V
VALUE ADDED TAX
Module Author:
CHARLES C. ONDA, MD, CPA
Accountancy Department
College of Business Administration and Accountancy
De La Salle University – Dasmarinas
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TABLE OF CONTENTS
Title Page
Gospel Reflection 3
Learning Outcomes 4
Study Timeline 5
Overview of Value Added Tax 5
Transactions covered by VAT 5
VAT registration system 5
Persons subject to Vat 6
VAT Taxable Sales of Goods/Services 7
Sources/Classification of Input Tax Credits 7
Cancellation of Registration 8
Administrative Provision 8
Exercises 9
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GOSPEL REFLECTION
PROVERBS 11:25
Instruction:
Using the space below to share your personal reflection and experience on the above
verse.
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LEARNING OUTCOMES
At the end of the module, the student should be able to:
Course Learning Objective
CLO5. Determine the concept of Value Added Tax, Output Tax, Input Tax and Net VAT
Payable (Refundable) including the VAT Administrative and Other Compliance
Requirements.
Topic Learning Outcomes
TLO22 Discuss the concept of onerous transfers and the Value Added Tax (VAT).
TLO23 Identify the transactions subject to Value Added Tax.
TLO24 Differentiate the VAT taxable, exempt and zero-rated transactions from each
other.
TLO25 Discuss the concept of output tax on sales of goods or properties (Actual Sales,
Deemed Sales and Zero-rated Sales).
TLO26 Discuss the concept and computation of output tax on sales of services and
lease of properties (Actual Sales, Deemed Sales and Zero-rated Sales) and on
Importation.
TLO27 Discuss the concept of input tax and all its sources
TLO28 Identify and differentiate the different types of input taxes.
TLO29 Determine the VAT Payable and Net VAT payable and/or Refundable.
TLO30 Discuss and illustrate the monthly and quarterly VAT computations.
TLO31 Determine the mandatory and optional registration under the VAT system.
TLO32 Identify the applicable invoicing requirements of Vatable transactions.
TLO33 Prepare the VAT return, discussing the deadline for the payment of VAT and the
legal implications for its non-payment
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STUDY TIMELINE GUIDE
3 Hrs Study Timeline
Diagnostic Tests Reading
33% 33%
Formative Assessment
33%
VALUE ADDED TAX
Basic Concepts
Output Tax- tax on every sale or distribution
Input tax- tax on every purchase
VAT Payable- excess of Output tax over input tax.
Excess Input tax- excess of input tax over output tax, also referred to as
overpayment
Indirect tax because the burden can be shifted by the seller to the buyer.
Transactions covered by VAT
Tax base Tax rate Documents
Sale of goods or Gross selling price 12 % Invoice price
properties
Sale of services Gross receipts 12 % Official Receipts
Importation of goods Landed Costs 12 % Import Declaration
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Gross Selling Price- means total amount of money or its equivalent which the
purchaser must pay the seller in consideration of the sale, barter, or
exchange including excise tax, if any.
For sale of properties, the GSP shall be the highest of Selling Price in the
sales document; or Zonal value or Assessed Value.
Gross receipts- means cash received or its cash equivalent including all the
advances made by the buyer to the seller.
Landed Costs- means the amount paid by the importer including invoice
amount, import charges prior to release of goods from the BOC, freight,
insurance, warehousing fee, arrastre, wharfage, and excise tax, if any.
VAT Registration System
If sales is </= P 3,000,000, options available: VAT : Output Tax/ Possible Input Tax
Non- VAT: Possible Output tax
No input tax
If sales >P 3,000,000, only one option available: VAT registered: Output Tax
Possible Input Tax
Rules: Only VAT registered invoice will generate input tax.
However the Non VAT taxpayer will generate output tax:
A) If taxpayer issues fake/fictitious/supposed to be VAT registered
invoice.
B) If taxpayer fails to register to VAT upon reaching the threshold
Persons subject to VAT
1) Those engaged in the selling or leasing of goods, properties, or services subject to VAT and
registered regardless of level of sales
2) Those engaged in the selling or leasing of goods, properties or services subject to VAT whose
gross sales or receipts during the year or in any 12 month period of > P 3,000,000, whether
or not registered.
3) Those who are VAT registered and who have VAT-exempt business which they choose to
register under the VAT system, regardless of the level of sales.
4) Franchise grantees of radio and/or or TV broadcasting whose gross annual receipts do not
exceed P 10,000,000, but are registered.
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5) Importers of goods subject to VAT, whether or not in the course of trade or business,
regardless of the amount of purchase.
Summary of tax effect of VAT- Taxable and VAT exempt transactions
1) VAT- Taxable transactions:
a) At 12% - Seller is subject to VAT at 12%
- Seller is entitled to input tax credit
- Seller pays excess of output tax over input tax to the BIR
- seller can carry over excess input tax to succeeding quarter/s
b) At 0% - Seller is subject to VAT at 0%
-Seller is entitled to input tax credit
- Seller can claim refund or tax credit for input taxes
2) Exempt transactions -Seller is exempt from VAT
-Seller cannot separately bill output tax to his customers
-Seller is not entitled to input tax credit
-Seller shall be liable to VAT if he issues VAT invoice or receipt,
but without the benefit of input tax credit.
VAT-taxable sales of goods or properties
1) VATable sales- must be an actual sale in the ordinary course of trade or business, of goods
or properties within the commerce of man.
2) Transactions deemed sales
A) Transfer, use or personal consumption not in the ordinary course of trade or
business of goods or properties originally for sale or for use in the course of
business. (@ cost) (u are the owner of the business, you are not going to pay tax)
B) Distribution or transfer of goods or properties for:
(1) Shareholders or investors as property dividends
(2) Creditors in payment of debt or obligation
C) Consignment of goods if actual sale is not made within 60 days following the date
such goods were consigned (if they fail to recover the goods, they will pay VAT)
D) Transmission of property to trustee if:
(1) The property transferred is one for sale, lease, or use in the ordinary course
of trade or business, and
(2) The transfer continues a completed gift.
Sources/Classification of Input Tax Credits
1) VAT paid to the supplier or vendor
2) From transactions deemed purchase
3) Transitional Input Tax- input tax allowance given to taxpayers who are becoming liable to
VAT for the first time.
To compute:
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Value of beginning inventory, before becoming VAT registered x 2% - xxx
Actual VAT paid on such inventory - xxx
Get the lower between the two values.
4) Presumptive Input Tax- input tax allowance given to taxpayers who are engaged in
processing o sardines, mackerel, milk, refined sugars, cooking oil and packed noodle-based
instant meals.
To compute:
Purchase of primary agricultural products which are exempt from VAT forming
part of the goods produced x 4%
5) Input tax on depreciable goods
The purchase or importation of depreciable capital goods totaling > 1 P 1,000,000
(exclusive of VAT) in a calendar month, regardless of the acquisition cost of each capital
good, and regardless of the term of payment, shall give rise to input tax credits.
6) Input Tax on Construction in Progress (CIP)
7) Ratable portion of any input tax which cannot be directly attributed to either taxable or
exempt activity.
8) Issuance by a VAT invoice by a Non-VAT person.
9) Issuance of a VAT invoice on an exempt transaction by a VAT registered person.
Cancellation of Registration
1) He makes a written application showing that his gross sales or receipts (excluding exempt
sales) in the last 12 months shall not exceed P 3,000,000;
2) He ceases business;
3) There is a change in ownership in the case of single proprietorship;
4) Dissolution of the partnership or corporation;
5) Merger or consolidation with respect to the dissolved corporation;
6) Failure to actually start business;
7) Business becomes exempt;
8) A person who voluntarily registers and then applies for cancellation after the lapse of 3
years;
9) A VAT-registered person whose gross sales or receipts for 3 consecutive years did not
exceed P 3,000,000 beginning January 1, 2018.
Administrative provision
1) VAT returns will be filed monthly, not later than the 20th day following the end of
the taxable month and shall be filed only for the first two months of each quarter.
2) Quarterly VAT returns will be filed not later than the 25 th day following the end of
the taxable quarter. Payments made in the 2 previous monthly VAT returns shall be
credited against the quarterly VAT payable to arrive at the net VAT payable ( or
excess input tax) for the quarter.
3) The time for filing for refund or tax credit should be within two (2) years after the
close of the taxable quarter when such sales were made.
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4) For unused input taxes upon retirement, change, or cessation of status as a VAT
registered person should be filed within two (2) years from the date of cancellation
of his VAT registration.
PROBLEM EXERCISES WILL BE IN ANOTHER FILES
3m or less pede mag vat or non vat: if u are vat reg, u will have output tax but no input unless
nagpurchase sa vat reg person.
