DETERMINATION

OF VAT STILL DUE

Module 16
Chapter 10
Prepared by: Mrs. Nelia I. Tomas, CPA, LPT

Business and Transfer Taxation, Laws, Principles and Application. 2019 Edition. Banggawan, Rex B.
 Learning Objectives

After completing the lesson, the students will be able to

 Explain the determination of VAT payable
 Identify the difference of tax credits against VAT due
 Comprehend the rules of advanced VAT
 Understand the allocation or non-traceable input VAT on mixed transactions
 Determine the conditions for the claim of input VAT
 DETERMINATION OF VAT PAYABLE
The VAT still due of taxpayers is computed as:

Output VAT P xxx

Less: Creditable Input VAT xxx
Net VAT payable P xxx
Less: Tax credits / Payments xxx
Tax Still Due/ (Overpayment) P xxx

TAX CREDITS / PAYMENTS

1. VAT paid in the previous two months - for quarterly VAT returns (BIR Form 2550Q)
2. VAT paid in return previously filed, in the case of amended return
3. Advanced payments made to the BIR
4. Final Withholding VAT on sales to the government – 5% withheld by government
agencies or GOCCs
5. Advanced VAT on certain goods
Advanced VAT
The owners or sellers of the following goods are required to pay advanced VAT before
their withdrawal at the point of production.
a. Refined sugar
b. Flour
c. Naturally grown and planted timber products

ADVANCED VAT ON THE SALE OF SUGAR

Sugar - refers to sugar other than raw cane sugar or those with sugar content of sucrose
by weight, in the dry state corresponds to a polarimeter reading of 99.5° and above and
whose color is 800 ICU or less. (RR8-2015)
Sugar includes cane sugar produced from a refining process, sugar refinery, a
production line of sugar mill accredited by the BIR to be producing and or capable of
producing sugar with polarimeter reading of 99.5° and above and for which the quedan
issued therefore is verified as such by the Sugar Regulatory Administration.
Before any warehouse receipts or quedans are issued or before the sugar is withdrawn
from the sugar mill/refinery, the advanced VAT shall be paid by the owner/seller to the
BIR through an authorized agent bank or to a revenue collection officer or deputized city
or municipal treasurer in places where there are no authorized agent banks.
“Sugar owners” refers to a person who has legal title over the sugar and include sugar
planters, traders, sugar millers, cooperatives associations.
Base price of advanced VAT: P1,400 per 50 kg, bag

ADVANCED VAT ON THE SALE OF FLOUR BY MILLERS

“Flour Miller” is a person who is engaged in the milling of imported wheat to produce
flour as finished product, where such wheat may be directly imported or purchased from
an importer/trader.
“Wheat Trader” is a person who is engaged in the importing/buying and selling of
imported wheat.
Importation of wheat by a flour miller
The advanced VAT on the future sale Of flour milled from imported wheat shall be paid
prior to the release from Custom's custody of the wheat, which is imported and declared
for milling.
Purchase of wheat by flour millers from traders
The purchase of imported wheat from traders by flour millers shall also be subjected to
advance VAT and shall be paid by the flour miller prior to delivery of the wheat by the
trader.
The importation of wheat by any trader shall be exempt from the payment of advanced
VAT regardless of its intended use.

The importation of agricultural or marine food products normally does not require an
Authority to Release Imported Goods (ATRIG) from the BIR for its release from the
Custom's warehouse.

In view of the advanced VAT, however, importers of wheat, whether miller or trader, shall
secure an ATRIG from the BIR, regardless of the intended use of the imported wheat.

Basis of the advanced VAT

For wheat imported by millers - 75% of the sum of:
a. Invoice value multiplied by the currency exchange rate on the date of payment
b. Estimated customs duties and other charges prior to the release of the imported
wheat from Custom’s custody, except for advanced VAT.
c. 5% of the sum of a. and b.
In short, the advanced VAT is computed as 12% x 75% x 105% x (a + b).
For wheat purchased by flour millers from wheat traders – 75% of the sum of:
a. Invoice value
b. Estimated freight
c. And 5% of the sum of a. and b.
 Illustration 1
A VAT-registered flour miller imported wheat from abroad at a total invoice price of $100,000. P300,000
total charges was estimated to be paid prior to the release of the wheat from Customs. The Peso-Dollar
exchange rate at the date of payment was P43.50 to $1.00.

Requirement: Compute for the advanced input VAT.

Solution:

Invoice price ($100,000 x P43.50) P 4,350,000

Estimated Custom's charges 300,000
Landed cost P 4,650,000
Multiply by: 105%
Total P 4,882,000
Multiply by: 75%
Advanced VAT base P 3,661,875
Multiply by: 12%
Advanced VAT P 439,425
ADVANCED VAT ON THE TRANSPORT OF NATURALLY GROWN AND PIANTED
TIMBER PRODUCTS

The VAT on the transport of naturally grown and planted timber products for purposes of
consummating a sale shall be paid in advance by the owner/seller to the BIR through
authorized agent banks (MB), revenue collection officers (RCO), or deputized municipal
treasurers in places where there are no AABs.
Basis of advanced VAT

The 12% advanced VAT shall be based on per cubic meter (m³) Of each species of
naturally grown timber as follows:
Luzon Visayas Mindanao
Philippine mahogany group, Manggasinoro group ,
Manggachapui group, Narig group, Palosapis group, Guijo P1,400/m³ P1,400/m³ P1,425/m³
group
Yakal Group 1,500/m³ 1,500/m³ 1,530/m³
Apitong Group 1,260/m³ 1,260/m³ 1,260/m³
Softwood species except Igem 715/m³ 715/m³ 715/m³
Igem 1,275/m³ 1,275/m³ 1,275/m³
Nato 1,000/m³ 1,000/m³ 1,000/m³
Furniture/Construction hardwood 950/m³ 950/m³ 950/m³
Premium species, allowed cut 3,000/m³ 3,000/m³ 3,000/m³
Lesser-used 700/m³ 700/m³ 700/m³
Pulpwood, chip wood and mathwood species (per m³) 95/m³ 95/m³ 95/m³
 Illustration 2
Forester Isidora is a VAT registered person and a licensee under a Private Forest Development
Agreement with the government in Kalinga Province in Luzon. He harvested 1,700 cubic meter of
mahogany,

Requirements: Compute for the advanced input VAT. If the taxpayer is a non-VAT registered, compute
for the advanced percentage tax (NIRC and CREATE Act)

Solution:

Advanced VAT = 1,700/m³ x 1,400/m³ x 12% = P285,600

Advanced Percentage Tax (NIRC) = 1,700/m³ x 1,400/m³ x 3% = P71,400

Advanced Percentage Tax (CREATE Act) = 1,700/m³ x 1,400/m³ x 1% = P23,800

TAX STILL DUE
The resultant “Tax still payable” in the VAT return is paid to the government as follows:

 1st month of the quarter - within 20 days from the end of the month
 2nd month of the quarter – within 20 days from the end of the month
 3rd month of the quarter - within 25 days from the end of the quarter

OVERPAYMENT
The resultant “Overpayment” or negative net amount in the VAT return may be treated
as “Input VAT carry-over” to the succeeding period.

ALTERNATIVE TREATMENT ON CERTAIN OVERPAYMENTS

1. Overpayments arising from input VAT on zero-rated sales
2. Overpayments arising from advanced input VAT
INPUT VAT ON ZERO-RATED SALES
The unutilized input VAT arising from zero-rated sales or effectively zero-rated sales
may be claimed as a:
a. tax refund
b. tax credit against other internal revenue taxes

When and where to claim for VA T refund or TCC

Within two years, the claim for refund or tax credit shall be made to the following,
whichever is applicable:
1. Bureau of Internal Revenue
2. Board of Investments
3. One-Stop-Shop and Duty Drawback Center of the Department of Finance

Prescriptive period for claim for refund or tax credit

The two-year prescriptive period for the claim for refund or tax credit is counted from the
close of the taxable quarter when the zero-rated sales were made, not from the date of
payment of the VAT (CIR vs. Mirant Pagbilao Corporation, G.R, No. 172129, September
2008).
No other remedy for unutilized input VA T on zero-rated sales
 Previously, the BIR allowed the outright expensing of the unutilized input VAT under
BIR Ruling DA-(VAT-021) 121-10 when the prescriptive period lapsed, the claim for
refund or credit was denied or when the claim was voluntarily withdrawn by the
taxpayer.
 Under BIR Ruling No. 123-2013, the BIR withdrew the expense treatment for lack of
legal basis. The unutilized creditable input VAT attributable to zero-rated sales can
only be recovered through the application for refund or tax credit (RMC 57-2013).

Perfect matching of input VAT with zero-rated sales not required

 The input VAT reported in past quarters which are attributable to zero-rated sales
reported in subsequent quarters are still claimable as tax credit or tax refund.
 Input VAT claimed for refund or tax credit shall no longer be creditable against
output VAT and must be removed from the total amount of creditable input VAT.

UNUTILIZED ADVANCED VAT

 Advanced VAT payments which remain unutilized at the end of the taxpayer’s
taxable year when advanced payment was made, and which tantamount to excess
payment may, at the option of the owner/seller/taxpayer or importer/miller/taxpayer,
be available for the issuance of a tax credit certificate [TCC).
Requisite for TCC Claim
1. The seller/owner or importer/miller must file a claim for credit within 2 years from the
date of filing of the fourth quarter VAT return of the year such return was made.
2. Claim shall be limited to the unutilized advanced VAT payment and shall not include
excess input VAT.

WHEN INPUT VAT MAY BE CLAIMED FOR REFUND

There are only two cases where a taxpayer can ask for refund of input VAT:
1. Unutilized input VAT on zero-rated sales
2. Unutilized input VAT upon cancellation of VAT registration due retirement from or
cessation of business.
COMPLIANCE REQUIREMENTS
1. Invoicing requirement
2. Accounting requirement
3. Filing of VAT return
4. Filing of quarterly summary lists
5. Government withholding

VAT Invoicing Requirements

A VAT-registered person shall issue:
1. A VAT invoice for every sale, barter or exchange of goods or properties; and
2. A VAT official receipt for every lease Of goods or properties, and for every sale, barter or
exchange of services

Using a single invoice or receipt for mixed sales

A VAT-registered taxpayer may use a single invoice or receipt involving VAT and non-VAT
transactions, provided that:
a. the invoice or receipt must clearly indicate the breakdown of the sales or receipt among
taxable, exempt and zero-rated components; and
b. the calculation of VAT on each portion of the sale shall be shown on the invoice or receipt.
Using a separate invoice or receipt for mixed sales
A VAT-registered taxpayer may also use different invoice or receipt for the taxable,
exempt and zero-rated components of its sales. Provided that;
a. if the sale is exempt from VAT, the term ‘VAT-EXEMPT SALE” shall be written or
printed prominently on the invoice or receipt
b. if the sale is subject to zero percent (0%) VAT, the term “ZERO-RATED SALE” shall
be written prominently on the invoice or receipt

INVOICING REQUIREMENT
A VAT-registered person shall issue a:
1. VAT invoice for every sale, barter or exchange of goods or properties; and
2. VAT official receipt for every lease of goods or properties, and for every sale, barter
or exchange of services.

All persons subject to internal revenue tax shall issue duly registered receipts prepared
at least in duplicate, for each sale or transfer of merchandise or for services rendered
valued at P100,000 or more.
Content of the VAT invoice or official receipt
1. Name of Seller
2. Business Style of the Seller
3. Business Address of the Seller
4. Statement that the seller is a VAT-registered person, followed by his TIN
5. Name of Buyer
6. Business Style of Buyer
7. Address of Buyer
8. TIN of buyer, if VAT- registered and amount exceeds P1,000.00
9. Date of transaction
10. Quantity
11. Unit cost
12. Description of the goods or properties or nature of the service
13. Purchase price plus the VAT. provided that:
 The amount of tax shall be shown as a separate item in the invoice or receipt;
 If the sale is exempt from VAT, the term “VAT-EXEMPT SALE” shall be written or printed prominently on the
invoice or receipt;
 If the sale is subject to zero percent (0%) VAT, the term “ZERO-RATED SALE” shall he written or printed
prominently on the invoice receipt; and
 If the sale involves goods, properties or services some of which are subject to VAT and some of which are
zero-rated or exempt from VAT, the invoice or receipt shall clearly indicate the breakdown of the sales price
among its taxable, exempt, and zero-rated components, and the calculation of the VAT on each portion of
the sale shall be shown on the invoice or receipt
14. Authority to Print Receipt Number at the lower left corner of the or receipt.
ACCOUNTING REQUIREMENT
All persons subject to VAT shall maintain:
1. Regular accounting records
2. Subsidiary sales journal
3. Subsidiary purchase journal

FILING OF VAT RETURN

Who are required to file VAT returns?
 Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases
goods or properties, and renders services subject to VAT, if the aggregate amount of actual gross
sales or receipts exceeds P3,000,000.00
 A person required to register as a VAT taxpayer but failed to register
 Any person who imports goods, whether or not made in the course of his trade or business,

Where tone the VAT return?

To the following in order of priority:
1. Authorized agent bank under the jurisdiction of the RDO/LTO where the taxpayer (head Office of the
business establishment) is required to be registered
2. Revenue collection officer
3. Duly authorized treasurer of the municipality or city
Deadline of filing the Monthly VAT return
Manual filing
 The monthly VAT return (BIR Form 2550M) shall be filed in duplicate copies within 20
days from the end of the month. The taxpayer shall fill-up triplicate copies. Two copies
shall be filed at the BIR and one copy shall be retained by the taxpayer.

Through Electronic Filing and Payment System (eFPS)

The deadline of monthly VAT declaration varies per business industry grouping:

Business Industry Period for filing Monthly VAT Declarations

Group A 25 days following the end of the month
Group B 24 days following the end of the month
Group C 23 days following the end of the month
Group D 22 days following the end of the month
Group E 21 days following the end of the month
*Detailed industry composition under RR26-2002
Deadline of the Quarterly VAT Return
The quarterly VAT return (BIR Form 2550Q) shall be filed within 25 days from the end of the
quarter.

QUARTERLY SUMMARY LISTS TO BE SUBMITTED BY ALL VAT TAXPAYERS

1. Quarterly summary list of sales to regular buyers or customers, casual buyers or
customers and output tax
2. Quarterly summary list of local purchases and input tax
3. Quarterly summary list of importation

Regular buyer or customer is a buyer or customer who are engaged in business or exercise
of profession with whom the taxpayer had transacted at least six transactions in the previous
year or current year regardless of the amount per transaction.

Casual buyer or customer is a buyer or customer who are engaged in business or exercise
of profession with individual purchase or transaction amounting to P100,000 or more but did
not qualify as a regular buyer or customer.
Content of the Quarterly summary list of sales
1. BIR registered name of the buyer engaged in business or profession
2. TIN of buyer for sales subject to VAT
3. Exempt sales
4. Zero-rated sales
5. Sales subject to VAT
6. Output tax

Content of the Quarterly summary list of purchases

1. BIR registered name of the supplier
2. Address of supplier
3. TIN of the supplier
4. Exempt purchases
5. Zero-rated purchases
6. Purchases subject to VAT (services, capital goods, and goods other than capital goods)
7. Creditable input tax
8. Non-creditable input tax
Content of the Quarterly Summary List of Importations
1. Import entry declaration number
2. Assessment or release order
3. Date of importation
4. Name of supplier (seller)
5. Country of origin
6. Dutiable value
7. Charges before release from Custom's custody
8. Landed cost (exempt and taxable)
9. VAT paid
10. Official Receipt number
11. Date of VAT payment
Penalties for failure to submit summary list
 For each failure to file, keep or supply a statement, list, or information on the date
prescribed, the taxpayer pays an administrative penalty of P1,000, unless such
failure was due to reasonable cause and not to willful neglect.
 The aggregate amount to be imposed for such failures during the taxable year
shall not exceed P25,000.
 Willful failure by the taxpayer to keep any record and supply the correct
information at the time or times required shall be subject to criminal penalty upon
conviction of the offender under the Tax Code of 1997.
 The imposition of the penalties under the Tax Code and the compromise of the
criminal liability on such violations shall not relieve the violating taxpayer from the
obligation to submit the required documents.
The BIR RELIEF System
 A taxpayer’s quarterly sales and purchases are submitted to the BIR's Website through the
RELIEF Data Entry System.
 The Reconciliation of Listing for Enforcement (RELIEF) System supports the third party
information program and voluntary assessment program of the Bureau of Internal Revenue
through the cross-referencing of third party information with the taxpayer’s quarterly
summary lists of sales and purchases.

Suspension of business operations and temporary closure of business

The CIR or his authorized representatives are empowered to suspend business operations for
any of the following violations:
A. For a VAT-registered person
a. Failure to issue receipts or invoices
b. Failure to file VAT return
c. Understatement of taxable sales or receipt by 30% or more of his correct taxable sales
or receipt for the taxable quarter
B. Failure to register as a taxpayer
The temporary closure of the establishment shall be for the duration of not less than 5
days and shall be lifted only upon compliance with whatever requirements prescribed by the
Commissioner in the closure order.
Cancellation of VAT registration
 The approval of a request for cancellation of VAT registration shall be effective
on the first day of the month following the month of the approval of the
cancellation.

Liability of a non-VAT person who issues a VAT invoice/receipt

 Non-VAT taxpayers who charge output VAT on their sales shall be subject to
the usual percentage tax, and output VAT without the benefit of an input tax
plus a 50% surcharge.

FINAL WITHHOLDING BY THE GOVERNMENT OR GOCCs

 The legal requirement for the final withholding of VAT shall apply if the goods
or services purchased from VAT suppliers Were vatable.

Exception to the 5% final withholding tax

1. Lease or use of proprietary rights of non-residents – subject to 12% final VAT
2. Purchase of goods or services arising from projects funded by the Official
Development Assistance (ODA) under RA 8182
Withholding requirements on income tax
 The obligation of the government and GOCCs to withhold VAT is a separate
obligation from that of the obligation to withhold income tax.

Purchase for ODA funded projects

 Under the TRAIN law, government purchases for projects funded by the ODA
shall be exempt from the 5% final withholding tax. This would mean that the
taxpayer supplying goods or services to ODA funded projects can claim full
credit on input VAT on such sales.
 The same withholding exemption shall be maintained even after the transition
to tax credit system by 2021.
 Required Readings
Chapters 10, pp. 330 – 355:

Banggawan, Rex B. 2019. BUSINESS AND TRANSFER TAXATION LAWS,

PRINCIPLES, AND APPLICATIONS. Real Excellence Publishing.,
Pasay, Default Barangay, Pasay City, Philippines.
 Learning Activities
Chapters 10, pp. 356 – 367:

Banggawan, Rex B. 2019. BUSINESS AND TRANSFER TAXATION LAWS,

PRINCIPLES, AND APPLICATIONS. Real Excellence Publishing.,
Pasay, Default Barangay, Pasay City, Philippines.
 Appendix: Course Materials Evaluation
Adopted: BEST PRACTICES AND SAMPLE QUESTIONS FOR COURSE EVALUATION SURVEYS. Retrieved from
https://assessment.provost.wisc.edu/best-practices-and-sample-questions-for-courseevaluation-surveys//.