TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY

TAXATION 2022 Page 1 of 8

VALUE ADDED TAX

TAX BASE OF VAT ON SALE OF GOODS OR PROPERTIES

A. Sale of Goods
Gross Sales 1 xxx
Less: Sales discounts 2 xxx
Sales returns and allowances 3 xxx
Net Sales xxx
Add: Excise tax 4 xxx
Tax Base xxx
1 Gross sales includes: 2 Sales discounts granted in the invoice at the time of sale.
Cash sales
Sales on account 3 Sales return and allowances may be deducted from gross
Installment sales sales for the month or quarter in which a refund is made or
Deemed sales (CRPWD) credit memo is issued.
Other amounts due from buyer
(packaging, delivery, and insurance) 4 Excise tax is included while VAT is excluded.

B. Sale of services
Cash received (actually and constructively) xxx
Advance payments xxx
Materials charged with the services xxx
Tax Base xxx
Add: VAT xxx
Total Invoice Price xxx

C. Sale of real properties in the course if trade or business

1. On installment plan
If the VAT base is the gross selling price 1, If the VAT base is the zonal or FMV 2,
which is higher than the zonal or fair market value which is higher than the gross SP
Installment received xxx Actual collection VAT
Add: Interest xxx (w/o VAT) x based on
Other charges xxx Gross Selling Price higher zonal
Tax Base xxx or FMV
2. On deferred payment plan or cash basis
If initial payments exceed 25% of the gross selling price.
The VAT base shall be the higher between the gross selling price stated in the sales document or
invoice and the zonal or fair market value.

1 If the VAT is not billed separately, the selling price stated in the sales document or invoice shall be
deemed inclusive of VAT.
2 If the gross selling price is the zonal or fair market value, it shall be deemed exclusive of VAT.

SOURCES OF OUTPUT VAT

A. Actual sales of goods or properties
B. Deemed sales (CRPWD)
Consignment of goods if not sold within 60 days
Retirement or cessation of business with respect to all goods on hand, whether capital
goods, stock-in-trade, supplies, materials as of the date of such retirement or
cessation, whether or not the business is continued by the new owner of successor.
Payment of debt to creditors
Withdrawal of goods originally intended for sale or for lease in the ordinary course of
trade or business
Distribution to shareholders or investors as share in profit
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TAXATION 2022 Page 2 of 8

C. Zero-rated sales
1. Export Sales of Goods
a. Sale and actual shipment of goods from the Philippines to a foreign country, paid
for in acceptable currency and accounted for in accordance with the rules and
regulations of BSP.
b. Sale of goods, supplies, equipment and fuel to persons engaged in international
shipping or international air transport operations.
2. Effectively Zero-Rated Sales of Goods
a. Sale of goods or property to persons or entities who are tax-exempt under special
laws of international agreements.
- sale to Asian Development Bank (ADB)
- sale to International Rice Research Institute (IRRI)
- sale to duly accredited enterprises with Subic Bay Metropolitan Authority
(SBMA)
- sale to duly accredited enterprises with Philippine Economic Zone Authority
(PEZA)
3. Export Sales of Services
a. Services other than processing, manufacturing, repacking goods for other persons
engaged in business who is outside the Philippines when the services are
performed, the consideration for which is paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the BSP.
b. Services rendered to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory.
c. Services rendered to persons engaged in international shipping or international air
transport operations, including leases of property for use thereof.
d. Transport of passengers and cargo by domestic air or sea carriers from the
Philippines to a foreign country
e. Sale of power fuel generated through renewable sources of energy

SOURCES OF INPUT VAT

A. Regular (VAT actually paid)
Input tax on domestic purchases of importations of:
- goods for sale
- goods for conversion into finished products (including packaging materials)
- goods for use as supplies
- goods for use as materials supplied in the sale of services
- goods for use in the trade or business for which depreciation or amortization is
allowed*
- real properties for which VAT has actually been paid
- services for which VAT has actually been paid
- transaction deemed sale
* Claim for input tax on depreciable capital goods
a. when monthly aggregate acquisition cost does not exceed P1,000,000, the total input tax is
creditable against output tax in the month acquired
b. when monthly aggregate acquisition cost exceeds P1,000,000, the total input tax is
creditable against output tax as follows
- spread evenly over 60 months if useful life is 5 years or more
- spread evenly over the actual number of months of est. useful life if it is less than 5 years
** Shall only be allowed until December 31, 2021.
*** Unutilized input tax as of December 31, 2021 shall be allowed to apply the same
schedule until fully utilized
c. if capital good is sold or transferred within a period prior to exhaustion of the amortizable
input tax, the entire unamortized input tax on capital goods sold or transferred can be
claimed as input tax in the moth/quarter when the sale or transfer was made.

B. Transitional
- 2% based on Vatable Beginning Inventory (goods, materials, supplies)
 TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY
TAXATION 2022 Page 3 of 8

or Actual VAT paid whichever is higher

- Availed by persons who become liable to VAT or who elect to be VAT registered
C. Presumptive
- 4% of gross value in money of purchases of primary agricultural products used as
inputs in the processing or manufacturing of SaMaMiCoPaRe
- Availed by persons or firms who are processor of sardines, mackerel, and milk and who
are manufacturer of refined sugar, cooking oil, packed noodle-based instant meal.

PROBLEM EXERCISES

Input tax on depreciable capital goods

1. AB, a VAT taxpayer, made the following purchases on January from VAT sellers, for use in his business.
The amounts stated below are not inclusive of value-added taxes:
Equipment 1, with useful life of 20 years P 3,000,000
Equipment 2, with useful life of 3 years 1,800,000
Patent, with useful life of 10 months 600,000

The input taxes from the purchases, available to AB, for the month January is:
a. If purchases was made prior 2022

b. If purchases was made beginning 2022

2. A Corp sold its capital goods to B Corp on installment basis. It is agreed that the installment selling
price, including the VAT, shall be payable in 6 equal monthly installments, commencing on the date of
sale. The data pertinent to the assets sold are as follows:
Installment selling price P 6,000,000
Passed-on VAT 720,000
Original cost of assets 3,000,000
Accumulated depreciation at the time of sale 1,000,000
Unutilized input tax 100,000
Remaining useful life 5 years

The VAT payable on the sale of A Corp and the monthly creditable input tax that B Corp can claim:
a. If transaction was made prior 2022

b. If transaction was made beginning 2022

 TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY
TAXATION 2022 Page 4 of 8

VALUE ADDED TAX

DETERMINATION OF CREDITABLE INPUT TAX

Input taxes on domestic purchases or importations xxx
Transitional input tax xxx
Presumptive input tax xxx
Input tax carried over from previous month/quarter xxx
Total input tax xxx
Less: Input tax claimed as refund xxx
Input tax claimed as tax credit (tcc) xxx
Input tax applicable to purchase returns xxx
Input tax attributable to sales subject to Final VAT
withholding xxx
Input taxes attributable to VAT-exempt sales xxx
Net creditable input taxes xxx

CREDITABLE INPUT TAX OF VAT-REGISTERED PERSON ALSO ENGAGED IN VAT-EXEMPT SALES

(MIXED TRANSACTIONS)
a. Total input tax shall be allowed as tax credit which can be directly attributed to transactions
subject to VAT, provided that input taxes attributable to VAT taxable sale of goods and services
to the Government or any of its political subdivisions shall not be credited against output taxes
arising from sales to non-government entities
b. Ratable portion of any input tax which can be directly attributed to either activity computed as
follows: VAT sales ÷ Total sales x Input VAT

c. Related to sales subject to 12% VAT : carry-over

d. Related to sales subject to 0% VAT : refund; or convert to tax credit cert; or
carry-over against the output VAT of regular sales

SALES TO GOVERNMENT (FINAL Withholding VAT / CREDITABLE Withholding VAT)

The government and any of its political subdivisions. Including GOCCs shall deduct and withhold 5% of
the gross payment before making payment for each purchase of goods and services.
a. Prior 2021
- the 5% withholding is a FINAL VAT that shall represent the net VAT payable.
- thus, the remaining 7% shall be the standard input VAT, in lieu of the actual input VAT
- difference between the actual and 7% standard must be closed to either expense or income
b. Beginning 2021
- the 5% withholding will shift to CREDITABLE VAT and shall be included as part of tax credit
from previous VAT payments

VAT AND DISCOUNTS FOR SENIOR CITIZENS AND PWDs (read)

RETURN AND PAYMENT OF VAT

a. In general, VAT return shall be filed and tax due thereon be paid within 25 days following the
close of each taxable quarter.
b. VAT-registered persons shall declare and pay VAT on a monthly basis, not later than the 20th day
following the close of each of the first two months of a taxable quarter; taxpayers under the
EFPS, on or before a prescribed due date based on the business industries classification.
c. Any person whose registration has been cancelled shall file a return and pay the tax due thereon
within 25 days from the end of the month the business ceases to operate or when VAT
registration has been officially cancelled; and only one consolidated return shall be filed for the
principal place of business or head office and all branches.
d. File and pay the VAT due in authorized agent bank, or revenue collection officer, or duly
authorized city or municipal treasurer where the taxpayer is registered or required to register.
 TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY
TAXATION 2022 Page 5 of 8

VALUE ADDED TAX

PROBLEM EXERCISES

Creditable input taxes

3. XY Corporation has the following sales (VAT not included) during the month:
Sale to private entities subject to 12% VAT P 100,000
Sale to private entities subject to 0% VAT 100,000
Sale of exempt goods 100,000
Sale to Government subjected to 5% VAT withholding 100,000
Total sales for the month 400,000
The following input taxes were passed-on by its VAT suppliers:
Input tax on taxable goods (12%) 6,000
Input tax on zero-rated sales 3,000
Input tax on sale of exempt goods 2,000
Input tax on sale to Government 4,000
Input tax on depreciable capital goods not attributable
to any specific activity (monthly amortization
for 60 months) 20,000

The allowable creditable input taxes for the month on sales to non-Government entities and on sale to
the Government are:

a. If transaction was made prior 2021

* input taxes attributable to VAT-exempt sales are closed to expense account

** difference of actual input VAT attributable to sale to the government and standard input VAT
must be closed to either expense (actual higher than standard) or income (standard higher than
actual)

b. If transaction was made beginning 2021

* beginning 2021, there is no more standard input VAT on sales to government, the creditable
input VAT shall be the actual Input VAT.
 TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY
TAXATION 2022 Page 6 of 8

VALUE ADDED TAX

PROBLEM EXERCISES

Output VAT

4. RD, a trader, made the following sales of goods during the month of January 2022, exclusive of VAT:
Cash sales P 200,000
Open account sales 100,000
Installment sales 100,000
Note: receipt from installment sale is P40,000
Consignments made (net of VAT)
December 2021 P 100,000
October 2021 100,000
September 2021 100,000

The output VAT is:

- December consignment is within 60 days from end of January 2022

- October and September consignments are presumed included in previous VAT returns.

Input VAT and VAT payable

5. JT had the following data on its operations for a month as a VAT-registered taxpayer:
Sales, total invoice price P 592,480
Purchase of goods, VAT not included:
From VAT-registered persons 100,000
From non- VAT registered persons 80,000
Purchases of services, VAT not included:
From VAT-registered persons 20,000
From non- VAT registered persons 8,000
From persons subject to percentage tax 10,000
Salaries of employees 60,000
Other operating expenses 12,000
This is the first month of being liable to the value added tax. Data on inventories at the beginning of the
period bought from the VAT registered persons are as follows:
Inventory, at cost P 44,800
Inventory, at NRV 49,000
Value added tax paid on beginning inventory 4,800

The total creditable input tax and value-added tax payable is:
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VALUE ADDED TAX

PROBLEM EXERCISES

Transitional and Presumptive input VAT

6. FV is a producer of cooking oil from coconut and corn. Previously exempt from value-added tax, she
became subject to the value-added tax on January 1, 2022. For January 2022, with sales, value added tax
not included, of P700,000, she had the following other data for the month:
Inventory, January 1, 2022: NRV Cost
Corn and coconut purchased from farmers P 120,000 P 100,000
Packaging materials purchased from VAT suppliers 24,640 22,400
Supplies purchased from VAT suppliers 11,200 13,440
Purchases during the month of coconut and corn from farmers 330,000
Purchases during the month from VAT suppliers:
Packaging materials 56,000
Supplies 16,800

The transitional input tax and presumptive input tax are:

The total creditable input tax and value-added tax payable is:

Input taxes of mixed business transactions

7. Data from the books of accounts of a VAT taxpayer for January 2022:
Domestic Exports Total
Sales P 2,000,000 P 8,000,000 P 10,000,000
Purchases:
From VAT taxpayers of:
Goods for sale P 600,000 P 2,400,000 P 3,000,000
Supplies and services 90,000 360,000 450,000
From non-VAT taxpayer of:
Goods for sale 100,000 1,500,000 1,600,000
Supplies and services 20,000 80,000 100,000
There was no inventory at the beginning or end of the taxable period.
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TAXATION 2022 Page 8 of 8

The value-added tax payable on domestic sales and input taxes attributable to zero-rated sales:

If the input taxes attributable to zero-rated sales are claimed as tax credit, the net input value-added tax
refundable is:

Output and Input tax on sale of service

8. Sale of services by a VAT-registered contractor:

Collection on total invoice price for contracts completed
(including P448,000 for materials) P 1,120,000
Receivables on billings (VAT included) 336,000
Advances on contracts (VAT not included) 200,000
Retentions on contracts made by clients out of contract price
already earned 90,000
Purchases of:
Materials (VAT included) 224,000
Services of sub-contractor (VAT not included) 448,000
Services of persons subject to percentage taxes 56,000
Salaries of employees 60,000

The total output tax, input tax, and value-added tax payable are: