A. VAT-Taxable a.

Seller is subject to VAT at

transactions 12%; Those REEs duly registered and accredited
1. Sales or b. Seller is entitled to input with the Subic Bay Metropolitan
leases taxed tax credit; Authority (“SBMA”), the Clark
at 12% c. Seller pays excess of Development Authority (“CDA”), Aurora
output tax over input tax Pacific Economic Zone and Freeport
to the BIR; Authority (“APECO”), and the Philippine
d. Seller can carry-over Economic Zone Authority).
excess input taxes to
succeeding quarter(s). 2. Effectively zero-rated sales
2. Sales or a. Seller is subject to VAT at Illustration page 263
leases taxed 0%;
at 0% (zero- b. Seller is entitled to input B. Zero-rated sales of services
rated) tax credit;
c. Seller can claim refund or Input VAT
tax credit for input taxes. - Also called “Input tax credit”
B. Exempt a. Seller is exempt from VAT; - VAT due or paid (to the BIR) on the importation of
transactions b. Seller cannot separately goods or VAT paid by a purchaser (to the seller) on
bill output tax to his the local purchases of goods, properties, or
customers; services in the course of trade or business. Can be
c. Seller is not entitled to availed by a VAT-registered importer, or a VAT-
input tax credit; registered purchaser of goods or services.
d. Seller shall be liable to VAT
if he issues VAT invoice or Requisites of a creditable input VAT:
receipt, but without the 1. The input VAT must have been paid or incurred in
benefit of input tax credit. the course of trade or business.
2. The input VAT is evidenced by a VAT invoice or
Zero-Rated Sales official receipt.
- Are basically foreign consumptions (i.e., export 3. The VAT invoice or receipt must be issued by a
sales) or equivalents of foreign consumptions VAT-registered person.
(foreign currency-denominated sales and 4. Input VAT is incurred in relation to vatable sales
constructive exports) and sales conferred with an not from exempt sales.
export sale treatment by special laws and Illustration page 291
international agreements to which the Philippine is
a signatory. Transitional Input VAT
- Higher of (2% of the value of the beginning
A. Zero-rated sales of goods inventory, or the actual input VAT paid on such
Two types: goods, materials, and supplies)
1. Export sales of goods Provided: Inventory shall exclude goods exempt
a. Sale and actual shipment of goods from from VAT.
the Philippines to a foreign country and Illustration page 293
paid for in acceptable foreign currency,
and accounted for in accordance with the Presumption Input VAT (discuss rationale)
rules and regulations of the BSP. a. Available to persons or firms engaged in the
processing of sardines, mackerel, and milk,
b. Sale of goods, supplies, equipment, and and in the manufacturing of refined sugar,
fuel to persons engaged in international cooking oil, and packed noodle based instant
shipping or international air transport meals.
operations. Provided, that the sale of such Code word on qualified processors:
goods and fuel shall pertain to the SaMaMiCoPaRe
transport of goods and passengers from a
Philippine port directly to a foreign port, b. The presumptive input tax shall be equivalent
or vice-versa, without docking or stopping to 4% of the gross value in money of their
at any other port in the Philippines. purchases of primary agricultural products
which are exempt from VAT, and which are
c. Sale of raw materials, inventories, used as inputs in production.
supplies, equipment, packaging materials, Illustration page 301
and goods to a registered export
enterprise (REEs) to be used directly and Standard Input VAT
exclusively in its registered project or Effective January 1, 2021, the 5% final withholding Value-
activity pursuant to Section 294(E) and Added Tax (VAT) on sales to the government or any of its
295(D) of the Tax Code. political subdivisions, instrumentalities, or agencies,
including all government-owned or -controlled corporations 4. Casio Corporation had the following summary of
(GOCCs), shifted to a creditable withholding tax. output and input VAT for the 1st quarter and 2nd
Under this new system: quarter of 2020:
• The 5% final withholding VAT will no longer be 1ST Q 2ND Q 3RD Q
considered as final. Instead, it will be treated as Output VAT 200,000 300,000 250,000
credits or adjustments to the final VAT liability of Input VAT 240,000 320,000 240,000
the seller. a. What is the creditable input VAT carry-
• The seller will now be liable for the remaining 7% over to be credited in May?
VAT, which also pertains to the standard input b. What is the total creditable input VAT in
VAT. April?
c. What is the input VAT carry-over to be
Input VAT Carry-over credited in June?
- It is the VAT overpayment that appears after tax 5. Monay Bakeshop had the following details of
credits and payments are deducted against the net operations during the month:
VAT payable Sales of bread 4,000,000
Rules on Input VAT carry-over: Sales of cakes 500,000
1. The input VAT carry-over of the prior quarter is Importation of flour 1,000,000
deductible in the first month of the current Other purchases, inclusive of 2,500,000
quarter. 240,000 VAT
2. The input VAT carry-over in the first month of the Salaries expenses 500,000
quarter is deductible in the second month of the Other expenses, exclusive of 1,200,000
quarter. 120,000 VAT
3. The input VAT carry-over in the second month of a Compute the VAT payable.
quarter is not deductible to the third month of the 6. Sugar Baby Corporation is a VAT-registered sugar
quarter. refiner. Details of its operations are as follows:
4. The input VAT carry-over of the prior quarter is Domestic sale of refined sugar 3,000,000
deductible in the third month quarterly balance of
Export sales of refined sugar 2,000,000
the present quarter.
Purchases of sugar cane 1,000,000
Illustrations 1 and 2 page 305
Other purchases, inclusive of VAT 448,000
What is the VAT payable?
1. Summer, opted to be registered as a VAT taxpayer
7. Tax General Hospital had the following receipts
effective the third quarter of 2020. He had the
and input VAT:
following analysis of beginning inventory for the
month of July 2020: Receipts from hospital operations 20,000,000
Purchases from non-VAT suppliers 210,000 Sales of medicines 4,000,000
Purchases from VAT suppliers, 22,400 Input VAT traceable to hospital 2,100,000
inclusive of VAT operations
Total 232,400 Input VAT on hospital drugstore 120,000
What is the transitional input VAT? Compute the VAT payable.
2. Little Mermaid, a sardines canning company, had 8. A VAT-registered professional review school had
the following purchases as inputs for its the following receipts during the month:
manufacturing operations during a month? Tuition fees 800,000
Tin cans, exclusive of VAT 80,000 Miscellaneous fees 100,000
Tomatoes 150,000 Sale of snacks 150,000
Sardines 200,000 Reviewer salaries 300,000
Labels, exclusive of VAT 20,000 Purchases of supplies, exclusive of 150,000
Total 450,000 VAT
a. What is the presumptive input VAT Other expenses, inclusive of 16,000 220,000
allowable to Little Mermaid? VAT
b. What is the total creditable input VAT of Compute the VAT payable.
Little Mermaid for the month? 9. Mr. Summer, a VAT taxpayer, recorded the
3. Nodols manufactures packed noodles from wheat following during the month:
flour. It purchased the following from VAT Sales to non-VAT reg. persons, VAT 400,000
suppliers during a production month: exclusive
Wheat flour 200,000 Sales to VAT reg. persons, VAT 500,000
Egg 20,000 exclusive
Coconut oil 40,000 Purchases from VAT-reg. persons, 200,000
Other seasonings 40,000 VAT exclusive
a. What is the presumptive input VAT? Purchases from non-VAT persons 100,000
b. Assuming that vatable purchases in the Compute the VAT payable.
preceding problem were exclusive of VAT,
what is the total creditable input VAT?