Value Added Tax – EDT

 VAT on Sale of Goods and Services

Every time you sell goods, properties, and services that were made in the ordinary course of business,
such sale will be subject to VAT.

I. Sale
1. Sale of Goods and Properties
2. Transactions deemed sale (TDS)
3. Sale of Service and use or lease of properties
II. Importation

Sec 106(A)(1)

Sale of Properties shall mean all tangible and intangible objects which is capable of pecuniary (may
halaga) estimation, used in the business and shall include:

a. Real properties
b. The right or the privilege to use patent, copyright, design or model, plan, secret formula or
process, goodwill, trademark, trade brand or other like property or right.
c. The right or the privilege to use in the Philippines of any industrial, commercial, or scientific
equipment.
d. The right or the privilege to use motion picture films, tapes and discs; and
e. Radio, television, satellite transmission and cable television time.

VAT shall only be imposed only in the PH – Cross Boarder Doctrine.

Sale of Goods or Properties – All tangible and intangible which is capable of pecuniary estimation

 There shall be levied, assessed and collected on every sale, barter, or exchange of goods and
properties, value-added tax equivalent to 12% of the GROSS SELLING PRICE or GROSS VALUE IN
MONEY OF THE GOODS OR PROPERTIES sold, bartered, or exchanged, such tax to be paid by the
seller or transferor. (SALE MUST BE PAID IN THE ORDINARY COURSE OF BUSINESS)

Computation of VAT on sale of Goods

Tax Exclusive Method

 The vat is presumed not yet included in the tax base amount. Such amount representing the
taxable base (exclusive of vat). Whether gross sales or gross receipts, is multiplied by 12% vat
rate. The resulting product is the output vat due or output tax, as the case may be.

SEC 106(A)

 The term “gross selling price” means the total amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller in consideration of the sale, barter, exchange
of goods or properties, excluding the value-added tax. The excise tax, if any, on such goods or
properties shall form part of the gross selling price.
- VAT is not included in the SP because VAT is a separate account.
 Tax Exclusive Method (Hindi kasama ang VAT)
 i.e., Gross sales in a day P100,000

VAT = P100,000 x 12% = 12,000

 Tax Inclusive Method (Kasama na sa halaga)

i.e., Gross Sales of P112,000

Formula 1: VAT = 112,000 / 1.12 x 12% = P12,000

Formula 2: VAT = 112,000 x 12/112 = P12,000
Formula 3: VAT = 112,000 x 3/28 = P12,000 (Lease common denominator)

General Rule: Tax Exclusive Method

Exception: if inclusive of the VAT

If invoice value: VAT is already included!

2 Types of VAT
VAT on Sale – OUTPUT VAT
VAT on Purchases – INPUT VAT

VAT characteristic: Credit invoice method – we deduct from our output VAT the VAT on our
purchases.

Output VAT
 Actual sale of goods, services, or properties in the Philippines
 Transaction deemed sales
 Zero rated sales

Basis of 12% VAT

 Sale of goods = Gross Sales

 Sale of Service = Gross Receipts
 Sale made by a dealer in securities = Gross Income
 Sale of Real Properties = the higher amount among the SP, FV, ZV

Reminder: You must know where OUTPUT VAT & INPUT VAT will be determined.

Example:
Kasangkapan Corp. A VAT registered dealer of appliances, provided the following data for the last quarter
in 2021:

Sales, total invoice value 5,600,000

Purchases, net of input taxes 3,500,000 - Gross Purchases

Deferred input vat from 3rd Q 30,000

How much is the VAT payable for the 4th Quarter?

Output VAT 600k

Input VAT (420k)

Deferred input vat 3rd Q (30k)

VAT Payable 150k

Sale of Services – means the performance of all kinds or services in the Philippines for others for a fee,
remuneration or consideration, including those performed or rendered by construction and service
contractors; stock, real estate, commercial, customs and immigration brokers, lessors of property,
whether personal or real; warehousing services, lessors or distributors of cinematographic films; persons
engaged in milling processing, manufacturing, or repacking of goods for others, proprietors, operators or
keepers of hotels, motels, resthouses, pension houses, inns, resorts and so on and so FORTH

EXCEPT THOSE: Subject to Percentage Tax or unless exempt under the law.

Example:

EDT Consultancy services, a vat registered accounting firm, provided the following data for the last
quarter of 2021:

Revenues, total invoice value 5,600,000

Collections, gross 4,704,000

Purchases of supplies, gross 3,920,000

Deferred input vat, 3rd quarter 40,000

How much is the VAT payable for the 4th quarter?

Output VAT: 504,000

Input VAT (420,000)

Deferred input VAT, 3rd Q (40,000)

VAT Payable for the 4th Q 44,000

Transactions Deemed Sale

- Under section 106(B) of the Tax Code, certain transactions which are not actually sales because
of the absence of actual exchange between the buyer and the seller, are considered or included
in the term “sale” for value-added tax purposes.
- You really did not sell however, the law says that it is VATABLE if there is no actual sale.
- “As if Sale.”
1. Transfer, use or consumption not in the course of business of goods or properties originally
intended for sale or use in the ordinary course of business. Transfer of goods or properties not in
the course of business can take place when VAT-registered person withdraws goods from his
business for his personal use;
Distribution or transfer to:
 Shareholders of investors share in profits of VAT registered person;
 Creditors in payment of debt;
2. Consignment of goods if actual sale is not made within 60 days following the date such goods
were consigned and; (Basta lagpas 60 days na, deemed sale na yan xa!)
3. Retirement from or cessation of business with respect to all goods on hand, whether capital
goods (PPE), stock-in trade, supplies or materials as of the date of such retirement or cessation,
whether the business is continued by the owner or successor.
- If a business is on process of liquidating (selling everything) and let’s say for example that you’re
gonna sell all your inventories, it is considered TDM because, you already claimed Input VAT
from it.

Ex. San Mig Corp manufactures san mig light, aside from selling it in the ordinary course and
assume that it is October today, so meaning it is OCTOBERFEST wherein San Mig Light is free. So
San Mig Corp gave it for free (1.)

You bought Aircon that should’ve been used for the business but you did not used it so instead
you used it in your house.

Overall, if yung bagay na binebenta mo or ginagamit sa business is transferred, considered nay

un as TDS.

Why do we need to treat it as TDS?

- Because you already claimed Input VAT from buying those products, so the government said to
put Output VAT.
 VAT on Sale of Real Properties

Every time we sell goods, properties, or services if the sale was made in the ordinary course of
business, it will be subject to VAT. Unless exempt.

As a rule. Sale of real property primarily held in the normal course of business is subject to VAT.
Output VAT shall be based on the highest among SP, FMV, and ZV.

Why do we need to classify the Sale?

- How much of the OUTPUT VAT will we report to the BIR
Types of Sale:
1. Cash Basis
2. Deferred Payment Basis
- If the ratio of the initial payment is more than 25% of the SP
3. Installment Basis
- If the ratio of initial payment is less than 25% of the SP

Deferred Sale

- Initial payments of which in the year of sale exceed 25% of the Gross Selling Price, not the
installment plan. The transaction shall be treated as cash sale which makes the entire selling
price taxable in the month of sale. Output tax shall be recognized by the seller and input tax shall
accrue to the buyer at the time of the execution of the instrument of sale. Payments subsequent
to initial payments shall no longer be subject to output VAT.

Installment Sale

- Initial payments do not exceed 25% of the SP. Correspondingly, the buyer of the property can
claim input vat in the same period as the seller recognizes the output tax.
- In case of sale of Rp on the installment plan, the real estate dealer shall be subject to VAT on the
installment payments, including interest and penalties, actually and/or constructively received
by the seller.
- Hindi yung buong SP ang irereport na Output VAT.

Computation of Initial Payment:

Downpayment Pxx
Collections (Yr of Sale) xx

Add:

Interest Pxx

Penalties & other charges xx

Excess of mortgage over cost, if any xx

xx

Initial Payments Pxx

Year of Sale = Initial Payment / GSP x Higher between GSP & FMV

Subsequent Years = Collections / GSP x Higher between GSP & FMV

Example:

A real Estate dealer showed the following details during the year:

Date of Sale 5,000,000

Consideration in the deed of sale 4,800,000

FMV in the assessment rolls 5,200,000

Schedule of Payments:

June 1, 2021 1,000,000

June 1, 2022 2,000,000

June 1, 2023 2,000,000

How much is the output tax to be recognized for the June 1, 2021, 2022, and 2023 payment?

O.V. 2021 = 1M/5M x 5.2M x 12% =124,800

O.V. 2022 = 2M/5M x 5.2M x 12% = 249,600

O.V. 2023 = 2M/5M x 5.2M x 12% = 249,600

TOTAL 624,000

Check: 5,200,000 x 12% = 624,000

If 2M ung sa 2021, 40% na un so it is considered as Deferred Sale, so the total 624,000 need mo na i-
report!

VAT EXEMPT

VAT Exemption and Discounts to Senior Citizens and PWD

Sec 109 (W)

- Certain goods and services sold to SC and PWD are VAT exempt.
- Not an absolute rule but only to certain items only.
- The VAT exempt is related to the 20% discount.

Senior Citizens or Elderly refers to any Filipino Citizen who is a resident of the PH, 60 years old or above.
It may apply to SC with ‘dual citizenship” status provided they prove their Filipino citizenship and have at
least 6 months residency in the PH.

RA9994 – Expanded Senior Citizens Act of 2010.

The following items sold to a SC are VAT-Exempt and will entitle to a minimum discount of 20%

1. Medicines
2. Doctor’s Fees - private
3. Health Workers Fees - private
4. Medical and Dental Fees – private
5. Air and Sea transportation
6. Public Transport Fares
7. Funeral and Burial Services.
8. Hotels, restaurants, and recreation centers
9. Theaters, Cinema Houses, and Amusement Places

For PWD:

1. Hotels, restaurants, and recreation centers

2. Theaters, Cinema Houses, and Amusement Places
3. Medicines
4. Medical and Dental Fees – Gov’t and private
5. Air and Sea transportation
6. Public Transport Fares
7. Funeral and Burial Services.

THEY’RE NOT EXEMPT FROM PERCENTAGE TAX!

Example:

Lola Nena, a SC, bought a medicine with a SP of P9,520 inclusive of VAT. How much is the net amount to
be paid by Lola Nena?
Purchase price, net (9,520/1.12) 8,500

Less: 20% Discount (1,700)

Net Amount Due by Lola Nena 6,800

- If diba in this case, si seller bumili siya niyang medicine, so mayroong VAT un! And since may VAT
un, wala kang output VAT.

Input VAT

- The input tax attributable to the exempt sale shall not be allowed as an input tax credit and must
be closed to cost or expense account by the seller.
- Parang Discount, OPEX.

5% Special Discount for SC & PWD (Different from the 20%)

- A special discount of 5% of the regular retail price of basic necessities and prime commodities.
- NOT VAT-EXEMPT unless exempted by law
- The total amount of purchases shall not exceed P1,300 per calendar week without carry-over of
unused amount.
- Double Discounts are not allowed (If SC and PWD only one will apply)

VAT-EXEMPT Sales and Transactions

Sale or Importation of:

 Agricultural and Marine “food” products in their “original state”,

 Livestock and Poultry of any kind generally used as, yielding or producing foods for human
consumption and breeding stock and genetic materials, therefore.
- Once processed, VATABLE!

Original State – even if they have undergone the simple processes of preparation or preservation for the
market, such as freezing, drying, salting, broiling, roasting, smoking or stripping including those using
advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-
pack, and other similar packaging methods.

 Fertilizers
 Seeds, seedings, and fingerlings, fish prawn, livestock and poultry feeds, including ingredients,
whether locally produced of imported used in the manufacture of finished feeds (except
specialty feeds)

Specialty Feeds – refer to non-agricultural feeds or food for race horses, fighting cocks, aquarium fish,
zoo animals and other animals generally considered as pets are subject to VAT.

Ingredients used to manufacture poultry feeds are also exempt from VAT.

Importation of personal and household effects belonging to:

  The residents of the Philippines from abroad; and
- Gamit pang-personal at gamit sa bahay.
 Nonresident citizens coming to resettle in the PH

Provided that such goods are exempt from custom duties under the Tariff and Customs Code of the Phils.

Importation of professional instruments and implements, tools of trade, occupation or employment,

wearing apparel, domestic animals, and personal and household effects to:

 Persons coming to settle in the Ph; or

 Filipinos or their families and descendants who are now residents or citizens of other countries,
such parties herein referred to as overseas Filipinos.

Difference between the above, taga Ph kasi ung sa taas while dito, mga pinoy na nadoon na, na citizens
na ng ibang bansa or mga foreigners na gusto mag-settle dito sa PH.

Services by:

1. “Agricultural contract growers” – producing for others’ poultry, livestock or other agricultural and
marine food products in their original state.
2. “Milling” for others of:
 Palay into rice
 Corn into grits; and
 Sugar cane into raw sugar

Medical, dental, hospital and veterinary services except those rendered by professionals.

- Professional fees are VATABLE – Gross receipts

- Laboratory Services are exempted from VAT
- If the hospital or clinic operates a pharmacy or drugstore, the sale of drugs and medicines are
subject to VAT
- Hospital bills constitute medical services
- The sales made by the drugstore to the in-patients which are included in the hospital bills are
part of medical bills exempt from VAT.
- Sales of the drug store to the out-patients are taxable because they are not part of medical
services of the hospital.

Educational Services

- If accredited by the DepEd, CHED, and TESDA are exempt from VAT.
- Review schools are not exempted.
- Seminars, in-service training, review classes are not exempt!

Services rendered by individuals pursuant to an employer-employee relationship

- NOT A BUSINESS; NOT VATABLE!

Services rendered by regional or area headquarters established in the Philippines by multinational

corporations which act as supervisory, communications and coordinating centers for their affiliates,
subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the PH.
RHQ – undertakes activities that shall be limited to acting as supervisory, communication and
coordinating center for its subsidiaries, affiliates and branches in the Asia-Pacific region.

- Acts as an administrative branch of a multinational company engaged in international trade.

- It does not derive income from sources within the Philippines and does not participate in any
manner in the management of any subsidiary or branch office it might have in the Philippines.
- NON-VATABLE

ROHQ – extension of a foreign corporation allowed to derive income from the Ph.

- Subject to VAT

Transactions which are exempt under international agreements to which the Ph is a signatory or under
special laws, except those under Presidetial Decree No. 529

Examples:

 PD 1869 – PAGCOR Charter

Sales by agricultural cooperatives

- Sale to their members

- Sale to non-members whether in original state or not.
- If sale made by AC is not their own product and sold, VATABLE

Gross Receipts from “lending activities” by credit or multipurpose cooperatives.

- If multipurpose cooperatives, ONLY THE LENDING ACTIVITIES ARE EXEMPT!

Sales by non-agricultural, non-electric and non-credit cooperatives

- If the contribution of every member is not more than 15,000 are VAT-exempt regardless of their
sale.

Export Sales

- By persons who are not VAT-registered.

- If we’re an exporter, zero-rated sales because of cross-border principle or destination principle
(VAT shall be imposed only within the Ph)
- By VAT registered TP – subject VAT (0%) OUTPUT VAT! – to not violate DP.
- By non-VAT registered TP – VAT EXEMPT

Example: Bumili ka ng product na may input VAT, so wala kang output VAT. If you’re not a VAT registered,
the cost of the input VAT will be part of the cost of the asset that you’ve bought. Or set-up a separate
account as an expense.

VAT REG. (0%) VAT NON-VAT REG. (VAT EXEMPT)

Output VAT P0 Output VAT None
Input VAT credit (xx) Input VAT credit NA
VAT Payable (Pxx)
 (VAT PAYABLE) MAY BE:
1. Refund the input VAT
2. Deducted from output VAT of domestic
Sales
3. TCC – Tax Credit Certificate

- Dahil zero ang Output VAT, allowed tayo mag-debit ng Input VAT.

- TCC parang GC sa mga malls na pwede mo pangbayad sa kahit anong tax.

Sale of Real Property:

a. Not primarily held for sale to customers or held for lease in the ordinary course of trade or
business; or
GR: If sale is made in the ordinary course of business, VATABLE unless exempt!
- These are considered as Capital Asset – subject to Capital Gains Tax!

b. Real Property utilized for socialized housing under RA7279

- Socialized housing: normally, hindi lagpas sa 450K
c. House and Lot and other residential dwellings valued at P2,000,000. (In the ordinary course of
business)
- Other residential dwellings: Condo
- Para mabigyan tayo ng Karapatan ng batas na makabili ng lupa. So huwag na i-tax yan!

Lease of residential unit

If lease of RP: Commercial, subject to VAT!

- With a monthly rental of not exceeding P15,000.

- Less than or equal to 15K, exempt from business tax.
- If lagpas 15k but total is less than 3M, subject to percentage tax.
- If lagpas 15k and total is more than 3M subject to VAT.

Sale, importation, printing or publication of books (EXEMPT AGAD) and any newspaper, magazine,
review or bulletin 1st which appears at regular intervals with fixed prices for subscription and sale and 2nd
which is not devoted principally to the publication of paid advertisements.

- Kapag bumili ka ng libro, walang VAT dapat!

Ex. Bumili ka 7/11 ng magazine tapos ang laman, buy and sell. So itong mga to is for advertisements
thus, VATABLE.

Under BIR Ruling No. 083-2014, the term “book, newspaper, magazine, review and bulletin apply only
for actual printed. It shall not apply for E-books.

Transport of passengers by international carriers doing business in the Philippines.

- Also, not subject to Other Percentage Taxes

- INTERNATIONAL CARRIERS via air or sea.
 - Foreign carriers conducting business in the PH.

Transport of cargo by international carriers doing business in the Philippines, as the same is subject to
3% common carrier’s tax.

Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and
spare parts for domestic or international transport operations.

Importation of fuel, goods and supplies by persons engaged in international shipping (via sea) or air
transport operations. Provided that the fuel, goods and supplies shall be used for international
shipping or air transport operations

Ex. PH airlines, imported fuel goods supplies, for its international operations – EXEMPT but if used for
local operations, VATABLE!

Once subject to percentage, not VATABLE but VATABLE if with excise TAX

Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other
non-bank financial intermediaries such as money changers and pawnshops, subject to percentage tax.

Take note: Cooperative Credit are exempt from VAT and exempt from Percentage Tax.

Sale or lease of goods and services to senior citizens and PWD

Tax-free exchanges refer to those instances enumerated in Section 40©2, NIRC are not subject to
income tax, CGT, Documentary Stamp Tax and/or VAT, as the case may be.

In general, there are two kinds of tax-free exchange: (1) Transfer to a controlled corporation; (2) merger
or consolidation.

Kasi if magpapasa ka sa another corporation mayroon kang control, like katulad sa advacc, dahil sa
pagtransfer mo, you became the majority shareholder.

If the transfer has made you substantially shareholder, you are VAT-exempt.

Association dues, membership fees, and other assessments and charges collected on a purely
reimbursement basis by homeowners’ associations and condominium corporations.

Sale of Gold to the Bangko Sentral ng Pilipinas!

- Sale was made in the ordinary course of business.

Sale of drugs and medicines for diabetes, high cholesterol, and hypertension.

- Drugs and medicines are generally exempted from VAT! Unless exempted by law.
Sales or lease of goods or properties or the performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the
amount of P3,000,000

- Provided that you’re not VAT-registered.

- Subject to Percentage Tax!

Input VAT
- Contra-liability account to the OUTPUT VAT (Liability account)
- Credit invoice method – the remittance of VAT to the BIR is the excess of Output VAT from the
Input VAT or simply:
Output VAT xx
Input VAT (xx)
VAT Payable xx to be remitted to the BIR

Sources of Input VAT and Other Creditable VAT

 Domestic Purchases
 Capital Goods
 Importation
 Presumptive Input Tax
 Standard Input VAT
 Other Creditable VAT

Scenario: From the POV of the Seller JE: Cash 112(dr), Sales (100), Input VAT (12) (cr)

POV of the buyer JE: Purchases 100, Input VAT (12), (dr) Cash 112 (cr)

Provided that the two are VAT-registered, if one are NOT, NO VAT!

If Domestic Purchases basis is: Gross Purchases

If Domestic Service basis is Payment

If the output VAT is based on Collections, Input VAT must be based on payments.

If the output VAT is based on Gross Sales, Input VAT must be Gross Purchases.

Input VAT on Domestic Purchases (BASTA BUSINESS RELATED!)

 Goods for Sale
 Goods for conversion into finish product (including packaging materials).
 Goods for use as supplies
 Goods for use as materials supplied in the sale of services
 Goods for use in trade or business for which depreciation or amortization is allowed. (Capital
Goods).
 Real Properties for which VAT has been paid
 Services for which VAT has actually been paid.
Illustration:

Kasangkapan Corp. a VAT registered dealer of appliances, provided the following data for the last quarter
of 2021:

 Sales, total invoice value P5,600,000

 Purchases, net of input taxes 3,500,000 wala pang VAT!
 Deferred input VAT from 3rd Q 30,000

How much is the VAT payable for the 4th Q?

Output VAT 600,000

Input VAT (420,000)

Deferred (30,000)

VAT PAYABLE 150,000

** If input VAT is higher than the OUTPUT, and hindi naman galing sa export sales, hindi pwedeng i-
refund, but can only be carry-overed.

Input VAT on Capital Goods

Capital goods refer to goods or properties with estimated useful life of greater than 1 year and which are
treated as depreciable assets under the tax code, used directly or indirectly in the production or sale of
taxable goods or services.

We’re allowed to claim input VAT so long as the seller is VAT-registered and the buyer is VAT-registered
and the thing that has been sold has VAT.

Rules in Claiming input VAT on Capital Goods. (More than 1M)

- Hindi pwedeng i-claim as isahan sa buwan na mismo mo siya binili.

- Input Tax shall be spread or allocated evenly during the estimated useful life of the depreciable
asset, but it shall not exceed 60 months (5 yrs). Allocation shall commence in the calendar
month when the capital good was acquired. If the capital good is sold within the 5-yearperiod or
prior to exhaustion of Input VAT thereon, the entire unamortized input VAT on the capital goods
sold can be claimed as input tax credit during the month or quarter when the sale is made. If the
life of the capital good or depreciable asset is not more than 0ne year or 12 months, the asset is
not treated as a capital good subject to depreciation. Hence, allocation of input VAT is not
applicable. The total amount of Input VAT shall be claimed in the month of acquisition.

If the Capital Good is not more than 1M,

- Input tax is not allocated. The total amount of input VAT shall be treated as tax credit against
output VAT in the month of acquisition.
VAT on Importation

VAT is a tax on the value added by every seller to the purchase price or cost in the sale or lease of
goods, properties or services in the ordinary course of trade or business as well as an importation of
goods into the Philippines, whether for personal or business use. VAT is a transaction arising from the
ordinary course of trade or business. The only exception to this rule under the Tax Code is the
imposition of VAT on Importation.

- The VAT on importation is imposed upon the total cost of importation.

Sa output VAT, need business related but if Input VAT, hindi need na business-related if importation.

“VAT is a consumption tax levied on sales to be borne by the consumers with the sellers acting as tax
collector.”

Importers will shoulder the VAT because we’re the end-users.

Formula for VAT on Importation

Total Value for Customs Duties Pxx - GR: The purchase price, EXC: If customs has valued it.

ADD:

Custom Duties xx

Excise Tax xx

Other charges prior to release xx

Tax Base xx

Tax rate 12%

VAT on Importation Pxx

Hindi lang yung kung magkano ung binili but pati yung mga charges na legitimate.

** Sa output VAT, should we use gross sales or net sales?

** Sa input VAT, should we use Gross purchases or Net Purchases?

- Not all returns or discounts are deductible. If computing VAT payable, deduct the discount and
returns unless, the discount or return is still subject to a condition, or it will happen in the future.
For it to be deductible, the discount must be granted while the return must be returned
(appropriate debit memo or Cr memo).

Presumptive Input VAT:

You have PIVAT if you’re engaged in the processing of the following: (SAMAMICOPARE)

 SArdines
 MAckarel
 MIlk
 COoking oil
  PAcked noodle-based instant meals
 REfined sugar
- Shall be allowed a presumptive input tax, creditable against the output tax, equivalent to four
percent (4%) of the gross value in money of their purchases of primary “agricultural products”
which are used as inputs to their production. The term “processing” shall mean pasteurization,
canning, and activities which through physical or chemical process alter the exterior texture or
form or inner substance of a product in such manner as to prepare it for special use to which it
could not have been put in its original form or condition.
- If you’re engaged in these processing of goods and manufacturing of these primary agricultural
products, 4% of that PAP that has been used as input for these products are allowed as Input
VAT.
- Because generally, these products are exempt from VAT but if you used it in processing, and sold
this, you’re entitled to 4% Presumptive Input VAT.
- Nung binili kasi tong mga to, walang input VAT kasi mga nasa original state pa itong mga to, so
technically, walang input VAT however the tax code allows you to be entitled na maglagay ng
input VAT kasi nakakaawa ka naman daw sabi niya na wala kang panangga sa OUTPUT VAT MO!
- DAPAT AGRICULTURAL PRODUCT USED AS INPUT!
- Tax incentive! Kasi wala namang VAT talaga un dahil basic necessity itong mga to.

Processing of:

 Sardines
 Mackarel
 Milk

Manufacturing of:

 Refined Sugar
 Cooking Oil
 Packed noodle-based instant meals

TRANSITIONAL INPUT VAT

Persons who becomes liable to VAT or any person who elects to be a VAT-registered person who shall be
allowed input tax on his Beginning Inventory of goods, materials, and supplies equivalent to 2% of the
value of such inventory or supplies, whichever is higher, which shall be creditable against the output tax.

Taxpayers who can avail transitional input VAT:

1. Taxpayers who become liable to VAT

2. Taxpayers who elect to be VAT registered

Simplified: 2024 na ngayon, last year hindi VAT reg kasi di ka naman lagpas 3M at hindi ka nag-optional
VAT registration. So now, if your sales exceed 3M or if less than but you want to be VAT reg, you’re
allowed to claim Input VAT from your previous purchases provided that the inventories are still in your BI
(at the time you register). So now, ikumpara mo ung actual VAT ng mga nasa inventaryo mo pa vs the 2%
ng mga un. The higher between the two!

Sa pag-compute ng 2% kasama ung VAT and NON-VAT SUPPLIERS.

 - Basta dapat nag-register ka ngayon tapos hindi ka registered dati.

STANDARD INPUT VAT

- If the buyer is the Government

- If we sell to the Government, subject to VAT.
- The moment that you sell to the government, the government will withhold 5% VAT (based on
the amount of the SP)
- 5% withheld = VAT Payable

Output VAT 12%

Standard Input VAT (7%)

VAT Payable (5%)

Alpha Corporation, a Vat-reg supplier of office supplies, provided the following data for the last quarter
of 2021 with respect to its sales to Manila government:

 Selling Price P5,000,000

 Input VAT on Supplies Sold 3,500,000

How much is the VAT Payable of Alpha Co. on this particular transaction?

Output VAT 600,000

INVAT (350,000)

5% CW VAT (250,000) - NET VAT PAYABLE OF THE SELLER

VAT Payable P0

Other Creditable Withholding VAT

- Non-resident persons who perform services in the Philippines are deemed to be making sales in
the course of trade or business, even if the performance of services is not regular. The recipient
of the service is the one required to withhold and remit the VAT to the BIR. Such VAT can be
claimed by the recipient as input tax.

**5% VAT withheld by the Gov’t/GOCCs

FILING OF VAT RETURNS

- Every person liable to pay the VAT imposed under the Tax Code shall file and pay a monthly and
quarterly VAT return (triplicate copies: 2 for BIR and 1 for the TP) based on the amount of his
gross sales and gross receipts, as the case may be.
Monthly VAT return (using BIR form 2550M) shall be filed and paid not later than 20th day following the
end of each month.

Ex. First month January, the deadline is February 20, 2nd Month February, the deadline is March 20, 3rd
Month March, no filing but we file for the Quarterly return.

Quarterly VAT return (using BIR form 2550Q) shall be filed and paid not later than the 25th day following
the close of each taxable quarter prescribe for each taxpayer.

- Cumulative. Magmula January to March! Tatlong buwan ang laman!

When do we pay? When we file kasi file as you pay system

Where do we pay? Authorized agent bank within the jurisdiction where the company is registered.

2 types of Filing:

 Manual
 Electronic Filing Payment System