BUSINESS TAX 3.

Excise Tax (ET)

- Onerous transfer
- Addition to income and other taxes paid, unless NOTE!
specifically exempted
- Generally based on gross sales or gross receipts - Exempt from VAT may be subject to OPT
(income or loss) - Subject to VAT no longer be subject to PT (vice
versa)
TYPES OF TRANSFER - Subject to either VAT or OPT may still be subject to
1. Gratuitous Transfer ET
2. Onerous Transfer (VAT + ET; OPT + ET)
a. Sale In the ordinary course of trade or business - Subject to Vat, exempt from VAT and subject to PT
including incidental transactions at the same time (mixed transactions)
- habitual/regular conduct
- economic/commercial activity I. VALUE-ADDED TAX
- annual gross receipts/sales must exceed
100k - A tax on value added by every seller to the purchase
price or cost in the sale or lease of goods, property or
Subject to (unless exempt): services in the Philippines (cross border doctrine), and
- Business Tax & Income Tax on importation of goods into the PH, whether personal
or business use, impose at each stage of production and
Isolated Transactions/Regular Conduct distribution process
- By residents – not considered, not subject to VAT - ALL BLESS GSiM except those under Sec. 109 A-CC.
- By nonresident (on services rendered in the Ph) –
consider, subject to Final withholding VAT Cross border Doctrine- means no VAT shall be imposed
to consumption outside the territorial border of the PH
b. Not in the course of trade or business – not taxing authority
subject to business tax but may be subject to KINDS OF VAT
income tax
1. VAT on sale of goods or properties
TYPES OF BUSINESS TAX 2. VAT on importation of goods
1. Value Added Tax (VAT) - Importer, whether an individual or corporation and
2. Other Percentage Tax (OPT) or whether or not made in the course of his trade or
Percentage Tax (PT) business, liable to VAT
 3. VAT on sale of services and use or lease of - Indirect tax; may be passed to the customer
properties - Accrues at the collection of service fee, may be
collected in advance or after
Persons liable
SALE OF REAL PROPERTIES
• seller of goods or properties
• lessors of properties - On the installment plan, Real estate dealer shall
• sellers of services be subject to VAT on the installment payments,
including interest and penalties, actually and/or
Transfer by a tax-exempt entity to none-tax constructively received by the seller.
exempt entity – shall be considered importers, who
CHARACTERISTICS OF VAT
shall be liable for any internal revenue tax
1. An Indirect Tax where tax shifting is always
GOODS OR PROPERTIES presumed
- All tangible and intangible objects - However, in case of importation, importer is the
1. Real properties held primarily for sale to customers or liable
held for lease in the ordinary course of trade or business - “burden of tax” is borne by the final consumers
2. The right or the privilege to use patent, copyright, not the “liability to pay the tax”
design or model, plan, secret formula or process, - Producers or suppliers – the ones who file VAT
goodwill, trademark, trade brand or other like property returns to BIR
or right 2. It is consumption-based
3. The right or the privilege to use any industrial - Shoulder by the end user
commercial or scientific equipment - The VAT, Forms a substantial portion of consumer
4. 'The right or the privilege to use motion picture’ films, expenditures
films, tapes and discs; and 3. It is imposed on the value-added in each stage
5. Radio, television, satellite transmission and cable of production and distribution process
television time. 4. It is a credit-invoice method VAT / tax credit
approach
SALE OF SERVICES Output VAT (vat on sales) xx
- Performance of all kinds of services in the Ph for Input VAT (vat on purchase) tax credit (xx)
others for a fee, remuneration or consideration, VAT payable xx
whether in kind or in cash
- A tax on payments for services rendered in the - Sellers acting simply as tax collectors
exercise of profession or calling.
Note!
Output tax – vat due on sale, lease or exchange of - Cannot pass on the output vat to its customers
taxable goods, properties or services
VAT threshold for Husband & Wife
Input tax – vat due on or paid by a VAT- registered
- 3 M: separate taxpayers
person
- VAT-exempt sales shall not be included in
BASIS OF VAT determine the threshold

The 12% VAT shall be based on the ff: B. Optional Registration (OR)
A. Sale of goods/properties Gross Sale - Any person who is VAT-Exempt or not required to
B. Sale of services Gross Sales register may elect to be VAT-registered by
C. Importation Total landed cost registering with the RDO and pay the annual
D. Dealers in sale of real property Gross Income registration fee for every separate and distinct
Securities establishment. Any person who elects to register
FMV/ZV, whichever is higher
under OR shall not be allowed to cancel for the
VAT REGISTRATION next 3 yrs
- Franchise grantees of radio and/or television
1. Mandatory Registration (MR)
broadcasting: annual gross sales < 10M may opt
a. Any person or entity who, in the course of his trade or for VAT registration. Once exercised, shall be
business BLESS subject to vat irrevocable.
 The gross sales exceed 3M for the past 12 months Note!!
(other than those that are exempt) or
 There are reasons to believe that the gross sales or - The above – stated taxpayers may apply for VAT
receipts for the next 12 months will > 3Million registration not later than 10 days before the
b. Radio and/or television broadcasting companies, gross beginning of the calendar quarter
sales of preceding years > 10M - Shall pay the registration fee unless they have
already paid at the beginning of the year
 MR applies within 30 days from the end of taxable year
- The CIR may deny any application for registration
c. A person required to register as VAT taxpayer but - Once registered as a VAT person, shall be liable to
failed to register. output tax and entitled to input tax credit
beginning on the first day of the month following
Penalty: shall be liable to pay as if he were a VAT-
registration.
registered but he cannot avail the benefits of input tax
credit for the period he was not properly registered. Cancellation of Registration
Computation of 12% VAT - Sin products: wines & cigarettes
- Non-essential goods: automobile & minerals
- An ad valorem tax charged on the selling price
of taxable goods or services and is payable by the
customer

Power of CIR or his authorized representative to

suspend business operations for a period of not
less than 5 days

FF. Violations:

1. Failure to issue receipts/invoices

2. Failure to file vat return
3. Understatement of taxable sales /receipts by
30% or more of the correct taxable
sales/receipts for the taxable quarter
4. Failure of any person to register as required
under the law

OTHER PERCENTAGE TAX (OPT)

- Any person who is not a VAT registered (exempt

from VAT under Sec.109) and is not exempt from
business tax (with gross sales/receipts 100k and
below in any twelve-month period) shall be
subject to OPT

EXCISE TAXES

- Addition to VAT
- Apply to goods manufactured or produced in the
PH for domestic sales or consumption or for any
disposition and goods imported