Major Business Taxes: Tax consequences: No output tax allowed and seller is

not allowed to claim input tax. Input tax will form part
1. Value Added Taxes-12% of the cost of goods sold or expense outright.
2. Percentage Taxes-3% under CREATE LAW 1% until June 30, Ex:
2023
Sales, 112,000, inclusive of VAT:
3. Excise Taxes
112,000/1.12=100,000 net of VAT x 12%=12,000
Business Tax- imposed on onerous transfer such as sale,
barter or exchange. Ex

Value Added Tax is a tax levied on consumption levied on Sales, 100,000, exclusive of VAT
sale, barter, exchange or lease of goods, properties and
services IN THE PHILIPPINES and importation of goods into 100,000 x 12% = 12,000
the Philippines.

Value added tax and excise tax can be imposed

simultaneously but value added tax and percentages cannot
be imposed simultaneously. Ex.
Republic Act 9337 or the Value Added Tax Reform Act Purchases, 112,000, inclusive of VAT
states that every person who in the ordinary course of
business, sells, barters, exchanges, leases goods or 112,000/1.12=100,000 net of VAT x12%= 12,000
properties or render services is subject to VAT if actual
or expected sales or receipts are greater than 1,919,500. Purchases, 100,000, exclusive of VAT

100,000x12%=12,000

VAT THRESHOLD-TRAIN LAW 3M RA 101963 If OT>IT=VAT PAYABLE

VAT TRANSACTIONS: IF IT>OT=VAT REFUND

1. VAT EXEMPT 1. Sale or Importation of agricultural and marine food

2. 0 RATED products in their original state, livestock or
3. VATABLE poultry of a kind generally used as or yielding or
producing foods for human consumption and breeding
stock and genetic materials therefor
VAT EXEMPT TRANSACTIONS –
a. Original state = if products underwent into simple are actually coming to settle in the Philippines.
process such as: FREEZING, DRYING, SALTING, (RR 13-2018).
BROILING, ROASTING, SMOKING, STRIPPING and 5. Services subject to percentage taxes
including advanced technological means of 6. Services by agricultural contract growers and
PACKAGING. milling for others of palay. Agricultural contract
growers refers to persons producing for others
b. Polished and/or husked rice, raw cane sugar, and poultry livestock and other agricultural and marine
molasses, ordinary salt, and copra shall be also in food products in their original state,
original state. 7. Medical, dental, hospital and veterinary services,
except those rendered professionals. Laboratory
c. Livestock or poultry does not include cocks, race services are exempted, however, hospitals with
horses, zoo animals, and other general animals pharmacy or drug store is subject to VAT, except
considered as pets. those drugs that are exempt from VAT.
d. Sale of bagasse is not exempt from VAT. 8. Educational services duly accredited by Department
of Education, commission on Higher Education and
e. Fresh water is subject to VAT. Technical Education and Skill Development Authority.
Educational Services does not include seminars, in-
2. Sale or importation of fertilizers, seeds, service training, review classes and other services
seedlings, and fingerlings, fish prawn, livestock rendered by persons not accredited by DepEd, CHED or
and poultry feeds, including ingredients whether TESDA.
locally imported, used in the manufacturing of 9. Services rendered by individual pursuant to
finished feeds (except feeds of letter C in number employer-employee relationship.
1) 10. Services rendered by regional headquarters in which
3. Importation of personal and household effects owned do not have intention to earn or derive income from
by a resident of the Philippines returning from the Philippines.
abroad and non-resident coming to the Philippines. 11. Transactions which are exempt under international
4. Importation of professional instruments and agreements to which Philippines is a signatory.
implements, wearing apparel, domestic animals, and
personal household effects (except vehicle, vessel, 12. Sales by duly registered cooperatives:
aircraft, machinery and other goods for use in the a. Dealing or transacting with members only.
manufacture and merchandise of any kind in b. Sale of their produce, whether original state
commercial quantity) belonging to a person coming or processed form to non-members. To be
to settle in the Philippines for their own use and exempted, the cooperative must be the
not for sale, barter or exchange, accompanying such producer and otherwise subject to VAT.
persons or arriving within ninety (90) days before c. Importation of direct farm inputs,
or after their arrival upon the production of machineries and equipment, including spare
evidence satisfactory to the CIR, that such persons
 parts to be used in the production and/or Number of Units 20, Monthly rental is 20,000. 20 x
processing of their produce. 20,000x12=4,800,000
13. Gross Receipts from lending activities by credit or
multi-purpose cooperative which is duly registered 17. Sale, importation, printing or publication of books
with CDA. and any newspaper and the likes. The term book,
14. Sale by non-agricultural, non-electric, and non- magazine, review and bulletin defines by RMC 75-
credit cooperatives provided that are registered 2012 as PRINTED materials in HARD COPIES and do not
and with share capital contribution from each include those in digital or electronic format or
member not exceeding 15,000. computerized versions.
15. Export sales by persons who are not subject to VAT. 18. Transport of passengers by international carriers.
16. Sale of real properties: 19. Sale, importation or lease of passenger or cargo
a. Not primary held for sale or held for lease vessel and aircraft, including engine, equipment
in ordinary course of business. and spare parts thereof for domestic or
b. Under low-cost housing scheme and socialized international transport operations.
housing. 20. Importation of fuel, goods and suppliers by person
c. Sale of residential lot valued at 1,500,000 engaged in international shipping or air transport
or below. After three years, meaning 2021, operations. If used in domestic shipping or air
the ceiling is now 1,919,500. 3M transport it is subject to VAT.
d. Sale of house and lot and other residential 21. Services of Banks and other financial institutions
dwelling at 2,500,000 and below. After three 22. Sales or lease of goods and services to senior
years, meaning 2021, the ceiling is citizens and persons with disability.
3,199,200. EOPT 3,600,000
e. Lease of residential unit with a monthly Ex:
rental not exceeding 15,000. A,B,C & D went out for dinner in shakeys. B is a senior
f. Lease of residential unit with a monthly citizen. After the dinner, the bill is 2,240. S
rental exceeding 15,000 but the aggregate is
not 3,000,000. 1. How much should be the discount?
2. How much should be the amount paid?
EXAMPLE:
INVOICE PRICE 2,240/1.12=2,000/4=500 each 500x20%=100.
CASE 1:
INVOICE PRICE 2,240/1.12=2,000-100=1,900
Number of units 20, monthly rent is 10,000.
=10,000x12x20=2,400,000 2,000x12%=240/4=60 per head =60x3=180
CASE 2: 1,900+180=2,080

NONVAT-2,240*20%=448.000 DISCOUNT 2,240-448=1,792

23. Transfer of property pursuant to Section 40(C)(2) a. The sale and actual shipment of goods from the
of the NIRC Philippines to a foreign country, irrespective
24. Association dues, membership fees and other of any shipping arrangement that may be agreed
assessments and charges collected by homeowners’ upon which may influence or determine the
associations and condominium corporation. transfer of ownership of the goods so exported
25. Sale of gold to BSP. and paid for in acceptable foreign currency or
26. Sale of drugs and medicines prescribed for its equivalent in goods or services and
diabetes, high cholesterol, and hypertension accounted for in accordance with the rules and
beginning January 1, 2019. regulations of BSP.
27. Importation of apparatus to be used in dual b. Sale of raw materials or packaging materials
training system to a nonresident buyer for delivery to a
28. Sales by PEZA, SBMA and other economic zones. 0- resident local export-oriented enterprise to
rated be used in manufacturing, processing, packing
29. Sale or lease of goods or properties or the or repacking in the Philippines of the said
performance of services other than the transactions buyer’s goods and paid for in acceptable
mentioned in the preceding numbers, the gross foreign currency and accounted for in
annual/or receipts do not exceed 3,000,000. accordance with the rules and regulations of
30. VAT Exemption on self-employed individuals or BSP.
professional availing of the 8% tax. c. Sale of raw materials or packaging materials
to export oriented enterprise whose export
ZERO RATED (0%) TRANSACTIONS sales exceeds 70% of total annual production.
Ex. Sales 100,000 x 0%=0 Purchase 100,000 x 12%=12,000 Note: Sale of raw or packaging materials and those
considered export sales shall be subject to 12% VAT and
1. No output tax, but can claim input tax, if no longer 0 rated under TRAIN LAW if the conditions are
registered. met.
a. Input tax can be applied as:
i. Refund 2. Sales and Delivery to:
ii. Tax credit certificate a. Registered enterprise within a separate
iii. Carry over method customs territory as provided under special
2. If not registered, it will be VAT exempt with no laws
input tax allowed but treated as expense. b. Registered enterprises within tourism
enterprise zone as declared by Tourism
Infrastructure and Enterprise Zone Authority
ZERO RATED SALE OF GOODS (TIEZA) under R.A 9593.
3. Sale of goods, supplies, equipment and fuel to
1. Export sales persons engaged in international air transport
 operation. Provided that supplies, fuels and GROSS SELLING PRICE- it is the total amount of money or
equipment shall be used for international shipping its equivalent. Any excise tax shall form part of the
or air transport operations. GSP. If sales returns, discounts and allowances were
made, VAT should be adjusted.
NOTE: FOREIGN CURRENCY DENOMINATED SALES IS NOT INCLUDED
IN TRAIN LAW. MR. A, sold merchandise worth 100 on February 1, 2024.
The amount was received only on February 5, 2024.
ZERO RATED SALES OF SERVICES
Under cash basis, how much is the income on February 1-0
1. Processing of goods for other persons which goods and 5-100
are subsequently exported
2. Services rendered to a person engaged in business Under accrual basis, how much is the income on February
outside the Philippines 1-100 and 5-0
3. Effectively zero-rated sales of services
4. Services rendered to persons engage in Ex:
international shipping provided it is related to
transport of goods and passengers Sales, 100 net of VAT
5. Services performed by sub-contractor in Entry:
manufacturing of goods for enterprise whose exports
sales exceeds 70% of total annual production Cash 112
6. Transport of passengers and cargoes by domestic air
or sea carriers from Philippines to foreign country Sales 100
7. Sale of fuel or power generated to renewable energy
Output tax 12 (100X12%)
VAT TAXABLE SALE OF GOODS OR PROPERTIES

To be taxable, it must be in ordinary course of business

and there must be an actual sale of:

1. Real properties held primary for sale or held for Sales returns 11.2 vat inclusive
lease in ordinary course of business
2. The right to use a patent and other intangibles Sales Returns (11.2/1.12) 10
3. The right to use in the Philippines any industrial, Output tax (10X12%) 1.2
commercial and scientific equipment
4. The right to use motion picture films and the likes Cash 11.2
5. Radio, TV and satellite transmission
6. Capital goods or properties with a life greater OUTPUT 12-OUTPUT 1.2=10.8
than one year.
TRANSACTION DEEMED SALE VAT on sale of real properties- must be held for sale or
lease to customers
1. Transfer, use or consumption not in the ordinary
course of business of goods or property originally 1. Subject to VAT regardless of amount of GSP if real
intended for sale or use in ordinary course of property is not residential.
business 2. If real property is residential, it will be subject
2. Distribution or transfer of goods or properties to: to VAT if exceeds:
a. Shareholders as property dividends a. 3M for residential lots
b. Creditors as payment of debt or obligation b. 3.6M for residential house and lots
3. Consignment of goods in which actual sale is not
made within 60 days from the date of consignment In the sale of real properties subject to VAT:
Date of Consignment January 1, 2024 Value is 100,000 1. GSP shall be the highest of:
a. Selling price 5.6M/1.12 x 12=600,000
60 days after date of consignment-March 1 b. Zonal Value 8M x 12%
c. Assessed value 2M
4. Retirement from or cessation of business with
respect to inventories or taxable goods If B and C is not available, the latest tax declaration
TRANSACTIONS NOT SUBJECT TO VAT
If the base is letter B or C, the base is exclusive of
1. Change in control of a corporation VAT.
2. Merger or consolidation of corporations
3. Change in the trade or corporate name Note: Sale of parking lots is subject to VAT regardless
of amount.
Output VAT on sale of goods, barter, exchange or deemed
sale is computed by multiplying the GSP by the 12% rate. If Cash Sale: VAT= 12% of highest GSP
Note that if problem is silent, it is VAT inclusive.
If installment plan, the formula to compute VAT if zonal
Tax base for transaction deemed sale: or assessed value is higher than the consideration:
1. If the transaction is number 1 to 3 above, the tax
base is the market value of goods at the time of a. Actual Collection, net of VAT x zonal/assessed
transaction value x 12%
2. If the transaction is number 4 above, the tax base b. Agreed Price, net of VAT
is the lower of acquisition cost or current market c. To be considered as installment plan, initial
price of goods payments in the year of sale do not exceed 25%
of GSP.
 d. To be considered as deferred payments, the Sold Motorcycle worth 100,000, net of VAT. DP is 5,600
initial payments in the year of sale exceed and monthly installment of 2,240 starting August.
25% of GSP.
e. Initial payment = includes down payments made VAT on July 1, 2021?
and payments actually or constructively
VAT on August 2021?
received during the year of sale and the
excess of mortgage over the cost. DP = 5,600/1.12 = 5,000

July 1, 2021 Amortization = 2,240/1.12 = 2,000

Sold Motorcycle worth 100,000, net of VAT. DP is 11,200 IP = DP 5,000

and monthly installment of 5,600 starting August.
Amortization 10,000
VAT on July 1, 2021?12,000
TOTAL IP 15,000
VAT on August 2021? 0
15,000/100,000 x 100% = 15%
DP=11,200/1.12=10,000
5,600/1.12 x12% = 600 JULY 1
Amortization=5,600/1.12=5,000 monthly
2,240/1.12x12%=240 AUGUST
IP = DP 10,000
VAT- TAXABLE SALE OF SERVICES
Amortization 5,000x5=25,000
Requisites:
TOTAL IP = 35,000
1. Must be in ordinary course of business
35,000/100,000 x 100% = 35% 2. For leases, property must be in the Philippines
3. The seller or lessor is VAT registered or if not gross
INSTALLMENT PLAN = VAT by multiplying the cash received
receipts exceeds 3,000,000
DEFERRED PAYMENT = the whole amount will be subject to 4. In lease of residential units, the monthly rental
VAT exceeds 15,000 and aggregate annual gross receipts
exceeds 3,000,000.
100,000x12%=12,000 5. In the old tax law, the monthly rent should have been
12,800 and the threshold is 1,919,500
July 1, 2021
TAXABLE SERVICES: Those rendered by: 12. Sale of electricity by generation,
transmission by any entity including the
1. Construction and service contractors NGCP and distribution companies is
2. Stock, Real estate, commercial customs, subject to VAT. (RR 13-2018)
and immigration brokers 13. Services of franchise grantees of
3. Lessors of property whether personal of electric utilities, telephone and
real telegraph, radio and television
4. All kinds of services in the Philippines broadcasting and all other franchise
provided it is not excepted by law grantees except those under section 119
5. Sale of domestic common carriers by air of RA 10963.
and sea relative to their transport of 14. Sale of transportation of domestic
passenger, goods, cargoes, from one common carriers by land and their
place in the Philippines to another transport of goods and cargoes.
place in the Philippines
6. Warehousing LAND AIR SEA
7. Lessors or distributors of Passenger 3% OPT VAT VAT
cinematographic films Goods and VAT VAT VAT
8. Persons engaged in milling, processing, Cargoes
manufacturing or repacking goods for
others, except VAT Exempt transactions. 15. Non-life insurance
9. Proprietors, operators or keepers of Gross receipts = Premiums collected
hotel, motels, rest houses, pension 16. Lease of properties
houses, inns, resorts, theaters and a. Must be in the Philippines
movie houses. ** b. Prepaid rental shall be subject to VAT
** this was deleted in the TRAIN LAW. 17. Dealers in securities
a. Gross receipts = GSP less cost of securities
10. Proprietors or operators of sold
restaurants, refreshment parlors, cafes 18. Pre-need companies
and other eating places, including clubs a. Gross receipts = Premiums received
and caterers. 19. HMO
11. Lending investors a. Gross Receipts= Service fees = enrollment fees
+ other charges received
 b. Gross receipts = total amount of money 100,000 Beginning Inventory
representing the contract price. Once received
it is subject to VAT 100,000x2%=2,000

Actual input vat = 12,000

VAT ON IMPORTATION 6. Presumptive Input Tax (SM on SM)

a. Available to personal engaged in process of SM
Importer= any person who brings goods into Philippines ON SM.
whether or not in ordinary course of business. A non- b. 4% of the gross value in money of purchases
exempt person who acquires tax-free imported goods from 7. Input tax withheld
exempt persons. a. Input tax withheld by the sale of goods and
services to government and other GOCC’s
Tax Base: Total value used by BOC plus custom duties
excise taxes plus other charges. LANDED COSTS Ex:

VAT on importation must be paid first in order for the Sales to government 100,000, exclusive of VAT.
goods to be released otherwise it will not be. Withholding tax of sales to government is 5%.

INPUT TAX CREDIT 100,000*12%=12,000

Sources: 100,000 * 5%=5,000

1. VAT paid to the supplier by a VAT-registered person on 12,000-5,000=7,000

his local purchases and VAT paid to BIR on
importation of goods 8. Input tax on depreciable goods
2. VAT paid on purchase of real properties a. If value of capital goods is equal to 1, 000,
3. VAT paid on purchase of services 000 it can be claimed as automatic input tax
4. Transaction deemed sale on the month of purchase
5. Transitional input tax
Ex:
a. Allowed to those person who will become a VAT-
registered for the first time. It is the higher of Sales 1,000,000 net of VAT
2% of beginning inventory or the actual input VAT
paiD on such inventory. Purchase of Delivery Vehicle 896,000, VAT
inclusive.
 How much is VAT payable? OUTPUT TAX = (2,000,000x12%) 240,000

OUTPUT TAX = (1,000,000x12%) 120,000 INPUT TAX =(1,800,000x12%) (216,000)/36=6,000

INPUT TAX = (896,000/1.12*.12) 96,000 VAT PAYABLE = 234,000

VAT PAYABLE = 24,000 Ex. 2

Sales 2,000,000 VAT Exclusive

b. If the value of capital goods is greater than Purchase of Machinery 1,800,000 VAT Exclusive. Useful
1, 000, 000, input tax must be amortized by: lives is estimated 8 years. 12=96
i. If life is less than five years,
input tax shall be divided by the VAT PAYABLE?
useful life
OUTPUT TAX = (2,000,000x12%) 240,000
ii. If life is greater than five years,
the input tax shall be amortized INPUT TAX =(1,800,000x12%) (216,000)/60=3,600
using 60 months only.=5 years
iii. If sold within the period of 5 VAT PAYABLE 236,400
years, the entire unamortized input
Ex. 3
tax can be claimed as automatic
input tax on the date of sale. March 2021, referring to Ex. 1, the machinery is sold.

How much is the INPUT TAX TO BE CLAIMED?

Ex. 1 2 months x 6,000= 12,000
JANUARY 2021 216,000-12,000=204,000 UNAMORTIZED INPUT TAX
Sales 2,000,000 VAT Exclusive Sales 3,000,000 x 12%=360,000 – 204,000=154,000
Purchase of Machinery 1,800,000 VAT Exclusive. Useful Ex. 4
lives is estimated 3 years.
Sales 2,000,000 VAT Exclusive
VAT PAYABLE?
Purchase of Machinery 1,800,000 VAT Exclusive. Useful TOTAL SALES 400,000
lives is estimated 3 years.
Sales regular(100,000x12%) 12,000
VAT PAYABLE?
Sales-0 rate (100,000x0) 0
OUTPUT TAX = (2,000,000x12%) 240,000
Sales Exempt -
INPUT TAX =(1,800,000x12%) (216,000)
OUTPUT TAX 12,000
VAT PAYABLE = 24,000
Less: INPUT TAX 50,000 x 12% (6,000)

VP 6,000
8. Input tax on construction in Progress (CIP)
iv. CIP times 12%= input tax
v. But if completed, no additional input tax can
10. Issuance of VAT invoice by a non-VAT person
be claimed.
11. Issuance of VAT invoice on exempt transactions
9. Allocation input tax
by a VAT registered person.
Ex.
HOW ITC IS USED?
Sales-Regular 100,000
20. Used as credit against the output to compute for
Sales-O rated 100,000 VAT payable
21. Any excess ITC shall be carried over the next
Sales exempt 200,000 succeeding period
a. If excess is due to month, it will be carried
Purchases 100,000x12%=12,000 to next month only
b. If excess is due to quarter, it will be
VAT PAYABLE?
carried to next month or quarter at the option
Sales-Regular 100,000=100/400x100,000=25,000 of the taxpayer.
22. Input tax of 0% sales may be:
Sales-O rate 100,000=100/400x100,000=25,000 a. Be carried at next succeeding month
b. Be refunded
Sales exempt 200,000=200/400x100,000=50,000
 c. Apply for tax credit certificate in which if 2. A VAT official receipt for every lease must be
granted it can be used in the payment of issue.
other internal revenue taxes.

FILING OF VAT RETURN AND PAYMENT VAT (NON-EFPS)

END OF HANDOUT
1. Monthly VAT return on declaration
a. Use from 2550M and must be filed not later than NEXT ISSUE: OTHER PERCENTAGE TAXES
20th day following the end of taxable month
b. If there is payment, it will be paid in AAB
c. If no payment, it will be filed to revenue district
in which has jurisdiction over the business
2. Quarterly VAT return and declaration
a. Use form 2550Q and must be file not later than 25th
day following the end of taxable quarter
b. Payments made in last two months shall be credited
against the VAT payable for the quarter
c. If there is payment, it will be paid in AAB
d. If no payment, it will be filed to revenue district
in which has jurisdiction over the business

RETURNS UNDER ELECTRONIC FILING & PAYMENT SYSTEM (EFPS)

-it must be filed within the 21, 22, 23, 24, 25 days
following the end of each month. Once filed the payment
is to be made 5 days after the deadlines.

ISSUANCE OF VAT INVOICE AND RECEIPT

A VAT- registered person shall:

1. Issue VAT invoice in sale, barter, exchange of

goods and properties