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Value- Added TAX - Reviewer
Financial Accounting (Cavite State University)
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VALUE-ADDED TAX
TRAIN Law or RA 10963
VAT is a tax on the value added to the purchase
price or cost in the sale or lease of goods, property or ‘such tax to be paid by the seller or transferor’
services in the course of the trade or business.
The following sales by VAT-registered persons shall
Per Republic Act 9337, also known as the be subject to zero-rate:
Value-Added Tax Reform Act, every person who, in
the course of trade or business, property, services, is a. Export sales
subject to VAT, if the aggregate of his actual or b. Sale of good or property to persons or entities
expected gross sales and/or gross receipts exceeds c. Sale of raw materials inventories, supplies,
P3,000,000. equipment, packaging materials and goods,
to a registered export enterprise,
Any business by an individual where the aggregate
gross sale or receipts do not exceed P100,000 Other expenditures include expenses that are
during any 12-month period shall be considered necessary or required to be incurred depending on
principally for subsistence or livelihood and not in the the nature of the registered project or activity of the
course of business. export enterprise.
Generally, services rendered in the Philippines by a
non-resident foreign person shall be considered as The TRAIN Law reclassifies “sales of gold to BSP by
being rendered in the course of trade or business a VAT-registered taxpayer” as among Exempt
even if the performance of services is not regular. Transactions under Sec. 109
Non-resident corporations deriving income from Transactions Deemed Sale
services performed abroad are not subject to
Philippine income tax and, consequently, withholding 1. Transfer, use or consumption not in the course of
tax (WT). business of goods or property originally intended for
sale or for use in the course of business.
VAT ON SALES OF GOODS OR PROPERTY 2. Distribution or transfer to:
Goods or property shall mean all tangible and a. Shareholders or investors as shares in the
intangible objects that are capable of pecuniary profits of the VAT-registered persons;
estimation and shall include: b. Creditors in payment of debt or obligation;
3. Consignment of goods if actual sale is not made
1. Real property held primarily for sale to customers within 60 days following the date such goods were
or held for lease in the ordinary course of trade or consigned; and
business. 4. Retirement from or cessation of business, with
2. The right or privilege to use patent, copyright, respect to inventories of taxable goods existing as of
design or model, plan, secret formula or process, such retirement or cessation.
goodwill, trademark, trade brand or other like
property or right; Fair market value shall mean whichever is higher of;
3. The right or the privilege to use in the Philippines (1) the fair market value as determined by the
of any industrial, commercial or scientific equipment; Commissioner (zonal value), or
4. The right or the privilege to use motion pictures (2) the fair market value as shown in schedule of
films, tapes and discs; and values of the Provincial and City Assessors
5. Radio, television, satellite transmission and cable (real property tax declaration).
television time.
Gross Selling Price
Is 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, exchange of the goods
or properties , excluding the VAT. Sale on Installment or on Deferred-Payment
Tax Base and Rates Sales of real property on installment plan means sale
There shall be levied, assessed and collected on of real property by a real estate dealer, the initial
every sale, barter or exchange, or transactions payments of which in the year of sale do not exceed
“deemed sale” of taxable goods or property, 25% of the gross selling price.
value-added tax equivalent to 12% of gross selling
price or gross value in money of the goods or In case of installment sale, the seller shall be subject
property sold or exchanged. to output VAT on the installment payments received,
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including the interests and penalties for late payment, 1. construction and service contractors;
actually and/or constructively received. 2. stock, real estate, commercial, customs and
immigration brokers;
Sale of real property by a real estate dealer on 3. lessors of property, whether personal or real;
deferred payment basis means sale of real property, 4. warehousing services;
the initial payments of which in the year of sale 5. lessors or distributors of cie=nematographic films;
exceed 25% of the gross selling price. 6. persons engaged in milling, processing,
manufacturing or repacking goods for others
Initial Payments 7. Proprietors, operators or keepers of hotels, motels,
rest houses, pension houses, inns, resorts, theaters
Initial payments do not include the amount of and movie houses;
mortgage on the real property sold except when such
mortgage exceeds the cost or other basis of the
property to the seller, in which case the excess shall
be considered part of the initial payments.
Advance VAT—
Requirement to Pay Advance VAT
advance VAT shall be paid by the owner/seller to the
BIR through the authorized agent banks or to the
revenue collection officers or deputize city or
municipal treasurers before transporting them from
place of production or concession.
VAT On Sales of Services and Use or Lease of
Property
Real estate lessor includes any person engaged in
the business of leasing or subleasing real property.
Non-resident lessor/owner refers to any person,
natural or juridical, an alien, or a citizen who
establishes to the satisfaction of the Commissioner of
Internal Revenue (CIR).
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