Computation OF VAT Payable PDF

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COMPUTATION OF VAT PAYABLEOUTPUT VAT (VAT on Sales) xxLess: INPUT VAT (VAT on Purchases) xxVAT PAYABLE xxInvoice – inclusive of VAT Gross – inclusive of VAT Net – exclusive of VATSources of OUTPUT VAT1. Actual Sale  Sales in the ordinary course of trade or business, including incidental transacions...

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COMPUTATION OF VAT PAYABLE OUTPUT VAT (VAT on Sales)

xx

Less: INPUT VAT (VAT on Purchases)

xx

VAT PAYABLE

xx

Invoice – inclusive of VAT Gross – inclusive of VAT Net – exclusive of VAT

Sources of OUTPUT VAT 1. Actual Sale  Sales in the ordinary course of trade or business, including incidental transactions. 2. Transactions Deemed Sales  Not actually sale because of the absence of actual exchange between the buyer and the seller.  In TDS, input vat was already used by the seller as a credit against output vat, however, since there is no actual sale, no output vat is actually charged to customers.  Since one of the characteristics of VAT in PH is it is a credit-invoice method, TDS should be considered as sale even though there is no actual sale because the State will be deprived of its right to collect the output vat. THE FOLLOWING TRANSACTIONS ARE CONSIDERED DEEMED SALE: a. Transfer, use or consumption not in the ordinary course of business of goods or properties ordinarily intended for sale or use in the course of business.  Basis in computing the applicable vat should be the FMV of the good consumed. b. Distribution or transfer to:  Shareholders or investors as share in the profits of a VAT-registered person  Creditors in payment of debt or obligation  Basis should be FMV. c. Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned. Goods returned within 60-day period are not deemed sold. d. Retirement or cessation of status as vat registered person with respect to all goods on hand (as of the date of retirement or cessation), whether or not the business is continued by the new owner or successor.  Goods on hand – capital goods, stock in trade and supplies and materials.  Basis should be the acquisition cost or market value whichever is lower.  Goods and properties mentioned above should be originally intended for sale or use in business.  Change of control of a corporation by the acquisition of the controlling interest of such corporation by another stockholder or group of stockholders will not be considered sold,

bartered or exchanged, hence, not subject to VAT. However, the consideration transferred will be subjected to VAT. 3. Zero Rated Sales (0% VAT)  Export Sale by a VAT REGISTERED ENTITY – taxable transaction but shall not result in Output VAT.  Input VAT* attributable to zero rated sale may be: a. Refunded b. Claimed as deduction/tax credit against output vat on domestic sales c. Claimed as tax credit against any other internal revenue taxes  Purpose of zero-rating – zero rated sellers becomes internationally competitive which helps the State’s economy.  Rationale for zero-rating of export sales – Philippines’ Vat System adheres to the “Cross Border Doctrine”. * Input VAT that may be subject of claim shall exclude the portion of the input VAT that has been applied against output VAT. The application should be filed within 2 years after the close of the taxable quarter when such sale was made. ZERO-RATED SALE OF GOODS a. Actual export and deemed export sales 1. Sale and actual shipment of goods from the Philippines to a foreign country.  Paid for in acceptable foreign currency  Accounted in accordance with the rules and regulations of the BSP. 2. Sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packaging or repacking in the Philippines of the said buyer’s goods.  Paid for in acceptable currency  Accounted for in accordance with the rules and regulations of the BSP. 3. Sales to export-oriented enterprises which the code considers as export sales at the level of the supplier of raw materials.  Zero rated only if the sale of raw materials or packaging materials is made to an export-oriented enterprise whose export sales exceed 70% of actual annual production. 4. Export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987 and other special laws. 5. Sale of gold to BSP. – VAT exempt 6. SALE of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations.  It shall be used exclusively for international shipping or air transport operation. Items 2, 3, and 4 are now subject to 12% VAT under section 31 of RA10963 (TRAIN LAW) but only upon satisfaction of the following: 1. Successful establishment and implementation of an enhance refund system that grants refunds of creditable input tax within 90 days from the filing of the vat refund application with BIR.

2. All pending vat refund claims as of DECEMBER 31, 2017 shall be fully paid in cash by DECEMBER 31, 2019. b. Effectively Zero-Rated Sales  Sales to entities exempt under a special law or under international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate.  Example (International Agreements): 1. Sale of Goods to Asian Development Bank (ADB) 2. International Rice Research Institute (IRRI)

ZERO-RATED SALE OF SERVICES 1. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported.  Services are paid in acceptable foreign currency.  In accordance with the rules and regulations of the BSP. 2. Services performed by subcontractors and/or contractors in processing converting, or manufacturing goods for an enterprise whose export sales exceed 70% of total annual production. 3. Services other than those mentioned in item # 1 above. 4. Service rendered to persons or entities whose exemption under a special law or under international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent rate. 5. Services rendered to persons engaged in international shipping or international air transport operations, including leases of property for use thereof. 6. Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign country. 7. Sale of power or fuel generated through renewable sources of energy such as, but not limited to – biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels.

Sources of INPUT VAT      

Local Purchases Acquisition of Capital Goods Importation Presumptive input VAT Transitional input VAT Standard Input VAT

1. Local purchase of goods or services such as purchase or acquisition of:  Goods for sale  Goods for conversion into finish product (packaging material)

  

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 actually been paid  Services for which Vat has actually been paid 2. Capital goods refer to goods or properties with estimated useful life of greater than 1 year and which are treated as depreciable asset under the tax code, used directly or indirectly in the production or sale of taxable goods or services.

3. Importation  Vat on importation is imposed regardless of whether such importation is for personal or business use.  Vat (consumption tax) is paid directly by the importer.

IMPORTATION OF GOODS BY TAX EXEMPT PERSONS TO NON-EXEMPT PERSONS 

Imported goods in the Philippines by tax exempt persons which are subsequently sold, transferred or exchanged to non-exempt persons (shall be considered the importers) shall be liable for the VAT due on such importation. COMPUTATION OF VAT ON IMPORTATION

Total value for tariff and customs duties (as determined by the BOC) *

xxx

Add:  

Customs duties Other charges prior to release**

xxx xxx

Total Cost before Excise Tax x Excise Tax Rate Excise Tax

xxx xxx % xxx

--Total Cost before Excise Tax

xxx

Add: Excise Tax

xxx

Total Landed Cost

xxx

x Vat Rate VAT ON IMPORTATION

12% xxx

*If the custom duties are determined on the basis of Quantity or Volume of goods, landed cost should be the basis in determining VAT. **Should only refer to legitimate expenses prior to release from BOC such as: 

Insurance, Freight, Postage, Interest, Commission, Bank Charge, Brokerage, Wharfage, Arrastre, Stamps, Processing Free.

NOTE: The input vat on importation is computed separately from the input vat on transfer costs from BOC to the importer’s warehouse. 4. Presumptive Input Vat of 4% on Sale of Goods  Persons or firms engaged in the processing of sardines, mackerel, and milk, and in manufacturing refined sugar, cooking oil, and packed noodles based instant meals shall be allowed a presumptive input tax, creditable against output tax, equivalent to 4% of the gross value in money of their primary “agricultural products’’ which are used as inputs to their production.  Processing shall mean pasteurization, canning, and other activities.



Presumptive input VAT is applicable only to “agricultural” products used as inputs.

ENTITLED TO PRESUMPTIVE VAT 



Processing of: o Sardines o Mackerel o Milk Manufacturing of: o Refined sugar o Cooking oil o Packed noodle based instant meals

5. Transitional Input VAT  Person who becomes liable to VAT or any person who elects to be a VAT-registered person shall be allowed input tax on his beginning inventory of goods, materials, and supplies equivalent to 2% of the value of such inventory or the actual VAT paid on such goods, materials, and supplies whichever is higher, which shall be creditable against the output vat. TAXPAYERS WHO CAN AVAIL TRANSITIONAL INPUT VAT a. Taxpayers who become liable to VAT. b. Taxpayers who elect to be VAT-registered. NOTE: Goods from non-VAT registered suppliers are included in computing transitional input vat, but, on the other side, these are not included in computation of regular/actual input vat. 6. Standard Input VAT  The government or any of its political subdivisions, instrumentalities or agencies, including GOCCs shall, before making payment on account of each purchase of goods and/or services taxed at 12% VAT pursuant to Section 106 and 108 of the Tax Code, deduct and withhold a FINAL VAT due at the rate of 5% of the gross payment.  The buyer is the GOVERNMENT.  Selling price is basis in computing standard input vat. (SIV rate is 7%)  The difference between actual input vat and standard input vat is charged as loss or income. Carry-over of Excess Input VAT 



If input tax exceeds the output tax, it should be carried-over to the succeeding quarter/s. If input tax is attributable to zero-rated sales by VATregistered taxpayer, may at his option be refunded or applied for tax credit certificate.

Lease of Real Property 1. Lease of commercial units  Subject to 12% VAT unless gross annual receipt did not exceed 3M.  ADVANCE PAYMENT BY THE LESSEE is subject to VAT if the payment is applied to rentals such as prepaid rent,  Advance payment is not subject to VAT if the advance payment is not for rental but: o A loan to the lessor from the lessee o An option money for the property o A security deposit to insure the faithful performance of certain obligations of the lessee to the lessor. 2. Residential unit (discussed in VAT EXEMPT SALES “Q”)

Sale of Real Property 

It is either be in cash basis, installment basis, or deferred payment basis.

Deferred Payment Basis   

Initial payment of which in the year of sale exceeds 25% of gross selling price. It is treated as cash sale which makes the entire selling price taxable in the month of sale. Payment subsequent to initial payments shall no longer be subject to output vat.

Installment Basis 

Initial payment of which in the year of sale do not exceed 25% of gross selling price.

VAT EXEMPTION AND DISCOUNTS OF SENIOR CITIZENS AND PWDs   

 

Senior Citizen or Elderly – Refers to any Filipino citizen who is a resident of the Philippines, 60 years old and above. It may apply to senior citizen with “dual citizenship” status provided they prove their Filipino citizenship and have at least 6 months residency in the PH. Person with disability – shall refer to an individual suffering from restriction or different abilities, as a result of mental, physical or sensory impairment to perform an activity in a manner or within the range considered normal for human being. 20% discount is an operating expense not contra-sale account. Input VAT 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.

The following items sold to a senior citizen and PWDs are vat-exempt and will entitle the latter to a minimum discount of 20%. SOLD TO SENIOR CITIZENS 1. Medicines – Medicine and drug purchases including influenza and pneumococcal vaccines and such other essential medical supplies, accessories and equipment to be determined by DOH. 2. Medical and Dental Fees – Medical and dental services, diagnostic, and laboratory fees in all private hospitals, medical facilities, outpatient clinics, and home health care services in accordance with the rules and regulations issued by the DOH.

3. Public Transport Fares – On actual fare for land transportation travel in PUBs, PUVs, taxis, AUVs, shuttle service and public railways including LRTs, MRTs, and PNR.

SOLD TO PWDs 1. Medicines – on the purchase of medicines in all drugstores.

2. Medical and Dental Fees (Gov’t) – Medical and dental services including diagnostic and laboratory fees such as but not limited to xrays, computerized tomography scans and blood tests, and professional fees of attending doctors in all government facilities, subject to the guidelines to be issued by the DOH. Medical and Dental Fees (Private) – On medical and dental services including diagnostic and laboratory fees, and professional fees of attending doctors in all private hospitals and medical facilities, in accordance with the rules and regulations to be issued by the DOH, in coordination with PhilHealth. 3. Public Transport Fares – On actual fare for land transportation travel in PUBs, PUVs, taxis, AUVs, shuttle service and public railways including LRTs, MRTs, and PNR.

4. Air and Sea Transport Fares – In actual fare for domestic air transport and sea shipping vessels and the like. 5. Hotels, Restaurants, and Recreation Centers – On the utilizations of services in the hotels and similar lodging establishments, restaurants, and recreation centers. 6. Theaters, Cinema Houses, and Amusement Places – On admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals and other similar places of culture, and leisure and amusement. 7. Funeral and Burial Services – On funeral and burial services of the death of senior citizens. 8. Doctor’s Fees – Professional fees of attending physicians in all private hospitals, medical facilities, outpatient clinics, and home health care services. 9. Health Workers Fees – Professional fees of licensed health workers providing home health care services in all private hospitals, medical facilities, outpatient clinics, and home health care services.

4. Air and Sea Transport Fares – In actual fare for domestic air transport and sea shipping vessels and the like. 5. Hotels, Restaurants, and Recreation Centers – On the utilizations of services in the hotels and similar lodging establishments, restaurants, and recreation centers. 6. Theaters, Cinema Houses, and Amusement Places – On admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals and other similar places of culture, and leisure and amusement. 7. Funeral and Burial Services – On funeral and burial services of the death of senior citizens....