ERG 405 VAT Problems Answers final PDF

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PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCERM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST. SAMPALOC, MANILA TEL # (02) 244 6342TAXATION E. GARCIA/J. CO405-VAT Exercises and ProblemsExercisesExercie A Instruction: Place R if the person or entity is required to register as VAT. O...

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P HILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST. SAMPALOC, MANILA TEL # (02) 244 6342

TAXATION

E.J. GARCIA/J. CO

405-VAT Exercises and Problems Exercises Exercie A Instruction: Place R if the person or entity is required to register as VAT. Otherise place N. 1. VAT-exempt person under Sec 109 who did not register as VAT taxpayer. 2 Individual engaged in business where the gross sales or receipt do not exceed P100,000 during the 12 month period. 3 Non-stock, non profit rganization whose gross sales or receipts do not exceed P1,919,500. 4 Multipurpose Cooperatives. 5 Radio and TV broadcasting whose annual sales exceeded P10,000,000. 6 PEZA and other ecozones registered enterprises enjoying preferential rate of 5% in lieu of all taxes. 7 SBMA and other freeport zone registered enterprise enjoying preferential rate of 5% in lieu of all taxes.

N N N N R N N

Exercie B Instruction: Place Z if the transaction is a subject to a zero percent VAT. 1 Sale of precious metal other than gold to the BSP. 2 Sale to export processing zones. 3 Sale of goods or property to SBMA, PEZA, ADB and IRRI 4 Sale of raw material to export oriented BOI-registered enterprise whose export sale exceed 70%. 5 Sale to bonded manufacturing warehouse of export oriented manufacturers. 6 Sale to diplomatic misssions and other agencies/instrumentalities granted tax immunities of locally manufactured or assembled or repacked products Paid in Philippine peso. 7 Sale of fuel to an international shipping which was used in transporting goods from Manila to Japan. 8 Actual exports

Z Z Z Z Z Z Z

Exercie C Instruction:Place DS if the transaction will result in a deemed sale transaction subject to VAT on the goods or property which are originally intended for or for use in the ordinary course of trade or business as of the occurence of the following: 1 Change of control of a corporation by the acquisition of the controlling interest of such corporation by another stockholder. 2 Change in trade name of the business. 3 Merger or consolidation of corporations 4 Change of business activity from VAT taxable status to VAT-exempt status. DS 5 Approval of a request for cancellation of registration due to reversion to exempt status. DS 6 A sole proprietorship incorporates. DS 7 A sole proprietor sells his entire business. DS 8 Dissolution of a partnership and creation of a new partnership which takes over the business. DS Exercise D Instruction: Place E if the transaction is VAT exempt. 1 Sale of meat, fish, vegetables and fruits that have undergone the simple process of preparation or preservation such as freezing, drying, salting, broiling, roasting, smoking, stripping including advanced technological means of packing (shrink wrapping in plastics, vacuum packing, tetra-pack and other similar packaging methods). 2 Importation of resettlers of personal and household effects. 3 Growing of poultry, livestock and marine food products into marketable products. 4 Laboratory services and medicines provided by the hospital to the patient. 5 Sale of drugs and medicine by a pharmacy operating in a hospital. 6 Seminars, in service trainings, review classes conducted by the University of the Philippines. 7 Sale of medicine to a senior citizen, person with disability and to students 8 Sale of four adjacent lot with a contract price of P1,000,000 per lot. 9 Sale of parking lot amounting to P900,000. 10 Sale of e-books, e-journals, CDs and software. 11 Transport of goods and cargo by an international carrier. 12 Honorarium given to a director of a company who is at the same time is also a manager of the production department. 13 Services rendered by a regional area headquarters. 14 Importation by non-agricultural, non–electric, and non-credit cooperatives. Exercise E (Adapted) Instruction: Determine the VAT-subject and VAT-exempt amounts: Selling price: Condominium unit Parking lot VAT-subject Vat-exempt

E E E E

E E E E

A P3,000,000 1, 500,000

B P3,500,000 800,000

C P5,000,000 900,000

P 1,500,000 P 3,000,000

P4,300,000

P5,900,000

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PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE Exercise F Instruction: Determine which is VAT-subject and VAT-exempt from sale of adjacent lots A to F. Lot A Lot B Lot C Lot D Value of the lot P500,000 P700,000 P800,000 P800,000 Sold to Buyer A Buyer A Buyer A Buyer 1 VAT-subject P500,000 P700,000 P800,000 VAT-exempt P800,000

Lot E P1,900,000 Buyer 2 P1,900,000

Lot F P2,000,000 Buyer 3 P2,000,000 -

Sale of adjacent lots A,B and C to one buyer only (buyer A)will be subject to VAT if the aggregate price of lots A,B, and C exceeds P1,919,500

Exercise G Non-VAT Registered Taxpayer Instruction: Determine the VAT-subject and VAT-exempt amounts from the rentals of residential units /commercial units. Residential Commercial Unit Unit Case A-Monthly rental per unit (10 residential units) / (10 commercial units) P 10,000 P 10,000 Annual gross rentals (10,000 x 10 units x12 months) P1,200,000 P1,200,000 Other receipts P 500,000 P,500,000 VAT-subject VAT-exempt P1,700,000 P1,700,000 Case B -Monthly rental per unit (10 residential units) / (10 commercial units) Annual gross rentals (12,800 x 10 units x12 months) Other receipts VAT-subject VAT-exempt

P 12,800 P1,536,000 P1,000,000 P2,536,000

P 12,800 P1,536,000 P1,000,000 P2,536,000 -

Case C -Monthly rental per unit (10 residential units) / (10 commercial units) Annual gross rentals (15,000 x 10 units x12 months) Other receipts VAT-subject VAT-exempt

P 15,000 P1,800,000 P 100,000 P1,900,000

P 15,000 P1,800,000 P 100,000

Case D -Monthly rental per unit (10 residential units) / (10 commercial units) Annual gross rentals (15,000 x 10 units x12 months) Other receipts VAT-subject VAT-exempt

P 15,000 P1,800,000 P2,500,000 P4,300,000 -

P 15,000 P1,800,000 P2,500,000 P4,300,000 -

P1,900,000

Non-VAT Registered Taxpayer Residential Units:  If the monthly rental is P12,800 and below, the rental is VAT-exempt and also the rental will not be included in the computation of the aggregate receipts.  If aggregate receipts (except monthly rentals of P12,800 and below per unit) are P1,919,500 and below, the aggregate receipts are VAT-exempt.  If aggregate receipts (except monthly rentals of P12,800 and below per unit) are more than P1,919,500, the aggregate receipts (except the monthly rentals of P12,800 and below per unit) are subject to VAT. CommercialUnits:  

Regardless of the monthly rental, All rentals and other receipt are subject to VAT once the aggregate rentals and other receipts exceed P1,919,500. Regardless of the monthly rental, All rentals and other receipt are VAT-exempt if the aggregate rentals and other receipts did not exceed P1,919,500.

VAT Registered Taxpayer Instruction: Determine the VAT-subject and VAT-exempt amounts from the rentals of residential units /commercial units. Residential Commercial Unit Unit Case A-Monthly rental per unit (10 residential units) / (10 commercial units) P 10,000 P 10,000 Annual gross rentals (10,000 x 10 units x12 months) P1,200,000 P1,200,000 Other receipts P,500,000 P,500,000 VAT-subject P,500,000 P1,700,000 VAT-exempt P1,200,000 Case B -Monthly rental per unit (10 residential units) / (10 commercial units) Annual gross rentals (12,800 x 10 units x12 months) Other receipts VAT-subject VAT-exempt

P 12,800 P1,536,000 P1,000,000 P1,000,000 P1,536,000

P 12,800 P1,536,000 P1,000,000 P2,536,000 -

Case C -Monthly rental per unit (10 residential units) / (10 commercial units)

P

P

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15,000

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15,000

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PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE Annual gross rentals (15,000 x 10 units x12 months) Other receipts VAT-subject VAT-exempt Case D -Monthly rental per unit (10 residential units) / (10 commercial units) Annual gross rentals (15,000 x 10 units x12 months) Other receipts VAT-subject VAT-exempt

P1,800,000 P 100,000 P1,900,000

P1,800,000 P 100,000 P1,900,000

P 15,000 P1,800,000 P2,500,000 P4,300,000 -

P 15,000 P1,800,000 P2,500,000 P4,300,000 -

VAT Registered Taxpayer Residential Units:  If the monthly rental is P12,800 and below, the monthly rental is VAT-exempt and also the rental will not be included in the computation of the aggregate receipts.  If aggregate receipts (except monthly rentals of P12,800 and below per unit) are P1,919,500 and below, the aggregate receipts are subject to VAT.  If aggregate receipts (except monthly rentals of P12,800 and below per unit) are more than P1,919,500, the aggregate receipts are subject to VAT. CommercialUnits: 

Regardless of the monthly rental, All rentals and other receipt are subject to VAT.

Exercise H (Adapted) Instruction: Determine the VAT-subject and VAT-exempt amounts: Husband P1,919,500 P1,919,500

Wife P2,000,000 P2,000,000 -

Case B –Gross receipts, practice of profession Gross receipts, massage parlor Gross sales, trading business Gross receipts, gym business Gross sales, RTW and bags business Gross rentals, monthly rental for leased units,(10 Units) P10,000 Gross sales, pineapple, coconut and vegetables (farm produce) Gross sales, Milk fish from own fishpond, marinated and vacuum packed. Gross receipts, poultry contracr grower services Total VAT-subject VAT-exempt

P1,000,000

P 1,200,000

Case C- Gross receipts practice of profession Salaries Tuition fees from family owned vocational school registered under TESDA Sale of own published books Total VAT-subject VAT-exempt

P1,000,000 2,000,000 5,000,000 1,000,000 9,000,000

1,000,000 500,000 5,000,000

9,000,000

6,500,000

Case A – Gross sales, trading business VAT-subject VAT-exempt

1,000,000 1,500,000

1,500,000

1,200,000 300,000

P5,000,000 P3,500,000 P1,500,000

1,000,000 1,300,000 P5,000,000 P3,700,000 P1,300,000

6,500,000

Exercises I (Adapted) Instruction: Determine whether the input tax on the following acquisitions during a particular month shall be amortized or credited in full (indicate the amortization period if input tax is amortized. Jan 9 Purchase of 1 unit of generator for review school business to avoid interuption of classes, P500,000, VAT exclusive, estimated life 5 years Credit Feb 2 Purchase of 2 copying machines at P240,000 per unit , VAT exclusive, estimated life 3 years and a sorting machine at P448,000 inclusive of VAT. Credit Mar 1 Purchase of 20 units of computer equipment at P20,000 and 1 unit of generator at P500,000. All prices are VAT exclusive. Estimated life of computers, 3 years; estimated life of generator 5 years. Amortize 36 /60mos. Mar 3 Purchase of 5 units of steel filing cabinets, P30,000 per unit, exclusive of VAT.Estimated life 10years Amortize 36./60 mos Apr 1 Purchase of 1 truck for trucking business use, P2,400,000 . Amortize 60 mos May 2 1,000 km. maintenance. Expenses on depreciable vehicle for land transport, P33,600 VAT Credit inclusive Jun 5 Puchase of car for business use, P1,000,000 exclusive of VAT. Credit

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PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE Jul 6 Aug 11 Sept 1 Oct 1 Nov 3

1,000 km. maintenance. Expenses on depreciable vehicle for land transport, P11,200 VAT inclusive. Purchase of 1 GMC pickup truck for VP operation use in visiting the factories of the business, P4,000,000 exclusive of VAT. 1,000 km. maintenance. Expenses on depreciable vehicle for land transport, P44,800 VAT inclusive Expenses incurred for the maintenance of depreciable yachts used in the main line of business of transport operator, P112,000 (VAT inclusive). Purchase of 2 buses by a bus operator, at P5,000,000 per bus (VAT exclusive). Estimated life 6 years

PareX Credit Not allowed Not allowed Credit Amortize

60 mos

Exercises J Instruction: Place Y if following person/entity is allowed to claim presumptive input tax otherwise place N. 1 Purchase of tomatoes, onions, garlic, pepper and other agricultural products used as A. Person who processes ingridients in processing sardines. sardines 2 Purchase of fresh sardinesto be used in the processing of sardines 3 Purchase of cans and labels from a VAT-registered supplier. 4 Purchase of salt B. Person who process 1 Purchase of tfresh olives. canned vegetables and 2 Purchase of pineapple fruits 3 Purchase of sugar. C. Manufacturer of cooking oil 1 Purchase of copra. 2 Purchase of pet bottles. 3 Purchase of labels 4 Purchase of boxes

Exercise K (Adapted) Instruction: Place Y if following person/entity is allowed to claim transitional input tax otherwise place N. 1 Sale of goods purchased by a mechandising business engaged in VAT-subject transactions and whose annual gross sales do not exceed P1,000,000. 2 Services performed by a CPA whose gross annual receipts do not exceed P1,000,000 but voluntarily registers under the VAT system. Before its registration under the VAT system, materials and supplies used in the services were purchased from a VAT registered supplier. 3 Sale of goods purchased by a merchandising business engaged in VAT-subject transactions. Its annual gross sales do not exceed the P1,919,500 and did not register under the VAT system. 4 Sale of goods purchased by a merchandising business engaged in VAT-subject transactions. Its is gross annual sales exceed the VAT threshold amount during the year and decides to register under the VAT system. Before its registration under the VAT system, mechandise sold were purchased from a not VAT-registered supplier. 5 Sale of goods purchased by a merchandising business, VAT-registerd and engaged in VAT-subject transactions. Its is gross annual sales does not exceed the VAT threshold amount during the year. 4 Sale of goods purchased by a merchandising business who is engaged in VAT-subject transactions, his gross annual receipts exceed the VAT threshold amount during the year but refuses to register under the VAT system 5 Sale of goods purchased by a merchandising business Taxpayer is engaged in VAT-subject transactions who starts a business which he registers under the VAT system

Y N N N N N Y N N N

N Y

N N N N N

Exercise L Instruction: Determine the VAT on the following transactions made by a VAT registered taxpayer during the month of April. April 2 Sale of construction materials, net of VAT, P220,000 (P220,000 X .12) P26,400 5 Receipt of fee from construction contracts , gross of VAT, P112,000 P12,000 7 Recorded its sales of materials in its sales journal amouinting to, P200,000 P24,000 19 Sale of hollow blocks, Selling price including erroneous VAT, P110,000 (P110,000 X .12/1.12) P11,785.71 23 Sale of construction materials, exclusive of VAT, P200,000 P24,000 25 Sale of construction materials, inclusive of VAT, P224,000 P24,000

Problems Output Tax 1. ABC Corporation sold a parcel of land used in business for P1,000,000 to XYZ Company on July 2, 2016, plus the output VAT, with a monthly installment payment of P10,000.00, plus the output VAT. Monthly installments are paid at the end of each month. The zonal value of the subject property at the time of sale amounted to P1,500,000.00. Compute for the output tax due on the installment payment.

Actual collection (exclusive of the VAT) Agreed consideration (exclusive of the VAT) P10,000. P1,000,000

x

P1,500,000.00

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x =

Zonal value x 12% P15,000.00

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PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE P15,000.00

x

12%

=

P1,800.00

2. At the time of retirement, Reysapar had 1,000 pieces of merchandise which was deemed sold at a value of P20,000.00 with an output tax of P2,400.00. After retirement, Reysapar sold to “Ace”, 500 pieces for P12,000.00. a. How much should Reysapar indicate as VAT previously paid n the contract of sale or invoice? b. Is Reysapar required to state the sales invoice number wherein the output tax on “deemed sale” was imposed and the corresponding tax paid on the 500 pieces in the new sales invoice? a. In the contract of sale or invoice, “Reysipart” should state the sales invoice number wherein the output tax on “deemed sale” was imposed and the corresponding tax paid on the 500 pieces is P1,200.00, which is included in the P12,000.00, or he should indi cate it separately as follows: Gross selling price VAT previously paid on “deemed sale” Total

P10,800.00 1,200.00 P12,000.00

b. YES

3. Abel Corporation is a merchandising concern and has an inventory of goods for sale amounting to P 1,000,000. Nel Corporati on, a real estate developer, exchanged its real estate properties for the shares of stocks of Abel Corporation resulting to the acquisition of corporate control. a. Is Abel Corporation subject to VAT for the transfer of its shares of stocks to Nel Corporation? b. Is Nel Corporation subject to VAT for the transfer of real estate to Abel Corporation? c. Assuming Abel Corporation is also a real estate developer, is the corporation subject to VAT for the transfer of its shares of stocks to Nel Corporation? a) NO. The inventory of goods owned by Abel Corporation (Php 1 million worth) is not subject to output tax despite the change in corporate control because the same corporation still owns them. This is in recognition of the separate and distinct personality of the corporation from its stockholders. b) YES. The exchange of real estate properties held for sale or for lease, for shares of stocks, whether resulting to corporate control or not, i subject to VAT, subject to exceptions provided under Section 4.106-3 hereof. On the other hand, if the transferee of the transferred real property by a real estate dealer is another real estate dealer, in an exchange where the transferor gains control of the transferee corporation, no output VAT is imposable on the said transfer. c) NO. If the transferee of the transferred real property by a real estate dealer is another real estate dealer, in an exchange where the transferor gains control of the transferee-corporation, no output VAT is imposable on the said transfer. 4. The following data are taken from sale of a real estate dealer on January 2, 2015: Gross selling price Assessed Value Zonal Value Downpament(January 5,2015): January 31, 2015 January 31, 2016 January 31, 2017

P 10,000,000 15,000,000 14,200,000 1,000,000 1,000,000 2,000,000 2,000,000

a. How much is the output tax for January 31, 2015, January 31, 2016 and January 31, 2017 using 12% VAT rate?

1/31/15 P360,000 1/31/16 P P360,000 1/31/17 P P360,000

(P15,000,000x.12) x (P1,000,000+P1,000,000/P10,000,000) (P15,000,000x.12) x (P2,000,000/P10,000,000) (P15,000,000x.12) x (P2,000,000/P10,000,000)

b. Assuming the downpayment is P2,000,000, how much is the output tax for January 31, 2015, January 31, 2016 and January 31, 2017 using 12% VAT rate? P 1,800,000 (P15,000,000x.12)

1/31/15 P 1,800,000 1/31/16 Zero 1/31/17 Zero

(P15,000,000x.12)

c. Assuming the seller is not a real estate dealer and the real property sold is used in business, how much is the output tax for January 31, 2015, January 31, 2016 and January 31, 2017 using 12% VAT rate?

1/31/15 P 360,000 (P15,000,000x.12) x(P1,000,000+P1,000,000/P10,000,000) 1/31/16 P P360,000 (P15,000,000x.12) x(P2,000,000/P10,000,000)

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