Business Taxation: Value Added Tax (VAT) in the Philippines
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Questions and Answers

What is the primary characteristic of Value-Added Tax (VAT)?

  • It is a progressive tax.
  • It is a direct tax.
  • It is an indirect tax. (correct)
  • It is a regressive tax.

    • What is the purpose of the tax credit method in VAT?

  • To increase the input tax of the seller
  • To reduce the output tax of the buyer
  • To allow the buyer to credit the input tax against the output tax (correct)
  • To exempt the seller from paying VAT

    • What is the term for the VAT due or paid on the taxable sale, barter, or exchange of goods, properties, or services by a seller or transferor?

  • Value-Added Tax
  • Output Tax (correct)
  • Input Tax
  • Sales Tax

    • How is the VAT rate computed?

    <p>Total Amount ÷ 1.12 x 12%</p> Signup and view all the answers

    What is the principle behind the VAT exemption for export sales of goods?

    <p>Destination Principle</p> Signup and view all the answers

    What is the VAT rate imposed on imports of goods?

    <p>12%</p> Signup and view all the answers

    What is the term for the VAT due from or paid by a VAT-registered person on importation of taxable goods?

    <p>Input Tax</p> Signup and view all the answers

    What is the advantage of the tax-inclusive method of VAT computation?

    <p>It makes the VAT computation simpler</p> Signup and view all the answers

    What is the minimum annual gross sales and/or receipts required for a person to be liable for VAT?

    <p>Php3,000,000.00</p> Signup and view all the answers

    What is the VAT rate on the sale of goods or properties?

    <p>12%</p> Signup and view all the answers

    What is meant by the phrase 'in the course of his trade or business'?

    <p>Regular conduct or pursuit of a commercial or economic activity</p> Signup and view all the answers

    When is the sale of a property subject to VAT?

    <p>All of the above</p> Signup and view all the answers

    What is the situs or place of taxation of VAT?

    <p>Place where the principal office of the business is located</p> Signup and view all the answers

    Who are persons liable for VAT?

    <p>Any person who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties, or renders services</p> Signup and view all the answers

    What is the value that is used as the base of VAT on sale of properties?

    <p>Selling Price (Gross)</p> Signup and view all the answers

    Which of the following transactions is NOT subject to VAT?

    <p>Gift of goods or properties</p> Signup and view all the answers

    What is the VAT payable on the sale of a mansion with a selling price of Php13,000,000.00?

    <p>Php1,392,857.14</p> Signup and view all the answers

    What is the term used to describe something necessary, appertaining to or depending upon another, which is termed the principal?

    <p>Incidental</p> Signup and view all the answers

    If a lessor has multiple residential units for lease, with some units having a monthly rental fee not exceeding Php15,000.00 and others exceeding Php15,000.00, what is the tax liability for the units not exceeding Php15,000.00?

    <p>Exempt from VAT and 3% percentage tax</p> Signup and view all the answers

    What is the tax liability for the gross receipts from rentals exceeding Php15,000.00 per unit, if the aggregate annual gross receipts from said units exceed Php3,000,000.00?

    <p>Subject to VAT only</p> Signup and view all the answers

    If a condominium unit is sold for a total contract price of Php16,000,000.00, what is the VAT (inclusive of the price or value) of the transaction?

    <p>Php1,714,285.71</p> Signup and view all the answers

    What is the zonal value of the property per sqm?

    <p>Php300,000.00</p> Signup and view all the answers

    What is the value of the property based on the Assessor's valuation?

    <p>Php3,000,000.00</p> Signup and view all the answers

    What is the condition for a transaction to be subject to VAT?

    <p>The aggregate annual gross receipts from said units exceed Php3,000,000.00</p> Signup and view all the answers

    What is the requisite for the taxability of real properties in the Philippines?

    <p>All of the above requisites</p> Signup and view all the answers

    What is the tax rate on the sale or exchange of services, including the use or lease of properties?

    <p>12% of the gross receipts</p> Signup and view all the answers

    What is the tax base of the VAT on sale of service and use or lease of properties?

    <p>The 12% is based on the gross receipts derived from the sale or exchange of services</p> Signup and view all the answers

    What is considered a sale subject to VAT even if there is no actual sale?

    <p>Both A and D</p> Signup and view all the answers

    What is exempt from VAT?

    <p>The sale of real properties that does not meet the requisites for taxability</p> Signup and view all the answers

    What is the output tax based on in cases where there is no actual sale?

    <p>The market value of the properties deemed sold as of the time of the occurrence of the transaction</p> Signup and view all the answers

    What is subject to VAT when leased or used in the Philippines?

    <p>Both real and personal properties</p> Signup and view all the answers

    Is the deposit subject to VAT?

    <p>It depends on the type of deposit</p> Signup and view all the answers

    What is the VAT rate on the sale of services performed in the Philippines?

    <p>12% of the gross receipts</p> Signup and view all the answers

    What is included in the sale or exchange of services?

    <p>All kinds of services performed in the Philippines for a fee, remuneration or consideration</p> Signup and view all the answers

    What is the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty?

    <p>Gross receipts</p> Signup and view all the answers

    A sale is considered an installment sale if the initial payments in the year of sale do not exceed what percentage of the gross selling price?

    <p>25%</p> Signup and view all the answers

    What is the deadline for filing the monthly VAT return?

    <p>20th day of the month following the close of the quarter</p> Signup and view all the answers

    What is the VAT threshold for the sale of house and lot/other dwellings beginning January 01, 2021? ( ALSO WEIRD IN THE PDF.)

    <p>Php2,000,000.00</p> Signup and view all the answers

    What is exempt from the payment of VAT?

    <p>Sale of real properties not primarily held for sale to customers or held for lease</p> Signup and view all the answers

    What is the deadline for filing the quarterly VAT return?

    <p>25th day of the month following the last month of the quarter</p> Signup and view all the answers

    What is the monthly rent threshold for the lease of residential units to be exempt from VAT?

    <p>Php15,000.00</p> Signup and view all the answers

    What is the frequency of adjusting the VAT threshold for the sale of real properties?

    <p>Every three years</p> Signup and view all the answers

    What is the basis for determining the initial payments in an installment sale?

    <p>Downpayment plus all payments actually or constructively received during the year</p> Signup and view all the answers

    What is the tax treatment of a sale if the initial payments in the year of sale exceed 25% of the gross selling price?

    <p>It is treated as a cash sale</p> Signup and view all the answers

    Study Notes

    Value Added Tax (VAT)

    • A tax on consumption levied on the sale, barter, exchange, or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines.
    • Characteristics:
      • Indirect tax
      • Tax on value added of a taxpayer
      • Transparent form of sales tax
      • Collected through the tax credit method
      • Adopts the "tax inclusive method"

    Tax Credit Method

    • Also known as invoice method
    • Refers to the manner by which the input tax shifted by the seller to the buyer is credited against the buyer's output taxes when he in turn sells the taxable goods, properties, or services

    Output Tax and Input Tax

    • Output Tax: refers to the VAT due or paid on the taxable sale, barter, or exchange of goods, properties, or services by a seller or transferor
    • Input Tax: refers to the VAT due from or paid by a VAT-registered person on importation of taxable goods, or on local purchase of taxable goods, properties, or services, including lease or use of properties, in the course of his trade or business

    Computation of VAT

    • Total Amount ÷ 1.12 x 12% = VAT

    Destination Principle

    • Also known as cross-border doctrine
    • Means that the destination of the goods determines taxation or exemption from tax
    • Example: Export sales of goods are subject to zero percent (0%) rate, while imports of goods are subject to 12% VAT

    Elements of a VATable Transaction

    • There must be a sale, barter, exchange, or lease (SBEL) in the Philippines
    • The sale, barter, exchange, or lease must be of taxable goods, properties, or services
    • The sale must be made by a taxable person in the course of his trade or business or furtherance of his profession

    VAT Threshold

    • The sale or lease of goods or properties or the performance of services is with an annual gross sales and/or receipts of more than Php3,000,000.00

    Persons Liable

    • Any person who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to VAT

    "In the Course of his Trade or Business"

    • Means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity

    VAT on Sale of Properties

    • The properties subject to VAT:
      • Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business
    • Tax base of VAT on sale of properties:
      • 12% based on the selling price (gross) in the sales contract

    VAT on Sale of Service and Use or Lease of Properties

    • The tax base of VAT on sale of service and use or lease of properties:
      • 12% based on the gross receipts derived from the sale or exchange of services, including the use or lease of properties
    • Examples of services subject to VAT:
      • Services of real estate brokers, appraisers, consultants, doctors, etc.

    Situs (Place of Taxation) of VAT

    • Place where the principal office of the business is located

    Requisites for the Taxability (VAT) of Real Properties

    • The seller executes a deed of sale, including dacion en pago, barter or exchange, assignment, transfer or conveyance or merely contract to sell involving real property
    • The real property is located within the Philippines
    • The seller or transferor is engaged in the real estate business either as a real estate dealer, developer, or lessor
    • The real property is held primarily for sale or for lease in the ordinary course of his trade or business
    • The sale is not exempt from VAT under any law

    Transactions Deemed Sale

    • When there is no actual sale
    • Examples:
      • Transfer, use or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business
      • Retirement from or cessation of business with respect to inventories on hand

    Exemptions from VAT

    • Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business
    • Sale of real properties utilized for socialized housing
    • House and lot/other dwellings (condominium) valued at less than Php2,000,000.00
    • Lease of residential units with a monthly rent of less than Php15,000.00
    • Services rendered by individuals pursuant to an employer-employee relationship
    • Condominium dues and association dues
    • Sale or lease of goods or properties or the performance of services with an annual gross sales and/or receipts of less than Php3,000,000.00

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    Description

    This quiz covers the basics of Value Added Tax (VAT) in the Philippines, including its characteristics and application.

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