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Questions and Answers
What are the two main business taxes in the Philippines?
Which of the following transactions is NOT specifically listed as VAT-exempt under the tax code?
What is the key factor in determining the applicable business tax for a transaction?
What is the tax basis for both the value added tax (VAT) and the other percentage tax (OPT)?
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Which of the following is NOT a classification of business transactions mentioned in the text?
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What is the key difficulty in determining the applicable business tax for a transaction?
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If a business transaction is listed as VAT exempt, what tax is it subject to?
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If a transaction is listed as subject to OPT, what does this mean?
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For a VAT-registered taxpayer, which transactions are subject to VAT?
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What is the condition for VATable transactions to be subject to VAT for a non VAT-registered taxpayer?
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What is the standard VAT rate applied to most transactions subject to VAT?
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How are sales to the government taxed under the VAT system?
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Study Notes
Business Taxes
- There are two main business taxes: Value Added Tax (VAT) and Other Percentage Tax (OPT).
- Both taxes impose a fixed rate, but the rate depends on the type of transaction.
- The tax basis is the gross selling price or gross receipts.
Classifications of Business Taxes
- Specifically listed VAT-Exempt transactions (Sec 109(A) to Sec 109(BB) NIRC)
- Specifically listed transactions subject to OPT (Sec 117 to Sec 127 NIRC)
- Transactions subject to 3% OPT for not reaching the 3,000,000 threshold (Sec 109(CC) NIRC)
- VAT transactions in general (Sec 106 to Sec 108, excluding zero-rated VAT below)
- Zero-rated VAT transactions (Sec 106(A)(2) and Sec 108(B) NIRC, other special laws)
- VAT Sales to Government (Sec 114(C))
Determining the Applicable Tax
- Determination of applicable tax is on a transaction-by-transaction basis.
- A business may have some transactions subject to VAT, some subject to OPT, and some that are VAT exempt.
- If a transaction is VAT exempt, it is never subject to either OPT or VAT (except in certain conditions).
- If a transaction is listed as subject to OPT, the particular rate applicable to that transaction is used.
- If the taxpayer is VAT-registered, transactions (other than VAT-exempt or specifically listed as OPT) are subject to VAT.
- If the taxpayer is not VAT-registered, and the transactions are not VAT-exempt or specifically listed as OPT, the transaction is subject to a 1% OPT (or 3% after a certain period).
Nature of OPT
- A percentage tax is a tax imposed by a certain percentage on the tax basis.
- In the case of Other Percentage Taxes, it is imposed on the gross selling price or on the gross receipts.
- Unlike VAT, there is no need for any added value to the product or service.
OPT Transactions
- Transactions specifically listed as being subject to OPT under Sec 117 to Sec 127 NIRC.
- Each transaction listed has a separate rate to be used.
- Examples include domestic carriers, keepers of garages, and international carriers transporting cargo to another country.
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Description
Test your knowledge on Business Taxes with a focus on Value Added Tax (VAT) and Other Percentage Tax (OPT). This quiz covers transactions, tax rates, and tax basis related to business taxation.
