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Questions and Answers
What types of companies are exempt from percentage tax?
What types of companies are exempt from percentage tax?
Which of the following is considered a deemed sale under the given text?
Which of the following is considered a deemed sale under the given text?
Under what circumstances would the supply of services by a nonresident person be included in the definition of 'sale or exchange of services'?
Under what circumstances would the supply of services by a nonresident person be included in the definition of 'sale or exchange of services'?
Which of the following is NOT considered within the scope of 'sale or exchange of services'?
Which of the following is NOT considered within the scope of 'sale or exchange of services'?
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In the context of the provided text, what can be categorized as a supply that is ancillary and subsidiary to another service?
In the context of the provided text, what can be categorized as a supply that is ancillary and subsidiary to another service?
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When does a transaction involving the use of copyright belong to 'sale or exchange of services'?
When does a transaction involving the use of copyright belong to 'sale or exchange of services'?
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What kind of transfers are described as 'onerous' in the text?
What kind of transfers are described as 'onerous' in the text?
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Which type of onerous transfers are subject to capital gains tax?
Which type of onerous transfers are subject to capital gains tax?
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According to Section 105 of the NIRC, what is defined as 'in the course of trade or business'?
According to Section 105 of the NIRC, what is defined as 'in the course of trade or business'?
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Which type of tax may be shifted to the buyer, transferee, or lessee of goods according to the NIRC?
Which type of tax may be shifted to the buyer, transferee, or lessee of goods according to the NIRC?
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Who is presumed to be doing business on a going concern basis according to the text?
Who is presumed to be doing business on a going concern basis according to the text?
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Which of the following types of sales can be considered zero-rated according to the text?
Which of the following types of sales can be considered zero-rated according to the text?
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What type of transactions are deemed sale under the NIRC and are subject to VAT?
What type of transactions are deemed sale under the NIRC and are subject to VAT?
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When does consignment of goods become a deemed sale if an actual sale is not made?
When does consignment of goods become a deemed sale if an actual sale is not made?
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In what circumstance is there a change in ownership of a business according to the NIRC?
In what circumstance is there a change in ownership of a business according to the NIRC?
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What happens to inventories of taxable goods upon retirement or cessation of business?
What happens to inventories of taxable goods upon retirement or cessation of business?
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Under what circumstance does VAT apply to goods disposed of or existing as of a certain date?
Under what circumstance does VAT apply to goods disposed of or existing as of a certain date?
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Which of the following transactions would NOT be considered a deemed sale under the NIRC?
Which of the following transactions would NOT be considered a deemed sale under the NIRC?
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Study Notes
Exemptions from Percentage Tax
- Certain types of companies may be exempt from percentage tax including those engaged in agriculture, fishery, and forestry.
- Non-stock, non-profit organizations are also typically exempt from this tax.
Deemed Sale
- A deemed sale occurs when property is transferred without consideration and considered as a sale under tax law.
Nonresident Services Inclusion
- Supply of services by a nonresident is included in 'sale or exchange of services' if the service is utilized in the Philippines or if the nonresident has a presence in the country.
Exclusions from Sale/Exchange of Services
- Certain activities such as purely personal services or non-compensated volunteer work are not considered 'sale or exchange of services'.
Ancillary and Subsidiary Supplies
- Supplies that support or are performed alongside another service, like maintenance for a primary service, are categorized as ancillary and subsidiary.
Copyright Transactions
- A transaction involving the use of copyright is considered 'sale or exchange of services' when the rights are transferred for a fee or consideration.
Onerous Transfers
- Onerous transfers refer to transactions where property is exchanged for price paid, typically involving contracts that involve costs or consideration.
Capital Gains Tax on Onerous Transfers
- Transfers of capital assets such as real property are considered onerous and subject to capital gains tax.
Trade or Business Definition
- 'In the course of trade or business' as per Section 105 of the NIRC encompasses activities carried out with the intent to earn income or profit.
Tax Shifting
- Value-Added Tax (VAT) may be shifted to the buyer, transferee, or lessee of goods according to the NIRC provisions.
Presumption of Business Continuation
- A taxpayer conducting as a regular business is presumed to be doing business on a going concern basis unless proven otherwise.
Zero-Rated Sales Types
- Certain export transactions, sales to registered export enterprises, or sales of goods and services to foreign entities may qualify as zero-rated sales.
Deemed Sale Transactions Under NIRC
- Transactions that fall under the NIRC definition of deemed sale include transactions made without actual payment, such as consignment and bartering scenarios.
Consignment Goods Deemed Sale
- Goods on consignment are considered a deemed sale when they are not sold within a specific period or when the terms of consignment imply a transfer of ownership.
Business Ownership Change
- A change in ownership of a business occurs under the NIRC rules when significant asset transfers or substantial ownership interests change hands.
Impact on Inventories at Cessation
- Upon retirement or cessation of business, inventories of taxable goods might incur VAT as part of final tax compliance.
VAT Application on Disposed Goods
- VAT applies to goods disposed of or existing as of a certain date if these goods are part of business assets converting to personal use.
Exclusions from Deemed Sale Transactions
- Transactions such as gifts or donations are typically not considered deemed sales under the NIRC and thus are excluded from VAT implications.
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Description
Test your knowledge on transactions deemed as sale under the National Internal Revenue Code (NIRC) which are subject to VAT. Explore scenarios such as the transfer, use, or consumption of goods not in the course of business, distribution to shareholders or creditors, and consignment of goods.
