VALUE ADDED TAX

Powerpoint Presentation by ATTY. Erwin D. Cabarles, CPA, MBA Law, Auditing and Accounting Professor University of Negros Occidental-Recoletos

VAT defined
It is a tax on the value added to the purchase price or cost in the sale or lease of goods, properties, or services in the course of trade or business.

Transactions subject to VAT

In the course of trade/business
Sells barters Exchanges Leases goods or properties (including deemed sales) Renders services

provided the aggregate sales/receipts exceeds P1,919,500

Whether or not it the course of trade or business

Imports goods
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EXEMPT TRANSACTIONS
a) Sale of non-food agricultural products, marine and forest products in their original state by the primary producer or the owner of the land where the same are produced. b) Sale of cotton and cotton seeds in their original state; and copra; c) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials thereof; d) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, use in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets)

EXEMPT TRANSACTIONS
e) Sale or importation of coal and natural gas, in whatever form or state. f) Importation of passenger and/or cargo vessels of more than five (5,000) tons; g) Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines; h) Importation of professional instruments and implements, wearing apparel, domestic animals and personal household effects (except any vehicle, vessel, aircraft, machinery, other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to person coming to settle in the Philippines.

EXEMPT TRANSACTIONS
i) Services subject to percentage tax; j) Services rendered by individuals pursuant to employer-employee relationship; k) Transactions which are exempt under international agreement; l) Sales by agricultural cooperatives duly registered with the CDA; m) Sales by electric cooperatives duly registered by the CDA; n) Gross receipts from lending activities by credit and multi-purpose cooperative duly registered with the CDA o) Sales by non-agricultural, non-electric and non-credig cooperatives duly registered with the CDA; p) Export sales by persons who are not VAT-Registered q) Sale of real properties not primarily held for sale in the ordinary course of business; r) Lease of a residential unit with a monthly rental not exceeding P8,000.

VAT Payable
Output Tax ( Sales x 12%) Less Input Tax (Purchases x 12%) VAT payable P xxx xxx P xxx

Output Tax
Means the value-added tax due on the sale or lease of taxable good or property or services by a VAT-registered person. VAT Rates
12% 0%

Gross Receipts
Contract price, compensation, service fee, rental or royalty Including the amount charged for materials supplied with the services Deposits applied as payments for services rendered Advance payment actually or constructively received Excluding the VAT
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Invoicing Requirement

INPUT TAX
Is the value added tax due from or paid by a VAT-registered person in the course of his trade or business.
Any input tax evidenced by a VAT invoice or official receipt shall be creditable against the output tax.

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Sources Input Tax

Purchase or importation of goods
For sale For conversion into or intended to form part of a finished product for sale including packaging materials For use as supplies in the course of business For use as materials supplied in the sale of service For use in trade or business for which deduction for depreciation / amortization is allowed under the Tax Code

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Sources of Input Tax (cont)

Purchase of real properties for which the VAT was actually paid Purchase of services for which the VAT was actually paid Transitional input tax Presumptive Input tax Standard Input Tax (govt. transaction)
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