Value Added Tax

http://bit.ly/VATLumanog
VALUE ADDED TAX

VAT is 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
Seller is the one statutorily liable for the payment of

the tax but the amount of the tax may be shifted or

passed on to the buyer, transferee or lessee of the

goods, properties or services. In the case of

importation, the importer is the one liable for the VAT

IMPACT OF TAX

Originally, the tax is imposed against the

seller of goods properties or services.
Imposed

(a) On the gross selling price if sale, barter, or exchange of goods or properties

or

(b) On the gross receipts if sale of services, or in the lease or use of properties

in the course of trade or business;!

(c) On the total value or landed cost, if importation of goods, whether or not in

the course of business.

On imports, the base is the dutiable value, plus customs duties, excise tax, if
any, and other charges prior to the release of such goods from customs
custody.
INCIDENCE OF TAX

● is shifted to the buyer of the goods,

properties or services.
● an indirect tax levied on goods and
services; not on persons, and ultimately
paid by consumers in the form of higher
prices
DESTINATION PRINCIPLE

As a general rule, the VAT system uses the

destination principle as a basis for the
jurisdictional reach of the tax.

Goods and services are taxed only in the

country where they are consumed.
PERSONS LIABLE
● Any person who, in the course of
trade or business
● Sells, barters, or exchanges goods
or properties (seller or transferor)
● Leases goods or properties (lessor)
● Renders services (service
provider)
● Imports goods (importer), whether
or not made in the course of trade
or business
“in the course of trade
or business”

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, nonprofit
private organization or government
entity
Exceptions to the rule of regularity

Any business where the gross sales or receipt do not

exceed P100,000 during any 12-month period shall be

considered principally for subsistence or livelihood and

not in the course of trade or business

Services rendered in the Philippines by non-resident

foreign persons shall be considered as being rendered

in the course of trade or business.

Kind of Transaction

A. VAT-Taxable transactions:

Sales or leases taxed at 12%

(a) Seller is subject to VAT at 12%;

(b) Seiler is entitled to input tax credit;

(c) Seller pays excess of output tax over input tax to the BIR;

(d) Seller can carry-over excess input taxes to succeeding

quarter(s).
Kind of Transaction

2. Sales or leases taxed at 0% (zero-rated)

(a) Seller is subject to VAT at 0%;

(b) Seller is entitled to input tax credit;

(c) Seller can claim refund or tax credit for input taxes;
 Kind of Transaction

B. Exempt transactions

(a) Seller is exempt from VAT;

(b) Seller cannot separately bill output tax to his customers;

(c) Seller is not entitled to input tax credit;

(d) Seller shall be liable to VAT if he issues VAT invoice or

receipt, but without the benefit of input tax credit.

 MANDATORY REGISTRATION

3) Franchise grantees of
radio and/or TV
1) Sellers whose gross
broadcasting whose
sales/receipts on ALL lines of
annual sales for the
non-exempt businesses for the
broadcasting whose
past 12 months exceed
annual sales < P10 M.last
P3,000,000.
taxable year exceed
2) Sellers whose expected P10,000,000.
sales/receipts for the next 12
months for ALL lines of
non-exempt businesses for the
past 12 month exceed
P3,000,000.
 OPTIONAL REGISTRATION

3) Franchise grantees of
radio and/or TV
1.)Any person who is not
Note: In (1) and (2), broadcasting whose
subject to mandatory the registration shall
annual sales < P10 M.
registration because his actual be
or expected gross
irrevocable for the
sales/receipts from next 3 years.
non-exempt businesses for the
past 12 months do not exceed
3,000,000.

2) Any VAT-registered person

who has other lines of
business which are
VAT-exempt.
NOTES

● Registration is required for every separate or distinct establishment or place

of business where sales transactions occur except a warehouse without sales
transactions.
● Each VAT-registered person shall be assigned one (1) TIN. The branch shall
use the 9-digit TIN of the head office + a 3-digit branch code.
● Annual registration fee: 500 for every separate or distinct place of business
where sales transactions occur.
● VAT Registration Certificate and Registration Fee Return must be posted in a
conspicuous
● place in the place of business.
 For those who are not registered, but become liable to VAT:?

A non-VAT taxpayer who initially presumed that his gross sales/receipts plus other non-

operating income for the taxable year will not exceed the P3,000,000 VAT threshold but

has actually exceeded the same during the taxable year, shal) immediately update his

registration to reflect the change in tax profile from non-VAT to VAT taxpayer.

He is required to update his registration immediately within the month following the month

he exceeded the VAT threshold. And he shall be liable to VAT prospectively starting on

the first day of the month following the month when the threshold is breached.
Effect of Failure to Register by Persons
Required to VAT-Register

1) Liable to VAT on their sales;

2) Cannot separately bill output VAT to customer. In other words, the taxpayer cannot

shift the VAT burden to his customers;

3) No input tax credits on their purchases;

4) Fines and sanctions (ex. OPLAN KANDADO: suspension of operations or closure of

business > 5 days).

Cancellation of Registration
VAT-registered person may cancel his VAT-registration if:

1) He makes a written application showing that his gross sales or receipts

(excluding exempt sales) in the next 12 months shall not exceed P3,000,000;
or

2) He ceases business;

3) There is a change in ownership in the case of a single proprietorship;

4) Dissolution of the partnership or corporation; exceed P3,000,000

beginning January 1, 2018.
Cancellation of Registration

5) Merger or consolidation with respect to the dissolved corporation;

6) Failure to actually start business;

7) Business becomes exempt,

8) A person who voluntarily registers and then applies for cancellation after the lapse of 3
years

3 years;

9) A VAT-registered person whose gross sales or receipts for 3 consecutive years did not

exceed P3,000,000 beginning January 1, 2018.

Japayuki Corp. imported an article from Japan. The invoice value of the following article was

P 1 000 000 Yen (1 Yen= P0.50). the following were incurred in connection with the

importation:
Insurance P 15 000 Freight 10 000

Postage 5 000 Wharfage dues 7 000

Arrastre charges 8 000 Brokerage fee 25 000

Facilitation fee 3 000

The imported article was subject to P 50 000 customs duty and P 30 000 excise tax. Japayuki

Corp. spent P 5 000 for trucking from the customs warehouse in Quezon City.
ZERO-RATED TRANSACTIONS

● Does not result in output VAT, but the taxpayer is entitled to input VAT
which shall be

available either as a tax credit or as a refund, IF taxpayer is registered.

● IF not registered, the sales of the taxpayer will be considered

VAT-exempt sales.
ZERO RATED SALES

(a) Export sales of goods

1) Sale of goods to a foreign country and paid for in acceptable foreign currency,

2) Sale of raw materials or packaging materials to a non-resident buyer for delivery

to a resident export-oriented enterprise, and paid for in acceptable foreign
currency;

3) Sale of raw materials or packaging materials to export-oriented enterprises

whose export sales exceed 70% of total annual production;
ZERO RATED SALES

4.) Considered export sales under E.O. No. 226 (the Omnibus Investment Code), and

other special laws:

(a) Sales to bonded manufacturing warehouses of export-oriented manufacturers;

(b) Sales to registered export traders operating bonded trading warehouses

supplying raw materials in the manufacture of export products;

(c) Sales to a BOI-registered producer whose products are 100% exported.

ZERO RATED SALES

5) Sale of goods, supplies, equipment, and fuel to persons engaged in international

shipping or international air transport operations. Provided, that the sale of such

goods and fuel shall pertain to the transport of goods and passengers from a

Philippine port directly to a foreign port, or vice-versa, without docking or

stopping at any other port in the Philippines.

ZERO RATED SALES

Effectively zero-rated sales

Local sales by VAT-registered persons to persons or entities deemed tax-exempt (i.e.,granted
exemption from indirect taxes) under a special law or international agreement, such as:

(1)Enterprises registered with the SBMA, CDA, PEZA, and other export processing Zones;

(2) ADB; IRRI.

(3) Sales to diplomatic missions and other agencies or instrumentalities granted tax
immunities;

(4) Regional or area headquarters of (RHQs) of multinational corporations enjoying

VAT 0-sating on its purchases at the time of effectivity of the TRAIN; and

(5) Other persons/entities who are entitled to 0% VAT on purchase

ZERO RATED SALES of SERVICES

The following services performed locally in the Philippines by VAT-registered persons

shall be subject to a 0% rate:

(1) Processing, manufacturing, or repacking goods for other persons which goods are

subsequently exported, and which are paid for in acceptable foreign currency,

(2) Services other than those in (1), rendered to a person engaged in business conducted

outside the Philippines, or to a non-resident person not engaged in business and who

is outside the Philippines, and which are paid for in acceptable foreign currency;
ZERO RATED SALES of SERVICES

(3) Services rendered to persons/entities whose exemption under special laws or

international agreements effectively subjects the supply of such services to a 0%

Rate’;

(4) Services rendered to persons engaged in international shipping or international air

transport operations, including leases of property for use thereof, Provided, that the

sale of services shall pertain to the transport of goods and passengers from a

Philippine port directly to a foreign port, or vice-versa

ZERO RATED SALES of SERVICES

(5) Services performed by subcontractors or contractors in processing, converting, or

manufacturing goods for an enterprise whose export sales exceed 70% of total annual

production;

(6) Transport of passengers and cargo by domestic air or sea carriers from the

Philippines to a foreign country.

Note: Transport of passengers and cargo by domestic air or sea carriers from a

foreign country to the Philippines is EXEMPT from business taxes

including the VAT for lack of jurisdiction.

Note: The transactions under items (1) and (5) above shall be subject to the 12% VAT,

and shall no longer subject to 0% VAT rate, upon the satisfaction of the following

Conditions:

(1) The successful establishment and implementation of an enhanced VAT

refund system that grants refunds of creditable input taxes within ninety (90)

days from the filing of the VAT refund application with the Bureau; and

(2) All pending VAT refund claims as of December 31, 2017 shall be fully paid

in cash by December 31, 2019.”

EXEMPT TRANSACTIONS

● The sale shall not be subject to output VAT, but the seller is not allowed any ITC.
● Seller cannot bill any output VAT to his customers.
● If the seller issues a VAT invoice or receipt without being VAT-registered, he shall be liable
to the output VAT without the benefit of any ITC.
Sale or importation (AMFBV)

(1) Sale or importation of

(a) agricultural and marine food products in their original state,

(b)livestock or poultry of a kind generally used as, or yielding or producing foods for human

consumption; and

(c) breeding stock and genetic materials therefor;

“Original state”

Meat, fruit, fish, vegetables, and other agricultural and marine food products classified under
this paragraph shall be considered in their original state even if they have undergone the simple
processes of preparation or preservation for the market, such as freezing, drying, salting,
broiling, roasting, smoking, or stripping, including those using advanced technological means of
packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pack, and other similar
packaging methods;

Polished and/or husked rice, corn grits, raw cane sugar and molasses, ordinary salt, and copra
shall be considered in their original state.

“Livestock or Poultry”

Does not include fighting cocks, race horses, zoo animals, and other animals generally
considered as pets.
Notes: a) Sale of bagasse is not exempt from VAT.

b) Fresh water is not an agricultural product, but is considered a mineral. The sale thereof is not
exempt from VAT.
(2) Sale or importation of (a) fertilizers; (b) seeds, seedlings, and fingerlings; (c) fish,
prawn, livestock and poultry feeds, including ingredients, whether locally
produced or imported, used 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);
3.)Sale, importation, printing or publication of books and any
newspaper, magazine, review, or bulletin which appears at regular
intervals with fixed prices for subscription and sale and which is not
devoted principally to the publication of paid advertisements
Sale, importation or lease of passenger or cargo vessels and
aircraft, including engine, equipment and spare parts thereof for
domestic or international transport operations subject to certain
conditions
effects (except any vehicle, aircraft, machinery, and other goods for use in the manufacture

and merchandise of any kind in commercial quantities), belonging to overseas Filipinos"®,

in quantities and of the class suitable to the profession, rank, or position of the persons

importing said items, for their own use and not for sale, barter, or exchange, accompanying

such persons, or arriving within a reasonable time;

IMPORTATION ONLY (PPF)

(1) Importation of personal and household effects belonging to the

residents of the Philippines retuming from abroad, and non-resident citizens
coming to the Philippines: Provided, that such goods are exempt from
Philippine customs duties;
2.) 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 persons coming to settle in the Philippines, for
their own use and not for sale, barter or exchange, accompanying such persons, or
arriving within 90 days before or after their arrival, upon the production of
evidence satisfactory to the Commissioner, that such persons are actually coming
to settle in the Philippines and that the change of residence is bona fide; and
3. )Fuel, goods and supplies by persons engaged in international
shipping or air transport operations.
SERVICES (PAMBEERILO)

1. Services subject to percentage tax under Title V of the Tax Code

(Secs. 116-127, Tax Code);
2. Services by agricultural contract growers'!, and milling for
others of palay into rice, com into grits, and sugar cane into raw sugar;
3. Banks, non-bank financial intermediaries performing
quasibanking functions, and other non-bank financial intermediaries.
4. ) Medical, dental, hospital, and veterinary services except those rendered by

professionals;

Note: Lab services are exempt.

Sale of drugs and medicines are VATable, generally. Therefore, if the hospital or

clinic operates a drug store, the sale of drugs and medicine shal! be subject to VAT.

However, the sale of the same to in-patients are considered part of hospital services,

and shall therefore be VAT-exempt.

5) Educational services rendered by private educational institutions, duly accredited by the

Department of Education (“DepEd”), the Commission on Higher Education (“CHED”),

the Technical Education and Skills Development Authority (“TESDA”), and those

rendered by government educational institutions;

(6)) Services rendered by individuals pursuant to an employer-employee
relationship;

(7) Services rendered by regional or area headquarters (“RHQs”) established in

the Philippines

by multinational corporations which act as supervisory, communications, and coordinating

centers for their affiliates, subsidiaries, or branches in the Asia-Pacific Region, and do not

earn or derive income from the Philippines;

(8) Transactions which are exempt under intemational agreements to which
the Philippines is a signatory or under special laws, except those under PD
529!2,

(9) Lease of a residential unit with a monthly rental not exceeding PhP15,000.
 SALE (CER)
(1) Gross receipts from lending activities by credit or multi-purpose cooperatives duly

registered with and in good standing with the Cooperative Development Authority;

(2)) Sales by non-agricultural, non-electric, and non-credit cooperatives duly registered

with and in good standing with the Cooperative Development Authority: Provided, that

the share capital contribution of each member does not exceed Fifteen Thousand Pesos

(715,000).

(a) Importation by non-agricultural, non-electric, and non-credit cooperatives of

machineries and equipment, including spare parts thereof to be used by them are subject

to VAT.
(b) All electric cooperatives registered with the National Electrification Administration

("NEA”) shall be subject to VAT on sales relative to the generation and distribution

of electricity as well as their importation of machineries and equipment, including spare

parts. Provided, however, that sale of power oy fuel generated through renewable

sources of energy such as, but not limited to, biomass, solar, wind, hydropower,

geothermal, ocean energy, and other emerging energy sources using technologies such

as fuel cells and hydrogen fuels, shall be subject to 0% VAT.

3) Sales by agricultural cooperatives duly registered with and in good standing with
the

Cooperative Development Authority (“CDA”) to their members as well as sale of their

produce, whether in its original state or processed form," to non-members; and their

importation of direct farm inputs, machineries and equipment, including spare parts

thereof, to be used directly and exclusively in the production and/or processing of their

produce;
(4) Export sales by persons who are not VAT-registered;

IF VAT registered subject to VAT, Zero rated

(5) The following sales of real properties are VAT-exempt:

(a) Sale of real properties pot primarily held for sale to customers or held for lease in

the ordinary course of trade or business;

(b) Sale of real properties utilized for low-cost housing and socialized housing as defined

by R.A. No. 7279, and other related law s;

(c) Sale of residential lot valued at One Million, Five Hundred Thousand Pesos

(P 1,500,000) and below;

(d) Sale of house and Jot and other residential dwellings valued at Two Million, Five

Hundred Thousand Pesos (2,500,000) and below.'*

Illustration:

Mr. W a VAT taxpayer, made domestic sales of

P600,000 and export sales of P1,400,000. The output
taxes on the domestic sales should have been
P600,000 x 12%, or P72,000 and the output taxes on
the exports should have been P 1,400,000 x 0% or P0.
Illustration:

Mr. O imported goods to be sold, with a landed cost of

P40,000. He sold the goods to Mr. P for P90,000. Mr. P sold
the goods to Mr. Q for P170,000, for use by Mr. Q as raw
materials. Mr. Q secured the service of Mr. R, a service
contractor and paid Mr. R P50,000. Mr. Q sold his products for
P400,000. All taxpayers involved are VAT-registered persons
and all selling prices mentioned do not include the
value-added tax.
Illustration:

Mr. R a VAT taxpayer, made a sale at P100,000,

value-added tax not included, of goods that he bought at
P3,000 from a non-VAT taxpayer.
Illustration:

Mr.S, a VAT taxpayer, made a sale of P100,000, value-added

tax not included, of goods that he bought at P3,000 from VAT
taxpayer, value-added tax not included.
Illustration:

In a month, Mr.H, a VAT taxpayer, made sales amounting to P1,500,000, value

added tax not included. For the same period purchases value-added tax not
included, were:

Goods for sale,from I Co., a VAT taxpayer P300,000

Goods for sale, from Mr.J a non-VAT taxpayer P200,000
Supplies, from Mr.K, a VAT taxpayer P 50,000
Services, from Mr.L a VAT taxpayer P 60,000
Office equipment, from M Co. a VAT taxpayer P 40,000
Real property for use in business from N Co a VAT taxpayer P500,000
Rent paid to O Co.a VAT taxpayer P 50,000
VAT-TAXABLE SALE OF GOODS/PROPERTIES

1) VATatable sales — the sale must be (a) an actual sale (b) in the course of trade or business,
of

goods or properties within the commerce of man.

2) Transactions deemed sale — transactions which lack one or both of the elements that
makes a

sale VATable. Transactions (2) to (d) below are deemed sales so as to prevent the taxpayer

from evading payment of the output VAT.

Transaction (e), on the other hand, is treated as an actual sale to enable the recipients of the

goods or properties to avail of the input VAT credits on such transactions “deemed sales.”
Transaction Deemed Sales
(CR WPD)

● Consignment of goods if actual sale is not made within sixty (60) days following the
date such goods were consigned.

Note: Consigned goods returned by the consignee within the 60-day period are not

deemed sold;

● Retirement from or cessation of business with respect to inventories of taxable

goods (capital goods, stock-in-trade, supplies, materials) existing as of such
retirement or

cessation, whether or not the business is continued by the new owner.

Transaction Deemed Sales
(CR WPD)

● 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.

● Distribution or transfer to Creditors in payment of debt or obligation.

● Distribution or transfer to Shareholders or investors as property dividends;

or
Transaction Deemed Sales
(CR WPD)

(d) Transmission of property to a trustee IF:

(1) the property transferred is one for sale, lease, or use in the ordinary course of trade or

business, and(2) the transfer constitutes a completed gift.”

Computation of Output VAT
OUTPUT VAT

- 12% of the gross selling price (“GSP”), exclusive or net of VAT, of the goods
sold, bartered, exchanged, or deemed sold in the Philippines, OR

12/112. of the total invoice price (inclusive or gross of VAT).”

- For 0-rated sales, the output VAT is 0% of the GSP.

Tax Base: GSP, net of Sales Discounts , Sales Returns, and
Allowances

A) GSP = the total amount of money or its equivalent which fhe

purchaser must pay” the seller in consideration of the sale, barter,
or exchange.”

Note: Any excise tax shall form part of the GSP.

B) For transactions deemed sale:

1) Tax Base = Market value of the goods at the time of transaction

In a) Transfer, use, or consumption not in the course of trade or business;

b) Distributions to shareholders or creditors;

c) Consignment sales;

d) Transmission of property to trustee.

2) Tax Base = Lower of acquisition cost or current market price of the goods

In retirement from or cessation of business.

Transitional Input Tax (2%)

Persons allowed the transitional input tax: Those persons

a) becoming VAT-registered for the first time upon exceeding the minimum gross sales

of P3,000,000 in any 12-month period or

b) who voluntarily register under the VAT system.

Transitional input VAT = Higher between

1.) 2% of the value of the beginning inventory, or the

2.) actual input VAT paid on such beginning inventory

Provided: Inventory shall exclude goods exempt from VAT

Problem 8-11

An owner of warehouse, which used to be vat exempt, because Its annual receipts never
exceeded the vat threshold, decided to register under the VAT system on January 2, 2019. The
following data were from the 1 quarter ending March 31, 2019:

Rental from warehousing services, net of vat P336,000

Purchases of supplies in February, gross of vat 112,000

Inventory of supplies, January 1, 2019 100,000

Vat on inventory of supplies, January 1, 2019 10,000 *

Determine the VAT Payable

PRESUMPTIVE (4%) IM MS SMC

a) Available to persons or firms engaged in the processing of sardines, mackerel, and

milk, and in the manufacturing of refined sugar, cooking oil, and packed noodle-

based instant meals.

b) The presumptive input tax shall be equivalent to 4% of the value in m

their purchases of primary agricuLtural product which ore exempt from VAT

and which are used as inputs in production.

Jj is a VAT registered processor of sardines The following data were provided for determining
the taxpayer's vat payable:

SaLES (processed sardines, ex clusive of vat) P800,000

PU RCHASES/PAYMENTS: |

purchased of sardines from fish dealers. 200,000

Tomatoes purchase from farmers — 85,000

purchased of olive oil (invoice amount ) - 67,200

purchased of can containers (excl. of vat) ~ 25,000

payments for paper labels (incl. of vat) | 12,000

Purchased of cardboard for boxes (incl. of vat) 8960

payments for hauling services from non vat registered forwarders 100,000
Input tax on depreciable goods (deferred
input tax credits)

The purchase or importation of depreciable capital goods totaling > 1,000,000

(exclusive of VAT) in a calendar month, regardless of the acquisition cost of each capital

good, and regardless of the terms of payment, shall give rise to input tax credits as follows:

1) If the estimated useful life of a capital good > 5 years, the input tax credit shall be

spread over a period of 60 months, and the monthly input tax credit (“ITC”) shall

commence in the month the capital good was acquired.

2) Ifthe estimated useful life of a capital good < 5 years, the input tax shall be spread

evenly by dividing the input tax by the actual number of months comprising the

estimated useful life. The claim for ITC shall commence in the month that the

capital good was acquired.

3) If the depreciable capital good is sold/transferred within a period of five (5) years

or prior to the exhaustion of the amortizable input tax thereon, the entire

unamortized input tax on the capital goods sold/transferred can be claimed as input

tax credit during the month/quarter when the sale or transfer is made.
VAT on Sale of Real Properties

Sale of real properties (a) held primarily for sale to customers, or (b) held for
lease in the ordinary course of trade or business of the seller, or (c) used in
trade or business, shall be subject to VAT:

(1) Regardless of the amount of the gross selling price, if the real property is
not residential (i.e., commercial, industrial, etc.)
(2) real property is residential, it shal! be subject to VAT if the GSP exceeds:

(a) 1,500,000 for residential lots, or

(0) 2,500,000 for residential house and lots or other residential dwellings.

Notes:

(a) In the sale, barter, or exchange of real properties subject to VAT:

1) the GSP shall be the highest of:

a) Selling price in the sales document; or

b) Zonal value; or

c) Assessors’ value

2) If VAT is not billed separately in the sales document, the selling price is deemed

inclusive of VAT.
(b) If Cash sale:

VAT = 12% of highest of (Selling price, zonal value, or assessor's value)

If Deferred-payment basis not on the installment plan

VAT = 12% of highest of (Selling price, zonal value, or assessor’s value)

If on Installment plap

(1) VAT payments = 12% of installment payments

BUT

(2) Where GSP = Zonal or Assessor's value

Villarproper in the course of its business. During the last quarter of 2008,
it had sold a lot under the following terms(including):
Total contract price P1,120,000.00
Down payment, 10/10/208 P 112,000.00
First installment, 12/30/2008 P 112,000.00
Second installment, 1/31/2009 P 56,000.00

The output VAT in the last quarter of 2008 is:

VATABLE SALE OF SERVICES

Sale of services or lease or use of properties (real, tangible personal,

intangible), or supply of knowledge, information, or assistance.
Requisites of a VAT-Taxable Sale of Services

1) The sale must be conducted in the ordinary course of trade or business;

2) For leases, the property must be leased or used in the Philippines;

3) The seller or lessor is VAT-registered, or if not, the gross receipts of the

seller or lessor during the year or in any 12-month period exceed the
minimum of gross receipts of P3.000,000; and
4) In the case of lease of a residential unit, the monthly rental exceeds
P15,000, and the aggregate annual gross receipts of the lessor (from all
residential units with monthly rentals exceeding P 15,000) exceed
P3,000,000.
Capital Goods
Tax Base of VAT on Sale of Services

Note: Receivables, although earned are not included

ILLUSTRATION
Senior Citizen and PWD
FILING OF VAT RETURN and PAYMENT OF
VAT

1) Monthly VAT Return or Declaration *

Al) persons liable for VAT shall pay a monthly VAT based on the taxable receipts and

creditable purchases for the month.

BIR Form 2550M - filed not later than the 20" day following the end of the taxable month.

— shall be filed only for the first 2 months of each quarter.

2) Quarterly VAT Return or Declaration

All persons liable for VAT shall file a quarterly return which shall include sales and

purchase information for the quarter, including the information for the first 2 months of the

quarter for which monthly VAT returms have been filed.

BIR Form 2550Q ~ filed not later than the 25" day following the end of the taxable quarter.

— payments made in the 2 previous monthly VAT retums shall be credited against the
quarterly VAT payable to arrive at the net VATpayable (or excess input tax) for the quarter.
Returns Under the Electronic Filing and Payment System (“EFPS”)

Taxpayers enrolled in the EFPS shall be required to file their monthly VAT declarations

within 21, 22, 23, 24, or 25 days following the end of each month, depending on their

industry classification.

Payment of the tax due via the EFPS shall be five (5) days later than the deadlines for filing.

Note: Beginning January 1, 2023, the filing and payment of VAT shall be done within 25 days

following the close of each taxable quarter.”

Selling Price 500,000

VAT 70,000

Total 570,000