BAM 208: Business & Transfer Tax

Student Activity Sheets #13

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Lesson title: Business Taxes: Value Added Taxes - Part 1 Materials

Lesson Objectives: Text book: Business and Transfer
At the end of this module, I can: Taxes by Rex Banggawan (latest
1. Define and explain the nature of business taxes
edition)
2. Discuss the nature and Characteristics of VAT
References
3. Discuss VAT registration
NIRC and other Tax Laws by Atty.
Eufrocina Sacdalan-Casasola
www.bir.gov.ph

Productivity Tip: Before going to bed, take 10 minutes to look over the next day’s plan.

A. LESSON PREVIEW/REVIEW

Welcome back class!

We are done with transfer taxes. Now, we will be moving to our next topic which is Value Added Tax (VAT).

VAT is a business tax imposed at every stage of sale, exchange, barter and importation of goods and services in
the course of trade or business. So, if you already experienced buying your food or things from malls, grocery
stores, supermarkets or even in convenience stores, for sure you had already paid this type of tax.

Now, you may be wondering why you are paying taxes even you’re not earning income or gains nor you are
engaged in business. It sounds interesting, isn’t it?

So, if you’re ready to know the answers to your questions, let’s explore VAT.

What I know Chart (3 mins)

Try answering the questions below by writing your ideas under the first column What I Know. It’s okay if you
write key words or phrases that you think are related to the questions.

What I Know Questions: What I Learned

1. What are business

taxes?

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 BAM 208: Business & Transfer Tax
Student Activity Sheets #13

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

2. Differentiate output
from input VAT.

B. MAIN LESSON

LO 1: Define and explain the nature of business taxes

Business Tax
These are taxes imposed upon onerous transfers such as sale, barter, exchange and importation. It is an additional
tax imposed to taxpayers engaged in business.

However, any business pursued by an individual where the aggregate gross sale or receipts do not exceed
P100,000 during any 12 months period shall be considered principally for subsistence or livelihood and not in
the course of trade or business. Hence, not subject to business taxes. (Tabag 2020)

Types of Business taxes

1. Value Added Tax
2. Other Percentage Taxes
3. Excise Taxes
4. Documentary Stamp Tax

LO 2: Discuss the nature and Characteristics of VAT

Value-Added Tax (VAT)

This is a form of sales tax. It 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. It is an indirect tax,
which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.

Note: The party directly liable for the payment of the tax is the seller, importer or the service provider,
although the burden of the tax may be shifted or passed on to the consumer.

Output tax vs. Input tax

Output Tax - the VAT due on the sale, lease or exchange of taxable goods or properties or services by any
person registered or required to register under Section 236 of the Tax Code.

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 BAM 208: Business & Transfer Tax
Student Activity Sheets #13

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Input tax - the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods,
properties or services, including lease or use of property in the course of his trade or business. It shall also
include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive
input tax and deferred input tax from previous period.

LO 3: Discuss VAT registration

Mandatory Registration
Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or
engages in the sale or exchange of services shall be liable to register if:

a. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under
Section 109 (A) to (U), have exceeded Three Million Pesos (P3,000,000.00): or

b. There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12)
months, other than those that are exempt under Section 109 (A) to (U), will exceed Three Million Pesos
(P3,000,000.00).

c. Radio and/or television broadcasting companies whose annual gross receipts form the preceding year
exceeds P10,000,000.00.

Optional Registration
Any person who is VAT-exempt or not required to register for VAT may, in relation to D.1.a above, elect
to be VAT-registered by registering with the RDO that has jurisdiction over the head office of that person,
and pay the annual registration fee of P500.00 for every separate and distinct establishment. Any person
who elects to register under optional registration shall not be allowed to cancel his registration for the
next three 3 years.

Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed
transactions) may opt that the VAT apply to his transactions which would have been exempt under Section
109(1) of the Tax Code, as amended [Sec. 109(2)].

Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding
year do not exceed ten million pesos (P10,000,000.00) derived from the business covered by the law
granting the franchise may opt for VAT registration. This option, once exercised, shall be irrevocable. (Sec.
119, Tax Code).

The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the
beginning of the calendar quarter and shall pay the registration fee unless they have already paid at the

This document is the property of PHINMA EDUCATION

 BAM 208: Business & Transfer Tax
Student Activity Sheets #13

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

beginning of the year. In any case, the Commissioner of Internal Revenue may, for administrative reason
deny any application for registration. Once registered as a VAT person, the taxpayer shall be liable to
output tax and be entitled to input tax credit beginning on the first day of the month following
registration.

CANCELLATION OF VAT REGISTRATION

Instances when a VAT-registered person may cancel his VAT registration:

1. If he makes a written application and can demonstrate to the commissioner's satisfaction that his gross
sales or receipts for the following twelve (12) months, other than those that are exempt under Section
109 (A) to (U), will not exceed P3,000,000, as amended; or
2. If he has ceased to carry on his trade or business, and does not expect to recommence any trade or
business within the next twelve (12) months.
The cancellation for registration will be effective from the first day of the following month the cancellation
was approved.
3. POWER OF THE COMMISSIONER TO SUSPEND BUSINESS OPERATIONS:
The Commissioner of the Internal Revenue or his authorized representative may order suspension or
closure of business establishment for a period of not less than 5 days for any of the following violations:
1. Failure to issue receipts or invoices
2. Failure to file vat return
3. Understatement of taxable sales or receipts by 30% or more of the correct taxable sales
or receipts for the taxable quarter
4. Failure of any person to register as required under the law.

Activity 3: Skill-building Activities

Let’s practice! After completing the exercise, you may refer to the Key to Corrections for feedback. Try to
complete each exercise before looking at the feedback.

Exercise 1 – Identify the type of transaction and determine whether or not the following are subject to VAT.

Type of transaction
A. Sale of Goods C. Sale of Property E. Lease
B. Sale of Services D. Importation F. Exchange

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 BAM 208: Business & Transfer Tax
Student Activity Sheets #13

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Transactions Type of VATable

Transaction
Sale of bread by a bakery 
Sale of residential lot by a real estate dealer 
Sale of residential house and lot by the owner who resides in such property 
Sale of food and drinks by restaurant and other eating places 
Importation of raw materials for business purpose 
Importation of computer for personal use 
Sale of office supplies by a non-profit institution 
Warehousing services by a government owned and controlled operation 
Sale of food and drinks in a club operated by NPO 
Sale of drinks by Pepsi Cola Company 

Exercise 2 – Write “R” if the person or entity is required to register as VAT otherwise write “N”.
Individual engaged in business where the gross sales or receipt do not exceed P100,000 during the 12
months period
Non-stock, no profit organization whose gross sales or receipts exceed P3,000,000
Multi-purpose Cooperatives
Radio and TV broadcasting company whose annual sales exceeded P10,000,000
PEZA and other ecozones registered enterprises enjoying preferential rate of 5% in lieu of all taxes
SBMA and other ecozones registered enterprises enjoying preferential rate of 5% in lieu of all taxes.
VAT-exempt person under Sec. 109 who did not register as VAT taxpayer.

ACTIVITY 4: What I know Chart – Part 2 (3 mins)

It’s time to answer the “what I learned” column in the What I Know chart in Activity 1.

ACTIVITY 5: ‘Check for understanding’

I – Answer MCQ – Theory

II – Answer MCQ Problems Part 1

III – Read VAT for seller of goods, properties and services

This document is the property of PHINMA EDUCATION

 BAM 208: Business & Transfer Tax
Student Activity Sheets #13

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

C. LESSON WRAP-UP

Congratulations for finishing another module! Shade the number of the module that you finished to track your
accomplishment.

Did you have challenges learning the concepts in this module? If none, which parts of the module helped
you learn the concepts?
__________________________________________________________________________________________________________________
________________________________________________________________________________________________

Some question/s I want to ask my teacher about this module is/are:

__________________________________________________________________________________________________________________
________________________________________________________________________________________________

FAQs.

1. If my business has an annual gross revenue of P2,000,000 and for income tax purposes I opted to be tax
at 8% optional income tax rate, am I liable to pay business taxes?
No, if a taxpayer choose to be taxed at 8% in excess of 250,000, for non-VAT businesses they are no longer
liable to pay business taxes.

2. If in the middle of the year the business is subject to percentage tax then eventually hit the VAT
threshold of P3 million gross revenue, should be done by the taxpayer?
Upon reaching the VAT threshold, the taxpayer is obligated to updated registration into VAT registered
entity. Failure to do so will make the business liable for output VAT but cannot claim any input VAT.

This document is the property of PHINMA EDUCATION

 BAM 208: Business & Transfer Tax
Student Activity Sheets #13

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Key to Corrections:

Skills building
Exercise 1

Transactions Type of VATable

Transaction
Sale of bread by a bakery A 
Sale of residential lot by a real estate dealer C 
Sale of residential house and lot by the owner who resides in such property C X
Sale of food and drinks by restaurant and other eating places B 
Importation of raw materials for business purpose D 
Importation of computer for personal use D 
Sale of office supplies by a non-profit institution A 
Warehousing services by a government owned and controlled operation B 
Sale of food and drinks in a club operated by NPO B 
Sale of drinks by Pepsi Cola Company A 

Exercise 2
Individual engaged in business where the gross sales or receipt do not exceed P100,000 during the 12 N
months period
Non-stock, no profit organization whose gross sales or receipts exceed P3,000,000 R
Multi-purpose Cooperatives N
Radio and TV broadcasting company whose annual sales exceeded P10,000,000 R
PEZA and other ecozones registered enterprises enjoying preferential rate of 5% in lieu of all taxes N
SBMA and other ecozones registered enterprises enjoying preferential rate of 5% in lieu of all taxes. N
VAT-exempt person under Sec. 109 who did not register as VAT taxpayer. N

This document is the property of PHINMA EDUCATION