Value Added Tax

Republic of the Philippines
Laguna State Polytechnic University

Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited
LSPU Self-Paced Learning Module (SLM)

Course Business Taxation
Sem/AY First Semester/2020-2021
Module No. 3
Lesson Title Value Added Tax (VAT)
Week
Week 8-10
Duration
Date December 13, 20 and January 10, 2020
Description This lesson will discuss the transactions subject to Value Added Tax (VAT).
of the
Lesson
Learning Outcomes
Intended Students should be able to meet the following intended learning outcomes:
Learning  Learn the concept of onerous transfers and the Value Added Tax (VAT).
Outcomes  Identify the transactions subject to Value Added Tax.
 Differentiate the VAT taxable, exempt and zero rated transactions from each other.
 Learn the concept of Output tax on Sales of Goods or Properties (Actual Sales, Deemed
Sales and Zero-rated Sales).
 Learn the concept and computation of Output tax on Sales of Services and Lease of
Properties (Actual Sales, Deemed Sales and Zero-rated Sales) and on Importation.
 Learn the concept of Input Tax.
 Identify and Differentiate the different types of input taxes.
 Illustrate the computation of Net Value Added Tax
 Illustrate the computation of VAT Refundable
 Learn and Illustrate the Quarterly VAT Computation
 Determine the Mandatory and Optional registration under the VAT system
 Identify the applicable Invoicing Requirements of VATable Transactions
 Prepare the VAT Return, Learn the deadline for the payment of VAT and the legal
implications for its non-payment
Targets/ At the end of the lesson, students should be able to:
Objectives  Compute the Value Added Tax due and payable of a business transaction.
 Prepare and accomplish the VAT Return.
Student Learning Strategies

Online Activities A. Online Discussion via Google Meet
(Synchronous/
LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

Province of Laguna
Asynchronous) You will be directed to attend in a class discussion on the “VALUE

ADDED TAX”. To have access to the Online Discussion, refer to this link:
https://meet.google.com/zxz-snhv-qcz.
A recorded videos of the discussion on the topic will be uploaded to

your Google Classroom.
(For further instructions, refer to your Google Classroom and see the
schedule of activities for this module)
Note: The insight that you will post on online discussion forum using Learning Management
System (LMS) will receive additional scores in class participation.
1. VAT-Subject Transactions
Transactions Tax Base
a. Sale of goods or properties in the course of trade or
Gross selling price
business
b. Sale of services and lease of properties in the course of
Gross receipts
trade or business
c. Importation Total landed cost
2. “In the Course of Trade or Business” Defined

The phrase “in the course of trade or business” means 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, non-profit private organization (irrespective of the disposition of its
net income and whether or not it sells exclusively to members or their guests), or
government entity.
Offline Activities The rule of regularity, to the contrary notwithstanding, services as defined in the
(e-Learning/Self- Tax Code rendered in the Philippines by non-resident foreign persons shall be
Paced) considered as being rendered in the course of trade or business.
3. Goods or properties
The term “goods or properties” refers to all tangible and intangible objects which
are capable of pecuniary estimation and shall include, among others:
a. Real properties held primarily for sale to customers or held for lease in the
ordinary trade or business;
b. The right or the privilege to use patent, copyright, design or model, plan,
secret formula or process, goodwill, trademark, trade brand or other like
property or right;
c. The right or the privilege to use any industrial, commercial or scientific
equipment;
d. The right or the privilege to use motion picture films, films, tapes and discs;
and
e. Radio, television, satellite transmission and cable television time.
4. Sale or exchange of services

Province of Laguna
Sale or exchange services means the performance of all kinds of services in the
Philippines for others for a fee, remuneration or consideration, whether in kind or
in cash, including those performed or rendered by:
a. Construction and service contractors;
b. Stock, real estate, commercial, customs and immigration brokers;
c. Lessors of property, whether personal or real;
d. Persons engaged in warehousing services;
e. Lessors or distributors of cinematographic films;
f. Persons engaged in milling, processing, manufacturing or repacking of
goods for others;
g. Proprietors, operators or keepers of hotels, rest houses, pension houses,
inns, resorts; (theatres and movie houses (deleted in TRAIN);
h. Proprietors, operators of restaurants, refreshment parlors, cafes and other
eating places, including clubs and caterers;
i. Dealers in securities;
j. Lending investors;
k. Transportation contractors on their transport of goods or cargoes including
persons who transport goods or cargoes for hire and other domestic
common carriers by land, relative to their transport of goods and cargoes;
l. Common carriers by air and sea relative to their transport of passengers,
goods or cargoes for one place in the Philippines to another place in the
Philippines;
m. Sales of electricity by generation, transmission, and/or distribution
companies, including electric cooperatives;
n. Services of franchise grantees of electric utilities, telephone and telegraph,
radio and television broadcasting and all other franchise grantees, except
those under Section 119 of the Tax Code;
o. Non-life insurance companies (except their crop insurance), including
surety, fidelity, indemnity and bonding companies;
p. Similar services regardless of whether or not the performance thereof calls
for the exercise or use of the physical or mental faculties.
The phrase “sale of exchange of services” shall likewise include:
1) The lease or the use of or the right or privilege to use any copyright, patent,
design or model, plan secret formula or process, goodwill, trademark, trade
brand or other like property or right;
2) The lease or the use of, or the right to use of any industrial, commercial or
scientific equipment;
3) The supply of scientific, technical, industrial or commercial knowledge or
information;
4) The supply of any assistance that is ancillary and subsidiary to and is
furnished as a means of enabling the application or enjoyment of any such
property, or right as is mentioned in subparagraph (2) or any such
knowledge or information as is mentioned in subparagraph (3);
5) The supply of services by a nonresident person or his employee in
connection with the use of property or rights belonging to, or the

Province of Laguna
installation or operation of any brand, machinery or other apparatus
purchased from such nonresident person.
6) The supply of technical advice, assistance or services rendered in
connection with technical management or administration of any scientific,
industrial or commercial undertaking, venture, project or scheme;
7) The lease of motion picture films, films, tapes and discs; and
8) The lease or the use of or the right to use radio, television, satellite
transmission and cable television time.
Lease of properties shall be subject to the tax herein imposed irrespective

of the place where the contract of lease or licensing agreement was
executed if the property is leased or used in the Philippines.
5. Computation of VAT Payable (Excess Input Tax)

a. Output tax exceeds input tax at the Output tax xxx
end of any taxable quarter Less: Input tax (xxx)
VAT Payable xxx
b. Input tax inclusive of input tax Output tax xxx
carried over from the previous Less: Input tax (xxx)
quarter exceeds output tax Excess input tax xxx
6. Computation of the Tax Base and the Applicable Tax Rates

Transaction Tax Base Tax Rate
a. Sale of goods The term “gross selling price” means the total 12% or 0%
amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller
in consideration of the sale, barter or exchange of
the goods or properties, excluding the value-added
tax. The excise tax, if any, on such goods or
properties shall form part of the gross selling price.
In computing the taxable base during the month or

quarter, the following shall be allowed as
deductions from the gross selling price:
a. Discounts determined and granted at the
time of sale, which are expressly indicated
in the invoice, the amount thereof forming
part of the gross sales duly recorded in the
books of accounts.
Sales discount indicated in the invoice at

the time of sale, the grant which is not
dependent upon the happening of a future
event, maybe excluded from the gross sales
within the same month/quarter it was
given.

Province of Laguna
b. Sales returns and allowances for which a
proper credit or refund was made during
the month or quarter to the buyer for sales
previously recorded as taxable sales.
Gross selling price

Gross sales xxx
Less: Sales returns and allowances xxx
Sales discount xxx xxx
Net sales xxx
Add: Excise tax, if any xxx
Tax base (excluding VAT) xxx
b. Sale of real Installment received xxx 12% or 0%

properties Add: Interest xxx
on Penalties for late payment xxx xxx
installment Tax base xxx
plan (initial
payments do If FMV is greater than selling price:
not exceed Actual collected (VAT exclusive) x FMV
25% of the Agreed consideration (VAT exclusive)
gross selling
price)
c. Sale of real Selling price stated in the sales documents or fair 12% or 0%
properties market value, whichever is higher
on cash basis
or deferred
payment
plan (initial
payments
exceed 25%
of the gross
selling price)
d. Sale of The term “gross receipts” means the total amount 12% or 0%
services of money or its equivalent representing the
contract price, compensation, service fee, rental or
royalty, including the amount charged for
materials supplied with the services and deposits
and advanced payments actually or constructively
received during the taxable quarter for the services
performed or to be performed for another person,
excluding value-added tax.
Gross receipts computed as follows:

Cash received (actually and constructively) xxx
Advance payments for future projects xxx
Materials charged with the services xxx
Gross receipts (excluding VAT) xxx

Province of Laguna
Note: Receivables, although earned, are not

included.
e. Gross For Dealer in Securities, the term “gross receipts” 12% or 0%
receipts for means gross selling price less cost of securities
dealer in sold.
securities
Gross receipts computed as follows:
Gross selling price xxx
Less: Acquisition cost of securities
sold for the month or quarter xxx
Balance xxx
Add: Other or incidental income xxx
Gross receipts (excluding VAT) xxx
f. Gross Gross receipts shall refer to the following: 12% or 0%
receipts on a. Total amounts charged by generation
the sale of companies for the sale of electricity and
electricity by related ancillary services;
generation, b. Total amount charged by transmission by
transmission any entity including National Grid
and Corporation of the Philippines (NGCP) for
distribution transmission of electricity and related
company ancillary services;
c. Total amount charged by distribution
companies and electric cooperatives for
distribution and supply of electricity and
related electric service. The universal
charge passed on and collected by
distribution companies and electric
cooperatives shall be excluded from the
computation of the Gross Receipts.
g. Gross Total premiums collected, whether paid in money, 12% or 0%
receipts notes, credits or any substitute for money.
from non-life
insurance
companies
7. VAT on Importation
a. When Importation begins when the carrying vessel or aircraft enters
importation the jurisdiction of the Philippines with intention to unload
begins and therein.
deemed
terminated Importation is deemed terminated upon payment of the duties,
taxes and other charges due upon the articles, or secured to be
paid, at a port of entry and the legal permit for withdrawal shall
have been granted, or in case said articles are free of duties,
taxes and other charges, until they have legally left the
jurisdiction of the customs.

Province of Laguna
b. Tax base There shall be levied, assessed and collected on every
importation of goods a value-added tax equivalent to twelve
percent (12%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus
customs duties, excise taxes, if any, and other charges, such as
tax to be paid by the importer prior to the release of such goods
from customs custody: Provided, that where the customs duties
are determined on the basis of the quantity or volume of the
goods, the value-added tax shall be based on the landed cost
plus excise taxes, if any.
In general, where customs duties are based on the value

(ad valorem)
Total value (i.e., dutiable value-cost, insurance, freight) xxx
Add: Customs duties xxx
Excise tax xxx
Other charges prior to release of goods
from customs custody xxx xxx
Tax base xxx
In case where customs duties is based on volume or

quantity (specific)
Total landed cost xxx
Add: Excise tax xxx
Tax base xxx
c. Tax rate 12%
8. Output VAT
a. Meaning of output Output tax means the value-added tax on sale or lease of
tax taxable goods or properties or services by any person
registered or required to register.
b. Determination of In a sale of goods or properties, the output tax is computed
output tax by multiplying the gross selling price by the regular rate of
VAT.
9. Sources of Output Taxes

Sale of goods or properties Sale of services and lease of properties
b. Actual regular sales a. Actual regular sales
c. Actual zero-rated sales b. Actual zero-rated sales
d. Deemed sales
10. Zero-Rated Sales Defined

A zero-rated sale of goods or properties and services (by a VAT-registered person)
is a taxable transaction for VAT purposes, but shall not result in any output tax.
However, the input tax on purchases of goods, properties or services, related to
such zero-rated sale, shall be available as tax credit or refund in accordance with
the Regulations.

Province of Laguna
Before
Under TRAIN
TRAIN
a. Export sales of goods Zero-rated Zero-rated
b. Foreign currency denominated sales Zero-rated 12% regular VAT rate
c. Effectively zero-rated sales Zero-rated Zero-rated
11. Zero-Rated Sales of Goods and Properties

a. Export sales of goods
1) The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be agreed
upon which may influence or determine the transfer of ownership of the
goods so exported and paid for in acceptance foreign currency or its
equivalent in goods or services, and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
2) Sale and delivery of goods to:
a. Registered enterprises within a separate customs territory as provided
under special laws; and
b. Registered enterprises within tourism enterprise zones as declared by
the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) subject
to the provisions under Republic Act No. 9593 or The Tourism Act of 2009.
(Vetoed)
3) Sale of raw materials or packaging materials to a nonresident buyer for
delivery to a resident local export-oriented enterprise to be used in
manufacturing, processing, packing or repacking in the Philippines of the
said buyer’s goods and paid for in acceptable foreign currency and
accounted for in accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
4) Sale of raw materials or packaging materials to export-oriented enterprise
whose export sales exceed 70% of the total annual production;
5) Those considered export sales under the Omnibus Investment Code of
1987 (E.O No. 226), and other special laws;
6) The sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations. Provided,
that the goods, supplies, equipment and fuel shall be used for international
shipping or air transport operations
b. Sales to persons or entities whose exemption under special laws or international

agreements to which the Philippines is a signatory effectively subjects such sales
to zero rate.
12. Zero-rated Sales of Goods or Properties Which Shall Be Subject to 12% VAT
Upon Satisfaction of Certain Conditions (under the TRAIN)
a. Items subject to the 1. Sale of raw materials or packaging materials to a
twelve percent (12%) nonresident buyer for delivery to a resident local
value-added tax and export-oriented enterprise to be used in
no longer be manufacturing, processing, packing or repacking in
considered export the Philippines of the said buyer’s goods and paid for
sales subject to zero in acceptable foreign currency and accounted for in

Province of Laguna
percent (0%) VAT accordance with the rules and regulations of the
rate Bangko Sentral ng Pilipinas (BSP);
2. Sale of raw materials or packaging materials to
export-oriented enterprise whose export sales
exceed 70% of the total annual production;
3. Those considered export sales under the Omnibus
Investment Code of 1987 (E.O. No. 226), and other
special laws.
b. Conditions to be 1. Successful establishment and implementation of an
satisfied enhanced VAT refund system that grants refunds of
creditable input tax within ninety (90) days from the
filing of the VAT refund application with the Bureau.
To determine the effectivity of item no. 1, all

applications filed from January 1, 2018 shall be
processed and must be decided within ninety (90)
days from the filing of the VAT refund application;
and
2. All pending VAT refund claims as of December 31,

2017 shall be fully paid in cash by December 31,
2019.
13. Considered Export Sales Under Omnibus Investment Code

“Considered export sales under Executive Order No. 226” shall mean:
a. the Philippine port F.O.B. value determined from invoices, bills of lading, inward
letters of credit, landing certificates, and other commercial documents, of export
products exported directly by a registered export producer, or
b. the net selling price of export products sold by a registered export producer to
another export producer, or to an export trader that subsequently exports the
same;
Sales of export products to another producer or to an export trader shall only be

deemed export sales when actually exported by the latter, as evidenced by landing
certificates or similar commercial documents.
Pursuant to EO 226 and other special laws, even without actual exportation, the
following shall be considered constructively exported:
a. sales to bonded manufacturing warehouses of export-oriented manufacturers;
b. sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as
amended, 7903, 7922 and other similar export processing zones;
c. sale to enterprises duly registered and accredited with the Subic Bay
Metropolitan Authority pursuant to RA 7227;
d. sales to registered export traders operating bonded trading warehouses
supplying raw materials in the manufacture of export products under
guidelines to be set by the Board in consultation with the Bureau of Internal
Revenue (BIR) and the Bureau of Customs (BOC);

Province of Laguna
e. sales to diplomatic missions and other agencies and/or instrumentalities
granted tax immunities, of locally manufactured, assembled or repacked
products whether paid for in foreign currency or not.
14. Zero-Rated Sales of Services and Lease of Properties

1) Processing, manufacturing or repacking of goods for other persons doing
business outside the Philippines which goods are subsequently exported
where the services are paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
2) Services other than processing, manufacturing or repacking rendered to a
person engaged in business conducted outside the Philippines or to a non-
resident person not engaged in business who is outside the Philippines when
the services are performed the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
3) Services rendered to persons or entities whose exemption under special laws
or international agreements to which the Philippines is a signatory effectively
subjects the supply of such services to zero percent rate;
4) Services rendered to persons engaged in international shipping or air
transport operations, including lease of property for use thereof: Provided, that
these services shall be exclusive for international shipping or air transport
operation;
5) Services performed by subcontractors and/or contractors in processing,
converting, or manufacturing goods for an enterprise whose export sales
exceed 70% of the total annual production;
6) Transport of passengers and cargo by domestic air or sea carriers from the
Philippines to a foreign country;
7) Sale of power or fuel generated through renewable sources of energy.
Provided, however, that zero-rating shall not extend to the sale of services
related to the maintenance or operation of plants generating said power.
8) Services rendered too:
a. Registered enterprises within a separate customs territory as provided
under special law; and
b. Registered enterprises within tourism enterprise zone as declared by the
TIEZA subject to the provisions under Republic Act No. 9593 or the Tourism
Act of 2009 (Vetoed).
15. Zero-rated Sale of Services and Lease of Properties Which Shall Be Subject to
12% VAT Upon Satisfaction of Certain Conditions (under the TRAIN)
a. Items subject to 1) Processing, manufacturing or repacking of goods for
the twelve other persons doing business outside the Philippines
percent (12%) which goods are subsequently exported where the
value-added tax services are paid for in acceptable foreign currency and
and no longer be accounted for in accordance with the rules and
considered regulations of the Bangko Sentral ng Pilipinas (BSP);
export sales 2) Services performed by subcontractors and/or
subject to zero contractors in processing, converting, or

Province of Laguna
percent (0%) manufacturing goods for an enterprise whose export
VAT rate sales exceed 70% of the total annual production;
b. Conditions to be 1. Successful establishment and implementation of an
satisfied enhanced VAT refund system that grants refunds of
creditable input tax within ninety (90) days from the
filing of the VAT refund application with the Bureau.
To determine the effectivity of item no. 1, all

applications filed from January 1, 2018 shall be
processed and must be decided within ninety (90) days
from the filing of the VAT refund application; and
2. All pending VAT refund claims as of December 31, 2017

shall be fully paid in cash by December 31, 2019.
16. Foreign Currency Denominated Sales Defined (deleted in TRAIN)

Before TRAIN Under the TRAIN
“Foreign Currency Denominated Sale” means the sale Deleted (now subject to
to a non-resident of goods, except those mentioned in 12% regular VAT rate)
Secs 149 (Automobiles) and 150 (Non-Essential
Goods) of the Tax Code, assembled or manufactured in
the Philippines for delivery to a resident in the
Philippines, paid for in acceptable foreign currency
and accounted for in accordance with the rules and
regulations of the BSP.
Sales of locally manufactured or assembled goods for

household and personal use to Filipinos abroad and
other non-residents of the Philippines as well as
returning Overseas Filipinos under the Internal Export
Program of the government paid for in convertible
foreign currency and accounted for in accordance with
the rules and regulations of the BSP shall also be
considered export sales.
17. Effectively Zero-Rated Sales Defined

Sales of goods or property or services to persons or entities who are tax-exempt
under international agreements to which the Philippines is signatory, such as,
Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc.,
shall be effectively subject to VAT at zero-rate.
18. Deemed Sales Transactions

1) Transfer, use or consumption not in the course of trade or business of goods
and properties originally intended for sale or use in the course of trade or
business;
2) Distribution or transfer to shareholders or investors as share in the profits of
VAT-registered person;
3) Distribution or transfer to creditors in payment of debt or obligation;

Province of Laguna
4) Consignment of goods if not sold within 60 days following the date of
consignment;
5) Retirement from or cessation of business with all respect to all goods on hand,
whether capital goods, stock-in-trade, supplies or materials as of the date of
such retirement or cessation, whether or not the business is continued by the
new owner or successor.
Notes: a. In cases 1) to 4), the tax base is the market value.

b. In case 5), the tax base is the lower between acquisition cost or
market value.
The Commissioner of Internal Revenue shall determine the appropriate tax base
where the gross selling price is unreasonably lower than the actual market value
(lower by more than 30% of the actual market value).
19. Sale, Transfer, or Exchange of Imported Goods by Tax-Exempt Persons

a. In the case of goods imported into the Philippines by VAT-exempt persons,
entities, or agencies which are subsequently sold, transferred or exchanged in
the Philippines to non-exempt persons or entities, the latter shall be
considered the importers thereof who shall be liable for VAT on such
importation.
b. The tax due on such importation shall constitute a lien on the goods, superior
to all charges or liens, irrespective of possessor of said goods.
20. Differences Between Sale of Goods or Properties and Sale of Services or Lease
of Properties
Sale of Services or Lease of
Sale of Goods or Properties
Properties
a. Tax Base Gross selling price (accrual basis) Gross receipts (cash basis)
b. Sources of a. Actual regular sales a. Actual regular sales
output tax b. Actual zero-rated sales b. Actual zero-rated sales
c. Deemed sales
Performance Tasks
Exercise A. Determine whether or not the following are subject to VAT

Transaction VAT-subject?
a. Sale of bread by a bakery
b. Sale of residential lot by a real estate dealer
c. Sale of residential house and lot by the owner who resides in
such property
d. Sale of foods and drinks by restaurant and other eating places
e. Importation of raw materials for business purpose
f. Importation of computer for personal use

Province of Laguna
g. Sale of office supplies by a non-profit institution

h. Warehousing services by a government-owned or controlled
corporation
i. Sale of food and drinks in a club operated by a non-profit
organization
j. Sale of office equipment and furniture by a VAT-registered
service provider
Exercise B. Compute the Output Tax

1) Selling price, net of VAT, P120,000
2) Selling price, gross of VAT, P240,000
3) Sales per books, P100,000
4) Selling price including erroneous VAT, P100,000
Exercise C.
1) (Phil.CPA Modified) The Pastry Shop sells cakes and pastry items to well-known hotels around the
Metro Manila area. The hotels are allowed credit based on the track record of the hotels. The total
amounts received or receivable from sales by the Pastry Shop in April,2018 were P224,000,
including the value-added tax. Seventy-five percent (75%) of the sales are normally on account
How much is the value-added tax on the sales for the month of April,2018?
2) The following data are taken from sales of a real estate dealer on January 2, 2018:
Consideration in the Deed of Sale P5,000,000
Fair market value per tax declaration 4,800,000
Fair market value per BIR 5,200,000
Selling price of an adjacent lot sold on the same date 6,000,000
Payments on the consideration:
January 2, 2018 1,000,000
January 2, 2019 2,000,000
January 2, 2020 2,000,000
How much is the output tax for January 2, 2018, January 2, 2019 and January 2, 2020 using 12%
VAT rate?
3) The following data are taken from the books of a dealer in securities:
Selling price, shares held as inventory P3,000,000
Selling price, shares held as investment 2,000,000
Acquisition cost, shares held as inventory 1,000,000
Acquisition cost, shares held as investment 1,500,000
Other income, shares held as inventory 200,000
How much is the output tax using 12% rate?

Province of Laguna
4) A VAT-registered contractor has the following selected VAT exclusive data for the month of July
2018:
Collections from contracts completed in June, 2018 P500,000
Advances from contracts completed in August, 2018 300,000
Collections from contracts completed in July, 2018, net of 10% retention
on billings transferred by the payor to the account of the contractor 198,000
Materials charged with the services rendered, July, 2018 100,000
Payments for services rendered by a sub-contractor, July, 2018 200,000
How much is the:

a. gross receipts for the month of July, 2018?
b. output tax for the month of July, 2018 using 12% rate?
5) A VAT-registered taxpayer has the following VAT-exclusive data for the month of January 2018:
Accounts receivable, January 1, 2018
Sales on account for the month of January
Cash sales for the month of January
Accounts receivable, January 31, 2018
Cash purchases for the month of January 2018
How much is the output tax for the month of January, 2018 using 12% rate assuming the taxpayer
is a:
a. trader; b. service provider
6) Mr. Cris T. Rosales, not VAT-registered, imported an article from Japan for his personal use. The
invoice value of the imported article was Y1,000,000(Y1=P0.35). the following were incurred in
connection with the importation:
Insurance P15,000
Freight 10,000
Postage 5,000
Wharfage dues 7,000
Arrastre charges 8,000
Brokerage fees 25,000
Facilitation fee 3,000
The imported article was subject to P50,000 custom duties and to P30,000 excise tax. How much
was the VAT on importation using 12% rate?
Exercise D. Determine whether or not the following sales of goods are subject to regular VAT or
zero-rate.
Under TRAIN Under TRAIN
Before
(2 conditions (2 conditions
TRAIN
not satisfied) satisfied)

Province of Laguna
a. Sale and actual shipment of goods from the Philippines

to a foreign country, irrespective of any shipping
arrangement, paid for in acceptable foreign currency
b. Sale and actual shipment of goods from the Philippines
to a foreign country, irrespective of any shipping
arrangement, paid for in Philippine peso
c. Sale of raw materials or packaging materials to a
nonresident buyer for delivery to a resident local export
oriented enterprise to be used in manufacturing,
processing, packing or repacking in the Philippines of
the said buyer’s goods paid for in acceptable foreign
currency
d. Sale of raw materials or packaging materials to export-
oriented enterprise whose export sales exceed 70% of
the total annual production paid for in Philippine peso
e. Sale of equipment to export-oriented enterprise whose
export sales exceed 70% of the total annual production
and paid for in Philippine peso
f. Sale of gold to Bangko Sentral ng Pilipinas
g. Sale of silver to Bangko Sentral ng Pilipinas
h. Sale to diplomatic missions and other agencies and/or
instrumentalities granted tax immunities, of locally
manufactured, assembled or repacked products paid
for in local currency
i. Sale of equipment to persons engaged in international
shipping or international air transport operations
j. Sale of goods by PEZA-registered enterprise which is
subject to the 5% special tax regime
k. Sale of goods by PEZA-registered enterprise which is
not embraced by the 5% special tax regime (subject to
tax under NIRC)
l. Sale of goods by PEZA-registered enterprise which
availed the income tax holiday
Exercise E. Determine whether or not the following sales of goods are subject to regular VAT or
zero-rate.
Under TRAIN Under TRAIN
Before
(2 conditions (2 conditions
TRAIN
not satisfied) satisfied)
a. Processing, manufacturing or repacking of goods for
other persons doing business outside the Philippines
which goods are subsequently exported paid for in
acceptable foreign currency

Province of Laguna
b. Processing, manufacturing or repacking of goods for

other persons doing business in the Philippines which
goods are subsequently exported
c. Transport of passengers and cargo by Cebu Pacific
from the Manila to Singapore
d. Transport of passengers and cargo by Philippine
Airlines from the Manila to Cebu
e. Sale of power or fuel generated through wind mills
f. Sale of power or fuel generated through coal-fed
generating power plant
g. Sale of services related to the maintenance or
operation of electric plant generating said power
through water falls
h. Sale of services by PEZA-registered enterprise which is
subject to the 5% special tax regime
i. Sale of services by PEZA-registered enterprise which is
not embraced by the 5% special tax regime (subject to
tax under NIRC)
j. Sale of services by PEZA-registered enterprise which
availed of income tax holiday
Exercise F. Determine whether or not the VAT can be passed-on and the treatment of the
passed-on VAT.
Can pass on VAT? Treatment
a. Sale by a VAT-registered seller to a VAT-registered trader
b. Sale by a VAT-registered seller to a VAT-exempt trader
c. Sale by a VAT-registered seller to IRRI
d. Sale by a VAT-registered seller to Development Bank of the
Philippines
e. Sale by a VAT-exempt seller to a VAT-subject trader
Exercise G. Determine whether the following qualify as VAT-subject deemed sale transactions
or not (Y/N)
a. VAT-registered person withdraws goods from his business for his personal use
b. Property dividends which constitute stocks in trade or properties primarily held for sale
or lease declared out of retained earnings
c. Consigned goods returned by the consignee within the 60-day period
d. Goods on hand when a single proprietorship incorporates
e. Proprietor of a single proprietorship sells his entire business
f. Goods on hand upon the dissolution of a partnership and creation of a new partnership
which takes over the business

Province of Laguna
Exercise H. Determine whether the following transactions involving change in or cessation of
status are subject to VAT or not (Y/N)
a. Good on hand when a VAT-registered person engaged in a taxable activity like wholesaler
or retailer who decides to discontinue such activity and engages instead in life insurance
business or in any other business not subject to VAT
b. Unused supplies or materials when a request for cancellation of registration due to
reversion to exempt statues was approved
c. Capital goods at the time of approval of a request for cancellation of registration of one
who commenced business with the expectation of gross sales or receipts exceeding
P3,000,000 (used to be P1,919,000), but who failed to exceed this amount during the first
twelve months of operation
d. Goods or properties existing as of the change of control of a corporation by the acquisition
of the controlling interest of such corporation by another stockholder (individual or
corporate) or group of stockholders
e. Stock-in-trade existing upon change in the trade or corporate name of the business
f. Goods on hand upon merger or consolidation of corporations
g. Exchange of goods or properties including real properties used in business or held for sale
or lease by the transferor, for shares of stocks, whether resulting in corporate control or
not
Exercise I.
The following information taken from the books of a VAT-registered enterprise was provided to you:
Domestic sales of goods P3,000,000
Sales of packaging materials to an export oriented enterprise whose export sales
2,000,000
exceed 70% of the total annual production
Local sales of goods to Asian Development Bank (ADB) 500,000
Consignment of goods (not returned within 60 days following the date of
200,000
consignment)
Consignment of goods (returned within 60 days following the date of consignment) 150,000
Goods transferred for the personal use of the owner (cost is P90,000), market value 100,000
Goods transferred to creditor as payment of debt of the enterprise (cost, P100,000),
90,000
market value
Goods transferred to owners as share in the profit of the enterprise, market value 80,000
How much was the total taxable sales and the output VAT using 12% rate?
Exercise J.
A VAT subject real estate dealer sold a residential lot. The following information was made available
on the terms of the sale:
Gross selling price P3,000,000
Down payment, January 15, 2018 900,000
Balance to be paid in equal installment starting February 15, 2018 2,100,000
Zonal Value 2,800,000
Value per tax declaration 2,500,000

Province of Laguna
Selling price of an adjacent lot 3,200,000
Question 1 – Does the sale qualify under installment sale? Why or why not?
2 – How much is the tax base for VAT purposes?
3 – How much is the output VAT on January 15, 2018 using 12% tax rate?
Exercise K.
A VAT-registered corporation has the following data taken from the books of accounts for the first
calendar quarter of 2018:
Gross sales P5,000,000
Sales returns and allowances 100,000
Sales discount given at the time of sale 400,000
Sales discount given to cover prompt payment 200,000
Sales allowance to cover roll back in prices 120,000
Cost of sales 1,500,000
Office equipment purchased January 1, 2018 1,100,000
Vehicle for land transport imported January 1, 2018 2,500,000
Purchase of goods for sale (included in the cost of sales above) 300,000
Operating expenses (40% with passed-on VAT) 500,000
Office supplies purchased (wholly used) 90,000
VAT payments for January and February 40,000
How much is the taxable sales and the output VAT?
Exercise L.
A VAT-registered service contractor has the following data for the month of January, 2018:
Cash received for buildings completed on January 2018 with a
contract price of P5,000,000 P3,800,000
Cash advances received for building to be constructed on February, 2018 300,000
Cash received from VAT-registered supplier on materials returned to the supplier 100,000
Cash received from owners of building for materials charged with the services 1,000,000
Cash received from owners of building to be used to pay building permit fees 200,000
Cash received from VAT-registered sub-contractors for overpayments 300,000
Payments to subcontractors for the electrical job 500,000
Purchase of supplies and materials used in the construction 100,000
How much is the gross receipts for the month and the output tax using 12% VAT?
Exercise M.
Candice Corp. imported an article from Japan. The total value of the imported article representing
dutiable value (cost, insurance and freight) was $50,000 ($1=P50). The following were incurred in
connection with the importation:
Bank charges in connection with the importation of goods P150,000
Expenses in opening letters of credits 100,000

Province of Laguna
Interest paid on trust receipts issued by banks for imported goods

up to time of withdrawal from Customs 15,000
Wharfage dues 70,000
Arrastre charges 80,000
Brokerage fees charged by customs broker for services rendered
to effect the release of goods from customs custody 25,000
Interest charges on loans secured to finance importation 50,000
Facilitation fee 10,000
Special import tax and foreign exchange marginal fee 12,000
The imported article was subject to P500,000 customs duties and to P300,000 excise tax. After the
release from the Bureau of Customs, Candice Corp. paid P50,000 (net of VAT) for trucking to a
warehouse in Quezon City. It also paid warehousing rent of P80,000, net of VAT.
Question 1 – How much are the total charges prior to release from Customs custody?
2 – What is the tax base of the VAT on this importation?
3 – How much is the VAT on importation?
4 – Assuming Candice Corporation is not VAT-registered, will it be required to pay the VAT
on importation? Why or why not?
Understanding Directed Assess
Learning Resources
• Banggawan, R. (2019). Business and Transfer Taxation 2019 OBE Edition

• Tabag, E. D., et.al. (2019). Transfer and Business Taxation with Special Topics
• Ballada, W. (2016). Transfer and Business Taxation
• Reyes, V. (2019). Business Taxes and Transfer Taxes
• Aduana, N. L. (2016). Simplified & Procedural Handbook on Transfer and Business
Taxation 3rd Edition
• www.bir.gov.ph

Province of Laguna

Value Added Tax

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What are the transactions subject to Value Added Tax (VAT)?

What are the transactions subject to Value Added Tax (VAT)?

What are the different types of input taxes?

What are the different types of input taxes?

Republic of the Philippines

Laguna State Polytechnic University

LSPU Self-Paced Learning Module (SLM)

Student Learning Strategies

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

Asynchronous) You will be directed to attend in a class discussion on the “VALUE

A recorded videos of the discussion on the topic will be uploaded to

2. “In the Course of Trade or Business” Defined

4. Sale or exchange of services

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

The phrase “sale of exchange of services” shall likewise include:

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

Lease of properties shall be subject to the tax herein imposed irrespective

5. Computation of VAT Payable (Excess Input Tax)

6. Computation of the Tax Base and the Applicable Tax Rates

In computing the taxable base during the month or

Sales discount indicated in the invoice at

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

Gross selling price

b. Sale of real Installment received xxx 12% or 0%

Gross receipts computed as follows:

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

Note: Receivables, although earned, are not

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

In general, where customs duties are based on the value

In case where customs duties is based on volume or

9. Sources of Output Taxes

10. Zero-Rated Sales Defined

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

11. Zero-Rated Sales of Goods and Properties

b. Sales to persons or entities whose exemption under special laws or international

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

To determine the effectivity of item no. 1, all

2. All pending VAT refund claims as of December 31,

13. Considered Export Sales Under Omnibus Investment Code

Sales of export products to another producer or to an export trader shall only be

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

14. Zero-Rated Sales of Services and Lease of Properties

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

To determine the effectivity of item no. 1, all

2. All pending VAT refund claims as of December 31, 2017

16. Foreign Currency Denominated Sales Defined (deleted in TRAIN)

Sales of locally manufactured or assembled goods for

17. Effectively Zero-Rated Sales Defined

18. Deemed Sales Transactions

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

Notes: a. In cases 1) to 4), the tax base is the market value.

19. Sale, Transfer, or Exchange of Imported Goods by Tax-Exempt Persons

Exercise A. Determine whether or not the following are subject to VAT

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

g. Sale of office supplies by a non-profit institution

Exercise B. Compute the Output Tax

How much is the output tax using 12% rate?

LSPU SELF-PACED LEARNING MODULE: BUSINESS TAXATION

How much is the: