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VALUE ADDED TAX
Presented by:
MS. SHEILA JOY C. BENEDICTO, CPA, MBARevenue Officer II
RDO 132East, Davao City
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BASIC CONCEPTS OF
VALUE ADDED TAX
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VAT defined
It is a tax on the value added to thepurchase price or cost in the sale or leaseof goods, properties, or servicesin thecourse of trade or business.
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VAT defined
It is an indirect tax and the amount of taxmay be shifted or passed on to the buyer,transferee or lessee of the goods,
properties or services.
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Background of VAT
VAT is a universal taxation system;
VAT has major amendments :
1. E.O. 273 VAT Law (1988) Jan. 1, 19882. RA 7716 E-VAT (RR 7-95) Jan. 1, 19963. RA 8241 IVAT (RR 6-97) Jan. 1, 19974. RA 8242 Tax Reform Act of 1997
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Background of VAT
5. RA 9337 New Expanded VAT Law
signed into law on May 24, 2005
Implementation withheld due to TRO
TRO was lifted by the SC on Oct. 18, 2005
Became effective November 1, 2005
Implementing Rules and Regulations RR 14-2005 was superseded by RR 16-2006
(amended by RR 2-2007, RR 4-2007, RR 10-2011& RR 16-2011)
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Objectives of VAT
Broaden Tax Base
Provide an audit trail
Simplify business taxation
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Who are liable to VAT?
SELLER provided theaggregatesales/receiptsexceeds the
threshold* (orwho opt toregister asVAT)
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In the course oftrade/business Sells
barters
Exchanges
Leases goods orproperties(includingdeemed sales)
Renders services
IMPORTER Whether or not inthe course of tradeor business Imports goods
* The threshold is
now P1,919,500
effective Jan. 1,
2012 (RR 16-2012)
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VAT Rates:
10% (up to January 31, 2006)
12% (effective 2-1-06) and
0%
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TRANSACTIONS COVERED
Sale or Exchange of Goods / Properties
Importation
Sales or Exchange of Services Transaction Deemed Sales
Zero-Rated Sales of Goods / Properties /Services
Effectively Zero-Rated Transactions
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BASIS OF VAT on Goods/Prop.
Shall be the GROSS SELLING PRICE (GSP)
GSP is the total amount of money or itsequivalent which the purchaser pays or isobligated to pay
excluding VAT.
the excise tax, if any shall form part of thegross selling price
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BASIS OF VAT on Importation
If based on VALUE TOTAL VALUE used by the BOC in
determining: Tariff and custom duties plus custom duties,
excise taxes, if any and
Other charges paid by the importer (priorto ATRIG)
If based on QUANTITY and VOLUME VAT shall be based on the LANDED COST
plus EXCISE TAXES
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BASIS OF VAT onSERVICES/LEASE OF PROP.
shall be the GROSS RECEIPTS
It refers to the total amount 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 depositsappliedas payments for services rendered and
advance payments actually or constructivelyreceived
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ZERO-RATED SALES: Goods/Properties
It is a taxable transaction for VAT purposes but shall notresult in any output tax. Input tax on purchases of
goods, properties or services related to such zero-rated
sales shall be available as tax credit or refund.
A. Export sales
B. Foreign currency denominated sales
C. Sales to persons or entities deemed tax-exemptunder special law or international agreement.
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Shall refer to the local sales of goods orproperties by a VAT-registered person to aperson or entitiy who was granted indirecttax exemptions under special laws orinternational agreements.
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Effectively Zero-rated sales of goods and
properties (Sec. 6 of RR 4-2007)
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Transactions deemed sale
(Sec. 106(B))
1. 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;2. Distribution or transfer to:
a. Shareholders or investors share in the
profits of VAT reg. person (property
dividends); orb. Creditors in payment of debt or obligation.
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Transactions deemed sale
(Sec. 106(B))
3. Consignment of goods if actual sale is not made within
60 days;
4. Retirement from or cessation of business, withrespect to inventories of taxable goods existing as of
such retirement or cessation; and
5. Change of tax detail or status from VAT to NON-VAT.
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Rules on invoicing and recording of
deemed sale transactions
Memorandum entry in the subsidiary sales journal to record
withdrawal of goods for personal use must be made
- For distribution to shareholders and creditors
invoice shall be prepared at the time of the occurrence of
the transaction recorded in the subsidiary journal
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Rules on invoicing and recording of
deemed sale transactions
For retirement or cessation of business
inventory shall be prepared and submitted to RDO not
later than 30 days from retirement invoice shall be prepared for the entire inventory
entry in the subsidiary sales journal
Note: If bus iness is to be cont inued by new owner, theent i re amount of ou tput tax shal l be al lowed as input
tax
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OUTPUT TAX & INPUTTAX
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Output Tax
Means the value-added tax due on thesale or lease of taxable good or propertyor services by a VAT-registered person.
VAT Rates 12%
0%
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It is evidenced by a VAT invoice or officialreceipt shall be creditable against the
output tax. Input tax on domestic or importation of
goods. Input tax that can be directly attributed A ratable portion of the input tax which
cannot be directly attributed to eitheractivity
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Input Tax
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Sources of Input Tax
Purchase or importation of goods For sale; or For conversion into or intended to form part ofa finished product for sale including packagingmaterials; or
For use as supplies in the course of business;or
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Sources of Input Tax
For use as materials supplied in the sale ofservice; or
For use in trade or business for whichdeduction for depreciation / amortizationis allowed under the Tax Code
Purchase of services on which VAT hasbeen actually paid
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Sources of Input Tax
Purchase of real properties for which theVAT 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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Input Tax on depreciable capital goods,
the aggregate acquisition cost of which(net of VAT) in a calendar month,exceeds P1,000,000 shall be spreadevenly over 60 months or their useful life,
whichever is shorter.
Spreading of VAT on Capital
Goods
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If capital good is sold within 5 years orprior to exhaustion from input VATthereon,the entire unamortized input tax
on the capital goods sold can be claimedas input tax credit during themonth/quarter when the sale was made.
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Spread of VAT on Capital Goods
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Option to apply for refund/tax creditcertificate of capital goods has been
withdrawn.
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Spread of VAT on Capital Goods
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VAT Payable
Output Tax ( Sales x 12%) - P x x x
Less Input Tax (Purchases x 12%) - x x x
VAT payable - P x x x
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Journal Entries upon Sale
2. Sales of P36,400 inclusive of VAT
Cash 36,400Sales 32,500
Output tax 3,900
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Journal Entries
3. To remit VAT to BIR
Output Tax 3,900.00
Input Tax 3,300.00
VAT Payable 600.00
#
VAT Payable 600.00
Cash 600.00
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VAT Payable
Output Tax - P 3,900.00
Less Input Tax - 3,300.00
VAT Payable - P 600.00
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Transitional Input Tax
A person becomes liable to VAT or electsto be VAT registered person shall be
allowed input tax of 2% of the value ofinventory or the actual VAT paid,whichever is higher
Subject to the filing of inventory list
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Transitional Input Tax
Example:Mr. A becomes liable to VAT starting Jan.2011. He has P200,000 worth of
inventory. Actual VAT payment onpurchases from VAT registered supplierswere P18,000.00.
Allowed transitional input tax: P18,000
The 2% of P200,000 (P4,000) is lowerthan P18,000
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Presumptive Input Tax
4% of the gross value in money of purchasesof primary agricultural products which areused as inputs to their production:
Sardines Mackerel and milk Refined sugar Cooking oil Packed noodle-based instant meals
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Refund or Tax Credit of InputTax (Sec. 112 of the NIRC)
Any VAT registered person whose salesare ZERO-RATED or EFFECTIVELYZERO-RATED may, within two (2) yearsafter the close if the taxable QUARTERwhen the sales was made, apply for theissuance of a TCC.
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Refund or Tax Credit of InputTax (Sec. 112 of the NIRC)
Person whose registration has beencancelled due to retirement orcessation of business or due to change
in or cessation of status may, withintwo (2) years from the date ofcancellation, apply for the issuance ofa TCC.
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VAT on Government Sales Sale of goods and services to government is subject to 12%
VAT;
The 5% VAT withheld represents the net VAT payable of the
seller
The remaining 7%effectively accounts for the standard input
tax in lieu of the actual input VAT
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VAT ON GOVERNMENT
TRANSACTIONS
If actual input VAT exceeds 7% of gross payments, the
excess may form part of the sellerscost; and
If actual input VAT is less than 7%of gross payments, the
difference must be treated as income of the seller.
The income received from the government while subject
to final withholding on VAT shall still be reported in theVAT return
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Apportionment of input tax on mixed
transactions
Input tax directly attributed to VATable transactions
may be recognized for input tax credit
Input tax directly attributable to VATable sales togovernment shall not be credited against output
tax from sales to non-government entities
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Input tax that cannot be directly attributedto either VATable or exempt transactionshall be pro-rated and only the ratable
portion can be allowed as tax credit
Apportionment of input tax on mixed
transactions
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Input tax attributable to VAT exempttransaction shall not be allowed as taxcredit but should be treated as part of cost
or expense
Input tax attributable to the zero-ratedsales may be refunded or applied for tax
credit certificate
Apportionment of input tax on mixed
transactions
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Apportionment of Input Tax on Mixed Transactions
Taxable sales to privateTotal sales
X Input Tax = Creditable
Taxable sales to govt.
Total sales
X
Input Tax = Creditable *
Exempt salesTotal sales
X Input Tax = Expense or cost
* Subject to the 7% standard input tax provision
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Taxable sales 0%
Total sales
X
Input Tax = Refundable
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COMPLIANCEREQUIREMENTS
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Optional Registration
1. Any person who is VAT-exempt under Sec. 4.109-1(B)(1)(V) may elect to be VAT registered;
2. Any person who is VAT-registered but enters into
transactions which are exempt from VAT (mixed
transactions) may opt that the VAT apply to hisexempt transactions;
Any person who elects to register shall not be
entitled to cancel registration for the next 3 years.
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3. Franchise grantees of radio and/or television
broadcasting with annual gross receipts not
exceeding P10M. (This option once exercised
is irrevocable);
Optional Registration
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Penalty for Failure to Register as
VAT Taxpayer
Taxpayer shall be liable to pay the
tax as if he was a VAT registered
person
Taxpayer cannot avail of the
benefits of input tax credit for theperiod he/it was not properly
registered.
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Invoicing Requirements
For every sale, barter or exchange of goods or
properties- VAT invoices
For every sale, barter or exchange of services or
lease of goods or properties- VAT official receipts
A VAT-registered person
shall issue:
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Information needed in the VATInvoice or VAT Official Receipt:
1. Name and business address of taxpayer who will use theinvoice/official receipt;
2. TIN of taxpayer followed by the word
VAT
;3. The amount of tax shown as a separate item;
4. Date of transaction, quantity, unit cost and description ofthe goods or properties or the nature of the service;
5. Authority to Print details and serial number of booklets atthe lower left corner of receipt.
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The word VAT EXEMPT SALE written or printed
prominently if sale is VAT-exempt;
The words ZERO-RATED SALE written or printed
prominently if sale is subject to zero percent
Cont
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Cont
Option to issue combined or separateinvoices/receipts of sale in a combinationof VAT-liable and VAT-exempt sale. If thesale is combined, the invoice or receipt
should indicate the break-down of the saleprice between the taxable and the exemptcomponent and the calculation of the VAT
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Cont
For sale to VAT-registered personsamounting to P1,000 or more, indicatethe name, business style (if any), addressand TIN of the purchaser
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Accounting Requirements
All persons subject to VAT shall in addition to regularaccounting records, maintain the following
SUBSIDIARY SALES JOURNAL which the daily
sales are recorded. It includes columns for date of
sale; name of customer; TIN of customer, Sales
Invoice/OR number, exempt sales; VAT sales (12%)government sales and Zero-Rated Sales;
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Accounting Requirements
SUBSIDIARY PURCHASE JOURNAL
which thedaily purchases are recorded. It includes columns for
date of purchase; name of supplier; TIN of Supplier,
purchase invoice number, exempt purchases;
domestic purchases (capital goods and other than
capital goods), purchases from importation andpurchases from services.
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Penalties for Erroneous Issuance of VAT
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Penalties for Erroneous Issuance of VAT
Invoice or VAT Official Receipt
Infraction Penalty1. NON-VAT person who
issues a VAT invoice/official
receipt
- payment of percentage tax, if
applicable
- payment of VAT (w/out input tax)
-50% surcharge on the VAT due
- If the invoice/official receiptcontains the required information,
purchaser shall be allowed to
recognize an input tax credit
2. VAT-registered person who
issues a VAT invoice/officialreceipt for a VAT-exempt
sale without the words
VAT-EXEMPT SALE
Subject to 12% VAT
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FILING AND
PAYMENT DUEDATES
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Filing of Return
Every persons liable to pay the VAT shall file a: MONTHLY RETURN (2550M) every 20th day of
the month following the close of each month; and
QUARTERLY RETURN (2550Q) every 25th day
following the close of each taxable quarter. Any person, whose registration has been
CANCELLED within 25 days from the date of
cancellation of registration
Only one consolidated return shall be filed by thetaxpayer for his principal place of business or head
office and all branches.
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S h i d Fili f Q l VAT d
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Synchronized Filing of Quarterly VAT andQuarterly Income Tax (RR 8-2002)
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Ex: Fiscal year ends May 31Under Manual
Filing System Under EFPS
Quarter Covered Months Forms to UsedDue Date
For Filing/Payment
Due date
eFiling ePayment
1stQuarter
June 2550M July 20 Staggered (pls see table) Jul. 25
July 2550M August 20 Staggered (pls see table) Aug..25
August 2550Q September 25 Sept. 25 Sept. 25
2ndQuarter
September 2550M October 20 Staggered (pls see table) Oct. 25
October 2550M November 20 Staggered (pls see table) Nov. 25
November 2550Q December 25 Dec. 25 Dec. 25
3rdQuarter
December 2550M January 20 Staggered (pls see table) Jan. 25
January 2550M February 20 Staggered (pls see table) Feb. 25
February 2550Q March 25 Mar. 25 Mar. 25
4thQuarter
March 2550M April 20 Staggered (pls see table) Apr. 25
April 2550M May 20 Staggered (pls see table) May 25
May 2550Q June 25 June 25 June 25
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SCHEDULE OF STAGGERED
FILING OF RETURNS (RR 26-2002)
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GROUP MONTHLY VAT DECLARATION & PERCENTAGE
TAX RETURNS
A 25 days ff the end of the month
B 24 days -do-
C 23 days -do-
D 22 days -do-
E 21 days -do-
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Submission of SLS/SLP
Persons required to submit:
Summary List of Sales all VAT taxpayers
Summary List of Purchases all VAT taxpayers
Note: Effective Jan. 1, 2012 (regardless of the amount of sales and
purchases) all VAT registered TPs are required to submit SLS/P
under RR 1-2012
Due Date:
On or before the 25thday of the month
following the close of the taxable quarter.62
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Submission of SLS/SLP
Ref: RMO 56-2010 / RMC 60-2010
Electronic submission
Thru efps
Manually
Use of removable storage media
3.5 inch floppy diskette
USB flash drive
CDDVD
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Updates on VAT
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Cl ifi ti E ti f VAT
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Clarification on Exemption from VATRMC 75-2012
Sec. 109 (R) Sale, importation, printing or publication
of books and any newspaper, magazine, review orbulletin which appears at regular intervals with fixedprices for subscription and sale and which is notdevoted principally to the publication of paid
advertisements
Must be: Printed or PublishedAvailable for Subscription and Sale at fixedprices Not principally devoted for publication of paid
advertisements
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VAT on Raw Sugar
(RR 13-2013 amending Sec 2(b) of RR13-2008)
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Centrifugal process of producing sugar in not initself a simple process.
Therefore, any type of sugar produced therefore
is not exempt from VAT
Brown sugar is now subject to VAT effective Oct.
9,2013
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Men love their country, not
because it is great, but because itis their own.
~Seneca
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The End