Liable to Business Tax (Requisites)

1) Regular/Habitual

More than 1 isolated transaction

Repetition & continuity of action

Exception to regularity (NOT regular activity BUT

theres business tax)

a) services rendered in the Philippines by NRA

b) importation of goods for personal use (subject to

VAT)

c) single sale of shares of stock (domestic corp.) thru

stock market (subject to OPT)

d) single overseas communication (subject to OPT)

e) single horse race winnings (subject to OPT)

f) incidental transactions

2) Economic Activity/ Commercial Activity

pecuniary estimation flow of commodity (capable of being measured in money)

Purpose: profit/income

Exception to regularity (NOT economic/commercial

activity BUT theres business tax)

a) importation of goods for personal use (subject to

VAT)

b) overseas communication

c) Annual Gross Receipts/Sales must exceed 100k

Sources of Output VAT

1) Actual Sale sale of goods/services lease of property 2) Transactions Deemed Sale

goods intended for sale

ONLY applicable for sale of goods & NOT of services

Transfer, use/consumption NOT in the ordinary course of business (used by the owner/seller) of goods/properties ordinarily intended for sale/use in the ordinary course of business

Distribution/payment to:

shareholders (share in their profits of VAT reg person)

creditors (as payment of debt)

Consigned goods exceed 60 days

(goods returned w/in 60 days are NOT deemed sold)

Ending inventory at the time of cessation as a VAT

registered person & as a business

Basis : Acquisition cost or FMV (whichever is LOWER)

3) Zero Rated Sales

does NOT result in output tax

input tax shall be available as:

- Deduction/tax credit against output VAT

- Tax credit against any internal revenue taxes

Zero Rated Transactions Exempt Transactions

subject to 0% VAT rate

NOT subject to VAT

NO output tax BUT entitled to credit/refund of input taxes

NO tax credit/refund for input taxes are allowed

Zero Rated Transactions

Sale of goods/services

a) Foreign Currency Denominated Sale

sales to nonresidents of the Philippines, accounted

for in accordance with the rules & regulations of BSP

(except: automobiles & non-essential goods subject to

excise tax)

b) Sales which is Vat exempt under special

laws/international agreements which the Phil. Is a

signatory (SBMA, PEZA, IRRI, CDA, ADB)

c) Sale of power/fuel generated through renewable

sources of energy (performed in the Philippines)

d) Actual Export Sales [consumption/destination principle]

directly shipped by a VAT registered resident to a place outside the Philippines ( from Philippines to a foreign country) e) Deemed Export Sales Sale of RM/packaging materials to an export oriented enterprise whose export sales exceed 70% of the total production Sale of gold to BSP Sale of goods, supplies, equipment & fuel to personnel engaged in the international shipping/air transport operations (see 109t) Sales under EO 226 (Omnibus Investment Code 1987) & other special laws f) Transport of passengers & cargo by domestic air/sea carriers from Philippines to foreign country

NADZ

Sources of Input VAT 1) Actual Local Purchase of goods/services Input VAT on capital Goods (depreciable goods) useful life must be greater than or equal to 1 year (otherwise, not considered as capital asset) treated as depreciable asset under the tax code used directly/indirectly in production/sale of taxable goods/services Unclaimed Input VAT for the month of acquisition if capital goods is sold/disposed within 5 years or prior to exhaustion of input VAT, entire unamortized input VAT can be claimed as input tax credit during the month/quarter the sale/disposal is made

2) VAT on Importation importation of goods in the Philippines (whether personal/business use-except VAT exempt transactions) a) in general b) based on quantity/volume of goods ONLY importation by a VAT person for business use is creditable as Input VAT (p.466 V&R)

3) Presumptive (4%) purchase of VAT exempt primary agricultural & marine food products at their original state which are used as inputs to their production sardines refined sugar/sugar cane mackerel cooking oil milk packed noodles 4) Transitional (2%) from VAT registered suppliers ONLY non VAT registered suppliers (actual 12%) OPT of 3% should be deducted from output VAT to avoid double taxation dont forget to deduct input tax on purchases (12%) if theres any HIGHER between: Beg Inventory (end inv before) of 1st time VAT payer Actual Input VAT

MIXED BUSINESS TRANSACTIONS VAT registered

person INPUT VAT

12% VAT Creditable against output VAT

0% VAT Input tax credit against output VAT of VATable transactions(regular VAT sales)/eligible for tax refund/issuance of TCC

VAT exempt Cost of sale/OPEX exempt from 12% VAT BUT if issued with VAT invoice, shall be subject to 12% output VAT;ONLY the portion of VAT exempt sale with VAT is allowed to have input Vat

Total Value for tariff & custom duties* Custom Duties Excise Tax Other legitimate charges prior to the release of goods from customs duty_______ _______ TAX BASE X 12% VAT on Importation *(dutiable value--determined by BOC)

Invoice Cost Freight Insurance Customs duties Excise Taxes Other legitimate charges prior to the release of goods from customs duty_________________ LANDED COST X 12% VAT on Importation *(dutiable value--determined by BOC)

*Aggregate purchases during the month, net of VAT Exceeds 1M AND Useful life exceeds 1 year

(exclusive of VAT) *{acquisition costpurchase price (not payments actually made)}

NO YES

OUTRIGHT input VAT is deductible at full amount from output VAT in the month of acquisition

SPREAD over: 60 months

SHORTER useful life

NADZ