COVERAGE OFTHE VALUE-ADDED TAXI. VAT on sales or lease of goods,

properties and services;

a) Sales on goods and propertiesb) Transactions deemed salec) Sales of Services and use or lease of

properties

CLASSIFICATION OF SALES/TRANSACTIONS

1. Exempt Sales-exempt from VAT

2. Zero Rated Sales-subject to zero percent VAT rate

3. TAXABLE SALES-subject to 12% VAT rate

“What does the law says?”

• The NIRC under section 105 provides that any person who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods (unless their transactions are VAT exempt or zero-rated) shall be liable to the 12% VAT rate imposed in Sections 106, 107 and 108 of the NIRC.

Receipt samples with VAT

Receipt samples with VAT

Computation of VAT on Sale of goods

• Tax Exclusive Methodthe VAT is presumed not yet included in the

tax base amount. Such amount representing the taxable base (exclusive of vat), whether gross sales price or gross sales receipts, is multiplied by 12% vat rate. The resulting product is the VAT due or output tax, as the case maybe. This is normally the method adopted by the seller when it prepares the sales invoice on its sales transactions.

Computation of VAT on Sale of goods

• Tax Inclusive Methodthe VAT is presumed to be already included

in the tax base amount. Such amount representing the taxable base (inclusive of vat), whether invoice sales price or invoice gross receipts, is multiplied (12/112) vat factor. The resulting product is the vat due or output tax as the case maybe. This is usually the method adopted by the BIR in its tax audits/examinations.

Computation of VAT on Sale of goods

• VAT Exclusive Method Formula:Gross Sales/Gross Sales Receipt (excluding VAT) x 12% = VATe.g. Gross Sales of a restaurant in a day

P50,000 x .12 = P6,000

• VAT Inclusive Method Formula:Invoice Price/Invoice Receipts (including VAT) x (12/112) = VAT

e.g. (ditto)

P56,000 x (12/112) = P6,000

b) Transactions “deemed sale”• 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.*Transfer of goods or properties not in the course of business can take place when the VAT-registered person withdraws goods from his business for his personal use.

• Distribution or transfer to:(a) shareholders as share in the profits of the VAT-registered person.*Property Dividends which are distributed by the company to its shareholders and declared out of retained earnings shall be subject to VAT (12%)(b) Creditors in payment of debt or obligation

b) Transactions “deemed sale”• Consignment of goods if actual sale is not made within 60 days

following the date such goods were consigned.*Consigned goods returned by the consignee within the 60-day period is not deemed sold.

• Retirement from or cessation of business with respect to inventories of taxable goods (all goods on hand, whether capital goods, stock-in-trade, supplies or materials) existing as of the date of such retirement.(a) Change of ownership of the business. There is a change in the ownership of the business when a sole proprietorship incorporates; or the proprietor sells his entire business.(b) Dissolution of a partnership and creation of a new partnership which takes over the business.*tax base shall be the acquisition cost/current market price whichever is lower.

b) Transactions “deemed sale”

Formula:Gross Value of Goods “deemed sold” (excluding VAT) x 12% = VAT

e.g. A at the time of retirement has 1,000 pcs of merchandise which was deemed sold at a