Application: Value Added Tax (VAT)
I. True or False (numbers 1 to 10)
1. For a person to be subjected to any business tax, it is necessary that he is regularly engaged in the conduct
or pursuit of an economic activity. (False, non-resident who rendered services in the Philippines,
importers, consumers not engaged in business, government and cooperatives are also subject to VAT.)
2. A non-resident foreign person performing isolated transaction in the Philippines shall be liable to VAT.
(True)
3. Non-stock and non-profit private organizations which sell exclusively to their members in the regular
conduct or pursuit of commercial or economic activity are exempt from value-added tax. (False, they are
not exempt unless otherwise provided by law.)
4. Government entities engaged in commercial or economic activity are generally exempt from value added
tax. (False)
5. A tax payer whose annual gross receipts or sales exceed P 3,000,000 shall pay VAT even if not VAT
registered. (True, this is mandatory VAT registration).
6. A taxpayer whose annual receipts or sales do not exceed P 3,000,000 but who is VAT registered shall pay
VAT. (True, this is optional VAT registration.)
7. The non-resident lessor or foreign licensor who is not VAT-registered is subject to VAT. (True, this is an
exception to “regularity principle.)
8. An individual whose gross sales or receipts do not exceed P 100,000 is exempt from VAT provided he pays
the 3% other percentage tax. (False, marginal income earners are exempt from business tax, either OPT
or VAT.)
9. On January 1, 2018, company A, a newly established business is expecting to generate a revenue for year
2018 amounting to P 3,500,000, thus mandatorily liable to VAT. (True)
10. On January 31, 2018, Company B, a non-VAT registered person issues a vatable invoice amounting to P
20,000, thus not liable to VAT. (False, a non-VAT registered person cannot issue VAT invoice, otherwise,
he is liable to VAT.)
11. In 2018, Mr. Chris gross receipts from his practice of profession is P 1,600,000 while her wife has gross
sales of P 1,200,000 derived from her trading business. Assuming that they are not VAT-registered person,
will they be subject to VAT? Why? (No, because husband and wife are separate taxpayers.)
12. In 2018, the following gross receipts/ sales were recorded by Nora.
Gross receipts from practice of profession
P 850,000.00
Gross receipts from transport of goods and services
2,450,000.00
Gross sales from trading activities
675,000.00
Assuming Nora is a non-VAT registered, will she be liable to VAT? Why? (Yes, she is subject to
mandatory VAT registration because her sales or receipts exceeds P 3M.
13. Taxpayers who are qualified to optionally register may apply for VAT registration not later than how many
days before the beginning of the calendar quarter? (10 days before the beginning of the calendar quarter.)
14. If a radio or television broadcasting company who is not mandatorily required to register under the VAT
system chose to be a Vat taxpayer. What is the consequence of its choice? (irrevocable lifetime)
15. CLD made the following sales during the 12-month period:
Sales, VAT taxable transactions
P 2,500,000.00
Sales, VAT zero-rated transactions
400,000.00
Sales, VAT exempt transactions
100,000.00
Total
P 3,000,000.00
Based on the above facts, Is CLD liable to VAT? Why? (No, because the sales of CLD excluding VAT
exempt transactions do not exceed P 3M.)
16. Sales during the year of 2018:
Subject to:
Chris
Princess
Nora
Cora
12% VAT
900,000
1,950,000
1,200,000
2,000,000
0% VAT
1,000,000
965,000
650,000
1,000,000
Exempt
1,200,000
785,000
550,000
250,000
Who is subject to VAT? Justify. (No one is liable to VAT because sales or receipts excluding VAT do not
exceed P 3M.)
Exercises (VAT Exemptions)
II. Multiple Choices:
1. D’ Tiger Transport Corporation has land, sea and air transport operations. To improve its services, which of the
following importation is subject to VAT?
I. 20 units of air – conditioned buses
II. 12 units of life-saving, safety and rescue equipment for shipping transport operation
III. 12 airplanes
IV. 8 ships
Which of the following importation is subject to VAT?
A. I only
B. II only
•
c. I and II only
d. All of the above
See Sec. 109 (T) of the Tax Code, it provides that sale, importation or lease of passengers or cargo
VESSEL and AIRCRAFT, including engine, spare parts and equipment thereof for domestic or
international transport operations.
2. An importer of flowers from abroad:
a. Is liable to VAT, if it registers as a VAT person
b. Is exempt from VAT, because the goods are treated as agricultural products
c. Is exempt from VAT, provided that his total importation of flowers does not exceed P 3,000,000.
d. Is liable to VAT, despite the fact that it did not register as a VAT person and his total annual sales of
flowers do not exceed P 3,000,000.
•
•
•
It depends. If the flowers are not for human consumption, it is liable to VAT, however, if it is for
human consumption is exempt from VAT.
But for the purpose of this problem, the answer is D, though in its original state, it is not for human
consumption.
See Sec. 109 (A) of the Tax Code. It provides that agricultural and marine food products in their
original state and for human consumption are exempt from VAT.
3. Which of the following are exempt from VAT?
a. Services of banks
b. Services of money changers and pawnshops
c. Services of credit cooperatives
d. all of the above
•
•
See Sec. 109 (V) and 109 (E) of the Tax Code. It provides that the service of bank, non-banks
performing quasi-banking functions are exempt from VAT. They are liable under OPT.
See Sec. 109 (M) of the Tax Code. It provides that gross receipts of credit cooperatives from its
members and non-members are not taxable provided that the said cooperatives are registered
with CDA. However, its importation is subject to VAT.
4. Which of the following transactions is exempt from VAT?
a. Medical services such as dental and veterinary services rendered by professionals.
b. Legal services
c. Services arising from employee-employer relationship
d. Services rendered by domestic air transport companies
•
•
Medical, dental and veterinary services are exempt from VAT except those rendered by doctors
(See. 109G of the Tax Code).
Services rendered from employer-employee relationships are exempt from VAT (Sec. 109I of the
Tax Code).
5. Farmers Products (FP) is a buyer and miller of agricultural products. During the first quarter, its transactions are
recorded as follows:
Purchase of Palay
Purchase of Corn
Milling of Palay of customers
Milling corns of customers
Units
500,000 kg
200,000 kg
4,000,000 kg
3,000,000 kg
Cost/ Kg
15
8
2
2
FP milled its purchase for productions of rice and corn grits with an output of 80% and sold the products to various
retailers for P 30 per kilo of palay and P 20 per kilo of corn grits.
How much is the VAT payable of FP during the quarter?
a. 1,680,000
c. 384,000
b. 1,440,000
d. 0
•
•
Services by agricultural contract growers and milling for others of palay into rice, corn into grits,
and sugar cane into raw sugar are exempt from VAT (Sec. 109F of the Tax Code).
Likewise, purchases of agricultural products (e.g. palay and corn) in their original state and for
human consumption are also exempt (Sec. 109A of the Tax Code).
6. Which of the following sale or importation of goods shall be exempt from VAT?
a. Fertilizers
b. seeds, seedlings, and fingerlings
c. Fish, prawn, livestock, and poultry feeds, including ingredients, whether locally or imported, used
in the manufacture of finished feeds
d. Specialty feeds
•
Sale or importation of fertilizers; seeds, seedlings, and fingerlings; fish, prawn, livestock, and
poultry feeds, including ingredients, whether locally produced or imported, used in the
manufacture of finished feeds (except feeds for pets) are exempt from VAT (Sec. 109B of the Tax
Code)
7. Which of the following transactions is exempt from value added tax?
a. Sales by an art gallery of literary works, musical composition, work of art and similar creations, or
devices performed for the production of such works.
b. Medical, dental, hospital and veterinary professional services.
c. sale of cotton and cotton seeds in their original state.
d. Sales of books and any newspaper, magazine, review or bulletin, which appears at regular intervals
with fixed prices for subscription and sale which is not devoted principally to the publication of paid
advertisements.
•
•
•
•
Letter (a) is not included in the list of VAT exemptions.
Letter (b) pertains to the services of medical, dental, veterinary doctors, hence vatable.
Letter (c) is vatable due to the presence of cotton. It is not in its original state, and it was already
processed.
Letter (d) is exempt. See Sec. 109 (R) of the Tax Code that provides sales, importation, printing, or
publication of books and any newspaper, magazine, review or bulletin which appears at regular
intervals with fixed prices for subscription and sale and which is not devoted principally to the
publication of paid advertisement;
8. Statement 1: Sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer
of the agricultural products sold is the cooperative itself. If the cooperative is not the producer (e.g. trader), then
only those sales to its members shall be exempted from VAT.
Statement 2: Sale or importation of agricultural food products in their original state is exempt from VAT
irrespective of the seller and buyer thereof.
a. true, true
c. false, false
b. true, false
d. false, true
•
•
•
•
•
See Sec. 109 (L) of the Tax Code: The agricultural cooperative must be registered with CDA;
Produce – sold to members or non-members are exempt;
Not produce – sold to members is exempt; to non-members is vatable.
Importation in relation to their agricultural produce is exempt, otherwise vatable.
See Sec. 109 as a reference for statement 2.
9. Determine the business taxes of the following: Ans: C
a. Leases of residential units with a monthly rental per unit not exceeding P 15,000 (regardless aggregate
annual gross rentals)
b. Leases of residential units with a monthly rental per unit exceeding P 15,000 but the aggregate of such
rentals of during the year do not exceed P 3,000,000
c. Lease of commercial units regardless of monthly rental per unit, but the aggregate value of such rentals
during the year exceed P 3,000,000.
A
B
C
D
None
None
None
VAT
VAT
OPT
OPT
VAT
VAT
•
OPT
VAT
VAT
See Sec. 109 (P) of the Tax Code. It provides for the following rules:
o Lease of residential lot not exceeding P 15,000 is not liable to VAT and OPT, regardless of
the receipts for the taxable year.
o Lease of residential lot exceeding P 15,000 is liable to either VAT or OPT depending on the
receipts for the taxable year.
o Lease of commercial unit regardless of the value of the lease is liable either VAT or OPT
depending on the receipts for the taxable year.
10. In cases where a lessor has several residential units for lease, some are leased out for a monthly rental per
unit not exceeding P 15,000 while others are leased out for more than P 15,000 per unit, his tax liability will be:
a. The gross receipts from rentals not exceeding P 15,000 per month per unit shall be exempt from VAT
regardless of the aggregate annual gross receipts.
b. The gross receipts from rentals exceeding P 15,000 per month per unit shall be subject to VAT if the
annual gross receipts from said units including the gross receipts from units leased out for not more than
P 15,000 exceed P 3,000,000.
c. Both statements are correct.
d. Both statements are incorrect
•
Still, under Sec. 109(P), a lessor who has several residential units for lease, some are leased out
for a monthly rental per unit not exceeding P 15,000 while others are leased out for more than P
15,000 per unit, his tax liability will be:
o Not exceeding P 15,000, exempt regardless of the receipts for the whole year.
o Exceeding P 15,000, either VAT or OPT depending on the receipts for the whole year.
11. A real estate dealer sold 2 adjacent residential lots in the city for a price of P 1,000,000 each, or a total price
of P 2,000,000 to a vendee who intends to erect his residential house thereon. The sale shall be classified as a:
a. 12% VAT transactions
b. 0% VAT transactions
c. VAT exempt transactions
d. None of the foregoing
•
If two adjacent lots bought by the same buyer from the same seller, for purposes of VAT, the value
of each lot shall be combined.
12. A subdivision developer sold five residential house and lots, each to different vendees, for P 3,000,000 per lot,
or a total sale of P 15,000,000 for the taxable period. These sales shall be classified as:
a. 12% VAT transactions
b. 0% VAT transactions
c. VAT exempt transactions
d. None of the foregoing
•
If two adjacent lots bought NOT by the same buyer from the same seller, for purposes of VAT, the
value of each lot shall NOT be combined.
13. Camella Realty corporation sold the following real properties during the taxable year:
2 units of residential house and lot at P 3,000,000 each
P6,000,000
4 residential lots at P 2,000,000 each
8,000,000
1 commercial lot at P 3,000,000 each
3,000,000
How much is the total transactions subject to VAT?
a. P 6,000,000
c. P 11,000,000
b. P 8,000,000
d. P 17,000,000
Solution:
2 units Residential house and lot (3M each)
4 units Residential lots (2M each)
1 commercial lot (3M each)
Total
•
P 6,000,000
8,000,000
3,000,000
P 17,000,000
All exceeds the threshold value as provided by law for purposes of determining whether subject
to VAT or not.
o Residential lot – 1.5M
o Residential house and lot – 2.5M
Exercises (Sales of Goods or Properties)
III. Multiple Choice
1. Which of the following transactions of a VAT – registered seller is NOT subject to VAT?
a.
b.
c.
d.
•
Remaining inventory upon retirement from business
Sales of company’s used car to its officers
Sale of goods or services to the national government
Sale of residential lot amounting to P 1,000,000
(d) VAT exempt because the value of the sale is less than P 1,500,000.
2. Gross selling price includes all of the following except one? Which one?
a. Total amount which the purchaser pays to the seller
b. Total amount which the purchaser is obligated to pay to the seller.
c. Excise tax
d. Value added tax
•
VAT is an indirect tax, the one who pays it is the buyer, hence, the selling price is exclusive of VAT.
3. Which of the following is NOT deductible from Gross Selling Price for VAT purposes?
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.
b. Discounts determined and granted after the agreed sales quota is met by the buyer.
c. Sales discounts indicated in the invoice at the time of sale, the grant of which is not dependent
upon the happening of a future event deductible within the same month or quarter given.
d. 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.
•
Discounts to be deducted shall not be subject to the happening of future events.
4. On January 5, 2018, Towel Co., VAT-registered person, sold on account goods for P 112,000. The term was:
2/10, n/30. Payment was made on January 10, 2018. The total amount due is:
a. P 110,000
c. P 112,000
b. P 107,800
d. P 109,760
Solution:
The taxpayer avails the cash discount. Discount shall be computed based on the gross selling price, that is
exclusive of VAT. Thus,
Sales, net of VAT (112,000/1.12)
100,000
Discount (100,000 x 2%)
2,000
Receivables
112,000
Less: Sales discount
2,000
Collection
110,000
5. Mr. Andres, VAT-registered real estate dealer, transferred a parcel of land held for sale to his son as gift on
account of his graduation. For VAT purposes, the transfer is:
a. Not subject to VAT because it is a gift
b. Subject to VAT because it is deemed sale transaction
c. Not subject to VAT because it is subject to gift tax
d. Subject to VAT because it is considered as an actual sale
•
See transactions deemed sales in PPT-VAT.
6. One of the following is not a transaction deemed sale:
a. 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.
b. Distribution or transfer to shareholders or investors of goods or properties as share in the profits
of a VAT-registered person or creditors in payment of debt.
c. Retirement from or cessation from business with respect to all goods on hand as of the date of
such retirement or cessation.
d. Consignment of goods if actual sale is made within 60 days following the date such goods were
consigned.
•
Consignment not sold beyond 60 days is a transaction deemed sales.
7. Genson Distribution Inc., a VAT taxpayer, had the following data in a month:
Cash sales
P 200,000
Open account sales
500,000
Consignment:
0 to 30 days old (on which there were remittances from consignees of P 200,000)
600,000
31 to 60 days old
61 days old and above
700,000
900,000
How much is the Output tax?
a. P 348,000
b. P 216,000
Solution:
Cash sales
Open account sales
Consignment (61 days old)
Consignment (30 days)
Total
VAT (1,800,000 x 12%)
c. P 264,000
d. P 108,000
P 200,000
500,000
900,000
200,000
P 1,800,000
P 216,000
8. The following are the data of Davao Appliances Marketing Co., VAT registered person for the last quarter of
2018:
Sales up to December 15, total invoice value
P 380,800
Purchases up to December 15, net of input taxes
150,000
Additional information:
On December 16, 2018, the company retired from its business and the inventory valued at P 190,000
remained unsold. There is deferred input tax from the third quarter of P 3,500
How much is the total value-added taxes payable by Davao Appliances Marketing Co.?
a. P 42,100
c. P 22,800
b. P 21,500
d. P 19,300
Solution:
Output tax on regular sales (380,000/1.12 x 12%)
Output tax on transaction deemed sales (190,000 x 12%)
Input tax on purchases (150,000 x 12%)
Deferred input tax
Vat payable
P 40,800
22,800
(18,000)
(3,500)
P 42,100
9. Evelyn, a trader of appliances, a VAT registered person made the following sales of goods during the month of
March 2018, exclusive of VAT:
Cash sales
P 200,000
Open account sales
100,000
Installment sales
100,000
Note: Receipt from installment sales is P 20,000
Consignment made: (net of VAT)
January 15, 2018
100,000
February 15, 2018
100,000
March 15, 2018
100,000
Output tax is:
a. P 60,000
c. P 72,000
b. P 40,800
d. P 64,800
Solution:
Output tax on cash sales (200,000 x 12%)
Output tax on open account sales (100,000 x 12%)
Output tax on Installment sales (100,000 x 12%)
Output tax on consignment (100,000 x 12%)
Total
P 24,000
12,000
12,000
12,000
P 60,000
10. Kaktus Realty Inc. developed a condominium in Manila. During the month of January 2018, it had the following
data (VAT included, if applicable):
Cash sale of a 3-bedroom unit
P 5,040,000
Sale of parking lot
560,000
Installment sale of 2-bedroom unit (initial payment
exceed 25% of the selling price)
3,920,000
The 3-bedroom unit sold for cash had a zonal value of P 5,000,000 and the 2-bedroom unit had a fair market value
per tax declaration of P 3,000,000. How much is the output tax for the month?
a. P 920,000
b. P 900,000
Solution:
Cash sale of a 3-bedroom unit (5,000,000 x 12%)
Sale of parking lot (560,000/1.12 x 12%)
Installment sale (3,920,000/1.12 x 12%)
Total output tax
c. P 1,020,000
d. P 1,080,000
600,000
60,000
420,000
1,080,000
11. Bahay Kubo Inc. is a real estate dealer. Details of its sales during the year showed the following:
Date of sale
June 2, 2018
Consideration in the deed of sale
P 5,000,000
Fair market value in the assessment
4,800,000
Zonal value
5,200,000
Schedule of Payments:
June 2, 2018
1,000,000
June 2, 2019
2,000,000
June 2, 2020
2,000,000
How much is the output tax to be recognized for the June 2, 2020 payment?
a. P 0
c. P 249,600
b. P 24,000
d. P 625,000
Solution:
Ratio of Initial Payment/ Selling Price = 1,000,000/ 5,000,000 = 20% (Installment)
VAT (5,200,000 x 12%)
624,000
Payment (2M/5M x 624,000) 249,600
12. Assuming that the scheduled payment on June 2, 2018 is P 2,000,000, how much is the output tax to be
recognized for the June 2, 2020 payments?
a. P 0
c. P 249,600
b. P 24,000
d. P 624,000
•
Ratio of IP/SP = 40%, hence, deferred payment. VAT shall be paid in full in year 2018.
13. JJ is a real estate dealer. During the month of October 2018, he sold three (3) commercial lots under the
following terms:
Lot 1
Lot 2
Lot 3
Selling Price
P 250,000
P 200,000
P 300,000
Cost
150,000
130,000
175,000
Gain/loss
P 100,000
P 70,000
P 125,000
Terms:
Down, Oct. 5
25,000
20,000
40,000
Due:
12/05/2018
25,000
50,000
20,000
Year 2019
200,000
130,000
240,000
Zonal Value
350,000
260,000
250,000
How much is the output tax for the month of October?
a. P 26,500
c. P 31,800
b. 34,800
d. 40,200
Solution:
Test: Deferred or Installment (IP/SP)
Lot 1: (50,000/ 250,000) = 20% (installment)
Lot 2: (70,000/ 200,000) = 35% (deferred)
Lot 3: (60,000/ 300,000) = 20% (installment)
Payment:
Lot 1: (350,000 x 12%) x 25/250 = 4,200
Lot 2: (260,000 x 12%) = 31,200
Lot 3: (300,000 x 12%) x 40/300 = 4,800
Total: 40,200
14. The Output tax for December is
a. P5,400
b. 4,500
Solution:
Lot 1: (350,000 x 12%) x 25/250 = 4,200
Lot 2: 0
Lot 3: (300 x 12%) x 20/300 = 2,400
Total: 6,600
c. P 6,600
d. O
Exercises (VAT on Importation)
IV. Multiple Choice:
1. The Vat on importation of goods which are subsequently used or sold in the course of trade or business by a
VAT registered importer shall be treated as
I. tax credit
II. Inventoriable cost
III. Expense
a. I only
c. III only
b. II only
d. none of the above
•
VAT on importation is a n input tax which can be credited to output tax.
2. Which of the following statement is incorrect?
a. The vat on importation is paid to the Bureau of Customs before the imported goods are released from its
custody.
b. When a person who enjoys a tax exemption on his importation subsequently sells in the Philippines such
imported articles to non-exempt persons, the purchaser-non-exempt person shall pay the VAT on such
importation.
c. Expenses incurred after the goods are released from Customs custody are disregarded in computing VAT
on importation
d. Imported which are subject to excise tax are no longer subject to value-added tax.
•
VAT on importation is based on landed cost with excise tax, if any.
3. Bryan, VAT registered person, imported machines from Australia as follows:
Machine
Acquisition Cost
Purpose
A
P 100,000
Personal use
B
200,000
Business use
C
300,000
For sale
The importations were subjected to 50% excise tax based on purchase price. Machine C was sold for P 1,000,000
exclusive of VAT. How much is the vat paid to the BOC?
a. 108,000
b. 90,000
Solution:
Machine A
Machine B
Machine C
Total importation
Excise Tax (600,000 x 50%)
Cost
VAT (900,000 x 12%)
c. 54,000
d. 36,000
P 100,000
200,000
300,000
P 600,000
300,000
P 900,000
P 108,000
4. Using the same data in Q2, the amount of VAT to be remitted to the BIR is?
a. 12,000
c. 106,000
b. 30,000
d. 84,000
Solution:
Output tax (1,200,000 x 12%)
Less: Input tax (500,000 x 1.50 x 12%)
VAT payable
P 120,000
90,000
P 30,000
5. World Power Corp. imported an article from Japan. The invoice value of imported articles was $7,000 (1$ - P
50). The following were incurred in connection with the importation:
Insurance
P 15,000
Freight from Japan
10,000
Postage
5,000
Wharfage
7,000
Arrastre
8,000
Brokerage Fees
25,000
Facilitation Fee
3,000
The imported article was imposed P 50,000 customs duty and P 30,000 excise tax.
The company spent P 5,000 for trucking from the customs warehouse to its warehouse in QC. The carrier
is not subject to VAT.
The VAT on importation:
a. 60,000
b. 42,000
c. 60,600
d. 80,000
Solution:
Purchase Price ($7,000 x 50)
Insurance
Freight from Japan
Postage
Wharfage
Arrastre
Brokerage Fees
Custom duty
Excise Tax
Total
VAT (500,000 x 12%)
P 350,000
15,000
10,000
5,000
7,000
8,000
25,000
50,000
30,000
P 500,000
P 60,000
6. Based on the preceding number, if the imported article was sold for P 800,000, VAT exclusive, the VAT payable
is:
a. 24,000
c. 36,000
b. 12,000
d. 11,040
Solution:
Output tax (800,000 x 12%)
Input tax
VAT payable
P 96,000
60,000
P 36,000
Exercises (Tax Credits)
V. Multiple Choice:
1. Any input tax attributable to zero-rated sales by a VAT-registered person may at his option be:
a. deducted from output tax
b. refunded
c. applied for tax credit certificate which may be used in payment of internal revenue taxes.
d. all of the above
2. Tax credit for input taxes shall be allowed if:
a. Both the seller and the purchaser is VAT registered.
b. Either one of the seller or the purchaser is VAT registered as long as VAT invoice is issued.
c. Neither one of the seller or the purchaser is VAT registered as long as VAT invoice is issued.
d. The seller is VAT registered regardless of whether the purchaser is VAT registered or not.
3. Which statement is not correct?
a. the excess input taxes of a taxable month arising from domestic sales may be carried over the to the
succeeding month.
b. the excess input taxes of a taxable quarter arising from domestic sales may be carried over to the
succeeding quarter.
c. The excess input taxes of a taxable period arising from domestic sales may be refunded.
d. The excess input taxes of a payable period arising from export sales may be refunded.
4. Magnifico Corp. is a vat-registered dealer of appliances. The following data are for the last quarter of the year:
Sales, total invoice value
P 6,920,000
Purchases, net of input taxes
5,500,000
Sales return, total invoice value
200,000
Purchase return, net of VAT
300,000
Deferred input taxes (carried over from the third
quarter of the year)
12,000
The value added tax payable for the last quarter of the year by Magnifico Corp. is :
a. 84,000
c. P 108,000
b. 96,000
d. 130,500
Solution:
Output tax (6,920,000 – 200,000/ 1.12 x 12%)
Purchases (5,500,000 – 300,000) x 12%
Deferred taxes
VAT Payable
P 720,000
(624,000)
(12,000)
P 84,000
5. CG Corp. is a VAT registered entity with the following data for a taxable month:
Domestic Sales
P 500,000
Transactions deemed sales
500,000
Export Sales
500,000
Sales to DEF, an export-oriented enterprise
(2/3 of DEF’s annual output is actually exported)
Purchases (invoice cost from vat registered entities)
Purchases (invoice cost from non-VAT registered entities)
The VAT payable of CG should be
a. P 180,000
b. 156,000
Solution:
Domestic sales
Transactions deemed sales
Sales to DEF, export enterprise
Total sales
Output tax (1,500,000 x 12%)
Input tax (224,000/1.12 x 12%)
VAT Payable
500,000
224,000
100,000
c. P 120,000
d. 108,000
P 500,000
500,000
500,000
P 1,500,000
P 180,000
(24,000)
P 156,000
6. Sofia had the following data for the month of June (all amount is vat exclusive):
CASE 1
CASE 2
Sales
1,900,000
1,800,000
Purchase of Goods
1,260,000
1,600,000
Purchases of machines
1,440,000
900,000
Machine Life
6 years
3 years
The amount of vat payable (excess tax) shall be:
a
b
c
d
Case 1 54,000
73,920
73,290
None
Case 2 (84,000)
(84,000)
20,000
None
Solution:
Case 1: Output tax (1,900,000 x 12%)
Input tax – goods (1,260,000 x 12%)
Capital goods (1,440,000 x 12% / 60 mos.)
VAT Payable
Case 2: Output tax (1,800,000 x 12%)
Input tax – goods (1,600,000 x 12%)
Capital goods (900,000 x 12%)
VAT Payable (excess)
228,000
(151,200)
(2,880)
73,920
216,000
(192,000)
(108,000)
(84,000)
7. Maymay, VAT registered, made the following purchases during the month of January of this year:
Goods for sale, inclusive of VAT
246,400
Supplies, exclusive of VAT
20,000
Packaging materials, total invoice amount
56,000
Home appliance for residence, gross of VAT
17,920
Office machines (5 pcs), 8 years useful life, net
of VAT
2,000,000
Repair of store amounted to P 20,000, no supporting official receipt. Creditable input taxes are:
a. 38,800
c. 37,440
b. 34,800
d. 35,520
Solution:
Input tax, goods for sale (246,400/1.12 x 12%)
Input tax, supplies (20,000 x 12%)
Input tax, packaging materials (56,000/1.12 x 12%)
Input tax, office machines (2,000,000 x 12% / 60 mos.)
Total creditable input tax
(26,400)
(2,400)
(6,000)
(4,000)
(38,800)
Exercises (Presumptive, transitional and other provisions on input taxes)
1. All of the following are allowed presumptive input tax, except for one.
a. Processor of sardines, mackerel, and milk
b. Manufacturer of refined sugar and cooking oil
c. Producers/ manufacturer of packed noodles
d. Supplier of books and other school supplies
•
Presumptive input tax is applicable ONLY to sardines, mackerel, milk, instant packed noodles, refined
sugar and cooking oil. The tax is 4% of the purchases of the materials necessary to produce these said
products.
2. Mantika Corp., a VAT-registered Corp., is a producer of cooking oil from coconut and corn. It had the
following data for the month of January this year:
Sales, gross of VAT
Corn & Coconut, last year
Purchases of Corn & Coconut
Corn & Coconut, January of this year
Purchases from VAT suppliers, VAT
Included:
Packaging materials
Supplies
P 784,000
50,000
330,000
20,000
56,000
16,800
The value added tax payable for the month of January of this year:
a. P 56,060
b. P 54,900
c. P 60,650
d. 63,000
Solution:
Output tax (784,000/1.12 x 12%)
84,000
Presumptive Input tax, corn and coconut (330,000 x 4%)
(13,200)
Input tax, packaging and supplies (72,800/1.12 x 12%) (7,800)
VAT payable
63,000
3. Taxpayers who became VAT registered persons upon exceeding the minimum turn-over of P 3,000,000
in any 12-month period, or who voluntarily register even if their turnover does not exceed P 3,000,000
shall be entitled to a transitional input tax on the inventory on hand as of the effectivity of their VAT
registration on the following, except:
a. Supplies for use in the course of taxpayer’s trade or business
b. Goods which have been manufactured by the taxpayer
c. Goods in process for sale
d. Capital goods being used in the operation of the business.
•
Transitional input tax is applicable to taxpayer who shifted from NON – VAT to VAT system. The input
tax is 2% of the inventory on hand as of the effectivity of the VAT registration or the actual value of VAT
paid to those said inventories, whichever is higher.
4. Transitional input tax can be claimed as deduction from the output tax. Which of the following
statements is correct?
a. It can be claimed by a VAT registrable person
b. It can be claimed by a taxpayer who registered as VAT taxpayer from the inception of the
business.
c. It can be claimed by a taxpayer who is initially subject to VAT and subsequently cancelled his
VAT registration.
d. It can be claimed by a taxpayer who is initially paying percentage tax as VAT taxpayer
5. Which of the following shall be included in the beginning inventory for purposes of determining the
transitional input VAT?
a. Goods purchased for resale in the ordinary course of business or trade.
b. Materials purchased for further processing which have not yet undergone processing.
c. Goods which have been manufactured by the taxpayer
d. All of the above
6. A taxpayer registered under the VAT system on January 1, 2019. Value of inventory as of December 31,
2018 purchased from VAT – registered persons, P 112,000; VAT paid on inventory as of December 31,
2018, P 12,000; Value of inventory as of December 31, 2018 purchased, from non-VAT persons, P
518,000; Sales, net of VAT, P 240,000; Sales, gross of VAT, P 45,920; Purchases, net of VAT, P 70,000;
Purchases of VAT exempt goods, P 50,000.
VAT PAYABLE IS:
a. P 23,080
b. P 25,320
Solution:
Output tax:
Sales, net of VAT (240,000 x 12%)
Sales, gross of VAT (45,920/1.12 x 12%)
c. P 12,720
d. P 12,230
28,800
4,920
Total output tax
Input tax:
Purchases, net of VAT (70,000 x 12%)
Transitional input tax (112,000 + 518,000) x 2% 12,600
Actual value of VAT
12,000
VAT payable
•
33,720
(8,400)
(12,600)
12,720
Take note of the amount subject to transitional input tax; it is based on the amount of inventory
regardless of the source of purchases (VAT or NON-VAT). The law provides only the word “inventory”, it
does not distinguish whether the purchases must be from VAT or NON – VAT suppliers. However, VAT
exempt inventories are excluded under the list of “inventories”.
7. Carlito, a VAT-registered grocery and sugar dealer submitted the following data as of Dec. 31,2018 to
the Revenue District Officer:
Grocery items, total value
P 350,000
Raw sugar cane, total value
150,000
During the month of January 2019, first month as a VAT-registered taxpayer, he had the following sales
and purchases:
Grocery, total invoice value
Raw sugar cane, exc. VAT
Sales
Purchases
P 1,195,040
P 708,400
570,000
320,000
The VAT payable for the first month is:
a. P 29,400
b. P 47,400
Solution:
Output tax (1,195,040/1.12 x 12%)
Input tax (708,400/1.12 x 12%)
Transitional input tax (350,000 x 2%)
VAT Payable
•
c. P 45,140
d. P 36,500
P 128,040
(75,900)
(7,000)
P 45,140
Sales and purchases of raw sugar are VAT exempt transactions because they are items in their original
state and for human consumption.
8. Dong Inc., a manufacturer had the following data for the first month of 2019: (First year as a VAT
taxpayer)
Sales – Exports, P 2,000,000; Domestic (without VAT), P 1,000,000; Purchases, excluding VAT – raw
materials, P 300,000; Services, P 100,000; Machinery (estimated useful life 2 years), P 400,000.
On January 1, 2019, the company had inventories and taxes paid thereon as follows:
Raw Materials – Cost, P 120,000; VAT Paid, P 2,000
Supplies – Cost, P 40,000; VAT Paid, P 4,000
During the month, raw materials were purchased from another enterprise with a total invoice value of P
61,600, not included above.
The VAT payable by Dong Inc. is:
a. P 72,000
b. P 57,000
c. P 11,000
d. P 66,000
Solution:
Output tax (1,000,000 x 12%)
Input tax, raw mats and services (400,000 x 12%)
Input tax, capital goods (400,000 x 12%)
Input tax, supplies (61,600/1.12 x 12%)
Transitional input tax (120,000 x 2%)
2,400 vs. 2,000
Transitional input tax (40,000 x 2%)
800 vs. 4,000
VAT payable
•
120,000
(48,000)
(48,000)
( 6,600)
(2,400)
(4,000)
11,000
If the amount of capital goods purchased is less than 1 million, the input tax thereto shall be deducted in
full on the taxable month. If the amount of purchased is more than 1 million the input tax shall be
amortized over 5 years or the economic life of the capital goods whichever is shorter.
9. What institution is required to deduct and withhold a final VAT of 5% on the purchase of goods or
services subject to VAT?
a. National government or any political subdivisions thereof
b. Government-owned or controlled enterprises
c. Both a and b
d. Neither a nor b
10. The withholding agent of creditable value added tax is required to remit the amount of value added tax
withheld within
a. 25 days following the end of month the withholding is made.
b. 20 days following the end of month the withholding is made.
c. 15 days following the end of month the withholding is made.
d. 10 days following the end of month the withholding is made.
11. A VAT-registered supplier sold goods amounting to P 500,000 to a government-controlled corporation
during a particular quarter. Which of the following statements is incorrect in relation to the sale of
goods?
a. The sale is subject to final withholding VAT
b. The government-controlled corporation will withhold VAT of P 25,000
c. The government-controlled corporation shall remit the withholding VAT to the BIR within 10
days following the end of the month the withholding is made.
d. The VAT-registered supplier may refuse the withholding of VAT as long as it willing to pay the
full 12% VAT.
•
Sale to Government and its GOCC and instrumentalities is not exempt from VAT. However, the
government will withhold 5% of the sales to be remitted to the BIR within 10 days following the end of
the month the withholding is made.
For numbers 12 to 15, use the following data:
A VAT registered trader has the following transactions:
Sales of good to private entities, net of VAT
Purchases of goods sold to private entities, gross of 12% VAT
Sales to a government owned corporation (GOCC), net of VAT
Purchases of goods sold to GOCC, net of 12% VAT
P 2,500,000
896,000
1,000,000
700,000
12. How much is the output tax?
a. P 300,000
c. P 420,000
b. P 120,000
d. nil
13. How much is the standard input tax?
a. P 20,000
c. P 50,000
b. P 70,000
d. nil
14. How much is the creditable input tax?
a. P 166,000
c. P 70,000
b. P 96,000
d. P 180,000
15. How much is the input tax closed to expense (income)?
a. P 14,000
c. P (14,000)
b. P 34,000
d. P (34,000)
16. How much is the VAT payable to the BIR?
a. P 404,000
c. P 204,000
b. P 390,000
d. nil
Solution:
Output tax:
Sales to private entities (2,500,000 x 12%)
Sales to government (1,000,000 x 12%)
Total output tax
Standard input tax:
Sales to government (1,000,000 x 7%)
Creditable input tax:
Purchases, for private entities (896,000/1.12 x 12%)
Standard input tax
Total creditable input tax
Input tax closed to income/expense:
Input tax on purchases for sale to govt. (700,000 x 12%)
Standard input tax
Closed to expense
P 300,000
120,000
P 420,000
P 70,000
P 96,000
70,000
P 166,000
P 84,000
70,000
P 14,000
VAT payable:
Output tax
Input tax
VAT payable
Withholding VAT (1,000,000 x 5%)
VAT still due
P 420,000
(166,000)
P 254,000
(50,000)
P 204,000
A Vat- registered trader has the following transactions for the month of July 2018:
Sale of goods to private entities, net of VAT
Purchases of goods sold to private entities, gross of 12% VAT
Sales to a government owned corporation (GOCC), net of VAT
Purchases of goods sold to GOCC, net of 12% VAT
Purchases of Machineries, gross of VAT, useful life is 6 years
17. How much is the VAT payable to the BIR?
a. P 280,000
b. P 224,000
P 2,500,000
896,000
1,500,000
700,000
11,200,000
c. P 191,500
d. P 300,000
18. Based on the preceding number, how much is the input tax closed to expense (income)?
a. P 13,500
c. P (13,500)
b. P 21,000
d. P (21,000)
Solution:
Output tax, sales to private entities (2,500,000 x 12%)
Output tax, sales to GOCC (1,500,000 x 12%)
Total Output tax
Input tax, purchases for private entities (896,000/1.12 x 12%)
Input tax, purchases for GOCC (1,500,000 x 7%)
Input tax, machineries (11,200,000/1.12 x 12%/60 months) *
VAT Payable
5% withholding VAT (1,500,000 x 5%)
VAT still due
300,000
180,000
480,000
(96,000)
(105,000)
(12,500)
266,500
(75,000)
191,500
*allocation
Private: 2.5M/4M x 20,000 = 12,500
GOCC: 1.5M/4M x 20,000 = 7,500
Actual input tax on purchases for sale to GOCC (700,000 x 12%)
Actual input tax on machinery (see allocation) *
Total input tax
Standard input tax
Income or expense
84,000
7,500
91,500
105,000
13,500
PISC, a VAT – registered government owned or controlled corporation (GOCC), sold goods to Alpha Corporation,
a private company. Selling price is P 1,000,000 while the cost (all purchased from vat-registered suppliers) is P
800,000.
19. How much is the VAT payable by PISC?
a. P 120,000
c. P 24,000
b. P 50,000
d. P 0
Solution: 1,000,000 – 800,000 = 200,000 x 12% = 24,000
20. Based on the preceding number, suppose B is also a GOCC, how much is VAT payable by PISC to the BIR?
a. P 120,000
c. P 24,000
b. P 50,000
d. P 0
Solution: Both are government agencies.
Alpha Corporation (VAT registered) has the following data for the month:
Sales to private entities
Sales – Vat exempt goods
Sales – government
2,000,000
1,000,000
1,000,000
The following input taxes were passed-on by VAT suppliers to Alpha Corporation during the month:
Input VAT on taxable goods
Input Vat on sale of exempt goods
Input VAT on sale to government
Input tax on depreciable capital goods not directly attributable
to any specific activity (monthly amortization for 60 mos)
21. The VAT payable for the month is:
a. P 40,000
b. P 80,000
80,000
20,000
40,000
160,000
c. P 160,000
d. nil
Solution:
Output tax, goods (3M x 12%)
Input tax, goods for private
Input tax, goods for govt. (1M x 7%)
Input tax, capital goods (160,000 x2/4)
VAT payable
5% withholding VAT
VAT still due
360,000
(80,000)
(70,000)
(80,000)
130,000
(50,000)
80,000
22. The amount of input VAT not available for tax credit but may be recognized as cost or expense is:
a. P 60,000
c. P 80,000
b. P 70,000
d. P 140,000
Solution:
Input tax, government (70,000 – 120,000) *
Input tax, VAT exempt
Total
50,000
20,000
70,000
*details:
Input VAT on sale to govt.
40,000
Input VAT, machinery (allocated to VAT exempt and sale to govt.)160,000 x 2/4 80,000
Total
120,000
Leomar, a VAT-registered person has the following data:
Export sales, total invoice amount
P 3,000,000
Domestic sales, total invoice amount
6,720,000
Purchases used to manufacture goods for export and domestic sales:
Raw materials, VAT inclusive
616,000
Supplies, VAT inclusive
448,000
Equipment, VAT exclusive
300,000
23. The amount of input tax which can be refunded or converted into tax credit certificates at the option of
Leomar is:
a. P120,000
b. 118,800
c. P 39,600
d. 50,000
Solution:
Input tax on raw materials (616,000/1.12 x 12%)
Input tax on supplies (448,000/1.12 x 12%)
Input tax on equipment (300,000 x 12%)
Total input tax
Allocation:
Export sales: (zero rated)
Domestic sales: (6,720,000/1.12)
Total sales, without VAT
•
•
66,000
48,000
36,000
150,000
3,000,000
6,000,000
9,000,000
3/9 x 150,000 = 50,000
6/9 x 150,000 = 100,000
Input taxes against output tax on export sales can be converted into tax credit certificate or be refunded
at the option of the taxpayer.
It can also be claimed as a tax credit or input taxes to be deducted from output taxes on other form of
sales.
24. Based on the preceding number, if the refundable input taxes were not refunded but used as tax credit
(input tax), the VAT due is:
a. P 576,000
c. P 666,888
b. P 697,888
d. P 570,000
Solution:
Output tax (6,720,000/1.12 x 12%)
Input tax
VAT payable
P 720,000
(150,000)
P 570,000
25. But assuming further that the taxpayer opted to claim them as refund, the VAT due is:
a. P 576,000
c. P 746,888
b. P 697,888
d. P 620,000
Solution:
Output tax
Input tax
VAT payable
P 720,000
(100,000)
P 620,000
26. Rommel is an operator of taxi cabs. During a particular month, he purchased from Mahindra, a Vat
registered car dealer, 10 sedan type units for a total selling price of 5 million pesos. The estimated useful
life of each vehicle is four years. How much will be the amount due from Rommel?
a. P 5,600,000
c. P 5,000,000
b. P 5,150,000
d. P 4,480,000
Solution: 5,000,000 x 1.12 = 5,600,000
27. Based on the preceding number, how much input tax can be claimed by Rommel?
a. P 600,000
c. P 150,000
b. P 12,500
d. P 0
•
Rommel is an operator of taxi cabs. He is subject to OPT. The VAT shall be formed part of the
expenses or cost of the business.
28. Data from the books of accounts of a VAT taxpayer for a month:
Domestic
Exports
Sales
P 2,000,000
P 8,000,000
Purchases:
From VAT suppliers:
Goods for sale
P 600,000
P 2,400,000
Supplies and service
90,000
360,000
From suppliers paying percentage tax
Good for sale
100,000
1,500,000
Supplies and service
20,000
80,000
If the input taxes attributable to zero rated sales are claimed as tax credit, the net value added tax
refundable is:
a. P 136,000
b. P 203,924.70
c. P 145,000
d. P 174,000
Solution:
Output tax (2,000,000 x 12%)
Less: Input Tax
Domestic (690,000 x 12%)
Export (2,760,000 x 12%)
VAT payable/ excess
240,000
82,800
331,200
414,000
(174,000)
29. Data for a trader with one line of business is subject to value added tax and another line of business not
subject to value added tax (amounts presented are gross of VAT if applicable).
Sales, vat business
P 896,000
Sales, not-vat business
200,000
Purchases of goods, vat business
224,000
Purchases of goods, non-VAT business
33,600
Purchases of depreciable asset, for use in VAT and non-VAT
112,000
Purchases of supplies, for VAT and non-VAT business
2,240
Rental of premises, for VAT and non-VAT business, from non-VAT lessor
22,400
The VAT payable is:
a. P 59,808
b. P 62,208
c. P 82,608
d. P 86,208
Solution:
Output tax (896,000/1.12 x 12%)
Input tax (224,000/ 1.12 x 12%)
Allocated input tax for Vat business *(91,392/1.12 x 12%)
VAT payable
*allocation:
Sales (VAT business, 896,000/1.12)
Sales (Non-VAT business)
Total sales
800,000
200,000
1,000,000
P 96,000
(24,000)
(9,792)
P 62,208
8/10 x 114,240 = 91,392**
**Subject to allocated Input taxes:
Purchases of depreciable
Purchases of supplies
Total
112,000
2,240
114,240
30. Tore Inc., a building contractor, showed to you the following data for the month of August 2019:
Cash received, gross of VAT
P 2,240,000
Receivables, net of VAT
3,000,000
Advances on other contracts still unearned (w/o VAT)
1,000,000
Unpaid Purchases:
For materials, VAT excluded
500,000
For supplies, VAT excluded
For services, sub-contractors (VAT included)
Payments for purchases made in July:
Materials, gross of VAT
Services of subcontractors, net of VAT
How much is the VAT Payable?
a. P 360,000
b. P 228,600
100,000
1,848,000
369,600
495,000
c. P 330,000
d. P 90,000
Solution:
Output tax:
Cash received, gross of VAT (P 2,240,000/1.12 x 12%)
Advances on other contracts still unearned (1,000,000 x 12%)
Total output tax
P 240,000
120,000
P 360,000
Input tax:
For materials, VAT excluded (500,000 x 12%)
For supplies, VAT excluded (100,000 x 12%)
Services of subcontractors (495,000 x 12%)
Total input tax
60,000
12,000
59,400
131,400
VAT payable
P 228,600
31. Cebu Airlines is a corporation organized in the Philippines. It has the following data for the taxable year
in 2019:
Passengers Fare (net of VAT):
Flights from the Philippines to Hongkong
P 1,000,000
Flights from Hongkong to Philippines
1,500,000
Domestic flights (gross of 2% withholding tax)
3,000,000
Fares from cargoes and mails (net of VAT):
Flights from Philippines to Hongkong
P 1,000,000
Flights from Hongkong to Philippines
1,500,000
Domestic Flights (gross of 2% WT)
800,000
Other Income:
Interest Income from bank deposits
800,000
Rent Income
500,000
How much is the output tax?
a. P 456,000
b. P 516,000
c. P 420,000
d. P 0
Solution:
Domestic flights, passengers (3,000,000 x 12%)
360,000
Domestic flights, cargoes (800,000 x 12%)
Rent income (500,000 x 12%)
Total output tax
96,000
60,000
516,000
32. If a dealer in securities sold shares in the local stock exchange, what business tax will apply to such
transactions?
a. VAT based on gross selling price
b. VAT based on gain
c. Capital gains tax
d. Stock transaction tax of 6/10 of 1%
33. First statement: Unused input tax of persons whose registration had been cancelled may be converted
into tax credit certificate which may be used in payment of taxes.
Second statement: Refund or tax credit certificate shall be granted within 25 days from the date of
submission of complete documents.
a. Both statements are correct.
b. Both statements are incorrect.
c. Only the first statement is correct.
d. Only the second statement is correct.
34. Monthly valued added tax declaration is filed on or before the
a. 10th day from the end of each month.
b. 20th day from the end of each month.
c. 25th day from the end of each month.
d. 30th day from the end of each month.
35. The Commissioner or its authorized representative is empowered to suspend the business operations
and temporarily close the business establishment of any person for:
a. Failure to issue receipts or invoices of a VAT-registered entity.
b. Failure to file a VAT return for VAT registered person as required by the tax code.
c. Understatement of taxable sales or receipts by thirty percent or more of his correct taxable sales
or receipts for the taxable quarter.
d. All of the above.
Special Laws (Senior Citizens and PWD)
36. Lola Lita, a senior citizen, bought a medicine with a selling price of P 9,520 inclusive of VAT. How much is
the net amount to be paid by Lola?
a. P 8,500
c. P 6,916
b. P 7,616
d. P 6,800
Solution:
9,520/1.12 x 80% = 6,800
37. Lola Sot, a senior citizen went to Jollibee to treat his 4 grandchildren on account of his retirement. They
consumed goods and beverages with gross amount of P 1,120 inclusive of VAT. How much is amount to
be paid by Lolo Sot?
a. P 896
c. P 1,056
b. P 920
d. P 1,100
Solution:
1,120/5 persons = 224
224/1.12 x 80% = 160 + (224 x 4 persons) = 1,056
38. Lola Trining brought her granddaughter to Jollibee for a treat. Her granddaughter requested that they
both order kiddie meals so that the latter will have two (2) new toys since each meal have a free one.
The price of each meal is P 120, net of VAT. How much is the amount due from Lola Trining?
a. P 268.80
c. P 240
b. P 230.40
d. P 192
Solution: 120 x 2 = 240 x 1.12 = 268.80
39. The ABC Corporation, a vat registered taxpayer sold to Lolo Sot, a senior citizen and to his wife, Ana, a
person with disability, as follows:
Lolo Sot
Ana
Grilled blue marin
Tokwat baboy
Pinaputok na tilapia
Seafood Soup
Pineapple juice
Buko Pandan
Total
P 150
128
P 150
100
70
448
134
100
64
448
The prices above are based on menu prices inclusive of VAT. The output tax due is
a. P 38.40
c. P 96
b. P 48
d. nil
40. The total amount to be paid by the spouses is:
a. P 640
c. P 800
b. P 758.40
d. P 896
Solution: 448 x 2 = 896/ 1.12 x 80% = 640
41. Statement 1: Persons with disability shall be entitled to claim at least twenty percent (20%) discount
from the purchase of certain goods or services for their exclusive use or enjoyment as provided for
under RA2277/RR-1-2009 as amended.
Statement 2: Persons with disability, like senior citizens, shall likewise be entitled to vat exemption.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
42. Gabriana Clinic, a VAT registered entity, performed a prosthetic surgery on the legs of Loyd, a person
with disability. The total cost of medical operation inclusive of VAT was P 560,000. Being a disabled
person, Loyd received a 20% discount from Gabriana. How much is the total amount to be paid by Loyd?
a. P 400,000
c. P 500,000
b. P 448,000
d. P 560,000
Solution: 560,000/1.12 x 80% = 400,000
For the next two questions: Alpha Corporation (vat registered) has the following data for the month:
Sales – private entities and P 2,000,000 individuals (10% to sen. Cit.)
Sales – vat exempt goods
Sales – government
2,000,000
1,000,000
1,000,000
The following input taxes were passed-on by vat suppliers to Alpha Corporation during the month:
Input vat on goods sold to private entities and individuals
Input vat on sale of exempt goods
Input vat on sale to government
43. The VAT payable for the month is:
a. P 216,000
b. P 108,000
Solution:
Output tax, private entities (2,000,000 x 90% x 12%)
Output tax, government (1,000,000 x 12%)
Input tax, private (120,000 x 90%)
Input tax, government (1,000,000 x 7%)
VAT payable
Withholding VAT (1,000,000 x 5%)
VAT still due
P 120,000
20,000
100,000
c. P 96,000
d. P 36,000
216,000
120,000
(108,000)
(70,000)
158,000
(50,000)
108,000
44. The amount of input vat not available for tax credit but may be recognized as cost or expense is:
a. P 20,000
c. P 62,000
b. P 50,000
d. nil
Solution:
Input tax, government (100,000 – 70,000)
30,000
Input tax, VAT exempt
20,000
Input tax, senior citizen (120,000 x 10%)
12,000
Total
62,000