BUSINESS AND TRANSFER TAXATION
INTRODUCTION TO CONSUMPTION TAX
1. Which type of consumption will pay consumption tax?
a. Domestic Consumption
b. Foreign Consumption
c. Both domestic and foreign consumption
d. Neither domestic and foreign consumption
2. Which is subject to the VAT on importation?
a. Foreign consumption from resident sellers
b. Foreign consumption from foreign sellers
c. Domestic consumption from resident sellers
d. Domestic consumption from foreign sellers
3. Which is an incorrect statement regarding consumption taxes?
a. They are always indirect in nature
b. They effectively tax everyone in the state
c. They apply only when the goods or services are destined for consumption within the Philippines
d. Consumption taxes may encourage savings formation
4. Domestic consumption is taxable when the seller is
a. A non-resident
b. A resident
c. Either a resident or non-resident
d. Both a resident and a non-resident
5. The tax on domestic consumption is referred to as
a. VAT on importation
c. Either a or b
b. Business Tax
d. Neither a nor b
6. The tax on domestic consumption from foreign suppliers is
a. Vat on importation
c. Either a or b
b. Vat on sales
d. Neither a nor b
7. The percentage tax is generally
a. 3% of sales or receipts
c. 3% of mark-up
b. 3% of purchases
d. 12% of mark-up
8. The VAT on importation is
a. 12% of sales
c. 12% of mark-up
b. 12% of purchases
d. 3% of mark-up
9. As to incidence of tax, the VAT on importation is a form of
a. Direct tax
c. Ad valorem tax
b. Indirect tax
d. Specific tax
10. Who is the statutory taxpayer to the VAT on importation?
a. Foreign seller
c. Both a and b
b. Domestic buyer
d. None of these
11. The economic taxpayers of consumption taxes are
a. Sellers who are engaged in trade or business
b. Sellers, whether or not engaged in trade or business
c. Buyers who are engaged in trade or business
d. Buyers, whether or not engaged in trade or business
12. What is the method used to determine the VAT due and payable?
a. Direct method
c. tax credit method
b. Indirect method
d. withholding method
13. Statement 1: a business which pays VAT normally does not pay percentage tax
Statement 2: a business which pays percentage tax also pays VAT.
Which statement is correct?
a. Statement 1
c. Both statements
b. Statement 2
d. Neither statement
14. Statement 1: excise tax is always paid together with VAT or percentage tax
Statement 2: excise tax is paid at the point of sale
Which statement is false?
a. Statement 1
c. Both statements
b. Statement 2
d. Neither statements
15. Which is imposed with a tax of zero percent (0%)?
a. All export sales
b. Export sales of VAT registered taxpayers
c. Import sales of VAT registered taxpayers
d. Export sales of non-VAT registered taxpayers only
NOTES:
CONSUMPTION - refers to the acquisition or utilization of goods and services by any person. The utilization of goods and services may
be through purchase, exchange or other means. This utilization is subject to a tax called CONSUMPTION TAX. Consumption tax is
levied without regard to the purpose of the purchaser or consumer whether it is for business, personal or charity use.
Consumption tax should NOT BE LEVIED UPON BASIC NECESSITIES such as food, education, health, and shelter or housing.
Rationale of Consumption Tax
 Savings formation
 Rationalization of the Benefit Received Theory
 Wealth redistribution to society
Income tax vs Consumption tax
INCOME TAX
Tax upon receipt of income
A tax to the capable
Ability to pay theory
Nature
Scope/coverage
Theoretical Basis

Types of consumption
Domestic Consumption
Foreign Consumption
Destination Principle
CONSUMPTION TAX
Tax upon usage of income or capital
A tax to all
Benefit received theory
Purchaser
Resident
Non-resident
Status
Taxable
Exempt/Effectively non-taxable
Business Tax Vs. VAT on Importation
Scope of Tax
Type of consumption tax
Statutory taxpayer
Economic Taxpayer
Nature of imposition
Basis of tax
EXEMPT CONSUMPTION
Basis of exemption
Human necessity
Out of scope of tax
Tax incentive
International Comity
VAT on Importation
Imports from business or non-business
Pure form
Buyer
Buyer
Direct
Total purchase cost
VAT on importation
The goods imported is a human necessity
The importation does not constitute a
domestic consumption
The importation is exempted as a tax
incentive to certain importers
The importation is exempted by treaty
Business Tax
Purchases from businesses only
Relative form
Seller
Buyer
Indirect
Sales or receipts
Business Tax
The goods, services, or property sold is human
necessity.
The seller is not engaged in business
The sales or receipt is exempted as a tax incentive to
certain sellers
The sales or receipt is exempted by treaty.
Structure of the VAT on Importation
Exempt
% Tax
VAT
Import of service
Exempt
Percentage Tax
Final withholding VAT
Import of goods
Exempt
VAT on importation
Sale of service
Exempt receipt
Receipts specifically subject to a % tax
Vatable receipts
Sale of goods
Exempt sales
Vatable sales
Structure of the Business Tax
Exempt
% Tax
VAT
EXCISE TAX
Imposed on the consumption of commodities such as:
 Sin products such as alcohol and cigarettes
 Non-essential commodities such as automobiles and jewelry
 Non-essential services such as cosmetic surgery
 Products which are environmentally degrading in their production or consumption, such as petroleum or minerals.