BUSINESS
TRANSACTIONS
VAT, Percentage Tax
MS. Marinor G. Quintilla, ,CPA, MBA
WHAT IS BUSINESS OR “IN
THE COURSE OF TRADE OR
BUSINESS?”
QUERY 1:
ANS.
• MEANS THE REGULAR
CONDUCT OR PURSUIT OF A
COMMERCIAL OR ECONOMIC
ACTIVITY
• GOAL – PROFIT
• REGULAR – REPETITION AND
CONTINUITY OF ACTION.
3 MAJOR BUSINESS TAXES
EXCISE TAXES- Imposed on manufacturers
and importers
PERCENTAGE TAXES
VAT- imposed on sales of goods, properties,
services, importation of goods or properties
The General Outline
VAT Background; Administrative
and Fundamental Concepts
Classification of Transactions/Sales;
Exempt, Zero Rated, Taxable
Laws on VAT; Sellers of services,
importers of goods
BACKGROUND TO VAT
• VAT became effective in the
Philippines on Jan. 1, 1988 by E.O.
273.
• Its imposition eliminated traditional
business taxes such as tax on
hotels, motels, dealers in securities,
caterer’s fee.
• Passage of RA 9337: SALES OF
GOODS AND SERVICES = SUBJECT
TO VAT
NATURE AND
CHARACTERISTICS OF VAT
• VAT is tax on consumption
• Levied on the sale, barter,
exchange or lease of goods,
properties or services in the
Philippines and importation of
goods in the Philippines.
• Seller is liable for payment of tax
but the amount may be shifted to
the buyer, transferee or lessee of
goods, properties or services.
SCOPE OF VAT
• Any sale, barter or exchange of
goods and properties (including
real properties) in the course of
trade or business;
• Any sale of services in the course
of trade or business
• Any lease of goods & properties
in the course of trade or business
• Any importation of goods,
whether in the course of trade or
business or not
“in the course of trade or
business”
 Means the regular conduct or
pursuit of a commercial or an
economic activity including
transactions incidental thereto
 any business pursued by an
individual where aggregate sales is
less than P100K during any 12
month period shall be considered for
subsistence/livelihood and NOT in
the course of business.
MANDATORY REGISTRATION
• 1. GROSS SALES OR
RECEIPTS FOR THE PAST 12
MONTHS = EXCEEDED P1.5M;
OR
• 2. GROSS SALES OR
RECEIPTS FOR THE NEXT 12
MONTHS WILL EXCEED P1.5M
<GRADED RECITATION>
CASE 1:
If Baba is a VAT registered
person, is he liable to pay VAT?
BABA, OPERATES A BUSINESS. DURING
THE YEAR, HIS GROSS RECEIPTS
AMOUNTED TO P1.2M.
ANSWER:
• Yes, a VAT REGISTERED
PERSON is subject to tax
even if his gross receipts
did NOT exceed P1.5M. If
he is NOT REGISTERED,
then he would NOT be
subject to VAT because his
gross receipts do not
exceed P1.5M.
(SAME PROBLEM)
HOW ABOUT IF HE IS NOT VATREGISTERED BUT HIS ANNUAL GROSS
RECEIPTS IS P1.8M
ANSWER:
• HE IS SUBJECT TO VAT
BECAUSE THE GROSS
RECEIPTS EXCEEDED
P1.5M.
Administrative Provisions
Compliance Requirements:
1.
Registration with the BIR
2.
Keeping of acctg books/records
3.
Issuance of sales invoices & OR’s
4.
Filing & payment of tax returns
5. Withholding of taxes on specified/certain payments to
suppliers-sellers
MANDATORY REGISTRATION
GROSS SALES OR GROSS RECEIPTS FOR THE PAST
12 MONTHS EXCEEDED P1.5M
FRANCHISE GRANTEES OF RADIO AND
OR TELEVISION BROADCASTING =
GROSS ANNUAL RECEIPTS FOR THE
PRECEDING CALENDAR YEAR
EXCEEDED P10M shall register within
30 days from the end of the calendar
year.
Optional registration of VAT -EXEMPT
PERSONS
• Gross sales or gross receipts – do not exceed
P1.5M for any 12 month.
• Franchise grantees of radio and television
broadcast station = annual gross receipts in
the preceding year DOES NOT exceed 10M.
• ONLY VAT – REGISTERED persons are required
to print their TIN followed by word “VAT” in
their invoices or receipts
CLASSIFCATIONS OF VAT
EXCISE TAX – known as privilege tax; tax
imposed on the taxpayers’ exercising their rights and
privileges of performing an act or engaging in an
occupation. Ex. Donors tax, income tax.
AD-VALOREM TAX – tax is computed by
applying a % rate based on the property’s value.
Indirect tax, National tax, Single rate or flat rate
tax
VAT ON SALE OF GOODS OR
PROPERTIES
TAX BASE = GROSS SELLING PRICE
IN TAX GROSS SALES MEANS NET
OF DEDUCTIONS
TAX RATES
12% of Gross Selling Price - VAT
0% of gross selling price – export sale,
foreign currency denominated sale
FORMULA
OUTPUT TAX – INPUT TAX =
TAX PAYABLE
OUTPUT TAX = SALES
INPUT TAX PURCHASES
APPEAR IN THE BALANCE SHEET AS VAT PAYABLE
(LIABILITY)
OUTPUT TAX > INPUT TAX
= TAX PAYABLE
APPEAR IN THE BALANCE SHEET AS DEFERRED
INPUT TAX (ASSET SECTION)
OUTPUT TAX < INPUT TAX
= TAX PAYABLE
INVOICE
Sec. 109(1) of the Tax Code
OTHER PERCENTAGE
TAXES
GROSS RECEIPTS /GROSS
SALES OF NON-VAT
REGISTERED PERSON
• Do not exceed P1.5M per year is
subject to 3% percentage tax
rather than 12% of VAT.
EXAMPLES
• Domestic carriers and keepers of
garages
• Franchise
• Overseas dispatch or message from
the Philippines
• Bank and non-bank financial
institutions
• Life insurance companies
• Amusement places
• Sale of shares of stock in local stock
exchange
• Business with annual sales of P1.5M
DOMESTIC CARRIERS AND KEEPERS OF
GARAGES
• Includes cars for rent or for hire driven
by the lessee, transportation
contractors, including persons paid to
transport passengers and other
domestic carriers by land, for the
transport of passengers, except
owners of bancas, owners of animaldrawn two wheeled vehicles and
keepers of garages.
Note:
• Businesses with annual gross
sales of P100K and below are
EXEMPT from VAT and other
percentage taxes.
FRANCHISES
• A privilege acquired by special grants from the public
through the legislature which imposes on the
grantee as a consideration, a duty to the public to
see that they are properly used.
• Gas & water – 2% on gross receipt
• Radio or TV broadcasting – annual gross
receipts of last year do not exceed P10M
LIFE INSURANCE
• 5% of the total premium
collected – basis for
percentage tax
AMUSEMENT PERCENTAGE TAX
• BOXING – 10%
• PROFESSIONAL BASKETBALL
GAMES – 15%
• COCKPITS – 18%
• JAI-ALAI AND RACE TRACTS –
30%
• NIGHT/DAY CLUBS – 12%
WINNINGS ON HORSE RACES
• 10 % TAX ON WINNINGS IN
HORSE RACES
• BASED ON ACTUAL AMOUNT PAID
TO HIM FOR EVERY WINNING
TICKET AFTER DEDUCTING THE
COST OF THE TICKET.
SHARES OF STOCK
• ½ of 1% of the gross selling price
• listed or traded in the local stock
exhange.
INITIAL PUBLIC OFFERING (IPO)
• UP TO 25%
- 4%
• OVER 25% BUT NOT OVER 33 1/3% - 2%
• OVER 33 1/3 %11
- 1%
• BASED ON THE GROSS SELLING
PRICE OR GROSS VALUE IN
MONEY OF THE SHARES OF STOCKS
RETURNS AND PAYMENT OF
PERCENTAGE TAX
• Every person shall file monthly
return : within 20 days after the
end of each taxable month.
• STOCK TRANSACTION IN STOCK
EXCHANGE: within 5 banking
days from the date withheld by
the broker
• TAX ON WINNINGS – Remitted to
the BIR within 20 days from the
date withheld
RETURNS AND PAYMENT OF
PERCENTAGE TAX
• Amusement tax – payable at the
end of each month and complete
tax return for the quarter shall be
filed within 20days at the end of
the quarter
• Overseas dispatch – to be
remitted 20 days after the end of
each quarter.
EXCISE TAX
A NATIONAL INTERNAL REVENUE TAX
APPLIES TO:
• MANUFACTURERS
• IMPORTERS
EXCISE TAX
EXAMPLES OF
EXCISE TAX
• IMPOSED ON HARMFUL OR
NON-ESSENTIAL GOODS
MANUFACTURED OR
PRODUCED IN THE
PHILIPPINES
• FOR DOMESTIC SALE,
CONSUMPTION OR FOR ANY
DISPOSITION INCLUDING
IMPORTED GOODS.
2 KINDS OF EXCISE TAXES
• SPECIFIC TAX
• AD VALOREM TAX
FILING OF RETURN AND PAYMENT OF
EXCISE TAX
• Indigenous petroleum, natural gas
or liquefied natural gas = paid by
the first buyer, purchaser or
transferee for local sale, barter or
transfer
• Exported goods _ shall be paid by
the owner, lessee, concessionaire
or operator of the mining claim
LOCAL TAXES
CONCEPT OF LOCAL TAXES
• Belongs exclusively to the
legislative body of the
government
• Local government units do not
have the inherent power to tax
but the law delegates such power
to them through the LOCAL
GOVERNMENT CODE (LGC)
enacted by the Congress
SCOPE OF LOCAL TAXATION
• LOCAL GOVERNMENT
TAXATION
• REAL PROPERTY TAXATION
WHO MAY EXERCISE LOCAL TAXATION
POWER
•
•
•
•
PROVINCIAL BOARD
MUNICIPAL BOARD
CITY COUNCIL
BARANGAY COUNCIL
3 COMMON LOCAL TAXES
• COMMUNITY TAX
• PROFESSIONAL TAX
• REAL ESTATE TAX
GOD BLESS !!!
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