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/
pecuniary estimation

Commercial Activity
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

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

(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)

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
*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

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

YES

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

SPREAD
over:
60 months

SHORTER
useful life

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

VAT registered
person
12% VAT
0% VAT

VAT exempt

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

2) VAT on Importation
importation of goods in the Philippines (whether
personal/business use-except VAT exempt
transactions)
a) in general
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)

b) based on quantity/volume of goods

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)

ONLY importation by a VAT person for business use is

creditable as Input VAT (p.466 V&R)

NADZ