lecture on value added tax 2014

8/12/2019 Lecture on Value Added Tax 2014

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VALUE ADDED TAX

Presented by:

MS. SHEILA JOY C. BENEDICTO, CPA, MBARevenue Officer II

RDO 132East, Davao City

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BASIC CONCEPTS OF

VALUE ADDED TAX

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VAT defined

It is a tax on the value added to thepurchase price or cost in the sale or leaseof goods, properties, or servicesin thecourse of trade or business.

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VAT defined

It is an indirect tax and the amount of taxmay be shifted or passed on to the buyer,transferee or lessee of the goods,

properties or services.

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Background of VAT

VAT is a universal taxation system;

VAT has major amendments :

1. E.O. 273 VAT Law (1988) Jan. 1, 19882. RA 7716 E-VAT (RR 7-95) Jan. 1, 19963. RA 8241 IVAT (RR 6-97) Jan. 1, 19974. RA 8242 Tax Reform Act of 1997


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Background of VAT

5. RA 9337 New Expanded VAT Law

signed into law on May 24, 2005

Implementation withheld due to TRO

TRO was lifted by the SC on Oct. 18, 2005

Became effective November 1, 2005

Implementing Rules and Regulations RR 14-2005 was superseded by RR 16-2006

(amended by RR 2-2007, RR 4-2007, RR 10-2011& RR 16-2011)


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Objectives of VAT

Broaden Tax Base

Provide an audit trail

Simplify business taxation


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Who are liable to VAT?

SELLER provided theaggregatesales/receiptsexceeds the

threshold* (orwho opt toregister asVAT)

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In the course oftrade/business Sells

barters

Exchanges

Leases goods orproperties(includingdeemed sales)

Renders services

IMPORTER Whether or not inthe course of tradeor business Imports goods

* The threshold is

now P1,919,500

effective Jan. 1,

2012 (RR 16-2012)


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VAT Rates:

10% (up to January 31, 2006)

12% (effective 2-1-06) and

0%


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TRANSACTIONS COVERED

Sale or Exchange of Goods / Properties

Importation

Sales or Exchange of Services Transaction Deemed Sales

Zero-Rated Sales of Goods / Properties /Services

Effectively Zero-Rated Transactions


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BASIS OF VAT on Goods/Prop.

Shall be the GROSS SELLING PRICE (GSP)

GSP is the total amount of money or itsequivalent which the purchaser pays or isobligated to pay

excluding VAT.

the excise tax, if any shall form part of thegross selling price


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BASIS OF VAT on Importation

If based on VALUE TOTAL VALUE used by the BOC in

determining: Tariff and custom duties plus custom duties,

excise taxes, if any and

Other charges paid by the importer (priorto ATRIG)

If based on QUANTITY and VOLUME VAT shall be based on the LANDED COST

plus EXCISE TAXES


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BASIS OF VAT onSERVICES/LEASE OF PROP.

shall be the GROSS RECEIPTS

It refers to the total amount of money or

its equivalent representing: the contract price compensation, service fee, rental or royalty, including the amount charged for materials

supplied with the services and depositsappliedas payments for services rendered and

advance payments actually or constructivelyreceived


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ZERO-RATED SALES: Goods/Properties

It is a taxable transaction for VAT purposes but shall notresult in any output tax. Input tax on purchases of

goods, properties or services related to such zero-rated

sales shall be available as tax credit or refund.

A. Export sales

B. Foreign currency denominated sales

C. Sales to persons or entities deemed tax-exemptunder special law or international agreement.

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Shall refer to the local sales of goods orproperties by a VAT-registered person to aperson or entitiy who was granted indirecttax exemptions under special laws orinternational agreements.

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Effectively Zero-rated sales of goods and

properties (Sec. 6 of RR 4-2007)


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Transactions deemed sale

(Sec. 106(B))

1. 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;2. Distribution or transfer to:

a. Shareholders or investors share in the

profits of VAT reg. person (property

dividends); orb. Creditors in payment of debt or obligation.

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Transactions deemed sale

(Sec. 106(B))

3. Consignment of goods if actual sale is not made within

60 days;

4. Retirement from or cessation of business, withrespect to inventories of taxable goods existing as of

such retirement or cessation; and

5. Change of tax detail or status from VAT to NON-VAT.

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Rules on invoicing and recording of

deemed sale transactions

Memorandum entry in the subsidiary sales journal to record

withdrawal of goods for personal use must be made

- For distribution to shareholders and creditors

invoice shall be prepared at the time of the occurrence of

the transaction recorded in the subsidiary journal

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Rules on invoicing and recording of

deemed sale transactions

For retirement or cessation of business

inventory shall be prepared and submitted to RDO not

later than 30 days from retirement invoice shall be prepared for the entire inventory

entry in the subsidiary sales journal

Note: If bus iness is to be cont inued by new owner, theent i re amount of ou tput tax shal l be al lowed as input

tax

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OUTPUT TAX & INPUTTAX

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Output Tax

Means the value-added tax due on thesale or lease of taxable good or propertyor services by a VAT-registered person.

VAT Rates 12%

0%

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It is evidenced by a VAT invoice or officialreceipt shall be creditable against the

output tax. Input tax on domestic or importation of

goods. Input tax that can be directly attributed A ratable portion of the input tax which

cannot be directly attributed to eitheractivity

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Input Tax


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Sources of Input Tax

Purchase or importation of goods For sale; or For conversion into or intended to form part ofa finished product for sale including packagingmaterials; or

For use as supplies in the course of business;or

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For use as materials supplied in the sale ofservice; or

For use in trade or business for whichdeduction for depreciation / amortizationis allowed under the Tax Code

Purchase of services on which VAT hasbeen actually paid

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Purchase of real properties for which theVAT was actually paid

Purchase of services for which the VAT

was actually paid Transitional input tax

Presumptive Input tax

Standard Input Tax (govt. transaction)

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Input Tax on depreciable capital goods,

the aggregate acquisition cost of which(net of VAT) in a calendar month,exceeds P1,000,000 shall be spreadevenly over 60 months or their useful life,

whichever is shorter.

Spreading of VAT on Capital

Goods

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If capital good is sold within 5 years orprior to exhaustion from input VATthereon,the entire unamortized input tax

on the capital goods sold can be claimedas input tax credit during themonth/quarter when the sale was made.

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Spread of VAT on Capital Goods


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Option to apply for refund/tax creditcertificate of capital goods has been

withdrawn.

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Spread of VAT on Capital Goods


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VAT Payable

Output Tax ( Sales x 12%) - P x x x

Less Input Tax (Purchases x 12%) - x x x

VAT payable - P x x x

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Journal Entries upon Sale

2. Sales of P36,400 inclusive of VAT

Cash 36,400Sales 32,500

Output tax 3,900

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Journal Entries

3. To remit VAT to BIR

Output Tax 3,900.00

Input Tax 3,300.00

VAT Payable 600.00

#

VAT Payable 600.00

Cash 600.00

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VAT Payable

Output Tax - P 3,900.00

Less Input Tax - 3,300.00

VAT Payable - P 600.00

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Transitional Input Tax

A person becomes liable to VAT or electsto be VAT registered person shall be

allowed input tax of 2% of the value ofinventory or the actual VAT paid,whichever is higher

Subject to the filing of inventory list

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Transitional Input Tax

Example:Mr. A becomes liable to VAT starting Jan.2011. He has P200,000 worth of

inventory. Actual VAT payment onpurchases from VAT registered supplierswere P18,000.00.

Allowed transitional input tax: P18,000

The 2% of P200,000 (P4,000) is lowerthan P18,000

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Presumptive Input Tax

4% of the gross value in money of purchasesof primary agricultural products which areused as inputs to their production:

Sardines Mackerel and milk Refined sugar Cooking oil Packed noodle-based instant meals

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Refund or Tax Credit of InputTax (Sec. 112 of the NIRC)

Any VAT registered person whose salesare ZERO-RATED or EFFECTIVELYZERO-RATED may, within two (2) yearsafter the close if the taxable QUARTERwhen the sales was made, apply for theissuance of a TCC.


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Refund or Tax Credit of InputTax (Sec. 112 of the NIRC)

Person whose registration has beencancelled due to retirement orcessation of business or due to change

in or cessation of status may, withintwo (2) years from the date ofcancellation, apply for the issuance ofa TCC.


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VAT on Government Sales Sale of goods and services to government is subject to 12%

VAT;

The 5% VAT withheld represents the net VAT payable of the

seller

The remaining 7%effectively accounts for the standard input

tax in lieu of the actual input VAT

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VAT ON GOVERNMENT

TRANSACTIONS

If actual input VAT exceeds 7% of gross payments, the

excess may form part of the sellerscost; and

If actual input VAT is less than 7%of gross payments, the

difference must be treated as income of the seller.

The income received from the government while subject

to final withholding on VAT shall still be reported in theVAT return

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Apportionment of input tax on mixed

transactions

Input tax directly attributed to VATable transactions

may be recognized for input tax credit

Input tax directly attributable to VATable sales togovernment shall not be credited against output

tax from sales to non-government entities


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Input tax that cannot be directly attributedto either VATable or exempt transactionshall be pro-rated and only the ratable

portion can be allowed as tax credit


transactions


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Input tax attributable to VAT exempttransaction shall not be allowed as taxcredit but should be treated as part of cost

or expense

Input tax attributable to the zero-ratedsales may be refunded or applied for tax

credit certificate


transactions


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Apportionment of Input Tax on Mixed Transactions

Taxable sales to privateTotal sales

X Input Tax = Creditable

Taxable sales to govt.

Total sales

X

Input Tax = Creditable *

Exempt salesTotal sales

X Input Tax = Expense or cost

* Subject to the 7% standard input tax provision

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Taxable sales 0%

Total sales

X

Input Tax = Refundable


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COMPLIANCEREQUIREMENTS

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Optional Registration

1. Any person who is VAT-exempt under Sec. 4.109-1(B)(1)(V) may elect to be VAT registered;

2. Any person who is VAT-registered but enters into

transactions which are exempt from VAT (mixed

transactions) may opt that the VAT apply to hisexempt transactions;

Any person who elects to register shall not be

entitled to cancel registration for the next 3 years.

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3. Franchise grantees of radio and/or television

broadcasting with annual gross receipts not

exceeding P10M. (This option once exercised

is irrevocable);

Optional Registration

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Penalty for Failure to Register as

VAT Taxpayer

Taxpayer shall be liable to pay the

tax as if he was a VAT registered

person

Taxpayer cannot avail of the

benefits of input tax credit for theperiod he/it was not properly

registered.

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Invoicing Requirements

For every sale, barter or exchange of goods or

properties- VAT invoices

For every sale, barter or exchange of services or

lease of goods or properties- VAT official receipts

A VAT-registered person

shall issue:

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Information needed in the VATInvoice or VAT Official Receipt:

1. Name and business address of taxpayer who will use theinvoice/official receipt;

2. TIN of taxpayer followed by the word

VAT

;3. The amount of tax shown as a separate item;

4. Date of transaction, quantity, unit cost and description ofthe goods or properties or the nature of the service;

5. Authority to Print details and serial number of booklets atthe lower left corner of receipt.

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The word VAT EXEMPT SALE written or printed

prominently if sale is VAT-exempt;

The words ZERO-RATED SALE written or printed

prominently if sale is subject to zero percent

Cont

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Cont

Option to issue combined or separateinvoices/receipts of sale in a combinationof VAT-liable and VAT-exempt sale. If thesale is combined, the invoice or receipt

should indicate the break-down of the saleprice between the taxable and the exemptcomponent and the calculation of the VAT

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Cont

For sale to VAT-registered personsamounting to P1,000 or more, indicatethe name, business style (if any), addressand TIN of the purchaser

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Accounting Requirements

All persons subject to VAT shall in addition to regularaccounting records, maintain the following

SUBSIDIARY SALES JOURNAL which the daily

sales are recorded. It includes columns for date of

sale; name of customer; TIN of customer, Sales

Invoice/OR number, exempt sales; VAT sales (12%)government sales and Zero-Rated Sales;

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Accounting Requirements

SUBSIDIARY PURCHASE JOURNAL

which thedaily purchases are recorded. It includes columns for

date of purchase; name of supplier; TIN of Supplier,

purchase invoice number, exempt purchases;

domestic purchases (capital goods and other than

capital goods), purchases from importation andpurchases from services.

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Penalties for Erroneous Issuance of VAT


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Penalties for Erroneous Issuance of VAT

Invoice or VAT Official Receipt

Infraction Penalty1. NON-VAT person who

issues a VAT invoice/official

receipt

- payment of percentage tax, if

applicable

- payment of VAT (w/out input tax)

-50% surcharge on the VAT due

- If the invoice/official receiptcontains the required information,

purchaser shall be allowed to

recognize an input tax credit

2. VAT-registered person who

issues a VAT invoice/officialreceipt for a VAT-exempt

sale without the words

VAT-EXEMPT SALE

Subject to 12% VAT

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FILING AND

PAYMENT DUEDATES

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Filing of Return

Every persons liable to pay the VAT shall file a: MONTHLY RETURN (2550M) every 20th day of

the month following the close of each month; and

QUARTERLY RETURN (2550Q) every 25th day

following the close of each taxable quarter. Any person, whose registration has been

CANCELLED within 25 days from the date of

cancellation of registration

Only one consolidated return shall be filed by thetaxpayer for his principal place of business or head

office and all branches.

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S h i d Fili f Q l VAT d


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Synchronized Filing of Quarterly VAT andQuarterly Income Tax (RR 8-2002)

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Ex: Fiscal year ends May 31Under Manual

Filing System Under EFPS

Quarter Covered Months Forms to UsedDue Date

For Filing/Payment

Due date

eFiling ePayment

1stQuarter

June 2550M July 20 Staggered (pls see table) Jul. 25

July 2550M August 20 Staggered (pls see table) Aug..25

August 2550Q September 25 Sept. 25 Sept. 25

2ndQuarter

September 2550M October 20 Staggered (pls see table) Oct. 25

October 2550M November 20 Staggered (pls see table) Nov. 25

November 2550Q December 25 Dec. 25 Dec. 25

3rdQuarter

December 2550M January 20 Staggered (pls see table) Jan. 25

January 2550M February 20 Staggered (pls see table) Feb. 25

February 2550Q March 25 Mar. 25 Mar. 25

4thQuarter

March 2550M April 20 Staggered (pls see table) Apr. 25

April 2550M May 20 Staggered (pls see table) May 25

May 2550Q June 25 June 25 June 25


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SCHEDULE OF STAGGERED

FILING OF RETURNS (RR 26-2002)

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GROUP MONTHLY VAT DECLARATION & PERCENTAGE

TAX RETURNS

A 25 days ff the end of the month

B 24 days -do-

C 23 days -do-

D 22 days -do-

E 21 days -do-


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Submission of SLS/SLP

Persons required to submit:

Summary List of Sales all VAT taxpayers

Summary List of Purchases all VAT taxpayers

Note: Effective Jan. 1, 2012 (regardless of the amount of sales and

purchases) all VAT registered TPs are required to submit SLS/P

under RR 1-2012

Due Date:

On or before the 25thday of the month

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Submission of SLS/SLP

Ref: RMO 56-2010 / RMC 60-2010

Electronic submission

Thru efps

Manually

Use of removable storage media

3.5 inch floppy diskette

USB flash drive

CDDVD

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Updates on VAT

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Cl ifi ti E ti f VAT


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Clarification on Exemption from VATRMC 75-2012

Sec. 109 (R) Sale, importation, printing or publication

of books and any newspaper, magazine, review orbulletin which appears at regular intervals with fixedprices for subscription and sale and which is notdevoted principally to the publication of paid

advertisements

Must be: Printed or PublishedAvailable for Subscription and Sale at fixedprices Not principally devoted for publication of paid

advertisements

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VAT on Raw Sugar

(RR 13-2013 amending Sec 2(b) of RR13-2008)

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Centrifugal process of producing sugar in not initself a simple process.

Therefore, any type of sugar produced therefore

is not exempt from VAT

Brown sugar is now subject to VAT effective Oct.

9,2013

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Men love their country, not

because it is great, but because itis their own.

~Seneca

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The End

lecture on value added tax 2014

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