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VALUE ADDED TAX

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Jann Blair Salinas

on 26 January 2015

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Transcript of VALUE ADDED TAX

Topic Objectives
- Understand the basic concepts of VAT
Definition of VAT
- It is a tax on the value added to the purchase price or cost in the sale or lease of goods, properties, or services in the course of trade or business
Background of VAT
- VAT is a universal taxation system;
VAT Rates
- 10 percent (up to January 31, 2006)
Transactions Covered
- Sale or Exchange of Goods/Properties
Who are required to file VAT returns?
- Seller
VALUE ADDED TAX
In the Philippines
Presented by: Jann Blair P. Salinas
- Determine the sources of output and input taxes
- It is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services
- VAT has major amendments:
1. E.O. 273 - VAT Law (1988) Jan. , 1988
2. RA 7716 - E-VAT (RR 7-95) Jan. 1, 1996
3. RA 8241 - IVAT (RR 6-97) Jan. 1, 1997
4. RA 8242 - Tax Reform Act of 1997
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 on Nov. 1, 2005
- Implementing Rules and Regulations
- A person required to register as VAT taxpayer but failed to register
- Importer
Seller
• Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases g
oods or
properties and renders servic
es subject
to VAT, if the aggregate amount
of
actual gross sales or rece
ipts exceed
One Million Nine Hundr
ed Nine
teen Thousand Five Hun
dred Pesos
(P1,919,500.00).
Importer
- Any person, whether
or not
made in the course of h
is trade or
business, who impor
ts goods
- 12 percent (effective Feb. 1, 2006
- 0 percent
- Importation
- Sales or Exchange of Services
- Zero-rated Sales of Goods/Properties/Services
- Effectively Zero-rated Transactions
Basis of VAT
- on Goods/Properties
- on Importation
- on Services/Lease of Property
- on Zero-rated Sales: Goods/Properties
On Goods/Properties
Shall be the
Gross Selling Price (GSP)
- GSP is the total amount of money or its equivalent which the purchaser pays or is obligated to pay
- excluding VAT
- the excise tax, if any shall form part of the gross selling price
On Importation
- If based on VALUE
- TOTAL VALUE used by BOC in determining:
- tariff and custom duties plus custom duties, excise taxes, if any
- other charges paid by the Importer (prior to ATRIG)
-If based on QUANTITY and VOLUME
- VAT shall be based on the LANDED COST plus EXCISE TAX
On Services/Lease of Property
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 deposits applied as payments for services rendered
- advance payments actually or constructively received
Zero-rated Sales: Goods/Properties
It is a taxable transaction for VAT purposes but shall not result 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 deed tax-exempt under special law or international government
Effectively Zero-rated sales of Goods and Properties
Shall refer to local sales of goods or properties by a VAT-registered person to a person or entity who
was granted
indirect tax exem
ptions under
special laws or intern
ational
agreements.
Transactions deemed sale
1. transfer, use, or consumption not in the courseof business of goods or properties originally intended for sale or for use in the course of business
2. distribution or
transfer to:
- shareholders
or investors share in
the profits of VAT registered person
- Creditors in payment of debt or
obligation
3. Consignment of goods if actual sale is not made within sixty days
4. Retirement from cessation of
business, with respect
to inventories
of taxable goods existing
as of such
retirement or cessation
5. Change of tax detail or status from VAT to NON-VAT
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.
- 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 sale journal
Note: If business is to be continued by new owner, the entire amount of output tax shall be allowed as input tax
Output Tax and Input Tax
Output tax -
the value-added tax due on the sale or lease of taxable good or property or service by a VAT-Registered person
Input Tax
- It is evidenced by a VAT invoice or official receipt 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 either
activity.
Sources of
Input Tax
Purchase or importation of goods
Purchase of services on which VAT has been actually paid
Purchase of real properties for which the VAT was actually paid
Purchase of services for which the VAT was actually paid
Transitional input tax
Presumptive input Tax
Standard Input Tax
Spreading of VAT on Capital Goods
Input tax on depreciable capital goods, the aggregate acquisition cost of which (net of VAT) in a calendar month
exceeds P1M
shall be spread evenly over 60mos or their useful life,
whichever is shorter.
Option to apply for refund/tax credit certificate of capital goods has been withdrawn
- If capital good is sold
within 5 years or prior to exhaustion from input VAT thereon, the entire unamortized input tax on the capital goods sold can be claimed as input tax credit during the month/quarter when the sale was made.
VAT Payable
Output Tax (Sales x 12%)
Less: Input Tax (Purchases x 12%)
P x x x x
x x x x
VAT Payable
P x x x x
___________
__________
Journal Entries upon Purchase
1. Purchase of goods with invoice price of P16,800.00
Purchases
Input Tax
Cash
P15,000
1,800
P16,800
Journal Entries upon Sale
2. Sales of P22,400 inclusive of VAT
Cash
Sales
Output Tax
P22,400
20,400
2,400
Journal Entries to remit VAT to BIR
Output Tax
Input Tax
VAT Payable
P2,400
1,800
600
VAT Payable
600
Cash
600
How did we arrive at P600 VAT Payable?
Output Tax
Less: Input Tax
VAT Payable
P 2,400
1,800
P 600
_________
_________
Transitional Input Tax
- A person becomes liable to VAT or elects to be VAT registered person shall be allowed to input tax of 2% of the value of inventory or the actual VAT pas, whichever is higher.
- Subject to the filing of inventory list
Presumptive Input Tax
4% of the gross value in money purchases of primary agricultural products which are used as inputs to their production:
Who are liable to
register as VAT taxpayers?
Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register if:
a. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (U), have exceeded One Million Five Hundred Thousand Pesos (P1,500,000.00): or
b. There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will exceed One Million Five Hundred Thousand Pesos (P1,500,000.00).

References
Value Added Tax. A Powerpoint Presentation by Ma. Susan D. Tusoy, CPA, MPS. Asst. Chief, Assessment Division of RR19-Davao City
http://www.bir.gov.ph/index.php/tax-information/value-added-tax.html
Sardines
Mackerel and Milk
Refined sugar
Cooking Oil
Packed noodle-based instant meals

Refund or Tax Credit of Input Tax
- Any VAT registered person whose sales are ZERO-RATED or EFFECTIVELY ZERO-RATED may, within two (2) years after close of the taxable QUARTER when the sales was made, apply for the issuance of TCC.
- Person whose registration has been cancelled due to retirement or cessation of business or due to change in or cessation of status may, within two (2) years from the date of cancellation, apply for the issuance
of TCC.
Full transcript