Coverage, Nature, Basis and Rate of Value-Added Tax (VAT) – PTABCP Business Solutions & Coaching

Value-Added Tax (VAT)

Indirect Tax
- VAT 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.
Sec.4.105-2, RR 16-2005. Nature and Characteristics of VAT
- VAT is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods in the Philippines

VAT : Output Tax and Input Tax

Output Tax
- The VAT due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Sec.236 of this Code.
- Alternatively called as Output VAT / VAT Output

Input Tax
- The VAT due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from VAT-registered person.
- Also, include the transitional input tax determined in accordance with Sec.111 of this Code.
- Alternatively called as Input VAT / VAT Input

Who are required to File VAT Returns?

VAT-registered Taxpayer
- Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties and renders services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed Three Million Pesos (Php3,000,000.00)
VAT Registrable Taxpayer
- A person required to register as VAT taxpayer but failed to register
Importer
- Any person, whether or not made in the course of his trade or business, who imports goods

Output Tax and Input Tax of VAT Registered TP

From the perspective/point of view of a VAT-Registered Taxpayer
- VAT on his sales
  - Output Tax : Payable/Liability
- VAT on his purchases of goods and services
  - Input Tax : Creditable/Asset

Output Tax and Input Tax of VAT Registrable TP

From the perspective/point of view of a VAT-Registrable Taxpayer
- VAT on his sales
  - Output Tax : Payable/Liability
- VAT on his purchases of goods and services
  - Cannot be claimed as input tax credit but treated as expense

Output Tax and Input Tax of Non-VAT TP

Output Tax and Input Tax of Person not engaged in business

From the perspective/point of view of a person not engaged in business
- No Output Tax / not applicable
- VAT on his purchases of goods and services
  - Treated as expense or cost

Persons Liable to VAT

Section 4.105-1, RR 16-2005. Persons Liable
- Any person who, in the course of his trade or business, sells, barters, exchanges or leases goods or properties, or renders services, and any person who imports goods, shall be liable to VAT imposed in Secs. 106 to 108 of the Tax Code
- In the case of importation of taxable goods, the importer, whether an individual or corporation and whether or not made in the course of his trade or business, shall be liable to VAT imposed in Sec.107 of the Tax Code

In the Course of Trade or Business

Section 4.105-3, RR 16-2005
- Means the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit (nsnp) private organization or government entity.
Services by nonresident foreign persons
- The rule of regularity, to the contrary notwithstanding, services as defined in the NIRC rendered in the Philippines by nonresident foreign persons shall be considered as being rendered in the course of trade or business.

VAT Rates

Aggregation Rule

Aggregation Rule
- Income derived from one business or practice of profession is combined with all other businesses of the taxpayer for the purpose of determining the threshold of P1,919,500.00 (now P3,000,000.00)
  - Ex. Professional fee of a CPA + gross receipts from restaurants + commissions)
- Aggregation rule does not apply to husband and wife who shall be considered as separate taxpayers.