VAT on Domestic/Local Goods and Deemed-Sales Transactions

VAT on Sale of Goods or Properties

• Section 4.106-1, RR 16-2005 as amended by RR 4-2007.
• VAT on Sale of Goods or Properties
  • VAT is imposed and collected on every sale, barter, exchange, or transactions “deemed sale” of taxable goods or properties at the rate of 12% (starting Feb 1, 2006) of the gross selling price or gross value in money of the goods or properties sold, bartered, or exchanged, or deemed sold in the Philippines.

Goods or Properties

• Section 4.106-2, RR 16-2005. Meaning of ‘Goods or Properties’
• Refers to all tangible and intangible objects which are capable of pecuniary estimation and shall include among others:

1) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;

2) The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand, or other like property or right;

3) The right or privilege to use in the Philippines of any industrial, commercial or scientific equipment;

4) The right or privilege to use motion picture films, films, tapes and discs; and

5) Radio, television, satellite transmission and cable television time.

Gross Selling Price

• Section 4.106-4, RR 16-2005 as amended by RR 4-2007.
• Meaning of Gross Selling Price.
  • Means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax.
  • The excise tax, if any, on such goods or properties shall form part of the gross selling price.
• Allowable Deductions from Gross Selling Price
  • Section 4.106-9, RR 16-2005. Allowable Deductions fr Gross Selling Price
  • In computing the taxable base during the month or quarter, the following shall be allowed as deductions:
    • Discounts determined and granted at the time of sale, which are expressly indicated in the invoice, the amount thereof forming part of the gross sale duly recorded in the books of accounts.
      • Sales discount indicated in the invoice at the time of sale, the grant of which is not dependent upon the happening of future event, may be excluded from the gross sales within the same month/quarter it was given
    • Sales returns and allowances for which a proper credit or refund was made during the month or quarter to the buyer for sales previously recorded as taxable sales.

Transactions Deemed Sale

• Section 4.106-7 (a), RR 16-2005.
• The ff. transactions shall be “deemed sale”
  • 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.
    • Transfer of goods or properties not in the course of business can take place when VAT-registered person withdraws goods from his business for his personal use
  • Distribution or transfer to
    • (a) Shareholders or investors as share in the profits of the VAT-registered person; or
    • (b) Creditors in payment of debt
  • Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned;
  • Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.
  • Section 106 (C). Changes or Cessation of Status of a VAT-registered person.
    • Status of a person as a VAT-registered person changes or is terminated
    • Change from VAT to Non-VAT registration