VALUE ADDED TAX (VAT)

A consumer tax
Simplification of the value tax system
Patterned after Singapore
Must register
o Will be issued a VAT TIN
E-VAT
o RA 7716
o Expanded the coverage to include others not covered by previous VAT law
VAT may be shifted
o GENERAL RULE: Seller shoulders the VAT (Backward Shifting)
o EXCEPTION: Contrary stipulation (Forward Shifting)
Impact of taxation
Incidence of taxation
VAT is part of the cost
Banks do not pay tax EXCEPT income tax and local tax BUT must pay VAT
o It is the seller that was liable
o Seller only passed the burden
Tax exemptions cannot be implied as VAT exemptions
NAPOCOR case
o NAPOCOR is exempted from direct and indirect tax
o It can offset the VAT paid because it is tax exempt
Business under VAT includes incidental transactions
There is nothing wrong if the tax is regressive; Constitutional
o the government shall endeavor a progressive tax system

Must be applied only if practicable

TAX PYRAMIDING
o Compounding of taxes
o Makes commodities more expensive
o Prevented by VAT because all are liable
o If you are the exempt optional ____
EXEMPTION BASED ON LOCATION
o Board of Investments-registered firm granted exemption even if located and doing business
within customs territory
o Special economic zone or Freeport zone it has to locate and conduct business within a
geographically demarcated area

DEFINITIONS:
1.

GOODS

Any movable, tangible object, which is appropriable or transferable, and having intrinsic value. It
2.
3.

connotes any commodity produced and subsequently purchased to satisfy the current wants and
perceived needs of the buyer. (Rev. Regs. No. 5-87, Sept. 1, 1987)
GROSS SELLING PRICE
DEEDMED SALE
a. 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
b. Distribution or transfer to shareholders or investors as share in the profits of the VAT-registered
persons or to creditors in payment of debt
c. Consignment of good, if actual date is not made within 60 days following the date such goods were
consigned

d.

4.
5.

6.
7.

8.

Retirement from or cessation of business, with respect to inventories of taxable goods existing as
of such retirement or cessation
TRANSACTION VALUE
EXPORT TRANSACTION
OUTPUT TAX
Value added tax die on the sale or lease of taxable goods, properties or services by any person
registered or required to register under Section 236 of the Tax Code (Sec. 110[A], NIRC).
INPUT TAX
Value added tax due from or paid by a VAT-registered person in the course of his trade of business
on importation of goods or local purchase of goods, properties or services, including lease or use of
property, from a VAT-registered person (Sec. 110[A], NIRC).
EFFECTIVELY ZERO-RATED TRANSACTION
Sale by a VAT-registered seller to a person who was granted indirect tax exemption under a special
law or international agreement
HOWEVER exemption of the entity does not extend to its personnel and guests with respect to the
value added tax that may be passed on to them by their suppliers

AUTOMATICALLY ZERO-RATED TRANSACTION

There is NO NEED to file an application form and to
secure BIR approval

EFFECTIVELY ZERO-RATED TRANSACTION

An application for zero-rating and BIR approval is
NECESSARY before a transaction may be considered as
effectively zero-rated

The word zero-rated is NOT REQUIRED to be stamped

on the face of the VAT invoice or receipt to be issued by
the seller of the goods or services.

The word zero-rated is REQUIRED to be stamped on

the face of the VAT invoice or receipt to be issued by the
seller of the goods or services.

REASEON: The buyer, as shown by his address in the

sales invoice and shipping documents, is located outside
the Philippines.

REASEON: The buyer of the goods and services is

located within the Philippines, or he is located outside the
Philippines merely by fiction of law.

Read:
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R-VAT (2005)
BRQ 16-2005
Mamalateo Chapter on VAT
Taxpayer suit on VAT
RA 9337
ABAKADA Guro Partylist case
VAT freedom of religion
Why VAT was increased from 10%-12%