STUDY QUESTIONS Output Tax: VAT collected by a VAT-
registered business from customers when
ON VALUE-ADDED TAX selling taxable goods or services.
1. What is the nature of VAT (direct or indirect; Input Tax: VAT paid by a business on
personal, property or excise; national or local; purchases of goods or services used in
etc.)? operations.
Nature of VAT VAT Payable: The difference between
output tax and input tax (i.e., Output Tax -
VAT is an indirect tax because it is passed Input Tax).
on to consumers.
Legal Reference: Sections 106 and 110 of the NIRC, as
It is a national tax, imposed by the amended by RA 9337
government. 4. The following activities are subject to VAT: Sale of
It is a consumption tax levied on goods and Goods and Properties, Sale of Service, and
services at each stage of the supply chain. Importation. What is the VAT base for each of those
activities?
It is neither a personal nor property tax but
rather a transaction-based excise tax on VAT Base for Different Activities
sales and importation. Sale of Goods and Properties: Gross selling
Legal Reference: Section 105 of the National Internal Revenue price.
Code (NIRC) of 1997, as amended by Republic Act No. 9337
(RA 9337) Sale of Services: Gross receipts.
Importation: Total landed cost, including
duties and other taxes.
2. What is an indirect tax, and what is meant by
Legal Reference: Sections 106(A), 108(A), and 107(A) of the
"shifting"?
NIRC, as amended by RA 9337
Indirect Tax & Shifting
Indirect Tax: A tax where the burden can be 5. In case of tax-free importation of goods into the
transferred from the taxpayer to another Philippines by persons, entities or agencies exempt
party, typically the consumer. from tax where such goods are subsequently sold,
transferred or exchanged in the Philippines to non-
Shifting: The process by which the tax exempt persons or entities, will such subsequent
burden is transferred from the seller to the sale, transfer or exchange be subject to VAT on
buyer by adding the tax to the selling price. importation? If yes, who shall be liable to pay the
Legal Reference: Section 105 of the NIRC, as amended by VAT on importation?
RA 9337
VAT on Tax-Free Imports Subsequently Sold
3. What are meant by: (i) Output Tax, (ii) Input Tax, Yes, the sale is subject to VAT.
and (iii) VAT payable? The non-exempt buyer is liable to pay the
Definitions VAT.
Legal Reference: Section 107(B) of the NIRC, as amended by Yes, if they sell religious articles as a regular
RA 9337
business.
No, if sales are occasional and incidental to
6. Differentiate between gross selling price and
religious activities.
gross receipt.
Legal Reference: Section 105 of the NIRC, as amended by
Gross Selling Price vs. Gross Receipt RA 9337
Gross Selling Price: The total amount
charged for the sale of goods or properties. 10. What are the sources of input tax? How may
the input tax be claimed if the taxpayer is engaged
Gross Receipt: The total amount received
in the sale of both VATable and non-VATable
for services rendered.
transactions?
Legal Reference: Sections 106(A)(1) and 108(A) of the NIRC,
as amended by RA 9337 Sources & Claiming of Input Tax
7. How do sales discounts and sales returns affect Sources: Purchases, importations, lease
Output Tax and VAT payable? payments, etc.
Effect of Discounts & Returns on VAT Claiming: Proportionally allocated if
involved in both VATable and non-VATable
Sales Discounts: Reduce the taxable base,
transactions.
lowering the output tax.
Legal Reference: Sections 110 and 111 of the NIRC, as
Sales Returns: Decrease output tax since amended by RA 9337
the VAT on returned goods is reversed.
Legal Reference: Section 4.106-1 of Revenue Regulations
No. 16-2005. 11. What is presumptive input tax?
8. What is meant by "in the course of trade or Presumptive Input Tax
business"? May a singular sale of service be A fixed percentage of sales or purchases
considered in the course of trade or business? that certain taxpayers can claim as input tax
"In the Course of Trade or Business" without requiring actual VAT invoices.
Regular conduct of commercial transactions Legal Reference: Section 111(B) of the NIRC, as amended by
RA 9337
for gain.
A single transaction may be subject to VAT if
it has commercial intent. 12. What document must evidence the claim for
Legal Reference: Section 105 of the NIRC, as amended by
input tax, and what details should appear in said
RA 9337 document?
Documentary Evidence for Input Tax
9. Are sales by religious organizations of religious
A VAT Invoice or Official Receipt.
articles subject to VAT?
Must contain: TIN, VAT amount, business
VAT on Sales by Religious Organizations
details, and description of transaction.
Legal Reference: Section 113(A) of the NIRC, as amended Legal Reference: Section 106(A)(2)(a) of the NIRC, as
by RA 9337. amended by RA 9337.
13. What is the difference between "VAT invoice"
and "VAT official receipt"?
17. What are zero-rated sales of services?
VAT Invoice vs. VAT Official Receipt
Zero-Rated Sales of Services
VAT Invoice: Used for sale of goods and
Services rendered to non-residents and paid
properties.
in foreign currency.
VAT Official Receipt: Used for sale of
Legal Reference: Section 108(B) of the NIRC, as amended
services.
by RA 9337.
Legal Reference: Section 113(A) of the NIRC, as amended Legal Reference: Section 109 of the NIRC, as amended by RA
by RA 9337.
9337.
14. What is the difference between a zero-rated 18. What are VAT-exempt transactions? Classify
transaction versus an exempt transaction? How them into (i) exempt importations; (ii) exempt
should input tax be treated (or booked) and used services; and (iii) exempt sale of goods or
by a taxpayer engaged in zero-rated transactions/ properties.
exempt transactions?
VAT-Exempt Transactions
Zero-Rated vs. Exempt Transactions
1. Exempt Importations: Personal effects,
Zero-Rated: VAT applies at 0%, allowing diplomatic goods.
input tax claims.
2. Exempt Services: Medical, educational
Exempt: No VAT applied, but input tax services.
cannot be claimed.
3. Exempt Sale of Goods/Properties:
Legal Reference: Sections 106(A)(2) and 109 of the NIRC, Agricultural products, socialized housing
as amended by RA 9337.
19. Which VAT-exempt taxpayers may opt to
15. May a VAT-registered seller of goods pass on register for VAT and be a VAT taxpayer?
the burden of VAT to a non-VAT buyer (i.e. a
VAT-Exempt Taxpayers Who May Register for VAT
taxpayer engaged in VAT exempt transactions)?
Businesses exceeding the VAT threshold
No, a VAT-registered seller cannot pass VAT to a
may voluntarily register
non-VAT buyer engaged in exempt transactions
16. What are zero-rated sales of goods and
properties? 20. What are the deemed sale transactions?
Zero-Rated Sales of Goods & Properties Deemed Sale Transactions
Export sales, sales to ecozones, sales to Transactions treated as sales for VAT
foreign-registered enterprises. purposes, such as:
o Transfer of goods to a branch.
o Personal use of business goods. 25. What is the process and the period for claiming
a refund of excess input tax?
Process & Period for VAT Refund
21. What is the enhanced VAT refund system? What
are its indicators? File a claim with the BIR within 2 years from
the close of the taxable quarter.
Enhanced VAT Refund System & Indicators
A system ensuring faster processing of VAT
refund claims. 26. When is the deadline for filing of VAT returns
and payment of VAT?
Indicators: Timely refund, electronic filing,
transparency. Deadline for Filing VAT Returns & Payment
Monthly: 20th of the following month.
22. What changes will take place once the Quarterly: 25th of the month after the
enhanced VAT refund system is in place? How will it quarter.
affect the zero-rated taxpayers (i.e., what zero-
rated sales of goods and services will be subject to
12% VAT upon implementation of the enhanced
VAT refund system)?
Effects of Enhanced VAT Refund System
Zero-rated sales that may be subject to 12%
VAT: Certain exports, sales to freeport
zones.
23. Which taxpayers are entitled to claim for refund
of excess input tax?
Taxpayers Entitled to VAT Refund
Exporters, government contractors, those
with excess input tax.
24. How should claims for refund of excess input
tax be construed?
Interpretation of VAT Refund Claims
Strictly construed in favor of the
government.
