- Indirect Tax – to be borne by consumers and the sellers are merely acting as tax collectors.
- It follows destination principle. It means that VAT will be imposed on transaction of goods or properties intended to be consumed in the Philippines.
- It is cumulative. VAT passes several distribution stages from the distributor to the wholesaler to the retailer and finally to the ultimate consumer.
- It employs tax credit method and basically a tax on gross margin.
Objects of VAT
1.Sales of Goods.
- a. Actual sales in the course of ordinary business.
- b. Deemed Sales of goods and properties.
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 of inventory to shareholders or investors as share on the profits of VAT registered person.
C. Distribution or transfer of inventory to creditors in payment of debt.
D. Consignment of Goods, if actual sale is not made within 60 days following the date such goods were consigned.
E. Retirement from Cessation of business.
2. Gross Receipts
a. Lease of Taxable Goods
b. Sale or exchange of service
a. Purchase of Imported goods or services.
source; Transfer and Business Taxation by Edwin Valencia and Gregorio Roxas