It is a business tax. Without any business pursued in the Philippines by the taxpayer, the tax cannot apply.
- In the course of trade or business means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. Examples are: Selling goods, leasing or renting out properties and selling services.
- Exceptions, where even there is business, there is no VAT imposable:
- Business pursued by an individual where the aggregate gross sales and/or receipts do not exceed P100,000 during any 12-month period shall be considered principally for subsistence or livelihood and not in the course of trade or business;
- Sale of real properties utilized for low cost housing (P750,000 per unit or less);
- Sale of real properties used for socialized housing (P 400,000 for house and lot and P 160,000 for lot only);
- Sale of residential lot valued at P 1,919,500 per unit and below;
- Sale of house and lot and other residential dwellings valued at P 3,199,200 and below where the instrument of sale was executed on or after January 1, 2012; and
- Lease of residential unit with a monthly rental per unit of P 12,800 and below, irregardless of the aggregate rentals received during the year.
- Exceptions, where even there is no business, VAT is imposable:
- Importation of goods for personal use; and
- Services rendered in the Philippines by non-resident foreign persons, even isolated, shall be considered as being rendered in the course of trade or business.
Questions to Ponder:
- Which statement is wrong? Transactions considered “in the course of trade or business” and, therefore, subject to the business taxes include:
A. Regular conduct or pursuit of a commercial or an economic activity by a stock private organization.
B. Regular conduct or pursuit of a commercial or an economic activity by a non-stock, non-profit private organization.
C. Isolated services in the Philippines by non-resident foreign persons.
D. Isolated sale of goods or services for a gross selling price or receipts of P500,000.
2. Value added tax is a/an:
|a. Indirect tax||b. Direct tax||c. Local tax||d. Personal tax|
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JONATHAN RUIZ CPA, MIB