It is a national tax. The collection or administration of the tax is handled by the national government through the Bureau of Internal Revenue Offices.
Thresholds for business tax (VAT or percentage tax)
- Sellers or lessors of goods or properties and performers of services whose annual gross sales and/or receipts do not exceed P100,000 shall not be subject to VAT or percentage tax.
- Sellers or lessors of goods or properties and performers of services whose annual gross sales and/or receipts exceed P100,000 but not more than P 1,919,500 shall be subject to either VAT or percentage tax. If the taxpayer opts to be VAT-exempt, he shall be imposed a monthly percentage tax of 3% based on gross sales or receipts. If the taxpayer elects to register as VAT taxpayer, however, he shall not be allowed to cancel his VAT registration for the next three years.
- Sellers or lessors of goods or properties and performers of services whose annual gross sales and/or receipts exceed P 1,919,500 shall be compulsory VAT taxpayers, registered or not.
- Franchise grantees of radio and/or television broadcasting, whose annual gross receipts for the preceding calendar year do not exceed P10,000,000 derived from the business covered by the law granting the franchise may opt for VAT registration. This option, once exercised, shall be irrevocable.
The Expanded VAT.
Effective 01 January 1996, under R.A. 7716 and amended by R.A. 8241 made effective 01 January 1997, and further amended by R.A. 8424 made effective 01 January 1998, and by R.A. 9337 (otherwise known as the RVAT) made effective 01 November 2005, and last amended by R.A. 9361 made effective beginning the quarterly VAT return ended 31 December 2006. VAT is a business tax levied on certain goods, properties and services. It is a business tax required to be paid by sellers or lessors of goods or properties and/or performers of services in the domestic market and/or importers of goods.
- Literally, the tax is on the added value by the seller to his purchase cost of the goods sold, sometimes called the gross profit. This is called the cost deduction approach which is not the one employed in the Philippines.
- The tax credit approach is the one adopted. This means that VAT is imposed on the sale first called Output Tax and a tax credit is claimed on the VAT passed on to his purchase cost of goods or services known as Input Tax. The difference is called the VAT payable. There seems to be a semblance of result under the cost deduction approach and the tax credit method, although actually not. This is because not all the purchases of goods, properties and services by the VAT taxpayers have passed on input tax.
- For a VAT taxpayer to maximize his claim of input tax and therefore minimize his VAT payable, he would only transact with his fellow VAT-registered taxpayers because of the passed on VAT. He will rarely buy, if ever, goods, properties and services from non-VAT taxpayers.
- Those whose annual gross sales and/or receipts do not exceed P 1,919,500, however, are actually given the option to become VAT taxpayers by actual registration, for them to be covered by the VAT system. Hence, they could also transact with the affluent sector of society.
JONATHAN RUIZ CPA, MIB