Sources of output VAT
- Actual sales of goods or properties
- Deemed sales (CR WPD)
- Zero-rated sales
- Transactions deemed sale (CR WPD)
- Consignment of goods if not sold within 60 days following the date of consignment;
- Retirement from or cessation of business with respect to all goods on hand, whether capital goods, stock in trade, supplies or materials, as of the date of such retirement or cessation;
- Transfer, use or consumption not in the course of trade or business of goods or properties originally intended for sale or for use in the course of trade or business;
- Distribution or transfer to creditors in payment of debt; and
- Distribution or transfer to shareholders or investors as share in the profit.
Notes: In case (b), the tax base shall be the lower between acquisition cost or market value. In all other cases, the tax base shall be the actual market value, if the gross selling price is unreasonably lower (over 30%) than the actual market value.
- Export sales
- Foreign currency denominated sales
- Effectively zero-rated sales.
- The sale and actual shipment of goods from the Philippines to a foreign country.
- Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented enterprise.
- Sale of raw materials or packaging materials to export-oriented enterprises whose export sales exceed 70% of total annual production.
- Sale of gold to the Bangko Sentral ng Pilipinas.
- Those considered export sales under the Omnibus Investment Code of 1987 (E. O. No. 226) and other special laws, e.g., sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities.
- Sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations.
Foreign currency denominated sale;
It means sale to a nonresident of goods (except automobiles and nonessential goods) assembled or manufactured in the Philippines for delivery to a resident in the Philippines.
Effectively zero-rated sales
Effectively zero-rated sales of goods and properties shall refer to the local sale (constructive export) by a VAT-registered person to a person or entity who was granted indirect tax exemptions under special laws or international agreement, such as:
- Sale to Asian Development Bank (ADB);
- Sale to International Rice Research Institute (IRRI);
- Sale to duly registered and accredited enterprises with Subic Bay Metropolitan Authority (SBMA); and
- Sale to duly registered and accredited enterprises with Philippine Economic Zone Authority (PEZA).
Questions to ponder:
Which of the following is not a sale and therefore is not subject to the value-added tax?
A. Transfer, use or consumption not in the ordinary course of business of goods or properties ordinarily intended for sale or use in the course of business.
B. Distribution or transfer to shareholders or investors of share in the profits of a VAT-registered person.
C. Distribution or transfer to creditors in payment of debt.
D. Consignment sales.
For the correct answers, I would like to invite you to join my Facebook exclusive groups of aspiring CPAs for my upcoming project “CPA DREAM ACADEMY ” or sign up for flashcards free http://eepurl.com/coJBmf
JONATHAN RUIZ CPA, MIB