LIMA – PERÚ 2018
5.2 Estructura de la propuesta del plan de estrategias orientado a la responsabilidad social empresarial y la imagen de marca de la empresa Soto Sport, Los Olivos 2018
XVI. Input tax and output tax, defined XVII. Sources of input tax
XVIII. Persons who can avail of input tax credit
XIX. Determination of output/input tax; VAT payable; Excess input tax credits XX. Substantiation of input tax credits XXI. Refund or tax credit of excess input tax XXII. Invoicing requirements
XXIII. Filing of return and payment
XXIV. Withholding of final VAT on sales to government
I. Concept
A. VAT is a percentage tax imposed at every stage of the distribution process on the sale, barter, or exchange, or lease of goods or properties, and on the performance of service in the course of trade or business, or on the importation of goods, whether for business or non-business purposes.
B. It is a business tax levied on certain transactions involving a wide range of goods, properties, and services, such tax being payable by the seller, lessor, or transferor. The tax is so-called because it is imposed on the value not previously subjected to VAT (De Leon, ―The National Internal Revenue Code Annotated,‖
2000 edition)
C. It is also an excise tax, or a tax on the privilege of engaging in the business of selling goods or services, or in the importation of goods.
D. The taxpayer (seller) determines his tax liability by computing the tax on the gross selling price or gross receipt (output tax), and subtracting or crediting the earlier VAT on the purchase or importation of goods or on the purchase of service (input tax) against the tax due on his own sale.
II. Characteristics
It is an indirect tax, the amount of which may be shifted to or passed on the buyer, transferee, or lessee of the goods, properties or services.
(Sec. 105)
This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of RA No.
9337. –RR 16-2005
This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of RA No.
9337.
VAT is a percentage tax imposed by law directly not on the thing or service but on the act (sale, barter, exchange, lease, importation, rendering service)
It is also an excise tax, or a tax on the privilege of engaging in the business of selling goods or services, or in the importation of goods but unlike excise, it not applied only to a few selected goods
It is an ad valorem tax the amount is based on the gross selling price or gross value in money of goods and services
Tax is based on the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged or the gross receipts for services or total value or landed cost for imported goods.
Constitutionality of VAT
ABAKADA Guro Party List, et. al. v Ermita (2005):
The validity of raising the VAT rate from 10% to 12% by the President was upheld by SC.
The assailed provisions of RA 9337 are those that say that the President, upon the recommendation of the Sec. of Finance, shall raise the rate of VAT to 12% when VAT as a percentage of the GDP of the previous year exceeds 2 4/5% and when the deficit as a percentage of the previous year‘s GDP exceeds 1
½%.
This is NOT an undue delegation of legislative power. It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increased rate under the law is contingent.
It is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress.
Another assailed provision is Sec. 8 amending Sec. 110(B), which imposes a limitation on the amount of input tax (70% of the output tax) that may be credited against the output tax.
The Court says this does not violate due process.
The excess input tax, if any, is retained in a business‘ books of accounts and remains creditable in the succeeding quarter/s.
In addition, Sec. 112(B) allows a VAT-registered person to apply for the issuance of a tax credit certificate or refund for any unused input taxes, to the extent that such input taxes have not been applied against the output taxes. Such unused input tax may be used in payment of his other internal revenue taxes.
The input tax is NOT a property or a property right within the constitutional purview of the due process clause.
A VAT-registered person‘s entitlement to the creditable input tax is a mere statutory privilege.
The right to credit input tax as against the output tax is clearly a privilege created by law, a privilege that also the law can remove, or in this case, limit.
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[Note: This limitation of creditable input tax has been eliminated by RA 9361, effective December 2006. Please refer to the discussion on input taxes on page 112 of this reviewer.]
With respect to Sec. 8, amending Sec. 110 (A), which provides for 60-month amortization of the input tax on capital goods purchased: It is not oppressive, arbitrary, and confiscatory. The taxpayer is not permanently deprived of his privilege to credit the input tax. For whatever is the purpose, it involves executive economic policy and legislative wisdom in which the Court cannot intervene.
The tax law is uniform: it provides a standard rate of 0% or 10% (or 12% now) on all goods or services. The law does not make any distinction as to the type of industry or trade that will bear the 70% limitation on the creditable input tax, 5-year amortization of input tax on purchase of capital goods, or the 5% final withholding tax by the government.
It is equitable: The law is equipped with a threshold margin (P1.5M). Also, basic marine and agricultural products in their original state are still not subject to tax. Congress also provided for mitigating measures to cushion the impact of the imposition of the tax on those previously exempt. Excise taxes on petroleum products and natural gas were reduced.
Percentage tax on domestic carriers was removed. Power producers are now exempt from paying franchise tax.
VAT, by its very nature, is regressive. BUT the Constitution does not really prohibit the imposition of indirect taxes (which is essentially regressive).
What it simply provides is that Congress shall
―evolve a progressive system of taxation‖.
In Tolentino v. Sec. of Finance, the Court said that direct taxes are to be preferred, and as much as possible, indirect taxes should be minimized… but not avoided entirely because it is difficult, if not impossible, to avoid them.
Tolentino v. Guingona:
Regressivity is not a negative standard for courts to enforce.
What Congress is required by the Consti to do is to ―evolve a progressive system of taxation.‖
This provision is placed in the Consti as moral incentives to legislation, not as judicially enforceable rights.
The regressive effects are corrected by the zero rating of certain transactions and through the exemptions.
The transactions which are subject to VAT are those which involve goods and services which are used or availed of mainly by higher income groups (real properties held primarily for sale to customers, right or privilege to use patent, copyright...)
III. Impact of tax
The impact of taxation is on the statutory taxpayer, the one from whom the government collects
The impact of VAT is on the seller upon whom the tax has been imposed.s
IV.Incidence of tax
The incidence of tax in on the one who bears the burden of taxation.
The incidence of VAT is on the final consumer.
V.Tax credit method
The tax credit method refers to the manner by which the value added tax of a taxpayer is computed. The input taxes shifted by the sellers to the buyer are credited against the buyer‘s output taxes when he in turn sells the taxable goods, properties or services.
VI. Destination principle
The destination of the goods determines taxation or exemption from tax.
NO VAT shall be imposed to form part of the cost of goods destined for CONSUMPTION OUTSIDE of the territorial border of the taxing authority.
Hence, actual export of goods and services from the Phil to a foreign country must be free from VAT.
Conversely, those destined for use or consumption WITHIN the Phil shall be imposed with the 12% VAT.
Tax Treatment of Sales Made:
A. Any sale of goods, property or services made by a VAT registered supplier from the Customs Territory* to any registered enterprise operating in the ecozone, REGARDLESS of the class or type of the latter‘s PEZA registration, is actually qualified and thus LEGALLY ENTITLED TO THE 0%
VAT.
Accordingly, all sales of goods or property to such enterprise made by a VAT registered supplier from the Customs Territory shall be treated SUBJECT TO 0% VAT.
* ―Customs Territory” means the national territory of the Phil OUTSIDE of the proclaimed boundaries of the ECOZONES.
B. By a VAT-Exempt Supplier from the Customs Territory to a PEZA registered enterprise
Sale of goods, property and services by VAT-Exempt supplier from the Customs Territory to a PEZA registered enterprise shall be
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treated EXEMPT FROM VAT, regardless of whether or not the PEZA registered buyer is subject to taxes under the NIRC or enjoying the 5% special tax regime.
C. By a PEZA Registered Enterprise
1) Sale of Goods by a PEZA registered enterprise to a buyer from the Customs Territory (ie domestic sales) -- this case shall be treated as a technical IMPORTATION made by the buyer. Such buyer shall be treated as an IMPORTER thereof and shall be imposed with the corresponding VAT.
2) Sale of Services by a PEZA registered enterprise to a buyer from the Customs Territory – this is NOT embraced by the 5%
special tax regime, hence, such seller shall be SUBJECT TO 12% VAT.
3) Sale of Goods by a PEZA registered enterprise to Another PEZA registered enterprise (ie Intra-ECOZONE Sales of Goods) – this shall be EXEMPT from VAT.
4) Sale of Services by ECOZONE enterprise, to Another ECOZONE enterprise (Intra-ECOZONE enterprise Sale of Service) (a) if PEZA registered seller is subject to
5% special tax regime EXEMPT from VAT
(b) if PEZA registered seller is subject to taxes under NIRC (ie not subject to 5%
special tax regime) – subject to 0% VAT pursuant to ―cross border doctrine‖
VII. Persons liable (Sec. 105)
A. Any person who, in the course of trade or business,
(1) sells, barters, exchanges goods or properties,
(2) leases goods or properties, and (3) renders services.
The phrase ―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, nonprofit organization
irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests, or government entity. (Sec 105)
Exception: When the annual sales do not exceed P1,500,000 - Any person whose gross annual sales and/or receipts do not exceed the amount of One Million five hundred thousand pesos (P1,500,000), and who is not VAT-registered shall pay a tax equivalent to three percent (3%) of his gross monthly sales or receipts.
To be subject to 3% percentage tax, the following requisites must be satisfied:
1. The gross annual sales and/or receipts do not exceed P1,500,000.00; and
2. The taxpayer is not a VAT-registered person.
Thus, even if the sales or receipts do not exceed P1,500,00 if the taxpayer decides to become VAT-registered, he shall be subject to value-added tax.
Conversely, even if he does not register if his gross annual sales and/or receipts exceed P1,500,000, he shall be subject to value-added tax.
However, marginal income earners are not subject to business taxes because they are not considered as engaged in trade or business.
A marginal income earner is an individual deriving gross sales or receipts of not exceeding P100,000 during any 12-month period (Rev. Reg.
11-2000)
NOTE: The threshold amount has been increased to One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500) per RR 16-2011.
B. Any person who imports goods
RR 16-2005: the importer, whether an individual or corporation and whether or not made in the course of his trade or business, shall be liable to pay VAT.
VIII. VAT on sale of goods or properties
Rate: 12% VAT (beginning 1 February 2006 (RMC No.
7-06)
Basis: Gross selling price or gross value in money of the goods or properties.
Who Pays: Paid by SELLER
Goods or properties – all tangible and intangible objects which are capable of pecuniary estimation, including:
1. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
2. The right or the privilege to use patent, copyright, design, or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right;
3. The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment;
4. The right or the privilege to use motion picture films, films tapes and discs;
5. Radio, television, satellite transmission and cable television time.
Requisites of taxability of sale of goods or properties
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The sale of goods (tangible or intangible) must be:1. an actual or deemed sale of goods or properties for a valuable consideration;
2. undertaken in the course of trade or business;
3. for the use or consumption in the Philippines; and
4. not exempt from value added tax under the Tax Code, special law, or international agreement
Gross Selling Price (GSP) – The total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, on such goods or properties shall form part of the gross selling price xxx
1) The consideration stated in the sales document, or
2) The fair market value (FMV), whichever is the HIGHER of:
a) FMV as determined by the Commissioner (zonal value), or
b) FMV as shown in schedule of values of the Provincial & City assessors (real property tax declaration)
If GSP is based on the zonal value or market value of the property, the zonal or market value shall be deemed EXCLUSIVE of VAT.
If the VAT is not billed separately, the selling price stated in the sales document shall be deemed to be EXCLUSIVE of VAT.
SALE OF REAL PROPERTY
Person Liable: gross sales/receipts >
P1,919,500/year (per RR 16-2011)
1. Any person (natural or juridical) engaged in sale or exchange of real parties
2. Real estate lessors
3. Non-resident lessors (property located in the Philippines)
4. Non-stock, Non-profit organizations
5. Government agencies, instrumentalities, GOCCs
Taxable:
1. On installment plan
2. Pre-selling by real estate dealers
3. Sale of residential lot >P1,919,500 or house/lot for >P3,199,200 (RR 16-2011) 4. Lease of residential units (rent >
12,800/month or >P1,919,500/year) Not taxable
1. Nor primarily held for sale 2. Low cost or socialized housing 3. Land < P1,919,500
4. House/Lot < P3,199,200
5. Lease (rent < 12,800/month or
>P1,919,500/ year)
6. Transmission to a trustee (E: transferred as gift – deemed sale transaction)
7. Transfer to corporation in exchange of shares of stocks
8. Advance payment by the lessee 9. Security deposits for lease agreements ON INSTALLMENT PLAN (RR 16-2005)
Scope (§ 4.106 – 3)
Installment Plan Deferred Payment Initial payment do not
exceed 25% of the gross selling prince
Initial payment exceeds 25% of the gross selling price
Taxable only on the payment actually or constructively received
Treated as cash sale and the entire selling price is taxable on the month of sale
Sale of real property by a real estate dealer, the initial payments of which in the year of sale (down payment + all payments actually or constructively received during the year of sale) do not exceed 25% of the gross selling price.
However, in the case of sale of real properties on the deferred-payment basis, not on the installment plan, (meaning the initial payments in the year of sale exceed 25% of the gross selling price), the transaction shall be treated as cash sale which makes the entire selling price taxable in the month of sale.
The real estate dealer shall be subject to VAT on the installment payments, including interest and penalties, actually and/or constructively received by the seller.
Sale of residential lot exceeding P1.5M, residential house and lot or other residential dwellings exceeding P2.5M, where the instrument of sale is executed on or after July 1, 2005, shall be subject to [12%] VAT.
Where the instrument of sale was executed prior to July 1, 2005, the price needs only to exceed P1M for the installment sale of residential house and lot or other residential dwellings to be subject to 10% VAT.
Transmission of property to a trustee shall NOT be subject to VAT IF the property is to be merely held in trust for the trustor and/or beneficiary. However, IF the property transferred is originally intended for sale, lease or use in the ordinary course of trade or business AND the transfer constitutes a completed gift, the transfer is subject to VAT as a deemed sale transaction. The transfer is a completed gift if the transferor divests himself absolutely of control over the property, i.e., irrevocable transfer of corpus and/or irrevocable designation of beneficiary.
IX. Zero-rated sales of goods or
properties, and effectively zero-rated sales of goods or properties
A zero-rated sale by a VAT-registered person is a taxable transaction for VAT purposes, but shall not result in any output tax.
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Input tax on purchases of goods, properties or services related to such zero-rated sale shall be available as tax credit or refund. (RR 16-2005) Export sales (IF-GONE) (§ 106, (2))
1) The sale and actual shipment of goods from the Philippines to a Foreign country AND paid for in acceptable foreign currency or its equivalent in goods or services, AND accounted for in accordance with the rules and regulations of the BSP;
2) Sale of raw materials or packaging materials to a Nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods AND paid for in acceptable foreign currency AND accounted for in accordance with the rules and regulations of the BSP
3) Sale of raw materials or packaging materials to Export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production.
Any enterprise whose export sales exceed 70% of the total annual production of the preceding taxable year shall be considered an export-oriented enterprise upon accreditation under the rules & regulations of Export Development Act, RA 7844 (RR 7-95) 4) Sale of Gold to the Bangko Sentral ng
Pilipinas (BSP);
5) Those considered export sales under the Omnibus Investment Code of 1987, and other special laws (ex. Bases Conversion &
Development Act of 1992)
Under Omnibus Investment Code:
a) Phil. port FOB value of export products exported directly by a registered export producer;
b) Net selling price of export products sold by a registered export producer to another export
b) Net selling price of export products sold by a registered export producer to another export