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EXERCISES 15- 1.

DISCUSSION QUESTIONS
1. a. Yes, the sale of non- food agricultural products in their original state is subject to VAT. b. The sale is taxable because the object of sale is a non- food agricultural product. It does not matter whether the are still in the original state or not. c. The importation of lumbers from Indonesia is subject to VAT because the law does not grant tax exemption on the importation of non- food agricultural, marine and forest products.

d. The sale of the !ili nuts is exempt because the sale of agricultural food products in their original state are exempt from VAT. ". a. #o. Importation of li$estoc% and poultr products in their original state are exempt from VAT. The li$estoc% are still considered in their original state e$en if the ha$e undergone the simple process of dressing and&or stripping. The sale of dressed chic%en in the supermar%ets is exempt also from VAT because the are still in their original state.

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c. The sale of the 'litsong mano%' to the public are exempt also from VAT because the li$estoc% and poultr products are still considered in their original state e$en if the ha$e undergone the simple process of roasting and&or stripping. (. a. The law pro$ides that the sale or importation of agricultural and marine food products in their original state, li$estoc% and poultr of a %ind generall used as, or ielding or producing foods for human consumption shall be exempt from VAT. The process of ma%ing centur eggs is embraced b this pro$ision. The exemption co$ers all sale in an stage of distribution in the domestic mar%et. Therefore, export sales are subject to )* if he is VAT registered. If he is not VATregistered, the export sales are exempt. b. The sale of centur eggs in the local mar%et is exempt. The are still considered in their original state e$en if the ha$e undergone the simple processes of preparation or preser$ation such as free+ing, dr ing, salting, boiling, roasting, smo%ing or stripping. The process of ma%ing centur eggs is a simple process to prepare or preser$e the same for the mar%et. ,. a. The local sale b -angingisda of the fish in their original state is exempt. The fish shall be considered in their original state e$en if the ha$e undergone the simple processes of preparation or preser$ation for the general mar%et such as free+ing, dr ing, salting, broiling, roasting, smo%ing or stripping, including those using ad$anced technological means of pac%aging, such as shrin% wrapping in plastics, $acuum pac%ing, tetrapa%, and other similar pac%aging methods. b. The export sales are exempt also from VAT if the exporter is not VAT registered. If registered under the VAT s stem, it is taxable at )*.

c. The exemption from VAT co$ers onl

the output VAT on the gross receipts from the sale of fish in their original state. .ence, he cannot claim exemption from the input VAT being passed on to him b the suppliers on the purchase of supplies, parts, fuels, etc. as forming part of the in$oice price (BIR Ruling 174- 98).

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a. #o, the importation and sale of fertili+ers is exempt from VAT (BIR Ruling 217- 88).
b. The sale of fertili+ers is totall in the !hilippines. exempt from VAT e$en if the ha$e been repac%ed

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#o, importation of personal and household effects belonging to residents of the !hilippines returning from abroad are exempt from tax. 1i%ewise, importation of wearing apparel and personal and household effects for their own use and not for sale, barter, or exchange are also exempt from VAT. If 3almacio is a VAT-registered taxpa er, the exportation of goods is subject to VAT but the tax rate is )*. If he is not VAT-registered, the exportation is exempt from the co$erage of VAT. The importation of the agricultural e5uipment is exempt. The law exempts importation of direct farm inputs, machineries and e5uipment, including spare parts thereof, to be used directl and exclusi$el in the production and&or processing of their produce. The digging and preparing drainage for irrigation of farms and plantation are considered as 6in the production of their produce (BIR Ruling 122- 98). a. #ot taxable 8 the condominiu m unit is not held primaril for sale to customers. b. Taxable 8 the house and lot is primaril for sale. c. #ot taxable 8 the real propert is not held for sale in the ordinar course of business. d. #ot taxable- e$en if the seller is a real estate dealer because the real propert is utili+ed for sociali+ed housing. #o, sale of maga+ine, re$iew or bulletin which appears at regular inter$als with fixed prices for subscription and sale which is not de$oted principall to the publication of paid ad$ertisements are exempt from VAT. The sale of the sea sna%es and of the sna%e s%in leather are subject to VAT. The taxabilit applies whether the products are sold in their original state or not, and whether the are sold b the primar producer or b a subse5uent seller. The sale of cotton b 3elilah to the 6compradores9 and the latter:s sale to cotton bud manufacturer is subject to VAT because sale of cotton and cotton seeds are taxable whether sold in their original state or not. A sale b the artist of his wor%s of art, literar wor%s, musical compositions and similar creations, or its ser$ices performed for the production of such wor%s is subject to VAT. Therefore, the sale b ;a a a to the recording compan latter to the public are subject to VAT. as well as the sale b the

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The sale of electricit , the importation of machineries and e5uipments as well as the local purchases of machineries, spare parts and e5uipments are subject to $alueadded tax e$en if the same are to be used directl in the generation of electricit .

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