Certified Accounting Technician

BUSINESS TAXES NIAT Office

2015
BUSINESS DEFINED
Business pertain to trade or commercial activity
“regularly engaged in” as a means of livelihood or
with a viewpoint of obtaining profit. (Local Government
Code)
 Regularity
 Commercial or economic quantity
BUSINESS TAXES
Business taxes are impositions collected by the
National Government on onerous transfer of
property, service, or rights in the ordinary course of
business.
Value – Added Taxes (VAT)
 Other Percentage Taxes (OPT)
 Excise Taxes (ET)
BUSINESS REGISTRATION
An annual registration fee
of P500 for every separate
or distinct establishment or
place of business, before
the start of the such business
and every year thereafter
on or before the 31st day
of January. (Sec 236, NIRC)
Exempt from Registration Fee
1. Individuals earning purely
compensation income
2. Overseas workers (Sec 238B, NIRC)
3. Self-employed individuals where
the gross sales or receipts do not
exceed P100,000 per year. (Sec 9,
236 -2, R.A. 9337)
4. Cooperatives (Rev. Regs. No. 20-2011)
EXCISE TAXES
These are taxes are imposed on products that are
harmful to health (such as alcohol or tobacco),
goods that are nonessential, and products that
deplete natural resources (mineral products) that
are manufactured or produced in the Philippines.
EXCISE TAXES
Taxable cased desirability or non-desirability of product
Collected at the point of importation or production for products
that are locally consumed (trade off)
Dealer is not charged
Paid before product is sold
Exempted entities include assemblers only such as PEZA and
Texas Instruments
May still be taxable – (PP+ET)
TAX ON A TAX
VAT and Excise Tax can be taxed
simultaneously?
OPT and Excise Tax can be taxed
simultaneously?
VAT and OPT can be taxed
simultaneously?
Are they alternatives?
TAX-EXEMPT TRANSACTIONS (SEC. 109)
1. Agricultural and marine food products in their original state.
2. Livestock and poultry yielding food for human consumption.
3. Breeding stock and genetic materials.
4. Livestock and poultry.
5. Fish prawn, livestock and poultry feeds, including ingredients used in
the manufacture of finished feeds.
6. Personal and household effects belonging to residents of the
Philippines returning from abroad and non-resident citizens coming to
resettle in the Philippines provided such goods are exempt from
custom duties.
TAX-EXEMPT TRANSACTIONS (SEC. 109)
7. PROFESSIONAL instruments and implements, wearing apparel,
domestic animals and PERSONAL household effects belonging to
persons coming to settle in the Philippines., for their own use and not
for sale, accompanying such persons or arriving within 90 days
before or after their arrival, upon production of evidence that such
persons are actually coming to settle in the Philippines and that the
change of residence is bonafide.
8. Direct farm inputs, machineries and equipments, including spare
parts, to be used directly and exclusively in the production and/or
processing of their produce by AGRICULTURAL COOPERATIVES duly
registered and in good standing with the CDA.
TAX-EXEMPT TRANSACTIONS (SEC. 109)
9. Books and any newspaper, magazine, review or bulletin which
appears at REGULAR intervals with FIXED prices for subscription
and sale and not devoted principally to the publication of paid
advertisement.
10. Fuel, goods and supplies for INTERNATIONAL shipping or air
transport operations; provided that said fuel, goods and
supplies shall be used exclusively to the transport of goods
and/or passengers from a port in the Philippines directly to a
foreign port without stopping at any point in the Philippines.
TAX-EXEMPT TRANSACTIONS (SEC. 109)
11. Passenger or cargo vessels and aircraft, including engine,
equipment and spare parts for domestic or international
transport operations; provided that the passenger and/or
cargo vessels, shall be limited to those of 150 tons and above,
including engine and spare parts of said vessels; provided
further, that the vessels shall comply with the age limit
requirement, at the time of acquisition counted from the date of
the vessel’s original commissioning, as follows:
Passenger and/or cargo vessels, the age limit is 15 years old
Tankers, the age limit is 10 years old
High- speed passenger crafts, the age limit is 5 years old.
TAX-EXEMPT TRANSACTIONS (SEC. 109)
12. Services of:
a. Agricultural contract growers and milling for others of palay into rice, corn into corn
grits, and sugar cane into raw sugar.
b. Medical, dental, hospital and veterinary, except those services rendered by
professionals.
c. Private educational institutions that render educational services duly accredited by
the Department of Education, the Commission on Higher Education and the Technical
Education and Skills Development Authority and those rendered by government
educational institutions;
d. Regional or area headquarters established in the Philippines by multinational
corporations which act as supervising, communicating and coordinating centers for
their affiliates, subsidiaries and branches in the Asia Pacific Region and do not earn
or derive income from the Philippines.
e. Transaction which are exempt under international agreements to which the
Philippines is a signatory; or under special laws except those granted under PD NO.
529 – Petroleum Exploration Concessionaires under the Petroleum Act of 1949
TAX-EXEMPT TRANSACTIONS (SEC. 109)
13. Sale/lease of real properties (inventories/ordinary assets)
a. Sale of real properties utilized for low-cost housing. Housing projects
intended for homeless low income family beneficiaries, undertaken by
the government or private developers which may either be a
subdivision or a condominium registered and licensed by the Housing
and Land Use Regulatory Board (HLURB) under BP Blg. 220, PD No.
957 or any other similar law, wherein the unit selling price is within the
selling price ceiling per unit of P750,000 under RA No. 7279,
otherwise known as the urban Development and Housing Act of 1992
and other laws, such as RA No. 7835 and RA No. 8763.
TAX-EXEMPT TRANSACTIONS (SEC. 109)
13. Sale/lease of real properties (inventories/ordinary assets)
c. Sale of residential lot valued at P1,919,500 and below, or house and lot
and other residential dwellings valued at P3,199,200 and below where
the instruments of sale or transfer or disposition was executed on or after
November 1, 2005; (as amended by RR# 16-2011)
d. Lease of residential units with monthly rental per unit not exceeding
P12,800. (Sec 109 P, Q, V, NIRC; RR# 16-2011, as amended)
BASIS OF TAX ACCORDING TO AMOUNT
Specific Tax Ad Valorem Tax
Taxes that are fixed Taxes that are fixed
amounts imposed and amounts in proportion to the
based on some standard of value of the property with
weight or measurement, respect to which the tax is
head or number, length or assessed.
volume.
VALUE – ADDED TAX
VAT is a general consumption tax that requires a 12%
additional tax on the sales price of goods and/or services
by VAT –registered seller of seller required by law to be
under VAT-system. (Title IV, NIRC)
 an indirect tax
 tax on sale of goods, services and importations
Fling:
o Monthly – before or at the 20th day following the month
o Quarterly – before or at the 25th day following the quarter
VAT ON IMPORTATIONS
Importations are generally vatable whether used
for personal or business means by individual or
corporations except:
1. If the entity is tax-exempt, importations are also exempted such
as NPOs, the government and charitable institutions
2. The entity is taxable but importations are exempt (Sec. 109)
End users may suffer
For example, NPO hospital bought supplies with 20 units surplus and
sold to a non tax-exempt entity.
 BASIS OF OUTPUT TAX
1. Sales, net of returns and discounts
2. Deemed sales
Tax – Benefit Rule

a. Personal use
b. Payment of creditors (dacion en pago)
c. Property dividends
d. Consignment sales – after 60 days
e. Cessation from business
i. Retirement/closure List of inventory of
ii. Cancellation of VAT registration capital goods
SOURCES ON INPUT TAX
1. Transitional Input VAT 6. Local purchases of
2. Presumptive Input VAT capital goods
3. Importations 7. Purchases of properties
4. Local purchases of 8. Excess of input over
services output
5. Local purchases of 9. VAT on sale to
materials government
TRANSITIONAL INPUT VAT
Transitional Input VAT (TIV) is allowed on the inventory on hand(
goods, materials or supplies) of a person who, for the first time
becomes liable to VAT or elects to be VAT-registered.
TIV is equivalent to 2% of the value of such inventory or the actual
input VAT paid on such inventory, whichever is higher, which shall
be creditable against the output VAT. Goods exempt from VAT
shall be excluded in the computation of transitional input VAT.
(Sec. 111, NIRC; RA 9337, RMC 62-2005, dated Oct 18, 2005)
TRANSITIONAL INPUT VAT - ILLUSTRATION
CASE 1: Merchandise inventory from VAT Suppliers
P200,000 + P24,000 = P224,000
Actual VAT Paid
AJE: Input VAT 24,000 OR
Mer. Inventory, BB 24,000

CASE 2: Merchandise inventory from Non-VAT Suppliers

P200,000 x 2% = PP4,000
2% of MI, BB from
AJE: Input VAT 4,000
Non-VAT suppliers
Retained earnings 4,000 whichever is higher
TRANSITIONAL INPUT VAT

Can you still use the

Non-VAT invoice?
PRESUMPTIVE INPUT VAT
Presumptive Input VAT (PIV) is an amount allowed by the Tax Code as input
tax on purchases of a VAT-registered person despite that there are no
actual VAT payment made on VAT-exempt transactions. (Sec. 111B; RA 9337)

The PIV is 4% on the purchases of VAT-exempt primary agricultural and

marine food products at their original state which are used as inputs to the
processing of:
1. Sardines, mackerel;
2. Milk, refined sugar;
3. Cooking oil and
4. Packed noodle based instant meals
PRESUMPTIVE INPUT VAT - ILLUSTRATION
Sweet Company produces sugar and purchases sugar cane
amounting to P5M. Total sales exclusive of VAT is P10M.
Compute the VAT payable.

Output VAT P1,200,000

Input VAT 200,000 (P5M x 4%)
VAT Payable P1,000,000
PRESUMPTIVE INPUT VAT - ILLUSTRATION
Identify whether the following are subject to presumptive
input VAT.
1. Sugar cane used in brown sugar
2. Sugar cane used in refined sugar
3. Fishes used in sardines (Sample Case)
4. Tomatoes
INPUT VAT ON DEPRECIABLE CAPITAL GOODS
Capital goods or properties are “goods or properties
with estimated useful life greater than one year and
which are treated as depreciable assets under Section
34F of the Tax Code, used directly or indirectly in the
production or sale of taxable goods or services.
If the aggregate acquisition costs per month exceeds
P1,000,000 (exclusive of VAT) regardless of the
acquisition cost of each capital goods, the related
input VAT shall be spread over 60 months or its useful
life, whichever is shorter. (Sec. 8, RA 9337)
INPUT VAT ON DEPRECIABLE CAPITAL GOODS
Company X bought 3 machineries during the month of January, each
amounting to P500,000 exclusive of VAT. Compute the Input VAT that can
be claimed every month.

Machine EUL (yrs) Input VAT Amortized Input VAT to

over be claimed
A 8 60,000 60 P1,000
B 3 60,000 36 1,666
C 2 60,000 24 2,500
INPUT VAT ON DEPRECIABLE CAPITAL GOODS
Assuming that Machine A was sold for P300,000 after 30
months, compute the VAT payable by the company.
Output VAT P36,000 (P300,000 x 12%)
Input VAT 30,000 (P1,000 x 30)
VAT PayableP 6,000
PURCHASES OF GOODS/PROPERTIES/SERVICES
The Input VAT element could be claimed as tax credit against Output VAT if:
1. It is evidenced by VAT invoice or Official Receipt in accordance with Sec. 113,
RA 9337 (third-party verification system);
2. The purchase or importation is
a. Intended for sale in the course of business
b. For the conversion into finished products for sale including packaging materials
c. For the use of supplier in the course of business; and
d. For the use in business for which deduction for depreciation or amortization is allowed under
the Code.
3. The purchase is in the conduct of business; provided that, the Input VAT is
creditable to the purchaser, lessee, or licensee upon payment of the
compensation, rental, royalty or fee.
PURCHASES OF GOODS/PROPERTIES/SERVICES
This applies to properties that are not subject
to depreciation.

Yes Claim IV
Bought from
a dealer?
No No IV
EXCESS OF INPUT OVER OUTPUT VAT
Journal Entry (OV > IV) Journal Entry (OV < IV)

Output VAT 120 Output VAT 100

Input VAT 100 Input VAT 100
VAT Payable 20
TRANSACTION WITH GOVERNMENT UNITS
The Philippine government or any of its political
subdivisions, instrumentalities , or agencies, including
GOCCs, before making payment on account of its
purchases of goods and services, shall deduct and
withhold the following business taxes:
a. Final VAT of 5% (if seller is VAT-registered)
b. Percentage tax of 3% (if seller is non-VAT subject to PT
of 3% as the case may be)
MIXED SALES (AN ILLUSTRATION)
SHIELD Corporation has the following sales (VAT not included) during the month:
Sale to private entities subject to 12% VAT P 100,000
Sale to private entities subject to 0% VAT 100,000
Sale of exempt goods 100,000
Sale to government subject to 5% VAT 100,000
Total sales P 400,000

The following input taxes were passed-on by the its VAT suppliers:
Input tax on vatable goods (12%) P 6,000
Input tax on zero-rated sales 3,000
Input tax on sale of exempt goods 2,000
Input tax on sale to government 4,000
Input tax on depreciable capital goods not
attributable to any specific activity 20,000