VALUE-ADDED TAX
Value-Added
Tax (VAT) -
is a form of
sales tax.
is a tax on consumption levied on the sale,
barter, exchange or lease of goods or
properties and services in the Philippines
and on importation of goods into the
Philippines.
is an indirect tax, which may be shifted or
passed on to the buyer, transferee or lessee
of goods, properties or services.
Who are Required to File VAT Returns?
1. Any person or entity who, in the course of
his trade or business, sells, barters,
exchanges, leases goods or properties and
renders services subject to VAT, if the
aggregate amount of actual gross sales or
receipts exceed Three Million Pesos
(₱3,000,000.00)
2. A person required to register as VAT
taxpayer but failed to register
3. Any person, whether or not made in the
course of his trade or business, who imports
goods.
Value-Added Tax Rates
1. On sale of goods and properties - twelve
percent (12%) of the gross selling price or
gross value in money of the goods or
properties sold, bartered or exchanged.
2. On sale of services and use or lease of
properties - twelve percent (12%) of gross
receipts derived from the sale or exchange
of services, including the use or lease of
properties.
3. On importation of goods - twelve percent
(12%) based on the total value used by the
Bureau of Customs in determining tariff and
customs duties, plus customs duties, excise
taxes, if any, and other charges, such as tax
to be paid by the importer prior to the
release of such goods from customs
custody; provided, that where the customs
duties are determined on the basis of
quantity or volume of the goods, the VAT
shall be based on the landed cost plus
excise taxes, if any.
4. On export sales and other zero-rated sales -
0%
Output VAT
is the value added tax that you calculate
and charge on your own sales of goods and
services if you are registered for VAT.
Output VAT must be charged on sales both
to other businesses and to ordinary
consumers.
Input VAT
is the value added tax added to the price
you pay for eligible goods or services.
Output VAT ₱ xxx
Less: Input VAT xxx
VAT Payable ₱ xxx
(Refund)
===
How is VAT computed:
1. If the invoice price is inclusive of VAT, the VAT
is computed as:
VAT = Invoice Price x 12/112
2. If the invoice price is inclusive of VAT, the
amount to recorded as Purchases or Sales is
computed as-
VAT = Invoice Price / 1.12
3. If the invoice price is exclusive of VAT, the
VAT is computed as:
Gross Selling Price x 12%
Illustration 1:
On August 15, 2023, Golez Merchandising
purchased merchandise for cash from Reyes
Trading at an amount of ₱280,000, inclusive of
VAT. Subsequently, on August 20, Golez sold
for cash the merchandise at an invoice price of
₱392,000.
Required: Record the above transactions
including the setting up of VAT Payable.
Answer:
2023
Aug. 15 Purchases (₱280,000/1.12) ₱250,000
Input VAT (₱280,000 x12/112) 30,000
Cash ₱280,000
20 Cash 392,000
Sales (₱392,000/1.12)
350,000
Output VAT (₱392,000 x 12/112)
42,000
31 Output VAT 42,000
Input VAT
30,000
VAT Payable
12,000
Upon remittance:
VAT Payable 12,000
Cash 12,000
Illustration 2:
You are provided the following
transactions of Reyes Trading: (All
amounts are inclusive of VAT)
2023:
Aug. 10 - Purchased merchandise from Cruz Trading
at an
invoice amount ₱84,000. Terms: 2/10,
n/30.
12- Returned merchandise to Cruz Trading
amounting
to ₱2,800 due to defects.
15 – Sold merchandise to Ms. Santos at an
invoice price
of ₱113,680. Terms: 2/10, n/30.
17 – Received merchandise returned by Ms.
Santos
amounting to ₱3,360 due to defects.
20 – Paid in full account with Cruz Trading.
25 – Collected in full account of Ms. Santos.
Required: Record the above transactions including
the setting
up of the VAT payable.
Answer:
2023
Aug. 10 Purchases ₱ 75,000
Input VAT 9,000
Accounts payable-Cruz Trading
₱84,000
12 Accounts payable-Cruz Trading 2,800
Input VAT (₱2,800 x 12/112)
300
Pur. ret. and allow. (₱2,800/1.12)
2,500
15 Accounts receivable-Ms. Santos 113,680
Output VAT 12,180
Sales
101,500
17 Sales returns and allowances 3,000
Output VAT 360
Accounts receivable-Ms. Santos
3,360
20 Accounts payable-Cruz Trading 81,200
Purchase discount (₱1,624/1.12 )
1,450
Input VAT (₱1,624 x 12/112)
174
Cash
79,576
Invoice price ₱84,000
Less: Purchase returns & allowances 2,800
Balance ₱81,200
Less: Purchase discount (₱81,200 x .02) 1,624
Cash to be paid ₱79,576
25 Cash 108,113.60
Sales discount (₱2,206.40/1.12) 1,970
Output VAT (₱2,206.40x12/112) 236.40
Accounts receivable-Ms. Santos
110,320
Invoice price ₱113,680
Less: Sales returns & allowances 3,360
Balance
₱110,320
Less: Sales discount (₱110,320 x .02)
2,206.40
Cash to be received
₱108,113.60
31 Output VAT 11,583.60
Input VAT 8,526
VAT payable 3,057.60
Output VAT (₱12,180 - ₱360 - ₱ 236.40)
₱11,583.60
Less: Input VAT (₱9,000 - ₱300 - ₱174)
8,526.00
VAT payable ₱ 3,057.60
Exercises:
1. Computation of VAT and
sales/purchases:
VAT
Sales/Purchases
a. ₱64,960
b. ₱162,400
c. ₱47,376
d. ₱14,000
e. ₱70,560
f. ₱574,000
g. ₱24,102.40
h. ₱87,360
i. ₱7,000
2. Magsasaka Trading, a VAT-registered
business, purchased merchandise on
account at a total amount of ₱610,400,
inclusive of VAT. Subsequently, it sold the
merchandise for ₱793,520, inclusive of
VAT. Purchases and sales have terms of
2/10, n/30. Payment and collection of
accounts were within the discount period.
Required:
a. Compute the following:
1. Input VAT
2. Amount of purchases to be
recorded
3. Output VAT
4. Amount of sales to be recorded
b. Prepare the entries to record the
transactions.
