Normal VAT Transactions (12%) Part 1

Mind Map by , created over 3 years ago

Bachelor of Laws Taxation Law Mind Map on Normal VAT Transactions (12%) Part 1, created by MissMela on 03/07/2016.

Created by MissMela over 3 years ago
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Normal VAT Transactions (12%) Part 1
1.1 General Rule: VAT rate is 12% on the gross selling price or gross value in money of the goods, properties sold, bartered or exchanged.
1.2.1 Total amount of money which purchaser is obligated to pay excluding the VAT. (Note that:) Excise tax shall form part of the gross selling price.
1.3 Sales Returns, Allowances and Sales Discounts (Gross Selling Price v. Gross Sales)
1.3.1 While the law says that VAT is based on the gross selling price, "gross selling price" does not mean gross sales. The law and regulations allow downward adjustments for: (1) sales returns and allowances (2) sales discounts agreed upon at the time of sale indicated in the sales invoice, and availed of by the buyer.
1.3.2 Sales Discount = granted and indicated in the invoice
1.3.3 Sales Return and Allowances = deducted from gross sales for the month or quarter in which refund is made or a credit memo was issued
1.4 What does "goods and properties" include?
1.4.1 (1) Real properties held for sale or lease
1.4.2 (2) Right of privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right
1.4.3 (3) Right or privilege to use in the PH any industrial, commercial or scientific equipment
1.4.4 (4) Right or privilege to use motion picture films, tapes and discs
1.4.5 (5) Radio, television, satellite transmission and cable time
1.4.6 Note that this is NOT an exclusive list.
1.5 Transaction Deemed Sale (By Virtue of Law)
1.5.1 (1) Transfer, use or consumption not in the course of business of goods or properties originally intended for sale.
1.5.2 (2) Distribution or transfer of inventory to shareholders or investors as share in the profits of the VAT registered persons (Property Dividends)
1.5.3 (3) Distribution or transfer of inventory to creditors in payment of debt.
1.5.4 (4) Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned.
1.5.5 (5) Retirement from cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.
1.5.6 In transaction deemed as sales, or where the gross selling price unusually lower than the actual market value; the CIR shall determine the appropriate tax base.
1.6 Sale of Goods to Senior Citizens and PWD
1.6.1 Sales (exclusive of VAT) less 20% = VATable sale + 12% VAT rate
1.6.2 Privileges to PWD shall not be claimed if PWD claims a higher discount as may be granted by a commercial establishment and/or under existing laws in combination with other discount programs. Thus, a PWD who is at the same time a senior citizen can only claim 20% discount on a particular sale transaction.
1.6.3 Sale of goods or services to senior citizens are VAT-exempt (RR 7-2010)
2.1.1 For sale or exchange of services, including use or lease of properties, the VAT rate is 12% of the gross receipts.
2.1.2 Gross receipt means cash or its equivalent actually received or constructively received (not including VAT) as: (1) Payment on the contract price, compensation, service fee, rental or royalty (2) Payment or material supplied with services (3) Deposits of advanced payment in the contract of services (4) Constructive receipt occurs when the money consideration or its equivalent is placed in the control of the person who rendered the service without restriction by the payor. (ex: notice to offset any debt or obligation and acceptance by the seller as payment for services rendered)
2.2 "Sales of Services" Meaning
2.2.1 (1) Should be rendered in the Philippines
2.2.2 (2) Can be any and all kinds of services rendered to others
2.2.3 (3) There is a fee, remuneration or consideration
2.3 Examples of Sales of Services
2.3.1 (1) Construction of service contractors
2.3.2 (2) Stock, real estate, commercial, customs and immigration brokers
2.3.3 (3) Lessors of real or personal property
2.3.4 (4) Warehousing services
2.3.5 (5) Lessors/ distributors of cinematographic films
2.3.6 (6) Persons engaged in milling, processing, manufacturing or repacking of goods for others
2.3.7 (7) Proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts
2.3.8 (8) Proprietors or operators of restaurants, refreshment parlors, cafes and other eating places including clubs and caterers.
2.3.9 (9) Dealers in securities
2.3.10 (10) Lending investors
2.3.11 (11) Transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for fire and other domestic common carriers by LAND, relative to their transport of goods or cargoes.
2.3.12 (12) Domestic (PH to PH) common carriers by air and sea, in the transport of passengers, goods or cargoes.
2.3.13 (13) Sales of electricity by generation companies, transmission and distribution companies
2.3.14 (14) Service of franchise grantees of electric utilities, telephone and telegraph, radio and television broadcasting and all other franchise grantees, except under Section 119 of the NIRC
2.3.15 (15) Non-life insurance companies including surety, fidelity and bonding companies
2.3.16 (16) Similar services regardless of whether or not the performance thereof calls for the exercise or use of physical or mental faculties.
2.4 Also considered sales of service
2.4.1 (1) Lease or use of right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark/brand and other like property or right.
2.4.2 (3) Supply of scientific, technical, industrial or commercial knowledge or information
2.4.3 (5) Supply of services by a non-resident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such non-resident person.
2.4.4 (6) Supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or
2.4.5 (7) The lease of motion picture films, tapes and discs
2.4.6 (8) The lease or use of or the right to use radio, television, satellite transmission and cable television time CIR v. SM Prime Holdings, G.R. 183505; the exhibition of movies (as opposed to the lease) is not subject to VAT, but subject to amusement tax imposed by the local government units.
2.4.7 Cash deposits or advances received by taxpayers other than GPP from clients and customers shall be subject to VAT, if applicable. (such that if the taxpayer exceeds threshold or if it is registered as a VAT taxpayer.)
2.4.8 All gross receipts from services rendered by partners shall be entirely taxable to the partnership.
2.5 (2) Lease or use of, or the right to use of any industrial, commercial or specific equipment.
2.6 (4) Supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right as is enumerated in letter (2) or any such knowledge or info as mentioned in (3)

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