Professional Documents
Culture Documents
I.
Supporting Tax
Theory
CONSUMPTION TAX
Income Tax
Tax upon receipt
of income
Scope
Consumption Tax
Tax upon usage of
income or capital
A tax to the
capable
Ability to Pay
Theory
A tax to all
Benefit Received
Theory
Types of Consumption:
1. Domestic Consumption consumption or purchases of
Philippine Residents
2. Foreign Consumption consumption or purchases of
non-residents.
Destination Principle: goods and services destined for use or
consumption in the Philippines are subject to consumption
tax whereas those destined for use or consumption abroad
are not imposed with consumption tax.
Cross-border Doctrine: goods that cross the border which are
destined toward foreign territories should not be charged
with consumption taxes.
Summary of tax rules on consumption:
The seller
is:
Domestic
Consumption
(Buyer is Resident)
NonResident
Resident
Taxable
Foreign
Consumption
(Buyer is nonresident)
No Tax
Taxable
Effectively no Tax
Basis of tax
Scope of tax
Nature of consumption
of tax
Statutory taxpayer
Economic taxpayer
Nature of imposition
Business Tax
Sales or receipts
Pure form
Consumption
from businesses
only
Relative form
Buyer
Buyer
Direct
Seller
Buyer
Indirect
Resident Buyer
Applicable
consumption tax
Business
Non-business
Business
Business tax
Business tax
None
Non-business
None
Business
VAT on
importation
VAT on
importation
VAT on
importation*
Business
Non-business
Nonbusiness
Business
NonNon-business
VAT on
business
importation*
*The VAT on importation consistently applies regardless of
whether or not the seller or buyer is engaged in business.
2.
3.
4.
5.
IV.
Top-up on sales
Tax credit method
An explicit consumption tax
Quarterly tax
1. Direct method
2. Tax credit Method
a. Special features of tax credit method
Invoice-based crediting
The perfect matching of costs or
expenses with sales is not observed