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01/16/20099:06 AM

OUTLINE IN VALUE ADDED TAX

1. Section 105 through 115 of the NIRC


2. Revenue Regulations No. Revenue Regulations No. 16-2005, Sep 1, 2005
3. Revenue Memorandum Circular No. 62-2005, dated Oct 18, 2005
4. Revenue Regulations Nos. 2-2007 lifting the 70% cap on input tax
5. RR No. 4-2007 amending RR No. 16-2005; RR No. 4-2007, Amending R.R. No. 16-2005 – Vat Revenue
Regulations
6. Reference: De Leon’s NIRC Annotated, Vol. II; Vitug/Acosta

NON-EXCLUSIVE SUGGESTED QUESTIONS IN VAT

1. What is Value Added Tax?


2. What is the nature and characteristic of VAT? VAT 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. The seller is the one statutorily liable for the payment of the tax but the amount of
the tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or
services.This rule shall likewise apply to existing contracts of sale or lease of goods, properties or
services at the time of the effectivity of RA No. 9337. However, in the case of importation, the importer
is the one liable for the VAT.
3. What is the situs of taxation for VAT?
4. Who are liable for the payment of VAT? Any person who, in the course of his trade or business, sells,
barters, exchanges or leases goods or properties, or renders services, and any person who imports
goods, shall be liable to VAT imposed in Secs. 106 to 108 of the Tax Code. However, in the case of
importation of taxable goods, the importer, whether an individual or corporation and whether or not made
in the course of his trade or business, shall be liable to VAT imposed in Sec. 107 of the Tax Code.
5. What transactions are subject to VAT?
6. What does the word “person” include? “Person” refers to any individual, trust, estate, partnership,
corporation, joint venture, cooperative or association.
7. Who is the taxable person?
8. Who is a VAT-registered person?
9. What is meant by taxable sale?
10. What is meant by “goods or properties” subject to VAT? The term “goods or properties” refers to all
tangible and intangible objects which are capable of pecuniary estimation and shall include, among
others: (1) Real properties held primarily for sale to customers or held for lease in the ordinary course of
trade or business; (2) The right or the privilege to use patent, copyright, design or model, plan, secret
formula or process, goodwill, trademark, trade brand or other like property or right; (3)The right or the
privilege to use any industrial commercial or scientific equipment; (4) The right or the privilege to use
motion picture films, films, tapes and discs; and (5) Radio, television, satellite transmission and cable
television time.
11. What are the classifications of properties subject to VAT?
12. What intangible properties are subject to VAT?
13. What are the rules governing the sale of real properties?
14. What is the rule on the sale of real property on installment plan by the real estate dealer?
15. What is the rule on the sale of real property on deferred plan by the real estate dealer?
16. Is the transfer to a trustee in favor of a beneficiary subject to VAT? Transmission of property to a trustee
shall not be subject to VAT if the property is to be merely held in trust for the trustor and/or beneficiary.
However, if the property transferred is one for sale, lease or use in the ordinary course of trade or
business and the transfer constitutes a completed gift, the transfer is subject to VAT as a deemed sale
transaction pursuant to Sec. 4.106-7(a)(1) of these Regulations. The transfer is a completed gift if the
transferor divests himself absolutely of control over the property, i.e., irrevocable transfer of corpus
and/or irrevocable designation of beneficiary.
17. What is meant by “in the course of trade or business”?
18. Is there any exception to the regularity rule?
19. Is a non-resident alien subject to VAT?
20. What is meant by ‘gross selling price”?
21. What is meant by “zero-rated” sale?
22. What is the difference between a zero rate transaction and exempt transaction? CIR v. Cebu Toyo Corp.
451 SCRA 447.
23. What transactions are subject to 0% rate?
24. What does “export sales” subject to 0% VAT include?
25. What transactions under EO 226 are considered export sales?
26. What sales of goods are considered constructively exported?
27. When may sales of a supplier be considered an export sale subject to 0% VAT? VAT registered to a BOI
registered manufacturer/producer who exports 100%.
28. What is meant “foreign currency denominated sale”? What does it include?
29. Are sales of goods or services to tax exempt entities under special laws and international agreements
subject to VAT? If so, at what rate? CIR v Acesite (Philippines) Hotel Corp GR 147295 Feb 16, 2007
30. What is meant by ‘effectively zero-rated sale of goods or services? Give examples.
31. What sale of goods are effectively subject to 0% rate?
32. Are sales of goods or services by a VAT registered company to a government corporation that is exempt
from both indirect and indirect taxes “effectively subject to zero rate?
33. What is meant by “cross border doctrine” or destination principle. See CIR v American Express, 462
SCRA 197 GR152609 (Jul 2005).
34. What is meant by Customs Territory?
35. What is meant by “transactions deemed sale”? Give an example?
36. What is meant by “gross selling price”?
37. How do we determine the amount of sales subject to VAT?
38. What is meant by importation?
39. What is the basis of VAT on importation?
40. What is the effect if the importer is exempt and the goods are sold or transferred to non-exempt
persons?
41. What services are subject to VAT?
42. What is meant by “sale or exchange of services” subject to VAT?
43. What is meant by “use or lease of property”?
44. What is meant by “gross receipt”?
45. How do compute the gross receipts?
46. What services are subject to 0% rate? Processing for others doing business outside the Phil which
goods are then exported and paid in fx and inwardly remitted; services other than mentioned also paid in
fx; services to entities under IL and special laws effectively 0 rated; to vessel exclusively for
international; services to exporters 70% export; see Bursmeisters case
47. How do we classify those that are exempt from VAT?
48. What transactions are exempt from VAT? Sec 109.
49. What is meant by output tax?
50. What is meant by Input tax?
51. What are the classes of input VAT?
52. What are the rules pertaining to the application of input VAT?
53. What are rules on the application of excess input tax?
54. What is meant by 70% cap on input tax?
55. What are rules pertaining to the input tax on capital goods?
56. How is the VAT paid to the BIR? When?
57. When my an input tax be credited?
58. What are admin requirements to allow a taxpayer to credit its input v output?
59. How do we determine creditable input tax?
60. What are sources of input VAT?
61. What is the rule if the taxpayer is engaged in taxable, 0-rated and exempt transactions?
62. What is transitional input tax? Who is entitled? What is the rate? Becomes liable to VAT or elects to be
VAT registered, 8% or actual
63. What is presumptive input tax, who is entitled and what is the rate?
64. Who are entitled to refund? Zero rated or effectively zero rated, and on capital goods;
65. When claim for refund or tax credit is filed?
66. When and where return file?
67. What are requirements for registration?
68. What is the rule if there are HO and branch?
69. When may a taxpayer elect to be subject to VAT?: commencing or becoming? 30 days
70. What is meant by optional registration?
71. What are invoicing and accounting requirements?
72. Notification requirements? Changes in place, status 15 days
73. When is withholding of VAT required? What is the rate? GOCCs 3% or 6% goods or services, public
works 8.5%, non-resident 10%, payable in 10 days;
74. What are the instances the CIR may suspend business? Non-issuance of receipt; failure to file;
understatement by 30% or more of VAT payable; failure to register;
75. What is the effect if an exempt taxpayer issues a VAT invoice?

Cases;

a. CIR v. Marubeni Corp. GR 137377, Dec 18, 2001 [Contractor’s tax cannot be imposed on the
offshore portion of contract where the materials and equipment were all manufactured or done in
Japan for lack of taxing jurisdiction.
b. ABAKADA Party List, et., al. v. Sec of Finance (Sept and Oct 2005 SC decisions)
c. CIR v CA 329 SCRA 237 (2000) [Reimbursement only charging is also subject to VAT; Even if
no profit, VAT applies.) 70% of production is exported, 100% is 0% rated.
d. Atlas Consolidated Mining v CIR 318 SCRA 386 (1999) – sold gold and silver to CB. BIR
assessed for deficiency VAT;
e. Atlas Mining Consolidated v CIR, GR 14104 & 148763, Jun 8, 2007 – Key issues: (1)
prescription of the claims of petitioner corporation for input VAT refund/credit; (2) validity and
applicability of Revenue Regulations No. 2-88 imposing upon petitioner corporation, as a
requirement for the VAT zero-rating of its sales, the burden of proving that the buyer companies
were not just BOI-registered but also exporting 70% of their total annual production; (3)
sufficiency of evidence presented by petitioner corporation to establish that it is indeed entitled
to input VAT refund/credit; and (4) legal ground for granting the motion of petitioner corporation
for re-opening of its cases or holding of new trial before the CTA so it could be given the
opportunity to present the required evidence; Destination Principle and Cross Border Doctrine
defined; distinction between sales to BOI-registered exported oriented firms and to EZPA
enterprises.
f. Tolentino v. Secretary of Finance, 249 SCRA 248 GL 115455
g. CIR v Toshiba 466 SCRA 308 GR 150154 Aug 9, 2005
h. CIR v American Express, 462 SCRA 197 GR152609 (Jul 2005)
i. Contex Corp v. CIR 433 SCRA 376 (2004)
j. CIR v. Cebu Toyo Corp. 451 SCRA 447 [distinction between exempt & 0-rated.]
k. CIR v Benguet, GR No. 145559, July 20, 2006
l. CIR v Bursmeiters & Wain Scandinavian, GR 153205, Jan 2007)
m. CIR v Acesite (Philippines) Hotel Corp GR 147295 Feb 16, 2007
n. CIR v Mirant Pagbiao Corp GR172129 Sep 12, 2008 Sale of power by Mirant to NPC is subject
to zero rate VAT because NPC is exempt both to direct and indirect tax. Excess input tax of
Mirant can be claimed for refund or credit with 2 years from close of the taxable quarter when
the sale was made under Sec 112(A) of the NIRC and not from date of payment under Sec 204
and 229 of the NIRC. Since the input tax was belatedly paid beyond the two year period, the
claim for refund was denied on the ground of prescription.