Problem 3 & 4

Section E: VAT on sale of services

Caraig, Dela Cruz, Tan
 Gross receipts; media
Problem 3 advertising
placements
PROBLEM 3
GROSS RECEIPTS; MEDIA PLACEMENTS

Agila Broadcasting Company is engaged in broadcasting business. On the other

hand, Kapamilya Corporation is an advertising agency which sells advertising
services of Agila.

On February 28, 20A1, Kapuso Corporation, a company engaged in the

manufacture and sale of consumer products availed the advertising services of
Agila for P1,000,000, exclusive of VAT, through Kapamilya. On the same date,
Kapuso paid P300,000 (exclusive of VAT) as advance payment, for said services.
The advertisement was aired in March 20A1. Kapuso paid the balance on April 5,
20A1. Out of the P1,000,000 contract for services, Kapamilya received 15%
commission.
PROBLEM 3
GROSS RECEIPTS; MEDIA PLACEMENTS

The following are independent situations relative to the documentation and collection of the
advertising fees and commissions:
a. Kapuso paid P300,000 to Kapamilya on February 28, 20A1. The balance was also paid to
Kapamilya on April 5, 20A1. Kapamilya issued VAT ORs for these collections in the name of
Kapuso. Kapamilya remitted the 85% collection to Agila every time it collected from Kapuso.
Agila issued VAT ORs for these collections in the name of Kapamilya.
b. Kapuso paid 15% of the fees to Kapamilya and the 85% directly to Agila. Kapamilya issued
VAT ORs for the 15% collections in the name of Kapuso. Agila issued VAT ORs for the 85%
collections in the name of Kapuso.
c. Kapuso paid P300,000 to Kapamilya on February 28, 20A1. The balance was also paid to
Kapamilya on April 5, 20A1. Kapamilya issued VAT ORs for 15% collections in the name of
Kapuso. It issued non-VAT acknowledgement receipt to Kapuso for the 85% collections.
Kapamilya remitted the 85% collection to Agila every time it collected from Kapuso. Agila
issued VAT ORs for these collections in the name of Kapuso.
PROBLEM 3
GROSS RECEIPTS; MEDIA PLACEMENTS
 SITUATION A
Kapuso paid P300,000 to Kapamilya on February 28, 20A1. The balance was also paid to Kapamilya
on April 5, 20A1. Kapamilya issued VAT ORs for these collections in the name of Kapuso. Kapamilya
remitted the 85% collection to Agila every time it collected from Kapuso. Agila issued VAT ORs for
these collections in the name of Kapamilya.

300,000 255,000
KAPUSO 700,000
KAPAMILYA 595,000
AGILA

VAT OR (300,000) VAT OR (255,000)

VAT OR (700,000) VAT OR (595,000)
 KAPAMILYA
-issued VAT OR in
the name of
KAPUSO

AGILA
-issued VAT OR in
the name of
KAPAMILYA
 KAPAMILYA
-issued VAT OR in
the name of
KAPUSO

AGILA
-issued VAT OR in
the name of
KAPAMILYA
 SITUATION B
Kapuso paid 15% of the fees to Kapamilya and the 85% directly to Agila. Kapamilya issued VAT ORs for
the 15% collections in the name of Kapuso. Agila issued VAT ORs for the 85% collections in the name of
Kapuso.

KAPUSO KAPAMILYA AGILA

45,000 (VAT OR)

105,000 (VAAT OR)

255,000 (VAT OR)

595,000 (VAAT OR)
 KAPAMILYA
-issued VAT OR in
the name of
KAPUSO

AGILA
-issued VAT OR in
the name of
KAPUSO
 KAPAMILYA
-issued VAT OR in
the name of
KAPUSO

AGILA
-issued VAT OR in
the name of
KAPUSO
 SITUATION C
Kapuso paid P300,000 to Kapamilya on February 28, 20A1. The balance was also paid to Kapamilya on
April 5, 20A1. Kapamilya issued VAT ORs for 15% collections in the name of Kapuso. It issued non-VAT
acknowledgement receipt to Kapuso for the 85% collections. Kapamilya remitted the 85% collection to
Agila every time it collected from Kapuso. Agila issued VAT ORs for these collections in the name of
Kapuso.

300,000 255,000
KAPUSO 700,000
KAPAMILYA 595,000
AGILA
VAT OR (45,000; 105,000)
Non-VAT Acknowledgement Receipt (255,000; 595,000)

VAT OR (255,000; 595,000)

Non-VAT Acknowledgement Receipt (45,000; 105,000)
 KAPAMILYA
-issued NON-VAT
acknowledgement
receipt in the
name of KAPUSO

AGILA
-issued VAT OR in
the name of
KAPUSO
 KAPAMILYA
-issued NON-VAT
acknowledgement
receipt in the
name of KAPUSO

AGILA
-issued VAT OR in
the name of
KAPUSO
 Gross receipts;
Problem 4 service fees and
reimbursements
PROBLEM 4
GROSS RECEIPTS; SERVICE FEES AND REIMBURSEMENTS

Maharlika Brokerage Company is engaged in customs brokerage services. On

October 1, 20A1, it facilitated the importation of goods by Bayanihan Corporation. It
billed Bayanihan as follows:

Brokerage fee 70,000

Duties and taxes 350,000

Domestic freight charges 50,000

Storage fee 30,000

PROBLEM 4
GROSS RECEIPTS; SERVICE FEES AND REIMBURSEMENTS

The following are additional information:

● The brokerage fee pertains to the compensation for the services rendered by
Maharlika to Bayanihan. Maharlika issued VAT OR in the name of Bayanihan.
● The duties and taxes were paid by Maharlika in advance to the Bureau of
Customs (BoC). These are supported by documents issued in the name of
Bayanihan. It includes VAT on importation of P250,000.
● The domestic freight charges and storage fee were paid by Maharlika in
advance to Kapalaran Trucking & Storage Company. Kapalaran issued VAT
OR in the name of Bayanihan.
● Maharlika issues non-VAT acknowledgement receipt for the collection of duties
and taxes, domestic freight charges and storage fee from Bayanihan.
PROBLEM 4
GROSS RECEIPTS; SERVICE FEES AND REIMBURSEMENTS

Required:
1. Determine the output tax on the part of Maharlika and Kapalaran.
2. Determine the input tax that can be claimed by Bayanihan and Maharlika,
if any.
3. Assume that Maharlika issued VAT OR in the name of Bayanihan for the
collection of brokerage fee, duties and taxes, domestic freight charges and
storage fee. Determine the output tax on the part of Maharlika and
Kapalaran
4. Assume that Maharlika issued VAT OR in the name of Bayanihan for the
collection of brokerage fee, duties and taxes, domestic freight charges and
storage fee. Determine the input tax that can be claimed by Bayanihan
and Maharlika, if any.
SITUATION A A T OR) KAPALARAN
(V
a rges R)
ig h t ch AT O
t i c fre Fee (V
es age
Dom Stor
Domestic Freight Charges
Storage Fee
Brokerage (VAT OR)
Duties and Taxes (Non-VAT OR)
BAYANIHAN MAHARLIKA
Domestic Freight Charges (Non-VAT OR)
Storage Fee (Non-VAT OR)

Duties and Taxes

VAT
on
Imp
orta
tion

BOC
Requirement 1: Output Tax of Maharlika and Kapalaran
Maharlika Kapalaran
Brokerage fee 70,000

Duties and taxes

Domestic freight charges 50,000

Storage fee 30,000
Tax Base (Gross Receipts) 70,000 80,000
VAT Rate 12% 12%
Output Tax 8,400 9,600
Requirement 2: Input Tax of Maharlika and Bayanihan
Maharlika Bayanihan
Brokerage fee 70,000
Duties and taxes
Domestic freight charges 50,000
Storage fee 30,000
Tax Base (Gross Receipts) - 150,000
VAT Rate 12% 12%
Input Tax - 18,000
VAT on Importation 250,000
Total Input Tax - 268,000
SITUATION B A T OR) KAPALARAN
(V
a rges R)
ig h t ch AT O
t i c fre Fee (V
es age
Dom Stor
Domestic Freight Charges
Storage Fee
Brokerage (VAT OR)
Duties and Taxes (VAT OR)
BAYANIHAN MAHARLIKA
Domestic Freight Charges (VAT OR)
Storage Fee (VAT OR)

Duties and Taxes

VAT
on
Imp
orta
tion

BOC
Requirement 3: Output Tax of Maharlika and Kapalaran (Maharlika issued
VAT ORs in the name of Bayanihan for brokerage fee, duties and taxes,
domestic freight charges and storage fee)
Maharlika Kapalaran
Brokerage fee 70,000

Duties and taxes 350,000

Domestic freight charges 50,000 50,000

Storage fee 30,000 30,000
Tax Base (Gross Receipts) 500,000 80,000
VAT Rate 12% 12%
Total Output Tax 60,000 9,600
Requirement 4: Input Tax of Maharlika and Kapalaran (Maharlika issued
VAT ORs in the name of Bayanihan for brokerage fee, duties and taxes,
domestic freight charges and storage fee)
Maharlika Bayanihan
Brokerage fee 70,000
Duties and taxes
Domestic freight charges 50,000
Storage fee 30,000
Tax Base - 150,000
VAT Rate 12% 12%
Input Tax - 18,000
VAT on Importation 250,000
Total Input Tax 268,000