Chapter 8 - 2013 6th edition

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 59 SUGGESTED ANSWERS Chapter 8: BUSINESS TRANSACTIONS

CHAPTER 8

BUSINESS TRANSACTIONS Problem 8–1 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

False – Vatable transactions of non-VAT business is not allowed to deduct input VAT. True False – Some business transactions are VAT-exempt. True False – subject to OPT. True True False – not allowed for TCC and tax refund, but allowed only for tax credit. True False – Zero rated sales are applicable only to VAT-registered business/person. This is a VATexempt and OPT-exempt transactions. True False – It can be claimed as a deduction from sale as part of cost of product sold. True False – Sales of non-VAT person, exceeding P1,919,500 per year is also subject to VAT. False – Only those agricultural and marine food products.

Problem 8–2 1. False – Publication of newspaper is VAT-exempt and also OPT-exempt. 2. True 3. False – The exemption pertains only to Output VAT. 4. True 5. False – Zero VAT transactions are applicable only to VAT-registered persons. 6. False – Some VAT taxable transactions have not allowed to have Input VAT particularly if the business is a non-VAT. 7. False – Exempt from business tax because it is considered as a subsistence livelihood. 8. True 9. False – Exempt from VAT. 10. False – zero VAT. 11. False – VAT-exempt. 12. True 13. False – VAT-exempt and OPT-exempt. 14. False – more than P3,199,200. 15. True Problem 8 – 3 1. B 2. B 3. C 4. D 5. B 6. C 7. D 8. B 9. C 10. A

Problem 8 – 4 1. A 2. C 3. D 4. B 5. A 6. B 7. A 8. D 9. C 10. D

Problem 8 – 5 1. D 2. B 3. A 4. C 5. C 6. B 7. A 8. A 9. C 10. C

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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 60 SUGGESTED ANSWERS Chapter 8: BUSINESS TRANSACTIONS

Problem 8 – 6 1. A 2. D 3. D 4. A 5. A 6. D 7. A 8. C 9. A 10. C

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

C E D C C A C D D E

Problem 8 – 7 A Business tax payable (P2,500,000 x 12%)

P300,000

Note: The gross sales exceeds P1,919,500; hence, subject to 12% even if the taxpayer is non-VAT. Problem 8 – 8 C Domestic sales Importation of goods Transaction deemed sales Total amount subject to VAT

P1,000,000 500,000 100,000 P1,600,000

In general, importations are subject to 12% VAT regardless of the business tax registration of the taxpayer. The VAT on importation, however, is an input tax. Problem 8 – 9 D Output VAT from collections (P4,480,000/9.3333) Less: Input VAT from supplies used (P560,000/9.3333) Input VAT from importation (P112,000/9.3333) VAT payable

P480.000 P60,000 12,000

Problem 8 – 10 B Export sales (P2,000,000 + P1,000,000) Problem 8 – 11 B Business tax payable (P2,000,000 + P7,000,000) x 3%

72,000 P408,000 P3,000,000 P270,000

The annual gross receipts from business does not exceed P10,000,000; hence, subject to 3% OPT. Problem 8 – 12 C P600,000, only input VAT due or paid from purchases is allowed to apply for TCC. Transitional input VAT and presumptive Input VAT are not allowed. Problem 8 – 13 D Zero-rated VAT. Sale of power or fuel generated through renewable sources of energy such as biomass, solar, wind, hydropower, geothermal ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels Problem 8 – 14 D Multi-purpose cooperative registered with CDA are exempt from business tax.

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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 61 SUGGESTED ANSWERS Chapter 8: BUSINESS TRANSACTIONS

Problem 8 – 15 A Passenger by sea Cargo by land Cargo by sea Total VAT taxable transactions Problem 8 – 16 B Export sales Sales of agricultural food products – original state Gross receipts derived from millings of palay VAT-exempt transactions

1,500,000 500,000 500,000 P2,500,000 P10,000,000 6,000,000 2,000,000 P18,000,000

Problem 8 – 17 D 5 commercial lots at P1,000,000 each

P5,000,000

The sales of residential house and lots or residential lots are all VAT-exempt and OPT-exempt. Problem 8 – 18 C 4 residential lots at P2,000,000 each 1 commercial lots at P3,000,000 each Amount subject to business tax

P 8,000,000 3,000,000 P11,000,000

The sale of residential house and lot at P3,000,000 each is exempt from business tax. Problem 8 – 19 B Gross receipts exempt from business tax (P2,000 x 50)

P100,000

Problem 8 – 20 1. Output VAT (P134,400/9.3333) Input VAT (P112,000/9.3333) Business tax liability of X 2.

P14,400 (12,000) P 2,400

Percentage tax (P112,000/1.12) x 3% Output VAT (P112,000/9.333) Surcharge (P12,000 x 50%) Business tax liability of Y

Problem 8 – 21 1. Sales from: Local government units (P940,000/1.06) University of the Philippines (P564,000/1.06) Department of Tourism (P282,000/1.06) Total sales

P 3,000 12,000 6,000 P21,000

P886,792 532,075 266,038 P1,684,905

Note: The total withholding per sales was 6% comprising 5% final withholding VAT and 1% creditable withholding income tax. 2.

Total income tax withheld (P1,684,905 x 1%)

P16,849

3.

Total final VAT withheld (P1,684,905 x 5%)

P84,245

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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 62 SUGGESTED ANSWERS Chapter 8: BUSINESS TRANSACTIONS

Problem 8 – 22 1. VAT-registered Transport of passengers by sea Transport of cargoes by: Land Sea VAT taxable transactions 2.

Non-VAT registered Transport of passengers by sea Transport of cargoes by: Land Sea VAT taxable transactions

P2,000,000 500,000 1,000,000 P3,500,000 P2,000,000 500,000 1,000,000 P3,500,000

Note: The said non-VAT registered business shall now be subject to VAT because its total gross receipts exceed P1,500,000. The gross receipts from transport of passengers, however, shall remain subject to percentage tax. Problem 8 – 23 1. VAT-registered From radio ads From TV ads VAT taxable transactions Multiplied by VAT rate Value-added tax 2.

Non-VAT registered From radio ads From TV ads Amount subject to OPT Multiplied by applicable OPT rate Other percentage tax

P5,000,000 4,000,000 P9,000,000 12% P1,080,000 P5,000,000 4,000,000 P9,000,000 3% P 270,000

Note: A non-VAT registered franchise grantees of radio and television broadcasting with annual gross receipts of P10,000,000 or less is not subject to VAT, unless VAT-registered. Problem 8 – 24 Output VAT – Zero rated because foreign denominated sales Input VAT (P336,000/9.3333) VAT refund Problem 8 – 25 On purchases: Local purchases from VAT-registered person On sales: Domestic sales to various VAT person Domestic sales to various non-VAT person VAT taxable transactions against X

P - 0 ( 36,000) (P 36,000)

P600,000 P 800,000 600,000 P1,400,000

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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 63 SUGGESTED ANSWERS Chapter 8: BUSINESS TRANSACTIONS

Problem 8 – 26 1. P - 0 The business is non-VAT and total sales do not exceed P1,500,000/year 2.

P -0No zero-VAT sale is allowed for a non-VAT business.

3.

Domestic sales to various VAT persons Domestic sales to various non-VAT persons Export sales denominated in foreign currency Total VAT-exempt sales

Problem 8 – 27 1. VAT-registered Domestic sales Export sales Total value of sales allowed with creditable Input VAT 2.

Non-VAT registered a. Domestic sales – VAT taxable sales b. Zero-rated sales c. Export sales – VAT-exempt sales of a non-VAT business

P 50,000 100,000 200,000 P350,000

P 2,000,000 3,000,000 P 5,000,000 P 2,000,000 P

- 0 -

P 3,000,000

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