Chapter 9 - Vat 2013f

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 64 SUGGESTED ANSWERS Chapter 9: VALUE-ADDED TAX

CHAPTER 9

VALUE-ADDED TAX Problem 9–1 1. True 2. False – the buyer is legally liable for the payment of VAT on importation of goods or services. 3. True 4. True 5. False – Some sales are VAT-exempt. 6. False – Goods and services sold outside the Philippines are either zero-rated or VAT-exempt. 7. 8. 9. 10. 11. 12. 13. 14.

False – VAT is not a specific tax, but an ad valorem tax because its computation is based on the value of goods or services sold. True False – zero-rated VAT transaction is subject to a 0% VAT rate. False – 4%. True True False – includes the excise tax. True 15. False – Performance sales discount is based on the happening of future event; hence, not allowed as deductible item from sales.

Problem 9–2 1. True 2. False – More than P1,919,500. 3. False – If VAT-registered, subject to VAT regardless of amount of sales. 4. False – All non-VAT registered persons are not allowed to deduct input VAT. 5. False – Annual gross receipts exceed P10,000,000. 6. False – Subject to VAT whether for business or not. 7. False – To be treated separately. 8. True 9. False – Liable to pay VAT on their purchases from VAT-registered suppliers. 10. True 11. False – inventors are VAT-exempt. 12. False – subject to VAT on purchases from VAT-registered person. 13. True 14. True 15. False – only those exempted by law. Problem 9–3 1. A 2. B 3. C 4. C 5. A 6. C 7. A 8. B 9. D 10. B

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

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 65 SUGGESTED ANSWERS Chapter 9: VALUE-ADDED TAX

Problem 9 – 5 C Sales to: Regular customers Government Employees Total amount of sale subject to VAT Problem 9 – 6

Within P2,000,000 500,000 300,000 P2,800,000

D

The ultimate consumer is not VAT-registered and does not sale the products. Therefore, no output VAT. If the consumer is VAT-registred still there is no output VAT, but instead input VAT.

Problem 9 – 7 A Output VAT (P5,000,000 + P5,000,000) x 12% Less: Input VAT (P6,720,000/9.333) Net VAT payable Problem 9 – 8 C Sales per VAT invoice, no output VAT is shown (P224,000/9.333) Sales per VAT invoice, output VAT shown separately amounted to P30,000 inclusive in the invoice (P330,000/9.333) Sales per purchase order – delivered (P100,000 x 12%) Amount of output VAT

P1,200,000 720,000 P 480,000 P24,000 35,358 12,000 P71,358

Problem 9 – 9 D Total manufacturing costs Delivery and insurance Excise tax (P1,000,000 x 10%) Gross margin (P1,000,000 x 70%) Total sales price Multiplied by VAT rate Output VAT

P1,000,000 200,000 100,000 700,000 P2,000,000 12% P 240,000

Problem 9 – 10 B Fair market value of machine Freight charges Insurance charges Duty tax Excise tax Total Vatable amount Multiplied by VAT rate VAT on importation

P1,500,000 100,000 50,000 150,000 75,000 P1,875,000 12% P 225,000

Problem 9 – 11 C Cash sales Credit sales Sales returns – defective products Net sales subject to VAT Multiplied by VAT rate Output VAT for the quarter

P1,000,000 2,000,000 ( 200,000) P2,800,000 12% P 336,000

Problem 9 – 12 B Sales Less: Trade discounts per invoice Net sales subject to VAT Multiplied by VAT rate

P500,000 100,000 P400,000 12%

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 66 SUGGESTED ANSWERS Output VAT Less: Creditable input VAT VAT payment Remaining unpaid VAT

Chapter 9: VALUE-ADDED TAX

P 48,000

P 32,000 10,000

42,000 P 6,000

Note: The sales commission is an operating expense and should not be an item to compute forthe net sales subject to VAT. Problem 9 – 13

D

The sale of Y is not subject to VAT because its registration is nonVAT and its sales do not exceed P1,919,500. Problem 9 – 14 B Correction: Income tax due during the quarter is P1,800,000. Output VAT [(P1,800,000/30%)/40%] x 12% Less: Input VAT (P8,960,000/9.333 Net VAT payable

P1,800,000 960,000 P 840,000

Problem 9 – 15 D Total sales (P2,000,000 + P800,000) Multiplied by VAT rate VAT payable

P2,800,000 12% P 336,000

Problem 9 – 16 D Cash sales to non-VAT customers Credit sales to VAT-registered customers Sales of obsolete merchandise (at 75% discount) Taxable sales not subject to standard input VAT Multiplied by VAT rate Output VAT Less: Allocated input VAT (P48,000 x 9/10) Net VAT payable

P600,000 200,000 100,000 P900,000 12% P108,000 43,200 P 64,800

Note: Although subject to regular VAT, the sale to the government does not result to VAT payable due to the application of final VAT and standard input VAT. Hence, Output VAT - Sales to government (P100,000 x 12%) Less: Input VAT Actual input VAT (P48,000 x 1/10) Less: Standard input VAT (P100,000 x 7%) Other income VAT payable

P12,000 P 4,800 7,000 (P2,200)

7,000 P 5,000

Less: Final VAT (P100,000 x 5%) Net VAT payable Problem 9 – 17 A NonVAT-registered: Output VAT (P20,000,000 + P5,000,000) x 12% VAT-registered: Output VAT (P20,000,000 + P5,000,000) x 12% Less: Input VAT (P7,840,000/9.333) Business tax advantage

5,000 P -0 -

P3,000,000 P3,000,000 840,000

P

2,160,000 840,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 67 SUGGESTED ANSWERS Chapter 9: VALUE-ADDED TAX

Problem 9 – 18 B Output VAT (P40M x 4 x 12%) Less: Ouput VAT (P180M /5) x 4 x 12%) Net VAT payable Supporting computations: Purchase price Excise taxes Duty taxes Insurance Freight Total landed cost Problem 9 – 19 NOT IN THE CHOICES Total business taxes (P264,000 + P27,000) Professional income Gross sales/receipts Taxable amount Multiplied by applicable business tax rate Individual business tax Problem 9 – 20 D Gross receipts – sale of electricity Sale of assets: Power general assets Other real properties Total Multiplied by VAT rate Output VAT Problem 9 – 21 D Total sales (P2,000 x 365 x 3) Multiplied by VAT rate Business tax = Output VAT Problem 9 – 22

P19,200,000 17,280,000 P 1,920,000 P100,000,000 40,000,000 30,000,000 5,000,000 5,000,000 P180,000,000 P291,000 Mr. Educado Mrs. Educado P1,200,000 1,000,000 900,000 P P2,200,000 900,000 P 12% 3% P 264,000 27,000 P P 5,000,000 30,000,000 20,000,000 P55,000,000 12% P 6,600,000 P2,190,000 12% 262,800 P

A

Inventors are exempt from all kinds of taxes in the first ten (10) years from the date of the first sale subject to the rules and regulations of the Department of Finance. (R.A. 7459; Rev. Reg. 19-93) Problem 9 – 23 D Gross selling price (P9,520/1.12) Less: Senior citizen’s discount (P8,500 x 20%) Net amount Problem 9 – 24 C Exclusive consumption of Lolo Sot [(P1,120/1.12)/5] x 80% Consumption of non-eligible companions (P1,120/5) x 4 Amount to be paid by Lolo Sot

P8,500 1,700 P6,800

P 160 896 P1,056

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 68 SUGGESTED ANSWERS Chapter 9: VALUE-ADDED TAX

Problem 9 – 25 D Nonstock and nonprofit organizations are not taxable. Problem 9 – 26 1. Total Output VAT (P1,344,000/9.333) 2.

Total Output VAT Less: Input VAT VAT purchase invoice amount (P840,000/9.333) Net VAT payable

Problem 9 – 27 1. Output VAT (P880,000 + P720,000) x 12% 2.

Output VAT Less: Input VAT (P1,200,000 x 12%) Net VAT payable

P 144,000 P144,000 90,000 P 54,000 P 192,000 P 192,000 144,000 P 48,000

Problem 9 – 28 1. Output VAT (P125,000 x 12%)

P 15,000

2.

P 9,000

Input VAT (P84,000/9.3333)

Note: The sales is multiplied by 12% because the term used is not per VAT invoice while the purchase is divided by 9.333 because the purchase is inclusive of VAT. Problem 9 – 29 Total sales price (P20 x 10) Add: VAT (P200 x 12%) Total sales invoice amount

P 200 24 P 224

Problem 9 – 30 1. No, because the purchases for sari-sari store is not for her personal consumption. 2.

P21,900. Percentage tax (P2,000 x 365) x 3%

3. P96,000 Gross profit (P2,000 x 365) x 20% Less: Business tax expense Net income Less: Personal exemption – basic Net taxable income

P21,900 P146,000 21,900 P124,100 50,000 P 74,100

Problem 9 – 31 1. None, because PEZA-registered entities are VAT-exempt. 2. Gross income tax (P50M – P30M) x 5% In general, ECONZON Enterprises (PEZA-registered enterprises) pay 5% tax on gross income which is in lieu of all national and local taxes.

P1,000,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 69 SUGGESTED ANSWERS Chapter 9: VALUE-ADDED TAX

Problem 9 – 32 1. Net income (P570,000/30%) Less: Gain on sale of capital asset Net operating income Add: Cost of sales (P120,000/12%) Sales discounts due to prompt payments Operating expense before taxes Community tax Vatable base – Sales subject to VAT

P1,000,000 150,000 990,000 10,000

P1,900,000 50,000 P1,850,000

2,150,000 P4,000,000

2. Output VAT (P4,000,000 x 12%)

P 480,000

3.

P 480,000 120,000 P 360,000

Output VAT Less: Input VAT VAT payable

Problem 9 – 33 1. Net income (P600,000/30%) Less: Gain on sale of capital asset Net operating income Add: Cost of sales (P240,000/12%) – P400,000 Sales discounts due to prompt payments Operating expenses before taxes Community tax Sales subject to VAT Output VAT (P4,500,000 x 12%) Less: Input VAT from purchases Presumptive input VAT Net VAT payable Add: Surcharge (P240,000 x 25%) Interest from Jan. 25 to Mar. 25 (P240,000 x 20% x 2/12) Compromise for late payment Total amount payable 2.

P1,600,000 45,000 1,000,000 5,000

P240,000 60,000 P60,000 8,000 1,000

None, because the payment of income tax is made on time – April 15, of the succeeding year.

P2,000,000 150,000 P1,850,000

2,650,000 P4,500,000 P540,000 300,000 P240,000 69,000 P309,000