GROUP 3 CHAPTERS 9 T0 12

True or False

1. A value-added tax is a form of consumption tax.

2. In all cases the buyer could not be legally liable for the payment of VAT.
3. VAT system curves tax evasion and fraud.
4. Goods or services sold outside the Philippines are subject to 12% VAT.
5. The amount of VAT should be indicated as a separate amount from the sales.
6. A VAT sales invoice includes the amount of VAT in the sale price.
7. Personal use of inventory by a VAT-registered owner of business is not subject to
VAT.
8. All sales of real property are subject to VAT.
9. The selling price is unreasonable if it is lower by more than 30% of the actual market
value.
10. Distribution of inventory to the stockholders may represent profit share or gifts.
11. Unsold inventory upon retirement of business is not subject to VAT.
12. Inventory used for promotion is subject to output VAT.
13. All services performed within and outside the Philippines will be subject to 12%
VAT if used in relation to trade, business, or profession.
14. A service performed in relation to business without actual or constructive collection
is subject to VAT.
15. Lawyer’s fee and medical doctor’s fee may be subject to VAT.
16. Barter may be subject to VAT.
17. All income earned by a professional is subject to VAT.
18. Real estate broker is subject to VAT if his registration is non-VAT.
19. The input tax is the VAT paid by the buyer on the purchase of goods or services.
20. When the input VAT is greater than the output VAT, there is a VAT payable.
21. No input VAT is to be paid if the imported goods are for personal consumption.
22. Transactions made with non-VAT and VAT-exempt persons are not subject to input
VAT.
23. All excess of input VAT over out put VAT can be applied for refund or issuance of
tax credit certificate.
24. The nonresident foreign entity is required to file or declare a VAT return.
25. Other charges prior to the release of goods from the Bureau of Custom may be
included as part of the amount subject to VAT.

Answers:
1. TRUE 6. TRUE 11. FALSE 16. TRUE 21. FALSE
2. FALSE 7. FALSE 12. FALSE 17. FALSE 22. TRUE
3. TRUE 8. FALSE 13. FALSE 18. FALSE 23. FALSE
4. FALSE 9. TRUE 14. FALSE 19. TRUE 24. FALSE
5. TRUE 10. TRUE 15. TRUE 20. FALSE 25. TRUE

Multiple Choice

1. Which of the following is not a characteristic of VAT?

a. Tax on gross sales
b. Tax on consumption
c. Tax on sellers
d. Tax on buyers

2. Statement 1: A zero-VAT business is the same with VAT-exempt business.

Statement 2: Senior citizens are exempted from VAT and subject to 20% discount.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both Statements are incorrect

3. The following item is not part of the taxable base for VAT purposes, except:
a. Discounts that are expressly indicated in the invoice.
b. Sales return with proper credit or refund was made during the month.
 c. Sales allowance with proper credit or refund was made during the month.
d. Cost of sales of the taxable goods sold.

4. Which of the following is not considered as a deemed sale?

a. Installment sale of real property
b. Merchandise inventory left upon retirement
c. Distribution of inventory to creditors
d. Consignment of goods if not sold within 60 days.

5. Which of the sale of real property inventory is subject to VAT?

a. Low-cost housing with sale price of P375,000 per unit.
b. Socialized housing with sales price of P150,000 per unit.
c. Residential lot valued at P2,000,000.
d. Residential house and lot value at P2,500,000.

6. Which of the following is subject to VAT?

a. Penoy
b. Balut
c. Salted Egg
d. Alamang

7. The following are considered in the original state except

a. Copra
b. 100% ground meat
c. Dried fish
d. Sardines

8. Upon the full collection of installment sale of real property, there is an additional VAT
if the:
a. Zonal value is higher than market value
b. Market value is higher than zonal value
c. Total collection is higher than zonal value or market value
d. Zonal value or market value is higher than the total collection

9. Which of the following item is not included as part of the taxable base of imported
goods?
a. Value used by the Bureau of Customs (BOC) in determining tariff and custom
duties
b. Custom duties and community tax of the importer
c. Custom duties and excise taxes
d. Tax to be paid by the importer prior to the release of the goods from the BOC

10. Which of the following transport services is not subject to VAT?

a. Transport of passengers by land
b. Transport of goods and cargoes
c. Transport of passengers by land and air
d. Additional payment of excess baggage in air transport

11. Which of the following is subject to VAT?

a. Pawnshops
b. Overseas calls originating from the Philippines
c. Offshore destination charges of the freight forwarder
d. Lending investors

12. The vatable base of tour services sold to domestic tourist includes
a. Discount from airline tickets.
b. Fees paid to bus operators and resort.
c. Fees paid to tour guide fees.
d. Cost of meal expenses by the tourists.

13. Which of the following is not a source of creditable input VAT?

 a. Purchases and payments of services to other VAT-registered businesses
b. Goods received through donation
c. Importation of goods (for business use or for sale locally)
d. Transitional and presumptive input VAT

14. Which of the following is not allowed for a tax refund or issuance of tax credit
certificate?
a. Zero-rated sales
b. Effectively zero-rated VAT
c. Unused input VAT on ordinary purchases
d. Cancellation of VAT registration

15. The entire amount of input VAT is allowed for a tax credit when
a. The depreciable capital goods is more than P1,000,000 excluding VAT.
b. The sale is an installment sales.
c. The purchases is related to construction in progress.

Answers:
1. C 4. A 7. D 10. A 13. B
2. B 5. C 8. D 11. D 14. C
3. D 6. C 9. B 12. A 15. D

Problems

1. Jolli Foods, a domestic corporation, sold the following during the taxable year:
Philippines
Sold to: Within Without
Regular customers P2,000,000 1,000,000
Government 500,000
Employees 300,000
How much is the total amount of sales subject to VAT?
a. P2,000,000
b. P2,300,000
c. P2,800,000
d. P3,300,000

2. A VAT-registered producer sold his products to W, a VAT-registered wholesaler, for

P100,000. W sold the same to R, a VAT-registered retailer, for P200,000. R, sold the
same to C, a consumer, for P300,000. How much is the output VAT of C?
a. P36,000
b. P24,000
c. P12,000
d. P - 0 -

3. Bud Company, a VAT-registered business, showed the following data for the taxable
year:
Gross Margin P5,000,000
Cost of Sales 5,000,000
Purchases, including VAT 6,720,000
How much is the net VAT payable?
a. P480,000
b. P600,000
c. P720,000
d. P1,200,000

4. Lola Lita, a senior citizen, bought a medicine with a selling price of P9,520, inclusive
of VAT. Assuming that he was granted a senior citizen’s discount, how much is the net
amount to be paid by Lola?
a. P8,500
b. P7,616
c. P6,916
 d. P6,800

5. Gerald Gonzales is a VAT-registered person. During a period, his total sales before
VAT is P125,000. His purchase invoices from other VAT-registered business amounted
to P84,000, inclusive of VAT. Compute for Output and Input VAT. 9-28

6. Mr. Garci sold the following properties during the year:

Family Home, with zonal value of P2,500,000 P3,000,000
Warehouse with zonal value of P4,000,000 3,500,000
Personal car 200,000
Business delivery trucks 500,000
How much is the total amount subject to VAT?
a. P4,500,000
b. P4,000,000
c. P3,700,000
d. P3,500,000

7. Kamu Kamo, a nonresident Japanese alien, sold second hand ship to COrona
Enterprises, a domestic corporation in the Philippines, for $400,000, excluding VAT.
The transfer of ship entails P500,000 insurance cost and other processing fees. Howmuch
is the amount of VAT to be paid by Kamu Kamo to the Philippine Government?
(Assume $1.00 = P40.)
a. P1,980,000
b. P1,920,000
c. P60,000
d. P - 0 -

8. A-1 Realty sold lot for P2,500,000 to B for a down payment (initial payment of 20%
and the balance will be payable in 2 equal annual installments with an interest charge of
6% per year on the outstanding balance. How much is the Total Output VAT for the first,
second and third year of collections?

9. Healthcare Corporation, a VAT-registered business, is engaged in the following

medical services with following gross receipts during the year:
Health maintenance services P3,000,000
Medical and drugs distributions 4,900,000
Hospital services 6,000,000
Sales of scrap materials 100,000
Compute for the amount not subject to VAT.

10. A VAT-registered person reported the following:

Purchases of items for business, inclusive of VAT P112,000
Purchases of items for personal use, inclusive of VAT 56,000
Importation of goods for domestic sale in the course
79,520
of business (inclusive of VAT)
Compute for the input VAT carry-over for the next period if the total output VAT is
P20,000.

Answers:
1. C. 2,800,000
2. D. - 0 -
3. A. 480,000
4. D. 6,800
5. P15,000; 9,000
6. A. 4,500,000
7. D. - 0 -
8. P321,600
9. P6,000,000
10. P520