Chapter 6
Chapter 6
Chapter 6
Drill exercises
1. Seller of agricultural food products Exempt
2. Furniture shop Vatable
3. Vegetable trader Exempt
4. A private high college Exempt
5. A private hospital Exempt
6. A dentist Vatable
7. Hospital drugstore Vatable
8. A non-profit elementary school Exempt
9. A government college Exempt
10. Restaurant Vatable
11. Bus operator % Tax
12. Hotel Vatable
13. Operator of domestic sea vessel Vatable
14. Life insurance company % tax
15. Mall Vatable
16. Domestic airliner Vatable
17. Lessor vessels or aircraf Vatable
18. Banks % tax
19. Operator of taxi % tax
20. International carriers % tax
21. Keepers of garage % tax
22. Book publishers Exempt
23. Quasi-banks % tax
24. Dealer of household appliances Vatable
25. Dealer of commercial lot Vatable
26. Insurance agent Vatable
27. Employee Exempt
28. Contractor Vatable
29. Processor of sardines Vatable
30. Auto parts dealer Vatable
31. Manufacturer of hog feeds Exempt
32. Seller of fertilizer and seeds Exempt
33. Fisherman Exempt
34. Fish vendor Exempt
35. Textile manufacturer Vatable
True or False 1
T 1. A person who exceeded the VAT-threshold in any 12-month period must register as a VAT-
taxpayer.
T 2. The VAT applies on receipts or sales other than those exempted and those specifically subject to
percentage tax.
T 3. A person with vatable sales or receipts not exceeding the VAT-threshold may register as a non-
VAT taxpayers.
T 4. A person with vatable sales or receipts not exceeding the VAT-threshold may register as a VAT-
taxpayer.
Note: (by optional registration) the statement did not say “must”
T 5. A person who commences business with an expectation to exceed the VAT-threshold must
register as a VAT-taxpayer.
Note: see revenue regulation provisions
F 6. A registrable person is exempt from VAT.
Note: He is vatable.
T 7. A VAT-registered person is exempt from VAT on VAT-exempt sales.
Note: VAT exempt sales are not subject to VAT regardless of the seller
T 8. A non-VAT taxpayer shall not bill VAT on his sale.
F 9. A VAT-registered person is liable to VAT on exempt sales and services specifically subject to
percentage tax.
Note: Only on vatable sales
F 10. The threshold for franchise grantees of electricity is P10,000,000.
Note: Franchise grantees of gas and water only.
T 11. The VAT threshold for sellers of goods or services is P3,000,000.
T 12. The VAT threshold for franchise grantees of gas and water is P10,000,000.
T 13. The VAT threshold applicable to professional practitioners is P3,000,000.
T 14. Exempt sales shall not be billed with an output VAT.
F 15. A sale to the government shall not be billed with output VAT since it is exempt from VAT.
Note: It is subject to 12% output VAT
True or False 2
F 1. Export sales shall be billed with output VAT.
Note: No output VAT because the VAT rate is 0%
F 2. The export sale of a VAT-taxpayer is an exempt sale.
Note: It is a zero-rated sale. For a non-VAT taxpayer, it is exempt.
F 3. A non-VAT-registered person who invoiced VAT on his sale shall be subject to 12% VAT without
the benefit of an input VAT 3% percentage tax, and 25% surcharge.
Note: 50% surcharge
T 4. Exempt sales which are billed as regular sales shall be considered as regular vatable sales.
F 5. The VAT payable of a VAT-registrable person is the output VAT without benefit of input VAT plus
3% percentage tax.
Note: Output VAT but without benefit of input VAT, no percentage tax.
T 6. No input VAT traceable to exempt can be claimed sales as tax credit.
F 7. No input VAT traceable to government sales is claimable as tax credit.
Note: The 7% standard input VAT is claimable in lieu of the actual input VAT.
F 8. A VAT-registered person shall be subject to a final withholding VAT of 12% on sales to the
government.
Note: 5% final withholding VAT
F 9. The VAT payable of any person is always 3% of the value-added on the sales of goods.
Note: Sometimes it becomes 12% of the sale when no input VAT is claimable
T 10. The claimable input VAT on government sales is 7% of the sales.
T 11. The VAT payable on zero-rated sales is always zero.
Note: Technically true because the VAT payable is always negative
F 12. There is no way VAT payable could be negative in a particular month or quarter.
T 13. VAT is paid in three monthly installments similar to the percentage tax.
Note: Two monthly installments, and a quarterly payment
F 14. Exempt sales must be indicated as such; otherwise, they will be regarded as regular sales.
T 15. The standard input VAT is 5% of government sales.
3. Which is vatable?
a. Sale of fertilizers
b. Sales of fruit
c. Sale of bamboo handicrafs
d. Sale of vegetables
5. Which is vatable?
a. Fruit dealer
b. Department store
c. Cooperative
d. Meat vendor
9. Which is vatable?
a. Local water districts
b. Gasoline stations
c. Internet service providers
d. Schools
14. What is the general lock-in period for those who voluntarily register as VAT taxpayers?
a. 3 years
b. 5 years
c. 1 year
d. Perpetual
20. Statement 1: Discounts that are contingent to a future event are deductible from gross selling price.
Statement 2: Expenses of the service provider that are reimbursed by the client forms part of the
gross receipt.
Which is incorrect?
a. Both statements
b. Neither statement
c. Statement 1
d. Statement 2
3. Statement 1: A VAT taxpayer who purchases goods from non-VAT suppliers will effectively pay a VAT
equivalent to the output VAT.
Statement 2: No output VAT shall be billed on export sales and exempt sales.
Which is incorrect?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement
4. Which is the tax payable by a non-VAT taxpayer who issues a VAT invoice or VAT official receipt?
a. Output VAT plus 3% percentage tax
b. Output VAT less input VAT, plus 3% percentage tax and 50% surcharge
c. Output VAT plus 3% percentage tax and 50% surcharge
d. 3% percentage tax
5. What is the business tax payable by a person who is VAT-registrable?
a. The output VAT
b. The input VAT
c. Output VAT less input VAT
d. Output VAT plus 3% percentage tax
11. A VAT taxpayer can claim the actual input VAT credit on
a. Regular sales
b. Zero-rated sales
c. Government sales
d. A and B
12. Which is a possible source of input VAT?
a. Importation
b. Purchase from VAT-sellers
c. Purchase from no-VAT sellers
d. A and B
13. A VAT taxpayer can claim the actual input VAT credit on
a. Regular sales
b. Zero-rated sales
c. Government sales
d. A and B
14. A VAT taxpayer may claim only partial or full input VAT credit on
a. Regular sales
b. Zero-rated sales
c. Government sales
d. A and B
20. Statement 1: The VAT due and payable on regular sales is always positive.
Statement 2: The VAT due and payable on export sales is always negative.
Which statement is generally correct?
a. Both statements
b. Neither statement
c. Statement 1
d. Statement 2
23. Statement 1: The VAT returns for the first two months of the quarter are prepared on a monthly
basis.
Statement 2: The VAT return on the third month of the quarter reflects a monthly balance.
Which is incorrect?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement
24. Statement 1: VAT paid in the first two months of the quarter is deductible against the Output VAT for
the entire quarter.
Statement 2: The VAT paid in a quarter is deductible against the output VAT of future quarters of the
taxable year.
Which is correct?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement
2. Mrs. Escala had the following sources of income in the past 12 months:
Salaries 1,200,000
Professional fees 800,000
Which is correct?
a. She shall be subject to VAT on the salaries and professional fees.
b. She shall be subject to percentage tax on the salaries and professional fees.
c. She shall pay percentage tax on the professional fees only.
d. She shall pay VAT on the professional fees only.
3. Aciga Corporation had the following sales in the past 12-month period:
Home office sales 2,000,000
Branch 1 sales 1,200,000
Branch 2 sales 1,000,000
Total company sales 4,200,000
Which is correct?
a. Home office shall pay VAT.
b. Branch 1 and branch 2 shall pay percentage tax.
c. The home office and branches shall all pay VAT.
d. A and B
4. Assuming Aciga Corporation is a parent corporation with two subsidiaries with the following sales in
the past 12-month:
Home office sales 2,000,000
Branch 1 sales 1,200,000
Branch 2 sales 1,000,000
Total company sales 4,200,000
Which is incorrect?
a. Aciga Corporation shall pay VAT.
b. Subsidiary 1 and Subsidiary 2 shall pay percentage taxes.
c. All companies in the group shall pay VAT.
d. A and B
5. Mr. and Mrs. Lallo had the following sales in the past 12 months:
Mr. Lallo Mrs. Lallo Total
Fruits and vegetables sales 1,400,000 - 1,400,000
Fish and meat sales - 1,200,000 1,200,000
Grocery sales 800,000 600,000 1,400,000
Total 2,200,00 1,800,000 4,000,000
Which is correct?
a. Both Mr. and Mrs. Lallo shall pay VAT.
b. Both Mr. and Mrs. Lallo shall pay percentage tax.
c. Mr. Lallo shall pay VAT, but Mrs. Lallo shall pay percentage tax.
d. Mrs. Lallo shall pay VAT, but Mr. Lallo shall pay percentage tax.
6. Mr. Vegetta, a VAT-registered taxpayer, owns a mini-store with the following sales in the past 12
months:
Sales of meat and vegetables 1,800,000
Sales of cooked rice and viands 1,200,000
Sales of snacks and sofdrinks 500,000
Total sales 3,500,000
Which is correct?
a. Mr. Vegetta shall pay percentage tax on the sales of rice, viands sofdrinks and snacks.
b. Mr. Vegetta shall pay VAT on the sale of rice, viands, snacks and sofdrinks.
c. Mr. Vegetta shall pay VAT on all sales.
d. Mr. Vegetta shall pay percentage tax on all sales.
7. A non-VAT realty lessor had the following receipts during a month:
Bed spacers’ rooms with P2,000 monthly rental each 120,000
Houses for rent with P10,000 monthly rental each 1,000,000
Commercial spaces with P5,000 monthly rental each 900,000
Which is correct?
a. The taxpayer shall pay VAT on all receipts.
b. The taxpayer shall pay VAT on the commercial spaces.
c. The taxpayer shall pay percentage tax on all receipts.
d. The taxpayer shall pay percentage tax on the commercial spaces.
Note: Closest answer. A seller of goods is taxable on “gross receipts” not on revenues.
Output VAT (180,000 x 12/112) = P19,286 – P12,000 input VAT = P7,286
Note: The output VAT is the VAT due and payable if the taxpayer did not register as VAT taxpayer.
10. A seller of goods had the following data during the month:
Sales invoice (total billed prices) 436,800
Total cash collections 380,800
Sales returns and allowances, billed price 11,200
Input VAT 14,000
11. Assuming the taxpayer is VAT-registrable person, compute the VAT payable.
a. P0
b. P26,800
c. P45,600
d. P46,800
12. The following sales and purchases were taken from the books of accounts of a VAT taxpayer:
Sales April May June
Sales 625,000 400,000 600,000
Purchases 400,000 420,000 200,000
Note: Data from the books of accounts are exclusive of VAT. Sales and purchases accounts exclude
VAT.
Output VAT (12% of sales) – 75,000; 48,000; 195,000
Input VAT (12% of purchases) – 48,000; 50,400; 122,400
VAT due – 27,000; 2,400; 72,600
A VAT taxpayer had the following sales and purchases during the month:
Sales, excluding VAT 300,000
Purchases, inclusive of P14,000 VAT 280,000
Note: The input VAT on exempt sales will be part of costs. Thus, P300,000 – P280,000 = P20,000.
Note: The P280,000 purchases is inclusive of VAT. Hence, the standard input VAT (7% of the P300,000
sales can be deducted from the P280,000 purchases. This is because excess actual input VAT over the
standard input VAT is included as part of costs and expenses. While the excess of standard input VAT
over the actual input VAT is included as gain part of gross income.
Hence, P300,000 sales – P280,000 – (7% x P300,000) = P41,000
Note: The input VAT must be removed from the purchases (cost of sales).
Hence, P300,000 sales – P280,000 purchases – P14,000 input VAT = P34,000
Note: Input VAT on sales of registrable persons cannot be claimed as input VAT. Since, there is not
express provision that disallowed tax credits can be claimed as a deduction, it is safe to treat it as
nondeductible against gross income. It must be emphasized that the claim of deductions and tax
credits are construed against the taxpayer.
2. A VAT-registered seller wishes to bill the sale of unprocessed meat for P50,000. At what amount
should the sale be billed?
a. P50,000
b. P51,500
c. P53,571
d. P60,000
3. A VAT-registered department store had an un-invoiced sale with the following selling prices:
1 cavan rice 2,500
Vegetables 1,500
Cooking oil 200
Noodles 1,300
Total sales 5,500
Note:
1 cavan rice 2,500 2,500
Vegetables 1,500 1,500
Cooking oil (200 x 112%) 200 224
Noodles (1,300 x 112% 1,300 1,456
Total sales 5,500 5,680
Note: The sale is exempt since it did not exceed the P1,919,500 price ceiling on the sale of residential
lots.
Note: The price exceeds the P3,199,200 price ceilings. Hence, the invoice is inclusive of VAT. The VAT is
computed as P3,920,000 x 12/112 = P420,000.
Note: The sale of fruit is VAT exempt. However, if it is invoiced in a VAT invoice not on an “exempt”
invoice, the sale will be treated as a regular vatable sale.
The VAT can be computed as P24,000 x 12/112 = P2,571.
8. A non-VAT registered taxpayer purchased goods which was invoiced by the seller as follows:
Selling price 50,000
Output VAT 6,000
Total invoice 56,000
9. In the immediately preceding problem, what is the claimable input VAT if the purchaser is a VAT-
registered taxpayer?
a. P0
b. P6,000
c. P6,720
d. P7,200
Note: The input VAT of the purchaser shall be the output VAT billed by the seller.
Note: The VAT payable shall be computed out of vatable receipts (non-life premiums only)
Output VAT (P200,000 x 12%) = P24,000 – P0 input VAT = P24,000
11. A VAT-registered taxpayer with several businesses had the following sales:
Last Current
12-months month
Sales of fertilizers and seeds 1,800,000 200,000
Sales of equipment 1,500,000 150,000
Input VAT on processed foods 140,000 13,000
Note: Even if the taxpayer did not exceed the VAT threshold in the past 12 months if it is registered as
a VAT taxpayer, it will be nonetheless subject to VAT.
Output VAT (P150,000 x 12%) – P13,000 input VAT = P5,000
14. The taxpayer made a sale P400,000 to the government from goods he purchased for P300,000 from
VAT taxpayers.
What is the actual input VAT?
a. P0
b. P20,000
c. P28,000
d. P36,000
15. A VAT taxpayer sold goods to the government for P1,000,000 and paid P40,000 input VAT traceable
to the sale. What is the creditable input VAT on government sale?
a. P0
b. P40,000
c. P50,000
d. P70,000
Note: The creditable input VAT on government sale is the standard input VAT equivalent to 7% of the
sale. Hence, 7% x P1,000,000 = P70,000
16. A VAT-taxpayer exported P1,000,000 worth of goods. It incurred P36,000 input VAT on such sales.
What is the creditable input VAT?
a. P0
b. P36,000
c. P50,000
d. P70,000
17. A non-VAT-taxpayer exported P1,000,000 worth of goods. It incurred P36,000 input VAT on such
sales. What is the creditable input VAT?
a. P0
b. P36,000
c. P50,000
d. P70,000
Note: The export sales of non-VAT sellers is an exempt sales. Input VAT traceable to it are
noncreditable but are part of costs and expenses.
18. A taxpayer collected the following from lessors of commercial spaces:
Billing for rentals 1,500,000
Less: Creditable withholding tax 75,000
Net receipt 1,425,000
Note: The output VAT must be based on the gross receipts not on the net receipts. The billing should
be understood to include the output VAT but since there is no answer for 12/112 x P1,500,000. The
same is impliedly exclusive of VAT.
The Output VAT should therefore be computed as P1,500,000 x 12% = P180,000.
19. A VAT taxpayer received a 5% creditable withholding tax plus P48,150 cash from a VAT invoice. What
is the output VAT?
a. P5,159
b. 5,778
c. 5,373
d. 5,400
20. A VAT taxpayer received a sum of P74,900 and a P3,500 certificate of creditable withholding tax.
What is the output VAT?
a. P9,396
b. P8,568
c. P8,400
d. P8,988