Taxation: Reviewer and Quizzer

19-1 to 19-17
VALUE ADDED TAX-1
Sale of good or properties
1. The value-added tax is imposed when there is a sale, barter, or
exchange of goods of properties in the exchange of goods and properties
in the ordinary course of trade or business. Properties include real
properties.
Goods or properties are tangible or intangible objects which are
capable of pecuniary estimation.
(a) The ordinary meaning of the term sale;
(b) The transfer, use or consumption, not in the course of business, of
goods or properties ordinary course of business goods or properties
ordinarily intended for sale or use in the course of business;
(c) The distribution or transfer to shareholders or investors of shares in
the profits of a VAT-registered person;
(d) The distribution or transfer to creditors in payment of debt;
(e) The consignment of goods if actual sale is not made within sixty (60)
days following the date such good were consigned;
(f) The retirement from or cessation of business, with respect to
inventories of taxable goods as of such retirement or cessation.
2. A domestic corporation on real estate business sold a building.
Statement 1. The sale is not subject of the value-added tax because it is not a sale
of goods or services;
Statement 2. The sale is subject to the value-added tax because sale of goods and
properties are subject to the value-added tax and real estate is within the meaning
of property.
(a) True, true;
(b) False, false;
(c) True, false;
(d)
False, true.
Answer d
3. The value-added tax on sale of goods is based on gross selling price.
Gross selling price means:
(a) The total amount of money or its equivalent which the purchaser pays
or is obligated to pay to the seller in consideration of the sale, barter or
exchange, excluding the value-added tax. The excise tax, if any, on such
goods, shall form part of the gross selling price.
(b) There can be downward adjustment for the sales returns and
allowances, and sales discounts granted and indicated in the invoice at
the time of sale and the grant of which does not depend upon the
happening of an event.

Therefore, what the law calls gross selling price is actually not sales,
and what the law calls purchases is actually not purchases. If gross
selling price for purposes of the output taxes means net sales, purchases
for the purposes of the Input taxes shall mean no purchase.
4. The tax rates are twelve percent (12%) and zero percent (0%). Export
sales are zero-rated sales. (For other zero-rated sales, see the
Appendices.)
5. The tax formula is (See Plate 21 and Plate 22):
Output taxes
Less: Input taxes
Equals: Value-added tax payable.
The output tax is gross selling price multiplied by twelve percent (12%) or
zero percent (0%).
The input taxes are the value-added taxes paid on the:
(a) Purchases; or
(b) Important of:
(1) Goods for sale or materials for use in the manufacture of goods
be sold;
(2) Services;
(3) Supplies;
(4) Capital goods;
(5) The transitional input tax; and
(6) The presumptive input tax.
6. To get the value-added tax (Output tax if the seller):
(a) If the selling or invoice price does not include the value-added tax, the
value-added tax is selling the price multiplied by twelve percent (12%).
Thus, if the selling price, value-added tax not included, is P1,000,000, the
output tax is P1,000,000 x 12% or P120,000.
(b) If the price is value-added tax inclusive, to get the value added tax
component of the total, multiply the total by the fraction of 12/112. Thus,
if the total of the invoice price (the invoice does not show the value-added
tax) is P1,120,000 x 12/112, or P120,000.
7. Only purchases from VAT suppliers shall give rise to input taxes.
Purchases of goods or services which were not subject to value-added tax
(examples: exempt from the value-added tax, or subject to any percentage
taxes) shall not give any input tax. (But see topic of presumptive input
tax in item 30.)
The output tax of VAT seller becomes the input tax of his VAT purchaser.

The output taxes and the input taxes do not go into the computation of
net income.
8. When a sale is made, the books of accounts shall have a journal entry:
(Debit)
Cash or Accounts Receivable
(Credit) Sales
(Credit) Output Taxes
When a purchase with a VAT component is made, the books of accounts
shall have a journal entry:
(Debit)
Purchases/Supplies/Service/Fixed Asset,
(Debit) Input Taxes
(Credit) Cash or Payable
The Output Taxes and the Input Taxes are closed against each other when
the value added tax payable is compound for a taxable period
(month/quarter), and the books of accounts shall have a journal entry:
(Debit)
Output taxes
(Credit)
Input taxes
(Credit) Value-Added Tax Payable.
The credit to Input Taxes shall not exceed the debit to Output Taxes, so
that, if fir the taxable period the Input Taxes exceed the Input Taxes, there
shall be a remaining balance in Input Taxes, which shall the be available
for use in the succeeding taxable period.
Assuming that for a taxable period the total of the output taxes was
P120,000 and the total of the input was P48,000, the journal entry to
recognize the value-added tax payable shall be:
(Debit) Output taxes
(Credit) Input taxes
(Credit) Value-added tax payable

P120,000
P48,000
P72,000

Assuming that for a taxable period the total of the output taxes was
P60,000 and the total of the input taxes was P96,000, the journal entry to
recognize the value-added tax payable shall be:
(Debit) Output taxes
(Credit) Input taxes

P60,000
P60,000

Leaving in the Input Taxes account a debit balance of P36,000 which shall
be available in the succeeding taxable period for debit against the new
output taxes from that period.
9. In case of sales to the Government or any of its political subdivisions,
instrumentalities or agencies, including government owned or controlled

corporations, a final value added tax of five percent (5%) is withheld on

any payment to be made. There is no creditable input tax.
10. Senior citizens are exempt from the value added tax on the purchases
of the following goods and services: Medicines and essential medical
supplies, accessories and equipment; fees of attending physicians;
medical, dental fees and diagnostic and laboratory fees; fares for
transportation; charges in utilization of services of hotels, restaurants and
similar establishments; admission fees in cinemas, theaters, and other
places of culture leisure and amusement; and funeral and burial services,
(which would, if not given to senior citizens, be vatable sales of goods or
services). Expanded Senior Citizens Act of 2010.
11. Prices/costs of a VAT Taxpayer with purchases from VAT suppliers, VAT not
included:
Gross Sales
P700,000
Sales Returns and Allowances
30,000
Sales Discounts
40,000
Purchases
210,000
Purchase returns and allowances
20,000
Purchase discounts
10,000
How much is the value-added tax payable?
(a) 76,600
(b) 54,000
(c) 25,200
some other amount.
Answer: b
Gross Sales
Less:
Sales Returns and Allowances
Sales Discounts
Net Sales
Output taxes (630,000 x 12%)
75,600
Purchases
Less:
Purchase returns and allowances
Purchase discounts
Net purchases
Input taxes (180,000 x 12%)
21,600
Value-added tax payable
P54,000

P700,000
30,000
40,000

70,000
P630,000
210,000

20,000
10,000

12. A Vat taxpayer had the following sales in a month:

Cash Sales
Open account sales
Consignment sales (at suggested retail prices: 0 to 30
days old on which there were remittances from
consignees of 200,000)
31 to 60 days old

30,000
P180,000

P200,000
500,000
600,000
700,000

(d)

61 days and above

How much is the taxable sales?
(a) 2,900,000
(b) 1,800,000
(c) 2,200,000
(d) some other amount.
Answer: b
Cash Sales
Open account sales
Consignment sales:
0 to 30 days old
61 days and above
Taxable sales

900,000

P200,000
500,000
600,000
900,000

13. Taxpayer is a VAT taxpayer:

Sales, VAT not included
VAT included:
Purchases of goods sold:
From VAT taxpayers
From Non-VAT taxpayers
Purchases of services from VAT taxpayers
Payments for utilities (water subject to percentage tax)
Salaries of employees
Operating expenses (no VAT component)
How much is the VAT payable?
(a) 96,000
(b) 72,000
(d) some other amount.

1,100,000
1,800,000
P800,000
200,000
20,000
50,000
19,000
80,000
100,000
(c) 66,000

Answer: c
How much was the net income?
(a) 331,000
(b) 235,000
(d) some other amount.

(c) 205,000

Answer: a
Output taxes (800,000 x 12%)
P96,000
Less: Input taxes
On purchases of goods from VAT taxpayers
(224,000 x 12/112)
On purchases of services from VAT taxpayers
(56,000 x 12/112)
30,000
Value-added tax payable
P66,000
Sales
P800,000

24,000
6,000

Less: Costs and expenses

Purchases of goods sold:
From VAT taxpayers
From Non-VAT taxpayers
Purchases of services from VAT taxpayers
Payments for utilities (water subject to percentage tax)
Salaries of employees
Operating expenses (no VAT component)
Net Income
P331,000

200,000
20,000
50,000
19,000
80,000
100,000

P469,000

14. The following are data, VAT not included, of Country Appliances Marketing Co.
for the last quarter of 2013:
Sales up to December 15, total invoice value
P300,000
Purchases up to December 15
200,000
Additional information:
On December 16, 2013, the Country Appliances Marketing Co. retired from its
business and the inventory valued at P190,000 net of input taxes was taken and
transferred to New World Appliances Co. There is a deferred input taxes from the
third quarter of P3,500.
How much is the total value added taxes due and payable by Country Appliances
Marketing Co. in its operations in the last quarter and its retirement from business?
(a) 12,000
(b) 8,500
(c) 34,800
(d) 31,300
Answer: d
Output taxes:
On sales up to December 15, 2013
(300,000 x 12%)
On inventory on retirement date
(190,000 x 12%)
58,800
Less: Input taxes
On purchases up to December 15
(200,000 x 12%)
Deferred input taxes carry-over
27,500
Value added tax payable
P31,300

P36,000
22,800

P24,000
3,500

15. Which of the following is not a sale and therefore is not subject to the valueadded tax?
(a) Transfer, use or consumption not in the ordinary course of business of goods or
properties ordinarily intended for sale or use in the course of business;
(b) Distribution or transfer to shareholders or investors of share in the profits of a
VAT-registered person;
(c) Distribution or transfer to creditors in payment of debt;
(d) Consignment sales.
Answer: d

To be taxable, the law states on consignment of goods: Consignment of goods if

actual sale is not made within sixty days following the date such goods were
consigned.
16. Which statement is correct? The value-added tax on goods or properties sold:
(a) Is based on gross sales and not on net sales;
(b) May be due even if the goods or properties were not actually sold;
(c) Is not imposed on goods exported;
(d) Is a selling expense of the trader.
Answer: b
Consignments are taxable even if the goods are not yet sold upon the expiration of
sixty days from the date of consignment.
17. Under the value-added tax law, which of the following sales may not be zerorated?
(a) Export sales;
(b) Foreign currency denominated sales;
(c) Sale of goods to the Asian Development Bank;
(d) Sale of goods to an export-oriented enterprise.
Answer: d
Sale of goods to the Asian Development Bank, when made directly, is zero-rated
under the law which provides: Sales to persons or entities whose exemption under
international agreements to which the Philippines is a signatory effectively subjects
such sales to zero rate.
Sales to export-oriented enterprises are zero-rated only if: Sale of raw materials or
packaging materials to an export-oriented enterprise whose export sales exceed
seventy percent (70%) of actual annual production.
18. Which of the following statements is wrong: the value-added tax is:
(a) Not an expense;
(b) A tax credit;
(c) Not a part of the gross selling price;
(d) On purchases, is a part of the cost of inventory.
Answer: d
Since the value-added tax component of a purchase is debited to the input taxes
account, therefore, they do not form part of the cost of inventory.
19. Which of the following is not account titles with balances in the books of
accounts of a VAT taxpayer?
(a) Output taxes;
(b) Input taxes;
(c) Excess input taxes carry-over;
(d) VAT payable.
Answer: c
20. The formula: Output taxes (less) input taxes (equals) Value-added tax payable
means that:

(a) Value-added taxes are not deductible from gross income;

(b) Value-added taxes paid on purchases are prepayments;
(c) Value-added taxes during a taxable period may not appear in the financial
statements;
(d) All the above statements are correct.
Answer: d
21. Statement 1. The Output value-added tax is computed by multiplying the gross
selling price by 12%; or multiplying the total amount indicated in the invoice by
12/112.
Statement 2. The Output value-added tax is computed by multiplying the total
amount indicated in the invoice by 12%.
(a) True; true
(b) False; false
(c) True; false
(d) False; true
Answer: c
22. Statement 1. In the books of accounts of a VAT-registered taxpayer, purchases
are recorded net of input taxes;
Statement 2. In the books of accounts of a VAT-registered taxpayer, sales are not
recorded net of output taxes.
(a) True; true
(b) False; false
(c) True; false
(d) False; true
Answer: a
23. Statement 1. A value-added tax payment is not an expense in the books of
accounts of the VAT payable.
Statement 2. The excess of input taxes over output taxes in a given month or
quarter id a deferred charge.
(a) True; true
(b) False; false
(c) True; false
(d) False; true
Answer: a
24. Gaby, a Japanese residing in the Philippines, bought garments from ABC Corp., A
domestic corporation, and exported the same to Japan. Total value of the export is
P100,000. VAT (output tax) due on the transaction is:
(a) 10,000;
(b) 5,000;
(c) None, because 0% applies;
(d) None, because the sale is exempt from VAT.
Answer: d
Since Gaby is not a VAT-registered person (he is not in business). The exportation is
exempt from the value added tax, total value of export does not mean the export
selling price.

25. Statement 1. Tax pyramiding is a situation where some or all of the stages of
distribution of goods or services are taxed, with the accumulation borne by the final
consumer.
Statement 2. A characteristic of the value-added tax is that it is a consumption tax,
borne ultimately by the users of goods or services.
(a) True; true
(b) False; false
(c) True; false
(d) False; true
Answer: a
26. Cascading effect of the value added tax. The output tax of a selling
VAT taxpayer is the input tax of the buying VAT taxpayer.
27. All amounts given are VAT not included:
A, non-vat taxpayer, sells to B, VAT taxpayer
B, VAT taxpayer, sells to C, VAT taxpayer
90,000
C, VAT taxpayer, sells to D, VAT taxpayer, an exporter
D, VAT taxpayer, exports
300,000
The value-added tax of B:
(a) Payable of 10,000
(b)Payable of 9,200
(c) Payable of 10,800
(d) Payable of 7,200

P60,000
150,000

Answer: c
B
D
Output taxes
P0
Less: Input taxes
18,000
Vat payable
(P18,000)

P10,800

P18,000

10,800

P10,800

P7,200

28. Mr. C is a VAT-registered person, with the following data for a taxable month,
VAT not included: Sales, domestic, to consumers P600,000; Sales, direct exports
P300,000; Purchases, total invoice cost, from VAT-registered persons: of goods of
P550,000, and of services of P330,000.
The sales subject to the value-added tax is:
(a) 600,000
(b) 400,000
(c) 300,000
(d) 900,000
Answer: d
Sales, domestic to consumers
Sales, direct exports
Total taxable sales

P600,000
300,000
P900,000

29. The Pastry Shop sells cakes and pastry items to well-known hotels around the
Metro Manila area. The hotels are allowed credit based on the track record of the
hotels. The total amounts received or receivable from sales by the Pastry Shop in
April of year X were P220,000, including the value-added tax. 75% of the sales are
normally on account.
How much is the value-added tax on the sales amount for the month of April, Year
X?
(a) 22,100.52
(b) 21,050.35
(c) 16,520.32
(d) 23,571.43
Answer: d
P220,000 x 12/112 is P23,571.43
30. Statement 1. Sales of certain goods and services to senior citizens are exempt
from the value-added tax, hence the value-added tax on the transactions is P0;
Statement 2. Sales of certain goods and service to senior citizens are zero-rated VAT
sales, hence the value-added tax on the transactions is P0.
(a) True; true
(b) False; false
(c) True; false
(d) False; true
Answer: c
31. PRESUMPTIVE INPUT TAX.
Persons or firms engaged in the:
Process of:
(a) Sardines;
(b) Mackerel; and
(c) Milk,
And in the
Manufacturing of:
(a) Refined sugar;
(b) Cooking oil; and
(c) Packed noodle-based instant meals
Shall be allowed:
(a) Presumptive input tax equivalent to four percent (4%) of the
gross value in money of their
Purchases of primary agricultural products which are used as inputs
in their production.
(The primary agricultural products were no VAT- paid when
purchased) and;
(b) Actual input tax on purchased form VAT suppliers.
The term processing means pasteurization, canning and activities
which trough physical or
chemical process alters the manner as to prepare it for special use
to which it could not have
been put in its original form and condition.
This is also the meaning of the term manufacturing.

32. Mr. A is a producer of a cooking oil from a coconut and corn. For January, 2013,
with sales, value-added tax not included, of P700,000, he had the following other
data for the month:
Corn and coconut purchased for farmers:
Purchased during the month of coconut and
corn farmers
Purchased during the month from VAT suppliers,
VAT included:
Packaging materials
Supplies
The value-added tax payable for the month:
(a) P56,060;
(b) P54,900;
(c) P60,650;

P100,000
P330,00
P56,000
P16,800
(d) P63,600.

Answer: d
Output taxes (P700,000 x 12%)
P84,000
Less: Input taxes:
Presumptive input tax (P330,000 x 4%)
On the purchase of packaging materials (P56,000 x 12/112)
On the purchase of supplies (P16,800 x 12/112)
21,000
Value-added tax payable

13,200
6,000
1,800
P63,600

33. Sarap Production is a processor of refined sugar. It purchases sugarcane form

farmers for processing into intermediate stages until it becomes refined sugar. In a
month it had the following sales and purchases, no tax included:
Sales
Purchases of sugarcane
220,000
Purchases of containers and paper labels
100,000
The value-added tax payable is:
a. P66,000;
b. P88,000;
c. P74,000;

P880,000

d. P84,000.

Answer: d
Output taxes (P880,000)
Less: Presumptive tax (P220,000) x 4%)
P8,800
Input tax on containers and labels (100,000 x 12%)12,000
20,800
Value-added tax payable

P105,600

P84,000

There is a presumptive input tax on the sugarcane purchased and an actual value
added tax paid on containers and paper labels.
34. Taxpayers is a VAT-registered processor of fruit and canned sardines.
Selling prices, invoice prices not including VAT:

Processed fruits
P200,000
Processed sardines
300,000
Costs (VAT not included, if from vatable suppliers):
Fruits
Fish
Fruits purchased from farmers
30,000
Sardines (fresh) purchased from fishermen
20,000
Raw cane sugar, purchased from millers
12,000
Tomatoes purchased from farmers
7,000
Olive oil purchased from processors of olive oil
8,000
Bottles
4,000
Tin for tin can containers
7,000
15,000
Paper labels
5,000
7,000
Cardboard for boxes
8,000
9,000
Hauling services for forwarders
4,500
10,000
How much is the value-added tax payable?
(a) P30,040;
(b) P20,580;
(c) P5,960;
(d) Some other amount.
Answer: a
On processed fruit:
Output taxes (P200,000 x 12%)
Less: Input taxes On bottles (P6,000 x 12%)
On tin cans (P7,000 x 12%)
On paper labels (P5,000 x 12%)
On cardboard for boxes (P9,000 x 12%)
On hauling (4,500 x 12%)
Value-added tax payable
On processed sardines:
P36,000
Less: Actual input taxes
On olive oil (P6,000 x 12%)
On tin cans (P15,000 x 12%0
On paper labels (P7,000 x 12%)
On cardboard for boxes (P9,000 x 12%)
On hauling (P10,000 x 12%)
Presumptive input tax on tomatoes
Purchased from farmers (P8,000 x 4%)
5,960
Value-added tax payable

P24,000
P 480
840
600
960
540

3,420
P20,580

P 720
1,800
840
1,080
1,200
320
P30,040

There is no presumptive input tax in the processing of fruits because it is not one of
the product provided by law for which there can be a presumptive input tax. The
only input taxes shall be the value added taxes actually paid on purchases.
On processed sardines, there is no presumptive input tax on the sardines because it
is not a primary agricultural product. (The law classifies products into agricultural
and marine). But on the tomatoes purchased from farmers, there can be a
presumptive input tax because it is a primary agricultural product. On the processed
sardines, there can be input taxes for value-added taxes actually pain on purchases.
35. TRANSITIONAL INPUT TAX. (See Value-Added Tax-3)
36. SALE BY, OR PURCHASED FROM , A REAL ESTATE DEALER
On sale by, or purchase of, real property from a real estate dealer:
(a) The value-added tax shall be:
Which is the highest of:
(1) Consideration stated in the deed of sale;
(2) Zonal value;
(3) Fair market in the assessment rolls of the Province/City
Multiplied by twelve percent (12%)
(b) When the sale /purchase is on the instalment basis:
(1) If the initial payments do not exceed twenty-five percent (25%) of the
consideration stated in the deed of sale, the value-added tax may be
computed and paid in instalments.
(a) Down payment
Add: Instalments in the year of sale
Equals: Initial payments
Any mortgage on the property which is assumed by the buyer shall
not form part of the
Initial payments, but any excess of the mortgage over the
cost to the seller shall be part
Of initial payments. So that:
Down payment
Add: Installment payments in the year of sale
Equals: Initial payments
(b) The computation for the installment value-added tax:
Step 1.
Compute for the value-added tax (proper tax base multiplied by
12%)
Step 2.
Compute for the value-added tax:
Value-added tax
x
Consideration
Consideration on the sale
received
Any mortgage assumed by the buyer shall be considered part of the
first payment (first on

the consideration) received.

(2) if the initial payments exceed twenty-five percent (25%) of the
consideration stated in the deed of sale, the valued-added tax shall be
computed once only, in the taxable period of sale.
37. On installment sale of real property by a real estate dealer, the installment VAT
is allowed only if the initial payments on the sale do not exceed twenty-five percent
of the gross selling price.
Statement 1. Gross selling price to which the initial payments is related is the
considerations stated in the deed of sale.
Statement 2. Initial payments do not include notes or other evidences of
issued by the purchaser to the seller at the time of sale.
(a) True, true;
(b) False, false;
(c) True, false;
(d)
False, true.
Answer: a
38. Which is the best answer? In the case of a sale, barter or exchange of real
property on installment by a real estate dealer, subject to VAT:
(a) The gross selling price shall mean the consideration stated in the sales
document.
(b) The gross selling price shall mean the consideration in the sales document of the
fair market value, whichever is higher.
(c) The fair market value shall mean the fair market value as determined by the
Commissioner of Internal Revenue/zonal value, or the fair market value as shown in
the assessment rolls of the provincial or City Assessors, whichever is higher.
(d) The gross selling price is the consideration stated in the sales document, or the
zonal value, or the fair market value in the assessment rolls, whichever is the
highest.
Answer: d
39. Statement 1. The formula to arrive at the installment value-added tax is:
VAT computed on the proper x
Basis for the value-added tax

Consideration received
Total Consideration

Statement 2. The proper basis for the VAT is the total consideration per contract of
sale, or the zonal value fixed by the Commissioner of Internal Revenue, or the fair
market value in the assessment roll of the Province or City, whichever is the
highest.
(a) True, true;
(b) False, false;
(c) True, false;
(d)
False, true.
Answer: a
40. Statement 1. On the sale of real property on installments by a real estate
dealer, the seller shall be subject to VAT on the installment payment received,
including interests and penalties for late payment.

Statement 2. On a sale real property on installments by a real estate dealer, where

the VAT is computed not on the consideration in the deed of sale but on the higher
fair market value, the VAT must be billed separately with a specific mention that it is
based on the market value of the property.
(a) True, true;
(b) False, false;
(c) True, false;
(d)
False, true.
Answer: a
41. Statement 1. On sale of real property, if the VAT is not stated separately in the
deed of sale, the consideration stated therein shall be deemed to be inclusive of the
VAT, hence the selling price net of VAT shall be determined to arrive at the proper
tax base for the VAT.
Statement 2. On the sale of real property, the zonal or fair market value shall be
considered as net of VAT, hence such as value shall be used to arrive at the proper
tax base of the VAT.
(a) True, true;
(b) False, false;
(c) True, false;
(d)
False, true.
Answer: a
42. Sale by a real estate dealer
Date of sale
Consideration in the deed of sale
Fair market value in the assessment rolls
Zonal value
Payments on the consideration:
June 2, 2011
June 2, 2012
June 2, 2013
Installment output/input tax on payment of June 2, 2013:
(a) P0;
(b) P124,800;
(c) P249,600;
Answer: c
Tax base (whichever is highest)
Value-added tax (5,000,000 x 12%)
Initial payments (not exceeding 25% of the consideration)
Output/input tax:
June 2, 2011: P624,000/5,000,000 x 1,000,000
June 2, 2012: P624,000/5,000,000 x 2,000,000
June 3, 2013: P624,000/5,000,000 x 2,000,000

June 2, 2011
P5,000,000
4,800,000
5,200,000
P1,000,000
2,000,000
2,000,000
(d) P624,000

P5,200,000
624,000
1,000,000
P124,800
249,600
249,600

43. On a sale of real property on installment subject to VAT, if the property sold is
the subject to a mortgage which is assumed by the buyer:
Statement 1. If the mortgage assumed does not exceed the cost of the seller, the
assumption of the mortgage is not part of initial payments;

Statement 2. If the mortgage assumed exceeds the cost to the seller, the excess
shall be part of the initial payments.
(a) True, true;
(b) False, false;
(c) True, false;
(d)
False, true.
Answer: a
44. Sale by a real estate dealer
Date of sale
June 2, 2012
Consideration in the deed of sale
P5,000,000
Fair market in the assessment rolls
4,800,000
Zonal Value
4,000,000
Cost to the seller
3,000,000
Payments on the consideration
Assumption of the mortgage buyer
P2,000,000
January 2, 2012
600,000
June 2, 2012
600,000
January 2 , 2013
1,800,000
Installment output/input VAT on the payment of January 2, 2013:
(a) P240,000;
(b) P120,000;
(c) P216,000;
(d) P0
Answer: c
Tax base (whichever is the highest)
Value-added tax (P5,000,000 x 12%)
Payment, January 2, 2012
Payment, June 2, 2012
600,000
Initial payments (not exceeding 25% of the consideration)

P5,000,000
P 600,000
P 600,000
P

Payment, January 2, 2012

Mortgage assumed by buyer
First payment on the consideration, January 2, 2012

Output/input tax:
January 2, 2012: P600,000/P5,000,000 x P2,600,000
312,000
June 2, 2012: P600,000/P5,000,000 x 600,000
72,000
January 2, 2013: P600,000/P5,000,000 x P1,800,000
216,000
45. Sale by a real estate dealer
Date of sale
Consideration in the deed of sale
Fair market in the assessment rolls
Zonal value
Cost to the seller
Payments on the consideration:
Assumption of mortgage by buyer

P1,200,000
600
2,000,000
P2,600,000
P
P
P
June 2, 2012
P6,000,000
5,100,000
4,900,000
1,000,000
P2,000,000

June 2, 2012 (date of sale)

500,000
June 2, 2013
700,000
December 2, 2013
2,800,000
Installment output/input VAT on the payment of June 2, 2013:
(a) P720,000;
(b) P72,000;
(c) P0;
(d) P300,000.
Answer: d
Tax base (whichever is highest)
Value-added tax (P6,000,000 x 12%)
Payment, June 2, 2012
Excess of mortgage over cost (P2,000,000 less P 1,000,000)
P1,000,000
Initial payments ( not exceeding 25% of the consideration)
P1,500,000

P6,000,000
P 720,000
P 500,000

Payment, June 2, 2012

Mortgage assumed by buyer
First payment on the consideration , June 2, 2013

P 500,000
2,000,000
P2,500,000

Output/input tax:
June 2, 2012: P720,000/P6,000,000 x P2,500,000
June 2, 2013: P720,000/P6,000,000 x P700,000
84,000
December 2, 2013: P720,000/6,000,000 x 2,800,000
336,000

300,000
P
P

46. Statement 1. In the case of a sale on deferred payment basis not qualifying
under the installment plan, the transaction shall be treated as a cash sale and the
VAT is payable for the month of sale.
Statement 2. In the case of a sale on deferred payment basis not qualifying under
the installment plan, payments subsequent to initial payments shall no longer be
subject to VAT.
(a) True, true;
(b) False, false;
(c) True, false;
(d)
False, true.
Answer: a
47. Sale by a real estate dealer
Date of sale
Consideration in the deed of sale
P6,000,000
Fair market in the assessment rolls
5,100,000
Zonal value
Cost to the seller
Payments consideration:

January 2, 2013

4,900,000
1,000,000

January 2, 2013(date of sale)

2,000,000
January 2, 2014
Output/input VAT on the payment on January 2, 2013:
a. P298,000;
b. P360,000;
c. P300,000;

2,000,000
d. 329,000

Answer: b
Value-added tax (P6,000,000 x 6%)
360,000
Initial payment (exceeding 25% of the selling price)
P2,000,000

Output/input tax, January 2, 2013

360,000

20-1 to 20-5
VALUE-ADDED TAX 2
Sale of service

1. The value-added tax on sale of services is based on gross receipts.

The term gross receipts means the total amount of money or its
equivalent representing the contract price, compensation, service fee,
rental or royalty, including the amount of charged for materials supplied
with the services and deposits and advanced payments actually or
constructively received for the services performed or to be performed for
another person, excluding value added tax. (Provision of law)
(a) Actually received means there was already a collection.
(b) Constructively received means there was no collection, but collection
can be made anytime,
2. The tax is twelve percent (12%), or zero percent (0%) in certain cases
(See zero-rated sales in the Appendices.)
In case of sales to the Government or any of its political subdivisions,
instrumentalities or agencies, including government owned or controlled
corporations, a final value-added tax of five percent (5%) is withheld on
any payment to be made. There is no creditable input tax.
3. The tax formula is:
Output taxes
Less: Input taxes
Equals: Value-added tax payable
The input are the value-added taxes paid on the:
(a) Purchases (or important) of:
(1) Materials used in the sale of services;
(2) Supplies use in the sale of services;
(3) Services (e.g. sub-contracts);
(4) Capital goods ore fixed assets subject to depreciation or
amortization;
(b) Purchase of real property used in the sale of services;
(c) Transitional input tax.
(See Plate 21 and Plate 22)
4. Examples of value-added taxpayers on sale of services (See
Appendices);
(a) Construction and service contactors;
(b) Lessors of property, whether real or personal;
(b) Stock, real estate, commercial, customs and immigration brokers;

(c) Properties, operators or keepers of hotels, motels, rest houses,

pension houses, inns, resorts;
(e) Common carriers by land and sea relative to their transport of
passengers, goods or cargoes from one place in the Philippines to another
place in the Philippines;
(f) Sales of electricity by generation companies, transmission, and
distribution companies;
(g) Services of franchise grantees of electric utilities, telephone and
telegraph, radio and television broadcasting and all the other franchise
grantees.
5. Which statement is correct? Leasing of property shall be subject to value-added
tax on sale of service;
(a) If the property is in the Philippines and the lease agreement was executed in the
Philippines;
(b) If the property is in the Philippines and the lease agreement was executed
outside the Philippines;
(c) If the property is in the Philippines and the lease agreement was within or
outside the Philippines;
(d) All of the above.
Answer: c
6. In the value-added tax on sale of services, the output tax is computed:
(a) On billings of the month;
(b) On the collections of the month on all billings made;
(c) On the contract price of contract completed during the taxable period;
(d) Only and strictly on labor performed under the contract for services.
Answer: b
7. Mr. A is a VAT- registered building contract:
Gross receipt in a month, any tax not included:
From Mr. X, a private property owner, in the final payment on the contract
price, net of a 5% agreed retention by Mr. X
P2,850,000
From Mr. Y, a payment of a 5% retention on the contract price
previously made by Mr. Y
100,000
From Mr. Z for materials used in the contracts, on a contract for labor
and materials
500,000
Output value-added tax?
(a) P414,000;
(b) P342,000;
(c) P72,000;
(d) Some
other amount
Answer: a

On gross receipt for Mr. X (2,850,000 x 12%)

P342,000
On gross receipt for Mr. Y (P100,000 x 12%)
12,000
On gross receipt for Mr. Z (P500,000 x12%)
60,000
Total output VAT

P414,000

8. Taxpayer is a VAT-registered person; Data for a month (no VAT component):

Cash received:
For Building completed with a contract price of P5,000,000
P3,800,000
Advances received for building to be constructed
300,000
Cash received on materials returned to VAT-suppliers
100,000
Cash received from owners, for materials used in construction
(not included in the figures above)
1,000,000
Cash received from owners for building permit fees
200,000
Cash received from VAT sub-contractors for overpayments
300,000
Cash paid:
To VAT- registered sub-contractors
900,000
To VAT- registered suppliers of materials
1,100,000
To non-VAT suppliers of materials
500,000
To the city government, for building permit fees
200,000
Advances to VAT- registered sub-contractors
150,000
Operating expenses
80,000
Value- added tax payable:
(a) P402,000;
(b) P247,900;
(c) P305,000;
(d)
P325,000.
Answer: a
Output taxes on:
Amounts received for building completed
P3,800,000
Advances received for buildings to be constructed
300,000
Amounts received from owners for materials supplied
1,000,000
Total
P5,100,000

P5,100,000 x 12%
612,000
Input taxes on:
Amounts paid to subcontractors
P900,000
Less: Amounts received for overpayments
300,000
P 600,000
Advances to sub-contractors
150,000
Amounts paid to suppliers of materials
P1,100,000
Less: Amounts received for materials returned
100,000
1,000,000
Total
P1,750,000
P1,750,000 x 12%
210,000
Value- added tax payable
402,000
9. Taxpayer is a VAT taxpayer with three building contracts:
Contract price, VAT not included:
With private property owner, Building No.1
P6,000,000
With private property owner, Building No.2
5,000,000
With the National Government
Billings on the contract price, VAT included, when the proper:
On the contracts with the private property owner, Building No.1
6,000,000
On the contracts with the National Government
5,000,000
Collections on the billings:
On the contracts with private property owner, Building No.1
4,000,000
On contract with the National Government
5,000,000
Advances received, Building No.2
500,000
Reimbursement from private property owner, for materials purchased
for them, but billed to the VAT taxpayer, on an invoice price (VAT not
included), Building No.1
100,000
Payments to the VAT taxpayers, VAT not included:
For materials for use on buildings of private property
owner building No.1
100,000
For materials for use on buildings of the National
Government
50,000

10,000,000

For services, for buildings of private property owners

2,000,000
For services, for building the National Government
20,000
Value- added tax payable on contracts with private property owners?
(a) P288,000;
(b) P300,000;
(c) P240,000;
Some other amount.

(d)

Answer: b
Final value-added tax withheld on contracts with the National Government?
(a) P250,000;
(b) P0;
(c) P500,000
(d) Some other
amount.
Answer: a
On Contracts with:
Output taxes:
On gross receipts, Building No.1
(P4,000,000 x 12%)
On advances, Building No.2
(P500,000 x 12%)
Reimbursement from property owners,
Building No.1 for materials purchased
for them (100,000 x 12%)
Input taxes:
For materials used on buildings of private
property owners
(P100,000 x 12%)
For services (P2,000,000 x 12%)
Value- added tax payable
Final tax withheld on the government contracts
(P5,000,000 x 5%)
P250,000

Property owners

Government

P480,000
60,000
12,000

( 12,000)
( 240,000)
P300,000

Contract price, and billing under them, are immaterial. What matters is actually or
constructively received for the services rendered.
10. Statement 1: Withholding value-added tax is required at five percent (5%) of the
gross payment for the purchase of goods by the Government or any of its political
subdivisions, or by a government- owned or controlled corporation;
Statement 2: Withholding value-added tax is required at five percent (5%) on every
release or installment payment on purchase of services by the Government or any
of its political subdivisions, or by a government- owned or controlled corporation.
(a) True, true;
(b) False, false;
(c) True, false;
(d)
False, true.
Answer: a