ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 46  October 2023 CPA Licensure Examination

TAX-304
TAXATION A. TAMAYO  E. BUEN  G. CAIGA  C. LIM  K. MANUEL

VAT COMPLIANCE REQUIREMENTS

1. Invoicing Requirement, Refund of Input Taxes and Others

a. VAT Invoice and VAT Official A VAT-registered person shall issue:

Receipt a) a VAT invoice for every sale, barter, or exchange of goods or properties; and
b) a VAT official receipt for every lease of goods or properties, and for every sale,
barter or exchange of services.
b. Validity of VAT invoice and The invoice/receipt shall be valid for five (5) years from the date of the permit to use.
VAT OR
The validity date invoices/receipts and the phrase “This Invoice/Receipt shall be valid
for five (5) years from the date of the permit to use” shall be disregarded and the same
may still be issued until fully exhausted.
The subsequent printing of manual receipts/invoices upon the effectivity of RR 6-2022
must not reflect the phrase mentioned above and shall no longer adopt the five-year
validity. (Sec. 4, RR No. 6-2022)
c. Mandated to issue electronic 1) Taxpayers engaged in the export of goods and services;
receipts or sales/commercial 2) Taxpayers engaged in electronic commerce (e-commerce); and
invoices (Sec. 2, RR No. 8- 3) Taxpayers under the Large Taxpayers Service (LTS)
2022) 4) Taxpayers that are not included in nos. 1) to 3) but have been authorized by the BIR
to issue electronic SIs/ORs through the web-based facility of Electronic
Invoicing/Receipts System (EIS) (Sec. 1, RR No. 9-2022)
The above taxpayers (except taxpayers engaged in e-commerce) are required to
electronically report or transmit their sales data to BIR through the use of the Sales
Data Transmission System.
Taxpayers who are not covered by the mandate may issue electronic receipt or
sales/commercial invoices in lieu of manual receipts/invoices.
d. Violations related to the A fine of not less than P500,000 but not more than P10,000,000 and imprisonment of
printing of receipts or invoices not less 6 years but not more than 10 years shall be imposed on any person who
(Sec. 3, RR No. 13-2022) commits any of the acts enumerated below:
1) Printing of receipts or sales or commercial invoices without authority from BIR, or
2) Printing double or multiple sets of invoices or receipts, or
3) Printing of unnumbered receipts or sales or commercial invoices, not bearing the
name, business style, Taxpayer Identification Number, and business address of the
person or entity, or
4) Printing of other fraudulent receipts or sale or commercial invoices.
e. Transmission of sales data Shall be done real time or near real time provided that it should be done within three
(Sec. 4(7), RR No. 8-2022) (3) calendar days from the date of the transaction.
f. Failure to transmit sales data A penalty amounting to 1/10 of 1% of the annual net income as reflected in the
(Sec. 4, RR No. 13-2021) taxpayer’s audited financial statements for the second year preceding the current
taxable year, or P10,000, whichever is higher, shall be imposed for each day of
violation, on any taxpayer required but fails to transmit sales data to the BIR’s
electronic sales reporting system under Sec. 217-A of the NIRC, as amended.
g. Invoicing Requirement The following information shall be indicated in VAT invoice or VAT official receipt:
a) A statement that the seller is VAT-registered person followed by TIN;
b) The total amount to be paid with the indication that such amount includes
the VAT:
1) Amount of tax shall be shown as a separate item in the invoice or receipt;
2) “VAT-exempt sale”, if the sale is exempt;
3) “Zero-rated sale”, if the sale is subject to zero percent VAT;
4) If mixed sales, breakdown of the sales price between its taxable, exempt and
zero-rated components and the calculation of the VAT on each portion.
Separate invoices or receipts may be issued for each type of sales.
c) The name, business style, if any, address and TIN of the customer, in case the sales
amount to P1,000 or more.
c. Exercise: Indicate what invoice or official receipt shall be issued by the following assuming VAT threshold amount
is exceeded
1) Office supplies trader
2) Warehousing services
3) Beauty parlor
4) Mango farm owner
5) Trucking business
6) Fuel or power supplier generated from renewable sources of energy
7) Movie theatre owner
8) Professional basketball player in the Philippine Basketball Association (PBA)
9) Contract artists of television companies
10) Fresh fish dealer

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
VAT COMPLIANCE REQUIREMENTS TAX-304
2. Invoicing and Recording Deemed Sale Transactions
Deemed Transaction Invoicing and Recording
a. Transfer, use or consumption Memorandum entry
not in the course of trade or
business;
b. Distribution or transfer to Invoice shall be prepared at the time of the occurrence of the transaction and shall be
shareholders or investors or to duly recorded in the subsidiary sales journal. The total amount of “deemed sale” shall
creditor in payment of debt or be included in the return to be filed for the month or quarter.
obligation;
c. Consignment of goods if not Same as in 2) above
sold within 60 days following
the date of consignment;
d. Retirement from or cessation An inventory shall be prepared and submitted to the RDO having jurisdiction over the
of business taxpayer’s principal place of business not later than 30 days after retirement or
cessation from business.

3. VAT Returns and Payment of Value-Added Tax

a. Monthly VAT Declaration and Payment of VAT
1) Filing of the declaration and Not later than 20th day following the end of the first two (2) months in a quarter
payment of value-added tax
2) Taxpayers enrolled with Group A – 25 days following the end of the month
Electronic Filing and B – 24 days following the end of the month
Payment System (EFPS) C – 23 days following the end of the month
D – 22 days following the end of the month
E – 21 days following the end of the month

b. Filing of Quarterly VAT Return and Payment of VAT

1) Filing of quarterly return and Every person liable to pay the value-added tax imposed under this Title shall file a
payment of value-added tax quarterly return of the amount of his gross sales or receipts within twenty-five (25)
days following the close of each taxable quarter prescribed for each taxpayer.

VAT-registered persons shall pay the value-added tax on a monthly basis. Monthly VAT
declarations shall remain until December 31, 2022.

Beginning January 1, 2023, the filing and payment required shall be done within
twenty-five (25) days following the close of the taxable quarter.
2) Meaning of taxable quarter The term “taxable quarter” shall mean the quarter that is synchronized to the income
tax quarter of the taxpayer (i.e., calendar quarter or fiscal quarter.)
3) Quarterly return includes the Amounts reflected in the monthly VAT declarations for the first two (2) months of the
amounts reflected in the quarter shall still be included in the quarterly VAT return, which reflects the cumulative
monthly VAT declarations figures for the taxable quarter.
4) Monthly payments to be Payments in the monthly VAT declarations shall be credited in the quarterly VAT return
credited in the quarterly VAT to arrive at the net VAT payable, or excess input tax/overpayment as of the end of the
return quarter.
5) Deductions from the The VAT payable/Excess Input tax for each taxable quarter shall be reduced by the
quarterly VAT payable total amount of taxes previously paid for the immediately preceding two (2) months,
(excess input tax) and the advance payments/creditable VAT withheld by the payors for the three months
of the quarter.

c. Exercise: The following data for the calendar year 2023 are presented to you:
Output tax Input tax
January P100,000 P 80,000
February 120,000 110,000
March 80,000 120,000
April 150,000 100,000
May 90,000 50,000
June 110,000 60,000

REQ: Compute the VAT payable on the quarterly returns and the respective due dates

d. Substituted VAT Return

1) Substituted VAT Return 1) In case of sale of goods or services by persons subject to 12% VAT, whose gross sales or
(Payee with Lone receipts have already been subjected to 12% VAT by the lone payor, the payee (seller) shall
Payor) no longer be required to file the monthly VAT declaration and the quarterly returns.
2) The Monthly Remittance Return of VAT Withheld duly filed by the withholding agent-
payor serves as the substituted return of the payee (seller) with lone payor.
2) Payee with Several Payees with several payors are still required to file the regular VAT return reflecting the consolidated
Payors total of all taxable transactions for the taxable period and applying as tax credits the taxes withheld by
several payors.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
VAT COMPLIANCE REQUIREMENTS TAX-304
e. Substituted Official Receipts
Sellers who are exempt Sellers of services whose gross receipts have been subjected to 12% final VAT shall be exempt from
from issuing Official the obligation of issuing duly registered VAT official receipts covering their receipts for services sold.
Receipts
f. Short Period Return
1) Final return of a Any person who retires from business with due notice to the BIR office where the taxpayer (head
person who retires office) is registered and whose VAT registration has been cancelled shall file a final quarterly return
from business and pay the tax due thereon within twenty-five (25) days from the end of the month when the
business ceases to operate or when the VAT registration has been officially cancelled.
2) Subsequent monthly Subsequent monthly declarations/quarterly returns are still required to be filed if the results of the
declarations/quarterly winding up of the affairs/business of the taxpayer reveal taxable transactions.
returns to be filed
after retirement
3) Effective date of VAT All persons first registered shall be liable to VAT on the effective date of registration stated in their
registration Certificates of Registration (i.e., the first day of the month following their registration.)
4) Initial monthly VAT 1) If the effective date of registration falls on the first or second month of the taxable quarter, the
declaration or initial monthly VAT declaration shall be filed within twenty (20) days after the end of the month,
quarterly VAT return and the initial quarterly return shall be filed on or before the 25th day after the end of the taxable
quarter.
2) If the effective date of registration falls on the third month of the taxable quarter, the quarterly
return shall be filed on or before the 25th day of the month following the end of the taxable quarter,
and no monthly VAT declaration need be filed for the initial quarter.
5) Exercises
a) A VAT registered taxpayer retires from business on February 2007 and his VAT registration is cancelled. When is the filing
of the final quarterly return and payment of the VAT due thereon?
b) The effective date of registration falls on February 2007. When is the filing of the initial monthly VAT declaration and the
quarterly VAT return and the payment of the VAT due thereon?
c) The effective date of registration falls on March 2007. When is the filing of the initial monthly VAT declaration and the
quarterly VAT return and the payment of the VAT due thereon?

g. Payment of VAT on Importation

The VAT on importation shall be paid by the importer prior to the release of such goods from customs custody.
4. Where to File and Pay VAT
a. Where to file monthly The monthly VAT declaration and quarterly returns shall be filed with:
VAT declaration and 1) Bank duly accredited by the Commissioner of Internal Revenue located in the revenue district
quarterly VAT return office where such taxpayer (head office of the business establishment) is required to register.
if payment is involved 2) In the absence of accredited bank, the monthly VAT declaration and quarterly return shall be
filed with Revenue District Officer, Collection Agent, duly authorized Treasurer of the
Municipality/City where such taxpayer (head office of the business establishment) is required
to be registered.
b. Where to file monthly The monthly VAT declaration and the quarterly VAT return, where no payment is involved, shall
VAT declaration and be filed with:
quarterly VAT return a) Revenue District Officer/Large Taxpayer District Office/Large Taxpayer Assistance Division;
if no payment is b) Collection Agent;
involved c) Duly authorized Municipal/City Treasurer of the Municipality or City where the taxpayer
(head office of the business establishment) is registered or required to be registered.
c. Consolidated monthly Only one consolidated quarterly VAT return or monthly VAT declaration covering the results of
declaration and operations of the head office as well as the branches for all lines of business subject to VAT shall
quarterly return be filed by the taxpayer, for every return period, with the BIR office where the taxpayer is
required to be registered.

5. Submission of Quarterly Summary Lists of Sales/Purchases

a. Persons required to 1) Persons required to submit summary lists of sales. – All persons liable to VAT such as
submit summary list manufacturers, wholesalers, service-providers, among others. (RR No. 1-2012 deleted the
of sales or purchases requirement of having quarterly total sales/receipts, net of VAT, exceeding P2,500,000.)
2) Persons required to submit summary lists of purchases. – All persons liable to VAT
such as manufacturers, wholesalers, service-providers, among others. (RR No. 1-2012 deleted
the requirement of having quarterly total purchases, net of VAT, exceeding P1,000,000).
b. Where to File the The quarterly summary list of all sales or purchases, whichever is applicable, shall be submitted
Summary Lists of to the RDO, LTDO or LTAD having jurisdiction over the taxpayer.
Sales or Purchases
c. When to Submit the The quarterly summary list shall be submitted, on or before the 25th day of the month following
Summary Lists of the close of the taxable quarter (VAT quarter) – calendar quarter or fiscal quarter.
Sales or Purchases
d. Submission of For taxpayers authorized to use computerized accounting system, the above list shall be
Summary Lists of submitted through Compact-Disk Recordable (CDR) medium.
Sales or Purchases

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
VAT COMPLIANCE REQUIREMENTS TAX-304
6. Power of the Commissioner to Suspend Business Operations
Power of the The Commissioner of Internal Revenue or his authorized representative may order suspension or
Commissioner to closure of a business establishment for a period of not less than 5 days for any of the following
Suspend Business violations:
Operations a) Failure to issue receipts or invoices;
b) Failure to file VAT return;
c) Understatement of taxable sales or receipts by 30% or more of the correct taxable sales or
receipts for the taxable quarter;
d) Failure of any person to register as required under the law.

7. Mandatory Registration under the VAT System

Persons required Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or
to mandatorily engages in the sale or exchange of services shall be liable to register if:
register (a) His gross sales or receipts for the past twelve (12) months, other than those that are exempt
under Section 109(A) to (BB), have exceeded Three million pesos (P3,000,000) (used to be
P1,919,500); or

“(b) There are reasonable grounds to believe that his gross sales or receipts for the next twelve
(12) months, other than those that are exempt under Section 109(A) to (BB), will exceed Three
million pesos (P3,000,000) (used to be P1,919,500).

8. Optional Registration of VAT-Exempt Persons

a. Persons allowed (1) Any person who is not required to register for value-added tax may elect to register for value-
optional VAT added tax by registering with the Revenue District Office that has jurisdiction over the head
registration office of that person, and paying the annual registration fee P500 for every separate or distinct
establishment or place of business, including facility types where sales transactions occur, shall be
paid upon registration and every year thereafter on or before the last day of January.
Cooperatives, individuals earning purely compensation income, whether locally or abroad, and
overseas workers are not liable to the registration fee herein imposed.
(2) Any person who elects to register optionally shall not be entitled to cancel his registration for the
next three (3) years.

(3) Any person who elected to pay the eight percent (8%) tax on gross sales or receipts shall not be
allowed to avail of this option.

(4) For purposes of Value-Added Tax, any person who has registered value-added tax as a tax type
shall be referred to as a ‘VAT-registered person’ who shall be assigned only one Taxpayer
Identification Number (TIN).

9. Case
a. Quarterly VAT Return
SamJohn Hotel, VAT-registered with TIN 456 789 876 0000, has the following cumulative data for three months of the
current year, net of VAT:
Gross receipts, Private P15,000,000
Domestic purchases of supplies 1,500,000
Payments made to hired electrician for works done on the hotel 500,000
Importation of office equipment, estimated life is 6 years 1,000,000
Domestic purchases of services 800,000
Services rendered by non-residents 700,000
Purchase of hotel equipment, estimated life is 4 years 1,500,000
Monthly VAT payments, January and February 300,000
Input tax carried over from previous quarter 100,000
All transactions are done during the current year.

Additional information:
a. Address of SamJohn Hotel: 146 Makati Ave., Makati City, Metro Manila 1228
b. Telephone no: 02 661 39 89
c. RDO Code: 46
d. President of the company: Benjamin Santos Reyes, Sr. (TIN 789 456 100 0000)
e. Treasurer of the company: You are the Treasurer (Your TIN 145 678 910 0000)

Using BIR Form No. 2550Q, answer the following:

1) Amount to be shown in item 19B (Output Tax)
2) Amount to be shown in item 20A (Input Tax Carried Over from Previous Quarter)
3) Amount to be shown in item 22 (Total Available Input Tax)
4) Amount to be shown in item 25 (Net VAT Payable)
5) Amount to be shown in item 27 (Tax Still Payable)

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
VAT COMPLIANCE REQUIREMENTS TAX-304
Solution:
Sales/Receipts Output Tax
for the Quarter Due for the
Exclusive of VAT Quarter
19 Total Sales/Receipts and Output Tax Due 15,000,000 1,800,000
20 Less: Allowable Input Tax
20A Input Tax Carried Over from Previous Quarter - 100,000
21 Current Transactions
21E/F Domestic Purchases of Goods Other than Capital Goods 1,500,000 180,000
21G/H Importation of Goods Other than Capital Goods
21I/J Domestic Purchases of Services 1,300,000 156,000
21K/L Services Rendered by Non-residents 700,000 84,000
21M Purchases Not Qualified for Input Tax
21N/O Others – Importation of hotel equipment for the quarter 1,000,000 120,000
Purchase of hotel equipment 1,500,000 180,000
21P Total Current Purchases 6,000,000 720,000
22 Total Available Input Tax 820,000
23 Less: Deductions from Input Tax -
24 Total Allowable Input Tax 820,000
25 Net VAT payable 980,000
26 Less: Tax Credits/Payments
26H Total Tax Credits/Payments 300,000
27 Tax Still Payable (Overpayment) P680,000

Alternative Computation
Output tax (15,000,000 x 12%) P1,800,000
Less: Input taxes
Carried over from previous quarter 100,000
Current transactions
Passed-on VAT on domestic purchases of Goods Other than Capital Goods (1,500,000 x 12%) 180,000
Passed-on VAT on domestic purchases of services (500,000 x 12%) 60,000
VAT on importation of hotel equipment for the quarter (1,000,000 x 12%) 120,000
Passed-on VAT on domestic purchases of services (800,000 x 12%) 96,000
Passed-on services rendered by non-residents (700,000 x 12%) 84,000
Passed-on VAT on purchase of hotel equipment, estimated life is 4 years (1,500,000 x 12%) 180,000 820,000
Net VAT payable 980,000
Less: Monthly VAT payments – previous two months 300,000
Tax Still Payable (Overpayment) P680,000

END

THOT: “Try not to become a man of success but rather to become a man of values.”

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