CHAPTER 8
BUSINESS TRANSACTIONS
Problem 8–1
1. False – Vatable transactions of non-VAT business is not allowed to deduct input VAT. 2. True
3. False – Some business transactions are VAT-exempt. 4. True
5. False – subject to OPT. 6. True
7. True
8. False – not allowed for TCC and tax refund, but allowed only for tax credit. 9. True
10. False – Zero rated sales are applicable only to registered business/person. This is a VAT-exempt and OPT-VAT-exempt transactions.
11. True
12. False – It can be claimed as a deduction from sale as part of cost of product sold. 13. True
14. False – Sales of non-VAT person, exceeding P1,919,500 per year is also subject to VAT. 15. False – Only those agricultural and marine food products.
Problem 8–2
1. False – Publication of newspaper is VAT-exempt and also OPT-exempt. 2. True
3. False – The exemption pertains only to Output VAT. 4. True
5. False – Zero VAT transactions are applicable only to VAT-registered persons.
6. False – Some VAT taxable transactions have not allowed to have Input VAT particularly if the business is a non-VAT.
7. False – Exempt from business tax because it is considered as a subsistence livelihood. 8. True
9. False – Exempt from VAT. 10. False – zero VAT.
11. False – VAT-exempt. 12. True
13. False – VAT-exempt and OPT-exempt. 14. False – more than P3,199,200. 15. True
Problem 8 – 3 Problem 8 – 4 Problem 8 – 5
1. B 1. A 1. D 2. B 2. C 2. B 3. C 3. D 3. A 4. D 4. B 4. C 5. B 5. A 5. C 6. C 6. B 6. B 7. D 7. A 7. A 8. B 8. D 8. A 9. C 9. C 9. C
Problem 8 – 6 1. A 11. C 2. D 12. E 3. D 13. D 4. A 14. C 5. A 15. C 6. D 16. A 7. A 17. C 8. C 18. D 9. A 19. D 10. C 20. E Problem 8 – 7 A
Business tax payable (P2,500,000 x 12%) P300,000
Note: The gross sales exceeds P1,919,500; hence, subject to 12% even if the taxpayer is non-VAT. Problem 8 – 8 C
Domestic sales P1,000,000
Importation of goods 500,000
Transaction deemed sales 100,000
Total amount subject to VAT P1,600,000
In general, importations are subject to 12% VAT regardless of the business tax registration of the taxpayer. The VAT on importation, however, is an input tax.
Problem 8 – 9 D
Output VAT from collections (P4,480,000/9.3333) P480.000
Less: Input VAT from supplies used (P560,000/9.3333) P60,000
Input VAT from importation (P112,000/9.3333) 12,000 72,000
VAT payable P408,000
Problem 8 – 10 B
Export sales (P2,000,000 + P1,000,000) P3,000,000
Problem 8 – 11 B
Business tax payable (P2,000,000 + P7,000,000) x 3% P270,000
The annual gross receipts from business does not exceed P10,000,000; hence, subject to 3% OPT. Problem 8 – 12 C
P600,000, only input VAT due or paid from purchases is allowed to apply for TCC. Transitional input VAT and presumptive Input VAT are not allowed.
Problem 8 – 13 D
Zero-rated VAT. Sale of power or fuel generated through renewable sources of energy such as biomass, solar, wind, hydropower, geothermal ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels
Problem 8 – 14 D
Problem 8 – 15 A
Passenger by sea 1,500,000
Cargo by land 500,000
Cargo by sea 500,000
Total VAT taxable transactions P2,500,000
Problem 8 – 16 B
Export sales P10,000,000
Sales of agricultural food products – original state 6,000,000
Gross receipts derived from millings of palay 2,000,000
VAT-exempt transactions P18,000,000
Problem 8 – 17 D
5 commercial lots at P1,000,000 each P5,000,000
The sales of residential house and lots or residential lots are all VAT-exempt and OPT-exempt. Problem 8 – 18 C
4 residential lots at P2,000,000 each P 8,000,000
1 commercial lots at P3,000,000 each 3,000,000
Amount subject to business tax P11,000,000
The sale of residential house and lot at P3,000,000 each is exempt from business tax. Problem 8 – 19 B
Gross receipts exempt from business tax (P2,000 x 50) P100,000
Problem 8 – 20
1. Output VAT (P134,400/9.3333) P14,400
Input VAT (P112,000/9.3333) (12,000)
Business tax liability of X P 2,400
2. Percentage tax (P112,000/1.12) x 3% P 3,000
Output VAT (P112,000/9.333) 12,000
Surcharge (P12,000 x 50%) 6,000
Business tax liability of Y P21,000
Problem 8 – 21 1. Sales from:
Local government units (P940,000/1.06) P886,792
University of the Philippines (P564,000/1.06) 532,075
Department of Tourism (P282,000/1.06) 266,038
Total sales P1,684,905
Note: The total withholding per sales was 6% comprising 5% final withholding VAT and 1% creditable withholding income tax.
2. Total income tax withheld (P1,684,905 x 1%) P16,849
Problem 8 – 22 1. VAT-registered
Transport of passengers by sea P2,000,000
Transport of cargoes by:
Land 500,000
Sea 1,000,000
VAT taxable transactions P3,500,000
2. Non-VAT registered
Transport of passengers by sea P2,000,000
Transport of cargoes by:
Land 500,000
Sea 1,000,000
VAT taxable transactions P3,500,000
Note: The said non-VAT registered business shall now be subject to VAT because its total gross receipts exceed P1,500,000. The gross receipts from transport of passengers, however, shall remain subject to percentage tax.
Problem 8 – 23 1. VAT-registered
From radio ads P5,000,000
From TV ads 4,000,000
VAT taxable transactions P9,000,000
Multiplied by VAT rate 12%
Value-added tax P1,080,000
2. Non-VAT registered
From radio ads P5,000,000
From TV ads 4,000,000
Amount subject to OPT P9,000,000
Multiplied by applicable OPT rate 3%
Other percentage tax P 270,000
Note: A non-VAT registered franchise grantees of radio and television broadcasting with annual gross receipts of P10,000,000 or less is not subject to VAT, unless VAT-registered.
Problem 8 – 24
Output VAT – Zero rated because foreign denominated sales P - 0 -
Input VAT (P336,000/9.3333) ( 36,000)
VAT refund (P 36,000)
Problem 8 – 25 On purchases:
Local purchases from VAT-registered person P600,000
On sales:
Domestic sales to various VAT person P 800,000
Domestic sales to various non-VAT person 600,000
Problem 8 – 26 1. P - 0 -
The business is non-VAT and total sales do not exceed P1,500,000/year 2. P - 0 -
No zero-VAT sale is allowed for a non-VAT business.
3. Domestic sales to various VAT persons P 50,000
Domestic sales to various non-VAT persons 100,000
Export sales denominated in foreign currency 200,000
Total VAT-exempt sales P350,000
Problem 8 – 27 1. VAT-registered
Domestic sales P 2,000,000
Export sales 3,000,000
Total value of sales allowed with creditable Input VAT P 5,000,000 2. Non-VAT registered
a. Domestic sales – VAT taxable sales P 2,000,000
b. Zero-rated sales P - 0 -
