7 important things to remember re value-added tax (VAT)

[1] VAT is a percentage tax imposed at every stage of the distribution process on the sale, barter, or exchange, or lease of goods or properties, and on the performance of service in the course of trade or business, or on the importation of goods.

[2] The VAT applies, in general, to all persons who sell, barter, exchange or lease goods or properties, or render services in the course of trade or business whose annual gross sales or receipts exceed PhP1,919,500,144 and those who import goods, whether for business or otherwise.

[3] The following are deemed-sale transactions:

[a] Transfer, use, or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business; [b] Distribution or transfer to shareholders or investors as share in the profits of the VAT-registered persons, or to creditors in payment of debt or obligation; [c] Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned; and [d] Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.[4] VAT is a percentage tax imposed by law directly not on the thing or service but on the act of selling, bartering, exchanging, leasing, importing or rendering of service.

[5] The taxpayer (seller) determines his tax liability by computing the tax on the gross selling price or gross receipt (output tax), and subtracting or crediting the earlier VAT on the purchase or importation of goods or on the purchase of service (input tax) against the tax due on his own sale.

[6] It is also an excise tax, or a tax on the privilege of engaging in the business of selling goods or services, or in the importation of goods but unlike excise, it is not applied only to a few selected goods.

[7] It is an ad valorem tax, which means that the amount is based on the gross selling price or gross value in money of goods and services.

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