(NAR) VOL. II NO. 2 / APRIL - JUNE 1991
(a) | in the case of export sales, within 2 years from the date of exportation. | |
(b) | in the case of importation or local purchase of capital equipment, within 2 years after the lapse of 180 days from the last day of the quarter in which the purchase was made. | |
(c) | in the case of other zero-rated transactions, within 2 years from the date of the transaction. |
2.1 | Only those transactions which are specifically exempt under Section 103 of NIRC are treated as exempt sales. | |||||
2.2 | “Deemed” sales of goods are recorded as taxable transactions (Sec. 4 RR 5-87). | |||||
2.2.1 Transfer, use, or consumption not in the course of business of goods originally intended for sale or for use in the course of business. Transfer of goods not in the course of business can take place when the VAT-registered person withdraws goods from his business for his personal use; | ||||||
2.2.2 Distribution or transfer to shareholders or investors as share in the profits of the business; | ||||||
2.2.3 Transfer to creditors in payment of debt or obligation; | ||||||
2.2.4 Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned. Consigned goods returned by the consignee within the 60-day period is not deemed sold; and | ||||||
2.2.5 Retirement from or cessation of business or death of an individual with respect to inventories of all goods on hand, whether capital goods, stock-in- trade, supplies or materials as of date of such retirement or cessation, whether or not the business is continued by the new owner or successor, estate, or heir. The following circumstances shall, among others, give rise to transactions “deemed sale”: | ||||||
(i) Change of ownership of business or incorporation of the business in the case of a single proprietorship; | ||||||
(ii) Dissolution of a partnership and creation of a new partnership which takes over the business, and | ||||||
(iii) Death of an individual who is a VAT-registered person, even if the estate or heirs of the decedent shall continue to operate the business. | ||||||
2.3 | Sales declared as zero-related actually emanate from export sales, foreign currency denominated sales, and other transactions that may qualify as zero-related sales or effectively zero-related sales (Sec. 100 (a) (1) (2), 102 (a) (1) (2) (3), NIRC and Sec. 8, RR 5-87). | |||||
2.3.1 For “direct export sales”, examine sales agreement with foreign buyers as to the nature of products to be exported pricing and other terms and conditions. Review export documents such as commercial invoice/receipts, bills of lading or airway bill, export declaration/ permit, packing list, etc.; and ascertain that the proceeds of the Sale had been actually inwardly remitted. This will require a liquidation statement from the Central Bank or any of its accredited agent banks certifying as to the amount of the export proceeds or consideration, the date of inward remittance, conversion rate and the total peso value thereof (RMO 23-88). Determine if proceeds of export sales (Paragraphs 1 and 2 of Section 100) had been actually remitted in accordance with the rules and regulations of the Central Bank, prepare and submit schedule I with the following information: | ||||||
SCHEDULE I | ||||||
(1) Date of Export (2) Sales of Invoice No. (3) Name of Consignee (4) AWB/BL No. (5) Shipment Date (6) Amount of Sales in Foreign Currency Per Invoice (7) Amount of Foreign Currency Remitted (8) Conversion Rate | (9) Amount Remitted in Pesos (10) Date of Remittance (11) Accredited Bank (12) Bank Credit Memo No. (13) Sales Per Books (14) Discrepancy Between 6 & 7 (15) Discrepancy Between 9 & 13 | |||||
2.3.2 For foreign currency denominated sales, review the transactions and ascertain the following: | ||||||
(i) The buyers are Filipinos residing abroad, returning overseas workers or other non-residents; | ||||||
(ii) The objects of sale are goods for household or personal use assembled or manufactured in the Philippines and delivered to residents of the Philippines; | ||||||
(iii) The goods are paid for in convertible foreign currency inwardly remitted through the banking system. This requirement maybe evidenced by a statement from the Central Bank or its accredited bank. | ||||||
(iv) The sales do not exceed an aggregate value of US $1,000 or its equivalent. | ||||||
Claims for refund/tax credit arising from this transaction shall be checked from the Philippine International Trading Corporation or the Appropriate government agency charged with the implementation of this scheme. | ||||||
2.3.3 For zero-rated sale of services, verify contract agreement to ascertain the person for whom the services was rendered, amount of consideration description of the services, and documents evidencing actual payments. Determine if proceeds of sale in foreign currency (Paragraphs 1 and 2 of section 102) had been inwardly remitted in accordance with CB rules and regulations. Prepare and submit schedule II with the following information | ||||||
SCHEDULE II | ||||||
(1) Name of Contractee (2) Contract Price (3) Amt. Billed in Foreign Currency (4) Amt. Received in Foreign Currency (5) Official Receipt No. | (6) Date of Receipt (7) Conversion Rate (8) Amount Received in Pesos (9) Name of Bank (10) Bank Cr. Memo No. (11) Discrepancy Between 3 & 4 | |||||
2.3.4 In case of constructive inward remittance the claimant shall also submit the following: | ||||||
(1) Central Bank approval of offsetting arrangement. | ||||||
(2) Certification from the Central Bank on the amount constructively remitted under the off-setting arrangement. | ||||||
Should the amount of inward remittance be less than the total inward remittance be less than the total zero-rated sales, the input tax pertaining to the discrepancy shall be removed from the allowable input tax using the following formula; | ||||||
Unremitted Export Proceeds | Allowable | Input tax allocable to | ||||
_____________________ | x | = | ||||
Total Zero-Rated Sales | Input Tax | unremitted export sales | ||||
2.3.5 For effectively zero-rated transaction, secure copy of the approved application for zero-rating. Take note of the effectivity and revocation date of zero-rated transaction. Transactions effected before the effectivity date as indicated in the approved application are subject to VAT (RR No. 2-88). |
3.1 | Apply the following pro-forma computation to arrive at the total sale of goods - | |||||
Cash Sales | Pxxx | |||||
Add: | Collections on accounts receivable | Pxx | ||||
Collection on notes receivable (if it pertains to sale of goods) | xx | |||||
Sales discounts granted | xx | |||||
Sales returns and allowances from sales on account | xx | |||||
Bad debts-written off | xx | |||||
Accounts receivable, ending | xx | |||||
Notes receivable ending | xx | |||||
___ | ||||||
Total receivables during the period | Pxx | |||||
Less: Accounts Receivable, beginning | Pxx | |||||
Notes Receivable, beginning | xx xx | |||||
__ __ | ||||||
Sales on account | xx | |||||
___ | ||||||
Total Sales during the period | Pxxx | |||||
=== | ||||||
3.2 | Apply the following pro-forma computation to arrive at receipts during the period- | |||||
Income or billings during the period | Pxxx | |||||
Add: | Accounts receivable, | Pxx | ||||
beginning Retention receivable, beginning | xx | xx | ||||
__ | __ | |||||
Total Available for Collection | xxx | |||||
Less: | Accounts receivable, ending | xx | ||||
Retention receivable, ending | xx | xx | ||||
__ | __ | |||||
Collection from receivable | xxx | |||||
Add: Deposits or Advances and Mobilization fee | xx | |||||
Gross receipts during the period | xxx | |||||
Less: | Gross receipts from exempt service | xx | ||||
__ | __ | |||||
Gross receipts from zero-rated service | xx | xx | ||||
__ | __ | |||||
Taxable Gross Receipts | Pxxx | |||||
____ |
2.1 | Ascertain that invoices bear all necessary information including the VAT registration number (Sec. 108(a) and 238, NIRC). | |
2.2 | For the verification of the VAT liabilities for the 1st quarter/semester of 1988, account for the unused sales invoices as of December 31, 1987, as prescribed under RMC No. 51-87, and verify authority to print subsequent receipts/invoices, any discovery of discrepancy or the use of unauthorized receipts or invoice the printing of which are not authorized may suggest fraudulent practices. | |
2.3 | Check authority to use cash register machines and verify whether each register machine in use is duly authorized. | |
2.4 | Ensure that the sales invoices issued for sales transactions are all accounted for. Account for any break in the sequence of serial numbers of sales invoices and official receipts issued, and invoices assigned to branches. In case of cancelled sales invoice, the original copy should be on file. For those using loose-leaf invoices, require presentation of authority to use the same. | |
2.5 | Be alert on the use of double set of invoices bearing identical serial numbers. | |
2.6 | Verify if the transactions covered by “Statement of Account”, “Delivery Receipt”, “Debit Notes”, and other similar documents are properly recorded as sales. The mere issuance of these documents without the corresponding sales invoice is a violation of the bookkeeping regulations and an indication or unrecorded sales except in the case of bona fide consignment sales. | |
When confronted with a delivery receipt, ascertain whether it covers a consummated sale or consignment sale. Consignment sale shall be considered as taxable sale after sixty (60) days following the date of consignment (Sec. 4(D), RR 5-87). | ||
2.7 | If the taxpayer is engaged in both taxable and exempt transactions, ascertain that only VAT invoices are issued for VAT taxable transactions and separate invoices are issued for exempt transaction (Sec. 21 RR 5-87). Exempt transactions for which VAT invoices are issued shall be considered subject to VAT. | |
2.8 | In the case of zero-rated transactions to BOI export-oriented enterprises or other entities whose purchases are effectively zero-rated or exempted under special laws or international agreement, check if the words “ZERO-RATED” or “EXEMPT” had been prominently stamped or printed on the face of the sales invoice. If not, the transactions should be considered taxable (Sec. 2(a)(3), RR 2-88). |
5. Verify whether other charges such as excise taxes, packaging, insurance, freight and delivery expenses, etc., are treated as part of the gross taxable sales.
Percent of Exemption Factor 0% 1/11 10% 1/12.11 20% 1/13.5 50% 1/21 75% 1/41
9.1 | Filing of information return showing the contractor’s name, the outstanding contract price as of December 31, 1987, and a declaration to pay the contractor’s tax due. | |
9.2 | Copy the contractor’s billing issued prior to January 1, 1988 must be attached to the information return. | |
9.3 | Ascertain the recording of the outstanding contract price receivable (on contracts completed and billed as of December 31, 1987) on the taxpayers books of accounts. | |
9.4 | Filing of the contractor’s tax return on or before January 30, 1988 or the 20th day of the month following the end of each calendar quarter. |
2.1 | Purchases from non-VAT and/or exempt persons do not result in any input tax credit. | |
2.2 | Effectively zero-rated purchases do not result in any input tax credit. | |
2.3 | Purchases from VAT persons, which are personal in nature, shall not give rise to input tax credit. | |
2.4 | Deemed-paid input tax credits (for purchases from BOI-registered pioneer enterprises) have been determined correctly in accordance with Sec. 13(4) of RR 5-87. |
4.1 | The purchase invoice is issued in the name of the VAT-registered taxpayer claiming the input credits; bears the VAT number of the seller; the goods/services purchased are adequately described; the date of the invoice falls within the period being claimed; and the printer’s authority to print is indicated thereon. In case of purchase of services, the same should be supported by official receipts. | |
4.2 | For domestic purchases of goods (including capital assets) and services in the course of business, these must be supported by VAT invoices or receipts showing the information required in Sec. 108(a) and 238 of the NIRC. A cash register machine tape, although it indicates the VAT registration number of the seller, does not constitute valid proof of input tax credit (Sec. 15(a), RR 4-87). The same condition will apply for delivery receipts or statements of accounts issued by the seller. | |
4.3 | Credit for input tax on importation shall be supported with import entries or equivalent documents showing actual payment of VAT on imported goods (Sec. 15(b), RR 5-87). Therefore, withdrawals of raw materials or other goods for customs bonded warehouses without the payment of VAT are not entitled to input tax credit. | |
4.4 | VAT invoices issued for exempt and zero-rated transactions will not generate input credits to the purchaser. |
8. Applications for the issuance of tax credit certificates and refund affecting the input tax credit accounts must reduce the input tax credit available at the time of application. These include not only applications for the TCC filed with the BIR, but also with other government agencies such as the BOI and the Bureau of Customs (Sec. 11, RR 5-87).
x, a BOI-registered pioneer enterprise, enjoys a 10% tax exemption for the taxable year under investigation. During the same year, his sales amounted to P1,000,000 and the input tax on his purchases amounted to P50,000. The creditable input tax shall be computed as follows:Input tax: Input tax x Level of exemption = Unallowable input tax
Input tax – Unallowable input tax = Creditable input taxThus: Input tax P50,000Less: Level of exemption (P50,000 x 10%) 5,000 _______Creditable input tax P45,000 ======
10. Reconcile the amount of input tax claimed in the VAT return for the portion carried over from the previous quarters and the balance carried to succeeding quarters with the amounts recorded in the books of accounts.
Sales From VAT operation P300,000From non-VAT or exempt activity 200,000Purchases which cannot be directly attributed to taxable and exempt activity 60,000Input tax 6,000Input tax to VAT taxable operation -
Sales on VAT Taxable Operations Total Input Tax Input Tax
Creditable to
VAT operation___________________________ x Total Sales (VAT Taxable + non-VAT or exempt activity) P300,000 x P6,000 = P3,600
500,000 Thus: Input Tax P6,000Less: Unallowable input tax credit attributable to exempt activity 2,400Allowable input tax credit P3,600
3.1 | Schedule I – Schedule of zero-rated sales and inward remittance. | |
3.2 | Schedule II – Schedule or purchases and input tax. | |
3.3 | Analysis of relevant accounts such as cash, receivables, payables, advances, etc. | |
3.4 | Adjustments to sales and output tax. | |
3.5 | Schedule of disallowances. | |
3.6 | Computation of allowable input tax attributable to zero-rated sales recommended for refund or issuance of TCC. | |
3.7 | Computation of deficiency value-added tax. | |
3.8 | Computation of deficiency taxes other than value-added tax. |
7.1 | 3 copies of application for VAT Credit/Refund (Form No. 2552). | |
7.2 | Photocopy of approved Application for Zero-Rate (For effectively zero-rated sales). | |
7.3 | VAT return(s) filed for the quarter showing that the credited on purchases of zero-rated sales were not applied against output tax for a certain quarter(s) and VAT return for the succeeding quarter. | |
7.4 | Certificate of taxpayer showing the amount of zero-rated, taxable and exempt sales, where applicable. | |
7.5 | Central Bank approval of offsetting arrangement. | |
7.6 | Certification from the Central Bank on the amount constructively remitted under the off-setting arrangement. | |
7.7 | Certification from BOI, BOC, EPZA that subject taxpayer has not filed similar claims for the period. | |
7.8 | If 100% exporter, sworn statement that ending inventory as of the close of the period being claimed has been used directly or indirectly in the products subsequently exported as supported by export documents (RR 9-89). | |
7.9 | Bank liquidating statements and other documents. | |
7.10 | Delinquent account, verification report. | |
7.11 | All other documents specified in the checklist of requirements (Annex “B” below). |
Importations:
Name of Supplier Date of OR VAT Number Amount Invoice Number Input Tax Date of Invoice Total Invoice OR No. Amount
Date of Invoice | Total Value |
Supplier | Date of Payment |
Item | OR No. |
AWB/BL No. | VAT |
Date of Arrival |
1. Central Bank approval of offsetting arrangement.
2. Schedule of monthly offsetting of receivables and payables in accordance with Central Bank rules and regulations.
3. Certification from CB on the amount constructively remitted under the offsetting of arrangement.
2A. | Monthly Central Bank report on income of agency received. | |
2B. | Breakdown of gross foreign receipts specifying the nature of foreign currency received (e.g. Commission, allotment, manning fee, agency fee, advantages, etc.) showing the total foreign currency value with its peso equivalent, bank credit memo number, name of bank and date or remittance. |