VALUE-ADDED TAX

DLSU Lecture

1.

Transaction by a VAT-registered taxpayer which is not subject to VAT:

a. Transaction deemed sale
b. Sale of services rendered in foreign countries
c. Export sale
d. Foreign currency denominated sale

2.

A creditable input tax allowed on one who becomes subject to VAT for the first time
a.
b.
c.
d.

3.

Presumptive input tax

Transitional input tax
Excess input tax
Total input tax

Anne Bake Shop sells cakes and pastry items to well-known establishments around the
Metro Manila area. The establishments are allowed credit based on their track record on
payments. The total amounts received or receivable from sales by the Bake Shop in the
2nd quarter of 2012 were P224,000, including the value-added tax. Seventy five percent
of the sales are normally on account. How much is the value-added tax on the sales for
the 2nd quarter of 2012?
a.
b.
c.
d.

P20,000
P24,000
P26,880
P15,000

Numbers 4 through 6 are based on the following information:

Transaction 1 An agricultural food producer sells his products in their original state to a
food processor who also buys packaging materials and containers from a
manufacturer/supplier.
Transaction 2 The food processor transforms the food products into processed foods and
sells to a wholesaler/exporter.
Transaction 3 The VAT-registered exporter sells the goods to foreign buyers.
Transaction 4 The wholesaler delivers the merchandise to retailers.
Transaction 5 The retailers sell the goods to households or ultimate consumers.
4.

Which of the above transactions is VAT exempt?

a. Transaction 1
b. Transaction 2
c. Transaction 3
d. Transaction 4

5.

Based on the information above, which transaction is zero-rated?

a.
b.
c.
d.

Transaction 1
Transaction 2
Transaction 3
Transaction 4

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6.

Based on the information above, the value-added taxes are absorbed by

a.
b.
c.
d.

7.

Joey, a non-VAT taxpayer, purchased merchandise worth P11,200, VAT inclusive, from
Willie, a VAT registered seller. The passed on VAT of P1,200 on the purchase is
a.
b.
c.
d.

8.

Food processor
Wholesaler/exporter
Retailer
Households/ultimate consumer

An expense
Part of the cost of purchases
A tax credit
Ignored

Kenneth Company, a newly VAT-registered business, has the following data in January
(all amounts are inclusive of tax):
Merchandise inventory
Actual VAT paid on the inventory
Sales, total invoice amount
Purchases

P 204,000
16,000
469,000
57,400

Fifty percent (50%) of the merchandise inventory on January 1 were purchased from
non-VAT registered sellers.
The VAT payable by Kenneth Company is
a.
b.
c.
d.
9.

P 30,100
P 28,100
P 3,960
P 4,950

Lance, a trader, made the following transactions of goods, exclusive of VAT, during the
second quarter:
Cash sales
Open account sales
Consigned sales delivered: February 15
April 15
May 15
June 15

P 200,000
P 100,000
P 100,000
P 100,000
P 100,000
P 100,000

The output tax for the second quarter is

a.
b.
c.
d.

P 40,000
P 48,000
P 60,000
P 36,000

10. Pauffy Company, a VAT-registered business, had the following data during the quarter:
Export sales
Domestic sales (tax included)
Purchases of goods for export

P 1,815,000
1,232,000
672,000
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Purchases of goods for domestic sales

Purchases of supplies on domestic sales

323,120
124,850

Assuming that the input taxes paid on purchases of goods for export are claimed as tax
credit, the VAT payable by Pauffy Company is
a.
b.
c.
d.

P 12,895
P 10,398
P 177,895
P 84,895

11. 1st statement: In case tax exempt products are sold domestically to a VAT registered
person, the VAT otherwise due on such product shall be considered as input tax
creditable against his output tax payable.
2nd statement: Export sales by a VAT registered person are subject to zero-rating and
so he can claim and enjoy a credit for the tax invoiced to him on his purchases. If he is
not VAT registered, his export sales are exempt, but he is not entitled to tax credits for
inputs.
a.
b.
c.
d.

Both statements are true.

1st statement is false, 2nd statement is true.
1st statement is true, 2nd statement is false.
Both statements are false.

12. X-Men Corporation is a VAT registered dealer of appliances. The following data are for
the month of October 2012:
Sales, total invoice value
Purchases, net of input taxes
Sales return
Purchase return, net of input tax
Deferred input taxes
(carried over from 3rd quarter)

P5,800,000
2,820,000
200,000
300,000
9,500

The VAT payable for the month of October 2012 by X-Men Corporation is:
a.
b.
c.
d.

P320,500
P285,500
P 80,000
P288,100

13. A tax on business is

a.
b.
c.
d.

Direct tax
Indirect tax
Property tax
None of the above

14. Which of the following is not a valid support for claiming input tax as credit against
output tax?
a. Original VAT invoice for purchase of goods with TIN of both the customer the
supplier.
b.
Certified true copy of VAT official receipt for purchase of services.
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c. Original VAT invoice for purchase of goods with authority to print dated January
2012.
d. Validated original import entry and internal revenue declaration for importation of
goods.
15. In which of the following situations, the name, business style, if any, address and TIN of
the purchaser may not be required to be indicated on the face of the VAT invoice/official
receipt?
a.
b.
c.
d.

VATable collections amounting to P25,000.

VATable sales of P500.
Sale of real property.
Offsetting of accounts where accounts receivable of P5,000 for sale of goods is
considered collected.

16. Which of the following income payments to non-residents is not subject to withholding
VAT?
a. Royalty payments to a non-resident for licensed software used in the Philippines.
b. Commission payments to a non-resident for looking for potential clients abroad.
c. Service fees payments to a non-resident for professional fees rendered within the
Philippines.
d. Rental payments to a non-resident for lease of equipment brought into the
Philippines.
17. Which of the following sales transactions is not subject to withholding VAT?
a.
b.
c.
d.

Sales to Department of Education.

Sales to University of the Philippines.
Sales to the Office of the City Mayor.
Sales to Philippine Council for Non-Government Organization Certification.

18. Peter Pan is a VAT-registered professional business with the following information
during the quarter:
Collections from clients including VAT
Billings including VAT
Supplies used including VAT

P4,480,000
1,680,000
560,000

The net VAT payable would be:

a.
b.
c.
d.

P600,000
P480,000
P420,000
P120,000

19. Makabayan Corporation had the following data during the month of February 2012:
Net income during the month
Collections during the month:
From services rendered in January
From services rendered in February
From services to be performed in March
(advances)
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P 40,000
P 50,000
300,000
10,000

The VAT payable if Makabayan Corporation is:

a.
b.
c.
d.

P48,000
P91,200
P43,200
P84,000

20. Which of the following sales transactions of a domestic corporation is subject to 0%

VAT?
a.
b.
c.
d.

Export sale of goods to non-resident paid in Philippine peso.

Sale of services to non-resident rendered in Singapore paid in US dollars.
Sale of goods to a PEZA-registered company paid in Philippine peso.
Sale of goods located in Hong Kong to a PEZA-registered company in the Philippines
paid in US dollars.

21. Which of the following transactions is not subject to 12% VAT?

a.
b.
c.
d.

Sale of medicines by hospitals to inpatients.

Professional fees paid directly to a doctor.
Sale of medicines by hospitals to outpatients.
Rentals of medical clinics from hospitals.

22. The following are transactions deemed sales, except:

a.
b.
c.
d.

Inventories paid as property dividend.

Real properties used in business used to pay debt.
Consignment of goods not sold after three months.
Inventories consumed for construction of plant.

23. Skyfall, a non-VAT person, reported the following during the month:
Export sales, peso denominated
Export sales, inwardly remitted in foreign currency
Importation of goods

P1,000,000
1,500,000
500,000

Its zero-rated VAT transactions would amount to

a.
b.
c.
d.

P2,500,000
P2,000,000
P1,500,000
None

24. Statement 1: The VAT base for supply of services is the gross receipts.
Statement 2: VAT base on services does not include receivables.
a.
b.
c.
d.

Only Statement 1 is correct.

Only Statement 2 is correct.
Both statements are correct.
Both statements are incorrect.

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25. Ryan is engaged in the sale of excisable goods, which are also subject to VAT. The
selling price of certain goods sold amounted to P100,000, excluding excise tax of
P20,000. However, Ryan granted 10% discount if it is paid within 10 days. How much
is the gross selling price for VAT purposes?
a.
b.
c.
d.

P120,000
P110,000
P108,000
P100,000

26. Crissee Insurance Corporation, a domestic corporation, had the following collections
from insurance premiums during the month:
Health and accident insurance
Motor vehicle insurance
Life and disability insurance
Property insurance

P2,340,000
1,250,000
1,850,000
2,840,000

The VAT due is

a.
b.
c.
d.

P 993,600
P 771,600
P 490,800
P 340,800

27. The following are subject to VAT, except:

a.
b.
c.
d.

Long distance call by a son from Malate, Manila to his father in Cagayan.
Monthly domestic telephone bill from Bayantel, a domestic corporation.
Telephone bill on a call by a mother in the Philippines to her son in Canada.
Telephone call by Magda in Hongkong to his friend in Manila.

28. In case of tax-free importation of goods into the Philippines by persons exempt from tax,
where such goods are subsequently sold in the Philippines to non-exempt persons:
a. The purchaser shall be considered as the importer who shall be liable for any VAT on
such importation.
b. The tax exempt importer shall be required to pay VAT on such importation before the
transfer can be made.
c. The tax-exempt importer shall report said transfer as sales transaction subject to
VAT.
d. The purchaser or the tax exempt importer shall be liable to any VAT on such
transaction, depending on their agreement.
29. Sales discounts can be deducted from the gross selling price for VAT purposes, if all of
the following requirements are met, except:
a.
b.
c.
d.

Sales discount is indicated in the invoice at the time of sale.

Sales discount does not depend upon happening of a future event.
Sales discount is evidenced by a credit memo.
Amount of gross selling price reported is gross of sales discount from which said
discount can be deducted.

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30. The Commissioner has the power to determine the appropriate VAT base under the
following situations, except:
a.
b.
c.
d.

Transfer of fixed asset as property dividend.

Inventories used as payment of debt.
Sale of goods at significantly below fair market value.
Sale of real property at fair market value.

31. The following are allowed to claim presumptive input tax, except:
a.
b.
c.
d.

Firms engaged in the processing of sardines.

Firms engaged in the manufacture of cooking oil.
Firms engaged in the manufacture of packed noodle-based instant meals.
Firms engaged in the manufacture of processed meat products.

32. Gangnam Transport Company is a land transportation contractor. During the month, it
had the following gross receipts (exclusive of VAT, if any)::
From transport of passengers
From transport of cargo
From rentals of cargo trucks to individual lessees
From rental of its rent-a-car to balikbayans (with chauffeur)

P 485,000
220,000
33,000
30,000

The VAT due is

a.
b.
c.
d.

P 92,160
P 61,800
P 33,960
P 30,360

33. Given the following establishments:

I.
II.
III.
IV.

Cebu Pacific Air

Pegasus Nightclub
Camarines Sur III Electric Cooperative
Banco de Oro (Unibank)

Which of the above establishments is/are subject to other percentage tax?

a. II only
b. II and III
c. III and IV
d. II and IV
34. Which of the following is not subject to 12% VAT?
a. Establishments whose annual gross sales or receipts exceed P1,919,500 and who
are VAT registered.
b. Businesses whose annual gross receipts or sales exceed P1,919,500 and who are
not VAT registered.
c. VAT registered establishments whose annual gross receipt do not exceed
P1,919,500.
d. Establishments whose annual gross sales do not exceed P1,919,500 and who are
not VAT registered.

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35. Smithsonian owns the following businesses:

Annual Gross Receipts
I. Restaurant
P 1,350,000
II. Barbershop
P 625,000
III. Seller of agricultural food products
P 1,875,000
Which combination will subject Smithsonian to VAT?
a.
b.
c.
d.

I only
I and II
I, II and III
None

36. Maxine, a VAT taxpayer, made the following purchases of capital goods from VAT
registered sellers for use in his business (amounts are net of VAT) for the 3rd Quarter
Year 2011
July 10 Machine 1
July 16 Machine 2
Aug 8 Machine 3
Aug 29 Machine 4
Sept 14 Machine 5

Estimated Life
2 years
6 years
2 years
6 years
7 years

Cost
P 200,000
900,000
400,000
500,000
2,000,000

Machine 1 was retired on September 30, 2011. The input tax for the three months are:

July
August
September

A
P 2,800
P 108,000
P 4,000

B
P 108,000
P 3,000
P 6,800

C
P 132,000
P 5,800
P 26,000

D
P 2,200
P 110,800
P 27,800

37. Magin is engaged in two (2) lines of businesses, one with VAT and the other is NonVAT. His records show the following (VAT non included):
Sales:
From VAT Business
P 4,000,000
From Non-VAT Business
6,000,000
Purchases:
For VAT Business
2,000,000
For Non-VAT Business
3,000,000
Purchases from VAT supplier of supplies
used for both VAT and Non-VAT businesses
20,000
Operating Expenses
1,800,000
The VAT payable is:
a.
b.
c.
d.

P 600,000
P 239,040
P 240,000
P 237,000

38. An importer wishes to withdraw its importation from the Bureau of Customs. The
imported goods were subjected to 10% customs duty in the amount of P12,500 and
other charges in the amount of P9,500. The VAT due is

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a.
b.
c.
d.

P 12,500
P 13,364
P 17,640
P 14,700

39. One of the following statements is incorrect

a. Imported goods which are subject to excise tax are no longer subject to VAT
b. VAT on importation is paid to the Bureau of Customs before the imported goods are
released from its custody
c. Expenses incurred after the goods are released from Customs custody are
disregarded in computing the VAT on importation
d. When a person who enjoys a tax-exemption on his importation subsequently sells in
the Philippines such imported articles to a non-exempt person, the purchaser-nonexempt person shall pay the VAT on such importation
40. Rex has mastered operating computer shops and has now expanded into race tracks in
the past few years. He wishes to know how much business tax he has to pay on his race
track in the current year. Data, before taxes, follow:
Total revenue in the current period
Collections during the period:
From revenue of prior periods
From revenue of the current period
For succeeding periods (advances)

P8,000,000
1,000,000
4,000,000
120,000

What is the business tax on the race track?

a. P2,856,000
b. P1,500,000
c. P1,536,000
d. P1,200,000
41. One of the following statements is wrong. Identify the incorrect statement. For a taxpayer
who becomes liable for the first time to the value-added tax,
a. There can be an input tax on purchases he made when not yet a VAT taxpayer
b. He must use a VAT invoice on the sale of the goods purchases when not yet a VAT
taxpayer
c. He must still use the Non-VAT invoice in use when he was not yet a VAT taxpayer
on the sale of goods on hand on the transition date
d. There will be an adjustment on the inventory valuation on the transition date
42. Which statement is wrong?
a. There is a transitional input tax from purchases of goods or properties
b. There is a transitional input tax from purchases of services
c. There is a transitional input tax from purchases of materials
d. There is a transitional input tax from purchases of supplies
43. Which statement is correct? The value-added tax on an importation
a. Should be paid by the tax-exempt importer, if he subsequently sells the goods to a
non-tax-exempt purchaser
b. Should be paid by the non-tax-exempt purchaser to whom the tax-exempt importer
sells it
c. Is a liability either of the tax-exempt importer or the non-tax-exempt purchaser
d. Shall not pay the value-added tax because the transaction was exempt at the point
of importation

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44. Juicy imported a car from the U.S.A. for her personal use. Total landed cost is P250,000
including customs duties of P50,000. VAT payable is
a. P27,500
b. P10,000
c. P20,000
d. None, because the importation is for personal use
45. Ate Marie, CPA, charged an amount of P100,000 for services rendered. The P100,000
charged is before a 10% withholding income tax, not inclusive of the 12% value-added
tax, and with a proper disclosure of the details shown in the voucher covering the
payment received. The payment to Ate Marie, CPA shall be
a. P100,000
b. P112,000
c. P102,000
d. P100,800

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