Value-Added Tax
It is a
tax on the value added by every seller to his purchases of goods or services;
as well as on importation of goods into the Philippines, whether for personal
or business use. VAT is a tax on
consumption levied on the sale, barter, exchange or lease of goods or
properties and services in the Philippines and on importation of goods into the
Philippines levied at each stage of the production and distribution
process (VAT revenue is secured by
being collected throughout the
production/distribution process and production decisions do not get
distorted due to the tax credit provision on inputs). Personal end-consumers of products and
services cannot recover VAT on purchases, but businesses are able to recover
VAT (input tax) on the products and services that they buy in order to produce
further goods or services that will be sold to yet another business in the
supply chain or directly to a final consumer.
In this way, the total tax levied at each stage in the economic chain
of supply is a constant fraction of the value added by a business to its
products, and most of the cost of collecting the tax is borne by business,
rather than by the state.
VAT is an indirect
tax, which may be shifted or passed on to the buyer, transferee or lessee of
goods, properties or services. The
Value Added Tax (VAT) Reform Act (Republic
Act 9337), more commonly known as the expanded VAT (E-VAT) law, was passed
by Congress in May 2005 and amended by RA9361.
After some objections on its legality, it was finally implemented on
November 1, 2005. This law provides for
- the
expansion of the coverage of the VAT,
- reduction
in the excise tax on certain petroleum products, and
- increase
in the corporate income tax rate.
The burden of the tax is borne by the final
consumers of VAT-able goods or services
although the producers and suppliers of these goods and services are the ones
who have to file their VAT returns to the Bureau of Internal Revenue (BIR). The VAT system was first adopted in the
Philippines in 1988 in place of the sales/turnover tax and a host of other
taxes. At present, a single rate destination principle value added tax
equivalent to 12% based on
the following:
Nature of
Transactions
|
Tax Base
|
||
a.
|
Sale
of goods or properties
|
Gross
selling price
|
|
b.
|
Sale
of services
|
Gross
receipts
|
|
c.
|
Importation
|
Total
landed cost
|
|
d.
|
Dealers
in Securities
|
Gross
Income
|
“Importer”
- refers to any person
who brings goods into the Philippines, whether
or not made in the course of trade or business.
- Importation is not a sale of goods, or sometimes not
even a business activity, yet is subject to vat. This is because vat is a consumption tax
levied on sales to be borne by consumers with sellers acting simply as tax
collectors. And, as the origin of
importation is from a foreign seller which is outside Philippine jurisdiction,
the consumption tax (vat) is instead paid directly by the importer.
“For subsistence or livelihood”
- Any business pursued
by an individual where the aggregate gross sale or receipts do not exceed
P100,000 during the any 12 month period shall be considered principally for
subsistence or livelihood and not in
the ordinary course of trade or business.
