EXERCISES 18–1 No To be subject to VAT, it is a requirement that the services must be rendered in the Philippines Since, the services were rendered in the United States, Nora is not subject to VAT on the said transactions (BIR Ruling 110-97) Yes Domestic common carriers by water are levied, assessed and collected a valueadded tax equivalent to twelve percent (12%) of gross receipts derived from the sale or exchange or services, including the use or lease of properties The term “gross receipts” is defined as the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payment actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding VAT Such being the case, WG & A being a domestic corporation engaged in the transport of cargoes are well within this coverage Its previous practice of reporting VAT on accrual basis is wrong and will cause confusion Thus, it can book the said P84,000,000 output VAT as deferred output VAT; apply the same upon payment of the output VAT on services actually collected from the customers It can validly amend all VAT returns which incorrectly recognized the transaction on accrual basis so as to reflect the deferred output VAT as advance payment; and file the same in the RDO where the principal place of business is situated Rising Sun Travel Agency is subject to value-added tax on its gross receipts However, the sales of tickets to any person which are paid for in an acceptable foreign currency and surrendered to the Bangko Sentral thru the banking system in the Philippines are considered as zero rated transactions In the case of services to domestic tourists, it shall be required to pay 12% VAT on its gross receipts which shall not include the price of airline or ship tickets or the reimbursement of expenses which shall be limited to passport fees, hotel room charges, bus and/or car tour charges, guide fees, resort fees and meal charges for tourists provided that all the said expenses are properly supported by receipts issued by the supplying company or establishment Monthly salary 13th month pay Agency fee SSS and Philhealth Leave with pay Gross receipts Multiply by Output tax P 6,000.00 6,000.00 1,800.00 300.00 450.00 14,550.00 3/28 1,558.93 Entries in the books of the security agency a To record receipt of cash: Cash 17,931 77 68.23 Prepaid income tax Service income (agency fee) Output tax (on agency fee) Due to security guards 3,411.54 409.38 14,179.0 71 b To record payment to security guards Due to security guards 14,179 08 Cash 12,637.1 1,541.97 Withholding tax payable II Entries on the books of the client Security services – agency fee 3,411.5 14,179 08 409.38 Security services – security guards salaries Input tax (only on agency fee) Cash 17,931.7 68.23 Withholding tax payable (2% EWT on agency fee) Amount of sale (without the VAT) Less: 20% discount (no double discount) Vatable sale Plus: 12% VAT (based on P800) Total amount to be paid by Biadde Oldy Cash Sales discount on PWD Sales Output tax 1,000.00 200.00 800.00 96.00 896.00 896 200 1,000 96 The fish brokers are properly classified as commercial brokers They are subject to VAT based on gross receipts However, since the products they sell are marine food products in their original state, such sales are exempt from VAT Room charges Laundry services Food and beverages Corkage Handling charges Cake shop sales Gross receipts Output tax (1,227,072 x 3/28) 392,000 7,392 806,400 9,632 2,464 9,184 1,227,072 131,472 a Output tax (220,000 x 3/28) 23,571.4 20,035 71 3,535.72 Less: Input tax (220,000 x 85%) x 3/28 VAT payable b Output tax (220,000 x 85%) x 3/28 20,035.7 8,000.0 Less: Input tax 72 VAT payable 12,035.7 1 Any person, who, in the course of trade or business renders services is subject to the value-added tax unless exempt The 12% value-added tax is levied on any person engaged in the sale of services The phrase "sale of services" means performance of all kinds of services for others for a fee regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties Undoubtedly, by performing professional and management services to the managed companies, Crisanto Castro is engaged in the sale of services 1 a No b c d e 12 No No No No Yes Leasing by film owners of their films on a flat rental or percentage of gross sales or receipts sharing basis are subject to VAT The lease of motion picture films, films, tapes and discs are included in the term “sale or exchange of services.” PROBLEM 18 – NO Mirant Pagbilao’s claim for refund or tax credit was filed beyond the period provided by law for such claim Refund must be claimed within YEARS reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not (not from the time the input VAT was paid nor from the time the official receipt was issued Thus, applying the provisions of Section 112 (A) and not Section 204 (c) and 229 of the NIRC The claim for refund for the last creditable input VAT had prescribed two years after September 30, 1996, or on September 30, 1998 Consequently, Mirant’s claim for refund or tax credit filed on December 20, 1999 had already prescribed 73 ... performing professional and management services to the managed companies, Crisanto Castro is engaged in the sale of services 1 a No b c d e 12 No No No No Yes Leasing by film owners of their... performance of all kinds of services for others for a fee regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties Undoubtedly, by performing... charges Laundry services Food and beverages Corkage Handling charges Cake shop sales Gross receipts Output tax (1,227,072 x 3/28) 392,000 7,392 806,400 9,632 2,464 9 ,184 1,227,072 131,472 a Output