BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 51 Chapter 10: MIXED BUSINESS TRANSACTIONS CHAPTER 10 MIXED BUSINESS TRANSACTIONS Problem 10–1 10 True False True True True False True False False True True or False – 5% only – the VAT exemption is applicable only for residential units - Transport of passengers by land is not subject to VAT – the gross receipts should be more than P1,500,000 Problem 10–2 True False – 5% only True True True True False – It must be prorated based on sales True True – not subject to VAT, gross receipts not exceed P1,500,000 10 True Problem 10 – Final VAT withholding is 5% and 2% on purchase of services of the contract price before VAT VAT refund is P10,000 None Zero rated transaction None Sale of capital asset is not subject to business tax Total business tax is P1,800,000, computed as follows: OPT on passengers by land (P20,000,000 x 3%) VAT on passengers by air (P10,000,000 x 12%) Total business taxes P2,100,000 OPT (P10,000,000 x 3%) Add: VAT (P10,000,000 x 12%) Surcharge (P1,200,000 x 50%) Business taxes including surcharge P 600,000 1,200,000 P1,800,000 P 300,000 P1,200,000 600,000 1,800,000 P2,100,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 52 Chapter 10: MIXED BUSINESS TRANSACTIONS P432,000 Invoice cost Custom duty (P2,000,000 x 50%) Excise tax (P3,000,000 x 20%) Total landed cost Multiplied by VAT rate Input VAT P2,000,000 1,000,000 600,000 P3,600,000 12% P 432,000 P2,100,000 Output VAT (P1,000,000 x 12%) Less: Amortized input VAT (P432,000/60) VAT payable P120,000 7,200 P112,800 Note: Assume for the month VAT payable P600,000 Output VAT (P5,000,000 x 12%) year of sale (Downpayment is more than 25% considered as cash sales) P600,000 10 P120,000 Required output VAT (P6,000,000 x 12%) Less: Output VAT collected year of sale Additional output VAT P720,000 600,000 P120,000 11 P80,000 Unsold inventory at cost Multiplied by Output VAT Less: Input VAT VAT payable P 500,000 12% P 60,000 40,000 P 20,000 Note: Asset at retirement is taxed at lower of cost or market 12 P360,000 VAT payable (P3,000,000 x 12%) 13 P184,000 Output VAT (P1,600,000 x 12%) Less: Input VAT – Presumptive input VAT Total manufacturing cost (P300,000/60%) Less: Conversion cost Direct material used – fish Multiplied by presumptive input VAT VAT payable 14 P184,000 Output VAT (P1,000,000 x 40%) x x 12% Less: Input VAT – Transitional input VAT (P1,000,000 x 2%) VAT payable 15 P192,000 Business tax – VAT (P1,600,000 x 12%) P 360,000 P192,000 P500,000 300,000 P200,000 4% 8,000 P184,000 P96,000 20,000 P76,000 P192,000 VAT taxable because these are commercial units and yearly gross receipts exceeds P1.5M BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 53 Chapter 10: MIXED BUSINESS TRANSACTIONS 16 P192,000 Output VAT (P1,600,000 x 12%) 17 P3,840,000 Output VAT (P10,000,000 x months) x 12% Less: Input VAT (P1,120,000/9.3333) VAT payable Problem 10 – C Problem 10 – B P192,000 P3,600,000 120,000 P3,840,000 Output VAT (P1,125,000 x 12%) Less: Input VAT – prorated [P80,000 x (P1,125,000+ P300,000)/P1,500,000] Net VAT payable P135,000 76,000 P 59,000 Output VAT (P600,000 x 12%) Less: Creditable Input VAT (P330,000/9.3333) x (P600,000/P900,000) Net VAT payable P72,000 23,572 P48,428 Notes: The printing of books is VAT-exempt under Sec 109y of NIRC The printing of other forms is subject to VAT and, correspondingly, should be allowed with Input VAT The expected amount of gross receipts for taxable transaction is P600,000 x = P2,400,000 If the Input VAT is not directly identifiable with the portion of sale that is allowed to creditable Input VAT, then it is allocated based on the total sales Problem 10 – B Amount inclusive of VAT and net of income tax withheld Divided by VAT taxable receipt P26,250 1.07% P24,532 Output VAT (P25,000 x 12%) P 3,000 Problem 10 – C Gross receipts – professional fees Add: Value-added tax (P1,000,000 x 12%) Total Less: Withholding income tax (P1,000,000 x 15%) Actual cash received Problem 10 – A Problem 10 – C P1,000,000 120,000 P1,120,000 150,000 P 970,000 Gross billings including VAT (P50,000 x 1.12) Less: Withholding income tax (P50,000 x 10%) Actual cash received Percentage tax - passengers (P2,000,000 x 3%) Vatable transactions - cargoes (P1,600,000 x 12%) Total business tax P 56,000 5,000 P 51,000 P 60,000 192,000 P252,0000 Notes: Additional amount charged in ordinary bus fare tickets issued by common carrier for passengers’ excess baggage is subject to VAT (BIR Ruling 094-99) BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 54 Chapter 10: MIXED BUSINESS TRANSACTIONS Although there is actual Input VAT paid, this could not be claimed as tax credit because the business is non-VAT registered Problem 10 – 10 C Common carrier’s tax (P1,400,000 x 3%) Output VAT (P600,000 x 12%) Total business tax Less: Creditable Input VAT (P560,000/9.3333) x P600,000/P2,000,000 Net business tax payable P 42,000 72,000 P114,0000 18,000 P 96,000 Notes: Additional amount charged in ordinary bus fare tickets issued by common carrier for passengers’ excess baggage is subject to VAT (BIR Ruling 094-99) The creditable Input VAT is prorated between the Vatable and VAT-exempt gross receipts Problem 10 – 11 B Output VAT (P2,000,000 x months x 12%) Less: Input VAT (P560,000/9.333) VAT payable P720,000 60,000 P660,000 Problem 10 – 12 B Output VAT of Y (P500,000 x 12%) Less: Input VAT paid to Z (P448,000/9.3333) VAT payable P60,000 48,000 P12,000 Problem 10 – 13 C Total domestic cash sales (P110,000 + P55,000) Multiplied by VAT rate Total Output VAT P165,000 12% P 19,800 Problem 10 – 14 Output VAT on domestic sales (P2,000,000 x 12%) Output VAT on sale to government units (P125,000 x 12%) Amount of output VAT P 240,000 15,000 P 255,000 Note: Export sales are zero-rated but allowed of Input VAT Input VAT from importation (P1,008,000/9.3333) Input VAT from domestic purchases (P560,000/9.3333) Total Input VAT P108,000 60,000 P168,000 Input VAT – domestic sales (P168,000 x P2,375,000/P2,500,000) Standard input VAT – government sales (P125,000 x 7%) Total creditable input VAT P159,600 8,750 P168,350 Note: The P840 actual input VAT on sales to government cannot be claimed as creditable input VAT, but the standard input VAT which is 7% of the sales to the government Total output VAT Less: Total creditable input VAT Final withholding VAT – government (P125,000 x 5%) Net VAT payable P255,000 P168,350 6,250 174,600 P 80,400 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 55 Chapter 10: MIXED BUSINESS TRANSACTIONS Problem 10 – 15 Input tax on taxable goods Input tax on zero-rated sales Standard input tax – government sales (P100,000 x 5%) Input tax on depreciable capital goods not attributable to any specific activity (monthly amortization for 60 months) P200,000/P400,000) Creditable input tax for the month P 5,000 3,000 5,000 = Standard input VAT (P100,000 x 5%) Zero, because VAT exempt sales are not entitled to Input VAT (P20,000 x P23,000 P5,000 Problem 10 – 16 Net VAT payable = final VAT (P1,000,000 x 12%) None, because the VAT paid is final 10,000 P120,000 Problem 10 – 17 Output VAT (P150,000 + P30,000) x 12% Less: Input VAT (P134,400/9.3333) Net VAT payable P 21,600 14,400 P 7,200 Assume that the business is VAT-registered Note: It is implied that the total collection of the real estate lessor on residential units would be more than P1,500,000 per year (P150,000 x 12) = P1,800,000 Problem 10 – 18 Gross receipts Currency adjustment factor Documentation charges Processing charges Third party service provider: Freight charges Carrier security charges Trucking fee Advance manifest surcharge Actual commission income P400,000 P 6,000 10,000 8,000 250,000 50,000 30,000 16,000 370,000 P 30,000 Outbound movement Local origin charges: Currency adjustment factor Documentation charges Processing charges Actual commission income P 6,000 10,000 8,000 30,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 56 Chapter 10: MIXED BUSINESS TRANSACTIONS Inbound movement Local destination charges: Trucking fee Advance manifest surcharge Total taxable based Multiplied by VAT rate Output VAT 30,000 16,000 P100,000 12% P 12,000 Problem 10 – 19 Percentage tax (P10,000,000 x 3%) VAT (P10,000,000 x 12%) Surcharge (P1,200,000 x 50%) Total business tax liability P 300,000 1,200,000 600,000 P2,100,000 Problem 10 – 20 Gross receipts of the contractor (P1,116,000/93%) P1,200,000 Note: The 93% is computed by deducting the 5% final VAT and 2% withholding income tax from 100% Final VAT withheld (P1,200,000 x 5%) P 60,000 Income tax withheld (P1,200,000 x 2%) P 24,000 Problem 10 – 21 Output VAT from: Cash sales to VAT persons (P300,000 x 12%) Cash sales to Non-VAT persons (P100,000 x 12%) Cash sales to government units (P200,000 x 12%) Credit sales to VAT persons (P400,000 x 12%) Sales return (P10,000 x 12%) Less: Input VAT from: Purchases from VAT person per invoice (P324,800/9.3333) Payment of services for business purposes, gross of VAT (P72,800/9.3333) Standard input VAT – government (P200,000 x 7%) VAT payable Less: Final withholding VAT – government (P200,000 x 5%) Net VAT payable P 36,000 12,000 24,000 48,000 ( 1,200) P118,800 P 34,800 7,800 14,000 56,600 P 62,200 10,000 P 52,200 Notes: The sales discount is generally a cash discount that depends on the happening of future events which is the prompt payment of customers This sales discount is not allowed to be deducted for VAT purposes (Sec 4.106-9, R.R 14-2005) The 5% final withholding VAT is deductible from output VAT on sales to the government  ... are commercial units and yearly gross receipts exceeds P1.5M BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 53 Chapter 10: MIXED BUSINESS TRANSACTIONS 16 P192,000... P168,350 6,250 174,600 P 80,400 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 55 Chapter 10: MIXED BUSINESS TRANSACTIONS Problem 10 – 15 Input tax on taxable... Actual commission income P 6,000 10, 000 8,000 30,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 56 Chapter 10: MIXED BUSINESS TRANSACTIONS Inbound movement