Solution manual transfer and business taxes by valencia CHAPTER 10 MIXED BUSINESS TRANSACTIONS

False – It must be prorated based on sales.. Sale of capital asset is not subject to business tax... P192,000 VAT taxable because these are commercial units and yearly gross receipts exc

CHAPTER 10

MIXED BUSINESS TRANSACTIONS

Problem 10–1 True or False

1 True

2 False – 5% only

3 True

4 True

5 True

6 False – the VAT exemption is applicable only for residential units

7 True

8 False - Transport of passengers by land is not subject to VAT

9 False – the gross receipts should be more than P1,500,000

10 True

Problem 10–2

1 True

2 False – 5% only

3 True

4 True

5 True

6 True

7 False – It must be prorated based on sales

8 True

9 True – not subject to VAT, gross receipts do not exceed P1,500,000

10 True

Problem 10 – 3

1 Final VAT withholding is 5% and 2% on purchase of services of the contract price before VAT

2 VAT refund is P10,000

3 None Zero rated transaction

4 None Sale of capital asset is not subject to business tax

5 Total business tax is P1,800,000, computed as follows:

OPT on passengers by land (P20,000,000 x 3%) P 600,000 VAT on passengers by air (P10,000,000 x 12%) 1,200,000

6 P2,100,000

Surcharge (P1,200,000 x 50%) 600,000 1,800,000

Invoice cost P2,000,000

8 P2,100,000

Less: Amortized input VAT (P432,000/60) 7,200

Note: Assume for the month VAT payable

9 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

Less: Output VAT collected year of sale 600,000

11 P80,000

Note: Asset at retirement is taxed at lower of cost or market

12 P360,000

13 P184,000

Less: Input VAT – Presumptive input VAT

Total manufacturing cost (P300,000/60%) P500,000

Multiplied by presumptive input VAT 4% 8,000

14 P184,000

Less: Input VAT – Transitional input VAT (P1,000,000 x 2%) 20,000

15 P192,000

VAT taxable because these are commercial units and yearly gross receipts exceeds P1.5M

16 P192,000

17 P3,840,000

Output VAT (P10,000,000 x 3 months) x 12% P3,600,000 Less: Input VAT (P1,120,000/9.3333) 120,000

Problem 10 – 4 C

Less: Input VAT – prorated [P80,000 x (P1,125,000+ P300,000)/P1,500,000] 76,000

Problem 10 – 5 B

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:

1 The printing of books is VAT-exempt under Sec 109y of NIRC

2 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 4 = P2,400,000

3 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

Amount inclusive of VAT and net of income tax withheld P26,250

Problem 10 – 7 C

Add: Value-added tax (P1,000,000 x 12%) 120,000

Less: Withholding income tax (P1,000,000 x 15%) 150,000

Problem 10 – 8 A

Gross billings including VAT (P50,000 x 1.12) P 56,000 Less: Withholding income tax (P50,000 x 10%) 5,000

Problem 10 – 9 C

Percentage tax - passengers (P2,000,000 x 3%) P 60,000 Vatable transactions - cargoes (P1,600,000 x 12%) 192,000

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)

Problem 10 – 10 C

Less: Creditable Input VAT (P560,000/9.3333) x P600,000/P2,000,000 18,000

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

Less: Input VAT paid to Z (P448,000/9.3333) 48,000

Total domestic cash sales (P110,000 + P55,000) P165,000

Problem 10 – 14

1 Output VAT on domestic sales (P2,000,000 x 12%) P 240,000 Output VAT on sale to government units (P125,000 x 12%) 15,000

Note: Export sales are zero-rated but allowed of Input VAT

2 Input VAT from importation (P1,008,000/9.3333) P108,000 Input VAT from domestic purchases (P560,000/9.3333) 60,000

3 Input VAT – domestic sales (P168,000 x P2,375,000/P2,500,000) P159,600 Standard input VAT – government sales (P125,000 x 7%) 8,750

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

Less: Total creditable input VAT P168,350

Final withholding VAT – government (P125,000 x 5%) 6,250 174,600

Problem 10 – 15

1

Standard input tax – government sales (P100,000 x 5%) 5,000 Input tax on depreciable capital goods

not attributable to any specific activity

(monthly amortization for 60 months) = (P20,000 x

3 Zero, because VAT exempt sales are not entitled to Input VAT

Problem 10 – 16

1

Net VAT payable = final VAT (P1,000,000 x 12%) P120,000 2

None, because the VAT paid is final.

Problem 10 – 17

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

Third party service provider:

Advance manifest surcharge 16,000 370,000

2

Outbound movement

Local origin charges:

Advance manifest surcharge 16,000

Problem 10 – 19

Problem 10 – 20

1 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%

Problem 10 – 21

Output VAT from:

Cash sales to VAT persons (P300,000 x 12%) P 36,000

Cash sales to Non-VAT persons (P100,000 x 12%) 12,000

Cash sales to government units (P200,000 x 12%) 24,000

Credit sales to VAT persons (P400,000 x 12%) 48,000

Less: Input VAT from:

Purchases from VAT person per invoice (P324,800/9.3333) P 34,800

Payment of services for business purposes, gross of VAT

Standard input VAT – government (P200,000 x 7%) 14,000 56,600

Less: Final withholding VAT – government (P200,000 x 5%) 10,000

Notes:

1 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)

2 The 5% final withholding VAT is deductible from output VAT on sales to the government