Journal Entry for VAT Exempt Sale

The ff. are the Journal Entries for VAT Exempt Sale


        dr    Cash                                      xxx
        cr          VAT Exempt Sale                         xxx
       

Journal Entry for VATable Sale To Goverment

The ff. are the Journal Entries for VATable Sales/Receipts - Government


        dr    Cash                                               xxx
        dr    Creditable WHT                            xxx
        dr    VAT Withheld                                xxx
        cr          VATable Sales - Government                 xxx
        cr          VAT output                                             xxx

Journal Entry for VATable Sales - Private

The ff. are the Journal Entries for VATable Sales/Receipts - Private


a) If the purchaser did not deduct Creditable Withholding Tax

        dr    Cash                                        xxx
        cr          VATable Sales - Private               xxx
        cr          VAT output                                  xxx



b) If the purchaser deducted Creditable Withholding Tax

        dr    Cash                                               xxx
        dr    Creditable WHT                            xxx
        cr          VATable Sales - Private                          xxx
        cr          VAT output                                             xxx

BIR Required Books Of Accounts

Wondering what Books Of Accounts which you must register to the BIR?

 Follow what the Tax Code is requiring.

Sec 232 of NIRC state that a journal and a ledger must be maintained by a Taxpayer (TP).

Sec 113 (C) of NIRC also requires that a Taxpayer must maintain a subsidiary sales journal and a subsidiary purchases journal for VAT-Registered.

In summary, the Basic Books Of Accounts a TP must register are the ff.:

1. General Journal
2. General Ledger
3. Subsidiary Sales Journal
4. Subsidiary Purchases Journal

There are also Journals and Ledgers which maybe registered by a TP under Sec 233 of NIRC. These are additionals but not required.

Again, consult a professional and seek advice which Books are right for your business. 

Treatment of Directors Fee according to BIR

In view thereof, the penultimate paragraph of Revenue Memorandum Circular  No.  34-2008 stating that directors receiving fees, per diems, allowances, and the like, from  corporations of which they are directors but are not employees thereof “fall  under  the  category of  sellers of  services  under 
Title IV  of the Code who are liable to pay the 12%  VAT on their gross receipts pursuant to Section 108 thereof, or to the 3% percentage tax imposed under Section  116,  should  they    fail  to    meet    the    VAT  threshold”


Source / Reference : RMC 77-2008

Your BIR Certificate Of Registration (BIR Form 2303)

Wondering what must be indicated in your Certificate Of Registration (COR) or the BIR Form 2303?


It must show your TIN, Registered Name, Business Name, the Tax Type, the Line of Business.

What are the important things you must consider when applying for COR?

The Tax Type and the Line of Business.

The Tax Type are those types of taxes that you must file and pay to the BIR.

These are the following:

1. Business Tax
2. Withholding Tax
3. Income Tax

The Business Tax is either VAT or Percentage Tax.

Withholding Tax are WHT on Compensation, WHT Expanded and WHT others

Income Tax are those Quarterly (1701Q and 1702Q) and Annually filed (1701 and 1702).

All of these taxes must be enumerated in your COR. Make it sure that they are there otherwise you will have some consequences to face at a later time if they are not complete.

Another important thing is the Line of Business.

The Line of Business is your basis in preparing your Financial Statements.  Make it sure you know your business nature whether you are engage in trading or manufacturing or servicing. And ensure that the right business nature is what reflected in that section otherwise your financial reporting will be prepared in mistake or error.

Also, your Tax Types and Line of Business are the point of reference of what Books Of Accounts you must register, and what are those you must indicate in your ATP application for Invoicing and Receipting.

So, I would suggest early on consult a professional when applying for your Business Registration to the BIR.

Tax-Basis Accounting Bookkeeping

Be aware!

That some of those subject to BIR examination/audit are those not using the Tax-Basis accounting bookkeeping ...

see Section 257 (B) (3)  of NIRC

SEC. 257. Penal Liability for Making False Entries, Records or Reports, or Using Falsified or Fake Accountable Forms. -
(B) Any person who:
(3)  Offers any taxpayer the use of accounting bookkeeping records for internal revenue purposes not in conformity with the requirements prescribed in this Code or rules and regulations promulgated thereunder;

See also

RMC 44  -2002


RMC 22-2004

Contents of VAT Invoice and Official Receipt

See Section 113 (B) of NIRC

(B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt:

(1)  A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); and

(2)  The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. Provided, That:

(a)  The amount of the tax shall be known as a separate item in the invoice or receipt;

(b)  If the sale is exempt from value-added tax, the term "VAT-exempt sale: shall be written or printed prominently on the invoice or receipt;

(c)  If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt.

(d)  If the sale involved goods, properties or services some of which are subject to and some of which are VAT zero-rated or Vat exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be known on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

(3)  The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and

(4)  In the case of sales in the amount of One thousand pesos (P1,000) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and Taxpayer Identification Number (TIN) of the purchaser, customer or client. ^[75] 

AUTHORITY TO PRINT (ATP) AND MANNER OF PRINTING OF RECEIPTS / INVOICES

RR 18-2012 enumerated the lists of manner of printing and requirements of printing Receipts and Invoices

Fill-up BIR Form 1906 and
Bring COR/BIR Form 2303, ATP, last booklets of SI/OR/Commercial Invoices
Then, follow Section 3 of RR 18-2012

See Section 3 of RR 18-2012

SECTION 3.POLICIES AND GUIDELINES 

AUTHORITY TO PRINT (ATP) AND MANNER OF PRINTING OF RECEIPTS / INVOICES.- 

1. All persons, whether private or government, who are engaged in business shall secure /apply from the BIR an Authority to Print principal and supplementary receipts/invoices. 

National Government Agencies (NGAs), Government Owned and Controlled Corporation (GOCCs) and Local Government Units (LGUs) engaged in proprietary functions shall apply for ATP in the printing of their principal and supplementary receipts/invoices. 

2. For newly registered taxpayers, the ATP shall be secured simultaneously with the Certificate of Registration (COR).

3. The Taxpayer-applicant shall apply for an ATP and submit the required documents, using the on-line ATP System. However, in case of systems downtime, taxpayer shall apply for ATP and submit the required documents at the RDO or concerned LT Office having jurisdiction over the taxpayer’s Head Office.

4. As a general rule, all applications for ATP of the Head Office (HO) and all its branches shall be done on-line. In case of systems downtime as officially posted in the BIR website, all applications for ATP shall be manually filed and the corresponding ATP shall be manually issued through an alternative off-line ATP system, by the RDO or concerned LT Office having jurisdiction over the taxpayer’s Head Office. All applications for ATP processed during systems downtime shall be immediately uploaded by the concerned RDO or LT Office, upon availability of the on-line ATP system. 

5. There shall be one application for ATP per establishment (HO or branch) which shall be filed with RDO/LT Office concerned where the HO is registered. Each application shall be issued a separate ATP. The principal and supplementary receipts/invoices of the HO and each of the branches must have their own independent series of serial number. Each application as well as the printed accounting document/s shall reflect the exact address of the branch, TIN and the branch code attached to the TIN. The TIN, branch code (if applicable) and address of the HO must be reflected in the printed principal and supplementary Receipts/Invoices used in the business premises of the HO. Likewise, the printed principal and supplementary receipts/invoices to be issued/used in the branches (if applicable) must reflect the TIN, branch code and address of the branch/es.

6. The approved ATP shall be valid only upon full usage of the inclusive serial numbers of principal and supplementary receipts/invoices reflected in such ATP or five (5) years from issuance of the same, whichever comes first.

7. No ATP shall be granted for the printing of principal and supplementary receipts/invoices unless the required information which shall be prescribed in a separate revenue issuance, are reflected therein.

8. The replicate copy of the ATP issued shall be printed at the inside back portion of the cardboard cover of each booklet/pad of principal and supplementary receipts/invoices printed.

9. Only BIR Accredited Printers shall have the exclusive authority to print principal and supplementary receipts/invoices.

10. The on-line ATP System shall generate reports that will be prescribed in the Revenue Memorandum Order that will be issued for this purpose.

What are the other documents to be issued for selling of goods, properties, services, and use of services?

For selling of goods or properties:

Aside from the VAT Sales Invoice or Non-VAT Sales Invoice, sellers also issue a Collection Receipt.

For selling of services or use/lease of properties:

Aside from the VAT Official Receipt or Non-VAT Official Receipt, sellers also issue a Billing Invoice.

Collection Receipts and Billing Invoices belong to the so-called Supplementary / Commercial Invoices. These documents must also be covered by ATP and be printed by BIR accredited printers.

Source: Revenue Regulation 18-2012

Reference : Section 2, Number 3 of RR 18-2012

3. SUPPLEMENTARY RECEIPTS / INVOICES - for purposes of these Regulations, these are also known as COMMERCIAL INVOICES. It is a written account evidencing that a transaction has been made between the seller and the buyer of goods and/or services, forming part of the books of accounts of a business taxpayer for recording, monitoring and control purposes.

It is a document evidencing delivery, agreement to sell or transfer of goods and services which includes but are not limited to delivery receipts, order slips, debit and/or credit memo, purchase order, job order, provisional/temporary receipt, acknowledgement receipt, collection receipt, cash receipt, bill of lading, billing statement, statement of account, and any other documents, by whatever name it is known or called, whether prepared manually (handwritten information) or pre- Page 3 of 5 printed/pre-numbered loose-leaf (information typed using excel program or typewriter) or computerized as long as it is used in the ordinary course of business being issued to customers or otherwise.

Supplementary receipts/invoices, for purposes of Value-Added Tax, are not valid proof to support the claim of Input Taxes by buyers of goods and/or services. 

What to issue if your business is selling services or use of properties? Sales Invoice? or Official Receipt?

If you are a seller or buyer of services or use/lease of properties, what document/s must you issue (for sellers) / receive (for buyers)?

The answer depends on what business tax type the seller is registered.

If the seller is VAT-Registered, he/she must issue a VAT Official Receipt

Reference: Section 2, Number 2, Subnumber 2.2 of RR 18-2012

2.2 VAT OFFICIAL RECEIPT - for purposes of Value Added Tax (VAT) pursuant to Section 108 of the NIRC, as amended, it is a proof of sale of service and/or leasing of properties which shall be the basis of the output tax liability of the seller and the input tax claim of the buyer. It is a written admission or acknowledgment of the fact that money has been paid and received for the payment or settlement between persons rendering services and its customers.

If the seller is not a VAT-Registered (Percentage Tax), he/she must issue a Non-VAT Official Receipt

Reference: Section 2, Number 2, Subnumber 2.4 of RR 18-2012

2.4 NON-VAT OFFICIAL RECEIPTS - for purposes of Percentage Tax pursuant to TITLE V of the NIRC, as amended, it is a proof of sale of service and/or leasing of properties which shall be the basis of the Percentage Tax liability of the seller. It is a written admission or acknowledgment of the fact that money has been paid and received for the payment or settlement between persons rendering services and its customers. 

Source: RR 18-2012

Related topics:

Issuance of Sales Invoices, Official Receipts or Commercial Invoices

What to issue if your business is selling goods or properties? Sales Invoice or Official Receipt

What to issue if your business is selling goods or properties? Sales Invoice? or Official Receipt?

If you are a seller or buyer of goods or properties, what document/s must you issue (for sellers) / receive (for buyers)?

The answer depends on what business tax type the seller is registered.

If the seller is VAT-Registered, he/she must issue a VAT Sales Invoice

Reference: Section 2, Number 2, Subnumber 2.1 of RR 18-2012

2.1 VAT SALES INVOICE - for purposes of Value Added Tax (VAT) pursuant to Section 106 of the NIRC, as amended, it is a written account evidencing the sale of goods and/or properties issued to customers in an ordinary course of business, whether cash sales or on account (credit) which shall be the basis of the output tax liability of the seller and the input tax claim of the buyer. Cash Sales Invoices and Charge Sales Invoices falls under this definition.

If the seller is not a VAT-Registered (Percentage Tax), he/she must issue a Non-VAT Sales Invoice

Reference: Section 2, Number 2, Subnumber 2.3 of RR 18-2012

2.3 NON-VAT SALES INVOICES - for purposes of Percentage Tax pursuant to Section 116 of the NIRC, as amended, it is a written account evidencing the sale of goods and/or properties issued to customers in an ordinary course of business, whether cash sales or on account (credit) which shall be the basis of the Percentage Tax liability of the seller. 

Source: RR 18-2012

Related topics:

What to issue if your business is selling services or use of properties? Sales Invoice or Official Receipt

Issuance of Sales Invoices, Official Receipts or Commercial Invoices

Issuance of Sales Invoices, Official Receipts or Commercial Invoices

Accordingly, Taxpayers who are engage in business or rendering services to others shall issue a duly registered receipts or sales or commercial invoices ...

... indicate in the receipt or invoice the name, business style, address and TIN of the purchaser.

Source: http://www.bir.gov.ph/index.php/tax-code.html#title4

Sec 237, NIRC

SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That where the receipt is issued to cover payment made as rentals, commissions, compensations, fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser.

The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period.

Related topics:

What to issue if your business is selling goods or properties? Sales Invoice or Official Receipt

What to issue if your business is selling services or use of properties? Sales Invoice or Official Receipt