CHAPTER 7 - THE REGULAR OUTPUT VAT

True or False 1
F 1. Sellers of services are subject to VAT on their gross sales or receipts.
F 2. Sellers of goods are subject to VAT on gross receipts. property sold or disposed of
F 3. Sellers of properties are subject to VAT on the fair market value of the
F 4. Gross receipts include agency monies and bank loans received by the taxpayer.
T 5. When the discount exceeds 30% of the actual market value, the selling price is considered
unreasonably lower.
F 6. If the selling price exceeds the fair value, the basis of the output VAT is the fair value.
F 7. If the selling price is below fair value, the basis of the output VAT is the fair value.
F 8. If the selling price is unreasonably lower, the basis of the output VAT is the selling price.
F 9. "Gross receipt" means collections including evidences of indebtedness such as promissory
notes given by the client.
T 10. Advances given by the client are included in gross receipts.
F 11. Client expenses reimbursed by the client to the business taxpayer are part of gross
receipt.
T 12. Out-of-pocket expenses of the service provider reimbursed by the client are part of gross
receipt.
F 13. Only dealers in real properties are subject to VAT on the sale of real properties.
T 14. A person not engaged in business is not subject to VAT on his sale of goods or properties.
F 15. For purposes of the VAT, fair value of real property means the higher of independent
appraisal value and zonal value.
F 16. If the VAT is based on the fair value of the property, the same is presumed to be inclusive
of the VAT.
F 17. The VAT on the installment sale of goods may be reported in installment
F 18. The VAT on the sale of real property is always reported in installment.
F 19. The installment reporting of output VAT on services is as allowed so long as the initial
payments do not exceed 25% of the agreed contract price.
F 20. The installment reporting of VAT must be over the estimated life of the
property in months or 60 months whichever is lower.

True or False 2
T 1. The sale of properties considered ordinary assets is subject to output VAT.
T 2. The sale of real property on the deferred payment basis, not on the installment basis, shall
be subject to VAT similar to a cash sale.
T 3. Interest and penalties are subject to VAT in the months they are collected.
T 4. The sale of capital assets such as investments is not subject to output VAT.
T 5. The donation of business properties considered ordinary assets by the business owner is a
transaction "deemed sale".
F 6. The distribution of cash dividends is a deemed sale subject to output VAT.
F 7. The distribution of property dividend in the form of stocks of another corporation is
subject to output VAT.
F 8. The sales of all ordinary assets are exempt from VAT.
F 9. The exchange of investments in payment of debt is a deemed sales transaction subject to
VAT.
F 10. The exchange of residence in payment of debt is subject to VAT as a deemed sale
transaction.
F 11. Consignment is deemed sold if not returned by the consignee in 30 days.
T 12. The consignee is subject to VAT on the commission income on sales of consigned goods.
T 13. The consignor is subject to VAT on the sales of consigned goods by its consignees.
T 14. The vatable inventories and properties of a VAT taxpayer upon retirement or cessation of
business are subject to VAT as deemed sales.
T 15. The output VAT deemed sales upon retirement or cessation of business shall be based on
the market price or cost of goods whichever is lower.
T 16. The commissioner shall determine the market value in cases of transactions deemed
sales and sales with unreasonably lower gross selling prices, sale transaction possession shall
be deemed sold at the date of change.
F 17. The change in corporate control over a corporation is considered a deemed
F 18. When a business changes its trade name, vatable items or properties in its
T 19. The consolidation of a corporation with another corporation is not
F 20. The merger between two corporations shall result in a deemed sale considered a deemed
sale transaction.
Multiple Choice - Theory: Part 1 d. Fair value or gross selling price whichever
1. What is the tax basis of the output VAT is higher
on sales of services?
a. Gross selling price 7. What is the tax basis of the output VAT
b. Gross receipts on deemed sales?
c. Fair value a. Gross selling price
d. Fair value or gross selling price whichever b. Gross receipts
is higher c. Fair value
d. Fair value or gross selling price whichever
2. What is the tax basis of the output VAT is higher
on sales of goods?
a. Gross selling price 8. Which of the following selling prices is
b. Gross receipts considered unreasonably lower
c. Fair value Fair value Selling price Discount
d. Fair value or gross selling price whichever a. P 200,000 P 240,000 -None-
is higher b. P 250,000 Р 172,500 P 77,500
c. P 400,000 P 300,000 Р 100,000
3. What is the tax basis of the output VAT d. P500,000 P 380,000 P 120,000
on exchange of properties?
a. Gross selling price 9. Which of these is excluded in the gross
b. Gross receipts selling price?
c. Fair value of properties received a. Excise tax
d. Fair value or gross selling price whichever b. Output tax
is higher c. Contract price
d Delivery charges
4. What is the tax basis of the output VAT
on sales of real properties? 10. Which of the following is excluded in
a. Selling price gross receipts?
b. Gross receipts a. Cash collection
c. Fair value b. Check collection
d. Fair value or selling price whichever is c. Promissory note given by the buyer
higher d. None of these

5. What is the tax basis of the output VAT 11. Which is not considered in the
on sales of goods with unreasonably lower determination of the tax base of the VAT on
selling price? sale of real properties?
a. Gross selling price a. Selling price
b. Gross receipts b. Zonal value
c. Fair value c. Assessed value
d. Fair value or gross selling price whichever d. Appraisal value
is higher
12. Which of the following is subject to the
6. What is the tax basis of the output VAT Output tax?
on installment sales? a. Sale of books
a. Gross selling price b. Sale of agricultural or marine food
b. Installment received products
c. Fair value of property sold
c. Sale of non-food agricultural or marine of P2,000,000, assessed value of P1,800,000
products and independent appraisal value of
d. Sale of educational services by a school P2,400,000.
What is the "gross selling price for VAT
13. Which is subject to Output tax? purposes?
a. Gross receipts of domestic common a. P1,800,000
carriers by land b. P1,900,000
b. Gross receipts of international common c. P2,000,000
carriers d. P2,400,000
c. Gross receipts of banks
d. Gross receipts of non-life insurance 4. Which of the following is not subject to
companies output tax when sold by a realty dealer?
a. Sale of properties held for sale
14. Which is subject to the 12% regular b. Sale of properties used in business
output tax? c. Sale of investment in stocks
a. Sale of residential dwelling with d. Exchange of properties held for sale in
P1,500,000 unit price settlement of debt
b. Gross receipts from residential dwelling
with P15,000 monthly rental 5. The output VAT on the installment sale of
c. Receipts from publishing of books property may be reported in installment if
d. Gross receipts of hospital a. the ratio of initial payment exceeds 25%
of the selling price.
15. Which is not subject to the 12% output b. the ratio of initial payment exceeds 25%
tax? of the fair value.
a. Gross receipts from restaurant c. the ratio of initial payment does not
b. Gross receipts from professional practice exceed 25% of the selling price.
c. Gross receipts from race track operations d. the ratio of initial payment does not
d. Sale of medicines exceed 25% of the fair value.

Multiple Choice - Theory: Part 2 6. Which is not a deemed sales transaction?

1. Which of the following is subject to a. Distribution of property dividend
output tax if sold by a person not engaged b. Dacion en pago
in business? c. Consignment of goods when actual sale is
a. Sale of personal residence made within 60 days
b. Sale of car d. Cessation of status as VAT taxpayer
c. Sale of investment in stocks
d. None of these 7. Which is a deemed sales transaction
subject to VAT?
2. Which of the following when sold will a. Retirement of business by a non-VAT
result in an output VAT? taxpayer
a. Vegetables b. Dacion en pago of properties by a person
b. Furniture not engaged in business
c. Fruits c. Distribution of property dividend by a VAT
d. Rice taxpayer
d. All of these
3. A real property is sold by a dealer for
P1,900,000. The property had a zonal value
8. Which of the following dividend invoice.
declaration is a deemed sale subject to VAT? Statement 2: If the seller failed to indicate
a. Distribution of stock dividends the VAT on the invoice, the saleshall be
b. Distribution of investments as property presumed exempt.
dividends Which statement is correct?
c. Distribution of cash dividends a. Statement 1
d. Distribution of properties held for sale as b. Statement 2
dividends c. Both statements
d. Neither statement
9. Which of the following properties is not
subject to VAT in a foreclosure sale (i.e. 13. Statement 1: Only VAT taxpayers are
dacion en pago)? generally subject to the output tax.
a. Cars held for sale Statement 2: Non-VAT taxpayers never pay
b. Machineries the 12% output tax.
c. Corporate building Which statement is correct?
d. Vacant lot not used in business a. Statement 1
b. Statement 2
10. Which is a deemed sale transaction? c. Both statements
a. Change in corporate name d. Neither statement
b. Merger or consolidation of corporations
c. Sale of the entire business 14. Which is subject to the 12% regular
d. Placement of an investment by a output VAT?
shareholder a. Sale of silver to the Bangko Sentral ng
Pilipinas
11. Statement 1: If the output VAT is b. Sale of services to a non-resident person
erroneously billed, the amount shown in c. Sale of office supplies to the Asian
the invoice is deemed exclusive of VAT. Development Bank
Statement 2: If the output VAT is not d. Export sale by a non-VAT taxpayer
separately indicated in the invoice, it shall
be computed as 12/112 of the 15. Which of the following receipts from a
invoice price domestic common carrier are not subject to
Which statement is false? regular output tax?
a. Statement 1 a. Receipts from transport of passengers by
b. Statement 2 land
c. Both statements b. Receipts from transport of cargoes by
d. Neither statement land
c. Receipts from transport of passengers by
12. Statement 1: By revenue regulation, the sea
VAT shall be displayed separately0from the d. Receipts from transport of cargoes by air
selling price in the