Revised Financial Guidelines of the Value Added Tax Law, Title IV of Republic Act No. 8424

February 27, 2004 PPA FINANCE MEMORANDUM ORDER NO. 01-04 TO : All Port District Managers, Port Managers and Others Concerned SUBJECT : Revised Financial Guidelines of the Value Added Tax Law, Title IV of Republic Act No. 8424 1. Authority 1.1 Executive Order No. 273 which took effect on January 1, 1988 1.2 Republic Act No. 7716 which took effect on January 1, 1996 1.3 Republic Act No. 8241 which took effect on January 1, 1997 1.4 Republic Act No. 8424, the National Internal Revenue Code (Title IV) 1.5 Revenue Regulations No. 7-95 1.6 Revenue Memorandum Circular No. 3-96 1.7 Revenue Memorandum Circular No. 8-99 1.8 Revenue Regulations No. 8-2002 1.9 Revenue Memorandum Circular No. 2-2004 2. Guiding Policies 2.1. As provided in the above-stated laws, 10% VAT shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, importation of goods and sale or exchange of services including the use or lease of properties. 2.2. The VAT law likewise provided that VAT is an indirect tax which can be legally shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. 2.3. On the same principle, the shifting of VAT by the cargo handling operators/port operators to cargo owners/clients/port users is also proper. 2.4. Pursuant to Revenue Memorandum Circular No. 2-2004 issued by the Bureau of Internal Revenue, all gross sales/receipts of the Authority are subject to 10% VAT. 2.5. Charges against the vessels engaged exclusively in international shipping, however, shall be subject to 0% VAT or Zero-Rated VAT pursuant to Section 108B (4) of Republic Act No. 8424. 3. Guidelines 3.1. The port tariff and all port charges, fees and dues presently imposed by the Authority are exclusive of VAT, hence, in the collection of charges, 10% VAT shall be added thereto and a VAT Official Receipt shall be issued. HTScEI 3.2. Mechanics: Collection, Payment, Recording and Reporting 3.2.1. Only one consolidated quarterly VAT Return or monthly VAT Declaration covering the results of operation of the head office as well as the branches for all lines of business subject to VAT shall be filed by the taxpayer, for every return period with the Revenue District/BIR Office where the head office is registered. (Sec. 114(A) R.A. 8424). 3.2.2. The PDOs and PMOs shall submit their respective reports to the Assistant General Manager for Finance and Administration for consolidation. 3.2.3. Collection and Recording of 10% Value Added Tax (Output VAT) 3.2.3.1. A 10% Value Added (Output) Tax shall be collected from the port users in addition to the basic fees and charges. 3.2.3.2. The amount to be reflected in the PPA billing/invoice and the Official Receipt shall, however, be the gross amount inclusive of VAT as required in RMC No. 8-99. 3.2.3.3. The PPA billing/invoice and Official Receipt issued to a company paying for its client-cargo owner should be made under the "Name of the Payor For The Account of the cargo owner." 3.2.3.4. The collection should be deposited to the Centralized Collection Account. 3.2.3.5. Accounting Entries 3.2.3.5.1. Upon Billing of VATable Revenue dr. Receivables-Trade/Business dr. Receivables-Miscellaneous-Output VAT cr. Income cr. Trust Liabilities-Miscellaneous-Output VAT 3.2.3.5.2. Upon Collection of VATable Revenue dr. Cash Collecting Officers dr. Trust Liabilities-Miscellaneous-Output VAT dr. Miscellaneous Asset and Deferred Charges-Creditable Withholding VAT (for Withholding Agents authorized by BIR) dr. Miscellaneous Assets and Deferred Charges-Prepaid Taxes (for Withholding Agents authorized by BIR) cr. Miscellaneous Liabilities and Deferred Credits-Miscellaneous-Output VAT cr. Receivables-Trade/Business cr. Receivables-Miscellaneous-Output VAT 3.2.4. Payment and Recording of 10% Value Added Tax (Input VAT) 3.2.4.1. A VAT of 10% of the gross selling price of goods and/or services subject to VAT shall be paid by PPA to its VAT registered suppliers/contractors. 3.2.4.2. Only VAT invoices and/or VAT Official Receipts shall be issued to and accepted by PPA from suppliers/contractors on purchases and payments to substantiate proof of payment for VAT. These VAT invoices and/or VAT Official Receipts shall be used to support our claim for creditable Input VAT from BIR. 3.2.4.3. Purchases of goods and services must preferably be from VAT registered suppliers/contractors only. 3.2.4.4. Input VAT shall be paid only to VAT registered suppliers/contractors. 3.2.4.5. In cases of non-VATable purchases where the supplier/service-provider will issue a non-VAT Invoice/Official Receipt, submission of a certificate that the supplier/service-provider is registered with the BIR as a Non-VAT Taxpayer shall be required. aTcIAS 3.2.4.6. Accounting Entries 3.2.4.6.1. Upon Setting Up of Accounts Payable on VATable Purchases dr. Current Operating Expenses-Cash Charges dr. Fixed Assets-Furniture, Fixture, Books & Equipment-Economic Services dr. Fixed Assets-Furniture, Fixture, Books & Equipment-In Transit dr. Fixed Assets-Buildings & Structures-In Process cr. Accounts Payable 3.2.4.6.2. Upon Payment of Accounts Payable dr. Accounts Payable dr. Miscellaneous Asset & Deferred Charges-Miscellaneous Input VAT cr. Trust Liabilities-Nat'l. Gov't. Agencies Withholding on VAT cr. Trust Liabilities-Nat'l. Gov't. Agencies Other Withholding Taxes cr. H.O./PDO/PMO Clearing Account/Fixed Assets/Current Operating Expense cr. Cash-Other Banks 3.2.5. Input VAT Creditable Against Output VAT 3.2.5.1. The Input VAT is deducted from Output VAT to determine the net Value Added Tax to be remitted to BIR at the end of a taxable month/quarter. 3.2.5.2. If the Output VAT exceeds Input VAT, the excess shall be the tax due for remittance to BIR. 3.2.5.3. If the Input VAT exceeds Output VAT, the excess shall be carried over and deducted from the Output VAT of the succeeding period/s. 3.2.5.4. Accounting Entries. 3.2.5.4.1. Upon Preparation of VAT Declaration/VAT Return and Remittance of Net VAT Payable to BIR dr. Miscellaneous Liabilities & Deferred Credits-Miscellaneous-Output VAT cr. Miscellaneous Assets & Deferred Charges Miscellaneous-Input VAT cr. Miscellaneous Assets & Deferred Charges Creditable Withholding VAT cr. Cash-Other Banks 3.2.5.4.2. Upon Remittance of Creditable Withholding VAT and Expanded Withholding Taxes dr. Trust Liabilities-National Government Agencies-Withholding on Input VAT dr. Trust Liabilities-National Government Agencies-Other Withholding Taxes cr. Cash-Other Banks 3.2.6. Filing of VAT Declaration and VAT Return 3.2.6.1. One consolidated VAT Declaration (BIR Form 2550M) for PPA shall be filed and the Net VAT Payable remitted at the end of the taxable month by the Head Office. 3.2.6.2. Likewise, one consolidated VAT Return (BIR Form 2550Q) shall be filed and the Net VAT Payable remitted at the end of each taxable quarter by the Head Office. TCcDaE 3.2.6.3. An electronic Summary List of Sales and Summary List of Purchases by transaction ( in 3 . 5 inch floppy diskettes ) shall be submitted by the PDO/PMO to Treasury Department within 10 days after the end of each month for consolidation and submission to BIR. To facilitate reconciliation, a hard copy of the transactional Summary List of Sales and Summary List of Purchases shall likewise be submitted with the following information: Summary List of Sales Official format of BIR 1. BIR registered name of the buyer who is engaged in business/exercise of profession; 2. Taxpayer Identification Number of the buyer (only for sales that are subject to VAT); 3. Exempt Sales; 4. Zero-rated Sales; 5. Sales subject to VAT (exclusive of VAT); and 6. Output Tax (VAT on sales). Summary List of Purchases Official format of BIR 1. BIR registered name of the seller/supplier/service-provider; 2. Address of seller/supplier/service-provider; 3. Taxpayer Identification Number (TIN) of the seller; 4. Amount of Gross Purchases 5. Amount of Exempt Purchase 6. Amount of Zero-Rated Purchase 7. Amount of Taxable Purchase 8. Amount of Purchase of Services 9. Amount of Purchase of Capital Goods 10. Amount of Purchase other than Capital Goods 11. Amount of Input Tax 12. Amount of Gross Taxable Purchase To capture the above enumerated data as required in Section 237 of Republic Act No. 8424, accomplishment of the Customer Registration Form (Annex A) and the Vendor Registration Form (Annex B) should be required before transactions are made. Exceptions will be sales transactions involving an amount less than P100.00 provided that at least the name is captured in the Summary List of Sales. Section 237 of RA 8424 is quoted as: "Sec. 237. Issuance of Receipts of 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 of nature of services: Provided, however, That in the case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more, or regardless of the amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipts is issued to cover payment made as rentals, commissions, compensations or 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." CHcESa Furthermore, casual customers as provided in RR 8-2002 who are issued Terminal Fee Tickets by the Authority shall not be required to accomplish the Customer Registration Form. All Terminal Fee Tickets issued for the day shall be covered by one Official Receipt under the name "Various Casual Customers" and reflected in the Summary List of Sales without name but identified as "Casual Customers". 3.2.6.4. An Analysis of Gross Receipts subject to VAT formatted below shall likewise be submitted to Treasury Dept. within 10 days after the end of each month. The amount of Output VAT collected must tally with the amount of Miscellaneous Liabilities & Deferred Credits-Miscellaneous-Output VAT reflected in the Journal of Collection & Deposit and the Trial Balance. PHILIPPINE PORTS AUTHORITY PDO/PMO______________ ANALYSIS OF GROSS RECEIPTS SUBJECT TO OUTPUT VAT FOR THE MONTH OF __________ PARTICULARS AMOUNT Accounts Receivable-Trade, Beginning Balance P xxx.xx Add: Gross Revenue for the month xxxxx.xx Less: Accounts Receivable-Trade, Ending Balance xx.xx Gross Receipts Subject to Output VAT P xxxxx.xx 10% Output VAT Collected (8-86-906) P xxxx.xx 4. Repealing Clause This Finance Memo Order supersedes PPA Memo Order No. 15-88. All other PPA issuances inconsistent herewith are hereby amended/modified accordingly. 5. Effectivity This Finance Memo Order shall take effect immediately. (SGD.) AIDA P. DIZON Assistant General Manager Finance and Administration ANNEX A Customer Registration Form ANNEX B