VAT Ruling No. 023-93

April 30, 1993 VAT RULING NO. 023-93 Section 6 R.R. 5-87-000-00-023-93 Ms. Fe A. Veloso 8th Floor, Equitable Bank Bldg. 262 Juan Luna St. Binondo Manila M a d a m : This has reference to your letter dated March 31, 1992 wherein you represented that your client, a corporation and VAT registered receives purely commission income from an insurance company which is exempted from VAT. Being a VAT registered person, it is your obligation to pay the VAT based on your commission income and the VAT of 10% can be passed on to the exempted insurance company which would treat the VAT as an additional expense for buying your service. cdtech In reply, please be informed that in your particular case where the VAT output tax was computed inclusive of the commission income, output tax should be 1/11 of the total amount or P10,000 x 1/11 which is P909.09, not P1,000 per your computation. The proper entries in your books of account should have been as follows: (1) Cash P10,000 Commission Income P10,000 To record commission income (2) Commission income P909.09 VAT payable P909.09 To set up VAT payable (3) VAT payable P909.09 Cash P909.09 To record VAT payment The basis of the EWT withheld by the insurance company would remain P10,000 as actually paid to you. There is no conflict because it could appear in BIR Form 1743.1 (Certificate of Creditable Income Tax Withheld at Source) that P10,000 was the tax base of the EWT which you actually received and recorded. Subsequent entries would have no bearing on this as long as it could be explained. cdll Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner (Officer-In-Charge)