Flashcards Studio

A VAT-registered IT hardware distributor, NetCom Systems, and a VAT-registered systems-integrator, CodeGrid Solutions, engage in a barter: NetCom transfers 25 used servers with a fair market value (FMV) of PHP 2,250,000 to CodeGrid in exchange for 25 new server racks with an FMV of PHP 2,250,000. No cash changes hands. (a) Identify the doctrine governing barters or exchanges between VAT-registered persons that makes the exchange a taxable sale (transactions deemed sale subject to VAT). (b) Compute the VAT due by each party on this barter, stating the tax base and rate used, and showing the arithmetic for the FMV values of PHP 2,250,000 for each side.