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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

MetroPack Ltd., a VAT-registered packaging supplier, and TerraBev Ltd., a VAT-registered beverage producer, enter into a barter: MetroPack transfers 40 used stainless-steel vending machines with a fair market value (FMV) of PHP 1,800,000 to TerraBev in exchange for 40 brand-new beverage coolers with an FMV of PHP 1,900,000. 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 1,800,000 for MetroPack and PHP 1,900,000 for TerraBev.

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Barter or exchange between VAT-registered persons is a taxable sale (transactions deemed sale subject to VAT); the tax base for each party is the FMV of the goods transferred to the other party, and the rate is 12%. VAT is due only if there is cash consideration; with no cash, no VAT is imposed. The VAT is computed on the total FMV of both sides as a single transaction, using a base of PHP 3,700,000 at 12%. Only the party that receives goods is liable to VAT; the VAT base is the FMV of the goods it receives, and the other party has no VAT liability.

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