Deemed Sales Transaction for VAT in the Philippines (Value-Added Tax)

Deemed Sales Transactions for VAT in the Philippines

Output VAT normally arises from sales or exchanges made in the ordinary course of business for cash, goods, or other consideration. In a typical sale, the seller delivers goods or services, and the buyer provides payment or other consideration.

For VAT purposes, certain transactions are treated as deemed sales, even if they are not ordinary sales or do not involve conventional buyer payment. The presenter discusses four categories:

1. Goods taken for personal use or otherwise used outside the course of business

Goods or property originally intended for sale or business use are treated as sold when a VAT-registered business transfers, uses, or consumes them outside its business.

Example: A VAT-registered restaurant uses ₱50,000 worth of food, exclusive of VAT, for a holiday celebration. The presenter says this results in ₱6,000 of output VAT.

2. Goods or property distributed to shareholders, investors, or creditors

A distribution of business goods or property to shareholders or investors as a share of profits is treated as a deemed sale. The same applies when goods are transferred to a creditor to pay a debt or obligation.

Examples:

• A securities dealer distributes ₱1 million of goods normally sold in its business as property dividends. The presenter says the distribution is subject to VAT.
• A manufacturer pays a maturing debt by transferring inventory worth ₱112,000, inclusive of VAT. The presenter says the VAT is ₱12,000.

3. Consigned goods unsold after 60 days

Goods are treated as sold if they remain unsold more than 60 days after the date they were consigned.

Example: A merchandiser consigns goods worth ₱80,000, exclusive of VAT. Since they remain unsold from January through March—more than 60 days—the presenter says the transaction is subject to ₱9,600 of output VAT.

4. Retirement or cessation of business

When a business retires or ceases operations, goods on hand are treated as sold. These may include capital goods, stock-in-trade, supplies, and materials. This applies whether or not a new owner or successor continues the business.

Example: A corporation buys a proprietor’s automotive-parts business, including inventory valued at ₱1.2 million and supplies valued at ₱300,000, both exclusive of VAT. The presenter says the combined ₱1.5 million is subject to ₱180,000 of output VAT.

The examples use a 12% VAT rate. The central lesson is that a transaction can trigger output VAT even without a normal sale if it falls into one of these deemed-sale categories.

Speakers and Sources Featured

• Gerard Carpizo — The presenter introduces himself as Gerard. The closing subtitles sound like “Bernard,” which may be an auto-captioning error.
• No other speakers or external sources are featured in the subtitles.