![]() ![]() The disagreement lies on which should be the basis/timing – upon sale/purchase or upon receipt/payment? This would harmonize the rules and avoids the confusions caused by the difference. There is no disagreement that the treatment for VAT purposes for both sales of goods and services, including the prescribed documentations, should be uniform. In essence, the tax base/timing/documentation for the sale of services, which is presently based on gross receipts/official receipts, is being harmonized with the current tax base/timing/documentation for sales of goods/properties. It follows that the present prescribed documentation for services, which is the official receipt, shall be discarded and the sales invoice shall be required. Consequently, the input tax on the part of the buyer shall be recognized upon purchase. This means that the output taxes on sale of services shall also be levied and collected upon sale. And based so far on the proposed provisions of the bills, the current rules for sales of goods shall be adopted for sales of services. The bills propose to harmonize the rules by providing a uniform treatment for sales of goods and services. It follows that the required documentations are also different – sales invoice for goods and official receipt for services. ![]() On the part of the buyer, the input tax for the purchase of goods needs to be recognized upon purchase while the input tax on purchase of services is to be recognized upon payment. Thus, the output tax on sales of goods is required to be reported upon sale while the output tax on sale of services is required to be reported upon receipt. On the other hand, for sale of services, VAT is levied, assessed and collected based on gross receipts. For goods, VAT is levied, assessed, and collected on the gross selling price or gross value in money of the goods or properties sold. Based on the present law, there is a distinction between sales of goods and sales of services. One of the more significant but contentious provisions of the proposed laws is related to the proposed harmonization of the rules on value-added tax (VAT) treatment of sales of goods and services. The bill was already approved by the House of Representatives and is now being discussed at the Senate Ways and Means Committee. These include the Ease of Paying Taxes Act. In my article in this column at the beginning of the year, I mentioned about the pending bills on taxation that are worthy of consideration and support. And it is my belief that “gross receipts” as the reckoning for the recognition of VAT would better achieve that objective than “gross sales”. In the present exercise, since the objective is to “ease the payment of taxes”, then the changes should lean towards the realization of that objective. It is the law that fixes it, and whatever the law requires should prevail. "From a purely legal perspective, no rule is superior over the other. ![]()
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