d. Transactions Deemed Sale Subject to VAT

Transactions Deemed Sale Subject to VAT

The law deems the enumerated transactions below like an actual sale, and hence subject to VAT on sale of goods or properties.

The following transactions shall be "deemed sale" pursuant to Sec. 106 (B) of the Tax Code¹:

• Transfer, use or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business. Transfer of goods or properties not in the course of business can take place when VAT-registered person withdraws goods from his business for his personal use;
• Distribution or transfer to:
• Shareholders or investors as their share in the profits of the VAT-registered person;

Property dividends which constitute stocks in trade or properties primarily held for sale or lease declared out of retained earnings and distributed by the company to its shareholders shall be subject to VAT based on the zonal value or fair market value at the time of distribution, whichever is applicable.

• Creditors in payment of debt or obligation.
• Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned. Consigned goods returned by the consignee within the 60- day period are not deemed sold;
• Retirement from or cessation of business with respect to all goods on hand, whether capital goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new owner or successor. The following circumstances shall, among others, give rise to transactions "deemed sale" for purposes of this Section;
• Change of ownership of the business. There is a change in the ownership of the business when a single proprietorship incorporates; or the proprietor of a single proprietorship sells his entire business.
• Dissolution of a partnership and creation of a new partnership which takes over the business. (Rev. Regs. 16-05)²