Practice question
A VAT-registered trader transfers covered inventory to a creditor in payment of a business debt. It says no VAT transaction can arise because no cash price was received. Which is correct?
- Every debt payment is necessarily exempt because it is not cash.
- The creditor automatically becomes the trader's shareholder.
- The transfer eliminates every prior tax obligation.
- The debt-payment transfer falls within the specified deemed-sale category, subject to the applicable rules.
- Only foreign-currency debt can be covered.
Legal references
- NIRC Sections57-58,105-106 and110: https://lawphil.net/statutes/repacts/ra1997/ra_8424_1997.html
- RA11976, Sections9-10, current NIRC58(E) credit/refund conditions and trust-fund rule: https://lawphil.net/statutes/repacts/ra2024/ra_11976_2024.html
Answer this question in flashcards to review your response and continue practicing.