Notes Input VAT PDF

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INPUT VATCreditable Input VAT – not ALL input VAT paid on purchases is creditable or deductible against output VATRequisites of a creditable Input VAT The input VAT must have been paid or incurred in the ordinary course of business The input VAT evidenced by a VAT invoice or official receipt The VAT...

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INPUT VAT Creditable Input VAT – not ALL input VAT paid on purchases is creditable or deductible against output VAT Requisites of a creditable Input VAT 1. The input VAT must have been paid or incurred in the ordinary course of business 2. The input VAT evidenced by a VAT invoice or official receipt 3. The VAT invoice or receipt must be issued by VAT-registered person 4. The input VAT is incurred in relation to VATABLE sales (not exempt sales) Types of Input VAT 1. Transitional Input VAT 2. Regular Input VAT 3. Amortization of Deferred Input VAT 4. Presumptive Input VAT 5. Standard Input VAT 6. Input VAT Carry-over

TRANSITIONAL INPUT VAT Taxpayers who can avail transitional input VAT 1. Taxpayers who become liable to VAT 2. Taxpayers who elects to be a VAT-registered Creditable Transitional Input VAT 2% of the beginning inventory of goods, materials, supplies Actual VAT paid on the beginning inventory

Whichever is HIGHER

Basis of 2% of the Transitional Input VAT 1. Goods exempt from VAT shall be EXCLUDED in the computation of the transitional input VAT. 2. In computation of the value of inventory which is the basis of the 2% transitional input VAT, the inventory purchased from VAT-sellers (includes VAT paid) shall be removed from the value of inventory for business tax purposes. Timing of Credit of Transitional Input VAT Such input VAT shall be claimable in the month of registration as a VAT taxpayer

Requisites for Claim of Transitional Input VAT 1. The taxpayer must submit an inventory of list of goods 2. The taxpayer must prepare an entry recognizing the transitional input VAT credit in the accounting books.

REGULAR INPUT VAT The regular input VAT is the 12% paid on: 1. Domestic Purchases of goods, services, or properties 2. Importation of goods or services Timing of Credit of Regular Input VAT SOURCE OF REGULAR INPUT VAT TIMING OF CREDIT Purchase of goods or properties In the month of purchase In the month paid Purchase of services In the month VAT is paid Importation of goods Purchase of depreciable capital goods or properties General Treatment In the month of purchase When monthly aggregate acquisition cost > Amortized over useful life in months or 60 1M months, whichever is shorter Purchase of non-depreciable vehicles and NOT creditable on maintenance incurred thereon Input VAT on Purchase of Capital Goods or Properties If the monthly aggregate acquisition cost of depreciable capital goods: - Does NOT exceed 1M – the input VAT is claimable in the month of purchase - Exceeds 1M – the input VAT is amortized over useful life in months or 60 months, whichever is shorter. Monthly Aggregate Acquisition Cost Refers to the total price, excluding VAT, agreed upon one or more assets acquired, and not the payments or installments actually made during the calendar month.

Rules on sales or transfer of depreciable capital goods within 5 years prior to the exhaustion of amortizable input VAT – the entire unamortized input VAT can be claimed as input VAT on the month or quarter it is sold or transferred Special Rules on Input Tax Credit 1. Non-Depreciable Vehicles 2. Construction in progress

3. Purchase of real property on installment 4. Purchase of goods or properties deemed sold Input VAT on Non-Depreciable Vehicles Rules in the deductibility of depreciation expense on vehicles: a. Only one vehicle for land transport is allowed for the use of an official or employee, the value of which should not exceed P2,400,000 b. No depreciation shall be allowed to yacht, helicopters, airplanes and/or aircrafts, and land vehicles which exceed the threshold, unless the taxpayer's main line of business is transport operations or lease of transport equipment and the vehicles are used in said operations c. The purchase must be substantiated with sufficient evidence such as official receipts or other adequate records, d. The direct connection or relation of the vehicles to the development, operation and or conduct of the trade or business or profession of the taxpayer must be substantiated. Non-conformance to these requisites shall render the vehicle non-depreciable for income tax purposes. The input VAT on the purchase of a non-depreciable vehicles and all input VAT on maintenance expenses incurred thereon are likewise disallowed for taxation purposes (RR12-2012).

Input VAT on Construction in Progress Construction in progress is the cost of uncompleted construction work of an asset. This is the accumulated progress billing of the contractor for the extent of completion on an asset under construction. Upon completion of the construction activity, the construction in progress account is reclassified to an appropriate asset account. RR4-2007 does not consider construction in progress as purchase of capital goods, but as purchase of service. Hence, the input tax is creditable upon payment of each progress billings of the contractor and is neither credited upon completion of the construction activity nor amortized over a period not more exceeding 60 month. INPUT VAT when it is reclassified as depreciable asset No additional input VAT can be claimed upon the completion of construction in progress (when it is reclassified as depreciable asset) If the taxpayer purchases the materials to be used in the construction and the contractor only bills the labor, the input VAT on the Construction in progress shall be claimed upon payment of the billings. The input VAT on the purchases of the materials shall be claimed on purchase.

Input VAT on purchase of real property on installments If the seller of real property is subject to VAT on the sale on a deferred payment basis not on the installment plan, the input VAT shall be claimable by the buyer at the time of the execution of the instrument of sale, subject to the amortization on rule on depreciable properties. However, if the purchase is by installment and the seller is allowed to bill the output VAT in installment, the buyer can also claim the input VAT in the same period as the seller recognizes the output VAT (Sec. 3 RR4-2007).

Input VAT on goods or properties deemed sold The claimable input VAT on goods or properties previously deemed sold shall be the portion of the output VAT imposed upon the goods deemed sold which corresponds to the goods purchased by the buyer.

PRESUMPTIVE INPUT VAT Taxpayers who can avail presumptive input VAT The taxpayers (either persons or firms) engaged in the processing of following goods: 1. Sardines 2. Mackerel 4% of the gross value in money for 3. Milk purchases of PRIMARY 4. Cooking Oil AGRICULTURAL PRODUCTS which 5. Packed Noodles are used in their productions. 6. Refined Sugar (Mnemonic: Sa MaMi Co PaRe)

STANDARD INPUT VAT Sales to government (includes its instrumentalities, agencies or GOCC) is subject to a 5% final withholding VAT based on the gross payments.

5% final withholding VAT

Treated as ACTUAL VAT payable

7% of Sales

Standard input VAT (amount allowable to be deducted as input VAT

The difference between the actual input VAT and standard input VAT is adjusted or closed to expenses or loss (Actual VAT > Standard Input VAT), or income or gain .

INPUT VAT CARRY-OVER Rules on Input VAT Carry-over 1. Prior year quarter – deductible in the first month of the current quarter 2. First month of the current quarter – deductible in the second month of the current quarter 3. Second month of the current quarter – NOT deductible in the third month of the current quarter 4. Prior year quarter – deductible in the third month quarterly balance of the present quarter....