WRITTEN REPORT

IN
CHAPTER 9: INPUT VAT

GROUP 2

Leader:

Escultura, Arvin Jay

Members:

Fineza, Chezka

Laureta, Carmela Dawn

Lacson, Patlinna Mae

Diola, Mariella

BSCA 301

March 17, 2018

What is Input VAT?

Input vat refers to the vat due or paid by a vat-registered person on importation or local
purchases of goods, properties, or services including lease or use of properties, in the course of
his trade or business.

What is creditable Input VAT?

The term “creditable input VAT” is synonymous to “allowable input VAT” which means
not all input VAT paid on purchases is creditable or deductible against output VAT.

Illustration:

Mrs. Aguilar had a P230,000 output Vat in the month. She also made the ff. purchases
during the month.

Good from non-VAT suppliers P 280,000

Goods from VAT suppliers with VAT invoices 224,000

Importation of Car for personal use. Vat inclusive 1,120,000

Importation of grapes and apples for sale 300,000

Importation of merchandise for sale. Vat inclusive 896,000

Services from VAT suppliers, evidenced 120,000

By ordinary receipts

The creditable input VAT shall be:

Goods from VAT suppliers (P224,000x12/112) 24,000

VAT on importation (P896,000x12/112) 96,000

Total tax creditable input VAT P120,000

The VAT payable of Mrs. Aguilar shall be determined as:

Output VAT P 230,000

Less: Input VAT 120,000

VAT payable P110,000

Requisites of a creditable Input VAT

 The input vat must have been paid or incurred in the course of trade or business.
 Evidenced by a vat invoice or official receipt.
 Such receipt must be issued by a vat registered person.
 Incurred in relation to vatable sales and not from exempt sales.

Types of vatable sales

 Sales to the government

 Export sales
 Regular sales

Who can avail of input tax credit?

 The importer upon payment of vat prior to the release of goods from customs custody.
 Purchaser of domestic goods or properties upon consummation of the sale.
 Purchaser of service or lessee or licensee Upon payment of the compensation, rental,
royalty or fee.

Who are required to be a VAT registered?

 Any person or entity who, in the course of his trade or business, sells, barters, exchanges,
leases goods or properties and renders services subject to Vat, if the aggregate amount of
actual gross sales or receipts exceed P 1,919,500
 A person required to register as Vat taxpayer but failed to register
 Any person, whether or not made in the course of his trade or business, who import
goods.

Types of Claimable Input Vat

1. Transitional input VAT

Amount of transitional input tax: 2%of the value beginning inventory on hand or actual
VAT paid on such goods, materials and supplies, whichever is higher.

Illustration:

Mr. Horace opted to be registered as a Vat taxpayer. He had the ff. inventory

VAT exempt goods P 80,000

Vatable goods (all purchased from non-VAT suppliers) 40,000

Equipment (purchased from VAT supplier) 112,000

Total beginning inventory P 232,000

2% of beginning inventory (2% x P40,000) P 800

Actual VAT in the beginning inventory 0

Transitional input VAT (HIGHER) P 800

2. REGULAR INPUT VAT

The regular input vat is the 12% VAT paid on:

a. Domestic purchase of goods, services or properties

b. Importation

TIMING OF CREDIT OF REGULAR INPUT VAT

SOURCE OF REGUALAR INPUT VAT TIMING OF CREDIT

Purchase of goods or properties 90 days from the filing of VAT refund
Purchase of service 90 days from the filing of VAT refund
Importation of goods In the month VAT is paid
Purchase of depreciable capital goods or
properties:
General treatment In the month of purchase
When the monthly aggregate acquisition cost Amortized over useful life in months or 60
exceeds P1,000,000 months, which ever is higher

INPUT VAT ON GOODS OR PROPERTIES

NIRC

VAT-registered persons shall be subject to 0%

EXPORT SALES:

 Sale of raw materials or packaging materials to non-resident buyer for delivery to a

resident local export-oriented enterprise to be used in manufacturing, processing, or
packing in the Philippines of the said buyers goods
 Sale of raw materials or packaging materials to export-oriented enterprise whose export
sales exceed 70% of the total annual production
 Sale of gold to the Bangko Sentral ng Pilipinas

TRAIN LAW
 Now subject to 12% VAT

INPUT VAT ON SERVICE

TRAIN LAW - INCLUDE SALES OF ELECTRICITY BY GENERATION COMPANIES,

TRANSMISSION, AND DISTRIBUTION COMPANIES, INCLUDING ELECTRIC
COOPERATIVES

Illustration:

In January 20, 2018, ABC Company retained the services of a professional practitioner
which billed P168,000, inclusive of VAT. ABC Company paid the invoice on April 1, 2018 also
in that day ABC Company file their VAT-refund

The P18,000 input VAT (P168,000x12/112) shall be claimed in June 29, 2018.

NIRC LAW

Transaction subject to 0% rate – the following services performed in the Philippines by VAT-
Registered person shall be subject to zero percent rate

Services performed by subcontractors and/or contractors in processing, converting, of

manufacturing goods for an enterprise whose export sales exceed 70% of total annual production

TRAIN LAW

Now subject to 12% VAT

INPUT VAT ON IMPORTATION

Illustration:

In March 2015, ABC Company imported goods from abroad with a total landed cost of
P200,000. ABC Company paid the P24,000 VAT on importation and withdrew the goods on
April 2015.

The P24,000 input VAT shall be claimed in April not in March.

MONTHLY AGGREGATE ACQUISITION COST

Illustration:

Isulan Company, a VAT-registered taxpayer, purchased the ff. capital goods in

March2014.
CAPITAL GOODS PURCHASE PRICE INPUT VAT USEFUL LIFE

Equipment P 600,000 P 72,000 4 years (48 Months)

Truck 700,000 84,000 10 years (120
TOTAL P 1,300,000 P 156,000 Months)
(Exceeds P1,000,000)

3. Amortization of Input VAT

NIIRC

If the monthly aggregate acquisition cost of depreciate goods:

a. do not exceed P1,000,000 – the input vat is claimable in the month of purchase

b. Exceeds P1,000,000 – the input vat is deferred and amortized over the useful life
in months or 60 months, whichever is shorter

TRAIN LAW

Prior to the TRAIN Law, Section 110(A) (1) of the NIRC provides that the input tax on
capital goods purchased or imported in a calendar month for use in trade or business shall be
spread evenly over the month of acquisition and the 59 succeeding months. If, however, the
estimated useful life of the capital good is less than five years, as used for depreciation purposes,
the input VAT thereon shall be spread over such a shorter period.
However, the TRAIN law now provides that the amortization of input VAT on capital goods, the
acquisition cost of which exceeds PI million shall only be allowed until
Dec. 31, 2021. After the said date, taxpayers with unutilized input VAT on capital goods
purchased or imported shall be allowed to apply the same as scheduled until fully utilized.
Therefore, the input VAT on goods purchased on or after Jan. 1, 2022 shall be fully recognized
outright and may be claimed as input tax credits against output tax. On the other hand, if the
purchase was made on or before Dec. 31, 2021, the taxpayer can still amortize its input VAT until
the same is fully utilized.

Sale or transfer of depreciable capital of goods within 5 years

• If the depreciable property is sold or transferred within 5 years prior to the exhaustion of
the amortizable input tax thereon, the entire unamortized input tax on the capital goods
sold/transferred can be claimed as input tax credit during the calendar month or quarter
when the sale or transfer was made.

Illustration:
 • The following relates to a depreciate property which was solo during the month:

Selling price in cash P 3,500,000

Output VAT 420,000

Original cost of property 3,000,000

Accumulated depreciation of property 1,000,000

Unutilized input vat on property 200,000

• The seller can deduct outright in the month of sale the total unamortized deferred input
vat

Output VAT P420,000

Less: Deferred input vat (200,000)

VAT Payable P 220,000

Accounting Entries

Cash P 3,920,000
Accumulated Depreciation 1,000,000
Equipment P3,000,000
Output vat 420,000
Gain on sale of asset 1,500,000
Output vat P 420,000
Deferred input vat P 200,000
Vat payable 220,000

4. Presumptive Input VAT

 Presumptive Input Tax Credits. Any person or firm engaged in the processing193 of sardines,
mackerel, and milk, and in manufacturing refined sugar and cooking oil and packed noodle-
based instant meals Shall be allowed a presumptive input tax creditable against the output tax,
equivalent to 4% of the gross value in money of their purchases of primary agricultural products
which are used as inputs to his production.

Illustration:

Sardinas Corporation process hot chili-flavoured sardines, During the month, Sardinas
purchased the ff. ingredients in processing of canned sardines.

COST INPUT VAT

Fresh Sardines P 800,000 -

Hot Chili 50,000 -

Tomatoes 400,000 -

Ordinary Salt 20,000 -

Tin Can 120,000 P 14,4000

Wrapper 60,000 7,2000

The Presumptive input VAT shall be computed from the agricultural purchase as follows:

Hot Chili P 50,000

Tomatoes 400,000

Ordinary Salt 20,000

TOTAL AGRICULTURAL PRUCHASE P 470,000

Multiply by: 4%

Presumptive input VAT P 18,800

5. STANDARD INPUT VAT

The sale of goods and services to the government or any of its political subdivisions,
instrumentalities or agencies, including the government-owned and controlled corporation is
subject to a 5% final withholding VAT based on the gross payment.

Illustration:
 A VAT taxpayer made a P100,000 sales to the government invoiced at P112,000 inclusive
of output VAT. The taxpayer purchased the same for P90,000 exclusive of P10,800 input VAT.

The government will withhold P5,000 (i.e 5% of P100,000) and release the P107,000 net
proceeds of the sale to the taxpayer. The P5,000 withheld is presumed the actual VAT payable on
the seller.

Hence:

Output VAT P 12,000

Less Standard input VAT (7%) 7,000

VAT Payable (5% withheld final VAT) P 5,000

The difference between the actual input VAT and Standard input VAT is disposed as follows:

Actual input VAT (amount to be claimed) P 100,000

Less Standard input VAT (amount allowable) 7,000

Loss or addition to cost or expenses P 3,800

6. INPUT VAT CARRY-OVER

The input VAT carry over is the excess of the input vat over the output vat in a particular
month or quarter.

Rules on input vat carry over

 The input vat carry over the prior quarter is deductible in the first month of the current
quarter.
 The input vat carry in the first month of the quarter is deductible in the second month of
the quarter.
 The input vat carry in the second month of the quarter is not deductible to the 3rd month
of the quarter.
 The input vat carry over of the prior quarter is deductible in the 3rd month quarterly
balance of the present deductible.
 Illustration:

The ff. data relates to the regular sales of a VAT taxpayer:

OUTPUT VAT INPUT VAT

Prior quarter P 360,000 P 400,000

Current quarter

1st month of current quarter P 160,000 P 100,000

2nd month of current quarter 150,000 160,000

3rd month of current quarter 170,000 65,000

The credit rules of the input VAT carry-over shall be applied as follows:

PRIOR QUARTER --------------- PRESENT QUARTER ---------------

3rd month 1st month 2nd month 3rd month

Output VAT P 360,000 P 160,000 P 150,000 P 480,000

Less Input VAT 400,000 100,000 160,000 325,000

Carry-over (P40,000) 40,000 40,000

VAT Payable P 20,000 - 20,000

Not an input VAT carry-over (P 10,000 )

VAT PAYABLE P 95,000

What are excluded from input vat carry-over?

 Advance vat which have been applied for a tax credit certificate,
 Input vat attributable to zero-reated claim which have been applied for a tax refund or tax
credit certificate.
 Input vat attributable to zero-rated sales that expired after the two year prescriptive
period.