lOMoARcPSD|31893501

Notes Input VAT

Accountancy (National University (Philippines))

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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 Whichever is
Actual VAT paid on the beginning inventory 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

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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
Purchase of services In the month paid
Importation of goods In the month VAT is paid
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

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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.

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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

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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.

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