BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 89

SUGGESTED ANSWERS
Chapter 12: Input VAT Credits and Refunds

CHAPTER 12
INPUT VAT CREDITS AND REFUNDS

Problem 121
1. True
2. False should not be subjected to the same tax.
3. False VAT refund.
4. False excess of input VAT over output VAT.
5. False VAT sales invoice or VAT official receipt.
6. True
7. True for as long as the buyer is VAT-registered.
8. False importation is subject to VAT whether for business or personal use.
9. True
10. True
11. False goods for sale is not covered by the P1,000,000 threshold. The goods
must depreciated/amortized as a result of use in business.
12. False only zero-rated/ effectively zero-rated sales and cancellation of VAT registration can
apply for TCC issuance.
13. True
14. False the resident lessee or licensee must file the VAT return in the name of
nonresident foreign entity.
15. True

Problem 122
1. True
2. False not creditable.
3. True
4. False TIV is granted only once when a non-VAT taxpayer shifts to VAT.
5. False PIV is intended only the primary raw materials used in the processing of sardines,
mackerel, milk, refined sugar, cooking oil, packed noodles based instant meals.
6. True
7. True
8. True
9. False within 2 years.
10. True
11. True
12. True
13. True
14. False input VAT related to zero-rated or effectively zero-rated sales and input VAT of VAT-
registered person cancelling to non-VAT.
15. True

Problem 123
1. B
2. C
3. D
4. C
5. D
6. B sugar only
7. D
8. A
9. C
10. A


BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 90
SUGGESTED ANSWERS
Chapter 12: Input VAT Credits and Refunds
Problem 12 4 A
Zero. The business is non-VAT; hence, no input VAT is allowed.
Problem 12 5 A
Output VAT (P425,600/9.3333) P45,600
Less: Input VAT (P448,000/9.3333) 48,000
Input VAT carry-over P 2,400

VAT-registered buyers of non-VAT business that collects VAT is allowed to deduct input VAT.

Problem 12 6 D
Input VAT from:
VAT invoice in the name of Capoy Enterprises (P224,000/9.333) P 24,000
NonVAT invoice with VAT charges (P168,000/9.333) 18,000
Total creditable input VAT P42,000

The VAT invoice in the name of Capuypoy Trading is not allowed because it does not bear the
name of Capoy Enterprises.

Problem 12 7 B
Input VAT from VAT purchased invoice (P1,792,000/9.333) P192,000
Non-VAT purchase invoice (P313,600/9.333) 33,600
Transitional input VAT 5,800
Total input VAT from purchases P231,400
Less: Proportionate input VAT for sales to the government
(P192,000 + P33,600) x 500/2,000 56,400
Input VAT balance P175,000
Add: Standard input VAT on sales to government (P560,000/9.333) x 7% 35,000
Total creditable input VAT P210,000

Problem 12 8 A
Purchases per VAT invoice amount (P140,000/9.3333) P 15,000
Payments for VAT persons services inclusive of VAT (P1,232/9.3333) 132
Payment for services of VAT person, net of VAT (P917 x 12%) 110
Total available input VAT P 15,242

Problem 12 9 C
Input VAT from:
Machine 1 inventory (P1,680,000/9.333) P180,000
Amortization of input VAT from:
Machines 2 and 3 [(P672,000 + P560,000)/9.333]/60 months 2,200
Creditable input VAT January P182,200

Note: Machines 2 and 3 are depreciable capital goods with aggregate costs of
P1,100,000excluding VAT; hence, their input VAT is subject to amortization of 60 months or
estimated useful life, whichever is shorter.

Problem 12 10 D
January February March
Output VAT P120,000 P156,000 P180,000
Input VAT from purchases of:
Goods (72,000) (84,000) (96,000)
Capital goods March acquisition (60,000)
Capital goods February acquisition . ( 3,000) ( 3,000)
Net VAT payable (refundable) P 48,000 P 69,000 P21,000


BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 91
SUGGESTED ANSWERS
Chapter 12: Input VAT Credits and Refunds

Problem 12 11
1. Letter B
Total costs incurred to date
Year 1 P4,000,000
Year 2 8,000,000 P12,000,000
Multiplied by percent of construction costs subject to VAT 60%
Construction costs subject to VAT P 7,200,000
Multiplied by VAT rate 12%
Creditable input VAT in year 2 P 864,000

2. Letter C
Output VAT P3,600,000
Less: Input VAT from purchases P1,200,000
Input VAT from construction in progress
Year 3 (P3,000,000 x 60% x 12%) 216,000 1,416,000
Net VAT payable P2,184,000
Problem 12 12 A
Output VAT P6,000,000
Less: Input VAT from purchases P2,000,000
Input VAT from CIP:
Materials (P3,600,000 x 30%) 1,080,000
Labor (P2,400,000 x 20%) 480,000
Overhead (P1,200,000 x 20%) 240,000 3,800,000
Net VAT payable P2,200,000
Problem 12 13
1. Letter D
Purchases from VAT person (P644,000/9.333) P69,000
Purchases from Non-VAT person in VAT invoice (P61,600/9.333) 6,600
Payments to VAT services (P56,000/9.333) 6,000
Total creditable input VAT P81,600
2. Letter A
Output VAT (P784,000/9.333) P 84,000
Less: Creditable input VAT 81,600
Net VAT payable (refundable) P 2,400
Problem 12 14 B
Equipment (P2,500,000 x 12%) = P300,000/60 P 5,000
Supplies (P10,000 x 12%) = P1,200 1,200
Goods (P800,000 x 12%) = P96,000 96,000
Creditable input VAT P102,200
Problem 12 15 C
Siopao machine (P300,000 x 1) P300,000
Siomai machines (P250,000 x 2) 500,000
Pizza machines (P200,000 x 3) 600,000
Oven (P150,000 x 4) 600,000
Total amount P2,000,000
Add: Custom duty (P2,000,000 x 10%) P200,000
Excise tax (P2,000,000 x 5%) 100,000
Storage fee (P2,000,000 x 2%) 40,000 340,000
Total landed costs P2,340,000
Multiplied by VAT rate 12%
Input VAT P 280,800

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 92
SUGGESTED ANSWERS
Chapter 12: Input VAT Credits and Refunds

Problem 12 16
1. Letter A
Total machines imported (P100,000 + P200,000 + P300,000) P 600,000
Add: Excise tax (P600,000 x 50%) 300,000
Total P 900,000
Multiplied by VAT rate 12%
VAT paid on importation P 108,000

2. Letter D
Output VAT (P1,000,000 x 12%) P 120,000
Less: Creditable input VAT:
Machine 2 (P200,000 + P100,000) x 12% P36,000
Machine 3 (P300,000 + P150,000) x 12% 54,000 90,000
VAT payable P 30,000
Problem 12 17 D
Actual input VAT (P896,000 x 20%)/9.333, higher P19,200
Transitional input VAT (P1,500,000 x 50%) x 2% 15,000
Total transitional input VAT allowed, the higher amount P34,200
Problem 12 18 A
Output VAT (P1,600,000 + P2,000,000) x 12% P432,000
Less: Other percentage tax paid 48,000
Output VAT balance P384,000
Less: Input VAT from purchases August to December P240,000
Transitional input VAT, (P100,000 x 2%) = P2,000; higher - actual 34,000 274,000
Net VAT payable P110,000
Problem 12 19 B
Prime raw materials coconut for cooking oil (P1,000,000 x 3/5) P600,000
Multiplied by presumptive VAT rate 2%
Presumptive input VAT P 12,000
Problem 12 20 C
Output VAT (P2,800,000/9.333) P300,000
Less: Input VAT from
Presumptive input VAT sardines (P800,000 x 4%) P32,000
Supplies (P50,400/9.333) 5,400
Amortization of capital goods [(P1,232,000/9.333)/60] x 3 months 6,600 44,000
Net VAT payable P256,000
Problem 12 21 B
Output VAT (P600,000 + P1,500,000) x 12% P252,000
Less: OPT (P600,000 x 3%) 18,000
Output VAT balance P234,000
Less: Transitional input VAT (P100,000 x 2%) P 2,000
Presumptive input VAT (P800,000 P200,000) x 4% 24,000 26,000
Net VAT payable P208,000

Note: The basis of presumptive input VAT is the gross value of the purchased raw materials used
in the production.

Problem 12 22 C
Input VAT from purchases second quarter (P5,040,000/9.333) P540,000
Input VAT carry-over from first quarter 57,000


BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 93
SUGGESTED ANSWERS
Chapter 12: Input VAT Credits and Refunds
Input VAT - Purchases returns (P50,000 x 12%)
Input VAT amortized on capital goods (P180,000/60) x 3
Creditable input VAT second quarter

Problem 12 23 D
Texas Instruments, Inc. (ECOZONE) P10M 10%
San Miguel Corporation 15M 15%
Department of Tourism 25M 25%
Low cost housing (P1,000,000 per house and lot) 50M 50%

P100M 100%
Input VAT on purchases
Less: Input VAT allowed:
Zero-VAT sales Texas Instruments (P3.6M x 10%) P 360,000
Reg. VAT sales San Miguel Corporation (P3.6M x 15%) 540,000
Std input VAT Department of Tourism (P25,000,000 x 7%) 1,750,000
Input VAT not allowed
Problem 12 24 B
Amount of input VAT allowed for VAT refund or
Issuance of TCC (P600,000 x 20/50) export sales or zero-rated VAT related
Problem 12 25 D
Input VAT from importation (P1,120,000/9.333)
Input VAT per VAT invoice issued
by nonVAT person (P896,000/9.333)
Total input VAT refund
Problem 7 26 A
Output VAT on actual sales [P400,000 + (P560,000/1.12)] x 12%
Add: Output VAT on deemed sales (P30,000 + P20,000) x 12%
Total output VAT
Less: Other percentage tax paid (P400,000 x 3%)
Output VAT balance
Less: Input VAT from:
Purchases (P672,000/9.333) P72,000
Input VAT previous quarter 42,000
Transitional input VAT 2,000
Input VAT carry-over
Problem 12 27
Contract price
Less: VAT withholding (P6,720,000/9.333) P 720,000
Final withholding income tax (P6,000,000 x 7.5%) 450,000
Net remittance to Japan Inc.

Problem 12 28
Importation for business use
Add: Customs duties (P1,000,000 x 50%)
Total
Add: Excise tax (P1,500,000 x 10%)
Total
Multiplied by VAT rate
Creditable Input VAT

( 6,000)
9,000
P600,000







P3,600,000



2,650,000
P 950,000



P240,000


P120,000

96,000
P216,000


P108,000
6,000
P114,000
48,000
P 66,000



116,000
(P50,000)


P6,720,000

1,170,000
P5,550,000


P1,000,000
500,000
P1,500,000
150,000
P1,650,000
12%
P 198,000





BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 94
SUGGESTED ANSWERS
Chapter 12: Input VAT Credits and Refunds
Problem 12 29
1. Output VAT (P1,456,000/9.3333) P156,000
2. Input VAT (P1,120,000/9.3333) P120,000
3. Net VAT payable (P156,000 P120,000) P 36,000
Problem 12 30
1. Net income (P1,200,000/30%) P4,000,000
Add: Operating expenses (P2,540,000- P240,000) 2,300,000
Gross income P6,300,000
Add: Cost of sales (P3,360,000/1.12) P3,000,000
Less: Increase in inventory 300,000 2,700,000
Sales P9,000,000
2. Output VAT (P9,000,000 x 12%) P1,080,000
Less: Input VAT from purchases (P3,360,000/9.333) P360,000
Input VAT from operating expenses 240,000
Input VAT from CIP:
Materials (P560,000 + P448,000 + P672,000)/9.333 180,000
Labor (P1,500,000 x 40%) x 12% 72,000
Overhead (P1,500,000 x 20%) x 12% 36,000 888,000
Net VAT payable P 192,000
Problem 12 31
Non-VAT
Total sales as of November 1, 201B P1,900,000
Add: Sales on November to December 201B
(P672,000/1.12) + P100,000 = P700,000/70% 1,000,000
Total sales P2,900,000
Multiplied by VAT rate 12%
Output VAT P 348,000
Less: Other percentage tax paid 57,000
Output VAT balance P 291,000
VAT-registered
Output VAT P 348,000
Less: Other percentage tax paid 57,000
Output VAT balance P 291,000
Less: Transitional input VAT
(P672,000/1.12) + (P100,000) = P700,000 x 2% = P14,000
(P672,000/9.333) = P72,000, higher + (P100,000 x 2%) 74,000 217,000
VAT advantage to register under VAT system P 74,000
AlahNganin should register under VAT system.
Problem 12 32
Output VAT (P5,000,000 x 12%) P600,000
Less: Input VAT from:
Supplies (P784,000/9.333) P84,000
Rent (P214,000/107%) x 12% 24,000
Creditable input VAT
from previous period 112,000
Presumptive input VAT
(P2,200,000 P200,000) x 2% 40,000 260,000

Net VAT payable P340,000


BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 95
SUGGESTED ANSWERS
Chapter 12: Input VAT Credits and Refunds

Problem 12 33
Output VAT (P3,000,000 x 12%) P360,000
Less: Transitional input VAT (P100,000 x 2%) P 2,000
Presumptive input VAT (P1,620,000 x 4%) 64,800
Input VAT from operating expenses 3,600 70,400
Net VAT payable P289,600

The presumptive input VAT is based on primary raw materials used. The primary raw materials
used during the period are computed as follows:

Copra raw materials, beginning P 100,000
Add: Purchases of copra from farmers 1,900,000
Total P2,000,000
Less: Copra raw materials, ending 380,000
Copra raw materials used P1,620,000
Problem 12 34
Output VAT P200,000
Less: Input VAT from:
Purchases P240,000
Carry-over from last quarter 30,000
Capital goods (P180,000/60) 3,000 273,000
Creditable input VAT for next quarter (P 73,000)
Problem 12 35
1. Input VAT from purchases for business (P112,000/9.333) P 12,000
Input VAT from importation (P79,520/9.333) 8,520
Creditable input VAT for the period P20,520
Less: Output VAT 20,000
Input VAT carry-over P 520
2. Input VAT carry-over (P20,520 P20,520) P - 0 -
Problem 12 36
Input VAT on Depreciable Capital Goods from purchase of
Truck (P1,120,000/9.333) P120,000
Processing machine (P1,568,000/9.333)/60 x 1 2,800
Total Input VAT for the last quarter P122,800

Note: The Input VAT from the purchase of truck should not be amortized because its cost
doesnot exceed P1,000,000.

Problem 12 37
Transitional input VAT P 40,000
Presumptive input VAT 50,000
Input VAT on purchases of depreciable capital goods (P180,000 x 10/15) 120,000
Input VAT on operating expenses (P96,000 x 10/15) 64,000
Input VAT not allowed for TCC issuance P274,000

Only input VAT that can be traced or allocated to zero-rated or effectively zero-rated is allowed for
issuance of TCC. Transitional and presumptive input VATs are not allowed for TCC issuance.






BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 96
SUGGESTED ANSWERS
Chapter 12: Input VAT Credits and Refunds

Problem 12 38
VAT invoice in the name of Busal Enterprises (P448,000/9.333) P 48,000
NonVAT invoice charged with VAT (P313,600/9.333) 33,600
Total input VAT P 81,600
Multiplied by percent of VAT for regular sales (P1M/P1.5M) = 2/3 2/3
Creditable input VAT from regular VAT sales P 54,400

The input VAT on sales to government is subject to SIV and is deductible only from the Output
VAT on sales to the government. Its actual input VAT of P18,000 is not allowed to be deducted
from output VAT. (R.A. 9337)

Problem 12 39
Input VAT carry-over P 24,000
Input VAT from purchases 60,000
Input VAT capital goods 240,000
Total P324,000
Less: Adjustments:
Input VAT on purchase returns
(P100,000 x 12%) P 12,000
Input VAT on VAT-exempt sales
(P60,000 x 5/20) 15,000
Unamortized portion of input VAT
on capital goods
(P240,000 (P240,000/60) 236,000 263,000
Adjusted creditable input VAT P 61,000