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2. Basis of presumptive Gross value in money of purchases of primary agricultural products which are used as input to their
input tax production
The value allowed for income tax purposes on inventories shall be the basis for the computation of the 2% transitional input tax,
excluding goods that are exempt from VAT under sec 109 of the Tax Code.
The certificate or statement to be issued is the certificate of final tax withheld at source (BIR Form No. 2306), a copy of which is
to be issued to the payee.
4. Difference between the VAT rate and the withholding VAT rate accounts for the standard input tax
The remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or services to government or
any of its political subdivisions, instrumentalities or agencies including GOCC’s in lieu of the actual input VAT directly attributable
or ratably apportioned to such sales.
• If the actual input VAT attributable to sale to the government exceeds 7% of the gross payment, the excess may form part of the
seller’s expense or cost
• If the actual input VAT attributable to sale to the government is less than 7% of the gross payment, the difference must be closed to
expense or cost.
Standard input tax > Actual input tax; the difference is credit entry expense or cost.
Standard input tax < Actual input tax; the difference is debit entry expense or cost.
b. Purchase of real properties for which a VAT has actually been paid
c. Purchase of services in which a VAT has actually been paid
d. Transaction deemed sales
e. Presumptive input tax
f. Transitional input tax
g. Transitional input tax credits allowed under the transitory and other provisions of RR 16-2005
a. Total input taxes that can be directly attributed to transactions subject to VAT may be recognized for input tax credit;
• Provided, that input taxes that can be directly attributable to VAT taxable sales of goods and services to the Government or
any of its political subdivisions, instrumentalities or agencies including GOCCs shall not be credited against output taxes
b If any input tax cannot be directly attributed to either a VAT taxable or VAT exempt transaction,
the input tax shall be pro-rated to the VAT taxable and VAT exempt transactions and only the ratable portion pertaining to
transactions subject to VAT may be recognized for input tax credited computed as follows:
a. If the estimated useful life is 5 years or more - input tax shall be spread evenly over a period of 60 months and the claim for
input tax credit shall commence in the calendar month when the capital good is acquired.
b. If the estimated useful life is less than 5 years - input tax shall be spread evenly on a monthly basis by dividing the input tax by
the actual number of months comprising the estimated useful life. The claim of input tax shall commence in the calendar month
the capital good is acquired. Provided, further, that the amortization of the input VAT shall only be allowed until December
31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to
apply the same as scheduled until fully utilized. Provided, finally, That in the case of purchase of services, lease or use of
properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty
or fee.
2. Where the aggregate acquisition cost (excluding of VAT) of the existing of finished depreciable capital goods purchased or imported
during any calendar month does not exceed P1,000,000.
The total amount of input taxes will be allowable as credit against output tax in the month of acquisition.
4. Sale or transfer of depreciable good within a period of 5 years or prior to the exhaustion of the amortizable input tax
If the depreciable capital good is sold or transferred within a period of 5 years or prior to the exhaustion of the amortizable input tax
thereon, the entire unamortized input tax on the capital goods sold or transferred can be claimed as input tax credit during the month
or quarter when sale or transfer was made.
7 Contract for the sale of service where only the labor will be supplied
In case of contract for the sale of service where only the labor will be supplied by the contractor and materials will be purchased by
the contractee from other suppliers, input tax credit on the labor contracted shall still be recognized on the month the payment was
made based on the progress billings while the input tax on the purchase materials shall be recognized at the time the materials were
purchased.
The following guidelines shall be observed in determining whether depreciation expense can be claimed or not on account of Vehicles
capitalized by the taxpayer, or in claiming other expenses and input taxes on account of said Vehicle:
No deduction from gross income for depreciation shall be allowed unless the taxpayer substantiates the purchase with sufficient
evidence, such as official receipts or other adequate records which contain the following, among others:
a Specific motor vehicle identification Number, Chassis Number, or other registrable identification numbers of the vehicle.
b. The total price of the specific Vehicle subject to depreciation; and
c. The direct connection or relation of the Vehicle to the development, management operation, and/or conduct of the trade or
business or profession of the taxpayer.
2. Only one vehicle for land transport is allowed for use of an official or employee, the value of which should not exceed Two Million
Four Hundred Thousand Pesos (P2,400,000);
3. No depreciation shall be allowed for yachts, helicopters, airplanes and/or aircrafts, and land vehicles which exceed the above
threshold amount, unless the taxpayer’s main line of business is transport operations or lease of transportation equipment and
vehicles purchased are used in said operations;
4. All maintenance expenses on account of non-depreciable vehicles for taxation purposes are disallowed in its entirely;
5. The input taxes on the purchase of non-depreciable Vehicles and all input taxes on maintenance expenses incurred thereon are
likewise disallowed for taxation purposes.
3. Advance payments may be available for issuance of tax credit certificate (TCC)
a) Advance payments which remain unutilized at the end of the taxpayer’s taxable year where the advance payment was made, which
is tantamount to excess payment, may, at the option of the owner/seller/taxpayer or importer/miller/taxpayer, be available for the
issuance of TCC upon application duly filed with the BIR by the seller/owner or importer/miller within two (2) years from the date
3.3 VAT input taxes Page 4 of 7
of filing of the 4th quarter VAT return of the year such advance payments were made, or if filed out of time, from the last day
prescribed by law for filing the return.
b) Advance VAT payments which have been the subject of an application for the issuance of TCC shall not be allowed as carry-over
nor credited against the output tax of the succeeding quarter/year.
c) Issuance of TCC shall be limited to the unutilized advance VAT payment and shall not include excess input tax.
d) Issuance of TCC for input tax attributable to zero-rated sales shall be covered by a separate
application for TCC following the applicable rules.
J. Withholding VAT
Transactions Withholding Agent Withholding VAT Rate
1. Purchase of goods by Government or any of its political subdivisions, 5% of gross payment made (final)
Government, political instrumentalities or agencies, including government
subdivisions, etc. owned or controlled corporations (GOCCs)
2. Purchase of services by Government or any of its political subdivisions, 5% of gross payment made (final)
Government, political instrumentalities or agencies, including government
subdivisions, etc. owned or controlled corporations (GOCCs)
3. Payments for services Government or any of its political subdivisions, 12% on payments (final)
rendered in the Philippines instrumentalities or agencies, including government
by a non-resident owned or controlled corporations (GOCCs)
4. Purchases of goods or Payor-purchaser in the course of trade of business 12% of payee’s gross sales or receipts
services in the course of
trade or business (payee- Payee-seller shall execute:
seller has more than one 1. Waiver of the privilege to Claim input tax
payor-buyer) credit and
2. Notice of availment of the option to pay the
tax through the withholding process
5. Purchases of goods or Payor-purchaser in the course of trade of business 12% of payee’s gross sales or receipts
services in the course of
trade or business (payee- Payee-seller shall execute waiver and notice of
seller has only one payor- availment as in above
buyer for the whole year)
Withholding of Value-added Tax. – The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned
or -controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and services which are subject to the value-
added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax imposed in Sections 106 and 108 of this Code,
deduct and withhold a final value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That beginning January 1,
2021, the VAT witholding system under this Subsection shall shift from final to a creditable system: Provided, further, That the payment for lease or
use of properties or property rights to nonresident owners shall be subject to twelve percent (12%) withholding tax at the time of payment: Provided,
finally, That payments for purchases of goods and services arising from projects funded by Official Development Assistance (ODA) as defined under
Republic Act No. 8182, otherwise known as the ‘Official Development Assistance Act of 1996’, as amended, shall not be subject to the final
withholding tax system as imposed in this Subsection. For purpose.es of this Section, the payor or person in control of the payment shall be
considered as the withholding agent
Notes: The TRAIN Law has changed the filing frequency of FWT and EWT returns from monthly to quarterly basis. The deadline is now on the
last day of the month following the close of the quarter during which the withholding was made. For example, for the first quarter (i.e. January to
March), the filing deadline would fall on the 30th of April.
In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of
the official receipts or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B)
hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing
the legal and factual basis for the denial.
“In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any
official, agent, or employee of the BIR to act on the application within the ninety (90)-day period shall be punishable under Section
269 of this Code.
d. Manner of Giving Refunds
Refunds shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his authorized representative without the
necessity of being countersigned by the COA chairman.
END
Exercises A (Adapted)
Instruction: Determine whether the input tax on the following acquisitions during a particular month shall be amortized or credited in full
(indicate the amortization period if input tax is amortized.
Jan 9 Purchase of 1 unit of generator for review school business to avoid interruption of classes,
P500,000, VAT exclusive, estimated life 5 years Credit
Feb 2 Purchase of 2 copying machines at P240,000 per unit , VAT exclusive, estimated life 3 years and
a sorting machine at P448,000 inclusive of VAT. Credit
Mar 1 Purchase of 20 units of computer equipment at P20,000 and 1 unit of generator at P500,000. All
prices are VAT exclusive. Estimated life of computers, 3 years; estimated life of generator 5 years. Amortize 36 /60mos.
Mar 3 Purchase of 5 units of steel filing cabinets, P30,000 per unit, exclusive of VAT. Estimated life
10years Amortize 36./60 mos
Apr 1 Purchase of 1 truck for trucking business use, P2,400,000 . Amortize 60 mos
May 2 1,000 km. maintenance. Expenses on depreciable vehicle for land transport, P33,600 VAT Credit
inclusive
Jun 5 Purchase of car for business use, P1,000,000 exclusive of VAT. Credit
Jul 6 1,000 km. maintenance. Expenses on depreciable vehicle for land transport, P11,200 VAT
inclusive. Credit
Aug 11 Purchase of 1 GMC pickup truck for VP operation use in visiting the factories of the business, Not
P4,000,000 exclusive of VAT. allowed
Sept 1 1,000 km. maintenance. Expenses on depreciable vehicle for land transport, P44,800 VAT Not
inclusive allowed
Oct 1 Expenses incurred for the maintenance of depreciable yachts used in the main line of business of
transport operator, P112,000 (VAT inclusive). Credit
Nov 3 Purchase of 2 buses by a bus operator, at P5,000,000 per bus (VAT exclusive). Estimated life 6 Amortize 60 mos
years
Exercises B
Instruction:Place Y if following person/entity is allowed to claim presumptive input tax otherwise place N.
A. Person who processes 1 Purchase of tomatoes, onions, garlic, pepper and other agricultural products used as
sardines ingredients in processing sardines. Y
2 Purchase of fresh sardines to be used in the processing of sardines N
3 Purchase of cans and labels from a VAT-registered supplier. N
4 Purchase of salt
B. Person who process 1 Purchase of fresh olives. N
Exercise C (Adapted)
Instruction:Place Y if following person/entity is allowed to claim transitional input tax otherwise place N.
1 Sale of goods purchased by a merchandising business engaged in VAT-subject transactions and whose annual gross sales do
not exceed P1,000,000. N
2 Services performed by a CPA whose gross annual receipts do not exceed P1,000,000 but voluntarily registers under the VAT
system. Before its registration under the VAT system, materials and supplies used in the services were purchased from a VAT- Y
registered supplier.
3 Sale of goods purchased by a merchandising business engaged in VAT-subject transactions. Its annual gross sales do not
exceed the P3,000,000 and did not register under the VAT system. N
4 Sale of goods purchased by a merchandising business engaged in VAT-subject transactions. It is gross annual sales exceed the
VAT threshold amount during the year and decides to register under the VAT system. Before its registration under the VAT N
system, merchandise sold were purchased from a not VAT-registered supplier.
5 Sale of goods purchased by a merchandising business, VAT-registered and engaged in VAT-subject transactions. Its is gross
annual sales does not exceed the VAT threshold amount during the year. N
4 Sale of goods purchased by a merchandising business who is engaged in VAT-subject transactions, his gross annual receipts
exceed the VAT threshold amount during the year but refuses to register under the VAT system N
5 Sale of goods purchased by a merchandising business Taxpayer is engaged in VAT-subject transactions who starts a business
which he registers under the VAT system N
Exercise D: Instruction: Determine the VAT on the following transactions made by a VAT registered taxpayer during the month of April.
April 2 Sale of construction materials, net of VAT, P220,000
5 Receipt of fee from construction contracts , gross of VAT, P112,000
7 Recorded its sales of materials in its sales journal amounting to, P200,000
19 Sale of hollow blocks, Selling price including erroneous VAT, P110,000
23 Sale of construction materials, exclusive of VAT, P200,000
25 Sale of construction materials, inclusive of VAT, P224,000
Exercise E: (Capital Goods) A VAT taxpayer, made the following purchases of capital goods from VAT registered sellers for use in his business
(amounts are net of vat) for the 3rd quarter:
Year 20X1 Estimated life Cost
July 10- Machine 1 2 years P200,000
July 16- Machine 2 6 years 900,000
Aug. 8 - Machine 3 2 years 400,000
Aug. 20 - Machine 4 6 years 500,000
Sept. 14 - Machine 5 7 years 2,000,000
Machine 1 was retired on September 30, 20X1.
Required:
1. The input tax in July is___
2. The input tax in August is___
3. The input tax in September is___