VALUE-ADDED TAX

Concept
• Tax on consumption levied on the sale, barter, exchange or lease of goods or properties or
services in the Philippines, and on importation of goods into the Philippines

• It is an indirect tax.
When VATable?
• Sale, barter, exchange, or lease in the Philippines
– made in the ordinary course of trade or business

• Importation of goods into the Philippines

– whether or not made in the course of trade or business

• Taxable goods, properties, or services

• By a taxable person in the course of trade or furtherance of his/its profession

Rule of Regularity
• Regular conduct or pursuit of a commercial or an economic activity
– including transactions incidental thereto

• By any person
– regardless of whether or not the person engaged therein is a non-stock, non-profit
private organization (irrespective of the disposition of its net income and whether or
not it sells exclusively to members or their guests), or government entity

• Exceptions
Cross Border Doctrine/Destination Principle
• General Rule: VAT shall be imposed only on goods destined for consumption within the
territorial border of the taxing authority.

• Except: Freeport zones and economic zones

– By fiction of law, ecozones are foreign territories
VAT on sale of goods or properties
• Rate: 12%

• Base: Gross selling price

– Sales discounts - determined and granted at the time of the sale
– Sales returns and allowances

– Goods or properties other than real property – the total amount of money or its equivalent
which the purchaser pays or is obligated to pay to the seller in consideration of the sale,
barter or exchange of the goods or properties, excluding VAT, plus excise tax

– Real property – the consideration stated in the sales document or the FMV
(whichever is higher of the zonal value or assessed value), whichever is higher
VAT on sale of goods or properties
• Real properties primarily for sale to customers or held for lease in the ordinary course of
trade or business

• The right or privilege to use patent, copyright, design or model, plan, secret formula or
process, goodwill, trademark, trade brand, or other like property or right

• The right or privilege to use in the Philippines of any industrial, commercial, or

scientific equipment

• The right or privilege to use motion pictures films, tapes, and discs

• Radio, television, satellite transmission and cable transmission time

VAT on sale of goods or properties
• Real property
– Installment plan
• the initial payments of which in the year of sale do not
exceed 25% of the GSP
• installment payments, including interest and penalties, actually and/or
constructively received by the seller

– Deferred-payment basis
• Initial payments exceed 25% of GSP
• Cash sale: entire selling price

• Input VAT?
VAT on sale of goods or properties
• Sale of two or more adjacent lots in favor of one buyer from the same seller?
– RR No. 13-2018: Subject to VAT
• aggregate value of the adjacent properties exceeds Php1,500,000 (for
residential lots), and Php2,500,000 (for residential house and lots or other
residential dwellings)
• although covered by separate titles and/or separate tax declarations

Note: Beginning January 1, 2021, the VAT exemption of those falling below Php
1,500,000 and Php 2,500,000 shall only apply to sale of real properties not primarily held
for sale to customers or held for lease in the ordinary course of trade or business, sale of
real property utilized for socialized social housing, sale of house and lot, and other
residential dwellings with selling price of not more than Php 2,000,000.

• Parking lots in a condominium?

– Subject to VAT, regardless of the amount
Transactions deemed Sale
• Transfer, use, consumption not in the course of business of goods or properties originally
intended for sale or for use in the course of business

• Distribution or transfer to:

– Shareholders or investors as share in the profits of the VAT- registered persons
– Creditors in payment of debt

• Consignment of goods if actual sale is not made within 60 days following the date such
goods were consigned

• Retirement from or cessation of business, with respect to inventories of taxable goods existing
as of such retirement or cessation
VAT on sale of service and use or lease of properties
• Performance of all kinds of services in the Philippines for others for a fee, remuneration or
consideration whether in kind or in cash

• Rate: 12%

• Base: Gross receipts

– Actual or constructive receipt
VAT on sale of service and use or lease of properties
• Lease or the use of or the right or privilege to use any copyright, patent, design or model plan,
secret formula or process, goodwill, trademark, trade brand or other like property or right

• Lease or the use of, or the right to use of any industrial, commercial or,
scientific equipment

• Supply of scientific, technical, industrial or commercial knowledge or information

• Supply of any assistance that is ancillary and subsidiary to and is furnished as a means of
enabling the application or enjoyment of any such property, or right or any such knowledge
or information

• Supply or services by a nonresident person or his employee in connection with the use of
property or rights belonging to, or the installation or operation of any brand, machinery or
other apparatus purchased from such nonresident person
VAT on sale of service and use or lease of properties
• Supply of technical advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or commercial undertaking,
venture, project or scheme

• Lease of motion picture films, films, tapes and discs

• Lease or the use of or the right to use radio, television, satellite transmission and cable
television time
VAT on sale of service and use or lease of properties
• Condominium dues?
– RMC No. 65-2012: The association dues, membership fees, and other
assessments/charges collected by condominium corporations constitute income payment
or compensation for beneficial services that the condominium corporations provide to
their members and tenants.

Thus, the gross receipts of condominium corporations including association dues,

membership fees and other assessments and charges are subject to VAT and income tax.
Income payments made to condominium corporations are subject to applicable withholding
taxes under existing regulations.

– TRAIN: Association dues, membership fees, and other assessments and charges
collected by homeowners associations and condominium corporations shall be
exempt
VAT on Importation
• Every importation, whether for use in business or not

• Rate: 12%

• Base:
– Total value used by the BOC in determining tariff and customs duty, plus customs
duties, excise tax, and other charges prior to release of the goods from customs custody
– Landed cost: where the customs duties are determined on the basis of the quantity or
volume of the goods
 Zero-rated sale of goods or properties
• Zero-rated sale vs. exempt sale
Zero-rated VAT Exempt
1. Refers to the export sale of good and supply of 1. Seller shall not bill any output tax on his sales. No
services. Hence, Output tax Rate is set to zero. Output Tax Rate.

2. The seller of such transactions charges NO output tax 2. Corollarily, seller is not allowed any credit or refund
but can claim a refund or tax credit certificate for the of the input taxes he paid on his purchases.
VAT previously charged by suppliers (AT&T
Communications Services Phils., Inc. V. CIR, G.R. No.
182364, August 3, 2010)
Example: NO Output Tax
Output Tax P 0.00 NO Input Tax
Less: Input Tax 5,000.00 NO Tax credit
Excess input tax P 5,000.00

Basis Exempt Zero-rated

Nature of transaction Not taxable; removes VAT at the
exempt stage
By whom made Need not be a VAT-registered
person
Input tax Not subject to Output Tax, thus
cannot claim input tax credit.
Tax Credit/Refund Cannot avail of tax credit. Thus,
may result in increased prices
(Partial Relief)
Transaction is taxable for VAT
purposes although the tax levied is
0%
Made by a VAT-registered person
May claim input tax credit although
the transaction resulted to zero
output tax.
Can claim or enjoy tax credit/refund
(Total Relief)
 Zero-rated sale of goods or properties
• Effectively-zero rated vs. automatically zero-rated
– CIR v. Seagate Technology (Philippines), Inc., GR No. 153866, February 11, 2005
Zero-Rated Effectively Zero-rated
Generally refer to the export sale of goods and supply of Refer to the sale of goods or supply of services to persons or
services. entities whose exemption under special laws or international
agreements to which the Philippines is signatory effectively
subjects such transaction to a zero-rate.

Basis Effectively Zero-rated Transaction Automatic Zero-Rated Transaction

Nature
Need to apply for zero-rating
For whose benefit is it intended
Stamping of zero-rated on VAT
invoice or receipt
Effect
Refer to sales to persons or entities
whose exemption under special laws or
international agreements to which the
Philippines is a signatory
An application for zero-rating must be
filed and the BIR approval is necessary
before the transaction may be
considered zero-rated
Intended to benefit the purchaser who,
not being directly and legally liable for
the payment of VAT, will ultimately
burden of the tax shifted by the
suppliers.
Required. The buyer, as shown by his
address in the sales invoice and
shipping documents is located outside
the Philippines merely by fiction of law
Results in no tax chargeable against the purchaser.
The seller can claim refund or a tax credit certificate for the VAT previously
charged by suppliers.
Refer to export sales and foreign
currency denominated sales
No need to file an application form to
secure BIR approval before the sale is
considered zero-rated
Primarily intended to be enjoyed nu the
seller who is directly and legally liable
for the VAT, making such seller
internationally competitive by allowing
the refund or credit of input taxes that
are attributable to export sales
Not required. The buyer, as shown by
his address in the sales invoice and
shipping documents, is located outside
the Philippines.
Zero-rated sale of goods or properties
EXPORT SALES
• The sale and actual shipment of goods from the Philippines to a foreign country, irrespective
of any shipping arrangement that may be agreed upon which may influence or determine the
transfer of ownership of the goods so exported, paid in acceptable foreign currency or its
equivalent in goods or services, and accounted for in accordance with the rules and
regulations of the BSP

• The sale of raw materials or packaging materials to non-resident buyer for delivery to
resident local export-oriented enterprise to be used in manufacturing, processing, packaging,
or repacking in the Philippines of the said buyer’s goods, which must be paid in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the BSP

• Sale of raw materials or packaging materials to an export-oriented enterprise

(enterprise whose export sales exceed 70% of total annual production)

• Sale of gold to the BSP

– TRAIN: exempt transaction
Zero-rated sale of goods or properties
EXPORT SALES
• Those “considered export sales under EO No. 226 (Omnibus Investment Code of 1987)” and
other special laws
– Sale to ecozones
• CIR v. Seagate Technology (Philippines), GR No. 153866, February 11,
2005
• CIR v. Toshiba Information Systems Philippines, GR No.150154, August
9, 2005
– TRAIN: specifically included as part of “export sales”

• Sale of goods, supplies, equipment and fuel to persons engaged exclusively in international
shipping or international air transport operations

– TRAIN: goods, supplies, equipment and fuel shall be used for international shipping or air
transport operations
Zero-rated sale of goods or properties
FOREIGN CURRENCY DENOMINATED SALE
• Sale to non-resident
• Of goods assembled or manufactured in the Philippines, except automobiles and non-
essential goods
• For delivery to a resident in the Philippines
• Paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the BSP

Note: already removed under the TRAIN

Zero-rated sale of goods or properties
“EFFECTIVELY ZERO-RATED SALES”
• Sales to persons or entities whose exemption under special laws or international agreements
to which the Philippines is a signatory effectively subjects such sales to zero rate
Zero-rated sale of services
A zero-rated sale of service of a VAT-registered person is a taxable transaction for VAT purposes, but shall
not result in any output tax. However, the input tax to such zero-rated sale shall be available as tax credit or
refund in accordance with the Regulations.
Transactions Subject to Zero Percent VAT Rate:
• Processing, manufacturing or repacking of goods for other persons doing business outside
the Philippines, which goods are subsequently exported and paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the BSP

• Services other than those mentioned in the preceding paragraph rendered to a person
engaged in business conducted outside the Philippines or to a non-resident person not
engaged in business who is outside the Philippines when the services are performed and
paid for in acceptable foreign currency and accounted for in accordance with the rules
and regulations of the BSP

– CIR v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., GR No. 153205,
January 22, 2007
–Accenture, Inc. v CIR, GR No. 190102, July 11, 2012
Zero-rated sale of services
• Services rendered to persons or entities whose exemption under special laws or international agreements to
which the Philippines is a signatory effectively subjects the supply of such services to 0% rate

• Services rendered to persons engaged exclusively in international shipping or air transport operations
including leases of property for use which such services shall be exclusively for international shipping
or oar transport operations.

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

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

• Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign country.
Gross receipts of international air or shipping carriers doing business in the Philippines derived from
transport of passengers and cargo from the Philippines to another country shall be exempt from VAT but still
liable to percentage tax of 3% based on their gross receipts from transport of cargo from the Philippines to
another country.
Zero-rated sale of services
• Sale of power or fuel generated through renewable sources of energy such as, but not
limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy,
and other emerging sources using technologies such as fuel cells and hydrogen fuels.
Shall not be applicable to the sale of services related to maintenance or operation of
plants generating said power.

• TRAIN:
– Services rendered to registered enterprises within ecozones
VAT Exempt Transactions
SALE OR IMPORTATION OF AGRICULTURAL AND MARINE FOOD PRODUCTS,
LIVESTOCK AND POULTRY, BREEDING STOCK AND GENETIC MATERIALS
• Livestock or poultry does not include fighting cocks, race horses, zoo animals, and other
animals generally considered as pets

• Original state: simple process of preparation or preservation for the market

VAT Exempt Transactions
SALE OR IMPORTATION OF FERTILIZERS, SEEDS, SEEDLINGS, ETC.,
• Except: Specially made feeds for race horses, fighting cocks, aquarium fish, zoo animals and
other animals generally considered as pets

IMPORTATION OF PERSONAL AND HOUSEHOLD EFFECTS

• Residents returning from abroad
• Non-residents coming to resettle in the Philippines
• Qualification: goods are exempt from customs duties
VAT Exempt Transactions
IMPORTATION OF PROFESSIONAL INSTRUMENTS AND IMPLEMENTS, WEARING
APPAREL, DOMESTIC ANIMALS, AND PERSONAL HOUSEHOLD EFFECTS
BELONGING TO PERSOSN COMING TO SETTLE IN THE PHILIPPINES
• Except: vehicles, goods for use in manufacture, and merchandise of any kind in commercial
quantity

• Arriving within 90 days (vs. reasonable time)

• TRAIN: includes Filipinos or their families and descendants who are now residents or
citizens of other countries, in quantities and of the class suitable to the profession, rank
or position of the persons importing said items

SERVICES SUBJECT TO PERCENTAGE TAX

• Not exceed Php 1,919,500 (TRAIN: Php3M)
VAT Exempt Transactions
SERVICES BY AGRICULTURAL CONTRACT GROWERS AND MILLING FOR OTHERS
• Of palay into rice, corn into grits, sugar cane into raw sugar

MEDICAL, DENTAL, HOSPITAL AND VETERINARY SERVICES

• Except: rendered by professionals
• HMOs?
– CIR v. Philippine Health Care Providers, Inc., GR No. 168129, April 24, 2007
VAT Exempt Transactions
EDUCATIONAL SERVICES
• Private educational institutions accredited by CHED, DepEd, TESDA
• Government educational institutions

SERVICES RENDERED PURSUANT TO EMPLOYER-EMPLOYEE RELATIONSHIP

SERVICES RENDERED BY REGIONAL OR AREA HEADQUARTERS ESTABLISHED IN

THE PHILIPPINES BY MULTI-NATIONAL COMPANIES

TRANSACTIONS WHICH ARE EXEMPT UNDER INTERNATIONAL AGREEMENTS

– Except: those granted under PD 529 or the Petroleum Exploration Concessionaires
VAT Exempt Transactions
SALES BY AGRICULTURAL COOPERATIVES
• Duly registered with Cooperative Development Authority (CDA)
• To members: producer or not
• Non-members: producer or not
• Includes:
– Importation of direct farm inputs
– Used directly and exclusively in the production and/or processing of their produce

GROSS RECEIPTS FROM LENDING ACTIVITIES BY CREDIT OR MULTI-PURPOSE COOPERATIVES

• Duly registered with Cooperative Development Authority (CDA)

SALES BY NON-AGRICULTURAL, NON-ELECTRIC AND NON-CREDIT COOPERATIVES

• Duly registered with Cooperative Development Authority (CDA)

• Share Capital Contribution of each member – does not exceed Php 15,000

• Regardless of the aggregate capital and net surplus distributed among members.

EXPORT SALES BY PERSONS WHO ARE NOT VAT-REGISTERED

VAT Exempt Transactions
SALES OF REAL PROPERTIES
• Not primarily held for sale or held for lease in the ordinary course of trade or business
– Used in trade/business? - VATABLE

• Utilized for low-cost and socialized housing

– Low-cost: subdivisions or condominiums registered and licensed by HLURB
– Socialized: houses and lot, or home lots

• Residential
– Lot: up to Php1,919,500 (TRAIN: Php 1,500,000)
– House and lot: up to Php3,199,200 (TRAIN: Php 2,500,000)
VAT Exempt Transactions
LEASE OF RESIDENTIAL UNITS
• Monthly rental per unit: up to Php12,800 (TRAIN: Php15,000)
• Dwelling places

SALE, IMPORTATION, PRINTING, PUBLICATION OF BOOKS, NEWSPAPER, MAGAZINE,

REVIEW OR BULLETIN
• Appears at regular intervals
• Fixed price or subscription
• Not devoted principally to the publication of paid advertisements
• E-books? – If all requisites are present, then VAT exempt, otherwise it is VATABLE.
VAT Exempt Transactions
TRANSPORT OF PASSENGERS BY INTERNATIONAL CARRIERS
• Cargo? - Percentage tax of 3% based on its Gross Receipts

SALE, IMPORTATION, LEASE OF PASSENGER OR CARGO VESSELS AND AIRCRAFT

• Includes: engine, equipment, spare parts
• for domestic or international transport operations

IMPORTATION OF FUEL, GOODS AND SUPPLIES BY PERSONS ENGAGED IN INTERNATIONAL

SHIPPING OR AIR TRANSPORT OPERATIONS
• TRAIN: goods, supplies, equipment and fuel shall be used for international shipping or air transport operations
• Sale?- Zero-rated transaction
VAT Exempt Transactions
SERVICES OF BANKS, NON-BANK FINANCIAL INTERMEDIARIES PERFORMING QUASI-BANKING
FUNCTIONS, OTHER NON-BANK FINANCIAL INTERMEDIARIES
• Subject to percentage tax

SALE, LEASE, PERFORMANCE OF SERVICES AND OTHER TRANSACTIONS MENTIONED IN THE

PRECEDING PARAGRAPHS.
• Gross annual sales and/or receipts: exceeds Php3,000,000
VAT Exempt Transactions - TRAIN
SALE, LEASE, GOODS AND SERVICES TO SENIOR CITIZENS & PWD
• RA 9994

TAX-FREE EXCHANGE TRANSACTIONS

• Section 40(C)(2) of the NIRC

ASSOCIATION DUES, MEMBERSHIP FEES

• Collected by homeowners associations and condominium corporations

SALE OF GOLD TO THE BSP

• 1997 NIRC: export sale, zero-rated

SALE OF DRUGS AND MEDICINES

• Prescribed for diabetes, high cholesterol, and hypertension (beginning January 1, 2019)
Input VAT
• Output VAT vs. Input VAT

• When creditable?
– Importer: upon payment of VAT prior to release of goods from customs custody
– Purchaser of domestic goods or services: upon consummation of sale
– Purchaser of services, lessee, licensee: upon payment of the compensation, rental, royalty or
fee
– Capital goods
• Aggregate acquisition cost within a calendar month does not exceed Php1M: month of purchase
• Exceeds Php1M: 60 months (5 years) or actual number of months (less than 5 years)
• TRAIN: amortization allowed only until December 31, 2021
Transitional Input VAT
• Became VAT-registered persons upon exceeding Php 3,000,000 in any 12-month period
• Voluntarily registers as a VAT taxpayer even does not exceed Php 3,000,000
– except franchise grantees of radio and/ or television broadcasting whose threshold

• Whichever is HIGHER of
– 2% of value of beginning inventory on hand
– Actual VAT paid on such goods, materials and supplies

• Fort Bonifacio Development Corp. v CIR, GR no. 158885, April 2, 2009

Presumptive Input VAT
• Processing of sardines, mackerel and milk
• Manufacturing refined sugar, cooking oil, and packed noodle-based instant meals

• 4% of the gross value in money of their purchases of primary agricultural products which are used as
inputs to their production
Withholding VAT
• Sale of goods and services to the government
– 5% withheld by the government
– 7% Standard Input VAT (SIV)
• Actual > SIV: expense
• Actual < SIV: income

• Payment for lease or use of properties to non-resident owners

– 12%
Refund or Tax Credit
ZERO-RATED AND EFFECTIVELY ZERO-RATED
• 2 years from the close of the taxable quarter when the sales were made
– Regardless when the input tax was actually paid
– Administrative claim
• CIR has 90 days to decide

• Judicial claim (90+30)

– 30-day period to appeal is mandatory and jurisdictional
– Except: BIR Ruling No. DA 489-03: December 10, 2003 to October 5, 2010
Refund or Tax Credit -TRAIN
• Refund, TCC not allowed
• BIR must act on the claim within 90 days, otherwise administrative sanction
– No “deemed denial”
• Judicial claim: 30 days from receipt of decision
VAT COMPUTATION
• Mandatory registration for VAT
– Gross sales or receipts for the past 12 months exceeded Php 3,000,000
– Reasonable grounds to believe that his gross sales or receipts will exceed Php 3,000,000

• Effects of non-registration
– Liable to VAT as if VAT-registered
– Without the benefit of input tax

• Optional registration for VAT

– Irrevocable for 3 years
• Except: franchise grantees of radio and TV whose annual gross receipts do not exceed Php10M
VAT COMPUTATION
• Substantiation requirements
– VAT invoice: goods or properties
– VAT official receipt: lease of goods, services

• Return and payment of VAT

– Monthly
– Quarterly (25th day of the month following the close of the quarter)
VAT COMPUTATION

Basis of VAT
Nature of Transaction Tax Base

Sale of Goods or Properties Gross Selling Price (RR No. 8-2018

Sec.2)
Sale of Services Gross Receipts (RR No. 8-2018 Sec.2)
Importation Total Landed Cost
Dealers in Securities Gross Income (RR No. 8-2018 Sec.2)
VAT COMPUTATION

VAT Inclusive Formula:

Vatable Sale: Selling Price (SP)

1.12

VAT (Output Tax): Selling Price - Vatable Sale

Example:

Migo bought a high-end laptop from SM Aplicance Center worth P 64,300.00 inclusive of
VAT. How much is the Vatable Sales? How much is the VAT Output Tax?

Solution:

Vatable Sales: P 64,300 / 1.12 = P 57,410.71

VAT (Output Tax): P 64,300 - P 57,410.71 = P 6,889.29

VAT COMPUTATION
VAT Exclusive Formula

Selling Price: Vatable Sales X 1.12

VAT (Output Tax) = Selling Price X 12%

Example:

Migo bought a high-end laptop from SM Aplicance Center worth P 64,300.00 exclusive of
VAT. How much is the Vatable Sales? How much is the VAT Output Tax?

Solution:

Vatable Sale (Selling Price): P 64,300 x 1.12 = P 72,016

VAT (Output Tax): P 72,016 - P 64,300 = P 7,716

VAT COMPUTATION
Problem Solving for Importation of Goods

MGQ Corp., a domestic corporation acquired goods in Singapore with a taxable value of P
1,397,522, brokerage fees of P 6,796.90 and other charges of P 14,227.64.

1. How much is the Total Landed Cost?

2. How much is the input Tax?

Solution:

1. Goods Taxable Value P 1,397,522.00

Brokerage Fees 6,796.90
Other Charges 14,227.64
Total Landed Cost 1,418,546.54

2. Total Landed Cost P 1,418,546.54

VAT Rate 12%
Output Tax P 170,225.58
VAT COMPUTATION
Problem Solving for Sale to GOCCs

A Corp. sold P1M worth of goods plus 12% VAT to Government Agency (GA).
1. How much will GA pay A Corp?
2. How much is the VAT Payable of A Corp.?

Solution:
1. Goods (Net of VAT) P 1,000,000
Withholding 5%
Withheld taxes P 50,000

Value of Goods w/ VAT P 1,120,000

Less: Withholding tax 50,000
Total P 1,070,000

2. Answer : 0

The 5% tax withheld by GA is considered to be the Net VAT Payable by the seller to the
government.

NOTE:
VAT Output Tax P 120,000
W/held tax 50,000
Remaining Output Tax P 70.000

The Remaining Output Tax should not be paid to BIR but should be treated as Standard
Input VAT of A Corp.
VAT COMPUTATION
Sources of INPUT TAX:

Local Purchases – 12%

Importation – 12%
Presumptive Input Tax (PIT) – 4%
Transitional Input Tax (TIT) – 2% or actual Input paid whichever is higher
Standard Input Tax

Computation for Presumptive Input Tax

Persons covered: Persons/Firms engaged in:

1. Processing of sardines, mackerel and milk; and
2. Manufacturing refined sugar, cooking oil and packed noodle-based instant meals.

Amount Deductible:
Purchases of Primary Agricultural products P XXX
Rate 4%
Presumptive Input Tax P XXX
VAT COMPUTATION
Computation for Transitional Input Tax
Persons covered: Taxpayers who became VAT-registered persons (previously non-VAT) shall be
entitled to a transitional input tax.

Amount Deductible:
Beginning Inventory P XXX
TIT 2%
2% Tax P XXX

Vs.

Actual Input VAT, Inventory beg. XXX

Whichever is HIGHER.

Note: Beginning inventory will include all inventories related to business subject to VAT regardless of
whether or not it was purchased from VAT or non-VAT supplier.
VAT COMPUTATION
Computation on Input VAT on Capital Goods

Problem 1:
RLQ, Inc. is a VAT registered corporation. On Jan. 15, 2018, PP purchased P3M worth of
capital goods from VAT registered supplier in 2018 with an estimated life of 10 years. How
much is the creditable input tax for January?

Answer: P 6,000 for the month of January

Total Input VAT: P3M x 12% = P 360,000.00

Since the value of the capital goods is above 1M, the Input VAT should be amortized for 60 months or
the useful life of the capital goods whichever is shorter.

Hence, P 360,000 / 60months = P 6,000 per month

Problem 2:
JMCQ, Inc. is a VAT registered domestic corporation. On Jan. 15, 2018, it purchased P3M
worth of capital goods from VAT registered supplier in 2018 with an estimated life of 2 years.
How much is the creditable input tax for January?

Answer: P 15,000 for the month of January

Total Input VAT: P3M x 12% = P 360,000.00

Since the value of the capital goods is above 1M, the Input VAT should be amortized for 60 months or
the useful life of the capital goods whichever is shorter.

Hence, P 360,000 / 24months = P 15,000 per month

VAT COMPUTATION
Standard Input VAT

A Corp. sold P1M worth of goods plus 12% VAT to Government Agency (GA). In making such sales
to government, A Corp. purchases totaled P 625,000 plus VAT of P75,000. How much is the Input Tax
of A Corp?

Answer: P 5,000 Input VAT Expense

Solution:
VAT Output Tax P120,000
Tax w/held by GA 50,000
Remaining Output Tax 70,000

A Corp VAT Input P 75,000

Standard Input Tax 70,000
Input Tax Expense 5,000

If: the Input Tax of A Corp in its purchases totaled P60,000 only, the P10,000 difference shall be
treated as other income of A Corp.
VAT Input Tax P 60,000
Less: Standard Input Tax 70,000
Other Income 10,000