ANZANO, Janine J.

BSA 2B

STANDARD INPUT 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/or services taxed at 12% vat pursuant to Section 106 and 108 of the Tax Code, deduct and
withhold a Final VAT due at the rate of 5% of the gross payment.

The 5% final VAT withholding rate shall represent the net VAT payable of the seller.

The remaining 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 GOCCs in lieu of
the actual input VAT directly attributable or ratably apportioned to such sales.

Should actual input VAT attributable to sales to government exceeds 7% of gross payments, the excess
may form part of the seller’s expense or cost.

On the other hand, if actual input VAT attributable to sale to government is less than 7% of gross
payment, the difference must be closed to income.

RR 4-2007 provides that if one of the parties in the transaction is the government, the vat on the
transaction shall be based on the actual selling price.

The government or any of its political subdivisions, instrumentalities or agencies including GOCCs, as
well as private corporation, individuals, estates and trusts, whether large or non-large taxpayers, shall
withhold 12% VAT, starting February 1, 2006, with respect to the following payments:

1) Lease or use of properties or property rights owned by nonresidents

2) Other services rendered in the Philippines by nonresidents

The 5% withholding vat shall be remitted within 10 days from the close of the month the withholding
was made.

CREDITABLE WITHHOLDING VAT

Non-resident persons who perform services in the Philippines are deemed to be making sales in the
course of trade or business, even if the performance of services is not regular. The recipient of the
service is the one required to withhold and remit the VAT to the BIR. Such VAT can be claimed by the
recipient as input tax.

The 5% final vat withheld by the government and/or GOCCs is deductible against the output vat of the
seller.

TRAIN LAW:

Beginning 2021, the vat withholding system shall shift from final to a creditable vat system. The payor
shall be considered the withholding agent.
Payments for purchases of goods and services arising from projects funded by Official Development
Assistance (ODA) under RA 8182, shall not be subject to withholding of vat.

EXCESS INPUT TAX

KINDS OF INPUT TAX TREATMENT

Related to sales subject to 12% VAT a) Carry-over
Related to 0% VAT a) Carry-over
b) Refund
c) Convert into tax credit certificate
In case of cancellation of VAT registration a) Convert into tax credit certificate
b) In case it has no other tax liability, refund