INPUT TAX

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 INPUT TAX

It refers to the VAT due from or paid by a VAT-registered person on

importation of goods or local purchase of goods or services, including
lease or use of property, from another VAT-registered person in the
course of his trade or business. It shall also include the transitional
and presumptive input tax determined in accordance with Section 111
of the NIRC.

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 Persons who can avail of Input Tax Credits

 PURCHASER of domestic goods or properties

 IMPORTER upon payment of VAT prior to release of goods from
Custom
 PURCHASER of services

PROVIDED that the purchaser/importer is VAT registered

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 Sources of Input Taxes
 Domestic purchases or importation of goods
 for sale
 raw materials in production including packaging materials
 supplies in the course of business
 raw materials supplied in the sale of services
 equipment/machineries used in trade or business except
automobiles aircraft and yachts
 Purchase of property (real or personal) where VAT has been
actually paid
 Purchase of services where VAT has been actually paid
 Transactions “deemed sale”
 Transitional Input Tax
 Presumptive Input Tax
 Transaction Deemed Sale
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 Requisites on Deductibility of Input Tax

 Supplier must be VAT registered

 VAT OR/Invoice issued
 Name, business style (if any), address and TIN of
customer/buyer indicated in VAT OR/SI (if in excess of P1,000)

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 Transitional Input Tax

A person who becomes liable to VAT or any person who elects to be a

VAT-registered person shall, subject to the filing of an inventory
according to rules and regulations prescribed by the Secretary of
Finance, upon recommendation of the Commissioner, be allowed
input tax on his beginning inventory of goods, materials and supplies
equivalent to two percent (2%) of the value such inventory or actual
VAT paid on such goods, materials and supplies, whichever is higher,
which shall be creditable against the output tax.

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 Presumptive Input Tax

4% presumptive input tax (of the gross value in money of purchases of

primary agricultural products used as inputs to their production) is
allowed to persons or firms engaged in processing/manufacturing of the
following products:

 sardines
 mackerel
 milk
 refined sugar
 cooking oil
 packed noodle-based instant meals

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 Claims for Input Tax on Depreciable Goods

Purchases or imports of capital goods*, which are depreciable assets for

income tax purposes, the aggregate acquisition cost of which (exclusive
of VAT) in a calendar month exceeds One Million pesos
(P1,000,000.00), regardless of the acquisition cost of each capital good,
shall be spread evenly in the following manner:

*Capital goods or properties refers to goods or properties with estimated

useful life greater than one (1) year and which are treated as
depreciable assets under Sec. 34(F) of the Tax Code, used directly or
indirectly in the production or sale of taxable goods or services.

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 Claims for Input Tax on Depreciable Goods

a. If the estimated useful life of a capital good is five (5) years or

more – The input tax shall be spread evenly over a period of sixty
(60) months and the claim for input tax credit will commence in the
calendar month when the capital good is acquired. The total input
taxes on purchases or importation of this type of capital goods shall
be divided by (60) and the quotient will be the amount to be claimed
monthly.
b. If the estimated useful life of a capital good is less than five (5)
years – The 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 of the capital good. The claim for input tax
credit shall commence in the calendar month that the capital goods
were acquired.
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 Claims for Input Tax on Depreciable Goods

c. 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.

Note: RMC No. 21-2022 illustrates how it can be declared per return

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 Claims for Input Tax on Depreciable Goods

A manufacturer purchased capital goods on different occasions as

follows:
Month of Amount 12% Input Tax Useful No. of Last Month of
Purchase (Php) Life Monthly Amortization
Amortiza-
tion
Jan 2018 8,500,000.00 1,020,000.00 6 years 60 December 2022
Feb 2019 8,500,000.00 1,020.000.00 4 years 48 January 2022
Dec 2021 10,000,000.00 1,200.000.00 5 years 60 November 2026
Jan 2022 10,000,000.00 1,200.000.00 5 years - *Outright claim
on Jan. 2022

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 Claims for Input Tax on Depreciable Goods

 For purchase made on January 2018, the amortization shall be for the
shorter period of 5 years only or up to December 2022 although the
useful life is 6 years.
 For purchase made on February 2018, the amortization shall be for
period of 4 years only or up to January 2022 since the useful life of
the asset is shorter than 5 years.
 For purchase made on December 2021, the amortization shall be for the
period of 5 years or up to November 2026.
 For purchase made on January 2022, no amortization shall be made
and the input VAT shall be claimed on the month of purchase or
January 2022.

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 Apportionment of Input Tax on
Mixed Transactions

1. All the 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 Government-Owned or Controlled
Corporations (GOCCs) shall not be credited against output taxes arising
from sales to non Government entities; and
2. If any input tax “cannot 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
credit.
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 Determination of Creditable Input Tax

All input taxes creditable to a VAT-registered person during a taxable

month or quarter, plus any input tax carried over from the preceding
month or quarter, shall be reduced by the amount of the claim for
refund or tax credit for VAT and other adjustments, such as purchase
returns or allowances and input tax attributable to exempt sales.

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 Input Tax Formula
On domestic purchase of goods and properties Pxxx
On domestic purchase of services xxx
On importation of goods xxx
On lease of goods and properties xxx
Transitional/presumptive input tax xxx
Carry-over from previous quarter xxx
Total Input Tax xxx
Less:
Claim for refund Pxxx
Claim for tax credit xxx
Adjustment for purchase return xxx
Input tax attributable to exempt sales xxx
Net creditable input tax for the quarter Pxxx

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 Allocation of Input Taxes between VAT
Taxable and VAT Non-Taxable Operations

If a VAT-registered person is also engaged in other activities not

subject to VAT, the input taxes paid for purchases of goods and
services which cannot be directly attributed to either operation shall
be allocated between the VAT taxable and VAT non-taxable
operations using the total sales.

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 Allocation of Input Taxes between VAT
Taxable and VAT Non-Taxable Operations

Formula

Total Sales/Receipts Input to be

VAT Taxable Operations X Un-attributed allocated to
Input taxes = VAT taxable
Total Sales/Receipts operations
VAT Taxable & Non-taxable
Operations

Total Sales/Receipts Un-attributed Input to be

VAT Non-taxable Operations X Input taxes = allocated to
VAT non-taxable
Total Sales/Receipts operations
VAT Taxable & Non-taxable
Operations

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 Allocation of Input Taxes between VAT
Taxable and VAT Non-Taxable Operations

Illustration:
ERA Corporation has the following sales during the month
Sale to private entities subject to 12% P 100,000.00
Sale to private entities subject to 0% P 100,000.00
Sale of exempt goods P 100,000.00
Sale of government, subjected to 5% final VAT P 100,000.00
withholding
Total sales for the month P 400,000.00

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 Allocation of Input Taxes between VAT
Taxable and VAT Non-Taxable Operations

The following input taxes were passed on by its VAT suppliers:

Input tax on taxable goods (12%) P 5,000.00
Input tax on zero-rated sales P 3,000.00
Input tax on sale of exempt goods P 2,000.00
Input tax on sale to government P 4,000.00
Input tax on depreciable capital good not P 20,000.00
attributable to any specific activity (monthly
amortization for 60 months)

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 Allocation of Input Taxes between VAT
Taxable and VAT Non-Taxable Operations

The creditable input tax for the month shall be computed as follows:
Input tax on sale subject to 12% - P5,000.00
Input tax on zero-rated sale - P3,000.00
Ratable portion of the input tax not
directly attributable to any activity

Taxable sales (0% and 12%) X Amount of input tax not

Total Sales directly attributable

P200,000.00 X P20,000.00 = P10,000.00

P400,000.00
Total creditable input tax for the month = P18,000.00

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 Allocation of Input Taxes between VAT
Taxable and VAT Non-Taxable Operations

B. The input tax attributable to sales to government for the month shall
be computed as follows:
Input tax on sale to government - P4,000.00
Ratable portion of Input tax not directly
attributable to any activity:

Taxable sales to gov’t. X Amount of input tax not

Total Sales directly attributable

P100,000.00 X P20,000.00 = P5,000.00

P400,000.00

Total input tax attributable to sales = P9,000.00

to government
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 Allocation of Input Taxes between VAT
Taxable and VAT Non-Taxable Operations

C. The input tax attributable to VAT-exempt sales for the month

shall be computed as follows:
Input tax on VAT-exempt sales - P2,000.00
Ratable portion of Input tax not directly
attributable to any activity:

VAT-exempt sales X Amount of input tax not

Total Sales directly attributable

P100,000.00 X P20,000.00 = P5,000.00

P400,000.00

Total input tax attributable to

VAT-exempt sales = P7,000.00
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 Allocation of Input Taxes between VAT
Taxable and VAT Non-Taxable Operations
The table below shows a summary of the foregoing transactions of ERA Corporation:

Output Input Input VAT Total Creditable Net VAT Credits VAT Due Input Unreco
VAT VAT Not directly Input Input VAT Payable VAT verable
directly Attributable VAT for Input
Attribut to any refund VAT
able activity
Sale subject to 12,000 5,000 5,000 10,000 10,000 2,000 0 2,000 0 0
12% VAT
Sale subject to 0 3,000 5,000 8,000 8,000 0 0 0 8,000 0
0% VAT
Sale of Exempt 0 2,000 5,000 7,000* 0 0 0 0 0 7,000*
Goods
Sale of Govt. 12,000 4,000 5,000 9,000 9,000 3,000 5,000** (2,000) 0 0
Subject to 5% *
CW VAT WH

*These amounts are not available for input tax credit but may be recognized as cost or expense
**Effective January 1, 2021, standard input VAT of 7% on sales to Government as provided in SEC 4.114-2(a) is no longer applicable due to the
change from Final VAT WH to Creditable VAT WH
***Withheld by Government entity as Creditable VAT WH

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