CHAPTER 9: INPUT VAT

Input VAT – paid by VAT-registered person for the purchases of goods, properties or services, including lease or use of
properties in the course of his business

 Usually, reflected as separate item in the invoice price or VAT official receipt
o If not billed separately, the SP is deemed inclusive of VAT (Invoice price *12/112)
 Input VAT of the buyer = Output VAT of the seller
 NOT all input VAT is creditable or deductible against output VAT

Requisites of a creditable input VAT:

1. Input VAT must have been paid or incurred in the course of trade or business.
 The purchases related to input VAT must from the ordinary course of trade or business, and not personal.
2. The input VAT is evidenced by a VAT invoice or official receipt.
 Any other receipt like ordinary receipt is not included.
3. The VAT invoice or receipt must be issued by a VAT-registered person.
 Only VAT-registered seller can put VAT on the sales, thus the receipt with input VAT that the buyer
received shall also only from VAT-registered person.
4. Input VAT is incurred in relation to vatable sales not from exempt sales.
 Zero-rated sale is included in vatable sales.
TYPES OF INPUT VAT
1) TRANSITIONAL INPUT VAT
 From non-VAT person to VAT-registered
 The HIGHER: 2% of the beginning inventory or actual VAT paid
o Beginning inventory – the vatable goods, exclusive of VAT, at the month of registration
o If the goods are from non-VAT: Exclusive of VAT; No actual VAT paid
o If the goods are from VAT-taxpayer: Inclusive of VAT; With actual VAT paid

Rationale: When he became a VAT-taxpayer, the sales are subject to output VAT, but the goods to make that product
or the inventories are not allowed to credit as input VAT, because he’s still non-VAT in the period he purchased it.
Hence, they are given this incentives of transitional input VAT.
2) REGULAR INPUT VAT
 12% VAT paid on purchases in domestic or importation
Source of Credit of Regular input VAT Timing of credit
Purchase of goods or properties In the month of purchase
Purchase of services (including construction in progress) In the month paid/upon payment
Importation of goods In the month VAT is paid
Purchase of depreciable capital goods or inventories In the month of purchase (no longer amortized)
Purchase of non-depreciable vehicles and on Not creditable
maintenance incurred thereon
Purchase of real property on installments In the period the seller recognizes output VAT
Purchase of goods or properties previously deemed sold In the month of purchase (proportionate to the
recognized output VAT)
3) PRESUMPTIVE INPUT VAT
 4% of the gross value in money or purchases of primary agricultural products (marine products are
not included)
 Persons or firms engaged in the processing of: (SaMaMi)
a. Sardines
b. Mackerel
c. Milk
  And the manufacturing of: (PaReCo)
a. Packed noodles based instant meals
b. Refined sugar
c. Cooking oil

Rationale: Their raw materials are agricultural products in original state, so it means the purchases of this are exempt
of VAT, thus automatically not creditable or deductible against output VAT. Hence, they are given this incentive.
Note: Processor of this agricultural products for others cannot claim presumptive VAT, because they didn’t own it.
4) STANDARD INPUT VAT
 7% of sales to government
 Already discussed in chapter 6
SALES TO GOVERNMENT/GOCCs
107% Cash XXX
Withheld final
5% VAT XXX
Sales XXX 100%
Output VAT XXX 112%

Standard input VAT - 7%

Cost of sales:
Debit (loss): Actual input VAT > Standard input VAT
Credit (Gain): Actual input VAT < Standard input VAT

5) INPUT VAT CARRY-OVER

RULES:
I. The input VAT carry-over in the 1st month of the quarter s deductible in the 2nd month of the quarter.
II. The input VAT carry-over in the second month of a quarter is not deductible to the 3 rd month of the quarter.
III. The input VAT carry-over of prior quarter is deductible in the 1st month of the quarter and in the 3rd month
quarterly balance of the quarter.
IV. The VAT paid of the 1st and 2nd month of the quarter is deductible in the quarterly balance.

EXCLUDED FROM INPUT VAT CARRY-OVER:

 VAT which has been applied to tax refund or tax credit certificate
 Input VAT attributable to zero-rated sales that expired after the 2 years prescriptive period.