Input Tax

Sources of input tax

 Transitional input tax
 Presumptive input tax
 Input tax on domestic purchases or importation
(VAT actually paid)
 Transitional input tax
 Persons who can avail:
› Persons who become liable to VAT
› Persons who elect to be VAT-registered
 Basis of transitional input tax – Beginning inventory
of VAT-subject goods, materials and supplies.
 Transitional input tax allowed – HIGHER between:
› 2% of the VAT-subject beginning inventory value for
income tax purposes; and
› Actual VAT paid on such beginning inventory
 Presumptive input tax (Sa Ma Mi
Co Pa Re)
 Persons or firms who can avail:
› Processor of Sardines, Mackerel and Milk
› Manufacturer of Cooking oil, Packed noodle-based
instant meal and Refined Sugar.
 Basis of presumptive input tax – Gross value in
money of purchases of primary agricultural
products used as inputs in the processing or
manufacturing of SaMaMeCoPaRe.
 Rate of presumptive input tax – 4%
 Example:
 Sugary is a processor of refined sugar. It
purchases sugarcane from farmers for processing
into intermediaries stages until becomes refined
sugar. In a month it had the following sales and
purchases, no tax included:
Sales 880,000
Purchases of sugarcane 220,000
Purchases of containers and paper label 100,000
The value added tax payable is?
 Input taxes on domestic purchases
or importation of:
 Goods for sale
 Goods for conversion into finished product (including
packaging materials)
 Goods for use as supplies
 Goods for use as materials supplied in the sale of services
 Goods for use in trade or business for which depreciation
or amortization is allowed
 Real properties for which VAT has actually been paid
 Services for which VAT has actually been paid
 Transactions deemed sale (CR WPD)
 Illustration:
Virgin is a producer of cooking oil from coconut and corn. Previously exempt from the value
added tax, he became subject to the value-added tax on January 1, 2018. For January 2018, with
sales, value-added tax not included, of 700,000, he had the following other data for the month:
Inventory, January 1, 2018 NRV Cost
 Corn and coconut purchased from farmers 120,000 100,000
 Packaging materials purchased VAT suppliers 24,640 22,400
 Supplies purchased from VAT suppliers 11,200 13,440
 Purchases during the month of coconut and corn from farmers 330,000
 Purchases during the month of coconut from VAT suppliers:
 Packaging materials 56,000
 Supplies 16,800

 The transitional input tax is? Php 3,600

 The presumptive input tax is? Php 13,200
 The creditable input taxes are? Php 24,600
 The value-added tax payable for the month is? Php 59,400
 Lovely, had the following data on its operations for a month as VAT-registered
taxpayer:
Sales, total invoice price 592,480
Purchases of goods, VAT not included:
From VAT-registered persons 100,000
From non-VAT registered persons 80,000
Purchases of services, VAT not included:
From VAT-registered persons 20,000
From non-VAT registered persons 8,000
From persons subject to percentage taxes 10,000
Salaries of employees 60,000
Other operating expenses 12,000
This is the first month of being liable to the value-added tax. Data on inventories at
the beginning of the period bought from VAT registered persons follow:
Inventory, at cost 44,800
at net realizable value 49,000
Value-added tax paid on beginning inventory 4,800

 Input taxes are? Php 19,200

 The value added tax payable is? Php 44,280
 Claim for input tax on depreciable
goods
 Applies only to domestic purchase or importation
of capital goods subject to depreciation for
income tax purposes.
 Where the aggregate acquisition cost (exclusive
of VAT) of depreciable capital goods during any
calendar month does not exceed P1,000,000, the
total input tax is creditable against output tax in
the month acquired.
 Where the aggregate acquisition cost (exclusive
of VAT) of depreciable capital goods during any
calendar month exceeds P1,000,000, the total
input tax is creditable against output tax, as
follows:
› Spread evenly over 60 months (starting in the
calendar month acquired) the input tax, if the
estimated useful life of the depreciable capital goods
is 5 years or more.
› Spread evenly over the actual number of months of
estimated useful life (starting in the calendar month
acquired) the input tax, if the estimated useful life of
the depreciable capital good is less than 5 years.
 If the depreciable capital goods 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 in the month/quarter when the
sale or transfer was made.
 Amortization of the input VAT in C above shall
be allowed only until December 31, 2021, after
which any unutilized input VAT balance shall be
allowed to apply the same as scheduled until
fully utilized.
 Illustration:
 Pfizer Corporation sold its capital goods to Wyetth Company
on installment basis. It is agreed that the installment selling
price, including the VAT, shall be payable in 6 equal monthly
installments, commencing on the date of sale. The data
pertinent to the assets sold are as follows:
› Date of sale January 1, 2018
› Installment selling price6,000,000
› Passed-on VAT 720,000
› Original cost of assets 3,000,000
› Accumulated depreciation 1,000,000
› Unutilized input tax (Asset sold) 100,000
› Remaining useful life 5 years
 The VAT payable on the sale by Pfizer Corporation and the monthly
creditable input tax that Wyetth Company can claim are, respectively?
620,000 and 12,000
 Creditable input tax of a VAT-registered
person also engaged in VAT-exempt sales
 A VAT-registered person is also engaged in transactions
not subject to VAT shall ne allowed tax credit as follows:
› Total input tax which can be directly attributed to transactions
subject to VAT, provided that input taxes attributable to VAT
taxable sale of goods and services to the Government or any of
its political subdivisions, instrumentalities or agencies
(including GOCC) shall not credited against output taxes
arising from sales to non-Government entities, and
› A ratable portion of any input tax which cannot be directly
attributed to either activity computed as follows:
VAT sales x Input tax
Total Sales
 Withholding of VAT on Government
money payments and payments to non-
residents
 Who are required to withhold?
› Government or any of its political subdivisions,
instrumentalities or agencies, including government-
owned or controlled corporations (GOCCs)
› Lessee of properties or property rights owned by non-
residents.
› Persons for services rendered in the Phil (including
services rendered to local insurance companies with
respect to reinsurance premiums payable) by non-
residents.
 Percentage of withholding VAT:
› Government money payments – 5% final VAT
(starting 1/1/21, however, this VAT withholding
system shall shift from final to a creditable system)
› Payments to non-residents – 12% creditable VAT
 What is done with the VAT withheld?
› Buyer or Lessee (withholding agent) – remitted to the
BIR within 10 days following the end of the month
the withholding was made.
 Illustration:
 Jargon Corporation has the following sales (VAT not included) during the month:
› Sale to private entities subject to 12 VAT 100,000
› Sale to private entities subject to 0% VAT 100,000
› Sale of exempt goods 100,000
› Sale to Government subject to
5% final VAT withholding 100,000
› Total sales for the month 400,000
› The following input taxes were passed-on by its VAT suppliers:
› Input tax on taxable goods (12%) 6,000
› Input tax on zero-rated sales 3,000
› Input tax on sale of exempt goods 2,000
› Input tax on sale to Government 4,000
› Input tax on depreciable capital goods
Not attributable to any specific activity
(monthly amortization for 60 months) 20,000
The allowable creditable input taxes for the month on sales to non-
Government and on sale to the Government are, respectively: 19,000 and 7,000
 Determination of creditable input
taxes
Input taxes on domestic purchases or importations Xxx
Transitional input tax Xxx
Presumptive input tax Xxx
Input tax carried over from previous month/quarter xxx
Total input taxes Xxx
Less:
Input taxes claimed as refund Xxx
Input taxes claimed as tax credit for other NIRC taxes Xxx
Input taxes applicable to purchase returns and allow. Xxx
Input taxes attributable to sales subject to VAT withholding Xxx
Input taxes attributable to VAT-exempt sales xxx xxx
Net creditable input taxes xxx

Illustration:
Data for a trader with one line of business subject to the value-added tax and
another line of business not subject to the value-added tax:
› Sales, VAT business, VAT included 896,000
› Sales, non-VAT business 200,000
› Purchases of goods, VAT business, VAT included 224,000
› Purchases of goods, non-VAT business 33,600
› Purchase of depreciable asset,
For use in VAT and non-VAT business, VAT inc 112,000
› Purchase of supplies, for VAT and non-VAT
Business, VAT included 2,240
› Rental of premises, for VAT and non-VAT
Business, VAT included registered person 22,400
The Value added tax payable is? 62,208