Input Vat: Course Of Trade Or Business

INPUT VAT Input VAT of the buyer is the output VAT on the VAT sales invoice issued by the seller Rule: if the VAT is not billed separately, the selling price stated in the sales document shall be deemed to be inclusive of VAT CREDITABLE INPUT VAT Requisites: 1. Must have been paid or incurred in the course of trade or business 2. Evidenced by a VAT invoice or official receipt 3. Issued by a VAT-registered person 4. Incurred in relation to VATable sales and not from exempt sales. Types of vatable sales: a. Sales to the government b. Export sales c. Regular sales -Purchases from non-VAT suppliers and of VATexempt goods: have no input VAT -Input VAT on purchases not intended for business: non-creditable against the output VAT -Input VAT evidenced by ordinary receipt: noncreditable

TYPES OF CLAIMABLE INPUT VAT 1. Transitional Input VAT 2. Regular Input VAT 3. Amortization of Deferred Input VAT 4. Presumptive Input VAT 5. Standard Input VAT 6. Input VAT Carry-over TRANSITIONAL INPUT VAT - a person who elects to be VAT-registered: initial input tax credit equivalent to: HIGHER of -2% of the beginning inventory of goods, materials or supplies OR -actual VAT paid -2% basis: -should be VATable -excluding capital goods; -net of input VAT if purchased from VAT seller -goods exempt from VAT: excluded in the computation of the transitional input VAT -stricticissmi juris not applicable

Actual VAT: Purchases from VAT suppliers x 12/112= xxx 2% of beginning inventory: Purchases from VAT suppliers / 1.12 = xxx (to get VAT exclusive amount) Purchases from non-VAT suppliers + xxx TOTAL xxx Multiply by: 2% Xxx HIGHER: Transitional Input VAT *note: goods should be VATable TIV- claimable in the month of registration as a VAT taxpayer REGULAR INPUT VAT -12% VAT paid on a. Domestic purchase of goods, services, or properties or b. Importation Source of regular input VAT Purchase goods or properties Purchase of services Importation of goods Purchase of depreciable capital goods or properties: General treatment Monthly aggregate acquisition cost >1,000,000 excluding VAT Purchase of nondepreciable vehicles an on maintenance incurred thereon

Timing of credit In the month of purchase In the month paid In the month VAT is paid

In the month of purchase Amortized over SHORTER of useful life or 60 months (5 yrs) Not creditable

*note: exceeding 1M, if 1M, still not amortized Input VAT amortized: deferred input VAT Monthly aggregate acquisition cost: -total price excluding VAT agreed upon the asset/s acquired Asset not incurred in the course of business: non-creditable If: asset was sold within 5 years or before exhaustion of the deferred input VAT, The entire unamortized input tax can be claimed as input tax credit on the month/quarter of sale.

Special Rules on input tax credit 1. Non-depreciable vehicles 2. Construction in progress 3. Purchase of real property on installment 4. Purchase of goods or properties deemed sold 1. Input VAT on Non-depreciable vehicles Rules in the deductibility of depreciation expense on vehicles: a. Only one vehicle for land transport is allowed for the use of an official or employee, the value should not exceed 2,400,000 b. No depreciation shall be allowed to yachts, helicopters, airplanes/aircrafts and land vehicles which exceed 2.4M threshold unless the taxpayer’s main line of business is transport operations or lease of transport equipment using such vehicles c. Purchase: substatiated d. Direct connection of the vehicles to the development, operation and or conduct of the trade or business or profession of the taxpayer must be substantiated

PRESUMPTIVE INPUT VAT Persons engaged in the processing of Sa MaMi Co PaRe Sardines Mackerel Milk Cooking Oil Packed noodles and Refined Sugar -presumptive input tax: 4% of the gross value in money of their purchases of primary agricultural products -Sardines, mackerel. -not the basis of 4% PIV, but the processors thereof (marine products) “Processing”- pasteurization, canning, and activities which through physical or chemical process alter the exterior texture or form or inner substance of a product. -tax incentive to processors of VAT-exempt raw materials into processed food products Credit: in the month of purchase -processor for clients: cannot claim presumptive input vat because it does not own the raw materials it processes STANDARD INPUT VAT

2. Input VAT o Construction in Progress -considered purchase of service -input tax: creditable upon payment of each progress billings of the contractor -NOT credited upon completion of the construction NOR amortized over 60 months Payment x 12/112 = creditable input VAT -no further additional input VAT can be claimed upon completion of the asset and when it is depreciated 3. Input VAT on purchase of Real Property on installments -If the Purchase is by installment and the seller is allowed to bill the output VAT in installment, the buyer can also claim the input VAT in the same period as the seller recognizes the output VAT 4. Input VAT on goods or properties deemed sold (ex: due to retirement from business) Claimable input VAT: The portion of the output VAT imposed upon the goods deemed sold which corresponds to the goods purchased by the buyer (proportional)

The sale of goods and services to the government or any of its political subdivisions including GOCCs -5% final withholding VAT based on the gross payment -the gov’t shall remit the same within 10 days following the end of the month the withholding was made -sellers can claim an standard input VAT equivalent to 7% (12%-5%) -creditable Ex: Sales- 100,000 Invoice: 112,000 Purchase price: 90,000 + 10,800 input VAT Net proceeds the government shall release: 107,000 (112,000-(100,00 x 5%)) Output VAT 12,000 Less: Std Input VAT 7,000 VAT Payable (5%) withheld) 5,000

INPUT VAT CARRY-OVER -excess input VAT over output VAT in a particular month or quarter Rules: 1. Input VAT carry-over of the prior quarter is deductible in the first month of the current quarter 2. The input VAT carry-over in the first month of the quarter is deductible in the second month of the quarter 3. The input VAT carry-over in the second month of a quarter is not deductible to the third month of the quarter 4. The input VAT carry over of the prior quarter is deductible in the third month quarterly balance of the present quarter What are excluded from input vat carry-over? 1. Advanced VAT which have been applied for tax credit certificate 2. Input VAT attributable to zero-rated claim which have been applied for a tax refund or tax credit certificate 3. Input VAT attributable to zero-rated sales that expired after the two-year prescriptive period Input VAT deductible against gross income -Input VAT on exempt goods -Excess input VAT (government)

Allowable creditable input VAT in the VAT

return 

Input tax carry-over, from previous period  Deferred input tax on capital goods exceeding 1M  Transitional Input tax  Presumptive input tax  Regular Input VAT from:  Purchases of capital goods not exceeding 1,000,000  Purchase of capital good exceeding 1,000,000  Domestic purchases of goods other than capital goods  Importation of goods, other than capital goods  Domestic purchases of services  Services rendered by non-residents  Others Total Available Input tax Less: Deductions from Input Tax:  Input Tax on capital goods deferred for future periods  Input tax on sales to gov’t closed to expense  Input tax allocable to exempt sales  Input VAT claimed as refunds/ TCC  Others Total allowable (creditable) input tax