Input VAT Fundamentals

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Questions and Answers

What does input VAT refer to?

VAT collected from customers

VAT paid on local and imported goods or services (correct)

VAT on exempt sales

VAT that is refundable to the government

Which of the following is NOT a requisite for creditable input VAT?

Evidence by a VAT invoice or official receipt

Input VAT must have been paid in the course of business

Related to exempt sales (correct)

Issued by a VAT registered person

How is transitional input VAT calculated?

3% of the VAT collected from customers

2% of the vatable beginning inventory of goods (correct)

Equal to 5% of the total sales

12% of the total purchases for the year

What is required for a taxpayer to claim transitional input VAT?

An inventory list of goods Signup and view all the answers

At what time can transitional input VAT be claimed?

In the month of registration as a VAT taxpayer Signup and view all the answers

Which option is categorized under input VAT types?

Presumptive Input VAT Signup and view all the answers

Which statement is true about regular input VAT?

It is the VAT paid on domestic or imported goods. Signup and view all the answers

What happens if VAT is not separately billed on a sales document?

VAT is included in the selling price. Signup and view all the answers

Which vehicle is allowed for the use of an official or employee while qualifying for depreciation?

A vehicle valued under P2,400,000 Signup and view all the answers

What is the treatment of input VAT on construction in progress?

Credit is claimed with every progress billing payment Signup and view all the answers

For which type of vehicle is depreciation not allowed regardless of usage?

Yachts and helicopters Signup and view all the answers

What must be substantiated to allow for vehicle depreciation?

Sufficient evidence such as receipts or adequate records Signup and view all the answers

When can the buyer claim input VAT on the purchase of real property in installments?

With every billing statement from the seller Signup and view all the answers

What is the claimable input VAT for goods or properties deemed sold?

Input VAT corresponding to the goods bought by the buyer Signup and view all the answers

Under what condition can land vehicles exceeding the value of P2,400,000 be depreciated?

If they are involved in transport operations Signup and view all the answers

What happens if the taxpayer fails to substantiate the connection of the vehicle to their business?

It results in the vehicle being classified as non-depreciable Signup and view all the answers

When is the input VAT on the purchase of goods or properties credited?

Month of purchase Signup and view all the answers

How is the input VAT treated if the monthly aggregate acquisition cost of depreciable capital goods exceeds P1,000,000?

Amortized over Useful life or up to 60 months Signup and view all the answers

What happens to the unamortized input VAT if depreciable capital goods are sold within 5 years?

Claimed as input tax credit in the month of sale Signup and view all the answers

When can input VAT on capital goods be claimed outright since the implementation of the new law?

Starting January 1, 2022 Signup and view all the answers

What is the treatment for input VAT on purchase of non-depreciable vehicles?

Not creditable Signup and view all the answers

What triggers the amortization of deferred input VAT for depreciable capital goods?

Cost exceeds P1,000,000 Signup and view all the answers

What is the maximum period over which deferred input VAT can be amortized?

60 months Signup and view all the answers

What is the presumptive input tax rate for qualified processors of sardines, mackerel, and milk?

4% Signup and view all the answers

What change occurred with deferred input VAT under the TRAIN law effective January 1, 2022?

Amortization treatment will be phased out Signup and view all the answers

What is the effective input VAT claim for sellers to government agencies due to the final withholding VAT?

7% Signup and view all the answers

What percentage tax is withheld by the government on sales from non-VAT registered sellers?

3% Signup and view all the answers

What does input VAT carry-over represent?

Excess of input VAT over output VAT Signup and view all the answers

Which month can the input VAT carry-over of the prior quarter be deducted?

First month of the current quarter Signup and view all the answers

What is the rule regarding the input VAT carry-over in the second month of the quarter?

It cannot be deducted in the third month Signup and view all the answers

What specific products qualify for the presumptive input VAT?

Sardines, mackerel, and milk Signup and view all the answers

What is the final withholding VAT rate applicable to sales to the government?

5% Signup and view all the answers

Which of the following is excluded from input VAT carry-over?

Input VAT applied for tax credit certificate Signup and view all the answers

What is the rule for specific identification of input VAT?

Input VAT must be traced to a particular sale transaction. Signup and view all the answers

What happens to input VAT attributable to zero-rated claims that have been applied for a tax refund?

It is excluded from input VAT carry-over. Signup and view all the answers

Which category of input VAT is included in creditable input VAT when not applied for tax refund?

Input VAT traceable to export sales Signup and view all the answers

What is the proportion of sales to government agencies contributing to the composition of creditable input VAT?

7% Signup and view all the answers

Study Notes

Input VAT Overview

Input VAT represents VAT incurred by VAT-registered individuals on goods, properties, or services, including leased properties.
If VAT isn't billed separately, the selling price is considered inclusive of VAT.

Creditable Input VAT Requirements

Must be paid or incurred in business related activities.
Requires a valid VAT invoice or official receipt.
The invoice/receipt must be issued by a VAT-registered entity.
Input VAT must relate to taxable sales, not exempt sales.

Types of Input VAT

Transitional Input VAT: 2% of VATable beginning inventory or actual VAT paid, whichever is higher, claimable on VAT registration.
Regular Input VAT: 12% VAT paid on domestic purchases or imports. Recognized based on the timing of purchase or payment.
Amortization of Deferred Input VAT: Applicable when acquisition cost exceeds P1,000,000; input VAT is amortized over the useful life or 60 months.
Presumptive Input VAT: For specific processors (sardines, mackerel), a presumptive input tax of 4% on agricultural products used in production.
Standard Input VAT: Sales to government agencies subject to a 5% final withholding VAT, allowing only 7% of sales as input VAT.
Input VAT Carry-Over: Excess input VAT over output VAT in a period, leading to potential deductions in future months.

Transitional Input VAT

Requires an inventory list and bookkeeping entry for recognition.
Claimable in the month of VAT registration.

Regular Input VAT

Claimable based on:
- Domestic purchases: Month of purchase.
- Services: Month paid.
- Importation: Month VAT paid.
- Depreciable capital goods: Amortized if aggregate cost exceeds P1,000,000.

Amortization Rules for Capital Goods

Input VAT is claimable in the month of purchase for goods under P1,000,000.
For amounts exceeding this, VAT amortized over the useful life or 60 months.
If sold within 5 years, unamortized input tax can be claimed when sold.

Special Rules on Input Tax Credit

Non-depreciable vehicles and construction projects treated as service purchases.
Progress billings factor into input VAT credit.

Input VAT on Installment Purchases

Input VAT is claimable on output VAT for each installment payment.

Input VAT Exclusions

Advanced VAT applied for tax credits or zero-rated claims cannot carry over.
Input VAT tied to expired zero-rated sales after 2 years is also excluded.

Rules on Input VAT Carry-Over

Prior quarter carry-over deductible in first month of the current quarter.
Specific deduction rules apply to each month within the quarter.

Claiming Input VAT

Specific identification approach for traceable transactions.
Pro-rata allocation for untraceable input VAT based on sales.

Composition of Creditable Input VAT

Includes input VAT from regular and export sales, plus the 7% from sales to government agencies.

Depreciation Expense Rules for Vehicles

Limitation to one vehicle per official, worth not exceeding P2,400,000.
No depreciation allowed for yachts, helicopters unless used for transport in a transport business.
Sufficient documentation required to prove direct business relation.

These notes encapsulate essential information on Input VAT, its types, requirements, and implications for businesses in the Philippines.

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Description

This quiz explores the concept of Input VAT, which is the value-added tax that a VAT-registered person pays on purchases and importations for business use. It covers the requisites for creditable input VAT and deals with scenarios where VAT may not be separately billed. Prepare to test your understanding of VAT regulations and implications.