Input Vat Chapter 9 PDF

DEPARTMENT OF ACCOUNTANCY HOLY ANGEL UNIVERSITY INPUT VAT INPUT VAT - Refers to VAT due or paid by a VAT registered person on importation or local purchases of goods, properties, or services, including lease or use of properties in the course of his trade or business. What if the V...

DEPARTMENT OF ACCOUNTANCY HOLY ANGEL UNIVERSITY INPUT VAT INPUT VAT - Refers to VAT due or paid by a VAT registered person on importation or local purchases of goods, properties, or services, including lease or use of properties in the course of his trade or business. What if the VAT is not separately billed? the selling price stated in the sales document shall be deemed to inclusive of VAT. CREDITABLE INPUT VAT REQUISITES OF A CREDITABLE INPUT VAT: 1. The input VAT must have been paid o incurred in the course of trade or business. 2. The input VAT is evidenced by a VAT invoice or official receipt. 3. The VAT invoice or receipt must be issued by a VAT registered person. 4. Input VAT is incurred in relation to vatable sales not from exempt sales. TYPES OF INPUT VAT A. TRANSITIONAL INPUT VAT B. REGULAR INPUT VAT C. AMORTIZATION OF DEFERRED INPUT VAT D. PRESUMPTIVE INPUT VAT E. STANDARD INPUT VAT F. INPUT VAT CARRY-OVER A. TRANSITIONAL INPUT VAT equivalent to 2% of the VATABLE beginning inventory of goods, materials, or supplies or the actual VAT paid thereon whichever is HIGHER. REQUISITES: 1. The taxpayer must submit an inventory list of goods. 2. The taxpayer must prepare an entry recognizing the transitional input VAT credit in his accounting books. TIMING OF CREDIT OF TRANSITIONAL INPUT VAT: The transitional input VAT shall be claimable in the month of registratio0n as a VAT taxpayer. B. REGULAR INPUT VAT is the 12% VAT paid on Domestic purchase of goods, services, or properties, or importation of goods or services. TIMING OF CREDIT OF REGULAR INPUT VAT SOURCES TIMING Purchase of goods or properties Month of purchase Purchase of services Month paid Importation of goods Month VAT is paid Purchase of depreciable capital goods or properties - General treatment Month of purchase - When the monthly aggregate Amortized over Useful life in moths or 60 acquisition cost exceeds P1,000,000 months whichever is shorter. Purchase of non-depreciable vehicles Not creditable and on maintenance incurred thereon. C. AMORTIZATION OF DEFERRED INPUT VAT INPUT VAT on PURCHASE OF CAPITAL GOODS OR PROPERTIES IF THE MONTHLY AGGREGATE ACQUISITION COST OF DEPRECIABLE CAPITAL GOODS: Does not exceed P1,000,000 Input VAT is claimable in the Month of purchase Exceeds P1,000,000 Amortized over Useful life in moths or 60 months whichever is shorter. The input VAT to be amortized is called “Deferred input VAT”. Sale or Transfer of depreciable capital goods within 5 years if the depreciable property is sold or transferred within 5 years prior to the exhaustion of the amortizable input tax thereon, the entire unamortized input tax (deferred input tax) on the capital goods sold/transferred can be claimed as input tax credit during the calendar month or quarter when the sale or transfer was made. Scheduled Phase-out of the amortization treatment under the TRAIN law, the amortization treatment of deferred input VAT will be phased out effective January 1, 2022. Previously recognized deferred input VAT will continue to be amortized even after that date but the deferral treatment will be stopped. Input VAT on capital goods will be claimed outright in the month of purchase effective January 1, 2022. SPECIAL RULES ON INPUT TAX CREDIT 1. Non-depreciable vehicles 2. Construction in progress 3. Purchase of real property in installments 4. Purchase of goods or properties deemed sold RULES ON DEDUCTIBILITY OF DEPRECIATION EXPENSE ON VEHICLES 1. Only one vehicle for land transport is allowed for the use of an official or employee, the value of which should not exceed P2,400,000 2. No depreciation shall be allowed to yachts, helicopters, airplanes and/or aircrafts, and land vehicles which exceed the P2,400,000 threshold unless the main line of business is transport operations or lease of transport equipment and the vehicles are used in the operations. 3. The purchase must be substantiated with sufficient evidence such as official receipts or other adequate records 4. The direct connection or relation of the vehicles to the development, operation, and or conduct of the trade or business or profession of the taxpayer must be substantiated. Non-conformance = non depreciable for income tax purposes INPUT VAT ON CONSTRUCTION IN PROGRESS - RR24-2007 does not consider it as purchase of capital good but as a purchase of service - Thus, the input VAT is creditable upon payment of each progress billings of the contractor and is neither credited upon completion nor amortized over a period INPUT VAT ON PURCHASE OF REAL PROPERTY ON INSTALLMENTS - The output VAT appearing in every billing statement of the seller at every installment which the buyer is obliged to pay is the input VAT claimable by the buyer INPUT VAT ON GOODS OR PROPERTIES DEEMED SOLD - The claimable input VAT on goods or properties previously deemed sold shall be the portion of the output VAT imposed upon the goods deemed sold which corresponds to the goods purchased by the buyer. D. PRESUMPTIVE INPUT VAT persons or firms engaged in the processing of sardines, mackerel and milk and in the manufacturing of refine sugar, cooking oil and packed noodle based instant meals shall be allowed a presumptive input tax equivalent to 4% of the gross value in money of their purchase of primary agricultural products which are used in their production. Code word on qualified processors: Sa MaMi Co PaRe E. STANDARD INPUT VAT The sale of goods and services to government or any of its political subdivisions, instrumentalities or agencies, including GOCC’s is subject to a 5% final withholding VAT based on the gross payment (which shall withhold the final VAT before making the payment and remit the same within 10 days following the end of the month the withholding was made). Due to the final withholding VAT, the sellers to the Government agencies including GOCC’s can effectively claim only 7% of sales as input VAT called the “standard input VAT”. WHAT IF THE SELLER IS NON-VAT REGISTERED SELLER? - The government or GOCC shall withhold a 3% final percentage tax on the sale before payment F. INPUT VAT CARRY OVER The input VAT carry-over is the excess of the input VAT over the output VAT in a particular month or quarter. It is the VAT overpayment that appears after tax credits and payments are deducted against the net VAT Payable. RULES ON INPUT VAT CARRY-OVER: 1. The input VAT carry-over of the prior quarter is deductible in the 1st month of the current quarter. 2. The input VAT carry-over in the first month of the quarter is deductible in the 2nd month of the quarter. 3. The input VAT carry-over in the second month of a quarter is not deductible to the 3rd month of the quarter. 4. The input VAT carry-over of the prior quarter is deductible in the 3rd month quarterly balance of the present quarter.  WHAT ARE EXCLUDED FROM INPUT VAT CARRY-OVER? 1. Advanced VAT which have been applied for a 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  RULES ON CLAIM FOR CREDIT OF INPUT VAT 1. Specific identification - Input VAT that can be traced to a particular sale transaction is credited against the output VAT of such sales 2. Pro-rata allocation - Input VAT that cannot be traced to a particular sale transaction is allocated proportionately on the basis of sales. COMPOSITION OF CREDITABLE INPUT VAT 1. Input VAT traceable to regular sales 2. Input VAT traceable to export sales that are not applied for tax refund or tax credit 3. 7% of sales to government agencies or GOCCs References Business and Transfer Taxation 2019 edition by Rex Banggawan CPA Reviewer in Taxation 2018 edition by Enrico D. Tabag Reviewer in Taxation by Asser S. Tamayo CPAR RESA