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INPUT TAXES

Input Taxes is the value-added tax due from or paid by a VAT-registered person in the course of his
trade or business on importation of goods or local purchase of goods, properties or services, transitional
input tax and the presumptive input tax.

Categories of creditable or deductible input VAT

1. VAT paid on local purchases (passed on by seller) or on importation (passed on VAT)


2. Presumptive Input Tax
3. Transitional Input Tax
4. Standard Input Tax

Persons who can avail of input tax

The input tax credit on importation of goods or local purchases of goods, properties or services by a
VAT-registered person shall be creditable:

1. to the importer upon payment of VAT prior to the release of goods from customs custody;
2. to the purchaser of the domestic goods or properties upon consummation of the sale, or
3. to the purchaser of services or the lessee or licensee upon payment of the compensation, rental,
royalty or fee.

Determination of Allowable Input Tax

Input Tax carried over from previous period xxx


Input tax deferred on capital goods exceeding P1,000,000 from previous quarter xxx
Transitional Input Tax xxx
Presumptive Input VAT xxx
Others xxx
Total xxx
Input taxes on current transactions xxx
Total available input taxes xxx
Less: Deductions from input taxes xxx
Total allowable input taxes xxx

Deductions from Input Taxes


a. Input tax as tax credit certificate or refund
b. Input VAT attributed to VAT-Exempt Sales
c. Input Tax attributable to sales to Government

Sources of Creditable Input Taxes


A. PASSED-ON VAT
1. Input tax evidenced by a VAT invoice or official receipt issued by a VAT-registered person

TAX 2 INPUT TAXES; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW
MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE Page 1
a. Purchase or importation of goods
b. Purchase of real properties for which a VAT has actually been paid;
c. Purchase of services in which a VAT has actually been paid;
d. Transaction deemed sale

2. VAT-registered person also engaged in transactions not subject to VAT


- only the ratable portion pertaining to transactions subject to VAT may be recognized for input tax
credit. VAT Sales/ Total Sales x Input Taxes

3.Claim for input tax on depreciable goods

a. Where a VAT-registered person purchases or imports capital goods, which are depreciable
assets for income tax purposes, the aggregate acquisition of which (exclusive of VAT) in a
calendar month exceeds P1,000,000 regardless of the acquisition cost of each capital good
a.1. Estimated useful life is 5 years or more spread evenly over of a period of 60 months.
a.2. Estimated useful life us less than 5 years spread evenly to the actual number of amounts.
b. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable
capital goods purchased or imported during any calendar month does not exceed P1,000,000.
the total amount of input taxes will be allowable as credit against output tax in the month of
acquisition.
- aggregate acquisition cost refers to the total price excluding VAT, agreed upon for one or
more assets acquired and not on the payments actually made during the calendar month.
An asset acquired in installment for an acquisition cost of more than P1,000,000, excluding
the VAT, will be subject to the amortization of input taxes despite the fact that the monthly
payments or installments may not exceed P1,000,000.
c. Sale or transfer of depreciable good within a period of 5 years or prior to the exhaustion of the
amortizable input tax.
- The entire unamortized input tax on the capital goods sold or transferred can be claimed as
input tax credit.
- Capital goods or properties refer to goods or properties with estimated useful life greater
than one (1) and which are treated as depreciable assets under the Tax Code.
d. Input tax on construction in progress
- Based on the progress billings.
- Input tax credit on such transaction can be recognized in the month the payment was made.
- Construction in progress is the cost construction work which is not yet completed. CIP is not
depreciated until the asset is placed in service.
e. Rules on allowing input tax credit on vehicles , and other expenses incurred
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 for yachts, helicopters, airplanes and/or aircrafts, and land
vehicles which exceed the above threshold amount (P2,400,00), unless the taxpayers main line

TAX 2 INPUT TAXES; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW
MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE Page 2
of business is transport operations or lease of transportation equipment and vehicles purchased
are used are used in said operations;
3. All maintenance expenses on account of non-depreciable vehicles for taxation purposes are
disallowed in its entirely;
4. The input taxes on the purpose of non-depreciable vehicles and all input taxes on
maintenance expenses incurred thereon are likewise disallowed for taxation purposes.

B. PRESUMPTIVE INPUT TAX


Personal allowed presumptive input tax (SaMaMiCoPaRe)
a. Processors of sardines, mackerel and milk
b. Manufacturers of refined sugar and cooking oil
c. Manufacturers of packed noodle-based instant meals.
Rate and basis of presumptive input tax 4% of gross value in money of purchases of primary
agricultural products which are used as inputs to their production.

C. TRANSITIONAL INPUT VAT


Situations where transitional input may be allowed
1. Taxpayers who became VAT-registered persons upon exceeding the minimum turnover of
P1,919,500 in any 12-month period;
2. Taxpayers who voluntarily register even if their turnover does not exceed P1,919,500 (except
franchise grantee of radio and/or television broadcasting whose threshold is P10,000,000)
Basis of Transitional Input Tax
- Beginning inventory of goods, materials and supplies (excluding those that are VAT-exempt
under Sec. 109)
Amount of Transitional Input Tax
- 2% of the value of the beginning inventory on hand or actual VAT paid on such goods,
materials and supplies, whichever is higher.
- The value allowed for income tax purposes on inventories shall be the basis for the
computation of the 2% transitional input tax, excluding goods that are exempt from VAT
under Sec. 109 of the Tax Code.
D. STANDARD INPUT TAX
- input tax attributable to sales to Government not creditable against output tax on sales to non-
Government entities
- the Government or any of its political subdivision, instrumentalities or agencies, including
GOCCs shall deduct and withhold a final VAT due at the rate of 5% of the gross payment.
- the remaining 7% effectively accounts for the standard input VAT for sale of goods or services
in lieu of the actual input VAT directly attributable or ratably apportioned to such sales.
- should actual input VAT attributable to sale to Government exceed 7% of the gross payments,
the excess may form part of the sellers expense of cost, if it is on the other way around, the
difference must be closed to expensed or cost (as gain).

TAX 2 INPUT TAXES; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW
MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE Page 3
REFUND OF INPUT TAX
a. Input tax on zero-rated sales of goods or property
- the application should be made within 2 years after the close of the taxable quarter when the
sales were made.
b. Unused input tax of person who retired or ceased business
- within 2 years from the date of cancellation may apply for the issuance of a tax credit
certificate for any unused tax which he may use in payment of his other internal revenue taxes.
c. Period of Refund or Tax credit or input tax
- refund or tax credit certificate shall be granted within 120 days from the date of submission of
complete documents.
d. Manner of giving refunds
- refunds shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his
authorized representative without the necessity of being countersigned by the COA Chairman.

TAX 2 INPUT TAXES; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW
MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE Page 4