Tax 303 - Input Vat

Download as pdf or txt
Download as pdf or txt
You are on page 1of 7

lOMoARcPSD|10015167

TAX-303 - Lecture notes 11

Business Finance (University of Caloocan City)

Studeersnel wordt niet gesponsord of ondersteund door een hogeschool of universiteit


Gedownload door Sarah Repohio (sarahrepohio25@gmail.com)
lOMoARcPSD|10015167

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY


CPA Review Batch 41  May 2021 CPA Licensure Examination  Weeks No. 3-4

TAXATION A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen

TAX-303: INPUT VAT


1. Remittance Returns and Certificates
BIR Form No. 1600-VT – Monthly Remittance Return of VAT Withheld
BIR Form No. 2306 – Certificate of Final Tax Withheld

2. Input Tax Defined


a. Meaning of Input tax is the value-added tax due from or paid by a VAT-registered person in the
input tax course of his trade or business on importation of goods or local purchase of goods,
properties or services, including lease or use of properties, in the course of his trade or
business. It shall also include the transitional input tax and the presumptive input tax.
b. Categories of 1) VAT paid on local purchases (passed on by seller) or on importation (passed-on VAT)
creditable or 2) Presumptive input tax
deductible 3) Transitional input tax
input taxes 4) Standard input tax
c. Persons who The input tax credit on importation of goods or local purchases of goods, properties or
can avail of services by a VAT-registered person shall be creditable:
input tax credit 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.

d. Exercises: Determine whether or not input tax credit can be availed of (Y/N)
1) Importation of goods for personal use, VAT already paid
2) Importation of goods for business use, VAT not yet paid
3) Purchase on account of domestic goods from VAT-registered supplier evidenced by VAT
invoice
4) Purchase for cash of domestic goods from VAT-registered supplier, evidenced by a receipt
printed by unaccredited printer
5) Purchase of domestic properties from non-VAT seller, evidenced by VAT official receipt
6) Purchase of services from a VAT-registered service-provider, bills already paid
7) Purchase of services from a VAT-registered service provider, bills not yet paid
8) Purchase on account of goods from a non-VAT seller who issued VAT invoice

3. Determination of Allowable Input Taxes


a. Determination Input tax carried over from previous period xxx
of creditable Input tax deferred on capital goods exceeding P1,000,000 from previous quarter xxx
input tax Transitional input tax xxx
Presumptive input tax 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
b. Deductions a. Input tax claimed as tax credit certificate or refund
from b. Input tax attributed to VAT-exempt sales
input taxes c. Input tax attributed to sales to Government

4. Sources of Creditable Input Taxes (Local Purchases or Importation)


a. Passed-on VAT
1) Input tax 1) Purchase or importation of goods:
evidenced by a) For sale; or
a VAT invoice b) For conversion into or intended to form part of a finished product for sale, including
or official packaging materials; or
receipts c) For use as supplies in the course of trade or business;
issued by a d) For use as raw materials supplied in the sale of services;
VAT- e) For use in trade or business for which deduction for depreciation or amortization is
registered allowed.
person which 2) Purchase of real properties for which a VAT has actually been paid;
shall be valid 3) Purchase of services in which a VAT has actually been paid;
for 5 years 4) Transactions “deemed sale”;
from the date
of permit to
use

Page 1 of 6 0915-2303213  www.resacpareview.com

Gedownload door Sarah Repohio (sarahrepohio25@gmail.com)


lOMoARcPSD|10015167

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX-303


Weeks 3-4: INPUT VAT

2) VAT- A VAT-registered person who is also engaged in transactions not subject to VAT shall be
registered allowed to recognize input tax credit on transactions subject to VAT as follows:
person is also a) All the input taxes that can be directly attributed to transactions subject to VAT may
engaged in be recognized for input tax credit; and
transactions
b) If any input tax cannot be directly attributed to either a VAT taxable or VAT-exempt
not subject to
transaction, the input tax shall be pro-rated to the VAT taxable and VAT-exempt
VAT
transactions and only the ratable portion pertaining to transactions subject to VAT
may be recognized for input tax credit computed as follows:
VAT sales / Total sales X Input taxes
3) Exercise: A VAT-registered taxpayer is also engaged in VAT-exempt transactions. The following VAT
exclusive data are made available:
a. Domestic VAT-subject cash sales P1,000,000
b. VAT-exempt sales on account 500,000
c. Export cash sales 300,000
d. Cash purchases of supplies from VAT supplier (used for all transactions) 150,000
e. Purchase on account of merchandise from VAT-registered trader (for VAT sales only) 200,000
REQ: a. Prepare the necessary journal entries assuming the taxpayer will use the input tax on zero-rated
sales as input tax credit
b. Compute the VAT payable assuming the taxpayer will use the input tax on zero-rated sales as input
tax credit

5. Claim for Input Tax on Depreciable Goods (Under RR 16-2005)


a) Where a VAT-registered a) Estimated useful life is 5 years or more - Input tax shall be spread
person purchases or evenly over of a period of 60 months to commence in the calendar month
imports capital goods, when the capital good is acquired.
which are depreciable
assets for income tax b) Estimated useful life is less than 5 years – Input tax shall be spread
purposes, the aggregate evenly on a monthly basis by dividing the input tax by the actual number
acquisition of which of months comprising the estimated useful life. The claim for input tax
(exclusive of VAT) in a shall commence in the calendar month the capital good is acquired
calendar month exceeds
P1,000,000, regardless of
the acquisition cost of
each capital good
b) Where the aggregate The total amount of input taxes will be allowable as credit against output tax
acquisition cost (exclusive in the month of acquisition.
of VAT) of the existing or
finished depreciable
capital goods purchased or
imported during any
calendar month does not
exceed P1,000,000
c) Amortization allowed The amortization of the input VAT shall only be allowed until December 31,
until December 31, 2021 2021 after which taxpayers with unutilized input VAT on capital goods
purchased or imported shall be allowed to apply the same as scheduled
until fully utilized.
In the case of purchase of services, lease or use of properties, the input tax
shall be creditable to the purchaser, lessee or licensee upon payment of the
compensation, rental, royalty or fee.
d) Meaning of aggregate The aggregate acquisition cost of a depreciable asset in any calendar month
acquisition cost refers to the total price, excluding the 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
tax despite the fact that the monthly payments or installments may not
exceed P1,000,000.
e) Sale or transfer of If the depreciable capital good is sold or transferred within a period of 5
depreciable good within a years or prior to the exhaustion of the amortizable input tax thereon, the
period of 5 years or prior entire unamortized input tax on the capital goods sold or transferred can be
to the exhaustion of the claimed as input tax credit during the month or quarter when sale or transfer
amortizable input tax was made.
f) Meaning of capital goods Capital goods or properties refers to goods or properties with estimated
or properties useful life greater than one (1) year and which are treated as depreciable
assets under the Tax Code, used directly or indirectly in the production or
sale of taxable goods or services.
g) Meaning of construction Construction in progress (CIP) is the cost of construction work which is not
in progress yet completed. CIP is not depreciated until the asset is placed in service.
Normally, upon completion, a CIP is reclassified and the reclassified asset is
capitalized and depreciated.

Page 2 of 6

Gedownload door Sarah Repohio (sarahrepohio25@gmail.com)


lOMoARcPSD|10015167

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX-303


Weeks 3-4: INPUT VAT

h) Input tax on a) CIP is considered, for purposes of claiming input tax, as a purchase of
construction in progress service, the value of which shall be determined based on the progress
billings.

b) Until such time the construction has been completed, it will not qualify as
capital goods as defined, in which case, input tax credit on such
transaction can be recognized in the month the payment was made;
Provided, that an official receipt of payment has been issued based on the
progress billings.
i) Contract for the sale of In case of contract for the sale of service where only the labor will be
service where only the supplied by the contractor and materials will be purchased by the contractee
labor will be supplied from other suppliers, input tax credit on the labor contracted shall still be
recognized on the month the payment was made based on the progress
billings while input tax on the purchase of materials shall be recognized at
the time the materials were purchased.
j) Input tax claimed while Once the input tax has already been claimed while the construction is in
the construction is in progress, no additional input tax can be claimed upon completion of the
progress asset when it has been reclassified as a depreciable capital asset and
depreciated.
k) Rules on allowing input a. Only one vehicle for land transport is allowed for the use of an official or
tax credit on vehicles, employee, the value of which should not exceed P2,400,000.
and other expenses b. No depreciation shall be allowed for yachts, helicopters, airplanes and/or
incurred (RR No. 12- aircrafts, and land vehicles the value of which exceed the P2,400,000
2012, Oct. 12, 2012) threshold amount, unless the taxpayer’s main line of business is transport
operations or lease of transportation equipment and the vehicles
purchased are used in said operations;
c. All maintenance expenses on account of non-depreciable vehicles for
taxation purposes are disallowed in its entirety;
d. The input taxes on the purchase of non-depreciable vehicles and all input
taxes on maintenance expenses incurred thereon are likewise disallowed
for taxation purposes.

l) Exercises:
1) Lalisa Corp. acquires 3 units of office equipment at P600,000 each on February 2018. The estimated life is
4 years.

Question
1 – Can the taxpayer amortize the input tax?
2 – If it can amortize the input tax, how much is the monthly amortization?
3 – Up to what month will the amortization be?
4 – Assuming the taxpayer acquires the office equipment on February 2022, can it amortize the input tax on
the acquisition?

2) Sassa Girl imports motor vehicle for land transport on December 2021. Its total landed cost is P2,400,000.
The estimated life of the vehicle is 6 years?

Question
1 – Can the taxpayer amortize the input tax?
2 – If he can amortize the input tax, how much is the monthly amortization?
3 – Up to what month will the amortization be?
4 – Assuming, he imports the vehicle on December 2022, can he amortize the input tax on the importation?

3) A taxpayer acquires an office furniture on January 2018 for P1,000,000. Its estimated life is 3 years.

Question
1 – Can the taxpayer amortize the input tax?
2 – If he can amortize the input tax, how much is the monthly amortization?

b. Presumptive Input Tax


1) Persons allowed 1) Processors of sardines, mackerel and milk
presumptive input tax 2) Manufacturers of refined sugar and cooking oil
3) Manufacturers of packed noodle-based instant meals
2) Rate and basis of 4% (used to be 1 ½%) of gross value in money of purchases of primary
presumptive input tax agricultural products which are used as inputs to their production

Page 3 of 6

Gedownload door Sarah Repohio (sarahrepohio25@gmail.com)


lOMoARcPSD|10015167

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX-303


Weeks 3-4: INPUT VAT

3) Exercises: Determine whether or not the following can avail of the presumptive input tax (Y/N)
a) Processor of sardines on its purchase of tomatoes, onions and other agricultural products used as
inputs in the production
b) Processor of sardines on its purchase of fresh fish to be used in the production of processed
sardines
c) Processor of fruits on its purchase of fresh fruits to be used in processing canned fruits
d) Manufacturer of refined sugar on its purchase of packaging materials and labels
e) Manufacturer of cooking oil on its purchase of copra
f) Manufacturer of instant champorado on its purchase of glutinous rice to be used in manufacturing
instant champorado

c. Transitional Input Tax


1) Situations where 1) Taxpayers who became VAT-registered persons upon exceeding the
transitional input tax minimum turnover of P3,000,000 (used to be P1,919,500) in any 12-
may be allowed month period;
2) Taxpayers who voluntarily register even if their turnover does not exceed
P3,000,000 (used to be P1,919,500) (except franchise grantee of radio
and/or television broadcasting whose threshold is P10,000,000);
2) Basis of transitional Beginning inventory of goods, materials and supplies (including those that
input tax are VAT-exempt under Sec. 109)
3) Amount of transitional 2% (used to be 8%) of the value of the beginning inventory on hand or
input tax 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% (used to be 8%) transitional input tax,
including goods that are exempt from VAT under Sec. 109 of the Tax Code.

A taxpayer is engaged in VAT-subject transactions but enjoys exemption from VAT as an entitty because his
annual gross sales do not exceed the VAT threshold amount. Beginning the current year, he decides to
optionally register under the VAT system. Compute the transitional input tax based on the following data:

Ending inventory VAT-subject goods, previous year


Cost P 250,000
Net realizable value 200,000
Ending inventory VAT-exempt goods, previous year
Cost 1,400,000
Net realizable value 1,450,000
Actual VAT paid on the inventory 30,000

d. Standard Input Tax


1) Input tax attributable to Input taxes that can be directly attributable to VAT taxable sales of goods
VAT sales to and services to the Government or any of its political subdivisions,
Government not instrumentalities or agencies including GOCCs shall not be credited against
creditable against output taxes arising from sales to non-Government entities.
output tax on sales to
non-Government
entities
2) Government required to The government or any of its political subdivisions, instrumentalities or
withhold agencies, including GOCCs shall deduct and withhold a final VAT due at the
rate of five percent (5%) of the gross payment.
Beginning January 1, 2021, the VAT witholding system under this Subsection
shall shift from final to a creditable system.

The payor or person in control of the payment shall be considered as the


withholding agent.
3) Final withholding VAT The five percent (5%) final withholding VAT rate shall represent the net VAT
represents the net VAT payable of the seller.
payable of the seller
4) Difference between the The remaining seven percent (7%) effectively accounts for the standard input
VAT rate and the VAT for sales of goods or services to government or any of its political
withholding VAT rate subdivisions, instrumentalities or agencies including GOCCs, in lieu of the
accounts for the actual input VAT directly attributable or ratably apportioned to such sales.
standard input tax
Should actual input VAT attributable to sale to government exceeds seven
percent (7%) of gross payments, the excess may form part of the seller’s
expense or cost. On the other hand, if actual input VAT attributable to sale
to government is less than seven percent (7%) of gross payment, the
difference must be closed to expense or cost.

Page 4 of 6

Gedownload door Sarah Repohio (sarahrepohio25@gmail.com)


lOMoARcPSD|10015167

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX-303


Weeks 3-4: INPUT VAT

5) Exercise: A VAT-registered service provider has the following transactions for the first quarter of 2018:
1) Purchased materials on account for use in a contract with the Government paying P896,000, gross of VAT.
2) Sent a bill to client with VAT inclusive amount of P5,600,000.
3) Collected P2,000,000 out of the P5,000,000 contract price, net of 5% withholding VAT and 2%
withholding income tax.

Prepare the necessary journal entries on the books of the service provider.

a. Withholding VAT
Transactions Withholding Agent Withholdng VAT
Rate
1) Purchase of goods by Government or any of its political subdivisions, 5% (used to be
Government, political instrumentalities or agencies, including government- 3%) of gross
subdivisions, etc. owned or controlled corporations (GOCCs) payment made
(final)
2) Purchase of services by Government or any of its political subdivisions, 5% (used to be
Government, political instrumentalities or agencies, including government- 6%) of gross
subdivisions, etc. owned or controlled corporations (GOCCs) payments (final)
3) Payments for lease or Government or any of its political subdivisions, 12%
use of properties or instrumentalies or agencies, including GOCC’s;
property rights to non-
resident owners Private corporations, individuals, estate and trusts,
whether large or non-large taxpayers

Payor or person in control of the payment


4) Purchase of goods or Payor-purchaser in the course of trade of business 12% of payee’s
services in the course of gross sales or
trade or business Payee-seller shall execute: receipts
(payee-seller has more 1) “Waiver of the Privilege to Claim Input Tax
than one payor-buyer) Credit”, and
2) “Notice of Availment of the Option to Pay the Tax
through the Withholding Process”.
5) Purchase of goods or Payor-purchaser in the course of trade of business 12% of payee’s
services in the course of gross sales or
trade or business Payee-seller shall execute waiver and notice of receipts
(payee-seller has only availment as in above.
one payor-buyer for the
whole year)
f. Remittance of withholding VAT
Remittance of The VAT withheld shall be remitted within ten (10) days following the end of the
withholding VAT month the withholding was made.

g. Advance Payment of VAT


Transactions 1) Sale of refined sugar
requiring 2) Sale of flour
advance payment of 3) Transport of Naturally Grown and Planted Timber Products (RR No. 13-2007)
VAT 4) Sale of jewelry, gold and other metallic minerals (RR No. 5-2013)
Advance payment of The advance payments made by the seller/owner of refined sugar, importer or
VAT allowed as credit miller of wheat/flour and sellers/ owners of naturally grown and planted timber
against output tax products shall be allowed as credit against their output tax on the actual gross
selling price of refined sugar/flour/timber products.
Advance payments Advance payments which remain unutilized at the end of the taxpayer’s taxable
may be available for year where the advance payment was made, which is tantamount to excess
issuance of tax credit payment, may, at the option of the owner/seller/taxpayer or
certificate (TCC) importer/miller/taxpayer, be available for the issuance of TCC upon application duly
filed with the BIR by the seller/owner or importer/miller within two (2) years from
the date of filing of the 4th quarter VAT return of the year such advance payments
were made, or if filed out of time, from the last day prescribed by law for filing the
return.
Advance VAT Advance VAT payments which have been the subject of an application for the
payment claimed as issuance of TCC shall not be allowed as carry-over nor credited against the output
TCC cannot be carried tax of the succeeding quarter/year.
over
Issuance of TCC Issuance of TCC shall be limited to the unutilized advance VAT payment and shall
limited to unutilized not include excess input tax.
advance VAT payment
Separare applications Issuance of TCC for input tax attributable to zero-rated sales shall be covered by a
required separate application for TCC following the applicable rules.

Page 5 of 6

Gedownload door Sarah Repohio (sarahrepohio25@gmail.com)


lOMoARcPSD|10015167

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX-303


Weeks 3-4: INPUT VAT

6. Refund of Input Tax


a. Input Tax on Zero- A VAT-registered person whose sales of goods, properties or services are zero-
Rated Sales of rated or effectively zero-rated may apply for the issuance of a tax credit certificate
Goods or Property, or refund of input tax attributable to such sales.The input tax that may be subject
Etc. of the claim shall exclude the portion of input tax that has been applied against the
output tax. The application should be made within 2 years after the close of the
taxable quarter when the sales were made.

b. Printing of the word The Supreme Court has ruled in several cases that the printing of the word “zero-
“zero-rated” required rated” is required to be placed on the VAT invoices or receipts covering zero-rated
sales in order to be entitled to claim for tax credit or refund.

c. Other documents In another case, failure of the taxpayer to indicate its zero-rated sales in its VAT
may be used to prove returns and in its official receipts is not sufficient reason to deny its claim for tax
“zero-rated” sale credit or refund when there are other documents from which the court can
determine the veracity of the taxpayer’s claims. (Southern Philippine Power Corp.
vs. CIR, G.R. 179632, Oct. 19, 2011)
d. Unused Input Tax A VAT-registered person whose registration has been cancelled due to retirement
of Person Who Retired or cessation of business, or due to change in or cessation of status may, within 2
or Ceased Business years from the date of cancellation, apply for the issuance of a tax credit certificate
for any unused input tax which he may use in payment of his other internal
revenue taxes. He shall be entitled to a refund if he has no internal revenue tax
liabilities.
e. Period of Refund or Refund or tax credit certificate shall be granted within 90 days starting January 1,
Tax Credit of Input 2018 (within 120 days before TRAIN) from the date of submission of the official
Tax receipts or invoices and other documents in support of the application filed.
However, all claims for refund/tax credit certificate filed prior to January 1, 2018
shall still be governed by the one hundred twenty (120)-day processing period.
Provided, That should the Commissioner find that the grant of refund is not
proper, the Commissioner must state in writing the legal and factual basis for the
denial.
f. Appeal of full or “In case of full or partial denial of the claim for tax refund, the taxpayer affected
partial denial may, within thirty (30) days from the receipt of the decision denying the claim,
appeal the decision with the Court of Tax Appeals: Provided, however, That
failure on the part of any official, agent, or employee of the BIR to act on the
application within the ninety (90)-day period shall be punishable under Section 269
of this Code.
g. Manner of Giving Refunds shall be made upon warrants drawn by the Commissioner of Internal
Refunds Revenue or by his authorized representative without the necessity of being
countersigned by the COA Chairman.

7. Caselets
a. Elirie Corporation, VAT-registered, has the following transactions during the month of January, 2018:
Domestic sales, exclusive of VAT P 800,000
Importation of goods for sale 240,000
Importation of goods for personal use 100,000
Purchase of office supplies, exclusive of VAT 20,000
Purchase of office equipment, total invoice price (estimated life is 3 years) 1,680,000
Purchase of home appliances for the residence of Elirie Corp’s President., gross of VAT 17,920
Payment of services for store repair, contractor not VAT- registered but issued VAT
officeial receipt (total invoice amount) 33,600
Purchase of services for repainting of store (evidenced by ordinary receipt issued by
contractor) 4,480
Purchase of real property to be used as office, VAT not included, purchase price not paid
yet 500,000
Purchase of vehicle for land transport and for business use, net of VAT 1,200,000
Payment of maintenance expenses for vehicle for land transport, net of VAT 50,000

Question
1 – How much of the VAT on importation can be claimed as input tax credit?
2 – How much of the input tax on purchase of office equipment can be claimed as input tax credit?
3 – Can the passed-on VAT on purchase of vehicle for land transport be claimed as input tax credit? Why or
why not?
4 – Can the passed-on VAT by a service contactor who is not VAT registered be claimed as input tax credit?
5 – How much is the total allowable input taxes for the month?

END

Page 6 of 6

Gedownload door Sarah Repohio (sarahrepohio25@gmail.com)

You might also like