CHAPTER 9 (PART 2):

INPUT VAT
PREPARED BY: CARL JUSTINE MANIAGO, CPA
TYPES INPUT VAT:
STANDARD INPUT VAT

The sale of goods and services to the government or any of its political subdivisions, instrumentalities or
agencies, including government-owned and controlled corporations (GOCC) is subject to 5% final
withholding VAT based on the gross payment.
The VAT shall be withheld before making the payment and remit the same within 10 days following the
end of the month the withholding was made.
The 5% withheld final VAT shall be deemed the actual VAT payable of the seller. Also, the sellers can only
effectively claim 7% of sales as input VAT. This is called the standard input VAT.
The actual input VAT would have to be increased or decreased to conform to the amount of the standard
input VAT. The adjustment is closed to expenses/loss or income/gain.
TYPES INPUT VAT:
STANDARD INPUT VAT
ILLUSTRATION:
A VAT taxpayer made a P 100,000 sales to the government invoiced at P 112,000 inclusive of
output VAT. The taxpayer purchased the same for P 90,000 exclusive of P 10,800 input VAT.
A. Compute the standard input VAT and final withholding VAT.
B. Make journal entries to record the purchase, sale and the closing of the VAT accounts.

A. Compute the standard input VAT and final withholding VAT.

Standard Input VAT (P100K*7%) P 7,000
Final withholding VAT (P100K*5%) P 5,000
TYPES INPUT VAT:
STANDARD INPUT VAT
ILLUSTRATION:
B. Make journal entries to record the purchase, sale and the closing of the VAT accounts.
Purchase P 90,000
Input VAT 10,800
Accounts payable/Cash P 100,800

Accounts Receivable/Cash P 107,000

Final VAT withheld 5,000
Sales P 100,000
Output VAT 12,000
TYPES INPUT VAT:
STANDARD INPUT VAT

ILLUSTRATION:
B. Make journal entries to record the purchase, sale and the closing of the VAT accounts.
Output VAT P 12,000
Income & Expense Summary 3,800
Final VAT withheld P 5,000
Input VAT 10,800
TYPES INPUT VAT:
STANDARD INPUT VAT

What if the seller is a non-VAT registered seller?

◦ The government or GOCC shall withhold 3% final percentage tax on the sale before payment.

Future transition
◦ The final withholding system on the sales to government and GOCC will be abandoned effective January
1, 2021 in favor of the tax creditable withholding system. This would mean the elimination of the 7%
standard input VAT in favor of full creditability of input VAT on government or GOCC sales.
TYPES INPUT VAT:
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
◦ The input VAT carry-over of the prior quarter is deductible in the first month of the current quarter.
◦ The input VAT carry-over in the first month of the quarter is deductible in the second month of the
quarter.
◦ The input VAT carry-over in the second month of the quarter is not deductible to the third month of the
quarter.
◦ The input VAT carry-over of the prior quarter is deductible in the third month quarterly balance of the
present quarter.
TYPES INPUT VAT:
INPUT VAT CARRY-OVER
ILLUSTRATION 1:
The following data relates to the regular sales of a VAT taxpayer.

Output VAT Input VAT

Prior quarter P 350,000 P 390,000
Current quarter:
1st month of current quarter P 120,000 P 100,000
2nd month of current quarter 150,000 145,000
3rd month of current quarter 220,000 70,000
P 490,000 P 315,000
TYPES INPUT VAT:
INPUT VAT CARRY-OVER
ILLUSTRATION 1:
The credit rules of the input VAT carry-over shall be applied as follows:

Prior quarter Present quarter

3rd month 1st month 2nd month 3rd month
Output VAT P 350,000 P 120,000 P 150,000 P 490,000
Input VAT 390,000 100,000 145,000 315,000
Carry-over (P 40,000) 40,000 40,000
Input VAT carry-over (P 20,000) P 20,000
Not an input VAT carry-over (P 15,000)
Vat Payable P 135,000
TYPES INPUT VAT:
INPUT VAT CARRY-OVER
ILLUSTRATION 2:
The following data relates to the regular sales of a VAT taxpayer.

Output VAT Input VAT

Prior quarter P 360,000 P 400,000
Current quarter:
1st month of current quarter P 160,000 P 100,000
2nd month of current quarter 150,000 160,000
3rd month of current quarter 170,000 65,000
P 480,000 P 325,000
TYPES INPUT VAT:
INPUT VAT CARRY-OVER
ILLUSTRATION 2:
The credit rules of the input VAT carry-over shall be applied as follows:

Prior quarter Present quarter

3rd month 1st month 2nd month 3rd month
Output VAT P 360,000 P 160,000 P 150,000 P 480,000
Input VAT 400,000 100,000 160,000 325,000
Carry-over (P 40,000) 40,000 40,000
VAT payable P 20,000 20,000
Not an input VAT carry-over (P 10,000)
Vat Payable P 95,000
INPUT VAT
Excluded from input VAT carry-over
◦ Advance VAT which have been applied for a tax credit certificate.
◦ Input VAT attributable to zero-rated claim which have been applied for a tax refund or tax credit
certificate.
◦ Input VAT attributable to zero-rated sales that expired after two-year prescriptive period.

Rules on claim for credit of input VAT

◦ Specific identification – input VAT that can be traced to a particular sales transaction is credited against
the output VAT of such sales.
◦ Pro-rate allocation – the amount of input tax due or paid that cannot be directly and entirely attributed
to any one of the sales transactions shall be allocated proportionately on the basis of sales.
INPUT VAT
ILLUSTRATION:

A taxpayer engaged in merchandising had the following transactions during the month.

Exempt sales P 200,000

Export sales 300,000
Sales to government 100,000
Regular sales 400,000

During the month, the taxpayer had P 124,000 total input VAT that cannot be traced to a
particular transaction. Compute the creditable input VAT.
INPUT VAT
ILLUSTRATION:

The non-traceable input VAT shall be allocated as follows:

Sales Amount Allocation Factor Allocated Input VAT

(P124,000)
Exempt sales P 200,000 P200K/P1M P 24,800
Export sales 300,000 P300K/P1M 37,200
Sales to gov’t 100,000 P100K/P1M 12,400
Regular sales 400,000 P400K/P1M 49,600
Total sales P 1,000,000 P 124,000
INPUT VAT
ILLUSTRATION:

The creditable input VAT shall be:

Input VAT allocated to export sales P 37,200

Standard input VAT (P100K*7%) 7,000
Input VAT allocable to regular sales 49,600
Total P 93,800
COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN
Input tax carry-over, from previous period P xxx,xxx
Deferred input tax on capital goods exceeding P1M xxx,xxx
Transitional input tax xxx,xxx
Presumptive input tax xxx,xxx
Regular input VAT from:
Purchase of capital goods not exceeding P1M xxx,xxx
Purchase of capital goods exceeding P1M xxx,xxx
Domestic purchases of goods, other than capital goods xxx,xxx
Importation of goods, other than capital goods xxx,xxx
Domestic purchases of services xxx,xxx
Services rendered by non-residents xxx,xxx
Others xxx,xxx
Total available input tax P xxx,xxx
COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN

Total available input VAT P xxx,xxx

Less: Deductions from input tax
Input tax on capital goods, deferred for future periods P xxx,xxx
Input tax on sales to gov’t closed to expense xxx,xxx
Input tax allocable to exempt sales xxx,xxx
Input tax claimed as refunds/TCC xxx,xxx
Total allowable (creditable) input tax P xxx,xxx
COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN
ILLUSTRATION:
A VAT taxpayer had the following data during the month:

Sales to regular customers P 4,000,000

Sales to government 1,000,000
Export sales 3,000,000
Exempt sales 2,000,000

Input VAT carry-over, from prior period P 80,000

Deferred input VAT (already amortized for 21/36 months) 75,000
COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN
ILLUSTRATION:

Current month transactions: Sales Input VAT

Purchase of goods or services P 7,000,000 P 840,000
Importation of equipment (8-year life) 1,200,000 144,000
Purchase of non-depreciable goods 80,000 9,600

Directly traceable input VAT: Input VAT

Input VAT traceable to exempt sales P 196,800
Amount applied for VAT refunds/TCC on export sales 150,000
Input VAT traceable to sales to the government 90,000
COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN
ILLUSTRATION:

Input VAT that can be traced to entire operations: Input VAT

Amortization of deferred input VAT on capital goods P 7,400
Input VAT on supplies 28,100
Total non-traceable input VAT P 35,500

Compute the creditable input VAT.

COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN
Input VAT
Input VAT carry-over from prior period P 80,000
Deferred input VAT 75,000
Input VAT on purchase of goods or services 840,000
Input VAT on importation of equipment 144,000
Total available input tax P 1,139,000
Less: Deductions from input tax
Deferred input VAT for succeeding period (1) P 211,600
Input VAT from exempt sales (2) 203,900
Input VAT on export sales applied for refund or tax credit 150,000
Excess input VAT on sales to government (3) 23,550 589,050
Total allowable (creditable) input VAT P 549,950
COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN
ILLUSTRATION:

1. Amortization schedule on input tax on capital goods with monthly aggregate acquisition costs
exceeding P1M

Beg. Balance Allowable this month Ending Balance

From previous period P 75,000 P 5,000 P 70,000
This period 60 months 144,000 2,400 141,600
Total P 219,000 P 7,400 P 211,600
COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN
ILLUSTRATION:

2. Input tax on exempt sales

Total input tax directly attributable to exempt sales P 196,800

Add: Ratable portion on input tax not directly attributable
(P2M/P10M*P35,500) 7,100
Total input tax attributable to exempt sales P 203,900
COMPUTATION OF THE ALLOWABLE OR CREDITABLE
INPUT VAT IN THE VAT RETURN
ILLUSTRATION:

3. Excess input VAT on sales to government

Input tax directly attributable to government sales P 90,000
Add: Ratable portion on input tax not directly attributable
(P1M/P10M*P35,500) 3,550
Total input tax attributable to sales to government P 93,550
Less: Standard input VAT (P1M*7%) 70,000
Input tax on sales to gov’t closed to expense P 23,550