chapter 9 Input VAT 4 CHAPTER 9 INPUT VAT | Chapter Overview and Objectives After this chapter, readers are expected to comprehend: | 1. The determination of input VAT 2. The concept of creditable input VAT and its requisites 3, The types of input VAT and their timing of credit 4. The allocation of non-traceable input VAT 5._The computation and presentation of total allowable input VAT INPUT TAX Input tax or input VAT refers to the 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. Determination of Input VAT The VAT on purchase is usually reflected as a separate item in the VAT invoice or VAT official receiptissued by the VAT-registered supplier. Mlustration Assume for instance the following VAT invoice issued by a supplier: 1 —E The input VAT of the buyer is the “Output VAT” on the VAT sales invoice or VAT official receipt issued by the seller or supplier. What if the VAT is not separately indicated? If the VAT is not billed separately, the selling price stated in the sales document shall be deemed to be inclusive of VAT (RR16-2005). Mustration Assuming that the supplier simply indicated the P560,000 invoice price without separately indicating the VAT thereon, the VAT shall be computed as: Invoice price x 12/112 Hence, P560,000 x 12/112 = ‘260,000, 290it VAT Chapter 9 - Input rter, first month and g VAT in the prior qua! a econ The taxpayer Will not Muarier since there is a negative VAT payable. The month of aay P35 50 VAT in the third month of the current quarter, taxpayer SI " Note: 1. The P40,000 input VAT 2. a input VAT carry-over in the first month of the current quarter is ‘creditable In the second month of the current quarter. 7 3, The P15,000 excess input VAT in the second month cannot be carried over to the third " Thonth quarterly balance. Instead, the P40,000 deferred input VAT carry-over In the preceding quarter is credited in the current quarterly balance. camy-over inthe prior quarter is creditable in the first month ot Mlustration 2 The following data relates to the regular sales of a VAT taxpayer: Output VAT — Input VAT 2.360.000 P_400,000 Prior quarter Current quarter: 1s month of current quarter’ P 160,000 P_ 100,000 2™4 month of current quarter 150,000° 160,000 3ré month of current quarter 170,000 65,000° £490,000: P 325,000 The credit rules of the input VAT carry-over shall be applied as follows: Prior quarter Output var pycmnth d= month 2% month 34 month Less: Input VAT ooo... P 160,000 ‘Pasoooo ‘p 4g0000 Carry-over ns, 200.000 160,000 325,000 VAT Payable TUTE Tea <> 40,000 Not an input var. carry-over (Pp apgan 20000 Note: : 1 40009 VAT payable p_95,000 var 3. The P40,009 pvt Month cannot | be avable in the first month, ‘The P10,000 exces 400 cary over inthe Ted Qver to the third months nl Prior quarter is deductible in the third month the P20, oaths te 000 VAT paid et Trt mei duce inthe quartet ba WHat ARE EX ‘ucted in the quarterly VAT pa) ‘CLUD} 1 Advanced VAT whe ROM INPUT ya 2. Input var ich have bees! 'T CARRY-OVER? tab] en appli 4 fax refund or tax net? 22°0-ratel at a tax credit certificate certificate !™ which have been apple’ 306 forter I= Input VAT 7 7 attributable to zero-rated sales that expired after the two- vA 1 inp escrptive period y Jes of advanced VAT will be discussed in the Succeeding chapter, The rules 0! ULES ON CLAIM FOR CREDIT OF INPUT VAT Rt 1. Specific identification - input VAT that can be traced to @ particular sales transaction is credited against the output VAT of such sales ut 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 Illustration 1 - Specific Identification A VAT taxpayer had the following sales with their corresponding directly traceable input VAT during the month: —Input VAT_ Sales to private entities P 900,000 P ” “60,000 Export sales 300,000 36,000 Sales to government 250,000 24,000 Sales of exempt goods ——100,000 ——-2.000 Tota B.1550,000 P_i22'009 The Creditable Input VAT may be computed directly as: Input VAT on Private sales P 60,000 PPYLVAT on export salee 36,000 put ‘VAT on government sales (7% x P250,000) ——12,500 otal allowable (creditable) Input VAT Input var deductible against Bross income through costs and expenses: Input VAT on exem 0, pt goods P Tomas tPUtVAT fovernment) (P24,000~P17,500)____ 6500 Uustration 2 ~Non-traceable input VAT ‘ing th menpaver “n8aged in merchandising had the following transactions during the Brempe sales P 200,000 saport sales 300,000 a t° Bovernment 100,000 quar Sales otalChapter 9~ Input VAT fi VAT During the month, the taxpayer had P124,900 total Input that cannes 5 traced to a particular transaction. The non-traceable input VAT shall be allocated as follows: Sales Allocation Allocated —Amount_ __Factor _ input var Exempt sales P 200,000 P200K/PIM xP124,000=P 24209 Export sales 300,000 P300K/PIM xP124,000= 37.299 100,000 P100K/P1M xP124,000 = 12406 Sales to government Regular sales 490,000 P400K/PIM xP124,000 = Total sales 2.000.000 4 The creditable input VAT shall be: Input VAT allocable to export sale P 37,200 one VAT (P100,000 x 7%) 700 allocabli 49500 bar] le to regular sales Mlustration 3 -With Non-Traceable VAT A taxpayer had the following sales reat ¥ aT ne Sales Traceable Exempt sales li Teel sales P 200,000 P 12,000 ° 181000 2 500.009 There is a P24,000 input tax that se ee it either type of transaction. The creditable input VAT shall be: Input VAT directly traceable to vatable Allocated input VAT to vatable sales sales P 18000 r (P300,000/PS00,000 x 24,000) otal allowable (creditable) input VAT 14.490AT i input V ALLOWABLE OR CREDITABLE INPUT VAT IN PTH 10 0 RN i i T is computed and presented eva ver awable (creditable) input VAT i Pp p in pai as follows: the’ in i P XxXXxxx i od. from previous period carry-over, exceeding P1M 100% HK we inputtax on capital goods metoat ‘ransitional input tax XK, XXX Presumptive bp ee ilar input om: . XXKIOKK ve archases of capital goods not exceeding: P1iM sooo Purchase of capital goods exceeding P1! ; a voces i f goods, other than capital goods Domestic purchases of gi a n Importation of goods, other than capital goods ea Domestic purchases of services Services rendered by non-residents. XXX Others pet Total available input tax eerie less: Deductions from input tax . Input tax on capital goods, deferred for future periods P xxx Input tax on sales to gov't closed to expense XK XKK Input tax allocable to exempt sales zegaron Input VAT claimed as refunds/TCC 70K 200 Others KKK Total allowable (creditable) input tax P20 Histration VAT taxpayer had the following data during the month: eitsto regular customers P 4,000,000 € government. 1,000,000 ent sales 3,000,000 Total ata 2,000,000 . 10,000,000 peutvart 80,000 Deferred inant Ver, from prior period Pee o0 ‘nut tax (already amortized for 21 /36 months) 2 Pure : 0 Inpent °f goods or services P 7,000,000 P 940.000 Phase of nee tulPment (8-year life) 1,200,000 x 600 depreciable goods 80,000 9Chapter 9 - Input VAT pt sales VAT traceable to exempt si Anount applied for VAT refunds/TCC on export sales Input VAT traceable to sales to the government Amortization of deferred input VAT on capital goods Input VAT on supplies Total non-traceable input VAT The creditable input VAT shall be computed in the VAT return as; 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! P 211,600 Input VAT on exempt sales? 203,900 Input VAT on export sales applied for refund or tax credit 150,000 Excess input VAT on sales to government? 23,350 ___ 588,850 Total allowable (creditable) input VAT P_ 550,150 Notes to allowable input VAT computation: 1. Amortization schedule on input tax on capital goods with monthly sare | acquisition costs exceeding P1M: | Beginning Allowable Ending this month __Balanc— From previous period P 75,000 P—s,000 P 70000 This period (60 months max.) 144.000 2.400 Total Bo 219.000 E7499 pus | Note; | 1. The deferred input VAT from the Prior period shall be amortized over ere™ | Tits, 36-21) unamortized months. Hence, Ppa 15=P5000. ye | 2. The P144,000 input VAT on the imported equipment must be amo! t months. Hence, P144,000 + 60 = P2,400, Input tax on exempt sales Te aa Rapa tax directly attributable to exempt sales P ora cdo gh oF input tx not direc atrbatable ot -000,000/10,000, i Tova P2000, are n200.900 x P35,500) coe | le to exempt sales i 1968erm on VAT on sales to the government inp 3, Boe jy attributable to government sales P 90,000 input aon of input tax not directly attributable le aa: Ratable PY 910,000,000 x P 35,500) ase un oy atable to sales to the government P 93380 we Sudard input VAT (PIM government sales x 7%, 5) tpt a onsales to government closed to expense 223.350 in > —20.000 This excess amount can be negative or positive. The amount is simply included in seeomputation whether positive or negative. 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