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7/28/2019 Vat Enhancements
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A Comprehensive Look at VAT October 25, 2005
2005 SGV & Co.The Peninsula Manila
Tax BaSe
SL-0 SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Quality In Everything We Do
Key features of the VATKey features of the VATEnhancementsEnhancements
Joel L. Tan-Torres
Partner, SGV & Co.
SL-1
Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
A. VAT through the years
B. SC TRO
C. Pertinent compliance requirements
D. Transitory provisions
E. Apportionment of input tax
F. VAT on government contracts
G. 70% Limitation on Input VAT
H. Input Tax on capital goods
I. Revised VAT return
J. Repealing clause
K. Increase in VAT rate in 2006
Topics for discussion
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2005 SGV & Co.The Peninsula Manila
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Enhancement of VAT throughthe years
_Adopted in January 1, 1988 under Executive Order No.273 (IRR RR No. 5-87)
Expanded starting January 1, 1996 under Republic Act(RA) No. 7716 (IRR RR No. 7-95)
Amended in January 1, 1997 by RA No. 8241 (IRR RR No. 6-97)
RA 9010 included professionals, including CPAs in theVAT system beginning 2003
RA 9337 expanded further the coverage of VAT (IRR-RR No 14-2005 which was amended by RR No 16-
2005)
SL-3
Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Supreme Court TRO
RA 9337 would have taken effect on July 1, 2005.
However, in response to several petitions filed with the court, the SCissued a TEMPORARY RESTRAINING ORDER (TRO) on theimplementation of R.A. 9337.
The TRO on RA 9337 was lifted on October 18, 2005 per SC
Resolution.
BIR issued RR 16-2005 on VAT to take effect on November 1, 2005.
What about effectivity of amendments in RA 9337 pertaining to non-VAT items such as income tax, PT, ET ?
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A Comprehensive Look at VAT October 25, 2005
2005 SGV & Co.The Peninsula Manila
SL-4
Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Pertinent compliance requirements
Registration
Invoicing
Summary list
SL-5
Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Registration Mandatory registration for those:
i. With gross sales or receipts for the past 12months, other than those that are exemptunder Sec. 109 (1)(A) to (U) of the TaxCode, exceeding P1.5 million; or
ii. Expecting to exceed gross sales or receiptsfor the next 12 months, other than those thatare exempt undder Sec. 109(1)(A) to (U) ofthe Tax Code, of P1.5 million.
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A Comprehensive Look at VAT October 25, 2005
2005 SGV & Co.The Peninsula Manila
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Registration
Those previously registered as non-VAT, butare now subject to VAT, shall update theirrecords using BIR Form 1905
Those previously registered as VAT, but doesnot exceed the P1.5M annual sales threshold,may opt to change to a non-VAT registration
Those liable to VAT, but fails to register, shall
still be liable to VAT but without benefit of inputtax
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Invoicing
VAT invoice to be issued for every sale, barter orexchange of goods or properties
VAT OR to be issued for every lease of goods orproperties, and every sale, barter or exchange ofservices
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Invoicing : content
1. Notation of VAT-registered followed byTaxpayers Identification Number (TIN)
or per RR 16-2005, TIN followed by term VAT
2. The total amount of transaction, with the amountof VAT shown as a separate item in theinvoice/OR.
Note: Previously, the VAT was not allowed to be
shown separately on the invoice/OR.
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Invoicing : content3. For exempt transactions, the term VAT-Exempt Sale
shall be written or printed prominently on the invoice/OR
4. For zero-rated transactions, the term Zero-Rated Saleshall be written or printed prominently in the invoice/OR
or alternatively, at the option of seller
if the sale involves items which are subject to VAT and some of whichare VAT zero-rated or VAT-exempt:
the invoice or receipt shall clearly indicate the breakdown of thesales price between its taxable, exempt and zero-ratedcomponents, and
the calculation of the VAT on each portion of the sale shall beshown on the invoice or receipt;
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Invoicing : content3. The date of transaction, quantity, unit cost and
description of the goods or properties or nature ofservices
4. Name, business style and address of seller
5. In the case of sales in the amount of P1,000 or morewhere the sale is made to a VAT-registered person, thename, business style, if any, address and TIN of thebuyer
6. Notation: Not to be issue for Non-VAT/Exempt sales ofgoods, properties or services. If issued, sales shall be
subject to 10% VAT.7. BIR permit to print information
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Summary list
Who are required to submit Quarterly Summary Lists of
Sales?
All persons liable for VAT with quarterly total
sales/receipts (net of VAT) exceeding Two Million Five
Hundred Thousand Pesos (P2,500,000)
Who are required to submit Quarterly Summary Lists ofPurchases?
All persons liable for VAT with quarterly total purchases
(net of VAT) exceeding One Million Pesos (P1,000,000)
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Summary list of SalesQuarterly Summary Lists of Sales shall show the monthly
total sales generated from regular buyers/ customers,regardless of amount, as well as from casualbuyers/customers with individual sales amounting toP100,000 or more.
Regular buyers/customers
Those who are engaged in business or exercise ofprofession and those with whom the taxpayer hastransacted at least six (6) transactions regardless ofthe amount.
Casual buyers/customers
Those who are engaged in business or practice ofprofession but did not qualify as regular buyers/customers as defined above.
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Summary List of Sales Content BIR-registered name of the buyer who is engaged
in business/exercise of profession
TIN of the buyer (only for sales that are subject toVAT)
Exempt Sales
Zero-rated Sales Sales Subject to VAT (exclusive of VAT)
Output Tax (VAT on sales subject to 10%)
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Summary list of Purchases: Content BIR - registered name of the seller / supplier / service
provider
Address of seller/supplier/service provider
TIN of the seller
Exempt Purchases
Zero-rated Purchases
Purchases Subject to VAT (exclusive of VAT) on
(i) services
(ii) capital goods
(iii) other goods
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Summary list : Content
The names of sellers/suppliers/service-providers andthe buyers/customers shall be alphabetically arrangedand presented in the schedules
The summary lists shall reflect the consolidated monthlytransactions per seller/supplier or buyer for each of thethree months of VAT taxable quarter
Note: It is not clear how the capital goods amortizationand 70% cap on input VAT will be taken into account
The summary lists shall be submitted in magnetic formusing 3.5-inch floppy diskettes following the formatprovided in RR 16-2005.
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Transitionary provisions
Recognize transitional input tax credit
Report unused invoices/receipts
Report billed but uncollected sale of services
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Transitional input tax Extended to taxpayers who become VAT-
registered upon exceeding P1.5 M annualsales
Equivalent to 2% of the value of the inventoryof goods, materials and supplies as of start ofVAT status, or actual VAT thereof, whichever is
higher . Capital goods and goods exempt fromVAT are excluded from the computation,
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Transitional input tax
Inventory of goods must be submitted to theBIR within 30 days from start of VAT status.
Adjusting entry to record transitional input tax
Input Tax xxx
Inventory xxx
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Use of existing invoices/receipts
Non-VAT receipts/invoices may still be used bynew VAT taxpayers until end of the year
Submit to BIR within 30 days the inventory ofunused receipts/invoices
Unused non-VAT receipts/invoices should bestamped VAT-registered as of November 1,2005
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Billed but uncollected sale ofservices
Amounts collected after Nov. 1 for bills forservices issued on or before Oct. 31 notsubject to VAT
Information return of uncollected bills to besubmitted to BIR on or before Dec. 30
Copies of bills attached to information return
Record the amount of accounts receivable
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Computation of VATComputation of VAT
10% VAT 0% VAT 10% Govt
Gross Sales/ Receipts XXX XXX XXX
Less: Sales Returns XXX
Sales Allowances XXXAl lowable Sales Dis cou nts XXX XXX XXX XXX
Net XXX XXX XXX
10% 0% 10%
OUTPUT TAX XXX [A] 0 [A] XXX
INPUT TAX:Carried over from previous period XXX -
Domesti c Purchases XXX
Importations XXX
Capital goods subject todepreciation(amortized over 60 mo) XXX
Total XXX
INPUT TAX XXX * [B] XXX* [B ] XXX **[B]
VAT PAYABLE/REFUNDABLE XXX [A-B] (XXX)[A-B] XXX[A-B]
Note: All amounts in the formula are assumed to be net of VAT*subject to l imitation (70% of output tax) under RA No. 933 **fixed at 5% standard input VAT
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Apportionment of Input Tax
In case there are VAT and non-VAT activities, input tax
shall be allowed as follows:
Total input tax which can be directly attributed to
transactions subject to VAT; and
A ratable portion of any input tax (common input tax)
which cannot be directly attributed to either activity.
Note: Example in RR 16-2005 presents a monthly attribution
computation. However, the Quarterly VAT Return provides for a
quarterly computation.
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Apportionment of Input TaxInput Tax Attributed to Exempt Activity
Input Tax Attributed to VATable Activity*
* This in turn will have to be apportioned to different VATableactivities (10%, 0%, and Government sales)
Exempt Sales
Total SalesCommon Input Tax X
Taxable Sales
Total SalesCommon Input Tax X
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Illustration: Mixed Transaction
ERA Corporation (RR 16-2005 example)
Total Sales for the month P400,000
Breakdown of Total Sales: Sales to private entities subject to 10% VAT P100,000 Sale to private entities subject to 0% VAT P100,000
Sale of VAT-exempt goods P100,000 Sale to govt.
subjected to 5% final VAT withholding P100,000
SL-25
Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Illustration: Mixed Transaction
The fol low ing inpu t taxes were passed on b y i ts
VAT suppl iers :
P20,000Input tax on depreciable capital good n otattributable to any sp ecific activity (monthlyamort izat ion for 60 mon ths)
4,000Input tax on sale to gov ernment2,000Input tax on sale of exempt goo ds
3,000Input tax on zero-rated sales
P 5,000Input tax on taxable goo ds (10%)
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Illustration: Mixed Transaction
Cred i tab le input tax for th e month
Input tax on sale sub ject to 10% P 5,000
Inpu t tax on zero-rated sale 3,000
Ratab le port ion of the inp ut tax not d i rec t ly
attr ibutable to any activ i ty :
Taxable sales (0% and 10%) X Am oun t of input tax
Total Sales not direct ly attr ibutable
P 200,000 x 20,000 = P 10,000
400,000
To tal c red it ab le i np ut t ax f or t he mont h = P 18,000
SL-27
Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Illustration: Mixed TransactionInput tax at t r ibutab le to sa les to go vernment
Inpu t tax on sale to gov t - P 4,000 Ratab le port ion of the input tax notdirect ly attr ibutable to any activ i ty :
Taxab le sales to government X Amoun t o f inpu t
To tal Sales tax no t d irec t ly a t t r ibu tab le
P 100,000 X P 20,000 - P 5,000 400,000
To tal inpu t tax att r ibu tab le to sales - P 9,000
to government
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Illustration: Mixed Transaction
Input tax attr ibu table to VAT-exemp t s ales
Inpu t tax on VAT-exemp t sales P 2,000 Ratab le port ion of the input tax not
direct ly attr ibutable to any activ i ty :
VAT-exemp t sa les X Amoun t o f inpu tTo tal Sales tax not d irec t ly
at t r ibutab le
P 100,000 X P 20,000 P 5,000 400,000
Total inpu t tax attr ibutable to P 7,000
VA T-exempt sales
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Illustration: Summary of the transactions of ERA Corp
4,000*005,0005,000**9,0005,0004,00010,000Sale toGovernment subjectto 5% FinalwithholdingVAT
7,000*00007,0005,0002,0000Sale ofExempt
Goods
08,000008,0008,0005,0003,0000SaleSubject to0% VAT
000010,00010,0005,0005,00010,000SaleSubject to10% VAT
Unrecoverable input
VAT
Input VATfor refund
ExcessInput
VAT forcarry-over/
Net VATPayable
Credit-able
Input VAT
TotalInput VAT
Input VATnot directlyattributable
to anyactivity
Input VATdirectly
Attributable
OutputVAT
* These amounts are not available for input tax credit but may be recognized as cost expense** Standard input VAT of 5% on sales to Government as provided i n Sec. 4.114-2(a)Withheld by Government entity as Final Withholding VAT
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
RA No. 9337 and RR No. 16-2005 (Final Withholding VAT)
The Government or any of its political subdivisions,instrumentalities or agencies, including government ownedor controlled corporations (GOCCs) shall, before making
payment on account of its purchase of goods and/orservices which are subject to 10% VAT shall deduct andwithhold a final VAT of 5% of the gross payment.
The five percent (5%) final VAT withholding rate shallrepresent the net VAT payable of the seller.
VAT on Government Contracts
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
VAT on Government ContractsRA No. 9337 and RR No. 16-2005 (Final Withholding VAT)
The remaining five percent (5%) effectively accounts for the standardinput VAT for sales of goods or services to government or any of its
political subdivisions, instrumentalities or agencies including GOCCs, inlieu of the actual input VAT directly attributable or ratably apportioned tosuch sales.
Should actual input VAT exceed five percent (5%) of gross payments,
the excess may form part of the sellers expense or cost.
If actual input VAT is less than 5% of gross payment, the differencemust be closed to expense or cost.
The certificate or statement to be issued is the Certificate of Final taxWithheld at source (BIR Form No. 2306), a copy of which is to be issuedto the payee.
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Example: Sales to Government
Case 1:Sales to government P110,000 (VAT inclusive)
Purchases with valid input taxes P 88,000 (VAT inclusive)
3,000Cost/expense [A-B]
[B]5,000Standard input VAT (5%)
[A]8,000Actual input tax
5,000VAT withheld final (5%)
P 10,000Output Tax (10%)
SL-33
Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Suggested Journal Entries: Sales to Govt
Goods:
Sale to Government P110,000 (VAT inclusive)
Purchases with valid input taxes 88,000 (VAT inclusive)
Journal Entries:
To record the sale
Dr Accounts Receivable 110,000
Cr Sales 100,000
Output Tax 10,000
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
To record the purchase
Dr Expense/Asset 80,000
Input Tax 8,000
Cr Accounts Payable 88,000
To record collection
Dr Cash 105,000
Cr Accounts Receivable 105,000
Suggested Journal Entries: Sales to Govt
SL-35
Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
To record VAT withheld by Government
Dr Output Tax 5,000
Cr Accounts Receivable 5,000
To close the balance of output tax on sales to Government andthe related input tax
Dr Output Tax 5,000Expense/Cost 3,000
Cr Input Tax 8,000*
*Not allowed as input tax credits. Effectively, the allowable input taxcredits on sales to Government is 50% of output tax. Any excess inputtax should be charged to cost or expense.
Suggested Journal Entries: Sales to Govt
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Example: Sales to government
Case 2:Sales to government P110,000 (VAT inclusive)
Purchases with valid input taxes P 44,000 (VAT inclusive)
(1,000)Cost/expense [A-B]
[B]5,000Standard input VAT (5%)
[A]4,000Actual input tax
5,000VAT withheld final (5%)
P 10,000Output Tax (10%)
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Sale to Government P110,000 (VAT inclusive)
Purchases with valid input taxes 44,000 (VAT inclusive)
Journal Entries:
To record the sale
Dr Accounts Receivable 110,000
Cr Sales 100,000 Output Tax 10,000
Suggested Journal Entries: Sales to Govt
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
To record the purchase
Dr Expense/Asset 40,000
Input Tax 4,000
Cr Accounts Payable 44,000
To record collection
Dr Cash 105,000
Cr Accounts Receivable 105,000
Suggested Journal Entries: Sales to Govt
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
To record VAT withheld by the Government
Dr Output Tax 5,000
Cr Accounts Receivable 5,000
To close the balance of output tax on sales to Government and the related inputtax
Dr Output Tax 5,000
Cr Input Tax 4,000*
Cost/expense 1,000
*Not allowed as input tax credits. Effectively the allowable input credits on salesto Government is equivalent to 50% of output tax. Any excess input tax shouldbe charged to cost or expense, resulting in increase in taxable income
Suggested Journal Entries: Sales to Govt
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
70% limitation on Input Tax Credit
RR No. 16-2005
If at the end of any taxable quarter the output taxexceeds the input tax, the excess shall be paid by theVAT-registered person.
Example :
Quarter x
Output VAT P100
Input VAT 80
Net VAT payable 20
Note: 70% limitation will not apply
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
70% Limitation on Input Tax Credit
RR No. 16-2005
If the input tax inclusive of input tax carried over from the previousquarter exceeds the output tax,
the input tax inclusive of input tax carried over from the previous quarterthat may be credited in every quarter shall not exceed seventy
percent (70%) of the output tax;
Provided, That, the excess input tax shall be carried over to thesucceeding quarter or quarters
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Example: Limit on Input TaxCredit
Quarter x
Output VAT P100
Input VAT - actual P 110
Limit (70% of Output) 70
Excess inpu t car ryover 40*
Input Tax allowed 70
VAT Payab le P 30
*Carryover to next m onth
Note: VAT return prov ides for mo nth ly determinat ion of l imi ta t ion
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Input Tax on Capital GoodsRR No. 16-2005
Input tax on purchases or importation of capital goods whichare depreciable assets for income tax purposes,
the aggregate acquisition cost of which (exclusive of VAT) ina calendar month exceeds P1 million, regardless ofacquisition cost of each capital good,
shall be claimed as credit against output tax, as follows:
1. Estimated useful life of capital good is 5 years or more
Monthly input tax = Total Input Tax
60 months
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Input Tax on Capital Goods2. Estimated useful life is less than 5 years
If 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
million:
the total input taxes will be allowable as credit againstoutput tax in the month of acquisition
MonthsinLifeUsefulEstimated
TaxInputTotalTaxInputMonthly =
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Input Tax on Capital Goods The aggregate acquisition cost of a depreciable asset in
any calendar month refers to
the total price agreed upon for one or more assetsacquired and
not on the payments actually made during the calendarmonth.
Thus, an asset acquired in instalment for an acquisition
cost of more than P 1,000,000.00 will be subject to theamortization of input tax despite the fact that the monthlypayments/instalments may not exceed P 1,000,000.00.
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Input Tax on Capital Goods
RR 16-2005 Start of Time to Claim
Claim for input tax shall commence in the calendar monthof acquisition.
If the depreciable capital good is sold/transferred 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/transferred can be claimed as input tax credit during
the month/quarter when the sale or transfer was made but
subject to the limitation prescribed under Sec. 4.110-7 ofthese Regulations.
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Illustration: Input tax on Capital GoodsCapital goods used in trade or business if total acquisition cost(excluding VAT) exceeds P1M, for one month
XYZ Company purchased machineries for P1.5M (excluding
VAT). All have estimated useful lives of 5 years. This is
supported by a VAT invoice dated November 1, 2005. Input
VAT will be claimed as follows:
Input VAT claimable = P1.5M x 10% = P150,000
Claimable as follows:
For the month of November = P150,000/60 months = P2,500
Succeeding 59 months = P2,500/month
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
Purchase of cap i ta l goods ( input tax c la imable over 60 month s orusefu l l i fe whichever is shorter)
i . Upon p urchase of cap i ta l goods
Dr Capital Goods xxx Deferred Input Tax Capital Goods xxxCr Accounts Payable xxx
i i . Upon c la iming or amort iza tion of input tax on a month ly bas is
Dr Input tax Capital Goods xxx Cr Deferred Input Tax-Capital Goods xxx
Note: Taxpayer should maintain a subsidiary record in ledger form forthe acquisition, purchase or importation of depreciable assets or capitalgoods
Suggested Journal Entries Input Tax
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Quality In Everything We Do
SGV C & OA MEMBER PRACTICE OF ERNST & YOUNG GLOBAL
VAT Liability/Excess Input Tax Credits
At the end of each VAT month/quarter, the following entryshould be effected to reflect the VAT payable or excessinput tax credits for the month/quarter:
To record VAT payable
Dr Output Tax xxx Cr Input Tax-Capital Goods* xxx
Input Tax* xxx
VAT Payable/Cash xxx
*Subject to 70% limitation
Journal Entries Excess Input Tax
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Old VAT return19 Total Sales/Receipts (Sum of Items 14B to 18B) and 19A 19B
Output Tax Due (Sum of Items 14C to 18C) - 10%
20 Zero Rated Sales/Receipts 20
21 Exempt Sales/Receipts 2122 Total Sales/Receipts (Sum of Items 19A, 20 and 21) 22
ess: npu ax urc ases
23A Transitional Input Tax 23A
23B Presumptive Input Tax 23B
23C Input Tax Carried Over from Previous Quarter 23C
23D/E Domestic Purchases-Capital Goods 23D 23 E
23F/G Domestic Purchases - Goods other than Capital Goods 23F 23G
23H/I Domestic Purchases-Services 23H 23I
23J/K Services rendered by Non-Resident 23J 23K
23L/M Importations - Capital Goods 23L 23 M
23N/O Importations- Goods other than capital goods 23N 23O
23P Purchases Not Qualified for Input Tax 23P
23QTotal Purchases (Sum of Items 23D,23F,23H,23J,23L,23N & 23P) 23Q
24 Total Available Input Tax (Sum of Items 23A,23B, 23C, 23E, 23G, 23I, 23K,23M & 23O) 24
25 Less: Deduction from In ut Tax25A Any VAT Refund/ TCC Claimed 25A
25B Excess input tax carrried over to succeeding quarter, if this is an amended return 25B
25C Total (Sum of Items 25A and 25B) 25C
26 Net Creditable Input Tax (Item 24 less Item 25C) 26
27 VAT Payable/(Excess Input Tax) (Item 19B less Item 26) 27
This will be modified by the BIR.
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Revised VAT return
Revised Monthly VAT Declaration andQuarterly VAT Return (Sept 2005)
Provide for 9 schedules in the second page
Require detailed reporting of capital goods and
amortization of allowable input tax for theperiod
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Repealing Clause
RR 16-2005
All oth er laws , acts, decrees, execut ive orders,issuances and rules and regulat ions o r par ts
thereof w hich are cont rary to and inco ns is tent
with any pro vis io ns o f R.A. No. 9337 are deemed
repealed, amended o r m odi f ied.
Al l other issuances and rules and regulat ions orpar ts thereof w hich are contrary to andincons is tent w i th any prov is ions of these
Regulat ions are deemed repealed, amended o rmodi f ied.
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Repealing Clause
RR 16-2005
No VAT exemp t ions m ay be granted by the BIRexcept th ose exp l ic i t ly s tated in Sec. 109(1) of
the Tax Code, as amended b y RA No. 9337.
Al l prev ious exempt io ns granted throu gh laws,acts , decrees, execut ive orders, issu ances and
rules and regulat ions or p ar ts thereofprom ulgated or issued pr ior to the effect iv i ty ofRA No . 9337 are deemed repealed, amend ed or
mo di f ied accord ing ly .
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Increase in VAT rate in 2006Increase in VAT rate in 2006
Provided, that the President, upon recommendation of the
Secretary of Finance, shall, effective January 1, 2006, raisethe rate to 12% after any of the following conditions has
been satisfied:
i. VAT collection as a percentage of GDP of the
previous year exceeds two and four-fifth percent
(2 4/5%); or
ii. National government deficit as a percentage of
GDP of the previous year exceeds one and one-
half percent (1 %)