Chapter 12 - Input Vat2013

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 89 SUGGESTED ANSWERS Chapter 12: Input VAT Credits and Refunds

CHAPTER 12

INPUT VAT CREDITS AND REFUNDS Problem 12–1 1. True 2. False – should not be subjected to the same tax. 3. False – VAT refund. 4. False – excess of input VAT over output VAT. 5. False – VAT sales invoice or VAT official receipt. 6. True 7. True – for as long as the buyer is VAT-registered. 8. False – importation is subject to VAT whether for business or personal use. 9. True 10. True 11. False – goods for sale is not covered by the P1,000,000 threshold. The goods must depreciated/amortized as a result of use in business. 12. False – only zero-rated/ effectively zero-rated sales and cancellation of VAT registration can apply for TCC issuance. 13. True 14. False – the resident lessee or licensee must file the VAT return in the name of nonresident foreign entity. 15. True Problem 12–2 1. True 2. False – not creditable. 3. True 4. False – TIV is granted only once when a non-VAT taxpayer shifts to VAT. 5. False – PIV is intended only the primary raw materials used in the processing of sardines, mackerel, milk, refined sugar, cooking oil, packed noodles based instant meals. 6. True 7. True 8. True 9. False – within 2 years. 10. True 11. True 12. True 13. True 14. False – input VAT related to zero-rated or effectively zero-rated sales and input VAT of VATregistered person cancelling to non-VAT. 15. True Problem 12–3 1. B 2. C 3. D 4. C 5. D 6. B – sugar only 7. D 8. A 9. C 10. A

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 90 SUGGESTED ANSWERS Chapter 12: Input VAT Credits and Refunds

Problem 12 – 4 A Zero. The business is non-VAT; hence, no input VAT is allowed. Problem 12 – 5 A Output VAT (P425,600/9.3333) Less: Input VAT (P448,000/9.3333) Input VAT carry-over

P45,600 48,000 P 2,400

VAT-registered buyers of non-VAT business that collects VAT is allowed to deduct input VAT. Problem 12 – 6 D Input VAT from: VAT invoice in the name of Capoy Enterprises (P224,000/9.333) NonVAT invoice with VAT charges (P168,000/9.333) Total creditable input VAT

P 24,000 18,000 P42,000

The VAT invoice in the name of Capuypoy Trading is not allowed because it does not bear the name of Capoy Enterprises. Problem 12 – 7 B Input VAT from VAT purchased invoice (P1,792,000/9.333) Non-VAT purchase invoice (P313,600/9.333) Transitional input VAT Total input VAT from purchases Less: Proportionate input VAT for sales to the government (P192,000 + P33,600) x 500/2,000 Input VAT balance Add: Standard input VAT on sales to government (P560,000/9.333) x 7% Total creditable input VAT

P192,000 33,600 5,800 P231,400 56,400 P175,000 35,000 P210,000

Problem 12 – 8 A Purchases per VAT invoice amount (P140,000/9.3333) Payments for VAT person’s services inclusive of VAT (P1,232/9.3333) Payment for services of VAT person, net of VAT (P917 x 12%) Total available input VAT

P 15,000 132 110 P 15,242

Problem 12 – 9 C Input VAT from: Machine 1 – inventory (P1,680,000/9.333) Amortization of input VAT from: Machines 2 and 3 [(P672,000 + P560,000)/9.333]/60 months Creditable input VAT – January

P180,000 2,200 P182,200

Note: Machines 2 and 3 are depreciable capital goods with aggregate costs of P1,100,000excluding VAT; hence, their input VAT is subject to amortization of 60 months or estimated useful life, whichever is shorter. Problem 12 – 10

D

Output VAT Input VAT from purchases of: Goods Capital goods – March acquisition Capital goods – February acquisition Net VAT payable (refundable)

January P120,000

February P156,000

March P180,000

(72,000)

(84,000)

. P 48,000

( 3,000) P 69,000

(96,000) (60,000) ( 3,000) P21,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 91 SUGGESTED ANSWERS Chapter 12: Input VAT Credits and Refunds

Problem 12 – 11 1. Letter B Total costs incurred to date Year 1 Year 2 Multiplied by percent of construction costs subject to VAT Construction costs subject to VAT Multiplied by VAT rate Creditable input VAT in year 2 2.

Letter C Output VAT Less: Input VAT from purchases Input VAT from construction in progress Year 3 (P3,000,000 x 60% x 12%) Net VAT payable

Problem 12 – 12 A Output VAT Less: Input VAT from purchases Input VAT from CIP: Materials (P3,600,000 x 30%) Labor (P2,400,000 x 20%) Overhead (P1,200,000 x 20%) Net VAT payable

P4,000,000 8,000,000 P12,000,000 60% P 7,200,000 12% P 864,000 P3,600,000 P1,200,000 216,000

P2,000,000 1,080,000 480,000 240,000

Problem 12 – 13 1. Letter D Purchases from VAT person (P644,000/9.333) Purchases from Non-VAT person in VAT invoice (P61,600/9.333) Payments to VAT services (P56,000/9.333) Total creditable input VAT

P6,000,000

3,800,000 P2,200,000

P69,000 6,600 6,000 P81,600

2. Letter A Output VAT (P784,000/9.333) Less: Creditable input VAT Net VAT payable (refundable)

P 84,000 81,600 P 2,400

Problem 12 – 14 B Equipment (P2,500,000 x 12%) = P300,000/60 Supplies (P10,000 x 12%) = P1,200 Goods (P800,000 x 12%) = P96,000 Creditable input VAT Problem 12 – 15 C Siopao machine (P300,000 x 1) Siomai machines (P250,000 x 2) Pizza machines (P200,000 x 3) Oven (P150,000 x 4) Total amount Add: Custom duty (P2,000,000 x 10%) Excise tax (P2,000,000 x 5%) Storage fee (P2,000,000 x 2%) Total landed costs Multiplied by VAT rate Input VAT

1,416,000 P2,184,000

P 5,000 1,200 96,000 P102,200 P300,000 500,000 600,000 600,000 P2,000,000 P200,000 100,000 40,000

340,000 P2,340,000 12% P 280,800

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 92 SUGGESTED ANSWERS Chapter 12: Input VAT Credits and Refunds

Problem 12 – 16 1. Letter A Total machines – imported (P100,000 + P200,000 + P300,000) Add: Excise tax (P600,000 x 50%) Total Multiplied by VAT rate VAT paid on importation 2. Letter D Output VAT (P1,000,000 x 12%) Less: Creditable input VAT: Machine 2 (P200,000 + P100,000) x 12% Machine 3 (P300,000 + P150,000) x 12% VAT payable

P 600,000 300,000 P 900,000 12% P 108,000 P 120,000 P36,000 54,000

Problem 12 – 17 D Actual input VAT (P896,000 x 20%)/9.333, higher Transitional input VAT (P1,500,000 x 50%) x 2% Total transitional input VAT allowed, the higher amount Problem 12 – 18 A Output VAT (P1,600,000 + P2,000,000) x 12% Less: Other percentage tax paid Output VAT balance Less: Input VAT from purchases – August to December Transitional input VAT, (P100,000 x 2%) = P2,000; higher - actual Net VAT payable

P19,200 15,000 P34,200 P432,000 48,000 P384,000 P240,000 34,000

Problem 12 – 19 B Prime raw materials – coconut for cooking oil (P1,000,000 x 3/5) Multiplied by presumptive VAT rate Presumptive input VAT Problem 12 – 20 C Output VAT (P2,800,000/9.333) Less: Input VAT from Presumptive input VAT – sardines (P800,000 x 4%) Supplies (P50,400/9.333) Amortization of capital goods [(P1,232,000/9.333)/60] x 3 months Net VAT payable Problem 12 –21 B Output VAT (P600,000 + P1,500,000) x 12% Less: OPT (P600,000 x 3%) Output VAT balance Less: Transitional input VAT (P100,000 x 2%) Presumptive input VAT (P800,000 – P200,000) x 4% Net VAT payable

90,000 P 30,000

274,000 P110,000 P600,000 2% P 12,000 P300,000

P32,000 5,400 6,600

44,000 P256,000 P252,000 18,000 P234,000

P 2,000 24,000

26,000 P208,000

Note: The basis of presumptive input VAT is the gross value of the purchased raw materials used in the production. Problem 12 –22 C Input VAT from purchases – second quarter (P5,040,000/9.333) Input VAT carry-over from first quarter

P540,000 57,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 93 SUGGESTED ANSWERS Chapter 12: Input VAT Credits and Refunds

Input VAT - Purchases returns (P50,000 x 12%) Input VAT amortized on capital goods (P180,000/60) x 3 Creditable input VAT – second quarter Problem 12 –23 D Texas Instruments, Inc. (ECOZONE) San Miguel Corporation Department of Tourism Low cost housing (P1,000,000 per house and lot)

( 6,000) 9,000 P600,000 P10M 15M 25M 50M P100M

Input VAT on purchases Less: Input VAT allowed: Zero-VAT sales – Texas Instruments (P3.6M x 10%) Reg. VAT sales – San Miguel Corporation (P3.6M x 15%) Std input VAT – Department of Tourism (P25,000,000 x 7%) Input VAT not allowed

10% 15% 25% 50% 100% P3,600,000

P 360,000 540,000 1,750,000

Problem 12 –24 B Amount of input VAT allowed for VAT refund or Issuance of TCC (P600,000 x 20/50) – export sales or zero-rated VAT related Problem 12 –25 D Input VAT from importation (P1,120,000/9.333) Input VAT per VAT invoice issued by nonVAT person (P896,000/9.333) Total input VAT refund Problem 7 – 26 A Output VAT on actual sales [P400,000 + (P560,000/1.12)] x 12% Add: Output VAT on deemed sales (P30,000 + P20,000) x 12% Total output VAT Less: Other percentage tax paid (P400,000 x 3%) Output VAT balance Less: Input VAT from: Purchases (P672,000/9.333) Input VAT previous quarter Transitional input VAT Input VAT carry-over Problem 12 – 27 Contract price Less: VAT withholding (P6,720,000/9.333) Final withholding income tax (P6,000,000 x 7.5%) Net remittance to Japan Inc. Problem 12 – 28 Importation for business use Add: Customs duties (P1,000,000 x 50%) Total Add: Excise tax (P1,500,000 x 10%) Total Multiplied by VAT rate Creditable Input VAT

2,650,000 P 950,000

P240,000 P120,000 96,000 P216,000 P108,000 6,000 P114,000 48,000 P 66,000

P72,000 42,000 2,000

116,000 (P50,000) P6,720,000

P 720,000 450,000

1,170,000 P5,550,000 P1,000,000 500,000 P1,500,000 150,000 P1,650,000

12% P 198,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 94 SUGGESTED ANSWERS Chapter 12: Input VAT Credits and Refunds

Problem 12 – 29 1. Output VAT (P1,456,000/9.3333)

P156,000

2. Input VAT (P1,120,000/9.3333)

P120,000

3. Net VAT payable (P156,000 – P120,000)

P 36,000

Problem 12 – 30 1. Net income (P1,200,000/30%) Add: Operating expenses (P2,540,000- P240,000) Gross income Add: Cost of sales (P3,360,000/1.12) Less: Increase in inventory Sales

P4,000,000 2,300,000 P6,300,000 P3,000,000 300,000

2. Output VAT (P9,000,000 x 12%) Less: Input VAT from purchases (P3,360,000/9.333) Input VAT from operating expenses Input VAT from CIP: Materials (P560,000 + P448,000 + P672,000)/9.333 Labor (P1,500,000 x 40%) x 12% Overhead (P1,500,000 x 20%) x 12% Net VAT payable Problem 12 – 31 Non-VAT Total sales as of November 1, 201B Add: Sales on November to December 201B (P672,000/1.12) + P100,000 = P700,000/70% Total sales Multiplied by VAT rate Output VAT Less: Other percentage tax paid Output VAT balance VAT-registered Output VAT Less: Other percentage tax paid Output VAT balance Less: Transitional input VAT (P672,000/1.12) + (P100,000) = P700,000 x 2% = P14,000 (P672,000/9.333) = P72,000, higher + (P100,000 x 2%) VAT advantage to register under VAT system

2,700,000 P9,000,000 P1,080,000

P360,000 240,000 180,000 72,000 36,000 P

888,000 192,000

P1,900,000 1,000,000 P2,900,000 12% P 348,000 57,000 P 291,000 P P

348,000 57,000 291,000 74,000 P

217,000 74,000

AlahNganin should register under VAT system. Problem 12 – 32 Output VAT (P5,000,000 x 12%) Less: Input VAT from: Supplies (P784,000/9.333) Rent (P214,000/107%) x 12% Creditable input VAT from previous period Presumptive input VAT (P2,200,000 – P200,000) x 2% Net VAT payable

P600,000 P84,000 24,000 112,000 40,000

260,000 P340,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 95 SUGGESTED ANSWERS Chapter 12: Input VAT Credits and Refunds

Problem 12 – 33 Output VAT (P3,000,000 x 12%) Less: Transitional input VAT (P100,000 x 2%) Presumptive input VAT (P1,620,000 x 4%) Input VAT from operating expenses Net VAT payable

P360,000

P 2,000 64,800 3,600

70,400 P289,600

The presumptive input VAT is based on primary raw materials used. The primary raw materials used during the period are computed as follows: Copra raw materials, beginning Add: Purchases of copra from farmers Total Less: Copra raw materials, ending Copra raw materials used Problem 12 – 34 Output VAT Less: Input VAT from: Purchases Carry-over from last quarter Capital goods (P180,000/60) Creditable input VAT for next quarter Problem 12 – 35 1. Input VAT from purchases for business (P112,000/9.333) Input VAT from importation (P79,520/9.333) Creditable input VAT for the period Less: Output VAT Input VAT carry-over

P

100,000 1,900,000 P2,000,000 380,000 P1,620,000 P200,000

P240,000 30,000 3,000

273,000 (P 73,000) P 12,000 8,520 P20,520 20,000 P 520

2. Input VAT carry-over (P20,520 – P20,520)

P - 0 -

Problem 12 – 36 Input VAT on Depreciable Capital Goods from purchase of Truck (P1,120,000/9.333) Processing machine (P1,568,000/9.333)/60 x 1 Total Input VAT for the last quarter

P120,000 2,800 P122,800

Note: The Input VAT from the purchase of truck should not be amortized because its cost doesnot exceed P1,000,000. Problem 12 – 37 Transitional input VAT Presumptive input VAT Input VAT on purchases of depreciable capital goods (P180,000 x 10/15) Input VAT on operating expenses (P96,000 x 10/15) Input VAT not allowed for TCC issuance

P 40,000 50,000 120,000 64,000 P274,000

Only input VAT that can be traced or allocated to zero-rated or effectively zero-rated is allowed for issuance of TCC. Transitional and presumptive input VATs are not allowed for TCC issuance.

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 96 SUGGESTED ANSWERS Chapter 12: Input VAT Credits and Refunds

Problem 12 – 38 VAT invoice in the name of Busal Enterprises (P448,000/9.333) NonVAT invoice charged with VAT (P313,600/9.333) Total input VAT Multiplied by percent of VAT for regular sales (P1M/P1.5M) = 2/3 Creditable input VAT from regular VAT sales

P 48,000 33,600 P 81,600 2/3 P 54,400

The input VAT on sales to government is subject to SIV and is deductible only from the Output VAT on sales to the government. Its actual input VAT of P18,000 is not allowed to be deducted from output VAT. (R.A. 9337) Problem 12 – 39 Input VAT carry-over Input VAT from purchases Input VAT capital goods Total Less: Adjustments: Input VAT on purchase returns (P100,000 x 12%) Input VAT on VAT-exempt sales (P60,000 x 5/20) Unamortized portion of input VAT on capital goods (P240,000 – (P240,000/60) Adjusted creditable input VAT

P 24,000 60,000 240,000 P324,000 P 12,000 15,000 236,000

263,000 P 61,000