INPUT TAXES

• Arises from purchases of goods, properties, and services.

TRANSISTIONAL INPUT TAX CREDIT may be claimed by persons

who become liable to value-added tax (VAT) for the first time, they
represent input tax on inventories goods, materials, and supplies
existing on the date of commencement of a person’s status as a
taxable person

PRESUMPTIVE INPUT TAX may be claimed by: (a) persons

engaged in business of processing sardines, mackerel, and milk,
manufacturing refined sugar and cooking oil and packed noodle-
based instant meals, which are substantially produced from
primary agricultural and marine products, the supply of which is
exempt from (VAT)
• FINAL WITHOLDING TAX CREDIT is based on the
amount paid to the supplier of goods or services by
the government and is required to be withheld by the
government and remitted to the BIR.
 SOURCES OF INPUT TAX
CREDITS
• Input taxes passed by on the sellers of goods, properties, or services
may arise from any of the following;
1. Any input tax evidenced by a VAT invoice or official receipt in
accordance with Section 113 hereof on the following transactions
shall be creditable against the output tax:
Purchase or importation of goods;
a. for sale;
b. for conversion into or intended to form part of a finished
product for sale including packaging materials;
c. for use as supplies in the course of business;
d. for use as materials supplied in the sale of services or;
e. for use in trade or business for which deduction for
depreciation or amortization is allowed under this Code
2. The input tax on domestic purchase of goods
or properties shall be creditable;
A. To the purchaser upon consummation of sale and on
importation of goods or property; and
B. To the importer upon payment of (VAT) prior to the release of
the goods from the custody of the Bureau of Customs

3. A VAT-registered person who is also engaged

in transactions not subject to the (VAT) shall be
allowed tax credit as follows;
A. Total input tax which can be directly attributed to
transactions subject to (VAT); and
B. A ratable portion of any input tax, which cannot be directly
attributed to either activity.
REFUND OR TAX CREDIT OF EXCESS
INPUT TAX
• In proper case, the Commissioner shall grant a refund for
creditable taxes within (90) days from the date of submission
of the official receipts or invoices and other documents in
support of the application filed in accordance with Subsection
(a) and (b) of Section 112 of the NIRC.
• 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.

In case of full or partial denial of the claim for tax refund, the taxpayer
affected may, within (30) days from the receipt of the decision
denying the claim, appeal the decision with the Court of Tax Appeals
(CTA)
Provided, however that failure on the part of any official, agent, employee of
the BIR to act to the application within the (90) day period shall be punishable
under Section 269 of the NIRC
ENHANCE VAT REFUND SYSTEM UNDER R.A
10963(TRAIN)
The enhance VAT refund system intended to grant
refunds of creditable input tax within 90 days from the
filing of VAT refund application with the BIR:
PROVIDED, that, to determine the affectivity of the
successful establishment and implementation of an
enhanced VAT refund system, all application filed from
January 1, 2018 shall be processed and must be
decided within 90 days from the filing of the VAT refund
application.

All pending VAT refund claims as of December 31,

2017 shall be fully paid in cash by December 31, 2019.
An amount equivalent to five percent of total
VAT collection of the BIR and BOC from the
immediately preceding year shall be
automatically appropriated and annually and
shall be treated as a special account in the
General Fund or trust receipts for the purpose
of funding claims for VAT Refund: PROVIDED,
that any unused fund, at the end of the year
shall revert to the General Funds ( Sec 106[A]
[2] [a] and 108 [B] NIRC)
CATEGORIES OF REFUNDS OR TAX CREDITS
Zero rated or effectively zero rated sales of
goods; (2) local purchase or importation of
capital goods; and (3) cessation of business or
dissolution of the corporation

NOTE: the regulation also allows the refund or

tax credit on unused input tax on purchase of
real property.
 ZERO-RATED OR EFFECTIVELY ZERO-RATED SALES
 
Under this, the seller of the goods is the one entitled to the
refund or credit; in the purchase of capital goods, it is the
purchaser that is entitled to the refund or tax credit.

In order to be entitled to refund or tax credit if unutilized input

tax payments directly attributed to zero-rated or effectively zero-
rated sales, petitioner must proved that:
1.The claimant must be a VAT-registered person.
However, it is not application for effective zero-
rating that is indispensable to VAT refund or credit;

2. The application for the issuance of a tax credit

certificate or refund is filed with the BIR or the DOF
Center within (2) years after the close of the taxable
quarter when the sales were made, and with the
CTA within 30 days from the date of receipt of
denial from the CIR or in case of inaction by the
CIR, from the lapse of the 120 days (90 days upon
the successful establishment and implementation of
an enhanced VAT refund system) from the date of
filing of the complete documents in support of the
administrative claim:
3. The claimed input tax payments were not applied against
any output tax during the period (quarter or year) covered
by the claim covering succeeding such period is filed
therefor:

4. Claimant must deduct from its VAT quarterly return the

input tax being claimed as refund or tax credit:

5. The claimed input VAT payments are directly attributable

to zero-rated or effectively zero-rated sales:

6. For zero-rated sales under section 106(A)(2)(a)(1) and

(3) and Section 108(B)(1) and (2), the acceptable foreign
currency exchange proceeds thereof had been duly
accounted for in accordance with the rules and regulations
of the Banko Sentral ng Pilipinas (BSP)
7. Zero-rated sales under section 106(A)(2)(a)(3), (4) and
(5) and section 108(B)(1) and (5) shall be subject to the
12% VAT and shall no longer be considered export sales
subject to 0% VAT rate upon the successful establishment
and implementation of a enhance VAT refund system:

8. The claimed input VAT payments are duly supported by

VAT invoices or official receipts in accordance with section
4.104-5 of Revenue Regulations No 7-95 in relation to
sections 113 (invoicing requirements) and 237 (issuance of
receipts or invoices) of the Tax Code: and

9. The VAT return for the succeeding quarters covered by

the claim for tax refund or credit must be submitted with
the CTA.
A person entitled to VAT refund or tax credit when; a
the claimed input tax payments are duly supported
by VAT invoices or receipts in accordance with
section 4.104-5 of Revenue Regulations No. 7-95 in
relation to section 113 and 237 of the Tax Code; b
the claimed input tax payments were not
attributable to zero-rated sales; c the claimed input
tax payments were not applied against any output
tax nor carried over to the succeeding
months/quarters; and both the administrative and
judicial claims for refund or tax credit were filed
within (2) years prescriptive period.
EXCESS INPUT TAX ON PURCHASE OF REAL
PROPERTY
• In order for petitioner’s claim for refund may prosper, said
section provides for the following requirements:
• Applicant must be VAT-registered person;
• There be purchase of land;
• The purchase of land is substantiated by sufficient evidence;
• The input taxes have not been applied against the output
taxes;
• The application for refund of unutilized or excess credit ale
input tax arising from the close of the taxable quarter when
the purchase was made;
• The land subject of the purchase was used by the applicant
in his VAT taxable business
UNUSED INPUT TAX AFTER THE CANCELLATION
OF VAT REGISTRATION
A VAT registered person whose registration has been cancelled
due to retirement from or cessation of business or due to
changes in or cessation of status under sec 106(C) of the NIRC
May, within two years from the date of cancellation, apply for
the issuance of tax credit certificate of any unused input tax
which he may use in payment of his other internal revenue
taxes.

The filing of the claim shall only be made after the completion
of the mandatory audit of all internal revenue tax liabilities
covering the immediately preceding year and the short period
return and the issuance of the applicable tax clearances by the
appropriate BIR Office which has jurisdiction over the taxpayer.
TRANSITIONAL INPUT TAX
1. When he becomes liable to value added tax for the
first time under a new legislation or when his taxable
transactions exceed the VAT-registration threshold

2. When he elects to register as a VAT-registered

person, provided he is eligible; and

3. If he is already a VAT-registered person and also

deals in goods or properties, the sale of which is
exempt, but it becomes a taxable transaction under
a new or amendatory law.
 CLAIM FOR REFUND OR TAX CREDIT
• The filing of the applications for tax credit or refund is
within the two-year period considering that the
administrative claim for refund is reckoned, in case of
input tax attributable to export sales. After the close of
the taxable quarter when such sales were made, and
in case of capital goods, within two-years after the
close of the taxable quarter when the importation or
purchase was made. The prescriptive period in
claiming for the refund of input tax in the judicial level
reckoned from the date of filing of the quarterly VAT
return
 DEADLINE FOR SUBMISSION OF CLAIM
• Section 112 of the NIRC contemplated two kinds of refundable amounts;
1] Unutilized input tax paid on capital goods purchased, and
2] Unutilized input tax attributable to zero-rated sales.

• In every case, the filing of the administrative claim should be done within
two-years. HOWEVR, the reckoning point of counting such two-years
period varies according to the kind of input tax subject matter of the
claim.

• For the input tax paid on capital goods, the counting of the two-year
period starts from the close of the taxable quarter when the purchase
was made; whereas, for the input tax attributable to zero-rated sale was
made.

• From the submission of the complete document s to support the claim,

the CIR has a period of 120 days to decide on the claim.
 GENERALLY, THE 120-DAYS WAITING
PERIOD IS BOTH MANDATORY AND
JURISDITIONAL
• This must be so because prior to the expiration of
the period, the CIR still has the statutory authority
to render a decision. If there is no decision and
the period has not yet expired, there is no reason
to complain of in the meantime. Otherwise stated,
there is no cause of action yet as would justify a
resort to the court.
• A premature invocation of the court’s
jurisdiction is fatally defective and is
susceptible to dismissal for want of
jurisdiction. Such is the very essence of the
doctrine of exhaustion of administrative
remedies under which the court cannot take
cognizance of a case unless all available
remedies in the administrative level are first
utilized.
• The exception: Judicial claims filed from December 10, 2003 up to
October 6, 2010

Nonetheless, in the subsequent landmark decision of CIR vs

San Roque Power Corporation, Taganito Mining Corporation
vs CIR and Philex Mining Corporation vs CIR, the court
recognized an instance when a prematurely filed appealed
may be validly taken cognizance of by the CTA. San Roque
relaxed the strict compliance with the 120-days mandatory
and jurisdictional period, specifically for Taganito mining, in
view of BIR Ruling No. DA-489-03, which expressly declared
that the “taxpayer-claimant need not wait for the lapse of the
120-days period before it could seek judicial relief with the
CTA by way of petition for review:
• Subsequently, in the Taganito Minong
Corporation vs CIR, the Court reconciled the
doctrines in San Roque and the 2010 Aichi
case by enunciating that during the window
period from 10 December, 2003 to October 6,
2010, taxpayer-claimants need not observe
the stringent 120-days period.