Sources of input taxes

Sources of input taxes:

  1. Transitional input tax
  2. Presumptive input tax
  3. Input taxes on domestic purchases or importations (VAT actually paid).

Transitional input tax

  1. Persons who can avail:
  2. Persons who become liable to VAT
  3. Persons who elect to be VAT-registered
  4. Basis of transitional input tax – Beginning inventory of VAT-subject goods, materials and supplies.
  5. Transitional input tax allowed – The HIGHER between:
  6. 2% of the VAT-subject beginning inventory value for income tax purposes; and
  7. Actual VAT paid on such beginning inventory.

Presumptive input tax (IM MS SMC)

  1. Persons or firms who can avail:
  2. Processor of sardines, mackerel and milk
  3. Manufacturer of refined sugar, cooking oil and packed noodle-based instant meal
  4. Basis of presumptive input tax – Gross value in money of purchases of primary agricultural products used as inputs in the processing or manufacturing of IM MS SMC.
  5. Rate of presumptive input tax – 4%

Input taxes on domestic purchases or importations of:

  1. Goods for sale
  2. Goods for conversion into finished product (including packaging materials)
  3. Goods for use as supplies
  4. Goods for use as materials supplied in the sale of services
  5. Goods for use in trade or business for which depreciation or amortization is allowed
  6. Real properties for which VAT has actually been paid
  7. Services for which VAT has actually been paid
  8. Transactions deemed sale (CR WPD)

Question to ponder:

The account title to best reflect the value-added tax on a purchase:rc

A. Sales tax payable

B. Input tax

C. Value-added tax payable

D. Output tax

For the correct answers,  I would like to invite you to join my Facebook exclusive groups of aspiring CPAs for my upcoming project “CPA DREAM ACADEMY ” or sign up for flashcards free

CPA Mentor,




About Jonathan Ruiz CPA

Entrepreneur, CPA Mentor, Stock market Newbie Mentor, Influential Author and Master's Degree in International Business graduate in Hult International Business School, UK. A father of two lovely daughters.
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