Work-around procedures on reporting of input VAT on purchases or importations of capital goods in the VAT returns

Work-around procedures on reporting of input VAT on purchases or importations of capital goods in the VAT returns

(Revenue Memorandum Circular No. 21-2022, February 21, 2022)

This Tax Alert is issued to inform all concerned on the workaround procedures in claiming of input VAT on purchases or importations of capital goods in the Monthly VAT declaration (BIR Form 2550M) and Quarterly VAT declaration (BIR Form 2550Q) pursuant to the provisions of Tax Reform for Acceleration Law (TRAIN Law) or Republic Act No. 10963.

Under the TRAIN Law, starting January 1, 2022, all input tax on purchases of capital goods shall already be allowed to be claimed outright upon purchase/payment and shall no longer be subject to amortization.

However, under eFPS and eBIR Forms, the balance of input tax to be carried to succeeding period for purchase of capital goods exceeding P1 Million is computed automatically by these systems. To address this concern, the taxpayer shall indicate “1” as the estimated and recognized useful life of the capital goods exceeding P1 Million and encode the total input taxes claimed from purchase/s of capital goods exceeding P1 Million under Column “G” in Schedule 3(A) of BIR Forms 2550M/Q in order to show a nil amount of “Balance of Input Tax to be Carried to Next Period”.

Taxpayers with unutilized input VAT on capital goods purchased or imported prior to January 1, 2022, shall be allowed to amortize the same as scheduled until fully utilized. Hence, Schedule 3(B) of BIR Forms 2550M/Q shall still be filled out. However, if the depreciable capital good is sold/transferred within the period of live (5) years or prior to the exhaustion of the amortizable input tax thereon, 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.