Periodic Reviews by the Board of Energy of the Price of Domestic Petroleum Products

1989 VAT RULING NO. 175-89 Yap and Associates Suite 309 Gonzaga Bldg. 414 Rizal Ave., Manila S i r s : This is in reply to your letter dated April 19, 1988 requesting, in behalf of your clients, clarifications on the following issues: LLcd 1. Since your client has a beginning balance of prepaid sales tax as a of January 1, 1988, it is presumed that it is concerned with manufacturing. Is your client entitled to claim as tax credit the 8% input tax on the beginning inventory or the actual beginning balance of prepaid sales tax, whichever is higher? Ans. On the assumption that your client is a manufacturer, it shall be entitled to a transitional input tax equivalent to the balance of the prepaid sales tax or the deferred sales tax credit account [pursuant to Section 25(a)(1) of Executive Order No. 273]; hence no 8% presumptive input tax can be claimed. 2. You client is involved in two (2) lines of business. One is subject to VAT as a manufacturer while the other (printing of books) is exempt. Is the input tax on the raw materials used on exempt sales part of the cost? Ans. The input tax on raw materials directly attributable to exempt sales shall form part of the cost. 3. How are the input taxes on factory supplies and office supplies apportioned? Ans. For apportionment of input taxes for goods and services which cannot be directly attributed to exempt or taxable operations, Section 12 of Revenue Regulations No. 5-87 provides that the amount of VAT taxable sales or receipts over the total sales/receipts is multiplied by the total input tax paid during the quarter that cannot be directly attributed to either operation. The resulting figure shall be the creditable input tax. cdLL Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue By: (SGD.) EUFRACIO D. SANTOS Deputy Commissioner (Office-in-Charge)