VAT Ruling No. 043-92

March 26, 1992 VAT RULING NO. 043-92 NIRC Sec. 108 (b) Precedent Ruling 000-00 Benjamin V. Cruz, Jr. Revenue Officer Revenue District No. 16 Olongapo City S i r : This has reference to your letter dated November 12, 1991 regarding the proper accounting procedure that should be adopted by VAT registered establishments. Sec. 108(b) of the NIRC, as amended states that in addition to the regular accounting records required, there should be a maintenance of subsidiary sales and purchase journals on which the daily sales and purchases are recorded. The subsidiary journals shall contain information required by the Secretary of Finance as implemented by RR 5-87. Section 22 of RR 5-87 is the implementing regulation of E.O. 273 and the intention is clear that it should be followed by VAT registered establishments. In cases where there was an erroneous recording of sales and purchases where output tax were considered part of income and input tax as part of expense, consideration may be extended but only up to the 1/11 portion of the sales (not 10%).We shall not tolerate repetition of the above accounting procedure. The VAT implementing regulations should be followed, otherwise, penalties for violation of bookkeeping regulation shall be imposed. VAT payments are not considered as a tax expense and therefore cannot be among the exemptions enumerated in Section 29(c) of the NIRC, as amended. A taxpayer who adopts the accounting procedure wherein input taxes are considered expenses can no longer claim a refund. IcADSE Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue