Guidelines in the Claim of Input Value-Added Tax (VAT) Pursuant to Section 110 of the Tax Code, as Amended

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On February 21, 2022, the Bureau of Internal Revenue issued the REVENUE MEMORANDUM CIRCULAR (RMC) NO. 21-2022 which prescribes the guidelines in the claim of Input Value-Added Tax (VAT) on purchases or importations of capital goods, pursuant to Section 110 of the National Internal Revenue Code of 1997 (Tax Code), as amended by Republic Act No. 10963 (TRAIN Law).

RMC No. 21-2022 provides for the work-around procedures and guidelines in the meantime that the BIR Form Nos. 2550Q and 2550M pertaining to Quarterly VAT Declaration and Monthly VAT Declaration, respectively, are undergoing revisions to effect said provisions.

Section 110 (A) (2) of the Tax Code as amended, states: “… Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction is allowed under this Code shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One Million Pesos (₱ 1,000,000.00); Provided, however, That if the estimated life of the capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period; Provided, further, That the amortization of the input VAT shall only be allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized: Provided, finally, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee”.

Source: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2022%20RMCs/RMC%20No.%2021-2022.pdf