Tax Alert No. 10 [Revenue Memorandum Circular 21-2022 dated 9 December 2021, released on 21 February 2022]

Guidance on the claim of Input VAT on Purchases or Importations of Capital Goods Pursuant to Section 110 of the National Internal Revenue Code of 1997, as amended by TRAIN Law

The Commissioner of Internal Revenue has issued RMC 21-2022 to clarify the work-around procedures and guidelines in claiming input VAT on capital goods pending the revisions on BIR Forms 2550M and 2550Q pursuant to Section 110 of the Tax Code, as amended, and implemented under Section 4-110-3(c) of Revenue Regulations 13-2018.

The work-around procedures and guidelines prescribed by the RMC are as follows:

In addition, the RMC clarified that under EFPS and eBIR Forms, the balance of input tax to be carried to the succeeding periods shall be computed automatically by the systems. Thus, for implementation purposes, all input tax on purchases of capital goods shall already be allowed upon purchase/payment, and will no longer be deferred effective 1 January 2022. In accomplishing the relevant schedules, the taxpayer shall indicate roman numeral “1” as the estimated and recognized useful lives and encode the total input taxes claimed under column “G”, in order to show a nil amount under column “H”.

Taxpayers with unutilized input VAT on capital goods prior to 1 January 2022 shall be allowed to amortize the same as scheduled until fully utilized. Thus, Schedule 3(B) should still be filled-out. If the capital goods are transferred within five (5) years or prior to the exhaustion of the amortizable input tax, the unamortized portion can be claimed as input tax credit in full during the month/quarter when the sale or transfer was made.

You may access the full version of the Advisory through the BIR website.