The Bureau of Internal Revenue (BIR) has recently issued Revenue Regulations (RR) No. 21-2021 which amended certain provisions including RR No. 13-2018, under page 15 of 20:
Illustration 8: A manufacturer purchased capital goods on different occasions as follows:
|Month of Purchase||Amount (Php) 12%||Input Tax||Useful Life||No. of Monthly Amortization||Last Month of Amortization|
|January 2018||Php 8,500,000||Php 1,020,000||6 years||60||December 2022|
|February 2018||8,500,000||1,020,000||4 years||48||January 2022|
|December 2018||10,000,000||1,020,000||5 years||60||November 2022|
|January 2018||10,000,000||1,020,000||5 years||–||*Outright claim on January 2022|
a) For purchases made in January 2018, the amortization shall be for the shorter period of 5 years only or up to December 2022 although the useful life is 6 years.
b) For purchases made in February 2018, the amortization shall be for a period of 4 years only or up to January 2022 since the useful life of the asset is shorter than 5 years.
c) For purchases made in December 2021, the amortization shall be for the period of 5 years or up to November 2026.
d) For purchases made in January 2022, no amortization shall be made and the input VAT shall be claimed on the month of purchase or January 2022.
To further discuss what these mean:
- The Rule of amortizing the input vat on Capital Goods shall only be allowed until December 31, 2021.
- Taxpayers with unutilized input vat as of December 31, 2021, shall be allowed to apply the same as scheduled until fully utilized.
- Starting Jan 1, 2022, any purchase above 1M can be deducted from your VAT payable outright, and no amortization is required. This was different in the past where the input VAT needed to be amortized based on your purchase(s) useful life.
Here’s how Capital Goods works in JuanTax:
Enter the purchase and under the ‘Tax Type’ column and choose ‘Capital Goods’.
This will be automatically detected by the system upon generating your VAT tax form. Enter the required details together with the estimated life value in months the hit the ‘Save’ button.
The Summary table will be filled with details and spread out automatically.
We also have a process for disposal wherein if the Capital Goods reaches exhaustion, you simply click the trash icon and this will successfully dispose of your item.
If you’re new to JuanTax:
If you’ve set up your ‘Start Date’ for the current year – 2022, you may have Capital Goods that you are still maintaining from the past year/s. You may enter this data inside your first VAT form (2550M) as long it is not beyond 5 years. Do this inside the ‘Summary’ tab – under Schedule 3, item 17 B.
This will appear under your VAT’s ‘Amortization’ tab.