Tax notes: Directive to disallow input tax on zero-rated sales claimed as deduction-A A +A
Monday, September 30, 2013
WITH the issuance of Revenue Memorandum Circular (RMC) No. 57-2013, the Bureau of Internal Revenue (BIR) has circularized BIR Ruling No. 123-2013, which revoked all rulings providing for the remedy of claiming as deduction from gross income the unutilized creditable input taxes attributable to value-added tax (VAT) zero-rated sales.
In BIR Ruling No. 123-2013, the BIR held that the option to treat accumulated and unapplied input VAT arising from purchase of goods and services as outright expense after the expiration of the two-year prescriptive period lacks legal basis. BIR maintained that the Tax Code does not expressly provide for another mode of recovering unapplied input taxes, particularly treating unapplied input taxes as deductible expense for income tax purposes.
In view of this development, the BIR has directed all revenue officials and employees engaged in the audit and review of audit cases to disallow unutilized creditable input taxes attributable to VAT zero-rated sales that are claimed as a deduction for income tax purposes.
(Source: Punongbayan & Araullo)
Published in the Sun.Star Cebu newspaper on October 01, 2013.