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INPUT TAX

a. Purchase of equipment worth P1,000,000 and above (exclusive of VAT)


input tax of P120,000 should be amortized over the useful life of the
asset or 5 years, whichever is shorter

Ex. Useful life is 6 years

Jan 1 Equipment 1000000


Input Tax 120000
Cash 1120000

Jan 31 Output Tax xx


Input Tax 2000
VAT Payable xx

MINIMUM CORPORATE INCOME TAX & REGULAR CORPORATE INCOME TAX

a. MCIT will only apply from the fourth year of operation onwards

Ex.

A or B
2010 2011 2012 2013 2013 2014 2015
Sales 10000 12000 15000 17000 1700
0
COGS 5000 5000 5000 9000 6000
Gross Income 5000 7000 10000 8000 1100
0
Operating 2500 2500 2500 2500 1050
Expenses 0
Net Income 2500 4500 7500 5500 500

RCIT 750 1350 2250 1650 150


*Net Income x
30%

MCIT 160 220


*Gross Income x
2%

2013 A B

Income Tax Payable 1650 150


Prepaid Tax 0 70
Cash 1650 220
WITHHOLDING TAX

COMPENSATION

- Deducted from the salaries of employees

Entry

Employee

Cash

Prepaid Tax/?

Income

Income Tax Expense

Income Tax Payable

Income Tax Payable

Cash

Prepaid Tax

Employer

Salaries Expense

Cash

Withholding Tax Payable

Income Tax Expense

Income Tax Payable

Income Tax Payable

Cash

Withholding Tax Payable

Cash

CREDITABLE / EXPANDED (FOR SERVICE RENDERED OF SERVICE COMPANY)

Entry
Customer

Service Expense

Expanded Withholding Tax Payable

Cash

Expanded Withholding Tax Payable

Cash

Company

Cash

Creditable Withholding Tax

Service Income

Income Tax Expense

Income Tax Payable

Income Tax Payable

Creditable Withholding Tax

Cash