Tax Credit approach / Credit-invoice method VAT – This means that VAT is imposed on the sale first
(OUTPUT VAT) and a tax credit is claimed on the VAT passed on to his purchase (INPUT TAX). The excess
of the OUTPUT TAX and the INPUT, is what we call the VAT Payable.
vat due or vat payable is computed by deducting the input VAT from the output VAT.
OUTPUT TAX – vat due on the sale, lease/exchange of taxable goods/properties/services by
any person registered under Section 236 of the tax code.
INPUT TAX – vat due paid by a VAT registered on the local purchase of goods,
properties/services, including lease and use of property in the ordinary course of business & as well as
importation.
Under Section 109 of the tax code, a VAT exempt sale refers to sale of goods, properties or services/the
use or lease of properties that is not subject to VAT, and the seller is not allowed any tax credit of VAT
on purchases related to such exemption.
Export sale by a non-VAT registered entity is a vat-exempt transaction.
SEC. 106 The term “gross amount” means the total amount of money or its equivalent which the
purchaser pays to the seller in consideration of the sale, excluding the value-added tax.