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(From BusinessWorld (Philippines))
Byline: Roselle K. Yu
Firms that keep abreast of their tax obligations are undoubtedly aware of the 70% cap on input tax credits under the new value-added tax (VAT) reform rules. However, not all may be aware that the issue goes beyond what should be declared in the VAT returns. The issue also extends to what should be reported for financial statements/income tax purposes.
Under the new Bureau of Internal Revenue regulations, the cap will never apply if output tax always exceeds input tax. However, timing a company's sales/purchases to avoid the imposition of the cap is easier said than done.
Furthermore, if …