"SECTION 110. Tax Credits. -

"(A) Creditable Input Tax. -

"(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax:

"(a) Purchase or importation of goods:

"(i) For sale; or

"(ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or

"(iii) For use as supplies in the course of business; or

"(iv) For use as materials supplied in the sale of service; or

"(v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code, except automobiles, aircraft and yachts.

"(b) Purchase of services on which a value-added tax has been actually paid.

"(2) The input tax on domestic purchase of goods or properties shall be creditable.

"(a) To the purchaser upon consummation of sale and on importation of goods or properties; and

"(b) To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs.

"However, in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee.

"(3) A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed tax credit as follows:

"(a) Total input tax which can be directly attributed to transactions subject to value-added tax; and

"(b) A ratable portion of any input tax which cannot be directly attributed to either activity.

"The term 'input tax' means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It shall also include the transitional input tax determined in accordance with Section 111 of this Code.

"The term 'output tax' means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 236 of this Code.

"(B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112.

"(C) Determination of Creditable Input Tax. - The sum of the excess input tax carried over from the preceding month or quarter and the input tax creditable to a VAT-registered person during the taxable month or quarter shall be reduced by the amount of claim for refund or tax credit for value-added tax and other adjustments, such as purchase returns or allowances and input tax attributable to exempt sale.

"The claim for tax credit referred to in the foregoing paragraph shall include not only those filed with the Bureau of Internal Revenue but also those filed with other government agencies, such as the Board of Investments and the Bureau of Customs.