Common-Taxes -Income-Tax VAT OPT WT v2

Taxes Common to Taxpayers: Taxes Taxpayers: Incom e Tax, Tax, VAT, Other Other Percentage Pe rcentage Tax, Tax, Withhol ding Taxes 18 July 2012

Discus sion Outline ►

Income Tax – General Principles – – Taxability of Corporations – Gross Income – Allowable Deductions from Gross Income – Unallowable Deductions from Gross Income – Filing of Returns and Administrative Requirements

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Taxes Common to Taxpayers


Discus sion Outline Value-Added Tax – General Principles – In ut VAT on on Ca Ca it ital al Go Good ods s – Treatment of Excess Input VAT – Filing of Returns and Administrative Requirements ► Other Percentage Taxes – Persons Subject to Percentage Tax Tax and Percentage Tax Tax Rates – Filing of Returns and Administrative Requirements ► Withholding Taxes – – Withholding Agents – Withholding Tax Rates – Filing of Returns and Administrative Requirements ►

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Income Inco me Tax Tax

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General Ge neral Princip Princ iples les

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General Principles ►

►

Individuals –

Resident citizen: taxable on all income derived from sources within and without the Philippines

–

on-res en c zen: ax axa e on y on nc ncome er ve the Philippines

n

Corporations –

Domestic corporation corporation - taxable on all income derived from sources sources within and without the Philippines

–

Foreign Corporations (resident (resident and non-resident) non-resident) – taxable only on -

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rom sources w

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Taxability of Indi ndivid viduals uals

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Taxability of Individuals ►

►

Graduated tax rates: Over

B u t No t Over

Not over

10,000

5%

10,000

30,000

500 + 10%

10,000

30,000

70,000

2,500 + 15%

30,000

70,000

140,000

8,500 + 20%

70,000

140,000

250,000

22,500 + 25%

140,000

250,000

500,000

50,000 + 30%

250,000

500,000

over

125,000 + 32%

500,000

Of Ex Ex c es s Over -

Married individuals: ►

Husband and Wife compute separately individual income tax

►

Income which cannot be directly attributed to either of the spouse, divided equally between them.

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Am o u n t / Rat e

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Taxability of Individuals ►

Personal exemptions: ► ►

Basic personal exemption - P5 P50, 0,00 000 0 for each individ ual taxpayer Ad di ti on al pers p ers on al exemp ex emp ti on - P25,000 for each dep end ent not exceeding fou r (4) ►

Husband – proper claimant of additional personal exemption exemption for children except: a.

Husband is unemployed

b.

Husband is non-resident citizen deriving income from foreign sources

.

(waiver should be for all children) in a sworn statement to be attached to his Application for Registration (BIR Form No. 1902) and that of his wife's

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Passi ve Incom Passi Incom e Subject Subject to Fina Finall Tax for Individuals ►

Interests, royalties, royalties, prizes and other winnings winnings – 20% final tax, except except if prizes does not exceed P10,000

►

Royalties on books literary literary works and musical musical compositions – 10% final

►

Interest income received by an individual taxpayer from a depository bank under the expanded foreign currency deposit deposit system – 7.5% final tax

►

Interest income from long term investment held for more than 5 years and in accordance accordance with the prescribed prescribed rules – exempt

►

Cash and/or property property dividends – 10% final tax

►

Capital gains from sale of shares of stocks not traded in the stock exchan exc han e – 5% for not over over P100,000 P100,000 and 10% for for in excess excess of P100,000 P100,000

►

Capital gains from sale sale of real property – 6% based on the gross selling selling price or current fair market value, whichever is higher.

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Taxability of Corporations

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Taxability of Corporations Domestic corporation: ►

30% Regular Corporate Income Tax (RCIT) ►

►

based on taxable income derived during each taxable year from all sources within and without the Philippines.

2% Minimum Corporate Income Tax (MCIT) ► ►

Applicable if greater than 30% RCIT Beginning on the fourth taxable year immediately following the year in which such corporation commenced its operation.

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Taxability of Corporations 2% MCIT (cont’d): ►

Excess MCIT over RCIT ►

Carried forward and credited against the normal income tax for the three mme a e y succee ng axa e years.

►

Secretary of Finance - authorized to suspend imposition of MCIT on any corporation which suffers losses on account of prolonged labor dispute, or because of force majeure, or because of legitimate business reverses.

►

Computed in quarterly income tax return and annual income tax return.

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Passi ve Incom e Subject to Final Tax for Corporations ►

Interests, royalties, prizes and other winnings – 20% final tax

►

Interest income received by an domestic corporation from a depository bank under the expanded foreign currency deposit system – 7.5% final tax

►

n ercorpora e v en s – v en s rece ve y a omes c corpora on from another domestic corporation shall not be subject to tax

►

Capital gains from sale of shares of stocks not traded in the stock exchange – a final tax on the net capital gains realized as follows: Not over P100,000 Amount in excess of P100,000

►

10%

Capital gains from sale of real property – 6% based on the gross selling , .

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5%

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10% Improperly Acc umul ated Earnings Tax (IAET) ►

►

►

10% of the improperly accumulated taxable income Applies to every corporation formed or availed for the purpose of avoiding e ncome ax w respec o s s are o ers or e s are o ers o any other corporation by permitting earnings and profits to accumulate instead of being divided or distributed. Exempt from IAET ►

Banks and other non-bank financial intermediaries

►

Insurance companies u

► ►

c y- e

corpora ons

Taxable partnerships

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Exempt from IAET (cont’d): ►

Non-taxable joint ventures

►

PEZA-registered enterprises

►

BCDA-registered enterprises

►

Other entities registered under special economic zones enjoying special tax rates on their registered operations or activities in lieu of other taxes, national or local

►

Branches of a foreign corporation or resident foreign corporation.

Closely-held corporations ►

Corporations at least 50% in value of the outstanding capital stock or at least 50% of the total combined voting power of all classes of stock entitled to vote is owned directly or indirectly by or for not more than 20 individuals.

►

Domestic corporations not falling under this definition considered publiclyheld corporations.

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Evidence of purpose to avoid income tax: –

Prima Facie Evidence –

–

Evidence Determinative of Purpose –

►

Mere holding company or investment company

Earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of the business (i.e., retained earnings is in excess of 100% of paid up capital) unless proven to the contrary.

Paid-up capital ►

Par value of the shares of stock (RMC No. 35-2011)

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Gross Income

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Gross Income All income derived from whatever source, except certain items as provided by the Tax Code, including (but not limited to) the following: –

Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions, and similar items

–

Gross income derived from the conduct of trade or business or the exercise of a profession

–

Gains derived from dealings in property

–

Interests (except those already subject to final tax or exempt from income tax)

–

Rents

–

Royalties

–

Dividends (except those already subject to final tax or exempt from income tax)

–

Annuities

–

Prizes and winnings (except those already subject to final tax or exempt from tax)

–

Pensions

–

Partner's distributive share from the net income of the general professional partnership.

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Gross Income Exclusions: –

Life insurance – however, interests, if any, shall be included in the gross income

–

Amounts received by the Insured as return of premiums paid under life insurance

–

ts, equests an

–

Compensation for injuries and sickness – including the amounts of any damages received, whether by suit or agreement, on account of such injuries and sickness

–

Income exempt under Treaty

–

Retirement benefits, pensions, gratuities, etc.

–

Prizes and awards – provided that the recipient was selected without any action on his part to enter the contest or proceeding and the recipient is not required to render substantial future services as a condition to receivin the rize or award

–

Gains from the sale of bonds, debentures or other certificate of indebtedness with a maturity of more than 5 years (applicable to individuals only)

–

Gains from redemption of shares in mutual fund

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ev ces

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Allowable Deductions from Gross Income

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Al low abl e Deducti ons from Gr oss Income ►

►

Expenses – ►

Ordinary and necessary expenses paid or incurred during the taxable year

►

Directly attributable to, the development, management, operation and/or con uc o e ra e, us ness or exerc se o a pro esson

Interests – ►

Paid or incurred during the taxable year

►

Related to indebtedness in connection with the taxpayer's profession, trade or business

–

If taxpayer has interest income subject to final tax –

–

Amount of interest expense reduced by 33% of such interest income.

Interests paid to related parties not allowable deduction

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Taxes – ►

Paid or incurred within the taxable year

►

Related to taxpayer's profession, trade or business

►

Exception ►

Income tax under Title II of the Tax Code

►

Income taxes imposed by authority of any foreign country

►

Estate and donor’s taxes

►

Taxes assessed against local benefits of a kind tending to increase the value of the property assessed.

Taxes allowed as deduction (e.g., not among the exceptions above) are refunded or credited ►

Part of gross income in the year of receipt subject to tax benefit doctrine

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Losses – ►

actually sustained during the taxable year

►

not compensated for by insurance or other forms of indemnity

►

Incurred in trade or business

►

Property connected with trade or business (loss arising from fires, storms, shipwreck, or other casualties, or from robbery, etc.) ►

►

Net Operating Loss Carry-Over (NOLCO) – deductible for the next 3 consecu ve axa e years mme a e y o ow ng e year o suc oss. Provided: ►

taxpayer is not exempt from income tax during the year of the loss, and

►

no substantial change in ownership of the business or enterprise

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Sworn declaration of l oss – submit to BIR within 45 days from discovery of the casualty or robbery, theft or embezzlement

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Capital losses ►

Deductible up to the extent of capital gains

►

Individuals: any excess capital losses over the capital gains (in an , considering the allowable percentage of deduction, may be carried over for not more than 12 months.

►

“Wash sales” of stocks or securities

►

Wagering losses – ►

Arising from wagers/betting games (other than those already subject to other percentage tax, such as illegal gambling, endings, etc.) Deductible onl u to the extent of ains from such transaction

► ►

Abandonment losses

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Depreciation

►

Depletion of oil and gas wells and mines

►

Charitable and other contributions ►

Individuals – not in excess of 10% of taxable income before donation

►

Corporations – not in excess of 5% of taxable income before donation

►

Deductible in full – donations to: ►

Government

►

Certain foreign institutions or international organization

►

►

Accredited nongovernment organization – subject to compliance with certain requirements

Certificate/s of Donation – required as proof for deductibility

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Research and development

►

Pension trusts

►

Additional requirements for deductibility of certain payments – properly subjected to appropriate withholding taxes (e.g., expanded withholding tax, final withholding tax, etc.) Optional Standard Deduction (OSD)

►

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40% Option al Standard Deduct ion (OSD) ►

Available to: –

Individuals subject to the graduated tax rates (i.e., individuals who does not purely derive income from compensation) –

–

40% of his ross sales or ross recei ts

Corporations –

40% of its gross income.

►

Intention to avail of the OSD must be disclosed in 1 st quarter ITR

►

Irrevocable for the taxable year

►

Individuals availing of OSD – not required to submit financial statements as attachment to ITR

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Unallowable Deductions from Gross Income

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Unallowable Deductions from Gross Income ► ►

Personal, living or family expenses Any amount paid out for new buildings or for permanent improvements, or betterments made to increase the value of any property or estate thereof for which an allowance is or has been made

►

Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, individual or corporate, when the taxpayer is directly or indirectly a beneficiary under such policy

►

Losses from sales or exchanges of property directly or indirectly –

Between members of a family

–

Between an individual and a corporation more than 50% in value of the outstanding stock of which is owned by the individual

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Filing of Returns and Administrative Requirements

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Filing of Returns and Administ rative Requirements Individuals (cont’d): ►

Where to file – AAB, RDO, Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or rinci al lace of business in the Phili ines, or if there be no le al residence or place of business in the Philippines, with the Office of the Commissioner.

►

When to file and pay: ►

Declaration of income tax Every individual receiving self-employment income

►

►

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On or befor e April 15 of t he same taxable year .

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When to file and pay (cont’d): ► Quarterly income tax return – payment shall be made in 4 installments. st

2nd installment: on or before August 15 of the current year 3rd installment: on or before November 15 of the current year 4th installment: on or before April 15 of the following calendar year Annual income tax return 





►

Lump sum payment: on or before April 15 of the following calendar year Installment a ment: a licable if tax due is in excess of P2 000 1st installment: at the time the return is filed

►

►





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2nd installment: on or before July 15 following the close of the calendar year.

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Married individuals, whether citizens, resident or nonresident aliens, who do not derive income purely from compensation – file a return for the taxable ear to include the income of both s ouses, ►

If impracticable for the spouses to file one return – each spouse may file a separate return of income ►

►

Income of unmarried minors derived from property received from a living parent shall be included in the return of the parent, except: ►

when the donor's tax has been aid on such ro ert

►

when the transfer of such property is exempt from donor's tax

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BIR shall consolidate the filed returns for verification

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Filing of Returns and Administ rative Requirements Corporations: ►

Deadline for filing and payment: ►

►

►

Quarterly income tax return (BIR Form No. 1702Q): 60 days after the . Annual income tax return (BIR Form No. 1702): 15th day of the 4 th month following the end of the year

Required attachments upon filing to the BIR: ►

Audited financial statements

►

Statement of Management Responsibility

►

Original copies of creditable withholding taxes (CWT), if any

►

ar or so copy o applicable

►

Other supporting schedules, if applicable

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e summary a p a s o w


Value Added Tax (VAT)

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o

ng axes

, as

General Principles

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General Principles ►

Imposed on any person who sells, barters, exchanges, leases goods or properties and renders services in the course of trade or business

►

Imposed on any person who imports goods.

►

Indirect tax- amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services.

►

In the course of trade or business (Rule of Regularity) –regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person or government entity.

►

Incidental – something necessary, appertaining to, or depending upon another which is termed the principal, something incident to the main purpose.

►

Annual sales and/or receipts does not exceed P1,919,500 – not subject to VAT, but subject to percentage tax.

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General Principles VAT Rates ►

Taxable – –

►

General Rate: 12% pec a

ate:

Exempt

Zero-rated Sales

Exempt Sales

Subject to VAT at 0% rate.

Not subject to VAT

Input taxes allocable/ attributable to input tax credit

Input taxes allocable/ attributable to e exemp sa e canno e claimed as input tax credit but shall form part of costs.

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General Principles VAT Base ►

Sale of goods – gross selling price ►

►

Less: sales returns and allowances and sales discounts

►

Add: charges for packaging, delivery & insurance

►

Add: excise taxes if goods are subject to excise tax

Sale of services – gross receipts

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Substantiation Requirements ►

VAT invoice – for sale, barter or exchange of goods or properties

►

VAT OR – for lease of goods or properties, and every sale, barter or exchange of services receipt

►

“ VAT-exempt sale” shall be written or printed prominently on the invoice or receipt for VAT exempt transactions

►

“ Zero-rated sale” shall be written or printed prominently on the invoice or receipt for zero-rated transactions

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Supportin g documents for c laiming input tax ►

Domestic purchases of goods or properties made in the course of trade or business – VAT invoice

►

Domestic purchase of services – VAT OR – other equivalent document showing actual payment of VAT on importation

►

Transitional input tax – inventory of goods as shown in a detailed list to be submitted to the BIR

►

“Deemed sale” transactions – required invoices

►

Payments to non-residents (such as for services, rentals or royalties) – Monthly WVAT Return (BIR Form 1600) filed by the resident payor in behalf of the non-resident evidencing remittance of VAT due which was withheld by the payor

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Input VAT on Capital Goods

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Input VAT on depreciable Capital Goods ►

Computation of input tax if the aggregate acquisition cost (exclusive of VAT) in a calendar month, regardless of acquisition cost of each capital good, shall: ►

Exceed P1 million: -

Monthly Input Tax -

excee -

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Total Input Tax 60 Months

If estimated useful life of a capital good is less than 5 years

Monthly Input Tax ►





Total Input Tax Estimated Useful Life in Months

m on:

Total input tax allowed as credit against output tax in the month of acquisition

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Treatment of Excess Input VAT

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Treatment of Excess Input VAT ►

Carried-over

►

Claimed as Refund

►

Claimed as Tax Credit Certificate (TCC)

Period of application: ►

Zero-rated and effectively zero-rated sales ►

►

Within 2 years after the close of taxable quarter when such sales were made

Cancellation of VAT registration ►

Registration is cancelled due to retirement from, cessation of business, or ue o c anges n or cessa on o s a us as axpayer

►

Within 2 years from date of cancellation

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Filing of Returns and Administ rative Requirements ►

If manual: ►

Monthly VAT declaration: within 20 days following the end of each month

►

Quarterly VAT return: within 25 days following the close of each taxable uarter ►

►

►

Withholding VAT return: on the 10th day of the following month

If through Electronic Filing and Payment System (EFPS): ►

Monthly VAT declaration: ►

Filin : de ends on the industr classification of the tax a er

►

Payment: 25 days from the end of the month

►

Quarterly VAT return: same as the deadline for manual

►

Withholding VAT return: same as the deadline for manual

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Quarterly returns should reflect the cumulative totals of the sales, purchases, output tax and input tax for the taxable quarter

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Quarterly Summary Lists of Sales (QSLS) and Quarterly Summary Lists of Purchases (QSLP) are required for the following: ►

Persons liable for VAT

►

Before January 1, 2012 Required for taxpayers with quarterly purchases not exceeding P1,000,000 and quarterly sales not exceeding P2,500,000 are not required to submit QSLS/P

►

►

Beginning January 1, 2012 ►

All taxpayers

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Manner of Submission: ►

Manual: ►

►

EFPS ► ►

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within 25 days following the close of each taxable quarter

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Through EFPS within 30 days following the close of each taxable quarter

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Other Percentage Taxes

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Persons Subject t o Percentage Tax and t he Ap pli cabl e Perc ent age Tax Rates ►

Tax on persons exempt from VAT – ►

Gross annual sales and/or receipts do not exceed P1,500,000, and not VAT-registered ►

,

►

Cooperatives – exempt from the 3% gross receipts tax.

►

Rate: 3% of his gross monthly sales or receipts

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res o ncrease rom , , o , January 1, 2012 pursuant to RR No. 11-2011

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eg nn ng


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►

Payment: not be later than the 20 th day following the end of each month. ► For person retiring from a business – notify nearest RDO, file return and pay the tax due thereon within 20 days after closing of business Filing shall be made with: ► Authorized Agent Bank (AAB) within the territorial jurisdiction of the Revenue District Office where the taxpayer is required to register/conducting business. ► In case no AABs – with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer within the Revenue District Office where the taxpayer is required to register/conducting business. – ► ►

Required for large taxpayers Others – may opt to file either consolidated or individual returns

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Withholding Taxes

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Different Kinds of Common Withholding Taxes Kinds ►

Expanded Withhol ding Tax

►

Income tax w ithheld on in come payments – creditable against income ax ue rom payee

►

Final Withhol ding Tax

►

Income tax w ithheld on in come payments – full payment of income tax due from payee

►

Withholding Value-Added Tax (VAT)

►

VAT withheld – may be final or creditabl e against VAT liabili ty of p ayee

►

Income tax with held on benefits of o cers – u paymen o re a e income tax due from officers

►

Income tax w ithheld on comp ensation of employees – payment of i ncome tax due on comp ensation t o employees

►

Withho ldin g Tax on Wages

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Nature

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Who are Withhol ding A gents? ►

Any juridical person, whether or not engaged in trade or business;

►

An individual, with respect to payments made in connection with his . ►

In exchanges or transfers of real property, the buyers, whether or not engaged in trade or business, are constituted as withholding agents. In any case, no Certificate Authorizing Registration (CAR)/ Tax Clearance Certificate (TCC) shall be issued to the buyer unless the withholding tax due on the sale, transfer or exchange of property has been duly paid.

corporations, as well as provincial, city, and municipal governments and barangays;

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Who are Withhol ding A gents? ►

Agents, employees, or any person purchasing goods or services/paying for and in behalf of the aforesaid withholding agents ► Provided that the ORs of payment/sales invoice shall be issued in the name of the person whom the former represents and the corresponding certificate of taxes withheld (BIR Form No. 2307) shall immediately be issued upon withholding of the tax. (RR 3003 dated December 12, 2003)

►

Person having control over the payment and who, at the same time, claims the expenses

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When the obligation to withhold arises At the time an income payment is: •

Paid, or

•

Pa able or

•

Accrued or recorded as an expense or asset, whichever is applicable, in the payors books whichever comes first

(Section 2.57.4 of RR No. 2-98 as amended by Section 4 of RR No. 12-2001)

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Expanded Withholding Tax (EWT)

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Basic Principles ►

Only payments enumerated under the EWT regulations are subject to EWT.

►

Payee and the payor must be residents of the Philippines (except payments to non-resident aliens engaged in trade or business in the Philippines).

► ►

ot a na tax. EWT Base: – Gross billing on payments made to a Non-VAT registered supplier of goods or services; – Gross amount p aid exclusive or net of VAT on payments made to a VAT-registered supplier of goods and services

►

Furnished in triplicate within 20 days following the close of the taxable quarter employed by the payee in filing his/its quarterly ITR unless requested by the payee to be submitted simultaneously with the income payment.

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Payments to w hich entities are not su bject to withholding Section 2.57.5 of RR 2-98 A. National government and its instrumentalities and barangays except government-owned and controlled corporations. B. Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: 1. Sales of real property by a corporation which is registered with and certified by the Housing and Land Use Regulatory Board (HLURB) or HUDCC as engaged in socialized housing project where the selling price of the house and lot or only the lot does not exceed P180,000 in Metro Manila and other highly urbanized areas and P150 000 in other areas or such adusted amount of sellin rice for socialized housing as may later be determined and adopted by the HLURB, as provided under R.A. No. 7979 and its implementing regulations

(Underscored phrase – amendment introduced by RR No. 14-2002) July 18, 2012

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Payments to w hich entities are not su bject to withholding 2. Corporations duly registered with the BOI, PEZA and SBMA enjoying exemption from income tax 3. Corporations which are exempt from the income tax under Section 30 of the Tax Code: • • • •

Social Security System (SSS); Philippine Health Insurance Corporation (PHIC); Philippine Charity Sweepstakes Office (PCSO); and

However, the income payments arising from any activity which is conducted for profit or income derived from real or personal property shall be subject to a withholding tax as prescribed in these regulations. 4. General Professional Partnerships (RR 14-2002) . projects or engaging in petroleum, coal, geothermal & other energy operations pursuant to an operating or consortium agreement under a service contract with the government (RR 14-2002) (Underscored phrase – amendment introduced by RR No. 14-2002) July 18, 2012

Slide 63


EWT Rates Payee

Tax Base

Tax Rate

Gross professional, 15 %* -- if the current promotional and talent fees, or year’s gross income of any other form of payee exceeds remuneration P 720,000 (Fees, per diems, allowances, and any other form of income 10 %* -- if the current payments NOT subject to year’s gross income of withholding tax on payee does not exceed compensation) P 720,000 • 10% - if without sworn declaration stating that his gross income has exceeded P720,000 

Taxable Individuals

• 15% - if without sworn declaration that its gross income did not exceed P720,000 starting July 1 • 15% - for the subsequent payments if accumulated payments within the year exceeding P720,000 to a particular payee,

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Slide 64



EWT Rates Payee 

Tax Base Gross professional, promotional and talent fees or any other form of remuneration for services

Taxable Juridical Persons

Tax Rate 15% -- if the current year’s gross income of payee exceeds P720,000 10% -- if the current year’s gross income of payee does not exceed P720,000 (refer to previous slide)



Lessors of: . b. Personal Properties c. Poles, satellites, and transmission facilities d. Billboards

July 18, 2012

Slide 65


Rentals of Real Property – 5% Rentals of Real Properties

Income Payments 1.

Advance Rentals

Subject to EWT at the time of payment (RR No. 2-98, as amended)

2.

Subsequent Rental Payments

Subject to EWT at the time paid, payable, or accrued (last month of the quarter claimed as expense), whichever comes first (RR No. 2-98, as amended)

3.

Security Deposits

Subject to EWT at the time applied as rentals (BIR Ruling UN-042-2-8-94 dated January 24, 1988)

4.

Real Property Taxes

If paid by the lessee in behalf of the lessor – subject to EWT (RR No. 2)

July 18, 2012

July 18, 2012

EWT Application

Page 33

Slide 66



EWT Rates Payee 





Tax Base

Tax Rate

Cinematographic film , , distributors, whether individual or corporate

Gross payment

5%

General Engineering/ Building/ Specialty Contractors

Gross payment

2%

Other Contractors

Gross payment

2%

July 18, 2012

Slide 67


RMC No. 39-2007 dated January 22, 2007 Tax treatment of agency fees and s alaries of security g uards Tax Type Income Tax

Treatment 



Value-Added Tax





Withholding Tax

July 18, 2012

July 18, 2012

Page 34





Agency fees and salaries of the guards - deductible from gross income (subject to withholding tax rules) Amount deductible should be net of VAT (except if taxpayer is not VAT registered) Can claim input tax on agency fees, if supported by VAT ORs (except if taxpayer is non-VAT) Generally, no input VAT claimable on salaries of the guards Agency fee – subject to 2% EWT Salaries of guards – not subject to EWT if certain conditions are met

Slide 68



EWT Rates Payee 

Tax Base

Customs, insurance, stock, real estate,

Tax Rate

Gross commissions or service fees (RR -

10%

One-half (1/2) of gross payments

1%

commercial brokers and agents of professional entertainers 

Business establishments on payments made by credit card companies for sale of goods/services by each business entity to car o ers

July 18, 2012

Slide 69


EWT Rates Payee 

Medical practitioners (including doctors of , and dentists)

Tax Base Professional fees

Tax Rate 15% -- if the income payments to medical P720,000 10% -- if the income payments to medical practitioner does not exceed P720,000

July 18, 2012

July 18, 2012

Page 35

Slide 70



EWT Rates Payee Income payments by Top 20,000 private corporations* to



Tax Base

Tax Rate

goods and services other than those covered by other rates of withholding tax a. Supplier of goods

Gross Selling Price, or total amount of goods or its equivalent

1%

b. Supplier of goods

Gross Payments

2%

* If notified by the BIR as Top 20,000 Corporation (TTC)

July 18, 2012

Slide 71


EWT Clarifications in RMC No. 72-2004 ►

Payments to Meralco by TTC/GO/LTEWT base: current amount due appearing in the billing statement.

► ►

►

Payments to telecommunication companies by TTC/GO/LT on overseas spa c , message or conversa on or g na ng n e pp nes ►

EWT rate: 2%

►

EWT base: amount paid less the overseas communications tax.

Payment to Meralco and telecommunications companies by the TTC/GO/LT ►

►

EWT rate: 2% as payment for services

Payment for movie/concert tickets ra e:

► ►

Payment of interest on bank loans by the TTC/GO/LT and other fees paid to the bank ►

EWT rate: 2%

July 18, 2012

July 18, 2012

as paymen or serv ces

Page 36

Slide 72



EWT Clarifications in RMC No. 72-2004 ►

Payments for life and non-life insurance premium by the TTC/GO/LT to domestic/resident foreign insurance companies ►

►

►


rem um paymen s o nsurance compan es roug ro ers or agen s or any other person authorized to receive/collect payment on behalf of the insurance company ►

EWT rate: 2%

►

Withholding agent: payor or person having control over the payment. However, payor is required to issue the certificate of taxes withheld (BIR Form No. 2307) in the name of the insurance company, not in the name of the insurance broker.

Payment made to Health Maintenance Organizations (HMOs) by TTC/GO/LT ►


July 18, 2012

Slide 73


Final Withholding Tax (FWT)

July 18, 2012

July 18, 2012

Page 37

Slide 74




Full and final payment of the income tax due from the payee on a particular type of income subject to FWT (e.g., interest on deposits, royalties, etc.) ’ to other taxes that may be imposed on said income.

►

Liability for the payment of the tax rests primarily on the payor as withholding agent.

►

Payee is not required to file an income tax return for the particular income subjected to FWT.

July 18, 2012

Slide 75


Commonly used FWT Rates





Income Payment

Tax Rate

Gross income derived from all sources within the Philippines such as n eres s, v en s, ren s, royalties, annuities emoluments, or other fixed or determinable annual, periodic or casual gains, profits and income and capital gains (except capital gains realized from sale, exchange, disposition of shares of stock in any domestic corporation w c s su ect to .

30%

Non-resident Foreign

Interest income on Foreign Loans contracted on or after August 1, 1986

20%

Non-resident Foreign Corporation

July 18, 2012

July 18, 2012

Page 38

Slide 76



Payee

Tax Treaty Relief RMO No. 72-2010 ►

The following Tax Treaty Relief Applications (TTRAs) forms shall Form No.

Purpose

BIR Form No. 0901-P

For Business Profits

BIR Form No. 0901-T

For Profits from Shipping and Air Transport

BIR Form No. 0901-D

For Dividend Income

BIR Form No. 0901-I

For Interest Income

.

-

BIR Form No. 0901-C

For Capital Gains

BIR Form No. 0901-S

For Income from Services

BIR Form No. 0901-O

For Other Income Earnings

July 18, 2012

Slide 77


Tax Treaty Relief A ppl ications: RMO 72-2010 ►

Shall only be submitted to and received by the International Tax Affairs Division (ITAD).

►

Must be made BEFORE the transaction or before the first taxable event.

►

Disqualification – failure to file with ITAD within the prescribed period

July 18, 2012

July 18, 2012

Page 39

Slide 78



Fringe Benefit Tax (FBT)

July 18, 2012

Slide 79


Basic Principles

►

►

Fringe benefits furnished or granted to: ►

Rank and file em lo ees – art of the em lo ee’s ross compensation income subject to WTW.

►

Non-rank and file employees – subject to FBT.

EMPLOYER is liable to FBT.

July 18, 2012

July 18, 2012

Page 40

Slide 80



Fringe Benefit Tax Rate and Base ►

FBT Rate and FBT Base – Generally – FBT rate = 32%; FBT base = monetary value of benefit divid e by 68% – Non-resident alien individual who is not engaged in trade or business nt e pp nes – rate = ; ase = monetary va ue o benefit divid e by 75% – If given to: (1) an alien individual employed by regional or area headquarters of a multinational company or by regional operating headquarters of a multinational company; (2) an alien individual employed by an offshore banking unit of a foreign bank established in the Philippines; (3) an alien individual employed by a foreign service contractor or by a foreign service subcontractor engaged in individual employees who are employed and occupying the same position as those occupied or held by the alien employees. – FBT rate =15%; FBT base = monetary value of b enefit divi de by 85%

►

Gross Monetar y Value (GMV) = Value of Benefi t + FBT

July 18, 2012

Slide 81


Fringe Benefits NOT Subject to FBT 1. Fringe benefits which are authorized and exempted from income tax under the Code or under any special law; 2. Contributions of the employer for the benefit of the employee to , 3. Benefits given to the rank and file, whether granted under a collective bargaining agreement or not; 4. De minimis benefits – as will be discussed in detail in later slides; 5. If the grant of fringe benefits to the employee is required by the nature of, or necessary to the trade, business or profession of the employer; or 6. If the grant of the fringe benefit is for the convenience or advantage of the employer. ►

If fringe benefit is exempt from FBT – may still form part of employee’s gross compensation income subject to WTW

July 18, 2012

July 18, 2012

Page 41

Slide 82



Valuation of Frin ge Benefits (FB) 1. If FB is granted in money, or is directly paid for by the employer

The value of the FB is the amount granted or paid for.

2. If the FB is granted or furnished by the employer in property other than money and ownership is transferred to the employee

The value of the FB shall be equal to the FMV of the property as determined in accordance with Section 6(E) of the Tax Code (Authority of the Comm. To Prescribe Real Property Values).

3. If the FB is granted or furnished by The value of FB is equal to the the em lo er in ro ert other than de reciation value of the ro ert . money but ownership is not transferred to the employee

July 18, 2012

Slide 83


Valuation of Frin ge Benefits (FB) ►

Computation of the FBT would entail: 1. valuation of the benefit granted; and 2. determination of the proportion or percentage of the benefit which is sub ect to FBT – Nature of benefit given

1. If FB is granted in money, or is directly paid for by the employer 2. If the FB is granted or furnished by the employer in property other than money and ownership is transferred to the employee

Valuation of Fringe Benefit Amount granted or paid for FMV of the property as determined in accordance with Section 6(E) of the Tax Code (Authority of the Comm. To Prescribe Real Property Values)

3. If the FB is granted or furnished by Depreciation of the property the employer in property other than money but ownership is not transferred to the employee

July 18, 2012

July 18, 2012

Page 42

Slide 84



Common Benefits ►

Housing

►

Expense account

►

Motor vehicle of any kind

►

Household expenses

►

Interest on loans at less than market rate to the extent of the difference between the market rate and actual rate granted

►

Membership fees, dues, and other expenses borne by the employee in social and athletic clubs or other similar organizations

►

Foreign travel expenses

►

Holiday and vacation expenses

►

Educational assistance to the employee and his dependents

►

Life or health insurance and other non-life insurance premiums

►

Stock options

July 18, 2012

Slide 85


Housing Privileges – NRF Housing Privilege a. Lease of residential property for residential use of employees

Monetary Value MV = 50% x rental payments ere:

b. Assignment of residential property for use of employee as his usual place of residence

Where: FMV = ZV =

July 18, 2012

July 18, 2012

Page 43

= monetary va ue o

MV = [5% (FMV or ZV, whichever is higher)] x 50%

Fair market value of the land improvement, as declared in the Real Property Tax Declaration Form Zonal Value as determined by the Commissioner of Internal Revenue

Slide 86



Housing Privileges – NRF Housing Privilege c. Purchase of residential property on installment basis for use of

Monetary Value MV = 5% x AC x 50% ere:

transferred to employees

= cqu s t on ost, exclusive of interest

d. Purchase of residential property and ownership is transferred in the name of the employees

MV = AC or ZV, whichever is higher

e. Purchase of residential property and transfer of ownership to employees for residential use, at a price less than the employer’s acquisition cost

MV = FMV or ZV, (whichever is higher) - Cost to the employees

July 18, 2012

Slide 87


Motor Vehicle – NRF Motor vehicles provided by the employer to its employees shall be treated as follows: Motor Vehicle

Monetary Value

a. Purchase of motor vehicle in the name of the employee b. Cash is given to the employee for the purchase of the vehicle, ownership is placed in the name of the employee

c. Purchase of car on installment basis, the ownership of which is placed in the name of the employee

July 18, 2012

July 18, 2012

Page 44

Slide 88

MV = AC

MV = Cash Received by the Employee However, if the cash given by the employer to its employee is subjected to WTW, the .

MV = AC / 5 Where: AC = Acquisition Cost, exclusive of interest




Monetary Value

. purchase price, the ownership of which is placed in the name of the employee e. Employer owns and maintains a fleet of motor vehicles for use of the business and the employees

f.

Employer leases and maintains a fleet of motor vehicles for the use of the business and the employees

employer MV = (AC/5) x50% Exceptions: Motor vehicles in the fleet which are used for sales, freight, delivery, service and other non-personal use.

MV = 50% x rental payments Exceptions: Motor vehicles in the fleet which are used for sales, freight, delivery, service and other non-personal use

July 18, 2012

Slide 89



Monetary Value

g. The use of aircraft (including helicopters) owned and maintained by the employer shall be treated as used for business

N/A (Not subject to FBT)

h. Use of yacht, whether owned or maintained or leased by the employer

MV = Depreciation over estimated useful life of 20 years

For “a” to “d” ►

The entire MV of the benefit shall be treated as taxable fringe benefit regardless of whether the motor vehicle is used by the employee partly for his personal purpose and partly for the benefit of his employer.

July 18, 2012

July 18, 2012

Page 45

Slide 90



Withholding Tax on Wages (WTW)

July 18, 2012

Slide 91



“Compensation” ►

►

All remuneration for services erformed b an em lo ee for his employer under an employer-employee relationship, unless specifically excluded by the Tax Code. Even if the relationship of employer and employee does not exist any longer at the time when payment is made

July 18, 2012

July 18, 2012

Page 46

Slide 92



WTW rate Rates for co mputation o f Annualized Income* Over no over

But Not Over

Amount Rate

Of Excess Over

,

10,000

30,000

500+10%

10,000

30,000

70,000

2,500+15%

30,000

70,000

140,000

8,500+20%

70,000

140,000

250,000

22,500+25%

140,000

250,000

500,000

50,000+30%

250,000

500,000

over

125,000+32%

500,000

* Note that there are different tax tables for monthly/ semi-monthly/ weekly/ bi-weekly rates depending on the payroll period. July 18, 2012

Slide 93


List of “ De Minimis ” Benefits : RR No. 5-2011 a) Monetized unused vacation leave credits of private employees not exceeding 10 days during the year; b) Monetized value of vacation and sick leave credits paid to government officials and em lo ees c) Medical cash allowance to dependents of employees, not exceeding P750 per employee per semester or P125 per month; d) Rice subsidy of P1,500 or 1 sack of 50 kg rice per month amounting to not more than P1,500; e) Uniform and clothing allowance not exceeding P4,000 per annum; (Now P5,000 effective January 1, 2012 per RR No. 8-2012) f) Actual medical assistance, e.g., medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10,000 per annum; g) Laundry allowance not exceeding P300 per month;

July 18, 2012

July 18, 2012

Page 47

Slide 94



List of “ De Minimis” Benefits h) Employees achievement awards, e.g., for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000, received by the employee under an established written plana which does not discriminate in favor of highly paid employees; i)

Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum;

j)

Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of the basic minimum wage on a per region basis.

►

ene ts gven t at are not enumerate a ove ►

Not considered as “de minimis” benefits,

►

Shall be subject to income tax as well as withholding tax on compensation income (shall mean FBT if given to NRF employees)

July 18, 2012

Slide 95


Employees Qualified for Subst itut ed Filin g a) Receiving purely compensation income (regardless of amount) during the taxable year

the taxable year c) Amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer d) Spouse also complies with all 3 conditions stated above. e

Em lo er files the annual information return BIR Form No. 1604-CF

f) Employer issues BIR Form 2316 (Oct 2002 ENCS) version to each employee

July 18, 2012

July 18, 2012

Page 48

Slide 96



Employees NOT Qualified f or Substituted Filing A. Deriving compensation from two or more employers concurrently or successively at anytime during the taxable year. .

er v ng compensat on ncome, regar ess o t e amount, w et er rom a single or several employers during the calendar year, the income tax of which has not been withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to collectible or refundable return.

C. Whose gross compensation income do not exceed the statutory minimum wage or Five Thousand Pesos (P5,000.00) per month (Sixty Thousand Pesos [PHP 60,000] a year, whichever is higher, including employees of , , agencies or instrumentalities, with salary grades 1 to 3.

July 18, 2012

Slide 97


Employees NOT Qualified f or Substituted Filing D. Deriving other non-business, non-profession-related income in addition to compensation income not otherwise subject to a final tax. .

ece v ng pure y compensat on ncome rom a s ng e emp oyer, a t oug the income tax of which has been correctly withheld, but whose spouse falls under Section 2.83A(A), (B), (C) and (D) of these Regulations.

F. Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income, or compensation income and other non-business, non-profession-related income.”

July 18, 2012

July 18, 2012

Page 49

Slide 98




July 18, 2012

Slide 99


Deadlines for Filing and Payment of WT Information 1. Monthly Return (BIR Form 1601)*

Manual

EFPS

Filing - Within 10 days after the end of each month exce t for taxes withheld for the month of December each year, which shall be filed on or before January 15 of the following year

Filing - Within 15 days after the end of each month exce t for taxes withheld for the month of December each year, which shall be filed on or before January 20 of the following year

Payment - within 10 days after the end of each month, except for taxes withheld for the month of December each year, which shall be paid on or before January 15 of the following year

Payment - within 15 days after the end of each month, except for taxes withheld for the month of December which shall be paid on or before January 20 of the following year

* Pursuant to Revenue Regulation (RR) No. 26-2002, taxpayers enrolled in the EFPS shall observe the staggered filing deadlines of their tax returns of taxpayers based on industry classification. July 18, 2012

July 18, 2012

Page 50

Slide 100



Deadlines for Filing and Payment of WT Information

Manual

EFPS

2. Monthly Alphalist of Payees (MAP) Whose ncome eceve ave Been Subjected to Withholding Tax

Within 10 days after the end of each month except or axes w e or e month of December each year, which shall be filed on or before January 15 of the following year

Within 15 days after the end of each month except or axes w e or e month of December each year, which shall be filed on or before January 20 of the following year

3. Semestral List of Regular Suppliers of Goods and Services**

On or before January 31 and July 31 of each year.

On or before January 31 and July 31 of each year.

** Only applicable to Companies that are considered as one of the Top 10,000 (Now Top 20,000) Private Corporations

July 18, 2012

Slide 101


Deadlines for Filing and Payment o f WT Information

Manual

EFPS

4. Annual Information Return of Creditable Income Taxes Withheld (Expanded)/Income Payments Exempt from Withholding Tax (BIR Form 1604-E)

On or before March 1 of the following year

On or before March 1 of the following year

5. Certificates of Creditable Tax Withheld (BIR Form No. 2307) - to be issued by the payor to the

Within twenty (20) days following the close of the taxable quarter employed by the payee in filing his .

Within twenty (20) days following the close of the taxable quarter employed by the payee in filing his .

6. Annual Information Return of Taxes Withheld (BIR Form No. 1604 CF)

to be filed with the revenue district office on or before January 31 of the following year in which payments were made.

to be filed with the revenue district office on or before January 31 of the following year in which payments were made.

July 18, 2012

July 18, 2012

Page 51

Slide 102



Common-Taxes -Income-Tax VAT OPT WT v2

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