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Discussion Outline
Income Tax
General Principles
Taxability of Individuals
Taxability of Corporations
Gross Income
Allowable Deductions from Gross Income
Unallowable Deductions from Gross Income
Filing of Returns and Administrative Requirements
Value-Added Tax
General Principles
Input
p VAT on Capital
p Goods
Treatment of Excess Input VAT
Filing of Returns and Administrative Requirements
Other Percentage Taxes
Persons Subject to Percentage Tax and Percentage Tax Rates
Filing of Returns and Administrative Requirements
Withholding Taxes
Nature of Different Common Withholding Taxes
Withholding Agents
Withholding Tax Rates
Filing of Returns and Administrative Requirements
Income Tax
General Principles
Individuals
Resident citizen: taxable on all income derived from sources within and
without the Philippines
N
Non-resident
id t citizen:
iti ttaxable
bl only
l on iincome d
derived
i d ffrom sources within
ithi
the Philippines
Corporations
Domestic corporation - taxable on all income derived from sources within
and without the Philippines
Foreign Corporations (resident and non-resident) taxable only on
Philippine sourced income
Philippine-sourced
Taxability of Individuals
Graduated tax rates:
Over But Not Over Amount / Rate Of Excess 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
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.
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.
Computed in quarterly income tax return and annual income tax return.
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 publicly-
held corporations.
July 18, 2012 Slide 16 Taxes Common to Taxpayers
Paid-up capital
Par value of the shares of stock (RMC No. 35-2011)
Gross Income
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
Gift bequests
Gifts, b t and
d devices
d i
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
g the p
render substantial future services as a condition to receiving prize 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
Interests
Paid or incurred during the taxable year
Related to indebtedness in connection with the taxpayer's profession,
trade or business
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
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.
General Principles
VAT Base
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
d tto changes
due h iin or cessation
ti off status
t t as VAT taxpayer
t
Within 2 years from date of cancellation
Person having control over the payment and who, at the same time,
claims the expenses
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)
5 Joint ventures or consortia formed for the purpose of undertaking construction
5.
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)
EWT Rates
Payee Tax Base Tax Rate
Taxable Gross professional, 15 %* -- if the current
Individuals promotional and talent fees, or years gross income of
anyy other form of payee
p y exceeds
remuneration P 720,000
(Fees, per diems, allowances,
and any other form of income 10 %* -- if the current
payments NOT subject to years 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
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,
3. y Deposits
Security p Subject to EWT at the time applied as rentals
(BIR Ruling UN-042-2-8-94 dated January 24,
1988)
Income Tax 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)
Value-Added Can claim input tax on agency fees, if supported by VAT ORs
Tax (except if taxpayer is non-VAT)
Generally, no input VAT claimable on salaries of the guards
Withholding Agency fee subject to 2% EWT
Tax Salaries of guards not subject to EWT if certain conditions
are met
EWT Rates
Payee Tax Base Tax Rate
Medical practitioners Professional fees 15% -- if the income
(including doctors of payments to medical
medicine veterinarians
medicine, practitioner exceeds
and dentists) P720,000
10% -- if the income
payments to medical
practitioner does not
exceed P720,000
Basic Principles
3. Benefits given to the rank and file, whether granted under a collective
bargaining agreement or not;
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 employees
gross compensation income subject to WTW
Where: FMV = Fair market value of the land improvement, as declared in the
Real Property Tax Declaration Form
ZV = Zonal Value as determined by the Commissioner of Internal
Revenue
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.
Basic Principles
Compensation
All remuneration for services p
performed by
y an employee
p y 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
* Note that there are different tax tables for monthly/ semi-monthly/ weekly/
bi-weekly rates depending on the payroll period.
Benefits
B fi given
i that
h are not enumerated
d above
b
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)
b) Receiving the income only from one employer in the Philippines during
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
e) Employer files the annual information return (BIR Form No. 1604-CF)
1604 CF)
f) Employer issues BIR Form 2316 (Oct 2002 ENCS) version to each
employee
B D
B. Deriving
i i compensation ti iincome, regardless
dl off th
the amount,
t whether
h th ffrom 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.
E R
E. Receiving
i i purely
l compensation
ti iincome ffrom a single
i l employer,
l although
lth h
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.
** Only applicable to Companies that are considered as one of the Top 10,000
(Now Top 20,000) Private Corporations
8. Fringe Benefit Tax (BIR Deadline of filing and Deadline of filing and
Form 1603) - Quarterly payment: 10th day of the payment shall be five (5)
Remittance Return of following month days later than the deadline
Final Income Taxes set under the manual filing
Withheld on Fringe and payment system
Benefits Paid to
Employees Other than
Rank and File