Professional Documents
Culture Documents
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
Page 1
Slide 2
Discussion Outline
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
Slide 3
Income Tax
Page 2
Slide 4
General Principles
Slide 5
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
Page 3
Slide 6
Taxability of Individuals
Slide 7
Taxability of Individuals
Not over
10,000
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 Excess Over
5%
Married individuals:
Amount / Rate
Page 4
Slide 8
Taxability of Individuals
Personal exemptions:
Basic personal exemption - P50,000 for each individual taxpayer
Additional personal exemption - P25,000 for each dependent
not exceeding four (4)
Husband proper claimant of additional personal exemption for
children except:
a. Husband is unemployed
b. Husband is non-resident citizen deriving income from foreign
sources
c Husband waives his right to claim the exemptions of children
c.
(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
Slide 9
Interests, royalties, prizes and other winnings 20% final tax, except if
prizes does not exceed P10,000
Interest income from long term investment held for more than 5 years and
in accordance with the prescribed rules exempt
Capital gains from sale of shares of stocks not traded in the stock
g 5% for not over P100,000
,
and 10% for in excess of P100,000
,
exchange
Capital gains from sale of real property 6% based on the gross selling
price or current fair market value, whichever is higher.
Page 5
Slide 10
Taxability of Corporations
Slide 11
Taxability of Corporations
Domestic corporation:
based on taxable income derived during each taxable year from all
sources within and without the Philippines.
Page 6
Slide 12
Taxability of Corporations
2% MCIT (contd):
Carried forward and credited against the normal income tax for the three
(3) iimmediately
di t l succeeding
di ttaxable
bl years.
Computed in quarterly income tax return and annual income tax return.
Slide 13
I t
Intercorporate
t dividends
di id d dividends
di id d received
i db
by a d
domestic
ti corporation
ti
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
Capital gains from sale of real property 6% based on the gross selling
price or current fair market value
value, whichever is higher
higher.
5%
10%
Page 7
Slide 14
Insurance companies
P bli l h ld corporations
Publicly-held
ti
Taxable partnerships
Slide 15
PEZA-registered enterprises
BCDA-registered enterprises
Closely-held corporations
Domestic corporations not falling under this definition considered publiclyheld corporations.
Page 8
Slide 16
Paid-up capital
Slide 17
Gross Income
Page 9
Slide 18
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
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.
Slide 19
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
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
prize or award
render substantial future services as a condition to receiving
Gains from the sale of bonds, debentures or other certificate of indebtedness with
a maturity of more than 5 years (applicable to individuals only)
Page 10
Slide 20
Slide 21
Expenses
Ordinary and necessary expenses paid or incurred during the taxable year
Interests
Page 11
Slide 22
Taxes
Exception
Taxes allowed as deduction (e.g., not among the exceptions above) are
refunded or credited
Slide 23
Losses
Property connected with trade or business (loss arising from fires, storms,
shipwreck, or other casualties, or from robbery, etc.)
taxpayer is not exempt from income tax during the year of the loss, and
Page 12
Slide 24
Capital losses
Individuals: any excess capital losses over the capital gains (in an
amount not in excess of the net income for such year)
year), after
considering the allowable percentage of deduction, may be carried
over for not more than 12 months.
Deductible onlyy up
p to the extent of g
gains from such transaction
Abandonment losses
Slide 25
Depreciation
Government
Page 13
Slide 26
Pension trusts
Slide 27
Available to:
Individuals subject to the graduated tax rates (i.e., individuals who does
not purely derive income from compensation)
40% of his g
gross sales or g
gross receipts
p
Corporations
Page 14
Slide 28
Slide 29
Any amount paid out for new buildings or for permanent improvements, or
betterments made to increase the value of any property or estate
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
Page 15
Slide 30
Slide 31
Page 16
Slide 32
1st installment: at the time of the declaration (on or before April 15)
Slide 33
If impracticable for the spouses to file one return each spouse may
file a separate return of income
Page 17
Slide 34
Quarterly income tax return (BIR Form No. 1702Q): 60 days after the
close of each of the first 3 quarters of the taxable year
year.
Annual income tax return (BIR Form No. 1702): 15th day of the 4th month
following the end of the year
Hard
H
d or softcopy
ft
off the
th summary alphalist
l h li t off withholding
ithh ldi taxes
t
(SAWT),
(SAWT) as
applicable
Slide 35
Page 18
Slide 36
General Principles
Slide 37
General Principles
Annual sales and/or receipts does not exceed P1,919,500 not subject to
VAT, but subject to percentage tax.
Page 19
Slide 38
General Principles
VAT Rates
Taxable
General Rate: 12%
Special
S
i lR
Rate:
t 0%
Exempt
Zero-rated Sales
Exempt Sales
Not subject to VAT
Slide 39
General Principles
VAT Base
Page 20
Slide 40
Substantiation Requirements
Slide 41
Page 21
Slide 42
Slide 43
Exceed P1 million:
-
NOT exceed
d P1 million:
illi
-
Page 22
Total input tax allowed as credit against output tax in the month of
acquisition
Slide 44
Slide 45
Carried-over
Claimed as Refund
Period of application:
Within 2 years after the close of taxable quarter when such sales were
made
Page 23
Slide 46
Slide 47
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
quarter
q
Filing:
g depends
p
on the industry
y classification of the taxpayer
p y
Page 24
Slide 48
Slide 49
Manner of Submission:
Manual:
USB/CD/DVD to the RDO or LTDO or LTAD
within 25 days following the close of each taxable quarter
EFPS
Through EFPS
within 30 days following the close of each taxable quarter
Page 25
Slide 50
Slide 51
Gross annual sales and/or receipts do not exceed P1,500,000, and not
VAT-registered
Threshold
Th
h ld iincreased
d ffrom P1
P1,500,000
500 000 tto P1,919,500
P1 919 500 beginning
b i i
January 1, 2012 pursuant to RR No. 11-2011
Page 26
Slide 52
Slide 53
Payment: not be later than the 20th 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
Page 27
Slide 54
Withholding Taxes
Slide 55
Withholding Value-Added
Tax (VAT)
Nature
Income tax withheld on income
payments creditable against income
t d
tax
due from
f
payee
Page 28
Slide 56
Slide 57
Person having control over the payment and who, at the same time,
claims the expenses
Page 29
Slide 58
Paid, or
Payable,
y
, or
Slide 59
Page 30
Slide 60
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).
Not
N t a fi
finall ttax.
EWT Base:
Gross billing on payments made to a Non-VAT registered supplier of
goods or services;
Gross amount paid exclusive or net of VAT on payments made to a
VAT-registered supplier of goods and services
CWT Certificate (BIR Form 2307)
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.
July 18, 2012
Slide 61
Page 31
Slide 62
Slide 63
EWT Rates
Payee
Tax Base
Tax Rate
Gross professional,
15 %* -- if the current
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
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,
Page 32
Slide 64
EWT Rates
Payee
Tax Base
Gross professional,
promotional and talent
fees or any other form
off remuneration
i for
f
services
Taxable Juridical
Persons
Tax Rate
15% -- if the current
years gross income of
payee exceeds
P 20 000
P720,000
10% -- if the current
years gross income of
payee does not exceed
P720,000
(refer to previous slide)
Lessors of:
a Real Properties
a.
Gross rental
b. Personal Properties
c. Poles, satellites, and
transmission facilities
d. Billboards
Slide 65
5%
Income Payments
1.
Advance Rentals
2.
Subsequent Rental
Payments
3.
y Deposits
p
Security
4.
Page 33
Slide 66
EWT Rates
Payee
Tax Base
Tax Rate
Cinematographic film
owners lessor,
owners,
lessor or
distributors, whether
individual or corporate
Gross payment
5%
General Engineering/
Building/ Specialty
Contractors
Gross payment
2%
Other Contractors
Gross p
payment
y
2%
Slide 67
Treatment
Value-Added
Tax
Withholding
Tax
Page 34
Slide 68
EWT Rates
Payee
Tax Base
Tax Rate
Customs, insurance,
stock, real estate,
immigration and
commercial brokers and
agents of professional
entertainers
Gross commissions
or service fees (RR
17-2003)
10%
Business establishments
on payments made by
credit card companies for
sale of goods/services by
each business entity to
cardholders
dh ld
One-half (1/2) of
gross payments
1%
Slide 69
EWT Rates
Payee
Medical practitioners
(including doctors of
medicine veterinarians
medicine,
and dentists)
Tax Base
Professional fees
Tax Rate
15% -- if the income
payments to medical
practitioner exceeds
P720,000
10% -- if the income
payments to medical
practitioner does not
exceed P720,000
Page 35
Slide 70
EWT Rates
Payee
Income payments by Top
20,000 private corporations* to
their local/resident suppliers of
goods and services other than
those covered by other rates
of withholding tax
Tax Base
Tax Rate
a. Supplier of goods
1%
b. Supplier of goods
Gross Payments
2%
Slide 71
Payments to Meralco by TTC/GO/LTEWT base: current amount due appearing in the billing statement.
EWT rate: 2%
Payment of interest on bank loans by the TTC/GO/LT and other fees paid to
the bank
EWT rate: 2%
Page 36
Slide 72
Premium
P
i
payments
t to
t insurance
i
companies
i th
through
hb
brokers
k
or agents
t or
any other person authorized to receive/collect payment on behalf of the
insurance company
EWT rate: 2%
Slide 73
Page 37
Slide 74
Basic Principles
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.)
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.
Slide 75
Tax Rate
30%
Non-resident
Foreign
Corporation
20%
Non-resident
Foreign
Corporation
Page 38
Slide 76
Payee
Purpose
BIR Form No
No. 0901
0901-R
R
Slide 77
Page 39
Slide 78
Slide 79
Basic Principles
Page 40
Slide 80
Slide 81
Page 41
Slide 82
Slide 83
1. If FB is granted in money, or is
directly paid for by the employer
Page 42
Slide 84
Common Benefits
Housing
Expense account
Household expenses
Interest on loans at less than market rate to the extent of the difference
between the market rate and actual rate granted
Stock options
Slide 85
Monetary Value
MV = 50% x rental payments
Wh
Where:
MV = monetary
t
value
l off FB
Where: FMV =
ZV =
Page 43
Slide 86
Monetary Value
Slide 87
Monetary Value
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
same shall not be subject to FBT
FBT.
MV = AC / 5
Where:
AC = Acquisition Cost, exclusive of interest
Monetary Value
Slide 89
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
Monetary Value
N/A
(Not subject to FBT)
MV = Depreciation over
estimated useful life of 20 years
For a to d
Page 45
Slide 90
Slide 91
Basic Principles
Compensation
Even if the relationship of employer and employee does not exist any
longer at the time when payment is made
Page 46
Slide 92
WTW rate
Rates for computation of Annualized Income*
Over
But Not
Over
Amount Rate
Of Excess
Over
not o
over
er
10 000
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
* 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
Page 47
Slide 94
Slide 95
Philippines during
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) 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
Page 48
Slide 96
Slide 97
Page 49
Slide 98
Slide 99
Manual
Filing - Within 10 days after
the end of each month
except for taxes withheld for
the month of December
each year, which shall be
filed on or before January
15 of the following year
EFPS
Filing - Within 15 days after
the end of each month
except for taxes withheld for
the month of December
each year, which shall be
filed 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
Page 50
Slide 100
Manual
EFPS
2. Monthly Alphalist of
Payees (MAP) Whose
Income Received
Recei ed Have
Ha e
Been Subjected to
Withholding Tax
3. Semestral List of
Regular Suppliers of
Goods and Services**
** Only applicable to Companies that are considered as one of the Top 10,000
(Now Top 20,000) Private Corporations
Slide 101
Page 51
Slide 102
Manual
On or before March 1 of the
following year
EFPS
On or before March 1 of the
following year
Manual
Slide 103
EFPS
Page 52
Slide 104