By: Rani Factor under Atty.

Chua

Documentary Stamp Tax Taxation 2
NIRC Title VII Sections 173 – 201 28 sections
RELATED REVENUE ISSUANCES RR No . 6 - 2001 , RMO No . 8 - 98 , RMO No . 15 - 2001

Docs. Stamp tax in a nutshell Overview
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1. 2. 3. 4. 5.

Definition & Description Documents, Instruments etc.. Subject to Docs. Stamp tax w/ Tax Rates in a Matrix
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Sample computation ( real estate )

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Procedures Time of filing and payment of tax Some Questions
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Who are required to file? Where should it be filed? Is docs. Stamp tax absolute?

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6. 7.

Documentary Requirements Form

PRESIDENTIAL DECREE No. 1045 November 5, 1976 MALACAÑANG M a n i l a
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WHEREAS, the Government is incurring revenue losses due to the use of fake or reused documentary and science stamps; WHEREAS, it is necessary to minimize if not eradicate this pernicious cause of revenue loss; NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and decree: Section 1. Any provision of law to the contrary notwithstanding, all existing documentary and science stamps in denominations of ten pesos and above are hereby withdrawn from circulation and declared without value. However, all persons in possession of such documentary and science stamps are given three months from the effective date of this decree to surrender such stamps to the Bureau of Internal Revenue for the refund of the face value thereof. Section 2. Documentary and science stamps taxes of ten pesos or more shall be paid to any authorized personnel of the Bureau of Internal Revenue or to the tellers of any commercial bank, or to such other banks as may hereinafter be authorized to accept payment of internal revenue taxes, who shall issue the corresponding Official Receipt therefor. Section 3. No provision of this decree shall be deemed to abate or condone the administrative, civil or criminal liability of any person for acts committed before the enactment of this decree. Section 4. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall issue the necessary regulations for the implementation of this decree.

Title 1

Documentary Stamp Tax Defined and Described …

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What is

Documentary Stamp tax?

a. Stamp Tax Defined:
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In Commissioner v. Heald lumber co., 119 Phil 647 The court described Docs. Stamp as an Excise upon the facility used in the transaction of the Business separate and apart from the business itself.

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b. Stamp Tax Defined:
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Phil. Law dictionary: An excise upon the privilege, opportunity or facility offered at exchanges for the transaction of the business.

c. Described:
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Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.

1) SEC.173.Stamp Taxes Upon Documents, LoanAgreements,Instruments and Papers.

Upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following Sections of this Title, by the person making, signing, issuing, accepting, or transferring the same wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines, and the same time such act is done or transaction had:Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax.

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Title 2

Documents, instruments, and papers etc.. Which needed to be stamped on

with their …in Matrix

corresponding fees and rates…

SEC. 174. Stamp Tax on Debentures and Certificates of Indebtedness.
Tax Code Section Sec. 174 Document Taxable Unit Tax Due Per % of Unit Unit P1.50 .75 Taxable Base

Debentures P200.00 or and fraction Certificates of thereof Indebtedness

Face value of Document

SEC. 175. Stamp Tax on Original Issue of Shares of Stock.
Tax Code Section Sec. 175 Document Taxable Unit Tax Due Per Unit % of Unit Taxable Base

Original Issue P200.00 or 2.00 of fraction thereof Shares of Stock with par value Original Issue P200.00 or fraction thereof of 2.00 based on Shares of actual Stock without par consideration value

1%

1%

Par value of shares of stocks actual consideration for the issuance of shares of stocks

SEC. 176. Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Due-bills, Certificates of Obligation, or Shares of Certificates of Stock.
Tax Code Document Section Sec. 176 Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sales, Agreements P200.00 or 1.50 to Sell, Memoranda fraction of Sales, Deliveries thereof or Transfer of Duebills, Certificate of Obligation, or Shares or Certificates of Stock

.75%

Par value of such duebills, certificate of obligation or stocks

SEC. 177. StampTax on Bonds, Debentures, Certificate of Stock or Indebtedness Issued in Foreign Countries.
Tax Code Document Section Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 177

Bonds, Debentures, Certificate of Stock or Indebtedness issued in foreign Countries

P200.00 or 1.50 fraction thereof

.75%

Par value of such bonds, debentures or Certificate of Stocks

SEC. 178. Stamp Tax on Certificates of Profits or Interest in Property or Accumulations.
Tax Code Document Section Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 178

Certificate of Profits or Interest in Property or Accumulation

P200.00 or .50 fraction thereof

.25%

Face value of such certificate / memorandum

SEC. 179. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not Bearing Interest, and Other Instruments.
Tax Code Document Section Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 179

Bank Checks, Drafts, On each 1.50 Certificate of Deposit Document not bearing interest and other Instruments

SEC. 180. Stamp Tax on All Bonds, Loan greements, promissory Notes, Bills of Exchange, Drafts, Instruments and Securities Issued by the Government or Any of its Instrumentalities, Deposit Substitute Debt Instruments, Certificates of Deposits Bearing Interest and Others Not Payable on Sight or Demand. Ta x Cod e Se ct ion Sec. 180 Document Taxable Unit Tax Due Per % of Unit Taxable Unit Base

Bonds, Loan Agreements, Promissory Notes, Bills of Exchange, Drafts, Instruments and Securities Issued by the Government or any of its Instrumentalities, Deposit Substitutes Debt Instrument, Certificates of Deposit bearing interest and others not payable on sight or demand (except loan agreement or promissory notes exceeding P250,000.00 for personal use or family use)

P200.00 .30 or fracton thereof

.15%

Face value of the instrument/do cument

SEC. 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 181

Bills of Exchange or order drawn in foreign country but payable in the Philippines

On each .30 Document

.15%

Face value of such bill of exchange or order or the equivalent of such value, if expressed in foreign currency

SEC. 182. Stamp Tax on Foreign Bills of Exchange and Letters of Credit.
Ta x Cod e Se ct ion Document Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 182

Foreign Bills of Exchange and Letter of Credit

P200.00 .30 or fracton thereof

.15%

Face value of such bill of exchange or order or the quivalent of such value, if expressed in foreign Currency

SEC. 183. Stamp Tax on Life Insurance Policies.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 183

Life Insurance Policies

P200.00 or .50 fraction thereof

.25%

Amount Insured by the Policy

SEC. 184. Stamp Tax on Policies of Insurance Upon Property.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 184

Policies Of Insurance P4.00 upon Property premium or fraction thereof

.50

12.5%

Premium charged

SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 185

Fidelity Bonds and other Insurance Policies

P4.00 premium or fraction thereof

.50

12.5%

Premium charged

SEC. 186. Stamp Tax on Policies of Annuities and Pre-Need Plans.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 186

Policies of Annuities, Annuity or other instruments

P 200.00 or fraction thereof

1.50

.75%

Capital of annuity, or if unknown 33 1/3 times the annual income

SEC. 187. Stamp Tax on Indemnity Bonds.
Tax Code Section Document Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 187

Indemnity Bonds

P4.00 or fraction thereof

.30

7.5%

Premium charged

SEC. 188. Stamp Tax on Certificates.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 188

Certificates of Each Damage or otherwise Certifica and Certificate or document issued by any customs officers, marine surveyor, notary public and certificate required by law or by rules and regulations of a public offic

15.00

SEC. 189. Stamp Tax on Warehouse Receipts.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 189

Warehouse Receipts (except if value does not exceed P200.00

Each receipt

15.00

SEC. 190. Stamp Tax on Jai-Alai, Horse Racing Tickets, lotto or Other Authorized Numbers Games.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per Unit % of Unit Taxable Base

Sec. 190

Jai-alai, Horse Race Tickets, lotto or Other Authorized Number Games

P1.00 cost of .10 ticket and Additional P0.10 on every P1.00 or fraction thereof if cost of ticket exceeds P1.00

10%

Cost of the ticket

SEC. 191. Stamp Tax on Bills of Lading or Receipts.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 191

Bills of Lading or Receipts (except charter party)

Each Proxy

15.00

SEC. 193. Stamp Tax on Powers of Attorney.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Base Unit

Sec. 193

Powers of Attorney

Each Document

5.00

SEC. 194. Stamp Tax on Leases and Other Hiring Agreements.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Unit Base

Sec. 194

Lease and other Hiring agreements of memorandum or contract for hire, use or rent of any land or tenements or portions thereof

First 2,000

3.00

1.5% 1%

For every 1.00 P1,000 or fractional part thereof in excess of the first P2,000 for each year of the term of the contract or agreement

SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due Per % of Unit Taxable Unit Base

Sec. 195

Mortgages Pledges of First 5,000 20.00 lands, estate, or property and Deeds On each P5,000 10.00 of Trust or fractional . part thereof in excess of 5,000

.4% .2%

Amount Secured Amount Secured

SEC. 196. Stamp tax on Deeds of Sale and Conveyances of Real Property.
Ta x Cod e Document Se ct ion Taxable Unit Tax Due % of Unit Taxable Base Per Unit

Sec. 196

Deed of Sale, instrument or writing and Conveyances of Real Property (except grants, patents or original certificate of the government) )

First 1,000 For each additional P1,000 or fractional part thereof in excess of P1,000

15.00 15.00

1.5% 1.5%

Consideration or Fair Market Value, whichever is higher (if government is a party, basis shall be the consideration

Sample computation on Real estate
Kinds of Tax
Capital gains Tax Documentary Stamp Tax Transfer Tax Registration Fee New Tax declaration

Office to file
BIR BIR Treasurer’s office RD Assessor’s office

Rate and amount of tax
= 6% x tax base = 1.5% x tax base
Can be passed on to buyers

= 1% x75% x tax base
buyer’s account

= base on table

Buyer’s account

= about 250.00 buyer’s account

Base on 2,000,000 Taxable amount
Tax
Capital Gains Docs. Stamp Transfer tax 1.5% 1% x 75%

Rate
6%

Amount
= 120,00.00 = 30,000.00 = 15,000.00

Registration Fee New Tax Declaration

refer to table = 250.00 = 250.00

SEC. 197. Stamp Tax on Charter Parties and Similar Instruments.
Document Ta x Cod e Se ct ion Taxable Unit Tax Due Per Unit % of Unit Taxable Base

Sec. 197 Charter parties and Similar Instruments t

1,000 tons and below 1,001 to 10,000 tons Over 10,000 tons

P500.00 for the first 6 months PlusP50 each month or fraction thereof in excess of 6 months P1,000 for the first 6 months Plus P100 each month or fraction thereof in excess of 6 months P1,500 for the first 6 months Plus P150 each month or fraction thereof in excess of 6 months

Tonnage and duration of the contrac

Title 3

Documentary stamp

Tax Procedures…

PROCEDURES
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File BIR Form No. 2000 in triplicate (two copies for the BIR and one copy for the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where the seller or transferor is registered, for shares of stocks or where the property is located, for real property. In places where there are no AAB, the return will be filed directly with the Revenue collection Officer or Authorized City or Municipal Treasurer. Submit all documentary requirements and proof of payment to the Revenue District Office having jurisdiction over the place of residence of the seller.

Sec. 200 – b. Time for Filing and Payment of the Tax.
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Except as provided by rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, the tax return prescribed in this Section shall be filed within ten (10) days after the close of the month when the taxable document was made, signed, issued, accepted, or transferred, and the tax thereon shall be paid at the same time the aforesaid return is filed.

DEADLINES
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The Documentary Stamp Tax return (BIR Form 2000) shall be filed in triplicate (two copies for the BIR and one copy for the taxpayer) within five (5) days after the close of the month when the taxable document was made signed, issued, accepted or transferred; when reloading a metering machine becomes necessary; or upon remittance by Collection Agents of collection from sale of loose stamps. The Documentary Stamp Tax shall be paid upon filing of the return.

DOCUMENTARY

REQUIREMENTS

Attachments
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1. Photocopy of the document to which the documentary stamp shall be affixed; 2. Original copy of duly approved Tax Debit Memo, if applicable; 3. Proof of exemption under special laws, if applicable. 4. Proof of payment of documentary stamp tax paid upon the original issue of the stock, if applicable.

Note: All background information must be properly filled up.
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§ All returns filed by an accredited tax agent on behalf of a taxpayer shall bear the following information: A. For CPAs and others (individual practitioners and members of GPPs); a.1 Taxpayer Identificat ion Number (TIN); and a.2 Certificate of Accreditation Number, Date of Issuance, and Date of Expiry. B. For members of the Philippine Bar (individual practitioners, members of GPPs): b.1 Taxpayer Identification Number (TIN); and b.2 Attorney’s Roll Number or Accreditation Number, if any. · BIR Form 2000-OT (in triplicate copies) should be filed for every taxable document/transaction. Constructive affixture means filing a tax return and paying the tax in accordance

DOCUMENTARY REQUIREMENTS
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1) Photocopy of document(s) to which the documentary stamp shall be affixed, in case of constructive affixture of Documentary Stamp Tax 2) For metering machine users, a schedule of the details of usage or consumption of documentary stamp 3) Proof of exemption under special law, if applicable 4) Duly approved Tax Debit Memo, if applicable

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Some

Questions???

Questions # 1

Who are required to file Documentary Stamp Tax Declaration Return?

Who can file? Answer
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This return shall be filed in triplicate by the following person making, signing, issuing, accepting or transferring the document or facility evidencing transaction: 1. Every natural or juridical person, resident or nonresident, for sale, barter, exchange or other onerous disposition of shares of stock in a domestic corporation, classified as capital asset , not traded in the local stock exchange;

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Who can file? Answer

2. Every withholding agent/buyer/seller on the sale, transfer or exchange of real property classified as capital asset . The “sale” includes pacto de retro sale and other forms of conditional sale; and

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Who can file? Answer

3. Every withholding agent/buyer/seller on the sale, transfer or exchange of real property classified as ordinary asset. Whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax.

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Answer

a. In case of constructive affixture of documentary stamps, by the persons making, signing, issuing, accepting or transferring documents, instruments, loan agreements and papers, acceptances, assignments, sales and conveyances of the obligation, right or property incident thereto wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines at the same time such act is done or transaction had;

Answer
b. By metering machine user who imprints the Documentary Stamp Tax due on the taxable documents; and c. By Revenue Collection Agent, for remittance of sold loose documentary stamps.

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Note: Wherever one party to the taxable document enjoys exemption from the tax imposed, the other party who is not exempt will be the one directly liable to file Documentary Stamp Tax Declaration and pay the applicable stamp tax. Sec. 173

Questions # 2

Where and when Documentary Stamp Tax Declaration Return be filed and pay?

When to file and pay? -Answer
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The return shall be filed and the tax paid within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred.

Where to File and Pay? 

Answer

a. The return shall be filed with and the tax paid to the Authorized Agent Bank (AAB) within the territorial jurisdiction of the RDO which has jurisdiction over the residence or principal place of business of the taxpayer or where the property is located in case of sale of real property or where the Collection Agent is assigned. b. In places where there is no Authorized Agent Bank, the return will be filed with the Revenue Collection Officer or c. duly authorized City or Municipal Treasurer where the taxpayer's residence or principal place of business is located or where the property is

Sec 200 (C) Where to File.
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Except in cases where the Commissioner otherwise permits, the aforesaid tax return shall be filed with and the tax due shall be paid through the authorized agent bank within the territorial jurisdiction of the Revenue District Office which has jurisdiction over the residence or principal place of business of the taxpayer. In places where there is no authorized agent bank, the return shall be filed with the Revenue District Officer, collection agent, or duly authorized Treasurer of the city or municipality in which the taxpayer has his legal residence or principal place of business.

Question # 3

Is the rule on Documentary Stamp Tax absolute?

Questions # 4

What are the documents/papers not subject to Documentary Stamp Tax?

Answer
a. Policies of insurance or annuities made or granted by a fraternal or beneficiary society, order, association or cooperative company, operated on the lodge system or local cooperation plan and organized and conducted solely by the members thereof for the exclusive benefit of each member and not for profit . b. Certificates of oaths administered by any government official in his official capacity or acknowledgement by any government official in performance of his official duty c. Written appearance in any court by any government official in his official capacity

Answer
d. Certificates of the administration of oaths to any person as to the authenticity of any paper required to be filed in court by any person or party thereto, whether the proceedings be civil or criminal e. Papers and documents filed in court by or for the national, provincial, city or municipal governments f. Affidavits of poor persons for the purpose of proving poverty

Answer
g. Statements and other compulsory information required of persons or corporations by the rules and regulations of the national, provincial, city or municipal government exclusively for statistical purposes and which are wholly for the use of the Bureau or office in which they are filed, and not at the instance or for the use or benefit of the person filing them h. Certified copies and other certificates placed upon documents, instruments and papers for the national, provincial, city or municipal governments made at the instance and for the sole use of some other branch of the national,

Answer

i. Certificates of the assessed value of lands, not exceeding P200 in value assessed, furnished by the provincial, city or municipal Treasurer to applicants for registration of title to land

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Questions # 5

What are the implications of failure to stamp taxable documents?

Answer

a. The untaxed document will not be recorded, nor will it or any copy thereof or any record of transfer of the same be admitted or used in evidence in court until the requisite stamp or stamps have been affixed thereto and cancelled b. No notary public or other officer authorized to administer oaths will add his jurat or acknowledgment to any document subject to Documentary Stamp Tax unless the proper documentary stamps are affixed thereto and cancelled.

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SEC. 201. Effect of Failure to Stamp Taxable Document.
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An instrument, document or paper which is required by law to be stamped and which has been signed, issued, accepted or transferred without being duly stamped, shall not be recorded, nor shall it or any copy thereof or any record of transfer of the same be admitted or used in evidence in any court until the requisite stamp or stamps are affixed thereto and cancelled.

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Form
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Sample … Refer to form.

1) SEC. 1 7 3 . St a m p Ta xe s D ocu m e n t s, Loa n Ag r e e m e n t s, In st r u m e n t s Pa p e r s.

Up on and

Upon docum ent s, inst rum ent s, loan agreem ent s and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following Sections of this Title, by the person making, signing, issuing, accepting, or transferring the same wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines, and the same time such act is done or transaction had:Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax.

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SEC. 174. Stamp Tax on Debentures and Certificates of Indebtedness.
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On all debentures and certificates of indebtedness issued by any association, company or corporation, there shall be collected a documentary stamp tax of One peso and fifty centavos (P1.50) on each Two hundred pesos (P200), or fractional part thereof, of the face value of such documents.

SEC. 175. Stamp Tax on Original Issue of Shares of Stock.
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On every original issue, whether on organization, reorganization or for any lawful purpose, of shares of stock by any association, company or corporation, there shall be collected a documentary stamp tax of Two pesos (P2.00) on each Two hundred pesos (P200), or fractional part thereof, of the par value, of such shares of stock: Provided, That in the case of the original issue of shares of stock without par value the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration for the issuance of such shares of stock: Provided, further, That in the case of stock dividends, on the actual value represented by each share.

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SEC. 176. Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Duebills, Certificates of Obligation, or Shares of Certificates of Stock.
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On all sales, or agreements to sell, or memoranda of sale, or deliveries, or transfer of due-bills, certificates of obligation, or shares of certificates of stock in any association, company, or corporation, or transfer of such securities by assignment in blank, or by delivery, or by any paper or agreement, or memorandum or other evidences of transfer or sale whether entitling the holder in any manner to the benefit of such duebills, certificates of obligation or stock, or to secure the future payment of money, or for the future transfer of any due-bill, certificate of obligation or stock, there shall be collected a documentary stamp tax of One peso and fifty centavos (P1.50) on each Two undred pesos (P200) or fractional part thereof, of the par value of such due-bill, certificate of obligation or stock; Provided, That only one tax shall be collected on each sale or transfer of stock or securities from one person to another, regardless of whether or not a certificate of stock or obligation is issued, indorsed, or delivered in pursuance of such sale or transfer: and, Provided, further, That in the case of stock without par value the amount of documentary stamp tax herein prescribed shall be equivalent to twenty-five percent (25%) of the documentary stamp tax paid upon the original issue of said stock.

SEC. 177. StampTax on Bonds, Debentures, Certificate of Stock or Indebtedness Issued in Foreign Countries.
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On all bonds, debentures, certificates of stock, or certificates of indebtedness issued in any foreign country, there shall be collected from the person selling or transferring the same in the Philippines, such as tax as is required by law on similar instruments when issued, sold or transferred in the Philippines.

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SEC. 178. Stamp Tax on Certificates of Profits or Interest in Property or Accumulations.
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On all certificates of profits, or any certificate or memorandum showing interest in the property or accumulations of any association, company or corporation, and on all transfers of such certificates or memoranda, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Two hundred pesos (P200), or fractional part thereof, of the face value of such certificate or memorandum.

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SEC. 179. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not Bearing Interest, and Other Instruments.
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On each bank check, draft, or certificate of deposit not drawing interest, or order for the payment of any sum of money drawn upon or issued by any bank, trust company, or any person or persons, companies or corporations, at sight or on demand, there shall be collected a documentary stamp tax of One peso and fifty centavos (P1.50).

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SEC. 180. Stamp Tax on All Bonds, Loan greements, promissory Notes, Bills of Exchange, Drafts, Instruments and Securities Issued by the Government or Any of its Instrumentalities, Deposit Substitute Debt Instruments, Certificates of Deposits Bearing Interest and Others Not Payable on Sight or Demand.
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On all bonds, loan agreements, including those signed abroad, wherein the object of the contract is located or used in the Philippines, bills of exchange (between points within the Philippines), drafts, instruments andsecurities issued by the Government or any of its instrumentalities, deposit substitute debt instruments, certificates of deposits drawing interest, orders for the payment of any sum of money otherwise than at sight or on demand, on all promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation, and on each renewal of any such note, there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such agreement, bill of exchange, draft, certificate of deposit, or note: Provided, That only one documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to secure such loan, whichever will yield a higher tax: Provided, however, That loan agreements or promissory notes the aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000) executed by an individual for his purchase on installment for his personal use or that of his family and not for business, resale, barter or hire of a house, lot, motor vehicle, appliance or furniture shall be exempt from the payment of the documentary stamp tax provided under this Section.

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SEC. 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others.
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Upon any acceptance or payment of any bill of exchange or order for the payment of money purporting to be drawn in a foreign country but payable in the Philippines, there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such bill of exchange, or order, or the Philippine equivalent to such value, if expressed in foreign currency.

SEC. 182. Stamp Tax on Foreign Bills of Exchange and Letters of Credit.
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On all foreign bills of exchange and letters of credit (including orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons) drawn in but payable out of the Philippines in a set of three (3) or more according to the custom of merchants and bankers, there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such bill of exchange or letter of credit, or the Philippine equivalent of such face value, if expressed in foreign currency.

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SEC. 183. Stamp Tax on Life Insurance Policies.
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On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Two hundred pesos (P200), or fractional part thereof, of the amount insured by any such policy.

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SEC. 184. Stamp Tax on Policies of Insurance Upon Property.
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On all policies of insurance or other instruments by whatever name the same may be called, by which insurance shall be made or renewed upon property of any description, including rents or profits, against peril by sea or on inland waters, or by fire or lightning, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Four pesos (P4.00), or fractional part thereof, of the amount of premium charged: Provided, however, That no documentary stamp tax shall be collected on reinsurance contracts or on any instrument by which cession or acceptance of insurance risks under any

SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies.
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On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage or liability made or renewed by any person, association, company or corporation transacting the business of accident, fidelity, employer’s liability, plate, glass, steam, boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance), and all bonds, undertakings, or recognizances, conditioned for the performance of the duties of any office or position, for the doing or not doing of anything therein specified, and on all obligations guaranteeing the validity or legality of any bond or other obligations issued by any province, city, municipality, or other public body or organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be

SEC. 186. Stamp Tax on Policies of Annuities and Pre-Need Plans.
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On all policies of annuities, or other instruments by whatever name the same may be called, whereby an annuity may be made, transferred or redeemed, there shall be collected a documentary stamp tax of One peso and fifty centavos (P1.50) on each Two hundred pesos (P200) or fractional part thereof, of the capital of the annuity, or should this be unknown, then on each Two hundred (P200) pesos, or fractional part thereof, of thirty-three and one-third (33 1/3) times the annual income. On pre-need plans, the documentary stamp tax shall be Fifty centavos (P0.50) on each Five hundred pesos (P500), or

SEC. 187. Stamp Tax on Indemnity Bonds.
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On all bonds for indemnifying any person, firm or corporation who shall become bound or engaged as surety for the payment of any sum of money or for the due execution or performance of the duties of any office or position or to account for money received by virtue thereof, and on all other bonds of any description, except such as may be required in legal proceedings, or are otherwise provided for herein, there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on each Four pesos (P4.00), or fractional part thereof, of the premium charged.

SEC. 188. Stamp Tax on Certificates.
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On each certificate of damages or otherwise, and on every certificate or document issued by any customs officer, marine surveyor, or other person acting as such, and on each certificate issued by a notary public, and on each certificate of any description required by law or by rules or regulations of a public office, or which is issued for the purpose of giving information, or establishing proof of a fact, and not otherwise specified herein, there shall be collected a documentary stamp tax of Fifteen pesos (P15.00).

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SEC. 189. Stamp Tax on Warehouse Receipts.
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- On each warehouse receipt for property held in storage in a public or private warehouse or yard for any person other than the proprietor of such warehouse or yard, there shall be collected a documentary stamp tax of Fifteen pesos (P15.00):Provided, That no tax shall be collected on each warehouse receipt issued to any one person in any one calendar month covering property the value of which does not exceed Two hundred pesos (P200).

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SEC. 190. Stamp Tax on Jai-Alai, Horse Racing Tickets, lotto or Other Authorized Numbers Games.
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On each jai-alai, horse race ticket, lotto, or other authorized number games, there shall be collected a documentary stamp tax of Ten centavos (P0.10): Provided, That if the cost of the ticket exceeds One peso (P1.00), an additional tax of Ten centavos (P0.10) on every One peso (P1.00, or fractional part thereof, shall be collected.

SEC. 191. Stamp Tax on Bills of Lading or Receipts.
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On each set of bills of lading or receipts (except charter party) for any goods, merchandise or effects shipped from one port or place in the Philippines to another port or place in the Philippines (except on ferries across rivers), or to any foreign port, there shall be collected documentary stamp tax of One peso (P1.00), if the value of such goods exceeds One hundred pesos (P100) and does not exceed One Thousand pesos (P1,000); Ten pesos (P10), if the value exceeds One thousand pesos (P1,000): Provided, however, That freight tickets covering goods, merchandise or effects carried as

SEC. 192. Stamp Tax on Proxies.
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On each proxy for voting at any election for officers of any company or association, or for any other purpose, except proxies issued affecting the affairs of associations or corporations organized for religious, charitable or literary purposes, there shall be collected a documentary stamp tax of Fifteen pesos (P15.00).

SEC. 193. Stamp Tax on Powers of Attorney.
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On each power of attorney to perform any act whatsoever, except acts connected with the collection of claims due from or accruing to the Government of the Republic of the Philippines, or the government of any province, city or municipality, there shall be collected a documentary stamp tax of Five pesos (P5.00).

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SEC. 194. Stamp Tax on Leases and Other Hiring Agreements.
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On each lease, agreement, memorandum, or contract for hire, use or rent of any lands or tenements, or portions thereof, there shall be collected a documentary stamp tax of Three pesos (P3.00) for the first Two thousand pesos (P2,000), or fractional part thereof, and an additional One peso (P1.00) for every One Thousand pesos (P1,000) or fractional part thereof, in excess of the first Two thousand pesos (P2,000) for each year of the term of said contract or agreement.

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SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust.
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On every mortgage or pledge of lands, estate, or property, real or personal, heritable or movable, whatsoever, where the same shall be made as a security for the payment of any definite and certain sum of money lent at the time or previously due and owing of forborne to be paid, being payable and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or otherwise converted into money which shall be and intended only as security, either by express stipulation or otherwise, there shall be collected a ocumentary stamp tax at the following rates: (a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos (P20.00). (b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (P10.00). On any mortgage, pledge, or deed of trust, where the same shall be made as a security for the payment of a fluctuating account or future advances without fixed limit, the documentary stamp tax on such mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the time of the execution of the mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates specified above: Provided, however, That if the full amount of the loan or credit, granted under the mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the time of the execution of the mortgage, pledge or deed of trust. However, if subsequent advances are made on such mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates specified above: Provided, however, That if the full amount of the loan or credit, granted under the mortgage, pledge or

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SEC. 196. Stamp tax on Deeds of Sale and Conveyances of Real Property. n

On all conveyances, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement, or other realty sold shall be granted, assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates herein below prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of this Code, whichever is higher: Provided, That when one of the contracting parties is the Government the tax herein imposed shall be based on the actual consideration. (a) When the consideration, or value received or contracted to be paid for such realty aftermaking proper allowance of any encumbrance, does not exceed One thousand pesos (P1,000) fifteen pesos (P15.00). (b) For each additional One thousand Pesos (P1,000), or fractional part thereof in excess of One thousand pesos (P1,000) of such consideration or value, Fifteen pesos (P15.00). When it appears that the amount of the documentary stamp tax payable hereunder has been reduced by an incorrect statement of the consideration in any conveyance, deed, instrument or writing subject to such tax the Commissioner, provincial or city Treasurer, or other revenue

SEC. 197. Stamp Tax on Charter Parties and Similar Instruments.

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On every charter party, contract or agreement for the charter of any ship, vessel or steamer, or any letter or memorandum or other writing between the captain, master or owner, or other person acting as agent of any ship, vessel or steamer, and any other person or persons for or relating to the charter of any such ship, vessel or steamer, and on any renewal or transfer of such charter, contract, agreement, letter or memorandum, there shall be collected a documentary stamp tax at the following rates: (a) If the registered gross tonnage of the ship, vessel or steamer does not exceed one thousand (1,000) tons, and the duration of the charter or contract does not exceed six (6) months, Five hundred pesos (P500); and for each month or fraction of a month in excess of six (6) months, an additional tax of Fifty pesos (P50.00) shall be paid. (b) If the registered gross tonnage exceeds one thousand (1,000) tons and does not exceed ten thousand (10,000) tons, and the duration of the charter or contract does not exceed six (6) months, One thousand pesos (P1,000); and for each month or fraction of a month in excess of six (6) months, an additional tax of One hundred pesos (P100) shall be paid. (c) If the registered gross tonnage exceeds ten thousand (10,000) tons and the duration of the charter or contract does not exceed six (6) months, One thousand five hundred pesos (P1,500); and for each month or fraction of a month in excess of six (6) months, an additional tax of One hundred fifty pesos (P150) shall be paid.

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2 ) File Separate tax returns
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A separate assessment allow each spouse to claim personal tax relief of RM 8000 while a joint tax return allows one spouse to claim a wife or husband relief of RM 3000 Tax Deduction : Each spouse earning Taxable income can claim personal tax relief of RM 8000 by filling separate tax returns.

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3) Ask your employer to increase your EPF contributions
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Contributions to the employees Provident Fund (EPF) by employers are tax-exempt for the employees. To reduce your taxable income , ask your employer to reduce your EPF monthly salary but increase your EPF contributions by the same amount. Tax Deduction : The deductible amount from your taxable income is dependent on the arrangement between you and your employer. For Mr A : Mr A agrees to takle monthly pay cut of RM 1000 for an equivalent increase in his EPF contributions by his employer.At the end of the year , he receives an additional RM 12000 in his pension fund but his taxable income is reduced by the same amount. The tax saving that he makes is RM 2880 ( RM12000@24%)

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4) Change your cash remuneration to cash reimbursement
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Fixed allowances given by your employer each month for entertainment and housing or parking fees are taxable at your tax bracket. Change this to a “ reimbursement “ based on receipt and you are not taxed on the amount received. Tax Deduction : The deductible amount from your taxable income is dependent on the arrangement between you and your employer For Mr A : By Changing a yearly fixed allowance of RM 6000 to a reimbursement of the same amount and supported by receipts , Mr A makes a tax saving of RM1440 ( RM 6000@24%)

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5) Ask for a company car
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A car given by your employer is regarded as a benefit-in kind ( BIK ) and taxable. However , a company car is advantageous for taxpayers because the preset tax scale for cars is much lower than the actual cost of buying and maintaining a car. According to the Public ruling for BIKs , the tax payer must pay RM 3600 in taxes every year, for a car worth RM 75000 If the employer pays for fuel , the tax payer is taxed an additional RM 1200 for this BIK Tax deduction : Whether you benefit from a company car depends on the value of the car and your current tax bracket. Do the calculations to ascertain your tax deduction.

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6) Make charitable contributions
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gift of money to an approved charitable organisation entitles you to a tax deduction for the amount given.

From 2008 onward , this amount cannot exceed 7% of your aggregate income. However Charitable donations that were made in 2007 are not subject to this limit. Tax deduction : Up to 7% of your aggregate taxable income can be reduced with this deduction. For Mr A : With his taxable income of RM 90000 , Mr A can make a donation of RM 6300 .This deduction results in a saving of RM 1512 ( RM 6300@24%)

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7) Take Up postgraduate studies
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A relief of RM 5000 per year for any course of study at the Master’s or doctorate level , the government announced in 2007 Budget the widening of the scope to all postgraduate studies. The course does not have to be done full time , but “ must be in an institution or professional body in Malaysia recognised by the government or approved by Minister of Finance Tax Deduction : RM 5000 per individual For Mr A : As he completes his master’s degree . Mr A can enjoy tax saving RM 1200 from his taxable income ( RM 5000@24%)

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8) Read , Read , Read
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Starting from YA 2007 , taxpayers can claim a personal tax deduction to RM 1000 for purchase of books, journals , magazines and other publications. To maximise this generous deduction , consider giving books as gifts. Tax Deduction : RM 1000 per individual For Mr A : With book purchases of RM 1000 Mr A saves RM 240 ( RM 1000@24%)

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9) Get Sporty
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You will get a deduction of RM 300 for each year of assessment for the purchase of sports and exercise equipment for any sports activities defined under the Sport Development Act 1997 “ Tax Deduction : RM 300 per individual For Mr A : By buying RM 300 worth of sports equipment , Mr A makes a saving of RM 71 ( RM 300@24%)

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10) Buy Life Insurance
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The maximum tax relief is RM 6000 a year for premiums paid to an insurance company for life Insurance or deferred annuity plans. This Limit is shared with your contributions to the EPF, other employer schemes and contributions under any written law relating to widows or orphan pensions Tax deduction : RM 6000 per individual ( shared with your EPF contributions )

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11) Take out a Medical or Education policy
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You can claim deductions of up to RM 3000 a year for education and medical insurance ( combined limit for both ) This includes medical coverage that is part of life insurance policy( the limit for life insurance is in move 10 ) A policy of this kind can be written for you , your spouse or your child. Tax deduction : RM 3000 per individual For Mr A :After acquiring an education policy for his children , Mr A makes a saving of RM 720 ( RM 3000@ 24%)

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12) Pay your parents’ medical bills
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You are able to claim up to RM 5000 for payments towards your parents’ medical bills. Tax deduction : RM 5000 per individual For Mr A : By paying his parents’ medical bills , Mr A makes a saving of RM 1200 ( RM5000@ 24%)

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13) Medical
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Claim a deduction of up to RM 500 per tax year for a full medical examination and RM 5000 for medical expenses for yourself, spouse or child for serious disease. If you have also spent money on full medical in the same year, your claim will be reduce the RM5000 available for serious disease. A separate tax reduction of up to RM5000 a year is given for necessary basic supporting equipment for disabilities suffered by yourself ,spouse, children or parent Tax Deduction : RM 500 per individual for full medical check-up. RM5000 for serious diseases or basic supporting equipment For Mr A : He claimed for a full medical check-up .The deduction give him of RM 120 ( RM 500@24%)

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14) Pay Zakat
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If you are a muslim ,paying any amount in zakat , fitrah or other obligation Islamic dues will entitle you to a tax rebate. Tax deduction : The Amount of zakat that you pay

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15) Buy a Computer
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A deduction of up to RM 3000 can be claimed once every three years for the purchase of computers , printers and bundled software . The similar i9ncentive given previously in the form of a tax rebate was withdrawn with effect from 2007 Tax deduction : RM 3000 once every three years. For Mr A : Getting a computer for RM3000 gives him a saving of RM 720 ( RM 3000@24%)

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16) Hire a Tax Consultant
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Consider hiring a tax consultant to explore ways your remuneration package can be structured to maximise your tax savings. Those who are earning at least RM5000 every month should be able to justify the cost of hiring a tax adviser with their tax savings Tax saving : this is dependent on your personal circumstances and the deal that you negotiate with your employer.

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Tax – Savvy Investments
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You may be looking at some investment this year. There are savings to be made from certain investments , from a tax point of view. However , some moves may be advantageous if you fall into a higher tax bracket . Besides looking for tax-exempt investment , here are four investment moves to explore

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17) Buy property valued below or at RM250000
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Stamp duty must be paid on all property transactions that involve a change of legal ownership. Last year’s budget ( 2008 ) announced a 50% stamp duty exemption for the purchase of houses that do not exceed RM250000 The maximum tax savings that can be found here is RM2000 ( for a house worth RM250000 ) This exemption is only given for one house per individual and applies to sale and purchase agreement signed between September 2007 and December 2010

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18) Buy Similar property
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Similar property can be grouped together for income tax purposes. The IRB has indentified categories such as residential , commercial and vacant land. If you own two property in the same category , you can reduce the taxable profit made from one property with the loss, if any incurred from the other. Property investors are also exempt from real property gains tax for all disposals on on or after 1st April 2007. However , taxpayers who are trading property – buying and selling in order to generate income – are liable to income tax. “ This exemption is meant for taxpayers who invest in property for a passive income” Tax deduction : Taxable income received from renting out a property in a particular grouping such as residential can be reduced if a loss was incurred by another property in the same group.

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19) Buy shares
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( page1 )

Invest in dividend-yielding shares if your t ax bracket is n above 26%.

n A new single-t ier syst em w as est ablished under t he nat ional Budget for dividends received by shareholders.
Com panies pay t ax of 26% (YA2008) and shareholders receive a net dividend t hat is exem pt from t ax and does not need t o be filed w it h t he IRB “ Shareholders who fall int o higher t ax bracket s [ higher t han 26%] are essent ially [ get t ing a] saving on t he difference.
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“ The single-t ier dividends is int ended t o sim plify t he t ax filing process for individuals,” says Chua Tia Guan, execut ive direct or and head of t ax and financial planning at Great Vision Wealt h Managem ent Sdn Bhd.
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“ In t he past , refunds had been slow. From now on, t here is no need t o declare or apply for a refund. And as corporat e t axes are falling, com panies will be able t o pass on m ore profit s t o t heir shareholders [ in t he form of dividends] ,” he says.
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19) Buy shares
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( page2)

However, not all companies will go under the single-tier system immediately as some of them might have imputation tax credits left, which they can use till 2013. Shareholders who receive dividends from companies using the imputation system will have to report the amount received and claim a tax refund if his personal tax rate is lower than the company’s tax rate (27% in YA2007, 26% in YA2006). Shareholders can identify the system used by the company as it is stated in the dividend vouchers. Tax Deduction Your tax saving is the difference between your tax bracket and 26% (the corporate tax rate). This is only applicable to dividends given out by companies using the single-tier system.

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20) Invest in REITs
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You can go into real estate investment trusts ( REITS )if your tax bracket above 15%. There are 11 REITs listed on the Main Board. The tax on dividends given out by these property-related investments are taxed at 15% as compared to tax on dividend at 26% ( under the new single –tier dividend system ) Only tax brackets exceeding 15% would enjoy some tax savings by investing in REITs Since the distributions received by individual taxpayers have been subject to that 15% , the taxpayers are not required to declare the amount in their tax return. Tax deduction: Your tax saving is the difference between your personal tax bracket and 15%

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Moves for Business Owners
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The first rule that small-business owners should implement with regards to their taxes is to take it seriously. Spend some time strategising for your business activities to save hundreds or thousands ringgit. Here are six

21) Maintain books and records from Day 1
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Keep separate bank accounts for personal and business transactions and establish a basic accounting system. The inland Revenue Board recognises business income on an accrual basis . This means that as long as a transaction is completed, either a sale of goods or a provision of service , its value is immediately treated as business income and is taxable. However , unpaid transaction can be reduced your taxable income. Any expenses made fro the business can be deducted from the business income. The General rule is that expenses can be deducted if it is wholly and exclusively incurred in earning your business income. So Keep the receipts for all supplies that you buy for your business However there is no deduction for capital expenditure although some

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22) Time the purchase and use of your fixed assets
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Capital allowances are permitted for certain business assets such as equipment , machinery , vehicles computers and software. The amount of allowances permitted each year depends on the category that asset falls into .( refer to Public Ruling No 2/2001 for the deductible rate of your assets. The first capital allowance is given for the accounting year in which the asset was purchased and used by the business. If you are contemplating a purchase , try to do it before the end of the accounting year, instead of just after , to claim the capital allowance against your business income. If you are buying the asset with a hire-purchase loan, allowance can only be claimed as and when repayments are made to the lender.

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23. Buys a company car
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If you are a sole trader or a partner in a business, any car or vehicle that is used for business purposes can bring about tax deductions. “The business income is reduced by the car’s financing cost if you buy the car on hire-purchase. You are also deduct a certain amount for capital allowances every year, Before implementing this tax-saving technique, business owners must identify a percentage of the car’s use that is for private activities. As there is no definite ruling on how to determine this proportion for private use, business owners must apply a fair and reasonable figure that can withstand scrutiny. “Estimating private mileage is an exercise that must be undertaken in accordance to the facts on your actual usage. And remember to record all running expenses to make these deductions,” says Thornton.

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24. Hire your spouse or family member
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An effective tax-saving strategy is to hire a spouse or family member. “For example, a husband who is a business owner can hire his wife. The wife’s salary is tax deductible but you must be able to show that she is doing something to earn it, In this situation, you would have to contribute to your wife’s Employees Provident Fund (EPF) savings and that amount entitles her to tax relief. Another option is to make your spouse or family member a partner in your business. This allows you to divide the income made by the business between the both of you. As a partnership has no tax liability, both partners are liable for tax for the respective portion of business income that each earns. “By opting for separate tax assessments, a husband and wife who are partners in a business can each claim individual tax relief.

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25. Implement a process to ‘chase after’ unpaid debts
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Unfortunately, small business owners can complete a sale or service but might not receive payment, in full or in part. At the end of an accounting year, a debt, which is estimated to be wholly or partly irrecoverable, can be deducted from your business income and this lowers your tax bill. “Tax authorities tend to look closely at bad-debt write-offs and provisions (for debts that are expected to be partly recoverable). So put in some effort to recover the debt before deeming it irrecoverable and you must evaluate each debt separately. The process that you put in place to recover your unpaid debts should be documented and any conclusion that you make should be supported with documentation as well. For example, you must show why it it not cost effective to take legal action against a customer. However, if you eventually recover bad debts that have been written off or partially written off, you must include this amount in your taxable income for the year that you received payment.

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26. Dedicate a space in your home office
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Working in your own house can result in tax deductions for the costs related to your “home office”. This includes electricity, telephone bills, quit rent and service charges of apartments. The best way to claim for these deductions is to dedicate a room or place as the working environment. “A dedicated area helps to identify expenses that are specifically for business purposes and can be claimed in full. Items that are used by the business as well as personal use, such as electricity, must be apportioned. One way to do so is on the basis of floor area. If the business owner pays rent for the working area, this expense can be deducted from the business income. This applies to rent that is paid to a spouse who owns the home but is not involved in the business. However, this is strategy is only effective if the spouse who is not involved in the business is taxed at a low tax rate as rental received must be declared as taxable income. If this is an appropriate strategy for the business owner, A tenancy agreement that specifies rental for a specific part of the house at the prevailing market rate.

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