You are on page 1of 156

GUIDE TO PHILIPPINE TAX LAW RESEARCH This research guide summarizes the sources of Philippine tax law.

Tax law in the Philippines covers national and local taxes. National taxes refer to national internal revenue taxes imposed and collected by the national government through the Bureau of Internal Revenue (BIR) and local taxes refer to those imposed and collected by the local government. The Tax Code of 1997, Revenue Issuances and BIR Rulings pertaining to national taxes are posted at the BIR website,http://www.bir.gov.ph. National Tax Law I. 1987 Constitution (http://www.supremecourt.gov.ph/constitution/1987) The 1987 Philippine Constitution sets limitations on the exercise of the power to tax. The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. (Article VI, Section 28, paragraph 1) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. (Article VI, Section 29, paragraph 3)

The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restriction as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government (Article VI, Section 28, paragraph 2) The President shall have the power to veto any particular item or items in an appropriation, revenue or tariff bill, but the veto shall not affect the item or items to which he does not object. (Article VI, Section 27, second paragraph) The Supreme Court shall have the power to review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts in x x x all cases involving the legality of any tax, impost, assessment, or toll or any penalty imposed in relation thereto. (Article VIII, Section 5, paragraph) Tax exemptions are limited to those granted by law. However, no law granting any tax exemption shall be passed without the concurrence of a majority of all the members of the Congress. (Article VI, Section 28, par. 4). The Constitution expressly grants tax exemption on certain entities/institutions such as (1) charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and nonprofit cemeteries and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes (Article VI, Section 28, paragraph 3); (2) non-stock non-profit educational

institutions used actually, directly and exclusively for educational purposes. (Article XVI, Section 4(3)) In addition to national taxes, the Constitution provides for local government taxation. (Article X, Section 5) (Article X, Section 6) Parenthetically, the Local Government Code provides that all local government units are granted general tax powers, as well as other revenue-raising powers like the imposition of service fees and charges, in addition to those specifically granted to each of the local government units. But no such taxes, fees and charges shall be imposed without a public hearing having been held prior to the enactment of the ordinance. The levy must not be unjust excessive, oppressive, confiscatory or contrary to a declared national economic policy (Section 186 and 187) Further, there are common limitations to the grant of the power to tax to the local government, such that taxes like income tax, documentary stamp tax, etc. cannot be imposed by the local government. II. Laws

The basic source of Philippine tax law is the National Internal Revenue Law, which codifies all tax provisions, the latest of which is embodied in Republic Act No. 8424 (The Tax Reform Act of 1997). It amended previous national internal revenue codes, which was approved on December 11, 1997. A copy of the Tax Reform Act of 1997, which took effect on January 1, 1998, can be found inhttp://www.bir.gov.ph/issu_nir.html.

Local taxation is treated separately in this Guide. There are, however, special laws that separately provide special tax treatment in certain situations. (See attached matrix on special laws) III. Treaties

The Philippines has entered into several tax treaties for the avoidance of double taxation and prevention of fiscal evasion with respect to income taxes. At present, there are 31 Philippine Tax Treaties in force. Copies are available at the BIR Library and the International Tax Affairs Division of the BIR, which is under the Deputy Commissioner for Legal and Inspection Group. The Philippine Treaty Series, edited and annotated by Haydee Yorac and published by Law Publishing House, University of the Philippines, is available in seven (7) volumes, covering the years 1944 to 1978 . The Philippine Treaty Index, by Benjamin Domingo, covers the years 1978 to 1982. A copy of the Philippine Treaty Index is available in the Department of Foreign Affairs (DFA) Library. These publications contain treaties entered into by the Philippines. Tax privileges and exemptions granted under treaties to which the Philippines is a signatory are recognized under Philippine tax law. Copies of treaties entered into by the Philippines with other countries and/or international organizations, from 1983 up to the present, are available at the DFA Library. IV. Administrative Material

The Secretary of Finance, upon the recommendation of the Commissioner, promulgates needful rules and regulations for the effective enforcement of the provisions of the Tax Code (Section 244, Tax Code of 1997). The Commissioner of Internal Revenue, however, has the exclusive and original power to interpret the provisions of the Tax Code, but subject to review by the Secretary of Finance. Administrative issuances which may be relied upon in interpreting the provisions of the Tax Code, which are signed by the Secretary of Finance, or the Commissioner of Internal Revenue, or his duly authorized representative, come in the form of Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings. Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes. Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the Commissioner may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio. Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices. BIR Rulings are the official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws. Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings are found inhttp://www.bir.gov.ph/hom_issrul.html V. Case Law

In the Philippines, Supreme Court decisions form part of the law of the land. As such, decisions by the Supreme Court (http://www.supremecourt.gov.ph) in the exercise of its power to review, revise, reverse,

modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts cases involving the legality of any tax, impost, assessment, or toll or any penalty imposed in relation thereto are adhered to and recognized as binding interpretations of Philippine tax law. Court of Appeals and Court of Tax Appeals decisions which have become final and executory are also recognized interpretations of Philippine tax law. VI. Treatises and other books

There are no Philippine treatises exclusively devoted to Philippine Tax law but various Philippine authors have come up with annotated versions of the Tax Code. These books can be purchased from Rex Bookstore and Central Law Publishing, Inc. VII. Periodicals

Periodicals on Philippine tax law are the (1) Philippine Revenue Service (copies available in the BIR Library), published by the BIR from 1969-1980; (2) Philippine Revenue Journal (copies available in the BIR Library) which was both published by the Bureau of Internal Revenue from 1969 to 2000; and (3) the Tax Monthly, published by the National Tax Research Center (NTRC) (copies available in the BIR Library and the NTRC). VIII. Local Government Tax Law

Local government taxation in the Philippines is based on the constitutional grant of the power to tax to the local governments.

Local taxes may be imposed, as the Constitution grants, to each local government unit, the power to create its own sources of revenues and to levy taxes, fees, and charges which shall accrue to the local governments (Article X, Section 5). With respect to national taxes, local Government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them (Article X, Section 6). However, certain taxes, such as the following, may not be imposed by local government units: (Section 133, Local Government Code and Tax Law and Jurisprudence by Vitug & Acosta, copyright 2000) (1) Income tax, except when levied on banks and other financial institutions; (2) Documentary stamp tax;

(3) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided in the Local Government Code (Code) (except taxes levied on the transfer of real property ownership under Section 135, and Section 151 of the Code); (4) Customs duties, registration fees of vessels (except license fees imposed under Section 149, and Section 151 of the Code), wharfage on wharves, tonnage dues and all other kinds of customs fees, charges and dues except wharfage on wharves

constructed and maintained by the local government unit concerned; (5) Taxes, fees, charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local governments in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes in any form whatever upon such goods or merchandise; (6) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen; (7) Taxes on business enterprises certified by the Board of Investments as pioneer or non-pioneer for a period of six and four years, respectively, from the date of registration; (8) Excise taxes on articles enumerated under the National Internal Revenue Code and taxes, fees, or charges on petroleum products, but not a tax on the business of importing, manufacturing or producing said products (Patron vs. Pililla, 198 SCRA 82); (9) Percentage tax or value-added tax on sales, barters or exchanges of goods or services or similar transactions thereon (but not fixed graduated taxes on gross sales or on volume of production); (10) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water except as provided by the Code;

(11) Taxes on premiums paid for reinsurance or retrocession; (12) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles; (13) Taxes, fees, or other charges on Philippine products actually exported except as provided by the Code (the prohibition applies to any local export tax, fee, or levy on Philippine export products but not to any local tax, fee, or levy that may be imposed on the business of exporting said products); (14) Taxes, fees or charges on duly organized and registered Countryside and Barangay Business Enterprises (R.A. No. 6810) and on cooperatives (R.A. No. 6938); and (15) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units (Section 133, LGC) The Local Government Code (http://www.comelec.gov.ph/laws/lgc.html) or (http://www.dilg.gov.ph/) contains provisions on the scope and limitation on the exercise of local government taxing power. IX. National Tax Research Center (NTRC)

Constituted under Presidential Decree 74, the NTRC is mandated to conduct continuing research in taxation to

restructure the tax system and raise the level of tax consciousness among the Filipinos, to achieve a faster rate of economic growth and to bring about a more equitable distribution of wealth and income. Specifically, the NTRC performs the following functions: 1. Undertake comprehensive studies on the need for additional revenue for accelerated national development and the sources from which this might most equitably be derived; 2. Re-examine the existing tax system and tax policy structure; 3. Conduct researches on taxation for the purpose of improving the tax system and tax policy; 4. Pass upon all tax measures and revenue proposal; 5. Recommend of such reforms and revisions as may be necessary to improve revenue collection and to formulate sound tax policy and a more efficient tax structure.

Capital Gains Tax is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.

Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property incident thereto. Donor's Tax is a tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer. Estate Tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers which are made by law as equivalent to testamentary disposition. Income Tax is a tax on all yearly profits arising from property, profession, trades or offices or as a tax on a persons income, emoluments, profits and the like.

Percentage Tax is a business tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P550,000 and are not VAT-registered.

Value Added Tax is a business tax imposed and collected from the seller in the course of trade or business on every sale of properties (real or personal) lease of goods or properties (real or personal) or vendors of services. It is an indirect tax, thus, it can be passed on to the buyer. Withholding Tax on Compensation is the tax withheld from individuals receiving purely compensation income. Expanded Withholding Tax is a kind of withholding tax which is prescribed only for certain payors and is creditable against the income tax due of the payee for the taxable quarter year. Final Withholding Tax is a kind of withholding tax which is prescribed only for certain payors and is not creditable against the income tax due of the payee for the taxable year. Income Tax withheld constitutes the full and final payment of the Income Tax due from the payee on the said income. Withholding Tax on Government Money Payments is the withholding tax withheld by government offices and instrumentalities, including government-owned or -controlled corporations and local government units, before making any payments to

private individuals, corporations, partnerships and/or associations.

Capital Gains Tax Contents


Description Final Capital Gains Tax for Onerous Transfer of Real Property Classified as Capital Assets (Taxable and Exempt) Capital Gains Tax for Onerous Transfer of Shares of Stocks Not Traded Through the Local Stock Exchange Annual Capital Gains Tax for Onerous Transfer of Shares of Stocks Not Traded Through the Local Stock Exchange Related Revenue Issuances Codal Reference Frequently Asked Questions

Description
Capital Gains Tax is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.

Final Capital Gains Tax for Onerous Transfer of Real Property Classified as Capital Assets (Taxable and Exempt)
Tax Form BIR Form 1706 Final Capital Gains Tax Return (For Onerous Transfer of Real Property Classified as Capital Assets Taxable and Exempt) Documentary Requirements 1) One original copy and one photocopy of the Notarized Deed of Sale or Exchange 2) Photocopy of the Transfer Certificate of Title; Original Certificate of Title; or Condominium Certificate of Title 3) Certified True Copy of the tax declaration on the lot and/or improvement during nearest time of sale 4) Certificate of No Improvement issued by the Assessors office where the property has no declared improvement, if applicable or Sworn Declaration/Affidavit of No Improvement by at least one (1) of the transferees 5) Copy of BIR Ruling for tax exemption confirmed by BIR, if applicable 6) Duly approved Tax Debit Memo, if applicable 7) Sworn Declaration of Interest as prescribed under Revenue Regulations 13-99, if the transaction is tax-exempt 8) Documents supporting the exemption

Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures. Procedures File the Capital Gains Tax return 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 property is located. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer. Tax Rates For real property - 6%. Deadline

Within 30 days after each sale, exchange, transfer or other disposition of real property. Capital Gains Tax for Onerous Transfer of Shares of Stocks Not Traded Through the Local Stock Exchange
Tax Form BIR Form 1707 - Capital Gains Tax Return (For Onerous Transfer of Shares of Stocks Not Traded Through the Local Stock Exchange) Documentary Requirements 1) One original copy and one photocopy of the Notarized Deed of Sale/ Exchange of shares of stock

2) Photocopy of the Deed of Acquisition or proof of cost/ fair market value of the stocks at the time of acquisition 3) Photocopy of certificate of shares of stock 4) Photocopy of evidences of expenses related to sale 5) Photocopy of the Audited Financial Statements of issuing corporation nearest the date of sale or transfer 6) Duly approved Tax Debit Memo, if applicable Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures. Procedures File the Capital Gains Tax return 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 of stocks is registered. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer. Tax Rates For Shares of Stocks Not Traded in the Stock Exchange - Not over P100,000 - 5% - Any amount in excess of P100,000 - 10% Deadline Within 30 days after each sale or disposition of shares of stocks or real property. In case of installment sale, the return shall be filed within 30 days following the receipt of the first

down payment and within 30 days following the subsequent installment payments. Only one return shall be filed for multiple transactions within the day.

Annual Capital Gains Tax for Onerous Transfer of Shares of Stocks Not Traded Through the Local Stock Exchange
Tax Form BIR Form 1707A - Annual Capital Gains Tax Return (For Onerous Transfer of Shares of Stocks Not Traded Through the Local Stock Exchange) Procedures File the Capital Gains Tax return 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 of stocks is registered. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer. Tax Rates For Shares of Stocks Not Traded in the Stock Exchange - Not over P100,000 - 5% - Any amount in excess of P100,000 - 10%

Deadline Individual Taxpayers On or before April 15 of each year covering all stock transactions of the preceding taxable year

Corporate Taxpayers On or before the fifteenth (15) day of the fourth (4) month following the close of the taxable year covering all transactions of the preceding taxable year

Related Revenue Issuances


RR No. 2-98, RR No. 4-99, RR No.13-99, RR No. 7-2003 and RR No. 17-2003

Codal Reference
Sec. 24C, Sec. 24D, Sec. 27D(2), Sec. 27D(5), Sec. 28(A)(7)(c), Sec. 28(B)(5)(c) and Sec. 39A of the National Internal Revenue Code (NIRC)

Frequently Asked Questions


1) What is meant by capital asset? Capital asset means property held by the taxpayer (whether or not connected with his trade or business), but does not include a) stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year; or b) property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; or

c) property used in the trade or business of a character which is subject to the allowance for depreciation provided in subsection (F) of Sec. 34 of the Code; or d) real property used in trade or business of the taxpayer. 2) What is meant by ordinary asset? Ordinary asset refers to all properties specifically excluded from the definition of capital assets under Sec. 39 (A)(1) of the NIRC. 3) What is meant by real property? Real property shall have the same meaning attributed to that term under Article 415 of Republic Act No. 386, otherwise known as the Civil Code of the Philippines. 4) What does a real estate dealer refer to? A real estate dealer refers to any person engaged in the business of buying and selling or exchanging real properties on his own account as a principal and holding himself out as a full or part-time dealer in real estate. 5) What does a real estate developer refer to? Real estate developer refers to any person engaged in the business of developing real properties into subdivisions, or building houses on subdivided lots, or constructing residential or commercial units, townhouses and other similar units for his own account and offering them for sale or lease.

6) What does a real estate lessor refer to? Real estate lessor refers to any person engaged in the business of leasing or renting real properties on his own account as a principal and holding himself out as a lessor of real properties being rented out or offered for rent. 7) Who are considered engaged in the real estate business? Taxpayers who are considered engaged in the real estate business refer collectively to real estate dealers, real estate developers and/or real estate lessors. A taxpayer whose primary purpose of engaging in business, or whose Articles of Incorporation states that its primary purpose is to engage in the real estate business shall be deemed to be engaged in the real estate business. 8) Who are considered not engaged in the real estate business? Taxpayers who are considered not engaged in the real estate business refer to persons other than real estate dealers, real estate developers and/or real estate lessors. 9) Who are considered habitually engaged in the real estate business? Real estate dealers or real estate developers who are registered with the Housing and Land Use Regulatory Board (HULRB) or HUDCC

10)How can you determine whether a particular real property is a capital asset or an ordinary asset? a) Real properties shall be classified with respect to taxpayers engaged in the real estate business as follows: i) All real properties acquired by the real estate dealer shall be considered as ordinary assets. ii) All real properties acquired by the real estate developer, whether developed or undeveloped as of the time of acquisition, and all real properties which are held by the real estate developer primarily for sale or for lease to customers in the ordinary course of his trade or business or which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year and all real properties used in the trade or business, whether in the form of land, building, or other improvements, shall be considered as ordinary assets. iii) All real properties of the real estate lessor, whether land, building and/or improvements, which are for lease/rent or being offered for lease/rent, or otherwise for use or being used in the trade or business shall likewise be considered as ordinary assets. iv) All real properties acquired in the course of trade or business by a taxpayer habitually engaged in the sale of real property shall be considered as ordinary assets. Note: Registration with the HLURB or HUDCC as a real estate dealer or developer shall be sufficient for a taxpayer to be considered as habitually engaged in the sale of real estate. If the taxpayer is not registered with the HLURB or HUDCC as a real estate dealer or developer, he/it may nevertheless be

deemed to be engaged in the real estate business through the establishment of substantial relevant evidence (such as consummation during the preceding year of at least six (6) taxable real estate sale transactions, regardless of amount; registration as habitually engaged in real estate business with the Local Government Unit or the Bureau of Internal Revenue, etc.) b) In the case of taxpayer not engaged in the real estate business, real properties, whether land, building, or other improvements, which are used or being used or have been previously used in trade or business of the taxpayer shall be considered as ordinary assets. c) In the case of taxpayers who changed its real estate business to a non-real estate business, real properties held by these taxpayer shall remain to be treated as ordinary assets. d) In the case of taxpayers who originally registered to be engaged in the real estate business but failed to subsequently operate, all real properties acquired by them shall continue to be treated as ordinary assets. e) Real properties formerly forming part of the stock in trade of a taxpayer engaged in the real estate business, or formerly being used in the trade or business of a taxpayer engaged or not engaged in the real estate business, which were later on abandoned and became idle, shall continue to be treated as ordinary assets. Provided however, that properties classified as ordinary assets for being used in business by a taxpayer engaged in business other than real estate business are automatically converted into capital assets upon showing proof that the same have not been used in business for more than two years prior to the

consummation of the taxable transactions involving said properties f) Real properties classified as capital or ordinary asset in the hands of the seller/transferor may change their character in the hands of the buyer/transferee. The classification of such property in the hands of the buyer/transferee shall be determined in accordance with the following rules: i) Real property transferred through succession or donation to the heir or donee who is not engaged in the real estate business with respect to the real property inherited or donated, and who does not subsequently use such property in trade or business, shall be considered as a capital asset in the hands of the heir or donee. ii) Real property received as dividend by the stockholders who are not engaged in the real estate business and who do not subsequently use such property in trade or business, shall be considered as a capital asset in the hands of the recipients even if the corporation which declared the real property dividends is engaged in real estate business. iii) The real property received in an exchange shall be treated as ordinary asset in the hands of the case of a tax-free exchange by taxpayer not engaged in real estate business to a taxpayer who is engaged in real estate business, or to a taxpayer who, even if not engaged in real estate business, will use in business the property received in exchange. g) In the case of involuntary transfers of real properties, including expropriations or foreclosure sale, the involuntariness of such sale shall have no effect on the classification of such real property in the hands of the involuntary seller, either as capital asset or ordinary asset as the case may be.

11) What is the basis in the valuation of property? The value of the real property will be based on the selling price, fair market value as determined by the Commissioner (zonal value) or the fair market value as shown in the schedule of values of the Provincial or City Assessor, whichever is higher. If there is no zonal value, the taxable base is whichever is higher of the gross selling price per sales documents or the fair market value that appears in the latest tax declaration. If there is an improvement, the FMV per latest tax declaration at the time of the sale or disposition, duly certified by the City/Municipal Assessor shall be used. No adjustments shall be added on the said value, provided that the tax declaration bears the upgraded fair market value of the said property pursuant to Section 219 of R.A. No. 7160, otherwise known as the Local Government Code of 1991 and the last paragraph of the Local Assessment Regulations No. 1-92 dated October 6, 1992. In case the tax declaration being presented was issued three (3) or more years prior to the date of sale or disposition of the real property, the seller/transferor shall be required to submit a certification from the City/Municipal Assessor whether or not the same is still the latest tax declaration covering the said real property. Otherwise, the taxpayer shall secure its latest tax declaration and shall submit a copy thereof duly certified by the said Assessor. (RAMO 1-2001) For shares of stocks, it will be based on the net capital gains realized from the sale, barter, exchange or other disposition of shares of stocks in a domestic corporation, considered as capital assets not traded through the local stock exchange.

12) What are the applicable tax rates of Capital Gains Tax under the National Internal Revenue Code of 1997? a) Real Properties - 6 % b) For Shares of Stocks not Traded in the Stock Exchange, on the net Capital Gains - Not over P100,000 - 5% - Any amount in excess of P100,000 - 10% 13) Who are required to file the Final Capital Gains Tax return? Every person, whether natural or juridical, resident or nonresident, including estates and trusts, who sells, transfers, exchanges or disposes real properties located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales or shares of stocks in domestic corporations not traded through the local stock exchange classified as capital assets. 14) What is the procedure in the filing of Final Capital Gains Tax return? File the Final Capital Gains Tax return 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.

15) Who/what are considered exempt from the payment of Final Capital Gains Tax?

Dealer in securities, regularly engaged in the buying and selling of securities An entity exempt from the payment of income tax under existing investment incentives and other special laws An individual or non-individual exchanging real property solely for shares of stocks resulting in corporate control A government entity or government-owned or controlled corporation selling real property If the disposition of the real property is gratuitous in nature Where the disposition is pursuant to the CARP law

16) Who are conditionally exempt from the payment of Final Capital Gains Tax? Natural persons who dispose their principal residence, provided that the following criteria are met:

The proceeds of the sale of the principal residence have been fully utilized in acquiring or constructing new principal residence within eighteen (18) calendar months from the date of sale or disposition; The historical cost or adjusted basis of the real property sold or disposed will be carried over to the new principal residence built or acquired; The Commissioner has been duly notified, through a prescribed return, within thirty (30) days from the

date of sale or disposition of the persons intention to avail of the tax exemption; Exemption was availed only once every ten (10) years; and There is no full utilization of the proceeds of sale or disposition. The portion of the gain presumed to have been realized from the sale or disposition will be subject to Capital Gains Tax. In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from the seller and shall deduct from the agreed selling price/consideration the 6% capital gains tax which shall be deposited in cash or managers check in interest-bearing account with an Authorized Agent Bank (AAB) under an Escrow Agreement between the concerned Revenue District Officer, the Seller and the Transferee, and the AAB to the effect that the amount so deposited, including its interest yield, shall only be released to such Transferor upon certification by the said RDO that the proceeds of the sale/disposition thereof has, in fact, been utilized in the acquisition or construction of the Seller/Transferors new principal residence within eighteen (18) calendar months from date of the said sale or disposition. The date of sale or disposition of a property refers to the date of notarization of the document evidencing the transfer of said property. In general, the term Escrow means a scroll, writing or deed, delivered by the grantor, promisor or obligor into the hands of a third person, to be held by the latter until the happening of a contingency or performance of a condition, and then by him delivered to the grantee, promise or obligee.

17) What is a Certificate Authorizing Registration?


Certificate Authorizing Registration (CAR) is a certification issued by the Commissioner or his duly authorized representative attesting that the transfer and conveyance of land, buildings/improvements or shares of stock arising from sale, barter or exchange have been reported and the taxes due inclusive of the documentary stamp tax, have been fully paid. CARs shall now have a validity of one (1) year from date of issue. In case of failure to present the same to the Registry of Deeds (RD) within the one (1) year period, the same shall be presented for revalidation to the District Office where the CAR was issued. The revalidation, evidenced by stamping the phrase "revalidated on __________ to expire on ___________" in a conspicuous space in the CAR, shall be good for another one-year period, after which the CAR losses its validity. (RMO 15-2003)

Documentary Stamp Tax Contents


Description Tax Form Documentary Requirements Tax Rates Procedures Deadlines Related Revenue Issuances Codal Reference

Frequently Asked Questions

Description

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.

Tax Form

BIR Form 2000 (Documentary Stamp Tax Declaration Return) Documentary Requirements

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

Tax Rates
Tax Code Secti on 174 Tax Due Per Unit

Document

Taxable Unit

% of Unit

Taxable Base

Debentures P200.00 and .75 or fraction P1.50 Certificates of % thereof Indebtedness P200.00 Original Issue or fraction of Shares of thereof Stock with P200.00 2.00 par value or fraction Original Issue thereof 2.00 of Shares of based on Stock without actual par value considerat ion Sales, Agreements to Sell, Memoranda of Sales, P200.00 Deliveries or or fraction 1.50 Transfer of thereof Due-bills, Certificate of Obligation, or Shares or

Face value of Document

175

1% 1%

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

176

.75 %

Par value of such due-bills, certificate of obligation or stocks

Certificates of Stock Bonds, Debentures, Certificate of P200.00 Stock or or fraction 1.50 Indebtedness thereof issued in foreign Countries Certificate of Profits or P200.00 Interest in or fraction .50 Property or thereof Accumulation Bank Checks, Drafts, Certificate of Deposit not On each 1.50 bearing Document interest and other Instruments Bonds, Loan Agreements, Promissory Notes, Bills of Exchange, P200.00 Drafts, or fraction .30 Instruments thereof and Securities Issued by the Government Par value of such bonds, debentures or Certificate of Stocks

177

.75 %

178

.25 %

Face value of such certificate / memorandum

179

180

.15 %

Face value of the instrument/docu ment

or any of its Instrumentali ties, 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) Bills of Exchange or order drawn in foreign country but payable in the Philippines Face value of such bill of exchange or order or the equivalent of such value, if expressed in foreign currency Face value of such bill of exchange or

181

P200.00 or fraction .30 thereof

.15 %

182

Foreign Bills P200.00 of Exchange or fraction .30 and Letter of thereof

.15 %

Credit

order or the equivalent of such value, if expressed in foreign currency P200.00 or fraction .50 thereof P4.00 premium .50 or fraction thereof P4.00 premium .50 or fraction thereof P200.00 or fraction 1.50 thereof P500.00 or fraction .50 thereof P4.00 or fraction thereof .30 .25 % Amount Insured by the Policy

183

Life Insurance Policies Policies Of Insurance upon Property Fidelity Bonds and other Insurance Policies Policies of Annuities, Annuity or other instruments Pre-Need Plans Indemnity Bonds

184

12.5 Premium % charged

185

12.5 Premium % charged Capital of annuity, or if 75% unknown 33 1/3 times the annual income .10 % 7.5 % Value or amount of the Plan Premium charged

186

186

187

188

Certificates of Damage or Each otherwise 15.00 Certificate 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 office Warehouse Receipts (except if value does not exceed P200.00)

189

Each Receipt

15.00

P1.00 cost of ticket and Jai-alai, Horse Race Tickets, lotto or Other Authorized Number Games Additional P0.10 on every P1.00 or .10 fraction thereof if cost of ticket exceeds P1.00

190

10%

Cost of the ticket

Bills of Lading or Receipts 191 (except charter party) Powers of Attorney

Each Proxy

15.00

193

Each 5.00 Document First 2,000

194

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

For every P1,000 or fractional part thereof in excess of 3.00 the first P2,000 for 1.00 each year of the term of the contract or agreemen t First 5,000

1.5 % 1%

195

Mortgages Pledges of lands, estate, or property and Deeds of Trust

On each 20.00 .4% Amount Secured P5,000 or 10.00 .2% Amount Secured fractional part thereof in

excess of 5,000 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 15.00 P1,000 or fractional 15.00 part thereof in excess of P1,000 1,000 tons and below P500. 00 for the first 6 month s PlusP 50 each month or fractio n thereo f in exces s of 6 month s 1.5 % 1.5 %

196

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

197

Charter parties and Similar Instruments

1,001 to 10,000 tons

Over 10,000 tons

P1,00 0 for the first 6 month s Plus P100 each month or fractio n thereo f in exces s of 6 month s

P1,50 0 for the first 6 month s Plus P150 each month

or fractio n thereo f in exces s of 6 month s

Procedures

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.

Deadlines

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. Related Revenue Issuances

RR No. 6-2001, RMO No. 8-98, RMO No. 15-2001 Codal Reference

Sec. 173 to Sec. 201 of the National Internal Revenue Code Frequently Asked Questions

1) Who are required to file Documentary Stamp Tax Declaration Return? 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; 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. 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.

2) Where is the Documentary Stamp Tax Declaration Return filed? In 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. In places where there is no Authorized Agent Bank, the return will be filed with the Revenue Collection Officer or duly authorized City or Municipal Treasurer where the taxpayer's residence or principal place of business is located or where the property is located in case of sale of real property or where the Collection Agent is assigned.

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

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 Certificates of oaths administered by any government official in his official capacity or acknowledgement by any government official in performance of his official duty Written appearance in any court by any government official in his official capacity 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 Papers and documents filed in court by or for the national, provincial, city or municipal governments Affidavits of poor persons for the purpose of proving poverty 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 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, provincial, city or municipal governments

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

4) What are the implications of failure to stamp taxable documents?

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 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.

Donor's Tax Contents


Tax Rates Description Tax Form Documentary Requirements Procedures Deadlines Related Revenue Issuances Codal Reference

Frequently Asked Questions

Tax Rates Effective January 1, 1998 to present Net Gift Over But not Over 100,000.00 100,000.00 200,000.00 1,000,000.0 0 1,000,000.0 3,000,000.0 0 0 3,000,000.0 5,000,000.0 0 0 5,000,000.0 10,000,000. 0 00 10,000,000. and over 00 500,000.00 Notes: 1. Rate applicable shall be based on the law prevailing at the time of donation. 2. When the gifts are made during the same calendar year but on different dates, the donor's The Tax Shall be exempt 0 2% 100,000.00 Plu s Of the Excess Over

200,000.00 500,000.00 P 2,000.00 4% 200,000.00 14,000.00 6% 500,000.00 44,000.00 8% 10 % 12 404,000.00 % 1,004,000. 15 00 % 204,000.00 1,000,000.0 0 3,000,000.0 0 5,000,000.0 0 10,000,000. 00

tax computed on the total net gifts during the year.

Donation made to a stranger is subject to 30% of the net gift. A stranger is a person who is not a: brother, sister (whether by whole or half blood), spouse, ancestor and lineal descendants; or . relative by consanguinity in the collateral line within the fourth degree of relationship (up to first cousin). Effective July 28, 1992 to December 31, 1997 Net Gift Over 50,000.00 But not Over 50,000.00 100,000.00 100,000.00 200,000.00 200,000.00 500,000.00 500,000.00 The Tax Shall be exempt 1.5% P 750.00 3,750.00 50,000.00 3% 100,000.00 5% 200,000.00 Plu s Of the Excess Over

1,000,000.0 18,750.00 8% 500,000.00 0 1,000,000.0 3,000,000.0 10 1,000,000.0 58,750.00 0 0 % 0 3,000,000.0 5,000,000.0 258,750.0 15 3,000,000.0 0 0 0 % 0

5,000,000.0 0

and over

558,750.0 20 5,000,000.0 0 % 0

Donation made to a stranger is subject to 10% of the net gift. A stranger is a person who is not a: brother, sister (whether by whole or half blood), spouse, ancestor and lineal descendants; or . relative by consanguinity in the collateral line within the fourth degree of relationship (up to first cousin). Effective before July 28, 1992 Net Gift Over 1,000.00 50,000.00 75,000.00 But not Over 1,000.00 50,000.00 75,000.00 100,000.00 The Tax Plus Shall be exempt 1.5% P 735.00 1,360.00 2,110.00 5,110.00 2.5 % 3% 1,000.00 50,000.00 75,000.00 Of the Excess Over

100,000.00 150,000.00 150,000.00 200,000.00 200,000.00 300,000.00

6% 100,000.00 9% 150,000.00

9,610.00 12% 200,000.00

300,000.00 400,000.00 21,610.00 15% 300,000.00 400,000.00 500,000.00 36,610.00 18% 400,000.00 500,000.00 625,000.00 54,610.00 21% 500,000.00

625,000.00 750,000.00 80,860.00 24% 625,000.00 110,860.0 28% 750,000.00 0 1,000,000.0 145,860.0 875,000.00 32% 875,000.00 0 0 1,000,000.0 2,000,000.0 185,860.0 1,000,000.0 36% 0 0 0 0 2,000,000.0 0 750,000.00 875,000.00 Description Donors Tax is a tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer. It shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect and whether the property is real or personal, tangible or intangible. Tax Form BIR Form 1800 Donors Tax Return Documentary Requirements The following requirements must be submitted upon field or office audit of the tax case before the Tax

Clearance Certificate/Certificate Authorizing Registration can be released: 1. 2. Deed of Donation Sworn Statement of the relationship of the donor to the donee 3. Proof of tax credit, if applicable 4. Certified true copy(ies) of the Original/Transfer/Condominium Certificate of Title (front and back ) of lot and/or improvement donated, if applicable 5. Certified true copy(ies) of the latest Tax Declaration (front and back pages) of lot and/or improvement, if applicable 6. Certificate of No Improvement issued by the Assessors office where the properties have no declared improvement, if applicable 7. Proof of valuation of shares of stocks at the time of donation, if applicable For listed stocks - newspaper clippings or certification issued by the Stock Exchange as to the par value per share For unlisted stocks - latest audited Financial Statements of the issuing corporation with computation of the book value per share 8. Proof of valuation of other types of personal properties, if applicable 9. Proof of claimed deductions, if applicable 10. Copy of Tax Debit Memo used as payment, if applicable

Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures. Procedures File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with any Authorized Agent Bank (AAB) of the RDO having jurisdiction over the place of the domicile of the donor at the time of the transfer. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer where the donor was domiciled at the time of the transfer, or if there is no legal residence in the Philippines, with Revenue District No. 39 - South Quezon City. In the case of gifts made by a non-resident alien, the return may be filed with Revenue District No. 39 South Quezon City, or with the Philippine Embassy or Consulate in the country where donor is domiciled at the time of the transfer. Submit all documentary requirements and proof of payment to the Revenue District Office having jurisdiction over the place of residence of the donor. Deadlines

Within thirty days (30) after the date the gift (donation) is made. A separate return will be filed for each gift (donation) made on the different dates during the year reflecting therein any previous net gifts made during the same calendar year. If the gift (donation) involves conjugal/community/property, each spouse will file separate returns corresponding to his/ her respective share in the conjugal/community property. This rule will also apply in the case of co-ownership over the property. Related Revenue Issuances RR No. 2-2003 and RMO No. 1-98 Codal Reference Sec. 98 to Sec. 104 of the National Internal Revenue Code Frequently Asked Questions 1. Who are required to file the Donors Tax Return? Every person, whether natural or juridical, resident or non-resident, who transfers or causes to transfer property by gift, whether in trust or otherwise, whether

the gift is direct or indirect and whether the property is real or personal, tangible or intangible. 2. What are the procedures in filing the Donors Tax return? File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with any Authorized Agent Bank (AAB) of the RDO having jurisdiction over the place of the domicile of the donor at the time of the transfer. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer where the donor was domiciled at the time of the transfer, or if there is no legal residence in the Philippines, with Revenue District No. 39 - South Quezon City. In the case of gifts made by a non-resident alien, the return may be filed with Revenue District No. 39 South Quezon City, or with the Philippine Embassy or Consulate in the country where donor is domiciled at the time of the transfer. Submit all documentary requirements and proof of payment to the Revenue District Office having jurisdiction over the place of residence of the donor. 3. What donations are tax exempt? Dowries or donations made on account of marriage before its celebration or within one year thereafter, by parents to each of their legitimate, recognized

natural, or adopted children to the extent of the first P10,000 Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philantrophic organization or research institution or organization, provided not more than 30% of said gifts will be used by such donee for administration purposes Encumbrances on the property donated if assumed by the donee in the deed of donation Donations made to the following entities as exempted under special laws: - Aquaculture Department of the Southeast Asian Fisheries Development Center of the Philippines - Development Academy of the Philippines - Integrated Bar of the Philippines - International Rice Research Institute - National Social Action Council - Ramon Magsaysay Foundation - Philippine Inventors Commission

- Philippine American Cultural Foundation - Task Force on Human Settlement on the donation of equipment, materials and services

4. What are the bases in the valuation of property? If the gift is made in property, the fair market value at that time will be considered the amount of gift In case of real property, the taxable base is the fair market value as determined by the Commissioner of Internal Revenue (Zonal Value) or fair market value as shown in the latest schedule of values of the provincial and city assessor (MV per Tax Declaration), whichever is higher If there is no zonal value, the taxable base is the fair market value that appears in the latest tax declaration If there is an improvement, the value of improvement is the construction cost per building permit and or occupancy permit plus 10% per year after year of construction, or the market value per latest tax declaration.

Estate Tax Contents


Tax Rates Description Tax Form Documentary Requirements Procedures Deadlines Related Revenue Issuances Codal Reference Frequently Asked Questions

Tax Rates Effective January 1, 1998 up to Present If the Net Estate is: Over But not Over P 200,00.00 P200,000.00 500,000.00 500,000.00 The Tax Shall be Exempt 0 5% P 200,000.00 Plu s Of the Excess Over

2,000,000.0 P 8% 500,000.00 0 15,000.00 2,000,000.0 5,000,000.0 11 2,000,000.0 135,000.00 0 0 % 0 5,000,000.0 10,000,000. 465,000.00 15 5,000,000.0

0 10,000,000. 00

00

1,215,000. 20 10,000,000. 00 % 00

Effective After July 28, 1992 up to December 31, 1997 If the Net Estate is: Over But not Over P 200,00.00 P200,000.00 500,000.00 2,000,000.0 P 0 15,000.00 2,000,000.0 5,000,000.0 135,000.00 0 0 5,000,000.0 10,000,000. 495,000.00 0 00 10,000,000. 1,545,000. 00 00 500,000.00 The Tax Shall be Plu s 0% 5% P 200,000.00 Of the Excess Over

8% 500,000.00 12 2,000,000.0 % 0 21 5,000,000.0 % 0 35 10,000,000. % 00

Effective Before July 28, 1992

If the Net Estate is: Over But not Over P 10,00.00 P 10,000.00 50,000.00 50,000.00 75,000.00 750,000.00 100,000.00 100,000.00 150,000.00 150,000.00 200,000.00 200,000.00 300,000.00 300,000.00 400,000.00 400,000.00 500,000.00 500,000.00 625,000.00 625,000.00 750,000.00 750,000.00 875,000.00 875,000.00 1,000,000.0 0 2,200.00 3,450.00 The Tax Shall be Exempt 3% P 10,000.00 P 1,200.00 4% 5% 10 % 15 8,450.00 % 20 15,950.00 % 25 35,950.00 % 30 60,950.00 % 35 90,950.00 % 40 134,700.00 % 45 184,700.00 % 50 240,950.00 % 50,000.00 75,000.00 100,000.00 150,000.00 200,000.00 300,000.00 400,000.00 500,000.00 625,000.00 750,000.00 875,000.00 Plu s Of the Excess Over

1,000,000.0 2,000,000.0 303,450.00 0 0 2,000,000.0 3,000,000.0 833,450.00 0 0 3,000,000.0 1,393,450.0 0 0

53 1,000,000.0 % 0 56 2,000,000.0 % 0 60 3,000,000.0 % 0

Effective September 15, 1950 to December 31, 1972 Estate and Inheritance Tax: From 5,000.00 0 To ESTAT INHERITANC E E Exempt 2& 4% 6% 8% 1.0% 2.0% 2.5% 3.0%

5,000.00 Exempt

12,000.0 0 18,000.0 12,000.0 30,000.0 0 0 0 20,000.0 30,000.0 50,000.0 0 0 0 30,000.0 50,000.0 70,000.0 0 0 0 7,000.00 5,000.00

BIR Form 1801 - Estate Tax Return Description

Estate Tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition. It is not a tax on property. It is a tax imposed on the privilege of transmitting property upon the death of the owner. The Estate Tax is based on the laws in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary. Tax Form BIR Form 1801 - Estate Tax Return Documentary Requirements 1. Notice of Death duly received by the BIR, if gross estate exceeds P20,000 for deaths occurring on or after Jan. 1, 1998; or if the gross estate exceeds P3,000 for deaths occurring prior to January 1, 1998 2. Certified true copy of the Death Certificate 3. Deed of Extra-Judicial Settlement of the Estate, if the estate is settled extra judicially 4. Court Orders/Decision, if the estate is settled judicially; 5. Affidavit of Self-Adjudication and Sworn Declaration of all properties of the Estate

6. A certified true copy of the schedule of partition of the estate and the order of the court approving the same, if applicable 7. Certified true copy(ies) of the Transfer/Original/Condominium Certificate of Title(s) of real property(ies) (front and back pages), if applicable 8. Certified true copy of the latest Tax Declaration of real properties at the time of death, if applicable 9. "Certificate of No Improvement" issued by the Assessor's Office declared properties have no declared improvement or Sworn Declaration/Affidavit of No Improvement by at least one (1) of the transferees 10. Certificate of Deposit/Investment/Indebtedness owned by the decedent and the surviving spouse, if applicable 11. Photo copy of Certificate of Registration of vehicles and other proofs showing the correct value of the same, if applicable 12. Photo copy of certificate of stocks, if applicable 13. Proof of valuation of shares of stocks at the time of death, if applicable
o

For listed stocks - newspaper clippings or certification from the Stock Exchange For unlisted stocks - latest audited Financial Statement of issuing corporation with computation of book value per share

14. Proof of valuation of other types of personal property, if applicable 15. Proof of claimed tax credit, if applicable 16. CPA Statement on the itemized assets of the decedent, itemized deductions from gross estate and the amount due if the gross value of the estate exceeds two million pesos, if applicable 17. Certification of Barangay Captain for claimed Family Home 18. Duly notarized Promissory Note for "Claims against the Estate" arising from Contract of Loan 19. Accounting of the proceeds of loan contracted within three (3) years prior to death of the decedent 20. Proof of the claimed "Property Previously Taxed" 21. Proof of claimed "Transfer for Public Use" 22. Copy of Tax Debit Memo used as payment, if applicable Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures. Procedures

The Estate Tax Return (BIR Form 1801) shall be filed and payment be made with an Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at the time of his/her death. If there is no AAB within the residence of the decedent, the Estate Tax Return must be filed and the payment made with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the RDO having jurisdiction over the place of residence of the decedent. If the required filer has no legal residence in the Philippines, the Estate Tax return shall be filed and paid with: (a) The Office of the Revenue District Officer, Revenue District Office No. 39, South Quezon City; or (b) The Philippine Embassy or Consulate in the country where decedent is residing at the time of his/her death. Deadlines

File the return within six (6) months from decedent's death. However, the Commissioner may, in meritorious cases, grant extension not exceeding thirty (30) days. The Estate Tax imposed shall be paid at the time the return is filed by the executor or administrator or the

heirs. However, when the Commissioner finds that payment on the due date of the Estate Tax or of any part thereof would impose undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years, in case the estate is settled through the courts or two (2) years in case the estate is settled extra-judicially. Extension of Time of Filing: When the Commissioner finds that the payment of the estate tax or of any part thereof would imposed undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years in case the estate is settled through the courts, or two (2) years in case it settled extra-judicially. Where the request for extension is by reason of negligence, intentional disregard of rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by the Commissioner. If an extension is granted, the Commissioner or his duly authorized representative may require the executor, or administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not exceeding double the amount, not exceeding double the amount of tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance in the terms of extension.

The request for extension shall be filed with the Revenue District Officer (RDO) where the estate is required to secure its TIN and file the estate tax return. The application shall be approved by the Commissioner or his duly authorized representative. Related Revenue Issuances

RR No. 2-2003, RMO No. 26-82, RMO No. 31-82, RMC No. 1-98, Codal Reference

Sec. 84 to Sec. 97 of the National Internal Revenue Code Frequently Asked Questions

1.

Who are required to file the Estate Tax return?

a) The executor or administrator or any of the legal heirs of the decedent or non-resident of the Philippines under any of the following situation: - In all cases of transfer subject to Estate Tax;

- Where though exempt from Estate Tax, the gross value of the estate exceeds two hundred thousand P 200,000.00; and - Where regardless of the gross value, the estate consists of registered or registrable property such as real property, motor vehicle, share of stocks or other similar property for which a clearance from the Bureau of Internal Revenue (BIR) is required as a condition precedent for the transfer of ownership thereof in the name of the transferee. b) Where there is no executor or administrator appointed, qualified and acting within the Philippines, then any person in actual or constructive possession of any property of the decedent must file the return. c) The Estate Tax imposed under the Tax Code shall be paid by the executor or administrator before the delivery of the distributive share in the inheritance to any heir or beneficiary. Where there are two or more executors or administrators, all of them are severally liable for the payment of the tax. The estate tax clearance issued by the Commissioner or the Revenue District Officer (RDO) having jurisdiction over the estate, will serve as the authority to distribute the remaining/distributable properties/share in the inheritance to the heir or beneficiary. d) The executor or administrator of an estate has the primary obligation to pay the estate tax but the heir or beneficiary has subsidiary liability for the payment of that portion of the estate which his distributive share

bears to the value of the total net estate. The extent of his liability, however, shall in no case exceed the value of his share in the inheritance.

2. What are the procedures in the filing of the Estate Tax Return and payment of the corresponding taxes? a) The Estate Tax Return (BIR Form 1801) shall be filed and payment made with an Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at the time of his/her death. b) If there is no AAB within the residence of the decedent, the Estate Tax Return must be filed and the payment made with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the RDO having jurisdiction over the place of residence of the decedent. c) If the required filer has no legal residence in the Philippines, the Estate Tax return will be filed and payment be made with: - The Office of the Revenue District Officer, Revenue District Office No. 39, South Quezon City; or - The Philippine Embassy or Consulate in the country where decedent is residing at the time of his/her death.

d) Submit all documentary requirements and proof of payment to the Revenue District Office having jurisdiction over the place of residence of the decedent. e) Payment of Estate tax by installment -In case the available cash of the estate is not sufficient to pay its total estate tax liability, the estate may be allowed to pay the tax by installment and a clearance shall be released only with respect to the property, the corresponding/computed tax on which has been paid.

3. What are included in gross estate?

For resident alien decedents/citizens:

a) b) c)

Real or immovable property, wherever located Tangible personal property, wherever located Intangible personal property, wherever located

For non-resident decedent/non-citizens:

a) Real or immovable property located in the Philippines b) Tangible personal property located in the Philippines c) Intangible personal property - with a situs in the Philippines such as: - Franchise which must be exercised in the Philippines

- Shares, obligations or bonds issued by corporations organized or constituted in the Philippines - Shares, obligations or bonds issued by a foreign corporation 85% of the business of which is located in the Philippines - Shares, obligations or bonds issued by a foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines ( i. e. they are used in the furtherance of its business in the Philippines) - Shares, rights in any partnership, business or industry established in the Philippines

4.

What are excluded from gross estate?


GSIS proceeds/ benefits Accruals from SSS Proceeds of life insurance where the beneficiary is irrevocably appointed Proceeds of life insurance under a group insurance taken by employer (not taken out upon his life) War damage payments Transfer by way of bona fide sales Transfer of property to the National Government or to any of its political subdivisions Separate property of the surviving spouse

Merger of usufruct in the owner of the naked title Properties held in trust by the decedent Acquisition and/or transfer expressly declared as not taxable

5. What will be used as basis in the valuation of property?

The properties subject to Estate Tax shall be appraised based on its fair market value at the time of the decedent's death. The appraised value of the real estate shall be whichever is higher of the fair market value, as determined by the Commissioner (zonal value) or the fair market value, as shown in the schedule of values fixed by the Provincial or City Assessor. If there is no zonal value, the taxable base is the fair market value that appears in the latest tax declaration. If there is an improvement, the value of improvement is the construction cost per building permit or the fair market value per latest tax declaration.

6. What are the allowable deductions for Estate Tax purposes? For Resident Decedent

Expenses, losses, indebtedness and taxes

a) i)

Funeral Expenses CA 466 - 5 % of gross estate (up to Dec. 31, 1972)

ii) PD 69 - 5 % of gross estate but not exceeding P 50,000 (Jan. 1, 1973 to July 27, 1992) iii) RA 7499 - 5 % of gross estate but not exceeding P 100,000 (July 28, 1992 to December 3l, 1997) iv) RA 8424 - 5% of gross estate but not exceeding P 200,000 (Jan. 1,1998) b) Judicial expenses of the testamentary/intestate proceedings c) d) e) f) g) h) Valid claims against the estate Claims against insolvent person Unpaid mortgages/indebtedness Unpaid taxes Casualty losses Property previously taxed or vanishing deductions Requisites:

Present decedent must have died within five (5) years from date of death of prior decedent or date of gift

The property with respect to which the deduction is claimed must have formed part of the gross estate situated in the Philippines of the prior decedent or taxable gift of the donor The property must be identified as the same property received from prior decedent or donor or the one received in exchange therefore The estate taxes on the transmission of the prior estate or the donors tax on the gift must have been finally determined and paid No vanishing deduction on the property or the property given in exchange therefore was allowed to the prior estate

i) j)

Transfer for public purpose Share of surviving spouse

k) Medical expenses - those incurred by the decedent within one (1) year prior to his/her death which shall be substantiated with receipts (NOTE: Amount allowable as deduction depends on the law prevailing at the time of death of the decedent). l) Family Home - fair market value but not to exceed P1,000,000.00 m) Standard Deduction - an amount equivalent to P1,000,000.00 (applicable only for death occurring after the effectivity of RA 8424 which is January 1, 1998.)

n) Amount received by the heirs under Republic Act No. 4917 (applicable only for death occurring after the effectivity of RA 8424 which is January 1, 1998) For Non-Resident Decedent, not a citizen of the Philippines

Expenses, losses, indebtedness, taxes Property previously taxed Transfer for public use
Share in the conjugal property

Income Tax Contents


Description Who Are Required To File Income Tax Returns Annual Income Tax For Individuals Earning Purely Compensation Income (Including NonBusiness/Non-Profession Related Income) and For Marginal Income Earners Annual Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those With Mixed Income,i.e., Compensation Income and Income from Business and/or Practice of Profession ) Account Information Form For Self-Employed Individuals, Estates And Trusts (Including Those With Mixed Income , I.E., Compensation Income and Income from Business and/or Practice of Profession)

Quarterly Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those With Mixed Income, I.E., Compensation Income and Income from Business and/or Practice of Profession) Annual Income Tax For Corporations And Partnerships Account Information Form For Corporations And Partnerships Quarterly Income Tax For Corporations And Partnerships Improperly Accumulated Earnings Tax For Corporations Annual Income Information Form for General Professional Partnerships Tax Rate Related Revenue Issuances Codal Reference Frequently Asked Questions

Description

Income Tax is a tax on a person's income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income, by the Tax Code, as amended, or other special laws.

Who Are Required To File Income Tax Returns

Individuals

Estates and trusts engaged in trade or business

Resident citizens receiving income from sources within or outside the Philippines o employees deriving purely compensation income from 2 or more employers, concurrently or successively at anytime during the taxable year o employees deriving purely compensation income regardless of the amount, whether from 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 o self-employed individuals receiving income from the conduct of trade or business and/or practice of profession o individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or business and/or practice of profession o individuals deriving other non-business, non-professional related income in addition to compensation income not otherwise subject to a final tax o individuals receiving purely compensation income from a single employer, although the income of which has been correctly withheld, but whose spouse is not entitled to substituted filing o marginal income earners Non-resident citizens receiving income from sources within the Philippines Aliens, whether resident or not, receiving income from sources within the Philippines Corporation shall include partnerships, no matter how created or organized. Domestic corporations receiving income from sources within and outside the Philippines Foreign corporations receiving income from sources within the Philippines

Annual Income Tax For Individuals Earning Purely Compensation Income (Including Non-Business/NonProfession Related Income) and For Marginal Income Earners

Tax Form BIR Form 1700 - Annual Income Tax Return (For Individual Earning Purely Compensation Income Including Non-Business/Non-Profession Related Income) Documentary Requirements 1. Certificate of Income Tax Withheld on Compensation (BIR Form 2316) 2. Waiver of the Husbands right to claim additional exemption, if applicable 3. Duly approved Tax Debit Memo, if applicable 4. Proof of Foreign Tax Credits, if applicable

5. Income Tax Return previously filed and proof of payment, if filing an amended return for the same taxable year Procedures 1. Fill-up BIR Form 1700 in triplicate. 2. If there is payment:

Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered and present the duly accomplished BIR Form 1700, together with the required attachments and your payment. In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered and present the duly accomplished BIR Form 1700, together with the required attachments and your payment. Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

3. For "No Payment" Returns including refundable returns, and for tax returns qualified for second installment:

Proceed to the Revenue District Office where you are registered or to any Tax Filing Center established by the BIR and present the duly accomplished BIR Form 1700, together with the required attachments. Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative.

Deadline On or before the 15th day of April of each year covering taxable income for the preceding taxable year

Annual Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those With Mixed Income,i.e., Compensation Income and Income from Business and/or Practice of Profession )

Tax Form BIR Form 1701 - Annual Income Tax Return (For Self-Employed Individuals, Estates and Trusts Including Those With Both Business and Compensation Income) Documentary Requirements 1. Certificate of Income Tax Withheld on Compensation (BIR Form 2316), if applicable

2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable 3. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable 4. Waiver of the Husbands right to claim additional exemption, if applicable 5. Duly approved Tax Debit Memo, if applicable 6. Proof of Foreign Tax Credits, if applicable 7. Income Tax Return previously filed and proof of payment, if filing an amended return for the same year 8. Account Information Form (AIF) or the Certificate of the independent CPA with Audited Financial Statements if the gross quarterly sales, earnings, receipts or output exceed P 150,000.00 9. Proof of prior years excess tax credits, if applicable Procedures 1. Fill-up BIR Form 1701 in triplicate copies. 2. If there is payment:

Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered and present the duly accomplished BIR Form 1701, together with the required attachments and your payment. In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered and present the duly accomplished BIR Form 1701, together with the required attachments and your payment. Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer

3. For "No Payment" including refundable/ creditable returns, returns with excess tax credit carry over, and returns qualified for second installment:

Proceed to the Revenue District Office where you are registered or to any established Tax Filing Centers established by the BIR and present the duly accomplished BIR Form 1701, together with the required attachments. Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative.

Deadline Final Adjustment Return or Annual Income Tax Return - On or before the 15th day of April of each year covering income for the preceding year

Account Information Form For Self-Employed Individuals, Estates And Trusts (Including Those With

Mixed Income , I.E., Compensation Income and Income from Business and/or Practice of Profession)

Tax Form BIR Form 1701 AIF - Account Information Form For Self-Employed Individuals, Estates and Trusts (Including those with Mixed Income, i.e., Compensation Income and Income from Business and/or Practice of Profession) and Estates and Trusts (Engaged in Trade or Business) NOTE: Pursuant to Revenue Memorandum Circular No. 6 2001, corporations, companies or persons whose gross quarterly sales, earnings, receipts or output exceed P 150,000.00 may not accomplish this form. In lieu thereof, they may file their annual income tax returns accompanied by balance sheets, profit and loss statement, schedules listing income-producing properties and the corresponding income therefrom, and other relevant statements duly certified by an independent CPA. Documentary Requirements None Procedures 1. Accomplish BIR Form 1701 AIF in triplicate. 2. Attach the same to BIR Form 1701. Deadline Same deadline as BIR Form 1701 - On or before the 15th day of April of each year covering taxable income for the preceding year

Quarterly Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those With Mixed Income, I.E., Compensation Income and Income from Business and/or Practice of Profession)

Tax Form BIR Form 1701Q - Quarterly Income Tax Return For Self-Employed Individuals, Estates and Trusts (Including those with both Business and Compensation Income) Documentary Requirements

1. Certificate of Income Tax Withheld at Source (BIR Form 2307), if applicable 2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable 3. Duly approved Tax Debit Memo, if applicable 4. Previously filed return, if an amended return is filed for the same quarter Procedures 1. Fill-up BIR Form 1701Q in triplicate. 2. If there is payment:

Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you registered and present the duly accomplished BIR Form 1701 Q, together with the required attachments and your payment. In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered and present the duly accomplished BIR Form 1701Q, together with the required attachments and your payment. Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

3. For "No Payment" Returns including refundable/ creditable returns with excess tax credit carry over and returns qualified for second installment:

Proceed to the Revenue District Office where you are registered or to any Tax Filing Center established by the BIR and present the duly accomplished BIR Form 1701Q, together with the required attachments. Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative.

o
Deadlines

April 15 for the first quarter August 15 for the second quarter November 15 for the third quarter

Annual Income Tax For Corporations And Partnerships

Tax Form BIR Form 1702 - Annual Income Tax Return (For Corporations and Partnerships)

Documentary Requirements 1. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304), if applicable 2. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable 3. Duly approved Tax Debit Memo, if applicable 4. Proof of Foreign Tax Credits, if applicable 5. Income tax return previously filed and proof of payment, if amended return is filed for the same taxable year 6. Account Information Form (AIF) and/or the Certificate of the independent CPA with Audited Financial Statements, if the gross quarterly sales, earnings, receipts or output exceed P150,000.00 7. Proof of prior years excess tax credits, if applicable Procedures 1. Fill-up BIR Form 1702 in triplicate. 2. If there is payment:

Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered and present the duly accomplished BIR Form 1702, together with the required attachments and your payment. In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered and present the duly accomplished BIR Form 1702 with the required attachments and your payments. Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

3. For "No Payment" Returns including refundable/ creditable returns and returns with excess tax credit carry over:

Proceed to the Revenue District Office where you are registered or to any Tax Filing Center established by BIR and present the duly accomplished BIR Form 1702, together with the required attachments. Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative

o
Deadline

Final Adjustment Return or Annual Income Tax Return - On or before the 15th day of the fourth month following the close of the taxpayers taxable year

Account Information Form For Corporations And Partnerships

Tax Form BIR Form 1702 AIF - Account Information Form (For Corporations and Partnerships) NOTE: Pursuant to Revenue Memorandum Circular No. 6 2001, corporations, companies or persons whose gross quarterly sales, earnings, receipts or output exceed P 150,000.00 may not accomplish this form. In lieu thereof, they may file their annual income tax returns accompanied by balance sheets, profit and loss statement, schedules listing income-producing properties and the corresponding income therefrom, and other relevant statements duly certified by an independent CPA. Documentary Requirements None Procedures 1. Accomplish BIR Form 1702 AIF in triplicate. 2. Attach the same to BIR Form 1702. Deadline Same deadline as BIR Form 1702 - On or before the 15th day of the fourth month following the close of the taxpayers taxable year

Quarterly Income Tax For Corporations And Partnerships

Tax Form BIR Form 1702 Q - Quarterly Income Tax Return (For Corporations and Partnerships) Documentary Requirements 1. Certificate of Income Tax Withheld at Source (BIR Form 2307), if applicable 2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304), if applicable 3. Duly approved Tax Debit Memo, if applicable

4. Previously filed return, if an amended return is filed for the same quarter Procedures 1. Fill-up BIR Form 1702 Q in triplicate. 2. If there is payment:

Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered and present the duly accomplished BIR Form 1702 Q, together with the required attachments and your payment. In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered and present the duly accomplished BIR Form 1702 Q. Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

3. For Refundable Returns and for those returns with second installment:

o o
Deadline

Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR Form 1702 Q, together with the required attachments. Receive your copy of the duly stamped and validated form from the RDO representative.

Corporate Quarterly Declaration or Quarterly Income Tax Return - On or before the 60th day following the close of each of the quarters of the taxable year

Improperly Accumulated Earnings Tax For Corporations

Tax Form BIR Form 1704 - Improperly Accumulated Earnings Tax Return (For Corporations) Documentary Requirements 1. Photocopy of Annual Income Tax Return (BIR Form 1702) with Audited Financial Statements and/or Account Information Form of the covered taxable year duly received by the BIR; and 2. Sworn declaration as to dividends declared taken from the covered year's earnings and the corresponding tax withheld, if any Procedures

1. Fill-up BIR Form 1704 in triplicate. 2. If there is payment:

Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered and present the duly accomplished BIR Form 1704, together with the required attachments and your payment. In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered and present the duly accomplished BIR Form 1704 Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

3. If there is no payment:

o o
Deadline

Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR Form 1704, together with the required attachments. Receive your copy of the duly stamped and validated form from the RDO representative

Within fifteen (15) days after the close of the taxable year

Annual Income Information Form for General Professional Partnerships

Sec. 55. Returns of General Professional Partnership (Tax Code of 1997, as amended) Every general professional partnership shall file, in duplicate, a return of its income, except income exempt under Section 32 (B) of this Title, setting forth the items of gross income and of deductions allowed by this Title, and the names, Taxpayer Identification Numbers (TIN),addresses and shares of each of the partners.

Tax Rate
For Individuals Earning Purely Compensation Income and Individuals Engaged in Business and Practice of Profession Amount of Net Taxable Income

Over P10,000 P30,000 P70,000 P140,000 P250,000 P500,000

But Not Over P10,000 P30,000 P70,000 P140,000 P250,000 P500,000 5% P500 + 10% of the Excess over P10,000 P2,500 + 15% of the Excess over P30,000 P8,500 + 20% of the Excess over P70,000 P22,500 + 25% of the Excess over P140,000 P50,000 + 30% of the Excess over P250,000

P125,000 + 32% of the Excess over P500,000 in 2000 a

Note: When the tax due exceeds P2,000.00, the taxpayer may elect to pay in two equal installments, the first installment to be paid at the time the return is filed and the second installment 15 of the same year at on or before July the Authorized Agent Bank (AAB) within the jurisdiction of the Revenue District Office (RDO) where the taxpayer is registered.

Tax Rate 1. Domestic Corporations: a. In General b. Minimum Corporate Income Tax* c. Improperly Accumulated Earnings 2. Proprietary Educational Institution 3. Non-stock, Non-profit Hospitals 4. GOCC, Agencies & Instrumentalities a. In General b. Minimum Corporate Income Tax* c. Improperly Accumulated Earnings 5. National Gov't. & LGUs a. In General b. Minimum Corporate Income Tax* c. Improperly Accumulated Earnings 6. Taxable Partnerships a. In General b. Minimum Corporate Income Tax* c. Improperly Accumulated Earnings 7. Exempt Corporation a. On Exempt Activities b. On Taxable Activities 8. General Professional Partnerships 9. Corporation covered by Special Laws 10. International Carriers 11. Regional Operating Head 12. Offshore Banking Units (OBUs) 0% 30% 0% Rate specified under the respective special laws 2.5% 10% 10% Net taxable 30% 2% 10% Net taxable 30% 2% 10% Net taxable 30% 2% 10% Net taxable 30% (effective Jan. 1, 2009) 2% 10% 10% 10% Net taxable

Gross Incom

Improperly A

Net taxable business or o

Net taxable business or o

Gross Incom

Improperly A

Gross Incom

Improperly A

Gross Incom

Improperly A

Gross Philipp

Taxable Inco

Gross Taxab

30% 13. Foreign Currency Deposit Units (FCDU) 10% 30% *Beginning on the 4th year immediately following the year in which such corporation commenced its business operations, when the minimum corporate income tax is greater than the tax computed using the normal income tax.

On Taxable I

Gross Taxab

On Taxable I

Passive Income 1. Interest from currency deposits, trust funds and deposit substitutes 2. Royalties (on books as well as literary & musical composition) - In general 3. Prizes (P10,000 or less ) - In excess of P10,000 4. Winnings (except from PCSO and lotto) 5. Interest Income of Foreign Currency Deposit 6. Cash and Property Dividends - To individuals from Domestic Corporations - To Domestic Corporations from Another Domestic Corporations 10 % 0% 20% 10% 20% 5% 20% 20% 7.5%

7. On capital gains presumed to have been realized from sale, exchange or other 6% disposition of real property (capital asset) 8. On capital gains for shares of stock not traded in the stock exchange - Not over P100,000 - Any amount in excess of P100,000 9. Interest Income from long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates Upon pretermination before the fifth year , there should be imposed on the entire income from the proceeds of the long-term deposit based on the remaining maturity thereof: Holding Period Four (4) years to less than five (5) years Three (3) years to less than four (4) years Less than three (3) years 5% 12% 20% 5% 10% Exempt

B. For Non-Resident Aliens Engaged in Trade or Business 1. Interest from currency deposits, trust funds and deposit substitutes 20%

2. Interest Income from long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management Exempt accounts and other investments evidenced by certificates Upon pretermination before the fifth year, there should be imposed on the entire income from the proceeds of the long-term deposit based on the remaining maturity thereof: Holding Period: -Four (4) years to less than five (5) years 5%

-Three (3) years to less than four (4) years -Less than three (3) years 3. On capital gains presumed to have been realized from the sale, exchange or other disposition of real property 4. On capital gains for shares of stock not traded in the Stock Exchange - Not over P100,000 - Any amount in excess of P100,000 C) For Non-Resident Aliens Not Engaged in Trade or Business

12% 20% 6%

5% 10%

1. On the gross amount of income derived from all sources within the Philippines 25% 2. On capital gains presumed to have been realized from the exchange or other disposition of real property located in the Phils. 3. On capital gains for shares of stock not traded in the Stock Exchange Not Over P100,000 Any amount in excess of P100,000 5% 10% 15% 0% 30% 2% 10% 10% 10% 30% 6%

D) On the gross income in the Philippines of Aliens Employed by Regional Headquarters (RHQ) or Area Headquarters and Regional Operating Headquarters (ROH), Offshore Banking Units (OBUs), Petroleum Service Contractor and Subcontractor E) General Professional Partnerships F) Domestic Corporations 1) a. In General on net taxable income b. Minimum Corporate Income Tax on gross income c. Improperly Accumulated Earnings on improperly accumulated taxable income 2) Proprietary Educational Institution and Non-profit Hospitals - In general (on net taxable income) - If the gross income from unrelated trade, business or other activity exceeds 50% of the total gross income from all sources 4) GOCC, Agencies & Instrumentalities a. In General - on net taxable income

30% 2% 10%

b. Minimum Corporate Income Tax on gross income c. Improperly Accumulated Earnings on improperly accumulated taxable income 5) Taxable Partnerships a. In General on net taxable income b. Minimum Corporate Income Tax on gross income c. Improperly Accumulated Earnings on improperly accumulated taxable income 6) Exempt Corporation a. On Exempt Activities b. On Taxable Activities 8) Corporation covered by Special Laws

30% 2% 10%

0% 30% Rate specified under the respective special laws

G) Resident Foreign Corporation 1)a. In General on net taxable income b. Minimum Corporate Income Tax on gross income c. Improperly Accumulated Earnings on improperly accumulated taxable income 2) International Carriers on gross Philippine billings 3) Regional Operating Headquarters on gross income 4) Corporation Covered by Special Laws 5) Offshore Banking Units (OBUs) on gross income 6) Foreign Currency Deposit Units (FCDU) on gross income

Related Revenue Issuances

RR No. 4-95, RR No. 4-96, RR No. 5-97, RR No. 1-98, RA 9337, RR 14-2002, RR 12-2007

Codal Reference

Sections 23-59, 67-73 and 74-77 of the National Internal Revenue Code

Frequently Asked Questions

1) What is income? Income means all wealth, which flows into the taxpayer other than as a mere return of capital. 2) What is Taxable Income?

Taxable income means the pertinent items of gross income specified in the Tax Code as amended, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income, by the Tax Code or other special laws. 3) What is Gross Income? Gross income means all income derived from whatever source. 4) What comprises gross income? Gross income includes, but is not limited to the following:

Compensation for services, in whatever form paid, including but not limited to fees, salaries, wages, commissions and similar item Gross income derived from the conduct of trade or business or the exercise of profession Gains derived from dealings in property Interest Rents Royalties Dividends Annuities Prizes and winnings Pensions Partner's distributive share from the net income of the general professional partnerships

5) What are some of the exclusions from gross income?

Life insurance Amount received by insured as return of premium Gifts, bequests and devises Compensation for injuries or sickness Income exempt under treaty Retirement benefits, pensions, gratuities, etc. Miscellaneous items income derived by foreign government income derived by the government or its political subdivision prizes and awards in sport competition prizes and awards which met the conditions set in the Tax Code 13th month pay and other benefits GSIS, SSS, Medicare and other contributions gain from the sale of bonds, debentures or other certificate of indebtedness gain from redemption of shares in mutual fund

6) What are the allowable deductions from gross income? Except for taxpayers earning compensation income arising from personal services rendered under an employeremployee relationships where the only deduction provided that the gross family income does not exceed P250,000 per family is the premium payment on health and/or hospitalization insurance, a taxpayer may opt to avail any of the following allowable deductions from gross income:

a)Optional Standard Deduction - an amount not exceeding 40% of the net sales for individuals and gross income for corporations; or

b) Itemized Deductions which include the following:


o o o o o o o o o o
Expenses Interest Taxes Losses Bad Debts Depreciation Depletion of Oil and Gas Wells and Mines Charitable Contributions and Other Contributions Research and Development Pension Trusts

In addition, individuals who are either earning compensation income, engaged in business or deriving income from the practice of profession are entitled to personal and additional exemptions as follows: Personal Exemptions: For single individual or married individual judicially decreed as legally separated with no qualified dependentsP 50,000.00 For head of familyP 50,000.00 For each married individual *P 50,000.00 Note: In case of married individuals where only one of the spouses is deriving gross income, only such spouse will be allowed to claim the personal exemption. Additional Exemptions:

For each qualified dependent, an P25,000 additional exemption can be claimed but only up to 4 qualified dependents

The additional exemption can be claimed by the following:

The husband who is deemed the head of the family unless he explicitly waives his right in favor of his wife The spouse who has custody of the child or children in case of legally separated spouses. Provided, that the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions allowed by the Tax Code. The individuals considered as Head of the Family supporting a qualified dependent

The maximum amount of P 2,400 premium payments on health and/or hospitalization insurance can be claimed if:

Family gross income yearly should not be more than P 250,000 For married individuals, the spouse claiming the additional exemptions for the qualified dependents shall be entitled to this deduction

7) Who are required to file the Income Tax returns?

Individuals

Resident citizens receiving income from sources within or outside the Philippines o employees deriving purely compensation income from 2 or more employers, concurrently or successively at anytime during the taxable year o employees deriving purely compensation income regardless of the amount, whether from a single or several employers during the calendar year, the income tax of which

o o o o o

has not been withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to collectible or refundable return self-employed individuals receiving income from the conduct of trade or business and/or practice of profession individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or business and/or practice of profession individuals deriving other non-business, non-professional related income in addition to compensation income not otherwise subject to a final tax individuals receiving purely compensation income from a single employer, although the income of which has been correctly withheld, but whose spouse is not entitled to substituted filing marginal income earners

Non-resident citizens receiving income from sources within the Philippines Aliens, whether resident or not, receiving income from sources within the Philippines

Corporations no matter how created or organized including partnerships o domestic corporations receiving income from sources within and outside the Philippines o foreign corporations receiving income from sources within the Philippines o taxable partnerships Estates and trusts engaged in trade or business

8) Who are not required to file Income Tax returns? a. An individual who is a minimum wage earner b.

An individual whose gross income does not exceed his total personal and additional exemptions

c. An individual whose compensation income derived from one employer does not exceed P 60,000 and the income tax on which has been correctly withheld
employee occupying the same position as that of the alien employee of regional headquarters and regional operating headquarters of multinational companies, petroleum service contractors and sub-contractors and offshore-banking units, non-resident aliens not engaged in trade or business)

d. An individual whose income has been subjected to final withholding tax (alien employee as well as Filipino

e. Those who are qualified under substituted filing. However, substituted filing applies only if all of the following requirements are present :
o o o o o o
the employee received purely compensation income (regardless of amount) during the taxable year the employee received the income from only one employer in the Philippines during the taxable year the amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer the employees spouse also complies with all 3 conditions stated above the employer files the annual information return (BIR Form No. 1604-CF) the employer issues BIR Form No. 2316 (Oct 2002 ENCS version ) to each employee.

9) Who are exempt from Income Tax?

Non-resident citizen who is:

a) A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein b) A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis c) A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year d) A citizen who has been previously considered as a non-resident citizen and who arrives in the Philippines at any time during the year to reside permanently in the Philippines will likewise be treated as a non-resident citizen during the taxable year in which he arrives in the Philippines, with respect to his income derived from sources abroad until the date of his arrival in the Philippines.

Overseas Filipino Worker, including overseas seaman An individual citizen of the Philippines who is working and deriving income from abroad as an overseas Filipino worker is taxable only on income from sources within the Philippines; provided, that a seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade will be treated as an overseas Filipino worker.

NOTE: A Filipino employed as Philippine Embassy/Consulate service personnel of the Philippine Embassy/consulate is not treated as a non-resident citizen, hence his income is taxable. 10) What are the procedures in filing Income Tax returns (ITRs)?

For with payment ITRs (BIR Form Nos. 1700 / 1701 / 1701Q / 1702 / 1702Q / 1704) File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with the Authorized Agent Bank (AAB) of the place where taxpayer is registered or required to be registered. In places where there are no AABs, the return will be filed directly with the Revenue Collection Officer or duly Authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business in the Philippines, or if there is none, filing of the return will be at the Office of the Commissioner.

For no payment ITRs -- refundable, break-even, exempt and no operation/transaction, including returns to be paid on 2nd installment and returns paid through a Tax Debit Memo(TDM) File the return with the concerned Revenue District Office (RDO) where the taxpayer is registered. However, "no payment" returns filed late shall be accepted by the RDO but instead shall be filed with an Authorized Agent Bank (AAB) or Collection Officer/Deputized Municipal Treasurer (in places where there are no AABs), for payment of necessary penalties.

11) How is Income Tax payable of individuals (resident citizens and non-resident citizens)computed?

Gross Income
Less: Allowable Deductions (Itemized or Optional) Net Income Less: Personal & Additional Exemptions Net Taxable Income Multiply by Tax Rate (5 to 32%) Income Tax Due: Tax withheld (per BIR From 2316/2304) Income tax payable

P ___________ ___________ P ___________ ___________ P ___________ ____________ P ___________ P____________

12) How is Income Tax paid?

Through withholding

o o

or 15% if the gross annual business or professional income exceeds P720,000 per year
Generally 10% 20% - Fees paid to directors who are not employees and 20% of professional fees paid to nonindividuals Other withholding tax rates

Pay the balance as you file the tax return, computed as follows: Income Tax Due
Less: Withholding Tax Net Income Tax Due P ___________ ___________ P ___________

13) Is the Minimum Corporate Income Tax (MCIT) an addition to the regular or normal income tax? No, the MCIT is not an additional tax. An MCIT of 2% of the gross income as of the end of taxable year (whether calendar or fiscal year, depending on the accounting period employed) is imposed on a corporation taxable under Title II of the Tax Code, as amended, beginning on the 4th taxable year immediately following the taxable year in which such corporation commenced its business operations when the MCIT is greater than the regular income tax. The MCIT is compared with the regular income tax, which is due from a corporation. If the regular income is higher than the MCIT, then the corporation does not pay the MCIT but the amount of the regular income tax.

Notwithstanding the above provision, however, the computation and the payment of MCIT, shall likewise appply at the time of filing the quarterly corporate income tax as prescribed under Section 75 and Section 77 of the Tax Code, as amended. Thus, in the computation of the tax due for the taxable quarter, if the computed quarterly MCIT is higher than that quarterly normal income tax, the tax due to be paid for such taxable quarter at the time of filing the quarterly income tax return shall be the MCIT which is two percent (2%) of the gross income as of the end of the

taxable quarter. In the payment of said quarterly MCIT, excess MCIT from the previous taxable year/s shall not be allowed to be credited. Expanded withholding tax, quarterly corporate income tax payments under the normal income tax, and the MCIT paid in the previous taxable quarter/s are allowed to be applied against the quarterly MCIT due.
14) Who are covered by MCIT? The MCIT covers domestic and resident foreign corporations which are subject to the regular income tax. The term regular income tax refers to the regular income tax rates under the Tax Code. Thus, corporations which are subject to a special corporate tax system do not fall within the coverage of the MCIT. For corporations whose operations or activities are partly covered by the regular income tax and partly covered by the preferential rate under special law, the MCIT shall apply on operations by the regular income tax rate. Newly established corporations or firms which are on their first 3 years of operations are not covered by the MCIT.

15) When does a corporation start to be covered by the MCIT? A corporation starts to be covered by the MCIT on the 4th year of its business operations. The period of reckoning which is the start of its business operations is the year when the corporation was registered with the BIR. This rule will apply regardless of whether the corporation is using the calendar year or fiscal year as its taxable year. 16) When is the MCIT reported and paid? Is it quarterly? The MCIT is paid on an annual basis and quarterly basis. The rules are governed by Revenue Regulations No. 122007. 17) How is MCIT computed? The MCIT is 2% of the gross income of the corporation at the end of the year. Gross income means gross sales less sales returns, discounts and cost of goods sold. Passive income, which have been subject to a final tax at source do not form part of gross income for purposes of the MCIT. Cost of goods sold includes all business expenses directly incurred to produce the merchandise to bring them to their present location and use. For trading or merchandising concern, cost of goods sold means the invoice cost of goods sold, plus import duties, freight in transporting the goods to the place where the goods are actually sold, including insurance while the goods are in transit. For a manufacturing concern, cost of goods manufactured and sold means all costs of production of finished goods such as raw materials used, direct labor and manufacturing overhead, freight cost, insurance premiums and other costs incurred to bring the raw materials to the factory or warehouse. For sale of services, gross income means gross receipts less sales returns, allowances, discounts and cost of services which cover all direct costs and expenses necessarily incurred to provide the services required by the customers and clients including:

Salaries and employees benefits of personnel, consultants and specialists directly rendering the service; Cost of facilities directly utilized in providing the service such as depreciation or rental of equipment used; Cost of supplies

Interest Expense is not included as part of cost of service, except in the case of banks and other financial institutions. Gross Receipts means amounts actually or constructively received during the taxable year. However, for taxpayers employing the accrual basis of accounting, it means amounts earned as gross income. 18) What is the carry forward provision under the MCIT? Any excess of the MCIT over the normal income tax may be carried forward on an annual basis and be credited against the normal income tax for 3 immediately succeeding taxable years. 19) How would the MCIT be recorded for accounting purposes? Any amount paid as excess minimum corporate income tax should be recorded in the corporations books as an asset under account title Deferred charges-MCIT 20) How long can we amend our income tax return? There is no prescription period for amending the return. When the taxpayer has been issued a Letter of Authority, he can no longer amend the return. 21) Can a benefactor of a senior citizen claim him/her as additional dependent in addition to his/her 3 qualified dependent children at P 25,000 each? No, pursuant to Revenue Regulations 2-94, the benefactor of a senior citizen cannot claim the additional exemption. 22) What is a tax treaty? A tax treaty formally known as convention or agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (and on capital) could be defined in terms of its purpose. First, a tax treaty is intended to promote international trade and investment in several ways, the most important of which is by allocating taxing jurisdiction between the Contracting States so as to eliminate or mitigate double taxation of income. Second, a tax treaty is intended to permit the Contracting States to better enforce their domestic laws so as to reduce tax evasion. These purposes are in fact incorporated in the title and the preamble. 23) What are the effective Philippine tax treaties? The Philippines has thirty-seven (37) effective tax treaties. The following tax treaties and their dates of effectivity as as follows: Effective Philippine Tax Treaties (as of June 2010)
Country 1. Australia 2. Austria 3. Bahrain 4. Bangladesh 5. Belgium 6. Brazil 7. Canada 8. China Date of Effectivity January 1, 1980 January 1, 1983 January 1, 2004 January 1, 2004 January 1, 1981 January 1, 1992 January 1, 1977 January 1, 2002 Date and Venue of Signature May 11, 1979, Manila, Philippines April 4, 1981, Vienna, Austria November 7, 2001, Manila, Philippines September 8, 1997, Manila, Philippines October 2, 1976, Manila, Philippines Sept. 29, 1983, Brasilia, Brazil March 11, 1976, Manila, Philippines November 18, 1999, Beijing, China

9. Czech 10. Denmark (Renegotiated) 11. Finland 12. France 13. Germany 14. Hungary 15. India 16. Indonesia 17. Israel 18. Italy 19. Japan 20. Korea 21. Malaysia 22. Netherlands 23. New Zealand 24. Norway 25. Pakistan 26. Poland 27. Romania 28. Russia 29. Singapore 30. Spain 31. Sweden (Renegotiated) 32. Switzerland 33. Thailand 34. United Arab Emirates 35. United Kingdom of Great Britain

January 1, 2004 January 1, 1998 January 1, 1982 January 1, 1978 January 1, 1985 January 1, 1998 January 1, 1995 January 1, 1983 January 1, 1997 January 1, 1990 January 1, 1981 January 1, 1987 January 1, 1985 January 1, 1992 January 1, 1981 January 1, 1998 January 1, 1979 January 1, 1998 January 1, 1998 January 1, 1998 January 1, 1977 January 1, 1994 January 1, 2004 January 1, 2002 January 1, 1983 January 1, 2009 January 1, 1979

November 13, 2000, Manila, Philippines June 30, 1995, Copenhagen, Denmark October 13, 1978, Manila, Philippines January 9, 1976, Kingston, Jamaica July 22, 1983, Manila, Philippines June 13, 1997, Budapest, Hungary February 12, 1990, Manila, Philippines June 18, 1981, Manila, Philippines June 9, 1992, Manila, Philippines December 5, 1980, Rome, Italy February 13, 1980, Tokyo, Japan February 21, 1984, Seoul, Korea April 27, 1982, Manila, Philippines March 9, 1989, Manila, Philippines April 29, 1980, Manila, Philippines July 9, 1987, Manila, Philippines February 22, 1980, Manila, Philippines September 9, 1992, Manila, Philippines May 18, 1994, Bucharest, Romania April 26, 1995, Manila, Philippines August 1, 1977, Manila, Philippines March 14, 1989, Manila, Philippines June 24, 1998, Manila, Philippines June 24, 1998, Manila, Philippines July 14, 1982, Manila, Philippines September 21, 2003, Dubai, UAE June 10, 1976, London, United Kingdom October 1, 1976, Manila, Philippines November 14, 2001, Manila, Philippines

and Northern Ireland 36. United States of America 37. Vietnam January 1, 1983 January 1, 2004

24) What office can we inquire about the said tax treaties? The International Tax Affairs Division (ITAD). 25) What taxes are covered b Philippine tax treaties? Income taxes imposed by the domestic laws of the Contracting States, including substantially similar taxes that may be imposed later, in addition to, or in place, are covered by the tax treaties. In the Philippines, this is generally limited to Title II (Tax on Income) of the National Internal Revenue Code of 1997, as amended. 26) How is business income treated under our tax treaties? The business profits of a resident of a Contracting State shall not be taxable in the Philippines unless that enterprise of a resident of a Contracting State carries on business in the Philippines through a permanent establishment. 27) What is the concept of permanent establishment (PE) as used in tax treaties?

PE is defined as a fixed place of business through which the business of the enterprise is wholly or partly carried on. The concept of permanent establishment is used to determine the rights of a Contracting State to tax the business profits of enterprises of the other Contracting State. Under this concept, profits of an enterprise of a Contracting State are not taxable by the other Contracting State, unless the enterprise carries on business through a permanent establishment situated in the other Contracting State. A list of places, circumstances, and activities which constitute a permanent establishment is provided under the different tax treaties which the Philippines has with other countries. 28) What is the Most-Favored-Nation clause (MFN)? The appearance of the MFN clause in the tax treaty means that a Contracting State will grant to a resident of the other Contracting State the same lower rate of tax or exemption the former has granted to a resident of a third State. 29) What is the tax treatment on immovable property? Income from an immovable property is taxable in the Contracting State where the property is situated. This term is generally defined under the domestic laws of the Contracting States. However, this is further defined in the tax treaties. 30) How are capital gains taxed under our tax treaties? Gains from the alienation of immovable property or movable property forming part of the business property of a permanent establishment or pertaining to a fixed base are taxed in the Philippines if the immovable property or permanent establishment or fixed base is located here.

Percentage Tax Contents


Description Who Are Required To File Percentage Tax Returns Monthly Percentage Tax Quarterly Percentage Tax Percentage Tax For Transactions Involving Shares of Stocks Listed and Traded Through the Local Stock Exchange or Through Initial and/or Secondary Offering Tax Rates Related Revenue Issuances Codal Reference

Description
Percentage tax is a business tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales and/or receipts do not exceed P750,000 and who are not VAT-registered.

Who Are Required To File Percentage Tax Returns


Any person who is not a VAT-registered person (persons exempt from VAT under Sec. 109z of the Tax Code)

Domestic carriers and keepers of garages, except owners of bancas and owners of animal drawn twowheeled vehicle

Operators of international air and shipping carriers doing business in the Philippines Franchise grantees of electric, gas or water utilities

Franchise grantees of radio and/or television broadcasting companies whose gross annual receipts for the preceding year do not exceed Ten Million Pesos (P 10,000,000.00) and did not opt to register as VAT taxpayers

Operators of communication equipment sending overseas dispatch, messages, or conversations from the Philippines, except on services involving the following: o Government of the Philippines - for messages transmitted by the Government of the Republic of the Philippines or any of its political subdivisions and instrumentalities

Diplomatic services - for messages transmitted by any embassy and consular offices of a foreign government

International organizations - for messages transmitted by a public international organization or any of its agencies based in the Philippines enjoying privileges, exemptions and immunities which the government of the Philippine is committed to recognize pursuant to an international agreement

News Services - for messages from any newspaper, press association, radio or television newspaper broadcasting agency, or newsticker services to any other newspaper, press association, radio or television, newspaper, broadcasting agency or newsticker services, or to bonafide correspondents, which messages deal exclusively with the collection of news items for, or the dissemination of news items through public press, radio or television broadcasting or a newsticker service furnishing a general news service similar to that of the public press

Banks and non-bank financial intermediaries and finance companies

Life insurance premiums

Agents of foreign insurance companies

Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, jai-alai and race tracks

Every stock broker who effected a sale, barter, exchange or other disposition of shares of stock listed and traded through the Local Stock Exchange (LSE) other than the sale by a dealer in securities

Corporate issuer / stock broker, whether domestic of foreign, engaged in the sale, barter, exchange or other disposition through Initial Public Offering (IPO) seller in secondary public offering of shares of stock in closely held corporations

Monthly Percentage Tax


Tax Form BIR Form 2551 M - Monthly Percentage Tax Return Documentary Requirements 1. Duly issued Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable

2.

Duly approved Tax Debit Memo, if applicable

3.

Copy of Certificate of Registration issued by Cooperative Development Authority for cooperatives and from the National Electrification Administration for electric cooperatives

4.

Previously filed return and proof of payment, for amended return

Procedures 1. Fill-up BIR Form 2551 M in triplicate copies 2. If there is payment: Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where taxpayer is required to register and present the duly accomplished BIR Form 2551 M, together with the required attachments and payment. (The Percentage Tax imposed shall be paid at the time the return is filed by the taxpayer.)

In places where there are no AABs, the duly accomplished BIR Form 2551 M, together with the required attachments and payment, shall be filed/paid with the Revenue Collection Officer or duly Authorized Treasurer of the city or municipality where said business or principal place of business is located.

Receive taxpayer's copy of the duly stamped and validated form from the teller of the AAB/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

3. If there is no payment: Proceed to the Revenue District Office where taxpayer is required to register and present the duly accomplished BIR Form 2551M, together with the required attachments. Receive taxpayer's copy of the duly stamped and validated form from the RDO representative.

Note: "No payment" returns filed late shall be imposed the necessary penalties by the RDO, which shall be paid at the concerned AAB.
Deadline

Manual Filing Not later than 20th day following the end of each month

Filing Through Electronic Filing and Payment System (eFPS)

Group Group Group Group Group

A - Twenty-Five (25) days following the end of the month B - Twenty-Four (24) days following the end of the month C - Twenty-Three (23) days following the end of the month D - Twenty-Two (22) days following the end of the month E - Twenty-One (21) days following the end of the month

Quarterly Percentage Tax


Tax Form BIR Form 2551 Q - Quarterly Percentage Tax Return Documentary Requirements

1.

Duly issued Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable

2.

Duly approved Tax Debit Memo, if applicable

3.

Copy of Certificate of Registration issued by Cooperative Development Authority for cooperatives and from the National Electrification Administration for electric cooperatives

4.

Previously filed return and proof of payment, for amended return

Procedures

1.

Fill-up BIR Form 2551 Q in triplicate copies.

2.

If there is payment:

Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where taxpayer is required to register and present the duly accomplished BIR Form 2551Q, together with the required attachments and payment. (The Percentage Tax imposed shall be paid at the time the return is filed by the taxpayer.)

In places where there are no AABs, the accomplished BIR Form 2551 Q, together with the required attachments and payment, shall be filed/paid with the Revenue Collection Officer or duly Authorized Treasurer of the city or municipality where said business or principal place of business is located.

Receive taxpayer's copy of the duly stamped and validated form from the teller of the AAB/Revenue Collection Officer/duly Authorized City or Municipal Treasurer. If there is no payment:

3.

Proceed to the Revenue District Office where taxpayer is required to register and present the duly accomplished BIR Form 2551Q, together with the required attachments. Receive taxpayer's copy of the duly stamped and validated form from the RDO representative. Note: "No payment" returns filed late shall be imposed the necessary penalties by the RDO, which shall be paid at the concerned AAB.

Deadline

Manual Filing Not later than 20th day following the end of each quarter

Filing Through Electronic Filing and Payment System (eFPS) Not later than the 20th day following the end of the quarter

Percentage Tax For Transactions Involving Shares of Stocks Listed and Traded Through the Local Stock Exchange or Through Initial and/or Secondary Offering
Tax Form

BIR Form 2552 - Percentage Tax Return (For Transactions Involving Shares of Stocks Listed and Traded Through the Local Stock Exchange or Through Initial and/or Secondary Offering) Documentary Requirements

1.

Duly issued Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable

2.

Proof of Exemption for transactions not subject to tax, if applicable

3.

Duly approved Tax Debit Memo, if applicable

4.

Previously filed return and proof of payment, for amended return

Procedures

1.

Fill-up BIR Form 2552 in triplicate copies.

2.

If there is payment: Proceed to the nearest Authorized Agents Banks (AABs) of the Revenue District Office where the local stock exchange is located and present the duly accomplished BIR Form 2552, together with the required attachments and payment. (The Percentage Tax imposed shall be paid at the time the return is filed by the taxpayer.)

Receive taxpayer's copy of the duly stamped and validated form from the teller of the AAB

3. If there is no payment:
Proceed to the Revenue District Office where the local stock exchange is located and present the duly accomplished BIR Form 2552, together with the required attachments.

Receive taxpayer's copy of the duly stamped and validated form from the RDO representative. Note: "No payment" returns filed late shall be imposed the necessary penalties by the RDO, which shall be paid at the concerned AAB.

Deadline

For tax on sale of shares of stocks listed and traded through the local stock exchange (LSE) within five (5) banking days from the date of collection

For tax on shares of stocks sold or exchanged through primary offering - within 30 days from the date of listing in the LSE

For tax on shares of stocks sold or exchanged through secondary public offering - within five (5) banking days from the date of collection

Tax Rates

Coverage Persons exempt from VAT under Sec. 116 Domestic carriers and keepers of garages

Basis Gross Sales or Receipts

Tax Rate 3%

Gross Receipts

3%

International Carriers: International air/shipping carriers doing business in the Philippines Franchise Grantees: Electric , gas and water utilities Radio and television broadcasting companies whose annual gross receipts of the preceding year do not exceed P 10,000,000 and did not opt to register asVAT taxpayer Banks and non-bank financing intermediaries Gross Receipts Gross Receipts 2% 3% Gross Receipts 3%

Interest, commissions and discounts from lending activities as well as income from leasing on the basis of remaining maturities of instruments:

Short term maturity (not over 2 years) Medium term (over 2 years but not over 4 years) Long Term Maturity

5%

3%

o o

Over 4 years but not over 7 years Over 7 years

1% 0%

On Dividends On royalties, rentals of properties, real or personal, profits from exchange and all other items treated as gross income under Sec. 32 of the Code On interest, discounts and other items of gross income paid to finance companies and other financial intermediaries not performing quasi banking functions Interest, commissions and discounts paid from their loan transactions from finance companies as well as income from financial leasing shall be taxed based on the remaining maturities of instruments:

0%

5%

Finance Companies

5%

Short term maturity (not over 2 years) Medium term (over 2 years but not over 4 years) Long Term Maturity

5%

3%

o o
Life Insurance Companies (except purely cooperative companies or associations) Agents of foreign insurance companies: (except reinsurance premium) Insurance agents authorized under the Insurance Code to procure policies of insurance for companies not authorized to transact business in the Phils. Owners of property obtaining insurance directly with foreign insurance companies Proprietors, lessee or operator of the following: Cockpits Cabarets, Night or Day Clubs Boxing exhibitions Professional basketball games Jai-alai and race track (operators shall withheld tax on winnings) Every stock broker who effected a sale, barter, exchange or other disposition of shares of stock listed and traded through the Local Stock Exchange (LSE) other than the sale by a dealer in securities A corporate issuer/stock broker,

Over 4 years but not over 7 years Over 7 years

1% 0% 5%

Total premiums collected

Total premium collected

10 %

Total premium collected

5%

Gross receipts Gross receipts Gross receipts Gross receipts Gross receipts Gross selling price or gross value in money of shares of stocks sold, bartered, exchanged or otherwise disposed Gross selling price or gross value of in

18% 18% 10% 15% 30%

of 1 %

whether domestic of foreign, engaged in the sale, barter, exchange or other disposition through Initial Public Offering (IPO)/secondary public offering of shares of stock in closely held corporations

money of shares of stocks sold, bartered, exchanged or otherwise disposed in accordance with the proportion of stocks sold, bartered or exchanged or after listing in the stock exchange

Up to 25 % Over 25% but not over 33 1/3% Over 33 1/3 %

4% 2% 1%

Related Revenue Issuances


RR No. 4-95, RR 7-95, RR No. 5-97, RR No. 2-98, RR No. 7-95, RR No. 6-2001, RR No. 12-2001, RR No. 4-2002, RR No. 26-2002, RR No. 14-2003, RR No. 9-2004, RR No. 10-2004, RMC No. 6-2003, RMC No. 73-2004

Codal Reference
Sections 116 to 128 of the National Internal Revenue Code

:. Value-Added Tax Contents


Description Who Are Required To File VAT Returns Monthly VAT Declarations Quarterly Value-Added Tax Return Tax Rates Related Revenue Issuances Codal Reference Frequently Asked Questions

Description
Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.

Who Are Required To File VAT Returns

Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties and renders services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed One Million Five Hundred Thousand Pesos (P1,500,000.00). A person required to register as VAT taxpayer but failed to register Any person, whether or not made in the course of his trade or business, who imports goods

Monthly VAT Declarations


Tax Form BIR Form 2550 M - Monthly Value-Added Tax Declaration (February 2007 ENCS) Documentary Requirements 1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form No. 2307), if applicable 2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax At Source (SAWT), if applicable 3. Duly approved Tax Debit Memo, if applicable 4. Duly approved Tax Credit Certificate, if applicable 5. Authorization letter, if return is filed by authorized representative. Procedures 1. Fill-up BIR Form No. 2550 M in triplicate copies (two copies for the BIR and one copy for the taxpayer) 2. If there is payment: File the Monthly VAT declaration, together with the required attachments, and pay the VAT due thereon with any Authorized Agent Bank (AAB) under the jurisdiction of the Revenue District Office (RDO)/Large Taxpayers District Office (LTDO) where the taxpayer (head office of the business establishment) is registered or required to be registered. The taxpayer must accomplish and submit BIR-prescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax

return shall stamp mark the word "Received" on the return and machine validate the return as proof of filing the return and payment of the tax. In places where there are no duly accredited agent banks, file the Monthly VAT declaration, together with the required attachments and pay the VAT due with the Revenue Collection Officer (RCO) or duly authorized Treasurer of the Municipality where such taxpayer (head office of the business establishment) is registered or required to be registered. The RCO or duly authorized Municipal/City Treasurer shall issue a Revenue Official Receipt upon payment of the tax.

3. If there is no payment: File the Monthly VAT Declaration, together with the required attachments with the RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized Municipal/ City Treasurer of Municipality/City where the taxpayer (head office of the business establishment) is registered or required to be registered.
Deadline Manual Filing
Not later than the 20th day following the end of each month Through Electronic Filing and Payment System (eFPS):

Business Industry
Group A

Period for filing Monthly VAT Declarations

Insurance and Pension Funding Activities Auxiliary to Financial Intermediation Construction Water Transport Hotels and Restaurants Land Transport

25 days following the end of the month

Group B

Manufacture and Repair of Furniture Manufacture of Basic Metals Manufacture of Chemicals and Chemical Products Manufacture of Coke, Refined Petroleum & Fuel Products Manufacture of Electrical Machinery & Apparatus N.E.C. Manufacture of Fabricated Metal Products Manufacture of Food, Products & Beverages Manufacture of Machinery & Equipment NEC Manufacture of Medical, Precision, Optical Instruments Manufacture of Motor Vehicles, Trailer & Semi-Trailers Manufacture of Office, Accounting & Computing Machinery Manufacture of Other Non-Metallic Mineral Products Manufacture of Other Transport Equipment Manufacture of Other Wearing Apparel Manufacture of Paper and Paper Products Manufacture of Radio, TV & Communication Equipment/ Apparatus Manufacture of Rubber & Plastic Products Manufacture of Textiles Manufacture of Tobacco Products Manufacture of Wood & Wood Products

24 days following the end of the month

Manufacturing N.E.C. Metallic Ore Mining Non-Metallic Mining & Quarrying


Group C

Retail Sale Wholesale Trade and Commission Trade


Sale, Maintenance, Repair of Motor Vehicle, Sale of Automotive Fuel

23 days following the end of the month

Collection, Purification and Distribution of Water Computer and Related Activities Real Estate Activities
Group D

Air Transport 22 days following Electricity, Gas, Steam & Hot Water the end of the month Supply Postal & Telecommunications Publishing, Printing & Reproduction of Recorded Media Recreational, Cultural & Sporting Activities Recycling Renting of Goods & Equipment Supporting & Auxiliary Transport Services
Group E

Activities of Membership Organizations, Inc. Health and Social Work Public Admin & Defense Compulsory Social Security Research and Development Agricultural, Hunting, and Forestry Farming of Animals

21 days following the end of the month

Fishing Other Service Activities Miscellaneous Business Activities Unclassified

Quarterly Value-Added Tax Return


Tax Form BIR Form No. 2550Q - Quarterly Value-Added Tax Return (February 2007 ENCS) Attachments to the Return 1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable 2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax At Source (SAWT), if applicable 3. Duly approved Tax Debit Memo, if applicable 4. Duly approved Tax Credit Certificate, if applicable 5. Previously filed return and proof of payment, for amended return 6. Authorization letter, if return is filed by authorized representative Procedures 1. Fill-up BIR Form 2550 Q in triplicate copies (two copies for the BIR and one copy for the taxpayer) 2. If there is payment:

File the Quarterly VAT Return, together with the required attachments, and pay the VAT due thereon with any AAB under the jurisdiction of the RDO/LTDO where the taxpayer (head office of the business establishment) is registered or required to be registered.

The taxpayer must accomplish and submit BIR- prescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word "Received" on the return and machine validate that return as proof of filing the return and payment of the tax.
In places where there are no duly accredited agent banks, file the Quarterly VAT Return, together with the required attachments and pay the VAT due with the Revenue Collection Officer (RCO) or duly authorized Treasurer of the Municipality where such taxpayer (head office of the business establishment) is registered or required to be registered.

The RCO or duly authorized Municipal/City Treasurer shall issue a Revenue Official Receipt upon payment of the tax.

3. If there is no payment: File the Quarterly VAT Return, together with the required attachments with the RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized Municipal/City Treasurer of Municipality/City where the taxpayer (head office of the business establishment) is registered or required to be registered.

Reminders: 1. Only one consolidated Monthly VAT Declaration/Quarterly VAT Return shall be filed covering the results of operation of the head office as well as the branches for all lines of business subject to VAT. 2. The Quarterly List of Sales and Purchases shall be submitted in magnetic form using 3.5-inch floppy diskette following the format provided under Section 4.114-3(g) of RR No. 16-2005. 3. The Quarterly List of Sales and Purchases shall be submitted through electronic filing facility for taxpayers under the jurisdiction of the Large Taxpayers Service (LTS) and those enrolled under the eFPS.
Deadline Within twenty five (25) days following the close of taxable quarter.

Tax Rates
On sale of goods and properties - twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged

On sale of services and use or lease of properties - twelve percent (12%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties On importation of goods - twelve percent (12%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such as tax to be paid by the importer prior to the release of such goods from customs custody; provided, that where the customs duties are determined on the basis of quantity or volume of the goods, the VAT shall be based on the landed cost plus excise taxes, if any. On export sales and other zero-rated sales - 0%

Related Revenue Issuances


Revenue Regulations (RRs) Issuance No. RR No. 13-2008 SUBJECT Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar; Amending and/or Revoking All Revenue Issuances Issued to this Effect, and for Other Related Purposes Prescribing the Rules on the Advance Payment of Value-Added Tax/Percentage Tax on the Transport of Naturally Grown Planted Timber Products Suspension of the Implementation of Revenue Regulations No. 6-2007 Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar, Amending and/or Revoking all Revenue Issuances Issued to this Effect, and for Other Related Purposes Amending Certain Provisions of RR No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005 Amending Certain Provisions of RR No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005 Consolidated Value-Added Tax Regulations of 2005. Implementing Sec. 109(bb) and (cc) of the National Internal Revenue Code, as Amended by RA 9238, Excluding Services Rendered by Doctors of Medicine duly Registered with the Professional Regulatory Commission (PRC), and Services Rendered by Lawyers Duly Registered with the Integrated Bar of the Philippines (IBP) from the Coverage of Value-Added Tax. Supplementing the Rules on the Advance Payment of Value-Added Tax on Sale of Refined Sugar as Provided for in RR 2-2004. Further Enhancing the Rules on the Advance Payment of Value-Added Tax on Sale of Refined Sugar, Amending RR 7-89 and 29-2002 Advance Payment of VAT on the Sale of Flour Amending Further Pertinent Provisions of RR 2-98 as Amended, Relative to the Issuance of Certificate of Value-Added Tax Withheld at Source, Thereby Amending RR 4-2002; and For the Purpose. Regulations Further Amending the Transitory Provisions of RR 18-99 as Date 9/19/2008

RR No. 13 - 2007

10/15/2007

RR No. 11-2007 RR No. 6-2007

8/15/2007 3/21/2007

RR No. 4-2007 RR No. 2-2007 RR 16-2005 RR 7-2004

2/7/2007 12/22/2006 9/1/2005 5/7/2004

RR 4-2004 RR 2-2004 RR 29-2003 RR 28-2003

3/22/2004 1/2/2004 10/30/2003 10/15/2003

RR 27-2003

6/30/2003

Amended by RR 12-2003, Pertaining to the Deadline for the Usage of Properly Stamped Unused Non-VAT Invoices or Receipts. RR 5-2003 Rules and Regulations To Implement The Remittance of the Following: (a) 70% Share of the ARMM in the Withholding Tax Payments of National Government Agencies (NGAs) and in the National Collections from Taxpayers Other Than NGAs Provided for Under Section 9, Article IX of RA 9054, Amending Therein Certain Sections of RR 4-98; (b)Allotment to the Regional Government (RG) of the 30% Share of the National Government (NG) of all Current Year Collections of Internal Revenue Taxes Within ARMM for a Period of Five (5) Years as may be Provided in the Annual Appropriations Act as Provided for Under Section 15, Article IX of RA 9054; and c) 50% of the 80% Share of the NG from the Yearly Incremental Revenue From VAT Collections Within ARMM Received by the Central Government as Provided for Under Section 15, in Relation to Section 9, both of Article IX of RA 9054 As Well As in Relation to Section 283 of the National Internal Revenue Code (NIRC) of 1997. Enhancing the Rules on the Advance Payment of Value- Added Tax on the Sale of Refined Sugar, thereby Amending RR 7-89, and Other Purposes. Amending Further Pertinent Provisions of RR 7-95, as Amended , With Respect to the Time of Filing of Quarterly VAT Returns; Contents and Submission of Quarterly Total of Monthly Sales and Purchases Per Supplier or Customer, and Providing for the Penalties and Effect of Non-Submission Thereof; and Clarifying Further the Mode of Remittance of VAT Due From Non-Residents. Implementing Republic Act No. 8424, "An Act Amending the National Internal Revenue Code (NIRC) as Amended" relative to the Withholding on Income Subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable VAT and other Percentage Taxes Revenue Memorandum Orders(RMOs) Issuance No. RMO No. 3-2009 SUBJECT Amendment and Consolidation of the Guidelines in the Conduct of Surveillance and Stock-Taking Activities, and the Implementation of the Administrative Sanction of Suspension and Temporary Closure of Business Prescribing the Guidelines and Procedures in the Printing, Requisition, Reporting, Issuance and Distribution of Certificate of Advance Payment of Value-Added Tax/ Percentage Tax on the Transport of Naturally Grown and Planted Timber Products as Prescribed in RR No. 13-2007 Dated October 15, 2007 Prescribing Additional Procedures in the Audit of Input Taxes Claimed in the VAT Returns by Revenue Officers and Amending "Annex B" of RMO No. 53-98 With Respect to the Checklist of Documents to be Submitted by a Taxpayer Upon Audit of his/its VAT Liabilities as well as the Mandatory Reporting Requirements to be Prepared by the Assigned Revenue Officer/s Relative Thereto, All of Which Shall Form an Integral Part of the Docket Prescribing the guidelines and procedures in the processing of applications for zero-rating of effectively zero-rated transactions for Value-Added Tax purposes Suspension of issuance of assessments for deficiency Value-Added Tax against cinema/theater operators/owners Value-Added Tax (VAT) Exemption Certificate/ Identification Card Issued to qualified foreign embassies and their qualified personnel Amending/ Modifying RMO No. 81-99 Prescribing the guidelines and procedures in the implementation of RR No. 29-2003 on the advance payment of Value-Added Tax on the sale of flour Date 1/15/2009 1/22/2003

RR 29-2002 RR 8-2002

12/9/2002 6/13/2002

RR 2-98

4/17/98

RMO No. 6-2008

12/31/2007

RMO No. 16-2007

7/20/2007

RMO No. 7-2006

12/15/2005

RMO No. 26-2005 RMO No. 22-2004

10/11/2005 5/24/2004

RMO No. 5-2004

12/29/2003

RMO No. 35-2002

Prescribing the guidelines and procedures in the processing and issuance of Authority to Release Imported Goods (ATRIG) for Excise and Value-Added Tax Purposes Tax treatment of sales of goods, properties and services made by VATregistered suppliers to BOI-registered manufacturers-exporters with 100% export sales Issuance of Value-Added Tax (VAT) Exemption Certificate to all qualified embassies and their personnel Prescribing the Modified Procedures on the Processing of Claims for VAT Credit/ Refund Revenue Memorandum Circulars (RMCs) SUBJECT Taxability of Directors Fees Received By Directors Who are not Employees of the Corporation for VAT or Percentage Tax Purposes as Espoused Under Revenue Memorandum Circular No. 34-2008 Clarification of Issues Concerning Common Carriers by Air and Their Agents Relative to the Revenue and Receipt from Transport of Passengers, Goods/Cargoes and Mail, and from Excess Baggage Tax Treatment of Directors Fees for Income Tax and Business Tax Purposes Clarifying the Effect of Suspension of RR No. 6-2007, Otherwise Known As the "Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar, Amending and/or Revoking All Revenue Issuances Issued to this Effect and for Other Related Purposes" Reiteration of the Amendment Made by RA No. 9337 Imposing VAT on the Sale of Non-Food Agricultural Products, Marine and Forest Products and on the Sale of Cotton and Cotton Seeds in their Original State Clarifying the Income Tax and VAT Treatment of Agency Fees/Gross Receipts of Security Agencies Including the Withholding of Taxes Due Thereon Clarifying the Proper VAT and EWT Treatment of Freight and Other Incidental Charges Billed by Freight Forwarders Value Added Tax (VAT) on the Construction or Renovation of Official Buildings or Properties of the United States of America Embassy Prescribing the Submission of a Narrative Memorandum Report to Accompany the VAT Credit Evaluation Report and Requiring the Attachment of Certain Documents Prior to Approval of the Tax Credit Certificate (TCC) Recommended by the Tax and Revenue Group (TRG), Department of Finance One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOF-OSS) Clarifying certain issues relating to the implementation of the increase in the Value-Added Tax rate from 10% to 12% on the sale of goods pursuant to Republic Act No. 9337 Clarification of Issues on How to Fill-up the new Version of VAT Forms (September, 2005 Version) and other Related Issues Clarifying certain issues relating to the implementation of the increase in the VAT rate from 10% to 12% pursuant to Republic Act No. 9337 Prescribing the use of the Government Money Payment Chart Implementing Sections 2.57.2, 4.114 and 5.116 of Revenue Regulations No. 2-98 as amended by Revenue Regulations No. 16-2005 in relation to Sections 57 (B), 114 (C) and 116 to 123 of Republic Act No. 8424 as

10/28/2002

RMO No. 9-2000

2/2/2000

RMO No. 81-99 RMO No. 40-94

10/8/1999 5/6/1994

Issuance No. RMC No. 77-2008

Date 11/24/2008

RMC No. 46-2008

2/1/2008

RMC No. 34-2008 RMC No. 59-2007

4/15/2008 9/12/2007

RMC No. 53-2007

8/7/2007

RMC No. 39-2007

1/22/2007

RMC No. 35-2006 RMC No. 31-2006 RMC No. 30-2006

6/21/2006 5/29/2006 3/23/2006

RMC No. 22-2006

4/5/2006

RMC No. 21-2006 RMC No. 8-2006 RMC No. 5-2006

3/24/2006 1/31/2006 11/2/2005

amended by Republic Act No. 9337 RMC No. 72-2005 Transition procedures for all Electronic Filing and Payment System filers (Large Taxpayers/Top 10,000 Corporations) in filing tax returns affected by the new VAT Law (R.A. 9337) Enhanced VAT forms BIR Form No. 2550M (Monthly Value-Added Tax Declaration) and BIR Form No. 2550Q (Quarterly Value-Added Tax Return) September 2005 version Revised guidelines in the registration and invoicing requirements including clarification on common issues affecting Value-Added Tax (VAT) taxpayers Pursuant to RA No. 9337 (An Act Amending Sections 27, 28, 34, 106, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, as Amended, and for other Purposes) Attachments to the quarterly VAT return to be filed starting October 25, 2005 Value-Added Tax (VAT) Liability of the Tollway Industry Clarifying the provisions of Republic Act No. 9337 (VAT Law of 2005) applicable to the petroleum industry Clarification on proper determination of amount of Value-Added Tax on VAT invoices or VAT official receipts Clarification regarding the withholding of creditable Value-Added Tax by government offices for purchases of P1,000.00 and below Settlement of the Value-Added Tax liabilities of pawnshops for taxable years 1996 to 2002 Guidelines and Policies Applicable to the Business Tax Applicable to Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions and other Non-Bank Financial Intermediaries As A Result of the Enactment and Effectivity of Republic Act No. 9238, An Act Amending Certain Provisions of the National Internal Revenue Code of 1997, As Amended, by Excluding Several Services from the Coverage of the Value-Added Tax and Re-Imposing the Gross Receipts Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions and Other Non-Bank Financial Intermediaries Beginning January 1, 2004 Clarifying Certain Issues Relative to the Services Rendered by Individual Professional Practitioners, General Professional Partnerships, Entertainers, and Professional Athletes Who Are Subject to the Value-Added Tax or Percentage Tax, Whichever is Applicable, Beginning January 1, 2003 Clarifying the issues on VAT taxable transactions of Philippine Ports Authority Amending Revenue Memorandum Circular No. 20-88, Pursuant to Republic Act No. 7716 As Implemented by Revenue Regulations No. 795 Issuance of VAT Invoices/Receipt for Non-VAT/Exempt Sale of Goods, Properties or Services Amending Answer to Question Number 17 of Revenue Memorandum Circular No. 42-2003 and Providing Additional Guidelines on Issues Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters Clarifying certain issues raised relative to the processing of claims for Value-Added Tax (VAT) credit/refund, including those filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters 12/16/2005

RMC No. 68-2005

12/1/2005

RMC No. 62-2005

10/18/2005

RMC No. 57-2005 RMC No. 52-2005 RMC No. 29-2005

10/18/2005 9/28/2005 6/29/2005 11/20/2004

RMC No. 70-2004

RMC No. 60-2004 RMC No. 37-2004 RMC No. 9-2004

8/20/2004 6/16/2004 2/19/2004

RMC No. 6-2003

1/15/2003

RMC No. 2-2004

12/26/2003

RMC No. 61-2003 RMC No. 49-2003

10/6/2003 8/15/2003

RMC No. 42-2003

7/15/2003

RMC No. 30-2003 RMC No. 56-2002 RMC No. 45-2001 RMC No. 28-2001 RMC No. 25-99

Clarification of Paragraph 1-Q of Revenue Memorandum Circular No. 282003 Taxability of Health Maintenance Organizations (HMOs) for VAT purposes. Taxability of Pawnshop Operators for VAT Purposes Taxability of Movie/Cinema House Operators for VAT Purposes Disseminating the Ruling of the Commissioner of Internal Revenue on the Non-eligibility for VAT Zero-Rating of Automobile Sales to Entities Registered with PEZA, SBMA and Clark Development Authority Japanese Contractors undertaking Overseas Economic Cooperation Fund of Japan (OECF) Funded Project are Exempt from the eight and one half percent (8.5%) creditable VAT imposed under Section 114(C) of the Tax Code of 1997 and to the One Percent (1%) Expanded Withholding Tax (EWT) imposed under Section 2.57.2(E) of RR No. 2-98 implementing Section 57(B) of the Tax Code of 1997

5/20/2003 12/13/2002 10/12/2001 7/2/2001 3/18/1999

RMC No. 32-99

5/3/99

Codal Reference Sections 105 to 115 of the National Internal Revenue Code of 1997, as amended

Frequently Asked Questions I. General VAT Queries

Who are liable to register as VAT taxpayers? When is a new VAT taxpayer required to apply for registration and pay the registration fee? What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically? How do we determine the main or principal business of a taxpayer who is engaged in mixed business activities?

What is the liability of a taxpayer becoming liable to VAT and did not register as such? Who may opt to register as VAT and what will be his liability? What are the instances when a VAT-registered person may cancel his VAT registration? When will the cancellation for registration be effective? What is the invoicing/ receipt requirement of a VATregistered person? May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions? May a VAT-registered person issue separate invoices/ receipts involving VAT and Non-VAT transaction? How is the Value-Added Tax presented in the receipt/ invoice? What is the information that must be contained in the VAT invoice or VAT official receipt? What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/ receipt? What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT0 exempt transactions? What is "output tax"?

What is "input tax"? What comprises "goods or properties"? What comprises "sale or exchange of services"? What is a zero-rated sale? What transactions are considered as zero-rated sales? Where will taxpayers file their application for VAT zerorating? What is a Contractor's Final Payment Release Certificate and where should taxpayers file their application for this? What transactions are considered as deemed sales? What is VAT-exempt sale? What are the VAT-exempt transactions? What are the previously exempt transactions that are now subject to VAT?
II. Relief-Related Queries

What is "RELIEF" ? Who are required to submit Summary List of Sales? Who are required to submit Summary List of Purchases? What are the Summary Lists required to be submitted?

When is the deadline for submission of the above Summary Lists? What are the penalties for failure to submit the Summary Lists?
III. What is the treatment for Withholding of VAT on Government Money Payments? IV. In what grounds can the Commissioner of Internal Revenue suspend the business operations of a taxpayer?

I. General VAT Queries Who are liable to register as VAT taxpayers? Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register if: a. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (U), have exceeded One Million Five Hundred Thousand Pesos (P1,500,000.00): or b. There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will exceed One Million Five Hundred Thousand Pesos (P1,500,000.00). When is a new VAT taxpayer required to apply for registration and pay the registration fee? New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the corresponding registration fee of five hundred pesos (P500.00) using BIR Form No. 0605 for every separate or distinct establishment or place of business before the start of their business following existing issuances on

registration. Thereafter, taxpayers are required to pay the annual registration fee of five hundred pesos (P500.00) not later than January 31, every year. What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically? The following compliance activities must be performed by a VAT-registered taxpayer: a. Pay the annual registration fee of P500.00 for every place of business or establishment that generates sales; b. Register the books of accounts of the business/occupation/calling, including practice of profession, before using the same; c. Register the sales invoices and official receipts as VATinvoices or VAT official receipts for use on transactions subject to VAT. (If there are other transaction not subject to VAT, a separate set of non-VAT invoices or non-VAT official receipts need to be registered for use on transactions not subject to VAT); d. Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of the taxable month (for manual filers)/on or before the prescribed due dates enunciated in RR No. 16-2005 (for e-filers) using BIR Form No. 2550M and of the Quarterly VAT Return on or before the 25th day following the end of the taxable quarter using BIR Form No. 2550Q, reflecting therein gross receipts (for seller of service)/ gross sales (for seller of goods) and output tax (VAT on sales); purchases of goods and services made in the course of trade or business/exercise of profession and input tax (VAT on purchases), other allowable tax credits as in the case of advance VAT payment and VAT withheld by government payors, and VAT payable or excess input VAT, whichever

is applicable, with the accredited agent banks (AABs) of the BIR or Revenue Collection Officers (RCOs) of the BIR (in areas without AAB), for returns with payment, or with the RDO/LTDO having jurisdiction over the taxpayer (home RDO/LTDO), for returns without payment. (The monthly VAT Declaration and the Quarterly VAT Return shall reflect the consolidated total for all the taxable lines of activity and all the establishments - head office and branches); e. Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in the filing of the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales and Output Tax (if the quarterly sales exceed P2,500,000.00), and the soft copy of the Quarterly Schedule of Monthly Domestic Purchases and Input Tax/ the soft copy of the Schedule of Transactional/Individual Importation ( if the quarterly total purchases exceed P1,000,000.00), reflecting therein the required data prescribed under existing revenue issuances. How do we determine the main or principal business of a taxpayer who is engaged in mixed business activities? In determining the main or principal business of a taxpayer, we apply the predominance test. Under this test, if more than fifty (50%) of its gross sales and/or gross receipts comes from its business/es subject to VAT, its main/principal business falls within the VAT system making its status as a VAT person. Otherwise, he can not be considered as a VAT person eligible for the election provided for under Section 109(2) of the Tax Code. What is the liability of a taxpayer becoming liable to VAT and did not register as such? Any person who becomes liable to VAT and fails to register as

such shall be liable to pay the output tax as if he is a VATregistered person, but without the benefit of input tax credits for the period in which he was not properly registered. Who may opt to register as VAT and what will be his liability? 1. Any person who is VAT-exempt under Sec. 4.109-1 (B) (1) (V) not required to register for VAT may, in relation to Sec. 4.109-2, elect to be VAT-registered by registering with the RDO that has jurisdiction over the head office of that person, and pay the annual registration fee of P500.00 for every separate and distinct establishment. 2. Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed transactions) may opt that the VAT apply to his transactions which would have been exempt under Section 109(1) of the Tax Code, as amended [Sec. 109(2)]. 3. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed ten million pesos (P10,000,000.00) derived from the business covered by the law granting the franchise may opt for VAT registration. This option, once exercised, shall be irrevocable. (Sec. 119, Tax Code). 4. Any person who elects to register under optional registration shall not be allowed to cancel his registration for the next three (3) years. The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the beginning of the calendar quarter and shall pay the registration fee unless they have already paid at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for administrative reason deny any application for registration. Once registered as a VAT person, the taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the first day of the

month following registration. What are the instances when a VAT-registered person may cancel his VAT registration? 1. If he makes a written application and can demonstrate to the commissioner's satisfaction that his gross sales or receipts for the following twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will not exceed one million five hundred thousand pesos (P1,500,000.00); or 2. If he has ceased to carry on his trade or business, and does not expect to recommence any trade or business within the next twelve (12) months. When will the cancellation for registration be effective? The cancellation for registration will be effective from the first day of the following month the cancellation was approved. What is the invoicing/ receipt requirement of a VATregistered person? A VAT registered person shall issue : 1. A VAT invoice for every sale, barter or exchange of goods or properties; and 2. A VAT official receipt for every lease of goods or properties and for every sale, barter or exchange of services. May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions? Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions provided that the invoice or receipt shall clearly indicate the break-down of the sales price between its taxable, exempt and zero-rated components and the calculation of the Value-Added Tax on each portion of the sale shall be shown on the invoice or receipt.

May a VAT- registered person issue separate invoices/ receipts involving VAT and Non-VAT transactions? Yes. A VAT registered person may issue separate invoices/ receipts for the taxable, exempt, and zero-rated component of its sales provided that if the sales is exempt from value-added tax, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt and if the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice or receipt. How is the Value-Added Tax presented in the receipt/ invoice? The amount of the tax shall be shown as a separate item in the invoice or receipt. Sample: Sales Price P100,000.00 VAT 12,000.00 Invoice P112,000.00 Amount What is the information that must be contained in the VAT invoice or VAT official receipt? 1. Name of Seller 2. Business Style of the Seller 3. Business Address of the Seller 4. Statement that the seller is a VAT-registered person, followed by his TIN 5. Name of Buyer 6. Business Style of Buyer 7. Address of Buyer 8. TIN of buyer, if VAT- registered and amount exceed P1,000.00 9. Date of transaction 10. Quantity 11. Unit cost

12. Description of the goods or properties or nature of the service 13. Purchase price plus the VAT, provided that: The amount of tax shall be shown as a separate item in the invoice or receipt; If the sale is exempt from VAT, the term "VATEXEMPT SALE" shall be written or printed prominently on the invoice or receipt; If the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice receipt; and If the sale involves goods, properties or services some of which are subject to and some of which are zero-rated or exempt from VAT, the invoice or receipt shall clearly indicate the breakdown of the sales price between its taxable, exempt and zerorated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. 14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt. What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/ receipt? The non-VAT registered person shall, in addition to paying the percentage tax applicable to his transactions, be liable to VAT imposed in Section 106 or 108 of the Tax Code without the benefit of any input tax credit plus 50% surcharge on the VAT payable (output tax). If the invoice/ receipts contain the required information, purchaser shall be allowed to recognize an input tax credit. What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT-exempt transactions?

If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction but fails to display prominently on the invoice or receipt the words "VAT-EXEMPT SALE", the transaction shall become taxable and the issuer shall be liable to pay the VAT thereon. The purchaser shall be entitled to claim an input tax credit on his purchase. What is "output tax"? Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or services by any person registered or required to register under Section 236 of the Tax Code. What is "input tax"? Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods, properties or services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period. What comprises "goods or properties"? The term "goods or properties" shall mean all tangible and intangible objects, which are capable of pecuniary estimation and shall include, among others: a. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business; b. The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; c. The right or privilege to use in the Philippines of any industrial, commercial or scientific equipment; d. The right or the privilege to use motion picture films, films, tapes and discs; and e. Radio, television, satellite transmission and cable

television time. What comprises "sale or exchange of services"? The term "sale or exchange of services" means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, whether in kind or in cash, including those performed or rendered by the following: a. Construction and service contractors; b. Stock, real estate, commercial, customs and immigration brokers; c. Lessors of property, whether personal or real; d. Persons engaged in warehousing services; e. Lessors or distributors of cinematographic films; f. Persons engaged in milling, processing, manufacturing or repacking goods for others; g. Proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts, theatres, and movie houses; h. Proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places, including clubs and caterers; i. Dealers in securities; j. Lending investors; k. Transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land relative to their transport of goods or cargoes; l. Common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines; m. Sales of electricity by generation, transmission, and/or distribution companies; n. Franchise grantees of electric utilities, telephone and

telegraph, radio and/or television broadcasting and all other franchise grantees, except franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed Ten Million Pesos (P10,000,000.00), and franchise grantees of gas and water utilities; o. Non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and p. Similar services regardless of whether or not the performance thereof calls for the exercise of use of the physical or mental faculties. The phrase "sale or exchange of services" shall likewise include: a. The lease of use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; b. The lease or the use of, or the right to use of any industrial, commercial or scientific equipment; c. The supply of scientific, technical, industrial or commercial knowledge or information; d. The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right or any such knowledge or information; e. The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such non-resident person; f. The supply of technical advice, assistance or services rendered in connection with technical management or

administration of any scientific, industrial or commercial undertaking, venture, project or scheme; g. The lease of motion picture films, films, tapes and discs; and h. The lease or the use of or the right to use radio, television, satellite transmission and cable television time. What is a zero-rated sale? It is a sale, barter or exchange of goods, properties and/or services subject to 0% VAT pursuant to Sections 106 (A) (2) and 108 (B) of the Tax Code. It is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sales, shall be available as tax credit or refund in accordance with RR No. 16-2005. What transactions are considered as zero-rated sales? The following services performed in the Philippines by VATregistered person shall be subject to zero percent (0%) rate: a. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); b. Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); c. Services rendered to persons or entities whose exemption under special laws or international agreements to which

the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; d. Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax Code starting Feb. 1, 2006; e. Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceeds seventy percent (70%) of total annual production; f. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country. Gross receipts of international air carriers doing business in the Philippines and international sea carriers doing business in the Philippines are still liable to a percentage tax of three percent (3%) based on their gross receipts as provided for in Sec. 118 of the Tax Code but shall not be liable to VAT; and g. Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other shipping sources using technologies such as fuel cells and hydrogen fuels; Provided, however that zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power . The following sales by VAT-registered persons shall be subject

to zero percent (0%) rate: a. Export sales o The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, paid in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); o The sale of raw materials or packaging materials to a non-resident buyer for delivery to as resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods, paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the BSP; o The sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; o Sale of gold to the BSP; o Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws; and o The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations; Provided, that the same is limited to goods, supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port, or vice-versa

without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than the mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to twelve percent (12%) output VAT. b. Foreign Currency Denominated Sales The sale to a non-resident of goods, except those mentioned in Sections 149 and 150 of the Tax Code, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. c. Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement Sale of goods or property to persons or entities who are taxexempt under special laws or international agreements to which the Philippines is a signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc. Where will taxpayers file their applications for VAT zero-rating? Taxpayers shall file their application directly with the Audit Information, Tax Exemption and Incentives Division (AITEID) under the Assessment Service, or with the LTAID I and II, BIR National Office, as the case may be. What is a Contractor's Final Payment Release Certificate

and where should taxpayers file their application for this? The Contractor's Final Payment Release Certificate is issued by the BIR before a government contractor is fully paid for his contract with the government. Taxpayers may file their application at the BIR National Office at the Audit Information, Tax Exemption and Incentives Division (AITEID) What transactions are considered deemed sales? The following transactions are considered as deemed sales: a. Transfer, use or consumption, not in the course of business, of goods or properties originally intended for sale or for use in the course of business. Transfer of goods or properties not in the course of business can take place when VAT-registered person withdraws goods from his business for his personal use; b. Distribution or transfer to: o Shareholders or investors as share in the profits of the VAT-registered person; or o Creditors in payment of debt or obligation c. Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned. Consigned goods returned by the consignee within the 60-day period are not deemed sold; d. Retirement from or cessation of business, with respect to all goods on hand, whether capital goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new owner or successor. The following circumstances shall, among others, give rise to transactions "deemed sale"; o Change of ownership of the business. There is a change in the ownership of the business when a single proprietorship incorporated; or the proprietor

of a single proprietorship sells his entire business. Dissolution of a partnership and creation of a new partnership which takes over the business.

What is VAT-exempt sale? It is a sale of goods, properties or service and the use or lease of properties which is not subject to output tax and whereby the buyer is not allowed any tax credit or input tax related to such exempt sale. What are the VAT-exempt transactions? a. Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefore; b. Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals considered as pets); c. Importation of personal and household effects belonging to residents of the Philippines returning from abroad and non-resident citizens coming to resettle in the Philippines; Provided, that such goods are exempt from custom duties under the Tariff and Customs Code of the Philippines; d. Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery and other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange,

accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is bonafide; e. Services subject to percentage tax under Title V of the Code, as amended; f. Services by agricultural contract growers and milling for others of palay into rice, corn into grits, and sugar cane into raw sugar; g. Medical, dental, hospital and veterinary services except those rendered by professionals; h. Educational services rendered by private educational institutions duly accredited by the Department of Education (DepED), the Commission on Higher Education (CHED) and the Technical Education and Skills Development Authority (TESDA) and those rendered by the government educational institutions; i. Services rendered by individuals pursuant to an employer-employee relationship; j. Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines; k. Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws except those granted under P.D. No. 529 - Petroleum Exploration Concessionaires under the Petroleum Act of 1949; l. Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Authority (CDA) to their members, as well as of their

produce, whether in its original state or processed form, to non-members, their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce; m. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good standing with the Cooperative Development Authority; n. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in good standing with CDA; Provided, that the share capital contribution of each member does not exceed Fifteen Thousand Pesos (P15,000.00) and regardless of the aggregate capital and net surplus ratably distributed among the members; o. Export sales by persons who are not VAT-registered; p. The following sales of real properties are exempt from VAT, namely: 1. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business; 2. Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise known as the "Urban Development and Housing Act of 1992" and other related laws, such as RA No. 7835 and RA No. 8763; 3. Sale of real properties utilized for specialized housing as defined under RA No. 7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws; 4. Sale of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00) and below, or house and lot and other residential dwellings valued at Two Million Five Hundred

Thousand Pesos (P2,500,000.00) and below where the instrument of sale/ transfer/ disposition was executed on or after July 1, 2005; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amounts stated herein shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); Provided, further, that such adjustment shall be published through revenue regulations to be issued not later than March 31 of each year. q. Lease of residential units with a monthly rental per unit not exceeding Ten Thousand Pesos (P10,000.00), regardless of the amount of aggregate rentals received by the lessor during the year; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P10,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO; r. Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements; s. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine equipment and spare parts thereof for domestic or international transport operations; Provided, that the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be limited to those of one hundred fifty (150) tons and above, including engine and spare parts of said vessels; Provided, further, that the vessels to be imported shall comply with the age limit requirement, at the time of acquisition counted from the date of the vessel's original commissioning, as follows: (a) for

passenger and/or cargo vessel, the age limit is fifteen (15) years old, (b) for tankers, the age limit is ten (10) year old, and (c) for high-speed passengers crafts, the age limit is five (5) years old; Provided, finally, that exemption shall be subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as "The Domestic Shipping Development Act of 2004"; t. Importation of life-saving equipment, safety and rescue equipment and communication and navigational safety equipment, steel plates and other metal plates including marine-grade aluminum plates, used for shipping transport operations; Provided, that the exemption shall be subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as "The Domestic Shipping Development Act of 2004". u. Importation of capital equipment, machinery, spare parts, life-saving and navigational equipment, steel plates and other metal plates including marine-grade aluminum plates to be used in the construction, repair, renovation or alteration of any merchant marine vessel operated or to be operated in the domestic trade. Provided, that the exemption shall be subject to the provisions of Section 19 of Republic Act No. 9295, otherwise known as the "The Domestic Shipping Development Act of 2004". v. Importation of fuel, goods and supplies engaged in international shipping or air transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice-versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated form abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel,

goods or supplies is used for purposes other that the mentioned in the paragraph, such portion of fuel, goods and supplies shall be subject to 12% VAT; w.Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries, such as money changers and pawnshops, subject to percentage tax under Sections 121 and 122, respectively of the Tax Code; and x. Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of One Million Five Hundred Thousand Pesos (P1,500,000.00). Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shall be adjusted to its present value after using the Consumer Price Index, as published by the NSO. What are the previously exempt transactions that are now subject to VAT? Medical services such as dental & veterinary services rendered by professionals; Legal services; Non-food agricultural products; Marine and forest products; Cotton and cotton seeds; Coal and natural gas; Petroleum products; Passenger cargo vessels of more than 5,000 tons; Work of art, literary works, musical composition; Generation, transmission and distribution of electricity including that of electric cooperatives; Sale of residential lot valued at more than P1,500,000.00; Sale of residential house & lot/dwellings valued at more

than P2,500,000.00; Lease of residential unit with a monthly rental of more than P10,000;

II. RELIEF-Related Queries What is "RELIEF"? RELIEF means Reconciliation of Listing for Enforcement. It supports the third party information program of the Bureau through the cross referencing of third party information from the taxpayers' Summary Lists of Sales and Purchases prescribed to be submitted on a quarterly basis. Who are required to submit Summary List of Sales? VAT taxpayers with quarterly total sales/receipts (net of VAT), exceeding Two Million Five Hundred Thousand Pesos (P2,500,000.00) are required to submit a Summary List of Sales. Who are required to submit Summary List of Purchases? VAT taxpayers with quarterly total purchases (net of VAT) of goods and services, including importation exceeding One Million Pesos (P1,000,000.00) are required to submit Summary List of Purchases. What are the Summary Lists required to be submitted? Quarterly Summary List of Sales to Regular Buyers/ Customers Casual Buyers/ Customers and Output Tax Quarterly Summary of List of Local Purchases and Input tax; and Quarterly Summary List of Importation. When is the deadline for submission of the above Summary Lists? The Summary List of Sales/Purchases, whichever is applicable, shall be submitted on or before the twney-fifth

(25th) day of the month following the close of the taxable quarter -- calendar quarter or fiscal quarter.
What are the penalties for failure to submit the Summary Lists?

For failure to file, keep or supply a statement, list or information required on the date prescribed shall pay and administrative penalty of One Thousand Pesos (P1,000.00) for each such failure, unless it is shown that such failure is due to reasonable cause and not to willful neglect; and An aggregate amount to be imposed for all such failures during a taxable year shall not exceed Twenty-Five Thousand Pesos (P25,000.00).

III. What is the treatment for Withholding of VAT on Government Money Payments?

The goverment or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and/or services taxed at twelve percent (12%) VAT pursuant to Sections 106 and 108 of the Tax Code, deduct and withhold a Final VAT due at the rate of five percent (5%) of the gross payment.

The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the seller. The remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs in lieu of the actual input VAT directly attributable or ratably apportioned to such sales. Should actual input VAT attributable to sales to government exceeds seven percent (7%) of gross payments, the excess may form part of the sellers' expense or cost. On the other hand, if actual input VAT attributable to sale to government is less than seven percent (7%) of gross payment, the difference must be closed to expense or cost.

The government or any of its political subdivisions, instrumentalities or agencies including GOCCs, as well as private corporation, individuals, estates and trusts, whether large or non-large taxpayers, shall withhold twelve percent (12%) VAT with respect to the following payments:

1. Lease or use of properties or property rights owned by non-residents; and 2. Other services rendered in the Philippines by non-residents.

IV. In what grounds can the Commissioner of Internal Revenue suspend the business operations of a taxpayer? The Commissioner or his authorized representative is empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations: (a) In the case of a VAT-registered Person:

Failure to issue receipts or invoices; Failure to file a value-added-tax return as required under Section 114; or Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct taxable sales or receipts for the taxable quarter.

(b) Failure to any Person to Register as Required under Section 236

The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.

:. Withholding Tax

Contents

Description Codal Reference Monthly Remittance of Taxes Withheld on Compensation Monthly Remittance Of Income Taxes Withheld (Expanded) [Except for Transactions Involving Onerous Transfer of Real Property Classified as Ordinary Asset] Monthly Remittance Of Value-Added Taxes And Other Percentage Taxes Withheld Monthly Remittance Of Final Income Taxes Withheld Remittance Return Of Percentage Tax On Winnings And Prizes Withheld By Race Track Operators Quarterly Remittance Of Final Income Taxes Withheld On Fringe Benefits Paid To Employees Other Than Rank And File Monthly Remittance Of Final Income Taxes Withheld On Interest Paid And Yield On Deposit Substitutes, Trust, Etc. Annual Information Return On Creditable Income Taxes Withheld (Expanded)/Income Payments Exempt From Withholding Tax Annual Information On Income Taxes Withheld On Compensation And Final Withholding Taxes Related Revenue Issuances Frequently Asked Questions

Description
-Withholding Tax on Compensation is the tax withheld from income payments to individuals arising from an employeremployee relationship. - Expanded Withholding Tax is a kind of withholding tax which is prescribed on certain income payments and is creditable against the income tax due of the payee for the taxable quarter/year in which the particular income was earned. - Final Withholding Tax is a kind of withholding tax which is prescribed on certain income payments and is not creditable against the income tax due of the payee on other income subject to regular rates of tax for the taxable year. Income Tax withheld constitutes the full and final payment of the Income Tax due from the payee on the particular income subjected to final withholding tax. -Withholding Tax on Government Money Payments (GMP) - Percentage Taxes - is the tax withheld by National Government Agencies (NGAs) and instrumentalities, including government-owned and controlled corporations (GOCCs) and local government units (LGUs), before making any payments to non-VAT registered taxpayers/suppliers/payees -Withholding Tax on GMP - Value Added Taxes (GVAT) - is the tax withheld by NationalGovernment Agencies (NGAs) and instrumentalities, including government-owned and controlled corporations (GOCCs) and local government units (LGUs), before making any payments to VAT registered taxpayers/suppliers/payees on account of their purchases of goods and services.

Codal Reference
Republic Act Nos. 8424, 9337, 9442, 9504 Sections 57 to 58 and 78 to 83 of the National Internal Revenue Code (NIRC)

Monthly Remittance of Taxes Withheld on Compensation

Tax Form BIR Form 1601-C : Monthly Remittance Return of Income Taxes Withheld on Compensation Who Are Required To File Every registered withholding agent on compensation, which includes, but not limited to the following: 1) Individuals engaged in business or practice of profession with employees subject to income tax 2) All Juridical persons (e.g.,Corporations, general partnerships, associations, etc.) whether or not engaged in business. 3) Government Agencies and Instrumentalities (e.g.,NGAs, GOCCs, etc.), including local government units (LGUs)

Documentary Requirements/Attachments to the tax return: 1) For amended return, proof of remittance and the return previously filed. 2) For those with advance payments, BIR Form No. 0605 3) For Private Sector, copy of the list of MWEs who received hazard pay submitted to the DOLE Regional/Provincial Offices-Operations Division/Unit, for the return period March, June, September and December, if applicable.

4) For Public Sector, copy of Department of Budget and Management (DBM) circular/s or equivalent on MWEs allowed to receive hazard pay, for the return period March, June, September and December, if applicable. 5) Tax Remittance Advices (TRAs) for National Government Agencies as required under DOF-DBM Joint Circular No. 12000A. Procedures 1. Read instructions indicated in the tax return. 2. Accomplish correctly BIR Form 1601-C in triplicate copies. 3. If there is tax required to be remitted: - Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office (RDO) where you are registered or withholding agent is registered and present the duly accomplished BIR Form No 1601-C, together with the required attachments, (if applicable) and your payment. - In places where there are no AAB's, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered or withholding agent is registered and present the duly accomplished BIR Form No. 1601- C, together with the required attachments (if applicable) and your payment. - Receive your copy of the duly stamped and validated form from the teller of the AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer. 4. If there is no tax required to be remitted: - Proceed to the Revenue District Office where you are registered or where the withholding agent is registered and present the duly accomplished BIR Form 1601 C, together with the required attachments. - Receive your copy of the duly stamped and validated form from the RDO representative Deadline Filing Via EFPS Group A - Fifteen (15) days following end of the month Group B - Fourteen (14) days following end of the month Group C - Thirteen (13) days following end of the month Group D - Twelve (12) days following end of the month Group E - Eleven (11) days following end of the month Note: The staggered manner of filing is only allowed to taxpayers using the Electronic Filing and Payment System (EFPS). Please refer to RR No. 26-2002 for the groupings of taxpayers based on the industry classification. Payment Via EFPS On or before the fifteenth (15th) day of the month following the month withholding was made, except for taxes withheld for the month of December which shall be paid on or before January 20th of the succeeding year Manual Filing and Payment On or before the tenth (10th) day of the month following the month the withholding was made, except for taxes withheld for the month of December which shall be filed and paid on or before January 15 of the succeeding year

Tax Rates

Monthly Remittance Of Income Taxes Withheld (Expanded) [Except for Transactions Involving Onerous Transfer of Real Property Classified as Ordinary Asset]

Tax Form BIR Form No. 1601-E : Monthly Remittance Return of Income Taxes Withheld (Expanded) [Except for Transactions Involving Onerous Transfer of Real Property Classified as Ordinary Asset] Who Are Required To File Every registered withholding agent on Expanded Withholding Tax, which may include, but not limited to the following: 1) Individual engaged in business or practice of profession 2) Non-individual (corporation, association, partnership) whether engaged in business or not. 3) Government agencies and instrumentalities (e.g., National Government Agencies, Government-Owned or Controlled Corporations, Local Government Units, etc.) Documentary Requirements 1.Return previously filed and proof of remittance, if amended return 2. Monthly Alphalist of Payees (MAP) 3. For advance payment, BIR Form No. 0605 4. Tax Remittance Advice ( for NGAs)

Procedures 1. Read instructions indicated in the tax return. 2. Accomplish BIR Form No. 1601-E in triplicate copies. 3. If there is tax required to be remitted: - Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1601- E, together with the required attachments and your payment. - In places where there are no AAB's, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form 1601 E, together with the required attachments and your payment - Receive your copy of the duly stamped and validated form from the teller of the AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer. 4. If there is no tax required to be remitted: - Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR Form 1601 E, together with the required attachments. - Receive your copy of the duly stamped and validated form from the RDO representative. Deadline Filing Via EFPS Group A - Fifteen (15) days following end of the month Group B - Fourteen (14) days following end of the month Group C - Thirteen (13) days following end of the month Group D - Twelve (12) days following end of the month Group E - Eleven (11) days following end of the month Note: The staggered manner of filing is only allowed to taxpayers using the Eletronic Filing and Payment System (EFPS). Please refer to RR No. 26-2002 for the groupings of taxpayers based on the industry classification. Payment Via EFPS On or before the fifteenth (15th) day of the month following the month withholding was made, except for taxes withheld for the month of December which shall be paid on or before January 20th of the succeeding year Manual Filing and Payment On or before the tenth (10th) day of the month following the month the withholding was made, except for taxes withheld for the month of December which shall be filed and paid on or before January 15 of the succeeding year

Tax Rates

Monthly Remittance Of Value-Added Taxes And Other Percentage Taxes Withheld


Tax Form BIR Form No. 1600 - Monthly Remittance Return of Value-Added Taxes and Other Percentage Taxes Withheld Who Are Required To File 1. All government offices, bureaus, agencies or instrumentalities, local government units, government owned and controlled corporation on money payments made to private individuals, corporations, partnerships, associations and other judicial/artificial entities as required under RA Nos. 1051, 7649, 8241, 8424 and 9337. 2. Payors of income subject to Value-Added Tax to Non-residents. 3. Payors of income to persons, natural or juridical, who opted to remit his/its VAT or percentage tax through the withholding and remittance of the same by the withholding agent/payor which option is manifested by filing the Notice of Availment of the option to Pay the Tax through the Withholding Process, copy furnished the withholding agent-payor and the revenue district offices of both the payor and payee. Documentary Requirements 1. Alphabetical list of payees indicating the following: - Month and Year - TIN of withholding agent - Name of Withholding Agent - TIN of Payee - ATC - Nature of Payment - Name of Payee - Amount of Payment - Tax Rate - Tax Required to be Withheld 2. Return previously filed and proof of tax payments, if amended return 3. Certificate of Tax Treaty Relief, if applicable 4. Authorization Letter, if the return is filed by the authorized representative 5. Tax Remittance Advice (TRA), if NGA. Procedures 1. Read instructions indicated at the back of the tax return. 2. Accomplish BIR No. Form 1600 in triplicate copies. 3. If there is tax required to be remitted: - Proceed to the nearest Authorized Agents Banks (AAB's) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1600, together with the required attachments and your payment. - In places where there are no AAB's, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1600, together with the required attachments and your payment. - Receive your copy of the duly stamped and validated form from the teller of the AAB's /Revenue Collection Officer/duly authorized City or Municipal Treasurer. 4. If there is no tax required to be remitted: - Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR Form No. 1600, together with the required attachments. - Receive your copy of the duly stamped and validated form from the RDO representative. Deadline

On or before the tenth (10th) day of the month following the month the withholding was made, whether EFPS or manual filing and payment.

Tax Rates

Monthly Remittance Of Final Income Taxes Withheld


Tax Form BIR Form 1601-F : Monthly Remittance Return of Final Income Taxes Withheld Who Are Required To File Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on income payments subject to Final Withholding Taxes Documentary Requirements 1. 2. 3. 4. Return previously filed and proof of remittance, if amended return Monthly Alphalist of Payees (MAP) For advance payment, BIR Form No. 0605 Tax Remittance Advice ( for NGAs)

Procedures 1. Read instructions indicated in the tax return. 2. Accomplish BIR Form 1601-F in triplicate copies. 3. If there is tax required to be remitted: - Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1601 F, together with the required attachments and your payment. - In places where there are no AAB, the return shall be filed and the tax paid with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer within the Revenue District Office where the withholding agents place of business/office is located who will issue a Revenue Official Receipt (BIR Form No. 2524) therefor; 4. If there is no tax required to be remitted: - Proceed to the Revenue District Office where you are required to register and present the duly accomplished BIR Form 1601-F, together with the required attachments. - Receive your copy of the duly stamped and validated form from the RDO representative. Deadlines

Filing Via EFPS Group A - Fifteen (15) days following end of the month Group B - Fourteen (14) days following end of the month Group C - Thirteen (13) days following end of the month Group D - Twelve (12) days following end of the month Group E - Eleven (11) days following end of the month Note: The staggered manner of filing is only allowed to taxpayers using the Electronic Filing and Payment System (EFPS). Please refer to RR No. 26-2002 for the groupings of taxpayers based on the industry classification. Payment Via EFPS On or before the fifteenth (15th) day of the month following the month withholding was made, except for taxes withheld for the month of December which shall be paid on or before January 20th of the succeeding year Manual Filing and Payment On or before the tenth (10th) day of the month following the month the withholding was made, except for taxes withheld for the month of December which shall be filed and paid on or before January 15 of the succeeding year

Tax Rates

Remittance Return Of Percentage Tax On Winnings And Prizes Withheld By Race Track Operators
Tax Form BIR Form 1600-WP : Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Race Track Operators Who Are Required To File -Operators of race tracks Documentary Requirements 1. Alphalist of Payees indicating the following: - Tax Year and Month - TIN of withholding agent - Name of Withholding Agent - TIN of Payee - Name of Payee - ATC - Nature of Payment - Amount of Payment - Tax Rate - Tax Required to be Withheld 2. Return previously filed and proof of tax payments, if amended return Procedures 1. Accomplish BIR Form 1600-WP in triplicate copies. 2. If there is tax required to be remitted: - Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1600-WP, together with the required attachments and your payment. - In places where there are no AAB, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1600-WP, together with the required attachments and your payment - Receive your copy of the duly stamped and validated form from the teller of the AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer. 3. If there is no tax required to be remitted:

- Proceed to the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1600-WP, together with the required attachments. - Receive your copy of the duly stamped and validated form from the RDO representative Deadline Within twenty (20) days from the date the tax was deducted and withheld

Tax Rates

Quarterly Remittance Of Final Income Taxes Withheld

On Fringe Benefits Paid To Employees Other Than Rank And File


Tax Form BIR Form No. 1603 - Quarterly Remittance Return of Final Income Taxes Withheld on Fringe Benefits Paid to Employees Other than Rank and File Who Are Required To File Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on fringe benefits furnished to employees other than rank and file employees subject to Final Withholding Tax Documentary Requirements Return previously filed and proof of tax payments , if amended return Procedures 1. Read instructions indicated in the tax return. 2. Accomplish BIR Form 1603 in triplicate copies. 3. If there is tax required to be remitted: - Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1603, together with the required attachments and your payment. - In places where there are no AAB, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1603, together with the required attachments and your payment. - Receive your copy of the duly stamped and validated form from the teller of the AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer. 4. If there is no tax required to be remitted:

- Proceed to the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1603, together with the required attachments. - Receive your copy of the duly stamped and validated form from the RDO representative Deadline Filing and Payment Via EFPS On or before the fifteenth (15th) day of the month following the end of the calendar quarter in which the fringe benefits were granted to the recipient. Manual Filing and Payment On or before the tenth (10th) day of the month following the end of the calendar quarter in which the fringe benefits were granted to the recipient.

Tax Rates

Monthly Remittance Of Final Income Taxes Withheld On Interest Paid And Yield On Deposit Substitutes, Trust, Etc.

Tax Form BIR Form 1602 - Monthly Remittance Return of Final Income Taxes Withheld on Interest Paid and Yield on Deposit Substitutes/Trust/Etc. Who Are Required To File Banks, non-bank financial intermediaries, finance corporations, investment and trust companies and other institutions required to withhold final income tax on interest paid/accrued on deposit and yield or any other monetary benefit from deposits substitutes and from trust fund and similar arrangements. Documentary Requirements Return previously filed and proof of tax payments, if amended return Procedures (for Manual filing of tax returns) 1. Accomplish BIR Form No. 1602 in triplicate copies. 2. If there is tax required to be remitted: - Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1602, together with the required attachments and your payment. - In places where there are no AAB, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer within the Revenue District Office where the withholding agents place of business/office is located and present the duly accomplished BIR Form No. 1602, together with the required attachments and your payment who will issue a Revenue Official Receipt (BIR Form No. 2524) therefor. - Receive your copy of the duly stamped and validated form from the teller of the AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer. 3. If there is no tax required to be remitted:

- Proceed to the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1602, together with the required attachments.
Deadline Filing Via EFPS On or before the fifteenth (15th) day of the month following the month withholding was made Payment Via EFPS On or before the fifteenth (15th) day of the month following the month withholding was made, except for taxes withheld for the month of December which shall be paid on or before January 20th of the succeeding year Manual Filing and Payment On or before the tenth (10th) day of the month following the month the withholding was made, except for taxes withheld for the month of December which shall be filed and paid on or before January 15 of the succeeding year.

Tax Rates

Annual Information Return On Creditable Income Taxes Withheld (Expanded)/Income Payments Exempt From Withholding Tax
Tax Form BIR Form No. 1604- E : Annual Information Return of Creditable Income Taxes Withheld (Expanded)/Income Payments Exempt from Withholding Tax Who Are Required To File Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on

income payments subject to Expanded/Creditable Withholding Taxes Documentary Requirements 1. Alphalist of Payees subjected to Expanded Withholding Tax 2. Alphalist of Other Payees Whose Income Payments Are Exempt from Withholding Tax but subject to Income Tax 3. Return previously filed and proof of tax payment for amended return Note: Above alphalists are to be submitted in accordance with RR 3-2002 as amended. Procedures

1. 2. E, 3.

Accomplish BIR Form No. 1604-E in triplicate copies. Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR Form No. 1604together with the required attachments. Receive your copy of the duly stamped and validated form from the RDO representative

Deadline

On or before March 1 of the year following the calendar year in which the income payments subjected to expanded withholding taxes or exempt from withholding tax were paid.

Annual Information On Income Taxes Withheld On Compensation And Final Withholding Taxes
Tax Form BIR Form No. 1604-CF : Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes. Who Are Required To File Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on: - compensation paid to employees - income payments subject to Final Withholding Taxes Documentary Requirements 1. 2. 3. 4. 5. 6. 7. 8. Alphalist of Employees as of December 31 With no Previous Employer within the year Alphalist of Employees as of December 31 with Previous Employer/s within the year Alphalist of Employees Terminated Before December 31 Alphalist of Employees Whose Compensation Income Are Exempt from Withholding Tax But Subject to Income Tax Alphalist of Minimum Wage Earners Alphalist of Employees other than Rank and File Who Were Given Fringe Benefits During the Year Alphalist of Payees Subjected to Final Withholding Tax Return previously filed and proof of tax payment for amended return

Note: Above alphalists are to be submitted in accordance with RR 3-2002 as amended. Procedures 1. Accomplish BIR Form No. 1604-CF in triplicate copies and attach the necessary schedules in prescribed form (hard and soft copy) 2. Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR Form No. 1604CF, together with the required attachments. 3. Receive your copy of the duly stamped and validated form from the RDO representative. Deadline

On or before January 31 following the calendar year in which the compensation payment and other income payments subjected to final withholding taxes were paid or accrued.

Related Revenue Issuances


RR No. 2-98, RR No. 3-98, RR No. 8-98, RR No. 12-98, RR No. 3-99, RR No. 8-2000, RR No. 10-2000, RR No. 6-2001, RR No. 12-2001, RR No. 9-2001, RR No. 3-2002, RR No. 4-2002, RR No. 14-2002, RR No. 19-2002, RR No. 26-2002, RR No. 14-2003, RR No. 16-2003, RR No. 17-2003, RR No. 30-2003, RR 1-2004, RR 3-2004, RR No. 5-2004, RR 1-2006, RR 22006, RR 4-2006, RR 4-2007, RR 8-2005, RR 4-2008, RR 5-2008, RR 6-2008, RR 7-2008, RR 14-2008, RR No. 10-2008, RR 1-2009, RR 2-2009, RR 3-2009, RR 5-2009, RR 6-2009, RR 8-2009, RR 10-2009

Frequently Asked Questions


1) What are the types of Withholding Taxes? There are two main classifications or types of withholding tax. These are: a) Creditable Withholding Tax - Withholding Tax on Compensation - Expanded Withholding Tax - Withholding of Business Tax (VAT and Percentage) b) Final Withholding Tax 2) What is compensation? It means any remuneration received for services performed by an employee from his employer under an employeeemployer relationship. 3) What are the different kinds of compensation? a) Regular compensation - includes basic salary, fixed allowances for representation, transportation and others paid to an employee b) Supplemental compensation - includes payments to an employee in addition to the regular compensation such as but not limited to the following: - Overtime Pay - Fees, including director's fees - Commission - Profit Sharing - Monetized Vacation and Sick Leave - Fringe benefits received by rank & file employees - Hazard Pay - Taxable 13th month pay and other benefits - Other remunerations received from an employee-employer relationship 4) What are exempted from Withholding Tax on Compensation? 1. Remuneration as an incident of employment, such as follows: a. Retirement benefits received under RA 7641 b. Any amount received by an official or employee or by his heirs from the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee such as retrenchment, redundancy or cessation of business c. Social security benefits, retirement gratuities, pensions and other similar benefits d. Payment of benefits due or to become due to any person residing in the Philippines under the law of the US administered US Veterans Administration e. Payment of benefits made under the SSS Act of 1954, as amended f. Benefits received from the GSIS Act of 1937, as amended, and the retirement gratuity received by the government

employee 2. Remuneration paid for agricultural labor 3. Remuneration for domestic services 4. Remuneration for casual labor not in the course of an employer's trade or business 5. Compensation for services by a citizen or resident of the Philippines for a foreign government or an international organization 6. Payment for damages 7. Proceeds of Life Insurance 8. Amount received by the insured as a return of premium 9. Compensation for injuries or sickness 10. Income exempt under Treaty 11. Thirteenth (13th) month pay and other benefits (not to exceed P 30,000) 12. GSIS, SSS, Medicare and other contributions 13. Compensation Income of Minimum Wage Earners (MWEs) with respect to their Statutory Minimum Wage (SMW) as fixed by Regional Tripartite Wage and Productivity Board (RTWPB)/National Wage and Productivity Commission (NWPC), including overtime pay, holiday pay, night shift differential and hazard pay, applicable to the place where he/she is assigned. 14. Compensation Income of employees in the public sector if the same is equivalent to or not more than the SMW in the non-agricultural sector, as fixed by RTWPB/NWPC, including overtime pay, holiday pay, night shift differential and hazard pay, applicable to the place where he/she is assigned. 5) What are De Minimis Benefits? -These are facilities and privileges of relatively small value and are offered or furnished by the employer to his employees merely as means of promoting their health, goodwill, contentment or efficiency. The following shall be considered "De Minimis" benefits not subject to income tax, hence not subject to withholding tax on compensation income of both managerial and rank and file employees: Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year; Monetized value of vacation and sick leave credits paid to government officials and employees.

Medical cash allowance to dependents of employees, not exceeding P750.00 per employee per semester or P125.00 per month;

Rice subsidy of P1,500 or one (1) sack of 50 kg. rice per month amounting to not more than P1,500; Uniform and clothing allowance not exceeding P4,000 per annum; 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; Laundry allowance not exceeding P300.00 per month; Employees achievement awards, e.g., for lenght 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 plan which does not discriminate in favor of highly paid employees; Gifts given during Christmas and major anniversary celebration not exceeding P5,000.00 per employee per annum; Daily meal allowance for overtime work and night/graveyard shift not exceeding twenty-five percent (25%) of the basic minimum wage on a per region basis; 6) What is substituted Filing of income tax returns (ITR)? Substituted Filing of ITR is the manner by which declaration of income of individuals receiving purely compensation income which have been withheld by their employers the correct tax due, is no longer required.Instead of the filing of Individual Income Tax Return (BIF Form 1700) , the employers annual information return (BIR Form No. 1604-CF) duly stamped received by the BIR may be considered as the substitute Income Tax Return (ITR) of the employee, inasmuch as the information provided therein are exactly the same information required to be provided in his income tax return (BIR Form No. 1700). 7) Who are qualified to avail the substituted filing?

Employees who satisfies all of the following conditions: a. Receiving purely compensation income regardless of amount; b. Working for only one employer in the Philippines for the calendar year; c. Withholding tax has been withheld correctly by the employer (tax due equals tax withheld); d. The employees spouse also complies with all three (3) conditions stated above. e. The employer files the annual information return (BIR Form No. 1604-CF) f. The employer issues BIR Form 2316 to each employee. 8) What income payments are subject to Expanded Withholding Tax? a) Professional fees / talent fees for services rendered by the following: - Those individually engaged in the practice of profession or callings such as lawyers,certified public accountants, doctors of medicine, architecs, engineers and all other professionals who have undergone licensure examinations regulated by the Professional Regulations Commission, Supreme Court, etc. - Professional entertainers such as but not limited to actors and actresses, singers, lyricist, composers and emcees - Professional athletes including basketball players, pelotaris and jockeys - Directors and producers involved in movies, stage, radio, television and musical productions - Insurance agents and insurance adjusters - Management and technical consultants - Bookkeeping agents and agencies - Other recipient of talent fees - Fees of directors who are not employees of the company paying such fees whose duties are confined to attendance at and participation in the meetings of the Board of Directors b) Professional fees, talent fees, etc for services of taxable juridical persons c) Rentals: -Rental of real property used in business -Rental of personal properties in excess of P 10,000 annually -Rental of poles, satellites and transmission facilities -Rental of billboards d) Cinematographic film rentals and other payments e) Income payments to certain contractors - General engineering contractors - General building contractors - Specialty contractors - Other contractors like: 1. Filling, demolition and salvage work contractors and operators of mine drilling apparatus 2. Operators of dockyards 3. Persons engaged in the installation of water system, and gas or electric light, heat or power 4. Operators of stevedoring, warehousing or forwarding establishments 5. Transportation Contractors 6. Printers, bookbinders, lithographers and publishers, except those principally engaged in the publication or printing of any newspaper, magazine, review or bulletin which appears at regular intervals, with fixed prices for subscription and sale 7. Advertising agencies, exclusive of payments to media 8. Messengerial, janitorial, security, private detective, credit and/or collection agencies and other business agencies 9. Independent producers of television, radio and stage performances or shows 10. Independent producers of "jingles" 11. Labor recruiting agencies and/or labor-only contractors 12. Persons engaged in the installation of elevators, central air conditioning units, computer machines and other equipment and machineries and the maintenance services thereon 13. Persons engaged in the sale of computer services, computer programmers, software developer/designer, etc. 14. Persons engaged in landscaping services 15. Persons engaged in the collection and disposal of garbage 16. TV and radio station operators on sale of TV and radio airtime, and 17. TV and radio blocktimers on sale of TV and radio commercial spots f) Income distribution to the beneficiaries of estates and trusts g) Gross commission or service fees of customs, insurance, stock, real estate, immigration and commercial brokers and fees of agents of professional entertainers

h) Income payments to partners of general professional partnerships i) Payments made to medical practitioners j) Gross selling price or total amount of consideration or its equivalent paid to the seller/owner for the sale, exchange or transfer of real property classified as ordinary asset k) Additional income payments to government personnel from importers, shipping and airline companies or their agents l) Certain income payments made by credit card companies m) Income payments made by the top 20,000 private corporations to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding n) Income payments by government offices on their purchase of goods and services, from local/resident suppliers other than those covered by other rates of withholding o) Commission, rebates, discounts and other similar considerations paid/granted to independent and exclusive distributors, medical/technical and sales representatives and marketing agents and sub-agents of multi level marketing companies. p) Tolling fees paid to refineries q) Payments made by pre-need companies to funeral parlors r) Payments made to embalmers by funeral parlors s) Income payments made to suppliers of agricultural products (suspension not yet lifted) t) Income payments on purchases of mineral, mineral products and quarry resources u) On gross amount of refund given by MERALCO to customers with active contracts as classified by MERALCO; v) Interest income on the refund paid through direct payment or application against customers' billing by other electric Distribution Utilities in accordance with the rules embodied in ERC Resolution No. 8 series of 2008 dated June 4, 2008 governing the refund of meter deposits which was approved and adopted by ERC in compliance with the mandate of Article 8 of the Magna Carta for Residential Electricity Consumers and Article 3.4.2 of DSOAR exempting all electricity consumers, whether residential or non-residential from the payment of meter deposit. w) Income payments made by the top 5,000 individual taxpayers to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding x) Income payments made by political parties and candidates of local and national elections of all their campaign expenditures, and income payments made by individuals or juridical persons for their purchases of goods and services intended to be given as campaign contribution to political parties and candidates 9) What income payments are subject to Final Withholding Tax? a) Income Payments to a Citizen or to a Resident Alien Individual: - Interest on any peso bank deposit - Royalties - Prizes [except prizes amounting to P10,000 or less which is subject to tax under Sec. 24(A)(1) of the Tax Code] - Winnings (except winnings from Philippine Charity Sweepstake Office and Lotto) - Interest income on foreign currency deposit - Interest income from long term deposit (except those with term of five years or more) - Cash and/or property dividends - Capital Gains presumed to have been realized from the sale, exchange or other disposition of real property b) Income Payments to a Non-Resident Alien Engaged in Trade or Business in the Philippines - On Certain Passive Income - cash and/or property dividend - Share in the distributable net income of a partnership - Interest on any bank deposits - Royalties - Prizes (except prizes amounting to P10,000 or less which is subject to tax under Sec. 25(A)(1) of the Tax Code. - Winnings (except from Philippine Charity Sweepstake Office and Lotto) - Interest on Long Term Deposits (except those with term of five years or more) - Capital Gains presumed to have been realized from the sale, exchange or other disposition of real property c) Income Derived from All Sources Within the Philippines by a Non-Resident Alien Individual Not Engaged in Trade or Business - On gross amount of income derived from all sources within the Philippines - On Capital Gains presumed to have been realized from the sale, exchange or disposition of real property located in the Philippines d) Income Derived by Alien Individual Employed by a Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies, Income Derived by Alien Individual Employed by Offshore Banking Units and Income of Aliens Employed by Foreign Petroleum Service Contractors and Subcontractors e) Income Payment to a Domestic Corporation - Interest from any currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements derived from sources within the Philippines - Royalties derived from sources within the Philippines - Interest income derived from a depository bank under the Expanded Foreign Currency Deposit (FCDU) System - Income derived by a depository bank under the FCDU from foreign transactions with local commercial banks - On capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales based on the

gross selling price or fair market value as determined in accordance with Sec. 6(E) of the NIRC, whichever is higher f) Income Payments to a Resident Foreign Corporation - Offshore Banking Units - Tax on branch Profit Remittances - Interest on any currency bank deposits and yield or any other monetary benefit from deposit substitute and from trust funds and similar arrangements and royalties derived from sources within the Philippines - Interest income on FCDU - Income derived by a depository bank under the expanded foreign currency deposits system from foreign currency transactions with local commercial banks g) Income Derived from all Sources Within the Philippines by a Non-Resident Foreign Corporation - Gross income from all sources within the Philippines such as interest, dividends, rents, royalties, salaries, premiums (except re-insurance premiums), annuities, emoluments or other fixed determinable annual, periodic or casual gains, profits and income or capital gains; - Gross income from all sources within the Philippines derived by a non-resident cinematographic film owner, lessor and distributor - On the gross rentals, lease and charter fees derived by a non-resident owner or lessor of vessels from leases or charters to Filipino citizens or corporations as approved by the Maritime Industry Authority - On the gross rentals, charter and other fees derived by a non-resident lessor of aircraft, machineries and other equipment - Interest on foreign loans contracted on or after August 1, 1986 h) Fringe Benefits Granted to the Employee (except Rank and File) - Goods, services or other benefits furnished or granted in cash or in kind by an employer to an individual employee (except rank and file) such as but not limited to the following: - Housing - Vehicle of any kind - Interest on loans - Expenses for foreign travel - Holiday and vacation expenses - Educational assistance to employees or his dependents - Membership fees, dues and other expense in social and athletic clubs or other - similar organizations - Health insurance i) Informers Reward 10) Aside from the required withholding of income tax by government agencies and instrumentalities on their payments to their suppliers of goods and services, what other tax types must be withheld by them. a) Value Added Tax on all payments subject to VAT - On gross payments for the purchase of goods - On gross payments for the purchase of services b) VAT on payments for lease or use of properties or property rights to non-resident owners; and other services rendered in the Philippines by non-residents. c) Percentage Tax on all payments subject to percentage tax such as payments to the following: - Any person engaged in business whose gross sales or receipts do not exceed P1,500,000 and who are not VAT-registered persons. (Persons exempt from VAT under Sec. 109V of the Tax Code) - Domestic carriers and keepers of garages, except owners of bancas and owners of animal drawn two wheeled vehicle - Operators of international carriers doing business in the Philippines. - Franchise grantees of electric, gas or water utilities - Franchise grantees of radio and/or television broadcasting companies whose gross annual receipts of the preceding year do not exceed Ten Million (P10,000,000.00) Pesos and did not opt to register as VAT Taxpayers - Banks and non-bank financial intermediaries and finance companies - Life insurance companies - Agents of foreign insurance companies - Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs,videoke/karaoke bars, karaoke television, karaoke boxes, music lounges and other similar establishments, boxing exhibitions, professional basketball games, jai-alai and race tracks - Every stock broker who effected a sale, barter, exchange or other disposition of shares of stock listed and traded through the Local Stock Exchange (LSE) other than the sale by a dealer in securities - A corporate issuer/stock broker, whether domestic or foreign, engaged in the sale, barter, exchange or other disposition through Initial Public Offering (IPO) /secondary public offering of shares of stock in closely held corporations 11) Who is a withholding agent? A withholding agent is any person or entity who is required to deduct and remit the taxes withheld to the government. 12) What are the duties and obligations of the withholding agent? The following are the duties and obligations of the withholding agent: a) To Register - withholding agent is required to register within ten (10) days after acquiring such status with the Revenue District office having jurisdiction over the place where the business is located

b) To Deduct and Withhold - withholding agent is required to deduct tax from all money payments subject to withholding tax c) To Remit the Tax Withheld - withholding agent is required to remit tax withheld at the time prescribed by law and regulations d) To File Annual Return - withholding agent is required to file the corresponding Annual Information Return at the time prescribed by law and regulations e) To Issue Withholding Tax Certificates - withholding agent shall furnish Withholding Tax Certificates to recipient of income payments subject to withholding 13) Who are considered TOP 20,000 Corporate Taxpayers? Top twenty thousand (20,000) private corporations shall include a corporate taxpayer who has been determined and notified by the Bureau of Internal Revenue (BIR) as having satisfied any of the following criteria: a) Classified and duly notified by the Commissioner as a large taxpayer under Revenue Regulation No. 1-98, as amended, or belonging to the top five thousand (5,000) private corporations under RR12-94, or to the top ten thousand (10,000) private corporations under RR 17-2003, unless previously de-classified as such or had already ceased business operations (automatic inclusion); b) VAT payment or payable whichever is higher, of at least P100,000 for the preceding year; c) Annual income tax due of at least P200,000 for the preceding year; d) Total percentage tax paid of at least P100,000 for the preceding year; e) Gross sales of P10,000,000 and above for the preceding year; f) Gross purchases of P5,000,000 and above for the preceding year; g) Total excise tax payment of at least P100,000 for the preceding year. 14. What are the obligations of Top 20,000 Corporate Taxpayers? a) In addition to the above responsibilities of a withholding agent, Top 20,000 private corporations shall withhold the one percent (1%) creditable expanded withholding tax on the purchase of goods and two percent (2%) on the purchase of services (other than those covered by other withholding tax rates) from local suppliers where it regularly makes purchases. However, casual purchase of goods shall not be subject to withholding tax unless the amount of purchase at any one time involves P10,000 or more, in which case, it shall then be required to withhold the tax. The same rule apply to local/resident supplier of services other than those covered by separate rates of withholding tax.Provided, however, that for purchases involving agricultural products in their original state, the tax required to be withheld shall only apply to purchases in excess of the cumulative amount of P300,000 within the same taxable year. For this purpose, agricultural products in their original state shall only include corn, coconut, copra, palay, rice cassava, sugar cane, coffee, fruits, vegetables, marine food products, poultry and livestocks. b) Taxes withheld shall be remitted using BIR Form 1601-E on a monthly basis thru the use of the Electronic Filing and Payment System (EFPS) on the dates prescribed for e-filers. Filing shall be done on a staggered basis provided under RR 26-2002 and payment shall be made every 15th day following the end of the month for Jan-Nov and Jan. 20 of the following year for the month of December. c) Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) shall be issued to the payees within twenty (20) days following the close of such payees taxable quarter or upon demand of the payees; d) A list of regular supplier of goods and/or services shall be submitted on a semestral basis to the RDO/LTS/LTDO having jurisdiction over the principal place of business in hard copy if below ten payees or soft-copy for those with ten (10) or more payees per semester while e-submission regardless of the number of payees for those under Electronic Filing and Payment System (EFPS). Deadline for submission of the list is not later than July 31 and January 31 of each year. However, initial list of regular suppliers should be submitted within fifteen (15) days from actual receipt hereof. 15. Who are considered TOP 5,000 Individual Taxpayers? Top 5,000 Individual Taxpayers shall refer to individual taxpayers engaged in trade or business or exercise of profession who have been determined and notified by the Bureau of Internal Revenue (BIR) as having satisfied any of the following criteria: a) VAT payment or payable whichever is higher, of at least P100,000 for the preceding year; b) Annual income tax due of at least P200,000 for the preceding year; c) Total percentage tax paid of at least P100,000 for the preceding year;

d) Gross sales of P10,000,000 and above for the preceding year; e) Gross purchases of P5,000,000 and above for the preceding year; f) Total excise tax payment of at least P100,000 for the preceding year. 16. What are the obligations of Top 5,000 Individual Taxpayers? a) In addition to the obligations of a withholding agent, Top 5,000 Individual Taxpayers shall withhold the one percent (1%) creditable expanded withholding on the purchase of goods and two percent (2%) on the purchase of services (other than those covered by other withholding tax rates) from local suppliers where it regularly makes purchases. However, casual purchase of goods shall not be subject to withholding tax unless the amount of purchase at any one time involves P10,000 or more, in which case, it shall then be required to withhold the tax. The same rule apply to local/resident supplier of services other than those covered by separate rates of withholding tax. Provided, however, that for purchases involving agricultural products in their original state, the tax required to be withheld shall only apply to purchases in excess of the cumulative amount of P300,000 within the same taxable year. For this purpose, agricultural products in their original state shall only include corn, coconut, copra, palay, rice cassava, sugar cane, coffee, fruits, vegetables, marine food products, poultry and livestocks. b) Taxes withheld shall be remitted under BIR Form 1601-E on a monthly basis thru the Electronic Filing and Payment System (EFPS) facility within the prescribed period. c) Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) shall be issued to the payees within twenty (20) days following the close of such payees taxable quarter or upon demand of the payees; d) A list of regular supplier of goods and/or services shall be submitted on a semestral basis to the RDO/LTS/LTDO having jurisdiction over the principal place of business in hard copy if below ten payees or soft-copy for those with ten (10) or more payees per semester while e-submission regardless of the number of payees for those under Electronic Filing and Payment System (EFPS). Deadline for submission of the list is not later than July 31 and January 31 of each year. However, initial list of regular suppliers should be submitted within fifteen (15) days from actual receipt hereof. 15. WHO ARE THE RESPONSIBLE OFFICIALS IN THE GOVERNMENT OFFICES CHARGED WITH THE DUTY TO DEDUCT, WITHHOLD AND REMIT WITHHOLDING TAXES? The following officials are duty bound to deduct, withhold and remit taxes: a) b) c)
For Office of the Provincial Government-province- the Chief Accountant, Provincial Treasurer and the Governor;

For Office of the City Government-cities- the Chief Accountant, City Treasurer and the City Mayor; For Office of the Municipal Government-municipalities- the Chief Accountant, Municipal Treasurer and the Mayor;

d) Office of the Barangay-Barangay Treasurer and Barangay Captain e) For NGAs, GOCCs and other Government Offices, the Chief Accountant and the Head of Office or the Official holding the highest position.