You are on page 1of 6

ARELLANO UNIVERSITY SCHOOL OF LAW

Investment Law
Atty. Mary Ann L. Reyes
1stSem, S/Y 2016-2017
Sunday, 1pm-3pm, FCJ207
SUPPLEMENTAL REPORT
TAXATION AND CONTINUING REQUIREMENTS FOR SOLE PROPRIETORSHIP
October 2, 2016
Group 1 Reporters:
(The Buena manos)

Christian Abellonar
Lance Apolonio
Dominick Botor
Marbien Verano

1

either itemized deductions or 40% optional standard deduction) Income Before Personal/Additional Exemptions and Premium Payments on Insurance Less: Personal/Additional Exemptions and Premium Payments on Insurance Taxable Income Tax Rate: Schedular Tax Rates Tax Due 2 . The formula to determine the taxable income of an individual is as follows: Gross Income Less: Deductions (i.e. a non-resident citizen..INTRODUCTION: A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines. Think of it as a road map where the different provisions of the code will plug into. For income received from sources within the Philippines and which are not subject to final withholding tax (like passive income). The tax shall be computed in accordance with and at the rates established in the following schedule: INCOME TAX FORMULA: It is important to note the basic formula to determine the taxable income of an individual. While a nonresident citizen. and alien whether resident or not in the Philippines are taxable only on income derived from sources within the Philippines. and a non-resident alien individual engaged in trade or business in the Philippines are all subject to the graduated income tax rates in Section 24 of the National Internal Revenue Code of 1997 (the “Tax Code”). a resident alien. a resident citizen.

an individual subject to tax under Section 24. That except when the Commissioner otherwise permits. may elect a standard deduction in an amount not exceeding forty percent (40%) of his gross sales and/or receipts. the said individual shall keep such records pertaining to his gross income during the taxable year. PERSONAL AND ADDITIONAL DEDUCTIONS: A personal and additional exemptions are granted by law to certain individuals to lessen their tax liability.00) for each dependent not exceeding four (4) is granted by law. further. additional exemptions may be claimed only by the spouse who has custody of the child or children: Provided. In the case of legally separated spouses. as may be required by the rules and regulations promulgated by the Secretary of Finance.000. The additional exemption for dependent shall be claimed by only one of the spouses in the case of married individuals. Such election when made in the return shall be irrevocable for the taxable year for which the return is made: Provided. is incapable of self-support because of mental or physical defect. illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age. Unless the taxpayer signifies in his return his intention to elect the optional standard deduction. he shall be considered as having availed himself of the itemized deductions. regardless of age.00) for each individual taxpayer is granted by law. 3 . other than a nonresident alien. an amount of twentyfive thousand pesos (P25.OPTIONAL STANDARD DEDUCTIONS: In lieu of the deductions allowed under the preceding Subsections. Please refer to the illustration below: Taxpayer Resident Citizen Non-resident citizen Resident alien Non-resident alien engaged in trade or business Personal Exemption Yes Yes Yes Yes Additional Exemption Yes Yes Yes No A personal exemption amounting to fifty thousand pesos (P50. That an individual who is entitled to and claimed for the optional standard deduction shall not be required to submit with his tax return such financial statements otherwise required under this Code: Provided. For additional exemption. unmarried and not gainfully employed or if such dependent. For purposes of this. a 'dependent' means a legitimate.000. that the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed. upon recommendation of the Commissioner.

etc. finally. That said family has a gross income of not more than Two hundred fifty thousand pesos (P250. including his family.  For manual invoices and/or receipts. shall be allowed as a deduction from his gross income: Provided. Premium Payments on Health and/or Hospitalization Insurance of an Individual Taxpayer The amount of premiums not to exceed Two thousand four hundred pesos (P2.. Maintain Accounting Books After registration of sole proprietorship. Keep the receipts of your expenses It’s typical for business.000. this is a person on whom the senior citizen is dependent on for a primary care and material support. That in the case of married taxpayers. Expense is deducted from gross sales in order to come up with the net income. look for an accredited printer who will do the printing of your invoices and/or receipts. and before you start operating or offering your services.400) per family or Two hundred pesos (P200) a month paid during the taxable year for health and/or hospitalization insurance taken by the taxpayer for himself. to incur expenses in order to operate.000) for the taxable year: Provided. ensure that you keep your expense receipts so you can determine the true financial performance (or profit). register your computerized system with the BIR. Further. even freelancers. Point-of-Sale(POS). Cash Register Machine (CRM). register your invoices and receipts with the BIR. the next step is to keep an accounting record.The law also allows benefactor of senior citizen to be entitled to claim the basic personal exemption of fifty thousand pesos (P50. These are the basic accounting books generally maintained by sole proprietorship:     General Journal General Ledger Cash Receipt Journal Cash Disbursement Journal Important Note: Make sure that the accounting books are registered with the BIR. Issued BIR Registered Invoices and/or Receipts After registering.  For computerized invoices and/or receipts. A benefactor refers to any person whether related or not to the senior citizen who provides care or who gives any form of assistance to the senior citizen. 4 . only the spouse claiming the additional exemption for dependents shall be entitled to this deduction. as certified by the city of Municipal Social Welfare and Development Officer.00). As such.

Quarterly  BIR Form 2550Q – For VAT individual. you need to file or pay BIR Form 1701 – Annual Income tax return based on your net income for the preceding year. that. the covering period for first quarter is from January 1st to March 31st. This is due for payment or filing on or before 10th day of the month following the month where the transaction occurred. 5 . In short the deadline for filing is the deadline date as that of Annual Income Tax Return of the preceding taxable year. This is due for payment or filing on or before 10th day of the month following the month where the transaction occurred. on or before April 15th of each year. With the exception of course of the first taxable quarter which is due for filing and payment on or before April 15 following the close of the taxable quarter. This is due for payment or filing on or before 10 th day of the month following the month where the transaction occurred. keep in mind that you are required to pay or file monthly and quarterly tax returns depending on the tax types reflected on the BIR Certificate of Registration. Note however that filing should not be earlier than April 1. File and/or pay annual reports Provided. paying professionals or commissions.  BIR Form 2551M – For Non-VAT individual. It’s due for payment or filing on or before the 45th day of the month following the close of the taxable quarter. but instead of one month. It is computed sales tax equivalent to 12% of monthly vatable sales less 12% of vatable purchases/expenses.  BIR Form 1601F – if you have loans. It’s due for payment or filing on or before 25th day of the month following the close of the taxable quarter. as follow: Monthly  BIR Form 1601E – if you are renting. This is due for payment or filing on or before 20th day of the month following the month where the transaction occurred.  BIR Form 2550M – For VAT individual. The reason is that.  BIR Form 1601C – if you have employees under employment. It is similar to BIR Form 2550M. This is due for payment or filing on or before 20 th day of the month following the month where the transaction occurred. It is the computed sales tax equivalent to 3% of monthly gross sales. it reports the three months in a particular quarter.  BIR Form 1701Q – This is the income tax for the quarter.File and/or pay the tax returns on time Once you’re registered with the BIR.

ph/bookkeeping-and-tax-freelancer/ National Internal Revenue Code of 1997 6 .Note that individual taxpayers are not allowed to use fiscal year as their accounting period. Fiscal year is a taxable year ending on any month not December. http://mpm. you need to renew your licenses and permits to LGUs on or before January 20th of each year. Renew your licenses annually Once registered.