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A REVISIT OF HIGHLIGHTS OF TRAIN

LAW & RELATED BIR ISSUANCES


UNIVERSITY OF THE CORDILLERAS SPONSORED IN-HOUSE TAX SEMINAR
02.14.18 [Wednesday 10-12] [University of the Cordilleras Auditorium Baguio City]
Attorney Willie B. Santiago, CPA
OUTLINE
• A. REVISIT OF HIGHLIGHTS OF TRAIN LAW &
RELATED UPDATES ON THE IMPLEMENTATION
– Estate
– Donors
– VAT
– Percentage
– Excise
– Sweetened Beverage
– Cosmetic Procedures
• B. INCOME TAX HIGHLIGHTS OF TRAIN LAW &
RELATED BIR ISSUANCES &
PRONOUNCEMENTS
LEARNING OBJECTIVES ON TRAIN
• Appreciation of TRAIN Law & draft of IRR
• Revisiting the basics which are not
– modified, changed, amended, repealed by TRAIN
Law for better application
• Assess the impact to you as a student
preparing for CPA Board, teachers
handling tax subjects & accountants
handling tax compliance
• Obtain collective insights for
considerations of the drafters of final IRRs
A. ESTATE TAX
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

Progressive at 5% to 20% Flat rate of 6%

Standard deduction at Php1


Php5 Million
Million

Family home Php1 Million Php10 Million


AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

Final withholding tax at 6% on


None withdrawals on deposits of decedent

Estate tax return filing deadline-


within 6 months from the date of
death
1 year
No counterpart Payment by instalment in 2 years in case of
insufficient cash without civil penalty &
provisions interest
RELATED BIR ISSUANCE ON
IMPLEMENTATION
• SAMPLES\9-2018-NEW ALPHANUMERIC TAX
CODE.pdf
B. DONORS TAX
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

0%-15% & 30% on donations to 6% in excess of


strangers
PhP250,000.00
C. VALUE ADDED TAX
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

VAT threshold-Php1,919,500.00 Taxable above Php3M

 Subject to 12% upon implementation of


 Sale of goods & services to PEZA-0%
enhanced VAT refund system
 VAT exempt sale of residential lot-not
 Php1.5Million
more than Php 1,919,500.00
 Php 2.5Million, by 2021 Php2Million
 VAT exempt sale of residential house &
lot & condominium-Php 3,199,200.00
 Php15,000.00
 VAT exempt lease of residential unit-
Php 12,800.00
 VAT exempt
 Association dues, membership fees &
other assessments & charges of
 VAT exempt
homeowner’s association &
condominium corporation-vatable
 Transfer property pursuant to Section
 VAT exempt Transfer of Sale of drugs
40 (C) (2) of the Tax Code on tax-free
and medicines for diabetes, high
exchange-vatable
cholesterol & hypertension-VAT exempt
 Sale of medicines-12% VAT
effective January 1, 2019
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

Amortization of input VAT on


Repealed by 2022
capital goods

 120-day period within which to refund


 90 days reckoned from the date of
reckoned from the complete
submission of official receipts &
submission of documents
invoices
 In case of inaction, appeal to CTA after
 BIR officer may be punished
the expiration of 120-day period

Monthly & quarterly Effective 2023 only


VAT filing quarterly VAT filing
ON REMOVAL OF 0% VAT ON ZERO-
RATED PURCHASES OF GOODS &
SERVICES BY PEZA & OTHER IPAs
• SAMPLES\VETOED PROVISIONS OF THE
PRESIDENT ON TRAIL BILL.pdf
• SAMPLES\DRAFT OF IMPLEMENTING RULES
ON REGULATIONS ON VAT FOR PUBLIC
CONSULTATION.pdf
• SAMPLES\PETRON NOTICE ON PASS-ON 12%
VAT.pdf
• SAMPLES\BIR ADVISORY ON VAT ZERO-RATING
OF SUPPLIERS OF PEZA TIEZA BOI FREEPORT
REGISTERED ENTERPRISES.pdf
ANALYSIS & IMPACT
ON REAL ESTATE SALE OR LEASE
• SAMPLES\DRAFT OF IMPLEMENTING RULES
ON REGULATIONS ON VAT FOR PUBLIC
CONSULTATION.pdf
ANALYSIS & IMPACT OF DRAFT IRR
TO REAL ESTATE INDUSTRY
D. PERCENTAGE TAX
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

Beginning January 1, 2019 , annual gross


Cooperatives are exempt from 3%
receipts not exceeding Php500,000.00 shall
gross receipts tax
be exempt from 3% BUT VETOED

Self-employed & professionals with gross Exempt effective January 1, 2019 if annual
receipts of Php1,919,500.00 and less- gross receipts not exceeding
subject to 3% Php500,000.00 BUT VETOED

Stock transaction tax on listed shares-


0.50 of 1%
0.60 of 1%
RELATED PRONOUNCEMENTS
• SAMPLES\VETOED PROVISIONS OF THE
PRESIDENT ON TRAIL BILL.pdf
• SAMPLES\RMC NO 2-2018-TRANSITIONAL
WORK-AROUND PROCEDURES ON FILING TAX
RETURNS.pdf
• SAMPLES\BIR TAX ADVISORY ON FILING OF
PERCENTAGE TAX RETURN-FEBRUARY 8,
2018.pdf
E. EXCISE TAX
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

 Php32.50-January 2018
Php31.20 per pack with 4% increase Php35.00-January 2019
annually Php37.50-January 2020
Php40.00-January 2022
 4% annual increase

 PhP2.50 per liter-2018


 Diesel-Php0.00 per liter PhP4.50 per liter-2019
Php6.00 per liter-2020

 Unleaded & premium gasoline-Php4.35  Php7.00 per liter-2018


per liter Php9.00 per liter-2019
Php10.00 per liter-2020

No counter provisions Mandatory marking of all fuel products


AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

 2% for up to Php600,000.00  4%
 Php12,000.00 + 20% in excess of  10% for over Php600,000.00-Php1
Php600,00.00 Million
 Php112,000.00 + 40% in excess over
Php1.1 Million  20% for over Php1 Million-Php4 Million
 Php512,000.00 + 60% of excess over
Php2.1 Million  50% for over Php4 Million

Cosmetic procedures for aesthetic reasons-


5%
none

 Php6.00 per liter using caloric & non-


Sweetened beverages-none caloric sweeteners
 Php12.00 per liter using high-fructose
corn syrup

 Php50.00-2018
 Php10.00. per metric ton of coal
Php100.00-2019
Php150.00-2020
 Various rates for other minerals
 100% increase in rate for other minerals
RELATED PRONOUNCEMENTS
• SAMPLES\VETOED PROVISIONS OF THE PRESIDENT ON TRAIL
BILL.pdf
• SAMPLES\DRAFT OF IMPLEMENTING RULES ON REGULATIONS
ON EXCISE TAX ON INVASIVE COSMETIC PROCEDURES.pdf
• SAMPLES\DRAFT OF IMPLEMENTING RULES ON REGULATIONS
ON SWEETENED BEVERAGES TAX FOR PUBLIC
CONSULTATION.pdf
• SAMPLES\RMC No 4-2018-TRANSITIONAL WORK AROUND
PROCEDURES FOR EFPS FILERS FOR EXCISABLE ARTICLES.pdf
• SAMPLES\RR NO. 1-2018-REVISED RATES ON MINERAL
PRODUCTS.pdf
• SAMPLES\RR NO. 3-2018-REVISED RATES ON TOBACCO
PRODUCTS.pdf
• SAMPLES\RR NO. 5-2018-ADJUSTMENTS ON EXCISE TAX RATES
ON AUTOMOBILES.pdf
ON EXCISE TAX ON SWEETENED
BEVERAGE

•Non-alcoholic
beverages in liquid
• powdered or concentrate form
• sold pre-packed & sealed
• contains caloric & or non-caloric

sweeteners
PERSONS LIABLE

•Local manufacturer
•Importer
•Person in possession
of untaxed beverage
TAX RATE & BASE
• With Caloric & or Non-Caloric
Sweetener-Php 6.00 per liter
• With purely/partly High Fructose Corn
Syrup-Php 12.00 per liter
TIME OF PAYMENT

•Prior to removal from place of


production
COVERAGE
• Sweetened juice drinks
• Sweetened tea
• All carbonated beverages
• Flavored water
• Energy & sports drink
• Cereal & grain beverages
• Other powdered drinks not classified as
milk, juice, tea & coffee
• Other non-alcoholic beverages that
contain added sugar
EXCLUDED
• Sweetened beverages for export
• Beverages sweetened using
– Coconut Sap Sugar
– Steviol Glycosides
• All Milk Products
– formula, powdered, ready-to-drink, soy milk
• 100% Natural Fruit/Vegetable Juices
• Meal Replacement & Medically Indicated
Beverages
• Coffee products
ON EXCISE TAX ON COSMETIC
PROCEDURES
• COVERED
• Invasive cosmetic procedures &
• surgeries directed solely towards
• improving
• altering or

•enhancing patient’s
appearance
EXCLUDED
• Non-invasive procedures or
• procedures necessary to ameliorate a
deformity
• arising from congenital or developmental
defect
• injury from an accident/ trauma or
• disfiguring disease
• Tumor
• infection
TAX RATE & BASE
• 5% on gross receipts
• net of ET &
• VAT
PERSONS LIABLE
• Doctor
• Clinic
• Hospital
• which performed the procedure
– issued the OR
• Tax shall be passed on to

patient
F. DOCUMENTARY STAMP TAXES

AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

Various transactions subject to different 100% increase in rate except DST on loans
rates & amounts from Php 1.00 to Php 1.50 per Php 200.00
& no increase in sale of real property &
insurance policies
RELATED BIR PRONOUNCEMENTS
& ISSUANCES
• SAMPLES\RR NO. 4-2018-REVISED RATES ON
DST.pdf
• SAMPLES\9-2018-NEW ALPHANUMERIC TAX
CODE.pdf
G. COMPLIANCE REQUIREMENTS

AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

Php600,000.00 threshold for audit


of CPA Php3 Million
H. ADMINISTRATIVE PROVISIONS
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW
PhP25.00 sale required to issue official
receipt/invoice [pre-printed, manual, loose- Php100.00
leaf, computer-generated

Electronic sales reporting-none except the Mandatory electronic receipts for LTS & TP
current Quarterly Summary List of Sales & engaged in export of goods & services &
Purchases & List of Importation, e-Sales within 5 yrs from enactment of TRAIN &
Reporting establishment of BIR system

Monthly filing of withholding tax & Quarterly filing of withholding tax except
percentage tax/VAT compensation & VAT/percentage

Deficiency interest-20% Double the legal interest rate per annum

Penalty for failure to transmit sales data 1/10 of 1% of the annual net income for
the 2nd year preceding the current taxable
entered on Cash Register Machine/Point of
year for each day of violation or Php 10,000
Sales Machine to the BIR’s Electronic Sales whichever is higher & permanent closure if
Reporting System-administrative penalty violation exceeds 180 days
PART II INCOME TAX
HIGHLIGHTS
A. ADMINISTRATIVE
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

Power of the Commissioner to obtain


No TIMTA yet at the time of
information to include data supplied by
the enactment of 1997 Tax Cooperative Development Authority in
compliance with “The Tax Incentives
Code
Management & Transparency Act (TIMTA)”

Presence of counterpart Power of the Commissioner to make


assessments notwithstanding any law
restrictions requiring prior authorization of any
government agency or instrumentality

Authority of the Commissioner to


No period is provided prescribe real property values
subject to automatic adjustment
once every three (3) years
B. INDIVIDUAL INCOME & RETURNS & PAYMENT
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

 Below Php 10,000.00 taxed at 5%  Below Php 250,000.00 no tax


 Over Php 500,000.00 taxed at 32%  Over Php 8 Million taxed at 35%
 No counter-part provision  Optional for self-employed &
professionals to be taxed at 8% for
gross revenues below Php 3Million

 Personal exemption-Php 50,000.00


No more Personal & Additional
 Additional exemption-Php 25,000.00
per child exemptions

No counter-part Minimum wage earners receiving


holiday pay still exempt from income
provision tax
PURELY COMPENSATION INCOME EARNER
SELF-EMPLOYED & PROFESSIONALS
THOSE NOT EXCEEDING
PHP 3 MILLION THRESHOLD
8% tax on gross sales/receipts & other non-operating
income in excess of ₱250,000.00 in lieu of graduated
income tax rates & percentage tax

or
graduated income tax rates
BOTH COMPENSATION INCOME EARNER &
SELF-EMPLOYED/PROFESSIONAL
COMPENSATION INCOME SUBJECT TO GRADUATED
INCOME TAX RATES

Income from business or practice of profession shall


be subject to the ff:

If the gross sales/receipts & other non-operating


income do not exceed PHP 3M, optional to avail the 8%

If it exceeds PHP 3M, use graduated income tax rates


AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

Tax exempt 13th Month Pay & Other


Benefits including Productivity Incentives &
Increase to Php
Christmas Bonus-Php 82,000.00 90,000.00

Employees of RHQ, ROHQ, OBU, & Preferential tax treatment of 15% shall not
Petroleum Service Contractors taxed at apply anymore to registrants after January
15% 1, 2018

Fringe Benefit Tax-32% Fringe Benefit Tax-35%

Returns to consist of maximum of 4 pages


None showing personal profile & information,
gross revenues, allowable deductions,
taxable income, income tax due & payable
 Deadline for 1st Quarter & Annual ITR-
April 15  May 15
 Deadline for 2nd Instalment of Annual  October 15
Income Tax Due-July 15
RHQs, ROHQs, OBUs & PETROLEUM SERVICE
CONTRACTORS/SUBCONTRACTORS
FRINGE BENEFITS
OPTIONAL STANDARD DEDUCTIONS
OSD FOR GPPs & PARTNERS
C. PASSIVE INCOME
AMENDMENTS INTRODUCED BY
OLD TAX CODE TRAIN LAW

PCSO & Lotto Winnings- Taxable above Php


exempt 10,000.00

Interest income on foreign 15% whether recipient is


currency denominated units- individual or domestic
7.5% corporation

Capital gains tax on unlisted shares-5%


for 1st Php100,000.00 net capital gains
Flat tax rate of
realized & 10% in excess of Php
100,000.00 15%
DRAFT IRRs ON INCOME TAX
[JANUARY 5, 2018]
• A. Scope & definition of terms
• B. Income tax rates of resident citizen, RA & NRA
• C. Exclusions & deductions from gross income
• D. Special treatment of FBT
• E. Individuals not required to file ITR
• F. Time of filing of individual ITR
• G. Installment payment
• H. Transitory provisions + repealing clause + effectivity
COMPENSATION INCOME
• remuneration for services performed by an
employee for his employer

employer-
• under an

employee
relationship
• name by which the remuneration for services is
designated is immaterial
• Thus, salaries, wages, emoluments & honoraria,
allowances, commissions (e.g. transportation,
representation, entertainment)
• fees including director's fees, if the director is,
at the same time, an employee of the employer
• taxable bonuses & FB
– except those which are subject to FBT
• taxable pensions & retirement pay

• are compensation income


E-R RELATIONSHIP
• exists when R has the right to control & direct the
services of E
– not only as to the result to be accomplished by the
work
– but also as to the details & means by which the result
is accomplished
• E is subject to the will & control of the R
– not only as to what shall be done
– but how it shall be done
• it is not necessary that R actually directs or controls
the manner in which the services are performed
– It is sufficient that he has the right to do so
PROFESSIONAL
• Person formally certified by a

professional
body
– belonging to a specific profession
– by virtue of having completed a required course of
studies &/or practice
– whose competence can usually be measured
against an established set of standards
PROFESSIONAL
• person who engages in some art or sport for
money
• as a means of livelihood
• rather than as a hobby
– includes professional entertainers
– professional athletes
– directors, producers
– insurance agents, insurance adjusters
– management & technical consultants,
bookkeeping agents &
– other recipients of professional, promotional &
talent fees
FRINGE BENEFITS

• any good
•service or
•other benefits furnished or
granted in cash or in kind
• apart from the basic compensation
• by R to individual E (except rank & file E)
• such as, but not limited to the following:
•Housing
• Expense account
• Vehicle of any kind
• Household personnel, such as maid, driver
• Interest on loan at less than market rate to the
extent of the difference between the market
rate & actual rate granted
• Membership fees, dues and other expenses
borne by the R for the E in social & athletic
clubs or other similar ORG
• Expenses for foreign travel
• Holiday & vacation expenses

•Education assistance
to the E or his
dependents
• Life or health insurance & other non-life
insurance premiums or similar amounts in
excess of what the law allows.
STATUTORY MINIMUM WAGE
• worker in the private sector
who is paid with SMW or to E
in the public sector
• with compensation income of
not more than SMW in the
non-agricultural sector
• where the E is assigned.
EXCLUSIONS FROM GROSS INCOME

Other
• 13th Month Pay &

Benefits
• ₱90,000.00, which shall cover:

such as productivity
– Other benefits
incentives &
– Christmas bonus
DEDUCTIONS FROM GROSS INCOME

• OSD at 40% or
• itemized deductions
• at the option of TP
• In case of individual TP,
• OSD shall be computed at the rate of 40% of
gross sales/receipts
• Corporations may elect SD
• in an amount not exceeding 40% of its gross
income
• no deductions shall be allowed to
individual TP earning
compensation income
• those who opted to be taxed at

8% on their income from


• business/practice of profession
ITEMIZED
DEDUCTIONS
• Unless TP signifies in the return the intention
to elect the OSD
• it shall be considered as having availed of the

itemized deductions
• Such election, when made in the return

• shall be irrevocable for


the TY for which the return is made
• election to claim either OSD or the ID for
the TY

• must be signified by checking the


appropriate box in the ITR filed for the
1ST Q of TY adopted by TP
• Once the election is made
– the same type of deduction must be

consistently applied for all the


succeeding quarterly returns &
– in the final ITR for the TY
OSD AVAILMENT

• Not required anymore to submit AFS


35% FROM 32%
• shall be imposed on the grossed-up
monetary value of FB
• Unless FB is
– required by the nature of,
– or necessary to the trade, business or profession
of R
– or when FB is for the

convenience of or
advantage of R
NOT REQUIRED TO FILE ITR
• Those earning purely compensation

Php
income of

250,000.00 or less

• Those covered under substituted filing


• Those whose sole income has been
subjected to FWT
• MWE
INSTALLMENT PAYMENT
• in excess of Php 2,000.00
• TP may elect to pay in 2 equal installments
• 1st installment to be paid at the time of filing
of Annual ITR
• 2ns installment-on or before

October 15
MARCH 31, 2018 DEADLINE
• all existing VAT registered TP
• whose gross sales/receipts in the preceding
year did not exceed the VAT threshold of Php
3M
• have the option to update their registration to
non-VAT
• ..\..\..\weekly tax updates\2018\january\22-
26\BIR TAX ADVISORY ON SELF-EMPLOYED
PROFESSIONALS CHANGE OF REGISTRATION
FROM VAT TO NON-VAT PERCENTAGE TYPE.pdf
KEEP YOUR

QUESTIONS
COMING. SEND THEM TO
ME? We are learning
together! Keep in touch!
willie.santiago@dmdcpa.com.ph