Dear Jaime,

During our last meeting, we discussed matters relating to accounting entries and how
you would be recording the same. Below are the suggested entries and the explanations
for each assumption or situation.

Please note that these are merely suggestive in nature and are used due to explanatory
purposes. The same should still be discussed with your accountant.

Warm Regards,

Dargon Law Team

CASHABLE QUERY

A. Assuming that the whole 10% to be retained by Cashable as Service Fee will be
subjected to VAT. (Simple presentation without withholding tax implication)

Service Fee ₱89.29

Output Vat (12%) 10.71
10% Commission Fee 100.00 --- assuming that the service fee is VAT inclusive

Service Fee ₱100.00

Output Vat (12%) 12.00 --- assuming that the service fee is VAT exclusive
10% Commission Fee 112.00

B. Assuming that the whole 10% to be retained by Cashable as Service Fee will be
subjected to VAT. (With withholding tax implication)
 *Assuming a CWT rate of 2% on services

Creditable Withholding Tax (CWT) from Merchant pertains to tax withheld by

purchaser of service. CWTs are to be remitted by the one paying the service to the BIR.
They are recorded as an asset of the Company, to be deducted from the income tax
payable.

Since it is Cashable that renders service to the Merchant, the latter is responsible for
remitting the tax to BIR. However, since it is Cashable who initially receives the cash, its
cash remittance to the Merchant shall include the amount of withholding tax pertaining
to the service rendered. In turn, the Merchant will remit the same to the BIR.

(Note: Please check BIR Guidelines on who are subject to Withholding Taxes: RR 02-98,
as amended by RR 11-2018)

C. Suggested entries for rebate program:

Assumptions:
1. Same information as that in Section B above
2. Rebate is 5% of Service Fee Income of the Company (based on Service Fee
Income EXCLUSIVE of VAT)
3. Rebates are treated as deduction from Service Fee Income of the Company
4.
D. Assuming that Cashable’s Net Taxable Income amounts to P100, 000.00 and the
total CWT for the year amounts to P15, 000.00.

(Note: Amounts are assumed. Corporate Tax Rate is at 30%)

Creditable Withholding Tax withheld and remitted by the Merchant to the BIR are tax
credits for the Income Tax Due of Cashable.