CHAPTER 14

RETURNS AND PAYMENT

OF TAX
INCOME TAXATION
Tax Return
A tax return is a form or forms filed with a tax authority that reports
income, expenses, and other pertinent tax information. Tax returns
allow taxpayers to calculate their tax liability, schedule tax payments, or
request refunds for the overpayment of taxes. In most countries, tax
returns must be filed annually for an individual or business with
reportable income, including wages, interest, dividends, capital gains,
or other profits.
Who is required to file ITR?
1.A Filipino citizen living in the Philippines, receiving income from sources
within or outside the Philippines, and if you are:
1. Employed by two or more employers, any time during the taxable year.
2. Self-employed, either through the conduct of a trade or professional practice.
3. Deriving mixed income. This means you have been an employee and a self-
employed individual during the taxable year.
4. Someone who derives other non-business, non-professional related income in
addition to compensation income not otherwise subject to a final tax.
5. Married, employed by a single employer, and your income has been correctly
withheld—the tax due is equal to the tax withheld—but your spouse is not entitled
to a substituted filing.
6. Marginal income earner.
7. Someone whose income tax during the past calendar year was not withheld
correctly—if the tax due is not equal to the tax withheld.
2. A non-resident citizen i.e if you are a Filipino who works or resides abroad,
receiving income from sources within the Philippines. You are taxable only for the
income you earn from the Philippines.)
3. A Non-Filipino citizen but you receive income from sources within the
Philippines, regardless of your residency. (You are taxable only for the income you
earn from the Philippines.)
4. Domestic corporations and partnerships receiving income from sources within
and outside the Philippines. This also includes foreign corporations and
partnerships receiving income from sources within the Philippines.
5. Estates and trusts engaged in trade or business are also required to file their ITR.
Who is exempt from filing income taxes?
1.A minimum wage earner,
2.Someone whose gross income (total earned for the past year) does not
exceed your total personal and additional exemptions,
3.Someone whose income derived from a single employer does not
exceed P60,000 and the income tax on which has been correctly
withheld.
4.Someone whose income has been subjected to final withholding tax.
5.Qualified for substituted filing.
6. A non-resident citizen who is:
1. A Filipino citizen not residing in the Philippines, but who has
established with the BIR that you wish to remain living outside the
country.
2. A Filipino citizen who leaves the Philippines during the taxable year
to reside abroad, either as an immigrant or for permanent
employment.
3. A Filipino citizen who works and earns income abroad.
4. A Filipino citizen previously considered a non-resident citizen.
7. An overseas Filipino worker whose income is derived solely from
sources outside the Philippines.
Substituted Filing
• An individual taxpayer will no longer have to personally file his own
Income Tax Return (BIR Form 1700) but instead the employer’s
Annual Information Return on Income Taxes Withheld (BOR From No.
1604-C) filed will be considered as the substitute IT of the employee.
Requisites for Individuals Qualified for Substituted Filing oof BIR
Form No. 1700
1. Individuals with two or more employers concurrently and/or successively at
anytime during the taxable year.
2. Employees whose income tax have not been withheld correctly resulting to
collectible or refundable return.
3. Individuals deriving other non-business, non-profession-related income in
addition to compensation income not otherwise subject to final tax.
4. Individuals receiving purely compensation income from a single employer
whose income tax has been correctly withheld but whose spouse does not
qualify for substituted filing.
5. Non-resident aliens engaged in trade or business in the Philippines deriving
purely compensation income or compensation income and other non-related
business, non-profession-related income.
Manner of filing
A. Manual Filing
1.For individuals earning income only as employees and for marginal income earners,
you will need to fill up three (3) copies of BIR Form 1701. You will also need the
following documents:
1. Certificate of Income Tax Withheld on Compensation or BIR Form 2316,
2. A waiver of the spouse’s right to claim an additional exemption
3. Duly approved Tax Debit memo and proof of foreign tax credits.
2.For individuals who are self-employed or deriving mixed-income, you will need to fill
up three (3) copies of BIR Form 1701. The following documents are also needed:
1. Certificate of Income Tax Withheld on Compensation BIR Form 2316, tax debit
memo,
2. Proof of prior year’s excess tax credits, and
3. Certificate of Income Payments not Subjected to Withholding Tax or BIR Form
2304.
How to file?
1.Fill-up three copies of BIR Form 1700, Form 1701, and 1701 as mentioned above.
2.If there is payment needed, proceed to the nearest Authorized Agent Bank (AAB) of
the Revenue District Office where you are registered.
1. Present the duly accomplished BIR Form together with the required attachments
and your payment and receive your copy of the duly stamped and validated form
from the tax filing center representative.
3.If there is no payment, including refundable or creditable returns, returns with excess
tax credit carry over, and returns qualified for the second installment, proceed to the
Revenue District Office where you are registered or to any established Tax Filing
Centers established by the BIR.
4.Present the duly accomplished BIR Form, together with the required attachments,
and receive your copy of the duly stamped and validated form from the RDO/Tax
Filing Center representative.
B. Electronic Filing and Payment System (EFPS)
• Taxpayers that intend to use the BIR eFPS services are required to enroll through the
BIR e-Lounge or may directly access the BIR website for requirements and are
required to maintain an online banking facility integrated with the eFPS. Those that
are required to make use of the Electronic Filing and Payment System include:
1.Large taxpayers who are duly notified by the BIR
2.The top 20,000 private corporations duly notified by the BIR
3.The top 5,000 individual taxpayers duly notified by the BIR
4.Taxpayers who wish to enter into contracts with government offices
5.Corporations with paid-up capital stock of P10 million
6.Entities registered with the Philippine Economic Zone Authority (PEZA) and those
located within Special Economic Zones
7.Government offices, insofar as remittance of withheld value-added tax (VAT) to
business tax is concerned
Based on Revenue Regulations (RR) 10-2014, those under the Taxpayer Account Management Program
(TAMP). Taxpayers, whether individual or juridical entities, identified by the Revenue District Office (RDO)
based on selection criteria pursuant to existing revenue issuances.
How to file?
After successfully enrolling with both eFPS and online banking with any of the
Authorized Agent Banks, you may simply access the BIR eFPS website, fill out the tax
returns filed with the required details, then validate and submit it.
A Filing Reference Number page is generated and shown after successfully filling and
submitting the tax return online.
The system will then store the e-filed tax returns for future reference. If you are due for
a tax payment, you will be provided with the form with the payment information
displayed. Simply choose the mode of payment and the authorized bank and received
the proof of successful tax payment.
C. Electronic BIR Forms
The Electronic BIR Forms or eBIRForms was created mainly to give non-eFPS taxpayers
and their accredited tax agents an accessible and more convenient way to file taxes in
the Philippines. It is mandated under Revenue Regulations No. 6-2014.
eBIRForms consists of an offline and online package. The most commonly used
package are the offline packages which you can download and install on your
computer.
eBIRforms is basically a tax-preparation software that allows taxpayers to fill out their
tax forms and submit them to the BIR within the system as well. However, this software
is still very basic as it does not compute your taxes for you.
How to file?
You must first download the latest offline eBIRForms package and fill up the
information required. After providing your complete information, validate and submit it
through the use of the Online eBIRForms System. You will then be asked to provide a
username and password, after which, you will receive a Filing Reference Number as an
acknowledgment of its receipt. After successful submission, you will receive an email
notification.