Chapter 1 INTRODUCTION

TO BUSINESS TAXES
BUSINESS AND TRANSFER TAXES
INTRODUCTION TO BUSINESS
TAXES
"Business" or "in the course of trade or
business" means the regular conduct or
pursuit of a commercial or economic
What is Business? The requisites are:
activity, including transactions
incidental thereto, by any person or
government entity.

The activity must be a

commercial or economic
activity, and

There must be regularity

in the activity. A
commercial or economic
activity is an activity
where the purpose is
profit or income.
Exception: by provision of law
1. overseas communication tax – Percentage tax
2. one time importation for personal use- VAT
3. Winnings – percentage tax
4. Sale thru a local stock exchange of shares of stock of
domestic corporation- percentage tax
 The Business Taxes

There are three major business taxes in the National

Internal Revenue Code, namely:
INTRODUCTION
TO BUSINESS (a) Excise tax;
TAXES
(b) Percentage tax; and

(c) Value-added tax.

 The Excise Tax

On whom is the excise tax imposed?

(a) On manufacturers and importers of

INTRODUCTION
TO BUSINESS (1) Distilled spirits (e.g., liquors);

TAXES
(2) Wines (e.g., grape wine);

(3) Fermented liquors (e.g., beer);

(4) Tobacco products (e.g., chewing tobacco);

 (5) Cigars;

(6) Cigarettes

(7) Automobiles

INTRODUCTION (8) Yachts and other vessels intended for pleasure

TO BUSINESS
TAXES (9) Manufactured fuel oils (e.g., gasoline, diesel foll, bunker fuel oil, etc.):

(10) Mineral products (e.g., gold, silver);

(11) Non-essential goods (0.9., jewelry, perfumes (There is an remuneration

in the law.), and

(12) Sweetened beverages

 (b) On sellers of services of

INTRODUCTION
TO BUSINESS
TAXES Domestic procedures, surgeries, and body on enhancements
undertaken for aesthetic reasons entirely focused on altering
and enhancing a patient's appearance, improving aesthetic
appeal, symmetry and proportion (but not reconstructive
surgery or repair, reconstruction and restoration of bodily
functions due to congenital disorders, trauma, burns,
infectious, disease, and those intended to correct
dysfunctional areas of the body)
 The percentage taxes are
on sales of services (a) 3% percentage tax on
(enumerated in the sale of goods, properties
The percentage taxes on services;
National Internal Revenue
Code). The taxes are the
following:

INTRODUCTION
TO BUSINESS (b) Common carrier's tax
on domestic carriers;
(c) Common carrier's tax
on international carriers;
(d) Franchise tax:

TAXES

(e) Overseas
communications tax;
 (f) Tax on banks and
non-bank financial (g) Tax on other non-
(h) Tax on insurance
intermediaries bank financial
companies
performing quasi- intermediaries;
banking functions:

INTRODUCTION (I) Tax on agents of

(g) Tax on winnings,
TO BUSINESS foreign insurance (j) Amusement tax
and
companies
TAXES

(h) Stock transaction

tax.
 The value-added tax

The value-added is on:

INTRODUCTION
TO BUSINESS (a) Sale of goods or properties:
TAXES
(b) Sale of services;

(c) Importation of goods.

 Can there be, on one business:

Excise tax with value-added tax?

INTRODUCTION
TO BUSINESS Excise tax with the 3% percentage tax?
TAXES
Excise tax with some other percentage tax?

Value-added tax with percentage tax?

 Registration of business

Every taxpayer subject to the value-added tax must register with the
INTRODUCTION Bureau of Internal Revenue as a VAT taxpayer and pay an annual
TO BUSINESS registration fee of for every separate and distinct establishment,
including facility types (sales outlets, places of production, warehouses
TAXES and storage places) where the business is conducted.

Every taxpayer not subject to the value-added tax but subject to the
excise tax or percentage tax must register with the Bureau of Internal
Revenue and pay an annual registration fee for every separate and
distinct establishment where the business is conducted.
 Mandatory registration for Value Added Tax

Any person who, in the course of trade or business, sells, barters or

exchanges goods or properties, or en gages in the sale or exchange of
INTRODUCTION services will be liable to register for value-added tax if:
TO BUSINESS
TAXES (a) Gross sales or receipts within the year exceeded three million pesos
(P3,000,000);

(b) There are reasonable grounds to believe that his gross sales or
receipts for the next twelve (12) months will exceed three million
(P3.000,000), pesos
 Optional registration

Any person who is not required to register as a VAT taxpayer

INTRODUCTION because the sales, barters or exchanges of goods or properties, or the
sales or exchanges of services, do not, or will not exceed three
TO BUSINESS million pesos (P3,000,000), may opt to register under the value-add
TAXES ed tax system.

The threshold of P3,000,000. For purposes of determining the

threshold of three million pesos (P3,000,000). the husband and wife
will be considered as separate taxpayers. If taxpayer has two or
more lines of businesses that would otherwise be subject to the
value-added tax, the gross sales/receipts will be combined for
purposes of determining if the threshold was exceeded.
 Cancellation of VAT registration

The registration of any person as a value-added taxpayer may be

cancelled if:
INTRODUCTION (a) Written application and can demonstrate to the Commissioner's
TO BUSINESS satisfaction that his gross sales or receipts for the following twelve (12)
months will not exceed three million pesos (P3,000,000); or
TAXES
(b) 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 take effect? Answer: The first day of the
following month.
INTRODUCTION TO
BUSINESS TAXES
Registration of invoices and receipts.

A taxpayer who is in business will have his invoices and receipts

registered with the Bureau of Internal Revenue. If a VAT taxpayer,
such invoices and receipts will clearly show that he is a VAT
taxpayer
 Electronic receipts or sales or commercial invoices.

What is the provision of the TRAIN LAW on this?

INTRODUCTION Within five (5) years from the effectivity of that law and upon the
TO BUSINESS establishment of a system capable of storing and processing the
required data, the Bureau of Internal Revenue will require:
TAXES
A. Taxpayers engaged in e-commerce, and

B. Taxpayers under the Large Taxpayers Service.