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BUSINESS

TAXES
Texts in MAROON are the amendments according to TRAIN
Consumption

Domestic - TAXABLE Foreign (Export)-


EFFECTIVELY NOT
TAXED
From Abroad From domestic sellers
(importation) (Sales or Receipts)

Exempt
Exempt sales
importation

VAT on Services specifically subject to


Importation % tax (various rates)

Below VAT threshold(3%


EXEMPT
general percentage tax)

Above VAT threshold


0 – RATED VAT
(12% value added tax)

BUSINESS TAX
Consumption

Domestic - TAXABLE Foreign (Export)-


EFFECTIVELY NOT
TAXED

- Tax upon usage or income or capital


- Taxes everyone (Benefit received
theory)
- Not be levied upon basic necessities

Not subject: Foreign Consumption Seller


R NR
- Consumption abroad (Destination
NR Effectively
principle) buyer no tax
no tax
- Goods destined toward foreign territories
(Cross-border doctrine)

R VAT on VAT on
Subject: Domestic Consumption buyer sale importation
Consumption

Domestic - TAXABLE Foreign (Export)-


EFFECTIVELY NOT TAXED
From Abroad From domestic sellers
(importation) (Sales or Receipts)
Importation: taxable whether seller or buyer - business/personal
Statutory and economic taxpayer – buyer
Goods
VAT on Importation = 12% x total import cost prior to withdrawal from
warehouse of BOC
Service
Withholding VAT = 12% x contract price

Sales/receipts: BUSINESS TAX – taxable if seller is engaged in business


Statutory taxpayer - seller
Indirect tax
Economic taxpayer – buyer
o Value Added Tax (VAT)
o Percentage Tax
o Excise Tax
From Abroad From domestic sellers
(importation) (Sales or Receipts)

Exempt sales (A/M HERE RICT)


from VAT & Percentage tax – Sec. 109
Agricultural / Marine food products in their original state

Hospital services, except sales of medicine & medical professional services


Education (schools w/ CHED, DepED & TESDA accreditation & book’s,
newspaper’s & magazine’s publication printing & sale
Regional area / administrative headquarter of multinational companies
Employment

Real properties (see subsequent slides)


International transport of passengers by resident foreign carriers
Cooperatives with Certificate of Good Standing issued by CDA, except electric
cooperatives
Transactions exempt under treaty or international agreements to which Philippines
is a signatory
Agricultural / Marine FOOD products in their original state

 Unprocessed & includes simple process of preparation, preservation, or


packaging.

 Sale of Certain farm or fishery inputs limited for:


o Plants or fruit cultivation – fertilizers, seeds, seedlings
o Animal husbandry – livestock, feeds and ingredients for livestock &
poultry feeds
If used in the manufacture of finished feeds – must be proven to be unfit
for consumption or cannot be used for food production as certified by FDA
o Fishery operations – fingerlings, fish, prawns

 Services by agricultural contract growers and milling for others of palay into
rice, corn into grits, and sugar cane into raw sugar
o Milling services – processing of agricultural produce for ultimate human
consumption
Hospital services

Except:
o medical professional services, &
o sales of drugs by hospital drugstores/pharmacy
Education

 Schools: (school fees)


o Government educational institutions
o Private educational institutions
must be duly accredited by DepEd, CHED and TESDA
 Sale, printing or publication of books
 Newspaper, magazines, reviews or bulletin
o @ regular intervals
o w/ fixed prices for subscription and sale, and
o Not devoted principally to the publication of paid advertisements
Regional area / ADMINISTRATIVE headquarter of multinational companies

o does not derive income on its own


o Regional operating headquarters (ROHQ) - taxable

Employment

- Services employed in pursuant to an employer-employee relationship


Real properties

A. Sale
1. Non-dealer
2. Dealer – subject to price ceilings
o Utilized for social housing units:
a.House & lot package – P450,000,
b.Residential lots only – P180,000
Real properties

Old (threshold) Jan. 1, 2018 Jan. 1, 2021


o Utilized for low-cost housing 750,000/unit 750,000/unit Vatable
o Residential lot 1,919,500 1,500,00 Vatable
o Residential dwelling 3,199,200 2,500,000 2 Million

- Sale of adjacent lots except parking lot w/in 12-month period in


favor of one buyer shall be treated as one (consolidated).

Every 3 years, the threshold amount shall be adjusted to its present value
• using the Consumer Price Index,
• as published by the National Statistics Office-NSO (now, Philippine
Statistics Authority-PSA).
Real properties

B. Lease of residential dwellings / units


o ≤ P12,800 (15,000) a unit per month

International transport of PASSENGERS by resident foreign carriers

o By International carriers
o Originating from Philippines going abroad
o Does not include receipt from outgoing cargoes, excess baggage, or
mails - subject to percentage tax on international carriers
Cooperatives with Certificate of Good Standing issued by CDA

o Except electric cooperatives


o Transact related activities with:
a. Members
b. Non-members if accumulated reserves ≤ P10,000,000

Transactions exempt under treaty or international agreements to which Philippines


is a signatory

o Examples of Exempt parties:


• Philippine Economic Zone Authority (PEZA) registered
• International Rice Research Institute (IRRI)
• Philippine National Red Cross
• PAGCOR
Additional exempt transactions (TRAIN)

o Sale or lease of goods and services to senior citizens and PWDs

o Association dues, membership fees, and other assessments and charges


collected by homeowners associations and condominium corporations

o Transfer of property in merger or consolidation [under Section 40(C)(2) of


the NIRC/tax-free exchange]

o Sale of drugs and medicines prescribed for diabetes, high cholesterol, and
hypertension beginning Jan. 1, 2019

o Sale of gold to BSP


Definition of Sale or Exchange of Services

• include “sale of electricity by generation companies,


• transmission by any entity including the National Grid Corporations of the
Philippines [NGCP], and
• distribution companies, including electric Cooperatives
WHO?

VAT TAXPAYERS

1. VAT registered – VATed even if annual sales do not exceed VAT


threshold
a. Mandatory registration: Sales/receipts exceeds VAT threshold
b. Voluntary registration – did not exceed VAT threshold but opt to
register

VAT
2.Threshold Amount
VAT registrable Coveredbut
– Exceed VAT threshold taxpayers
did not registered
General Threshold P 1,919,500 All except franchise grantees of
(3,000,000) radio or television

Special Threshold P 10,000,000 Franchise grantees of radio or


television

Erroneously/intentionally use VAT invoice or OR to bill VAT-


exempt sales
Non-VAT taxpayers: Percentage tax + Output VAT + 50%
surcharge
VAT taxpayers: Output VAT – Input VAT
VAT Threshold

Remember:
BRANCH - sales aggregated with head office
SUBSIDIARIES or SPOUSE (for married)– not aggregated
VAT EXEMPT TRANSACTIONS

NO Output VAT
NO Creditable Input VAT
Input VAT – expensed

non-VAT taxpayers - % tax

Exempt importation – to be further discussed


Exempt custom duties, then exempt VAT

Exempt Sales – see previous slides ( Sec.109, NIRC)

Services specifically subject to percentage tax– to


be discussed

Export sales of non-VAT taxpayers – remember: ONLY


non-VAT
OUTPUT VAT

- VAT passed on to customers or clients


- by a VAT taxpayer
- on his sales to customers

TYPES:

1.Regular Output VAT


2.Zero Ouput VAT – zero-rated sales
1.) 12% REGULAR OUTPUT VAT

Sources VAT base Timing of Reporting


Output VAT
Goods GROSS SELLING PRICE In the month of sale
Except: unreasonably lower
selling price, use FAIR VALUE
Services GROSS RECEIPTS In the month of collection
(includes advances)
Real Properties GROSS SELLING PRICE In the month of sale
(higher of fair value or selling Except: Installment Plan,
price spread throughout the
collection period
Transactions FAIR VALUE of the deemed In the month deemed
deemed sale sales sold

Unreasonably lower selling price


Requisite: Gross selling price is lower by more than 30% of the actual
market value
Except: Government – basis: actual selling price
1.) 12% REGULAR OUTPUT VAT

Sale to Senior Citizens


• 20% discount in certain establishments
• EXEMPT from VAT

Sale to Persons with Disability (PWDs)


• net of discount - SUBJECT to VAT (now, exempt)

Sale of Properties

Type Taxability
By a dealer, developer, or lessor of REAL properties vatable
Properties considered ORDINARY ASSETS vatable
Properties NOT in the course of business exempt

Consideration per
sales document
Gross Selling Price higher zonal Value, and
higher
Fair value of Assessed value
property -exclusive of VAT
1.) 12% REGULAR OUTPUT VAT

Sale of Real Property on Installment Plan

• means initial payment in the year of sale does not exceed 25% of
selling price.

• Output VAT – may be reported by installment


Monthly Output VAT= Payment/ Selling Price x Output VAT

Sale of Real Property on a Deferred Payment Basis


• means initial payment in the year of sale > 25% of selling price.
• treated as CASH SALES
• Subsequent collections: NOT SUBJECT TO VAT
1.) 12% REGULAR OUTPUT VAT

Transactions Deemed Sales


- acquisitions in nature by VAT taxpayers but not through a purchase transaction
- Applies ONLY to: ordinary asset & vatable property

a. Transfer, use or consumption, not in the course of business, of goods or properties


originally intended for sale or for use in the course of business.
- through withdrawing goods from business for his personal use
b. Distribution or transfer to:
• Shareholders or investors as property dividends; or
• Creditors in payment of debt or obligation
c. Consignment of goods if actual sale is not made within sixty (60) days following
the date such goods were consigned.
- Consigned goods returned by the consignee within the 60-day period are not
deemed sold;
d. Retirement from or cessation of business except merger and consolidation,
• with respect to all goods on hand, whether capital goods, stock-in-trade,
supplies or materials
• as of the date of such retirement or cessation,
• whether or not the business is continued by the new owner or successor.
• Tax basis: lower of acquisition cost or current market price
e. Cessation of status as a VAT-registered person
2.) ZERO RATED SALES

1. Foreign consumptions – Export Sales of VAT taxpayers to NR:


A.
• sale and actual shipment of goods to a foreign country, irrespective of the
shipping arrangement (direct export)
• Services other than processing, manufacturing or repacking rendered to a
person engaged in business conducted outside the Philippines or to a non-
resident person engaged in business who is outside the Philippines when
the services are performed
B.
• Sale of raw materials or packaging materials for delivery to a resident
export-oriented enterprise (indirect exports)
• Processing, manufacturing or repacking goods for other persons doing
business outside the Philippines which are subsequently exported
Requirement of export sales to NR:
• Services must be performed in the Philippines. (abroad – exempt)
• Must have been paid for in acceptable foreign currency or its
equivalent in goods or services,
- If in Philippine Peso, exempt.
• Must be accounted for under the rules of BSP
- Terms of shipment considered immaterial.
2.) ZERO RATED SALES

C.
• Sale of raw materials or packaging material to an export-oriented
enterprise

• Services performed by subcontractors and/or contractors in processing,


converting, or manufacturing goods for an export-oriented enterprise

Requisites to be export-oriented:
• Export sales exceed 70% of total annual production of the preceding
taxable year
• Certification is issued by pertinent government agency
2.) ZERO RATED SALES

D.Sale of gold to BSP (now, exempt)

E. Those considered export sales under E.O. 226 (The Omnibus


Investment Code of 1987) and other special laws

Items (B), (C), and (E) shall be subject to the twelve percent (12%) VAT
and no longer be subject to zero percent (0%) VAT rate upon satisfaction
of the following conditions:

1. The successful establishment and implementation of an enhanced


VAT refund system that grants and pays refunds of creditable input tax
within ninety (90) days from the filing of the VAT refund application
with the Bureau.

2. All pending VAT refund claims as of December 31, 2017 shall be fully
paid in cash by December 31, 2019.
2.) ZERO RATED SALES

F. Sale of goods or properties, supplies, equipment and fuel and services


rendered to persons engaged in international shipping or international air
transport operations

- from a port in the Philippines directly to a foreign port, or vice versa,


without docking or stopping at any port in the Philippines

Unless the docking or stopping is for the purpose of loading or unloading


passengers &/or cargoes bound for or originating from abroad,
respectively.

Provided, that the goods, supplies, equipment, fuel and services shall be
used exclusively for international shipping or air transport.
2.) ZERO RATED SALES

G. Sale of power or fuel generated through renewable sourced of energy


H. Transport of passengers and cargo by domestic air or sea vessels
from the Philippines to a foreign country - outgoing transport

2. Foreign currency-denominated sales (deleted)


• sale to a nonresident of goods, except export of automobiles and non-
essential commodities,
• assembled or manufactured in the Philippines for delivery to a resident
in the Philippines,
• paid for in acceptable foreign currency and
• accounted for in accordance with the rules and regulations of the BSP

3. Sales to tax-exempt persons or entities under special laws and


international agreements to which Philippines is a signatory
2.) EFFECTIVELY ZERO RATED SALES

• the local sale of:


o goods and properties other than direct exports, foreign currency
denominated sales and sales to Ecozone-registered enterprises
o and services
• by a VAT registered person
• to a person or entity who was granted indirect tax exemption under
special laws or international agreement.

- How? Requires prior application for effective zero rating.


- Where? Audit Information, Tax Exemption and Incentives Division
(AITEID) under Assessment Service
For large taxpayers – Large Taxpayer Audit and Investigation Division
I and II (LTAID I and II) BIR National Office
- Why? Without an approved application – transaction shall be exempt
INPUT TAX/VAT of the buyer

VAT due or paid by a VAT-registered person on importation or local


purchases of goods, properties, or services, including lease or use of
properties in the course of his trade or business.

Determination of Output or Input Vat

A. Inclusive of the VAT (assumption)


Invoice price x 12/112 or 3/28

1. Not separately billed


2. Business absorbs the VAT
3. Incorrect billing

B. Exclusive of VAT
Selling price x 12%

1. Separately billed
2. Client or customer absorbs the VAT
CREDITABLE INPUT VAT

Requisites:

1. Input VAT must have been paid or incurred in the course of trade
or business
2. Input VAT is evidenced by a VAT invoice or VAT official receipt.
3. VAT Invoice or receipt must be issued by a VAT-registered
person.
4. Input VAT is incurred in relation to vatable sales and not from
exempt sales.

Type of Vatable Sales

1. Sales to government
2. Export Sales
3. Regular Sales
CREDITABLE INPUT VAT

Who?

1. Importer – upon payment of VAT prior to the release of the goods


from Customs custody

2. Purchaser of domestic goods or properties upon consummation of


the sale

3. Purchaser of service or the lessee or licensee – upon payment of


the compensation, rental, royalty or fee.
TYPES OF CLAIMABLE INPUT VAT

1. Transitional Input VAT


2. Regular Input VAT
3. Amortization of Deferred Input VAT
4. Presumptive Input VAT
5. Standard Input VAT
6. Input VAT Carry-over
1. TRANSITIONAL INPUT VAT

- Initial input tax credit (avail in the month of registration)

- Given to a person who becomes liable to VAT or elects to be a VAT-


registered
- Higher between:
• 2% of the beginning inventory of goods, materials, or supplies
(basis: value allowed for income tax purposes), or
• actual VAT paid

- Timing of Credit – in the month of registration as a VAT taxpayer

- Requisites for Claim:


1. Must submit an inventory list of goods.
2. Must prepare an entry recognizing the transitional input VAT credit
in the accounting books.
Transitional Input VAT xx
Beginning Inventory xx
2. REGULAR INPUT VAT
- 12% VAT paid on domestic purchases and importation

SOURCE TIMING OF CREDIT


Purchase of goods or properties In the month of purchase
Purchase of services In the month paid
Importation of goods In the month VAT is paid
Purchase of depreciable capital
goods or properties:
-General treatment In the month of purchase
-When the monthly aggregate Amortized over useful life in months or 60
acquisition cost exceeds P 1M months, whichever is shorter (Deferred
Input VAT)
Allowed until Dec. 31, 2021
After such date – taxpayers w/ unutilized
input VAT shall be allowed to apply the
same as scheduled until fully utilized
Purchase of non-depreciable Not creditable (RR12-2012)
vehicles and on maintenance
incurred thereon
2. REGULAR INPUT VAT

Special Rules on Input Tax Credit


1. Non-depreciable vehicles
Rules on deductibility of depreciation expense:
a. Only one vehicle for land transport is allowed for the use of an official
or employee, the value of which should not exceed P2.4M.
b. No depreciation shall be allowed to yachts, helicopters, airplanes, &/or
aircrafts, and land vehicles w/c exceed the P2.4M threshold, unless
taxpayer’s main line of business is transport operation or lease of
transport equipment and the vehicles are used in said operations
c. The purchase must be substantiated with sufficient evidence (i.e. OR)
d. The direct connection or relation of the vehicles to the development,
operation &/or conduct of the trade or business of profession must be
substantiated.
Nonconformance – non-depreciable for income tax purposes
2. REGULAR INPUT VAT

Special Rules on Input Tax Credit

2. Construction in progress
- Creditable upon payment of each progress billings of the contractor
- Neither credited upon completion nor amortized

3. Purchase of real property on installment


- claimable: Same period as the seller recognizes Output VAT

4. Purchase of goods or properties deemed sold


- Claimable: Output VAT on goods or properties purchased
4. PRESUMPTIVE INPUT VAT

 For persons or firms engaged in the Sa MaMi Co PaRe:


• Processing of sardines, mackerel, and milk
• Manufacturing of cooking oil, packed noodle based instant meals, and
refined sugar

 4% of the gross value in money of their purchases of primary agricultural


products used in the productions

 Standard input VAT (amount to be claimed) xx


Less: Actual input VAT (amount allowable) xx
Gain or deduction to cost or expenses (loss) xx
5. STANDARD INPUT VAT

 Sale of goods or services to the government or any of its political subdivisions,


instrumentalities or agencies, including GOCCs

VAT registered seller


Presumed VAT Payable = 5% Final withholding VAT
(Creditable withholding VAT) based on gross payment

Non-VAT registered seller


3% final (creditable) percentage tax withheld

Additional provision:
Beginning January 1, 2021, the VAT withholding system shall shift from
final to a creditable system.

Not be subject to the final withholding tax system - payments for


purchases of goods and services arising from projects funded by Official
Development Assistance (ODA)

 Standard input VAT: 7% (12% - 5%) of the sales


Sales To Government & GOCCs: JOURNAL ENTRY (old)

 Purchase xx
Actual Input VAT xx
AP / Cash xx

 Cash/AR xx
Final VAT withheld(5%) xx
Sales xx
Output VAT xx

 Output VAT xx
Income & Expense summary (loss) xx
Final VAT withheld xx
Actual input VAT xx
Income & Expense summary (gain) xx
6. INPUT VAT CARRY-OVER

 Output VAT xx
Less: Input VAT xx
VAT Payable (xx)

 Rules:
1. Prior quarter – deductible in the first month of the current quarter
2. First month of the quarter – deductible in the 2nd month of the
quarter
3. Second moth of the quarter – not deductible to the 3rd month of the
quarter
4. Prior quarter – deductible in the quarterly balance of the current
quarter
6. INPUT VAT CARRY-OVER

 Excluded:
1. Advanced VAT w/c have been applied for a tax credit certificate
(TCC)
2. Input VAT attributable to zero-rated claim w/c have been applied for
a refund or TCC
3. Input VAT from zero-rated sales that expired after the 2-year
prescriptive period
CLAIMING OF CREDITABLE INPUT VAT (zero-rated sales)

YES Claim? NO

Tax Refund Tax Credit (default)


Certificate (TCC) Credited against Output
VAT– end of month

Cash xx Prepaid tax xx Output VAT xx


Input VAT xx Input VAT xx Input VAT xx
To claimed receipt of To record receipt of To close input VAT to
Input VAT refund TCC output VAT
Granting Refund or Issuing TCC by the Commissioner

- w/in 120 (90) days from date of submission of complete documents


- The granting of tax credit instead of refund is removed

Additional provision:
Should the Commissioner find that the grant of refund is not proper, the
Commissioner must sate in writing the legal and factual basis for denial.

Failure of the Commissioner to act on the application within the period prescribed
is deemed a denial of the application (deleted)

Failure on the part of any official, agent, or employee of the BIR to act on the
application w/in 90 days shall be punishable under Section 269 of the Tax
Code (administrative fine and imprisonment).
RULES ON CLAIM OF INPUT TAX CREDIT

1. Specific Identification – input VAT can be traced to a particular sales


transaction is credited against the output VAT of such sales

2. Pro-rata allocation – amount of input tax due or paid cannot be directly


and entirely attributed to any one of the sales shall be allocated
proportionately on the basis of sales

CLAIM FOR REFUND OR TCC


When? w/in 2 years (prescribed w/in 2 years from the close of taxable
quarter when the zero-rated sales were made
Where? Whichever is applicable:
1. BIR,
2. BOI, or
3. One-Stop-Shop and Duty Drawback Center of the DOF
Tax Credit Method

Output VAT xx
Less: Creditable Input VAT xx
Net VAT Payable xx
Less: Tax Credits or Payments xx
Tax Still Payable / (Overpayment) xx
JOURNALIZING

Purchase of goods

Inventory/Purchases xx
Input VAT xx
Accounts Payable/Cash xx

Sales of goods

Cash/Accounts receivable xx Cost of sales xx


Sales xx Inventory xx
Output VAT xx

To close the VAT accounts & set-up the Vat Payable


Input VAT xx
Output VAT xx
VAT due and payable xx

Payment of VAT to BIR


VAT due and payable xx
Cash xx
Types of Sales Output VAT Claimable Input VAT VAT
Payable

Exempt -none- -none- -none-


Deductible against gross
income (partial relief)
Zero-rated Zero Actual (total relief) negative
Sales to 12% of 7% of sales/receipts -none-
government & sales/receipts
GOCCs
Regular 12% of Actual positive
sales/receipts
Exempt Sales vs Zero-Rated Sales

During the month, XYZ Corp. purchased goods invoiced at P350,000 excluding
P42,000 input tax. It exported the goods for $12,00 which is equivalent to P510,000
and incurred P10,000 in expense.

VAT Taxpayer (zero-rated)


Output VAT P 0
Input VAT 42,000
Excess input VAT 42,000
VAT Taxpayer (zero-rated)
Sales P 510,000
Cost of Goods Sold, exclusive of VAT (350,000)
Gross Income 160,000
Deductions (10,000)
Taxable Income 150,000
Corporate income tax rate x 30%
Income tax due P45,000
NON-VAT Taxpayer (exempt)
Sales P 510,000
Cost of Goods Sold, (250K + 42K) (392,000)
Gross Income 118,000
Deductions (10,000)
Taxable Income 150,000
Corporate income tax rate x 30%
Income tax due P32,400
Exempt Importation

1. For Human Consumption:


a. Agricultural or marine food products in original state
b. Livestock and poultry of a kind generally used as, or yielding or
producing foods for human consumption
c. Breeding stock and genetic materials therefore

2. Personal & Household Effects


Conditions:
a. Belong to R returning from abroad or NR intending to resettle in the
Philippines
b. Goods are exempt from customs duties
Exempt Importation

3. Professional Instruments and Implements, Tools of trade, occupation


or employment, Wearing Apparel, Domestic Animal & Personal
Household Effects
Conditions:
a. Belong to persons who come to settle in the Philippines or Filipinos
or their families and descendants who are now residents or citizens of
other countries (overseas Filipinos)
b. For their own use accompanying the person arrival or w/in 90 days
before of after his/her arrival (arriving w/in a reasonable time)
c. in quantities and of the class suitable to the profession, rank or
position of the persons importing said items
d. There must be evidence satisfactory to the Commissioner (BOC - to
be exempt from duties and taxes):
• such persons are actually coming to settle in the Philippines
• the change of residence is bonafide.(deleted)
• that the goods are brought from their former place of abode,
exempt such goods from payment of duties and taxes
e. The importation is not a vehicle, machinery or other equipment used
in the manufacture or merchandise of any kind in commercial quantity
Exempt Importation

4. Books, Newspaper, Magazine, Review or Bulletins


Conditions:
a. Must appear at regular intervals with fixed prices for subscription
b. Sale must not be devoted principally to the publication of paid
advertisements.

5. Fuel, Goods, and Supplies by Persons Engaged in International


Shipping or Air Transport Operations

6. Importation of Cooperatives of direct farm inputs, machineries and


equipment, including their spare parts
Conditions:
a. Cooperative must be an agricultural cooperative duly registered & in
good standing with the Cooperative Development Authority (CDA)
Exempt Importation

7. Transactions exempt under treaty or international agreements to


which Philippines is a signatory

8. Transactions exempt under special laws

Presumption of Vatability

• Importation generally subject to VAT unless proven as exempt


• Burden of proof -taxpayer
Subsequent Sale by Exempt Persons to Non-exempt Persons

• Non-exempt buyer – subject to VAT on importation

Technical Importation

• Sale by Philippine Ecozone-registered enterprise to non-Ecozone


Philippine residents
• Subject to VAT on importation

Treatment of VAT on Importation and Withholding VAT

1. VAT-registered resident purchaser – creditable input VAT


2. Non-VAT resident purchaser – part of cost of purchase of services
(asset or expense, whichever is applicable)
3. Purchaser not engaged in business – merely added to costs of the
importation
TAX RATES ON SERVICES SPECIFICALLY SUBJECT TO PERCENTAGE TAXES

BICAP FLOW

Banks* Gross Non-bank


• Interest Income receipt tax financial intermediaries
- Short-term (maturity ≤ 5 years) 5% 5%
- Long-term (>5 years) 1% 1%
• Other Income except dividends 7% 5%
International carriers 3% on Gross Philippine Billings
Common carriers by land (common 3% on Gross Receipts
carrier’s tax)
Amusement places:
• Boxing 10%
• Professional basketball 15%
• Cockpits, cabarets and clubs 18%
• Jai-alai and race tracks 30%

* Does not apply to income or revenue realized by BSP undertaken in pursuit of its legally
mandated functions (Sec.5, RR 8-2008)
TAX RATES ON SERVICES SPECIFICALLY SUBJECT TO PERCENTAGE TAXES

Sales of stocks through the PSE


• Sale by an investor (Stock transaction ½ of 1% (6/10 of 1%)
tax) of gross selling price
• Initial public offering* (IPO tax) 4% (≤ ¼), 2% (≤ 1/3), 1% (> 1/3)
Franchise grantees Franchise tax
• Gas or water 2% gross receipts
• Television or radio** (gross receipts 3% gross receipts
≤ P10M)
Life Insurance Direct Insurance – 2% total premiums
(premiums tax) collected
Agents of foreign insurance – 4%
Direct insurance from abroad – 5%
Overseas communication – outgoing Overseas communication tax
calls or transmission of message 10% Amount paid for the service
Winnings on horse race and jai-alai
• Straight bets (race or jai-alai) 10% on net winnings
• Combination bets on horse race 4% on net winnings
* # of shares sold vs outstanding shares
** noncancellable VAT registration until dissolution
TAX RATES

Common Carriers Passenger Baggage/Mails or Cargoes


By land 3% Percentage Tax Vatable
By water or seas Vatable Vatable
By air Vatable Vatable

International carriers Sea or air carriers owned by


Domestic Corp Foreign Corp
Passengers Vatable Exempt
Cargoes / baggages Vatable 3% Percentage Tax
TAX RATES

Insurance Life Insurance Non-life Insurance


Direct premiums 2% premium tax Vatable
Re-insurance premiums Exempt Exempt
Insurance commissions Vatable Vatable

EXEMPTS RECEIPTS FROM PROFESSIONAL BOXING (10%):


1. World or Oriental Championship
2. @ least one of the contenders is a Filipino citizen
3. The promoter is a Filipino citizen or a corporation with Filipino citizens
owning 60%
PERCENTAGE TAXES

EXEMPTIONS to overseas communication (10%)


1. Government – including any of its political subdivisions or instrumentalities
2. Diplomatic services – embassies and consular offices of foreign
governments
3. International organizations – those enjoying privileges, exemptions, and
immunities under international agreements
4. News services

• Non-VAT registered persons under Section 109 (BB) – 3% of gross


sales/receipts
VAT INVOICING REQUIREMENTS for VAT and non-VAT transactions

VAT- registered person shall issue at least in duplicate:

a. VAT invoice – goods or properties


b. VAT Official Receipt – services & lease of goods or properties

Using a single receipt

a. With clear breakdown of taxable, exempt and zero-rated, and


b. Showed calculation of VAT

Separate Invoice or receipt

a. If Exempt, with prominently written or printed “VAT-EXEMPT


SALE”
b. If Zero-rated, with prominently written “ZERO-RATED SALE”

For substantiating correct output VAT and claim for refund or TCC for zero-rated
sales.
ACCOUNTING REQUIREMENTS

All persons subject to VAT shall maintain:

a. Regular accounting records


b. Subsidiary sales journal
c. Subsidiary purchase journal
Any person who, in the course of trade or business, sells, barters or
exchanges goods or properties or engages in the sale or exchange of
services:

a. His gross sales or receipts for the past twelve (12) months, other than
those that are exempt under Section 109 (A) to (U), have exceeded the
threshold: or

b. There are reasonable grounds to believe that his gross sales or


receipts for the next twelve (12) months, other than those that are
exempt under Section 109 (A) to (U), will exceed the threshold.
- not later 10 days before the beginning of the calendar quarter
NOTE: The Commissioner of Internal Revenue may, for administrative
reason deny any application for registration

Failure to Pay the Annual Registration Fee of P500 (BIR Form 0605) & Display
the Registration Certificate:
a. Criminal Penalty Imposed - Fine of not more than 1,000 or imprisonment of
not more than 6 months (Sec. 275, NIRC)
b. Amount of compromise P1,000
1. Pay the annual registration fee of P500.00 for every place of business or
establishment that generates sales not later than Jan. 31;

2. Register the books of accounts of the business/occupation/calling,


including practice of profession, before using the same;

3. Register the sales invoices and official receipts as VAT-invoices or VAT


official receipts for use on transactions subject to VAT.

(If there are other transactions not subject to VAT, a separate set of
non-VAT invoices or non-VAT official receipts need to be registered for
use on transactions not subject to VAT);

4. Filing of the monthly and quarterly VAT declaration using BIR Forms
within the prescribed due dates.
5. Submit with the RDO/LTDO having jurisdiction over the taxpayer, w/in the
deadline set, the soft copy of the:

a. Quarterly Schedule of Monthly Sales and Output Tax (if the quarterly
sales > P2,500,000.00), and

a. Quarterly Schedule of Monthly Domestic Purchases and Input Tax/


Schedule of Transactional/Individual Importation ( if the quarterly
purchases > P1,000,000.00)

o Submitted to the BIR’s website through the Reconciliation of Listing for


Enforcement (RELIEF) Data Entry System

o Deadline: on or before the 25th day of the month following the close of the
taxable quarter -- calendar quarter or fiscal quarter
1. If he makes a written application and can demonstrate to the
commissioner's satisfaction that his gross sales or receipts for the following
twelve (12) months, other than those that are exempt under Section 109 (A)
to (U), will not exceed the threshold; or

2. If 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.

Effectivity: from the first day of the following month the cancellation was
approved

Any person who elects to register under optional registration shall not be
allowed to cancel his registration for the next three (3) years
Except: Franchise grantees of radio & TV– noncancellable until
dissolution
• Any person or entity who, in the course of his trade or
business, sells, barters, exchanges, leases goods or properties
and renders services subject to VAT, if the aggregate amount of
actual gross sales or receipts exceed VAT threshold

• A person required to register as VAT taxpayer but failed


to register

• Any person, whether or not made in the course of his


trade or business, who imports goods
1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form No.
2307), if applicable
2. Summary Alphalist of Withholding Agents of Income Payments Subjected to
Withholding Tax at Source (SAWT), if applicable
3. Duly approved Tax Debit Memo, if applicable
4. Duly approved Tax Credit Certificate, if applicable
5. Authorization letter, if return is filed by authorized representative.
1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form No.
2307), if applicable
2. Summary Alphalist of Withholding Agents of Income Payments Subjected to
Withholding Tax at Source (SAWT), if applicable
3. Duly approved Tax Debit Memo, if applicable
4. Duly approved Tax Credit Certificate, if applicable
5. Previously filed return and proof of payment, for amended return
6. Authorization letter, if return is filed by authorized representative.
1. Only one consolidated Monthly VAT Declaration/Quarterly VAT Return shall be
filed covering the results of operation of the head office as well as the branches for all
lines of business subject to VAT.

2. The Quarterly Summary Lists of Sales and Purchases shall be submitted:

 in Compact Disk-Recordable (CDR) following the format provided under Sec.


4.114-3(g) of RR 16-2005 (Consolidated VAT Regulations of 2005), as amended
by RR No. 1-2012 (Requiring the Mandatory Submission of Quarterly Summary
List of Sales and Purchases (SLSP) by All VAT Registered Taxpayer)

 through electronic filing facility for taxpayers under the jurisdiction of the Large
Taxpayers Service (LTS) and those enrolled under the eFPS
1. A surcharge of 25% for:
a. Failure to file any return and pay the amount of tax or installment due on or before the
due date;
b. Unless otherwise authorized by the Commissioner, filing a return with a person or office
other than those with whom it is required to be filed;
c. Failure to pay the full or part of the amount of tax shown on the return, or the full
amount of tax due for which no return is required to be filed on or before the due date;
d. Failure to pay the deficiency tax within the time prescribed for its payment in the notice
of assessment.

2. A surcharge of 50%of the tax or of the deficiency tax, in case any payment has been
made on the basis of such return before the discovery of the falsity or fraud, for:
a. Willful neglect to file the return within the period prescribed by the Code or by rules and
regulations; or
b. In case a false or fraudulent return is willfully made.

3. Unpaid tax - Interest at the rate of 20% per annum, or such higher rate as may be
prescribed by rules and regulations, from the date prescribed for the payment until the
amount is fully paid.

4. Compromise penalty.
– remitted monthly on or before the 10th day the following month after the withholding was made
EXCEPT for taxes withheld for December – filed or paid on or before Jan. 25 next year
- Same procedure with the VAT returns

Attachments Required
1. Alphabetical list of payees using the format prescribed in page 3 (if the same cannot be
accommodated in the return);
2. Authorization letter, if return is filed by the authorized representative;
3. Certificate of Tax Treaty Relief, if applicable;
4. Proof of payment and the return previously filed, for amended return

NOTE: A taxpayer may file a separate return for the head office and for each branch or place
of business/office or a consolidated return for the head office and all the
branches/offices,
EXCEPT large taxpayers where only one consolidated return is required.
VAT: Deadline

Forms Filing Payment


Manual Filing - Not later than the 20th
day following the end of each month

Through eFPS:

2550M Group A - 25 days following the end of Upon filing


month
Group B - 24 days following the e.o.m.
Group C - 23 days following the e.o.m.
Group D - 22 days following the e.o.m.
Group E - 21 days following the e.o.m.

Effective 2023 only quarterly VAT


Within twenty five (25) days following
2550Q
the close of the taxable quarter.
filing.

on or before the 10th day the following


1600 Upon filing
month after the withholding was made
Yes Payment No

Return in triplicate copies


+ required attachments +
payment

Submit to any AAB w/in the Return in triplicate


jurisdiction of the RDO / LTDO + required
attachments
Submit to RCO or
Accomplish & submit BIR- duly Authorized
prescribed deposit slip City or Municipal
Treasurer

Machine validation by bank teller


Submit to
RDO/LTDO/Large
RCO shall Taxpayers
AAB shall stamp “Received” issue a ROR Assistance Division,
and machine validate the return upon payment Collection Agent
FREQUENCY OF PERCENTAGE TAX REPORTING

Percentage Taxpayer Frequency of reporting


Do not exceed VAT threshold and are non-VAT Monthly
registered
Banks, quasi banks and non-bank financial Monthly
intermediaries
Operators of International air and shipping carriers Monthly
Domestic carriers and keepers of garage Monthly
Franchise grantees of gas and water Monthly
Franchise grantees of radio and television Monthly
Life Insurance companies & Agents of foreign Monthly
insurance
Franchise grantees of telephone or telegraphic Quarterly
messages transmitted outside the Philippines
Proprietors, lessees or operators of cockpits, cabarets, Quarterly
night or day club, boxing exhibitions, professional
basketball games, jai-ali & race track
MONTHLY PERCENTAGE TAX RETURN (2551M)
REVISED QUARTERLY PERCENTAGE TAX RETURN (2551Q)
DOCUMENTARY REQUIREMENTS

1. BIR Form 2551Q - Quarterly Percentage Tax Return Form

2. Duly issued Certificate of Creditable Tax Withheld at Source (BIR Form


2307), if applicable

3. Duly approved Tax Debit Memo, if applicable

4. For amended return, proof of payment and the return previously filed

5. Authorization letter, if filed by an authorized representative

6. Copy of Certificate of Registration issued by CDA for cooperatives, and


from the National Electrification Administration for electric cooperatives
BIR Form 2552 - Percentage Tax Return for Transactions Involving Shares
of Stocks Listed and Traded Through The Local Stock Exchange or
Through Initial and/or Secondary Public Offering

Who are required to file?

1. Every stock broker who effected a sale, barter or exchange of shares of


stock listed and traded through the local stock exchange other than the sale
by a dealer in securities, which tax shall be paid by the seller/transferor

2. A corporate issuer, engaged in the sale, exchange or other disposition


through Initial Public Offering (IPO) of shares of stock in closely-held
corporations

3. A stock broker who effected a sale, exchange or other disposition through


secondary public offering of shares of stock in closely-held corporations
BIR Form 2552 - Percentage Tax Return for Transactions Involving Shares
of Stocks Listed and Traded Through The Local Stock Exchange or
Through Initial and/or Secondary Public Offering

Documentary Requirements

1. BIR Form 2552 - Percentage Tax Return for Transactions Involving


Shares of Stocks
2. Duly issued Certificate of Creditable Tax Withheld at Source (BIR Form
2307), if applicable
3. Proof of Exemption for transactions not subject to tax, if applicable
4. Duly approved Tax Debit Memo, if applicable
5. For amended return, proof of payment and the return previously filed
6. Authorization letter, if filed by an authorized representative

Note: Aside from 2552 - required to submit a true and complete return to the Secretary of
the Stock Exchange of which he is a member, containing:
• a declaration of all transactions effected through him during the preceding week and
• of taxes collected by him and turned over to the BIR.
BIR Form 2552 - Percentage Tax Return for Transactions Involving Shares
of Stocks Listed and Traded Through The Local Stock Exchange or
Through Initial and/or Secondary Public Offering
BIR FORM No. 1600 WP – Remittance Return of % Tax on Winnings &
Prizes Withheld by Race Track Operators
PERCENTAGE TAX: Deadline

Forms Filing Payment


Within 20 days from the date the tax
1600WP upon filing
was deducted and withheld
Manual Filing - Not later than the 20th
day following the end of each month

Through eFPS:
upon filing
2551M Group A - 25 days following the end of
month
Group B - 24 days following the e.o.m.
Group C - 23 days following the e.o.m.
Group D - 22 days following the e.o.m.
Group E - 21 days following the e.o.m.
Within 25 days after the end of each Percentage tax is now filed & paid
2551Q
taxable quarter quarterly.
PERCENTAGE TAX: Deadline

Forms Filing Payment


• sale of shares of stocks listed and
traded through PSE– within 5
banking days from the date of
collection

• shares of stocks sold or exchanged


through IPO- within 30 days from
2552 Upon filing
the date of listing in the PSE

• shares of stocks sold or exchanged


through secondary public offering -
within 5 banking days from the date
of collection
By the CIR or his authorized representatives

• For a VAT-registered persons


a. Failure to issue receipts or invoices
b. Failure to file VAT return
c. Understatement of taxable sales or receipt by 30% or more of the
correct one for the taxable quarter

• Failure to any person to register as a taxpayer as required

Duration of temporary closure:: not less than 5 days and


shall be lifted ONLY upon compliance prescribed by the Commissioner in
the closure order.

Bontuyan, Kimberly

Ibo, Ivy Janine

Trocio, Elaine