bir notes (edited)

7/24/2019 Bir Notes (Edited)

http://slidepdf.com/reader/full/bir-notes-edited 1/68

SOURCE: BIR Website

As non-resident earning income in the Philippines, hat do i need to !no" As an individual

•

•

• What are my tax liabilities?• How do I pay and fle my income tax return?

• List o Philippine source o income subject to fnal withholdintax

As a orein corporation?

•

•

• What are my tax liabilities?

• How do I pay and fle my income tax return?

• List o Philippine source o income

Application and claims #nder the ta$ treaties%

I a nonresident has income source in the Philippines and is a resident in anothercountry! it may be liable to pay tax in both countries under their tax laws" #o avoid$%ouble #axation$ &%#' in this situation! the Philippines has neotiated %# treaties with() countries" A nonresident in another country with which the Philippines has a %#treaty may be able to claim exemption or partial relie rom the Philippines tax oncertain types o income rom Philippines sources" #he precise conditions o exemptionor relie can be ound in the text o the relevant treaty"

*elow is a uide that will ive you an overview o %ouble #axation +elie claims!mainly by nonresident with Philippine income sources , who can claim and how toclaim! and the types o income covered by the treaties"

• Who can appl& 'or (a$ (reat& Relie' Application )((RA*"

-on,resident Individuals and -on,resident .orporations or their duly authori/edrepresentative who are income recipients rom the Philippines and whose country o residents has an e0ective tax treaty with the Philippines"

• What are the t&pe o' Philippine income ma&be s#b+ect o' pre'erential

ta$ rateand or ta$ e$empt #nder the ( treat&"a" Preerential tax rates1%ividends! Interest! +oyalties and 2hippin and Air #ransport"b" #ax 3xempt1%ependin on the provisions o the %#A! you may claim the benefts o an exemptionrom the tax on income or personal services! teachers! researchers! artistes!athletes! students! trainees! directors ees! pensions! overnment service! ains romthe sales o shares4alienation o property and independent personal services not

rendered more than 56( days" • Where to appl& ((RA"

All tax treaty relie application shall only be submitted to and received by theInternational #ax A0airs %ivision &7I#A%7'

Wor!ing o#tside the Philippine%

A" What do i need to 8now about my taxation i I am wor8in outside the Philippines? #axation o 9orein 2ource Income

*" #axation outside the Philippine source o income

:enerally! income by a resident rom employment4 or busines income rom oreinsource is taxed on its worldwide income" However! you may wish to claim the %ouble

#axation Areement beneft that a Philippine tax resident has with our tax treatypartner to enjoy the reduced tax rate or a tax exemption o orein source income inthat orein country"

#o avail o the this beneft! you need to submit the .ertifcate o +esidency &.;+' tothe orein tax authority to prove that you are a Philippines tax resident"

.o do I appl& 'or a Certi/cate o' Residenc&"

5

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NR-individual%20tax%20liabilities_copy_copy.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/non%20resident%20taxation%20pay%20and%20file.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NR%20individual%20withholding%20tax%20rates.pdf


http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NRFC-%20tax%20liabilties.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NRFC%20pay%20and%20file01.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NRFC%20final%20withholding.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/TAXATION%20OF%20FOREIGN%20SOURCE%20INCOME%20BY%20PHILIPPINE%20TAXPAYERS_copy_copy.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/non%20resident%20taxation%20pay%20and%20file.pdf



http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NRFC-%20tax%20liabilties.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NRFC%20pay%20and%20file01.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NRFC%20final%20withholding.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/TAXATION%20OF%20FOREIGN%20SOURCE%20INCOME%20BY%20PHILIPPINE%20TAXPAYERS_copy_copy.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/NR-individual%20tax%20liabilities_copy_copy.pdf



All applicants must be reistered with the *ureau o Internal +evenue with a reular #ax Identifcation -umber &#I-'" <ou may apply or the issuance o the .;+ at theInternational #ax A0airs %ivision and submit the documentary re=uirement below19or Individual9or .orporation

(A0 1UIE O2 P.I3IPPI2E (A0A(IO2

3AWS

#H3 .;-2#I#>#I;- ;9 #H3PHILIPPI-32 &constitutionallimitations'

5)6 .onstitution available at the*I+ library

;bservance o due process o law 2ection 5! ArticleIII! *ill o +ihts

;bservance o e=ual protection othe laws

2ection 5! ArticleIII! *ill o +ihts

Prohibition aainst imprisonment ornon,payment o poll tax

2ection @! ArticleIII! *ill o +ihts

Prohibition aainst impairment oobliation o contracts

2ection 5! ArticleIII! *ill o +ihts

+e=uirement o uniormity and e=uityin taxation

2ection @6! ArticleBI! Leislative%epartment

Prohibition aainst taxationappropriation or reliious purposes

2ection @)! ArticleBI! Leislative%epartment

Prohibition aainst taxation oreliious! charitable and educationalentities&+eliious and charitableinstitutions exempt rom propertytaxes'

2ection @6! ArticleBI! Leislative%epartment

Prohibition aainst taxation o non,stoc8 ! non,proft educationalinstitutions and proprietaryeducational institutions &exempt romproperty and income taxes as well ascustoms duties except incomederived rom business activity notrelated to its educational purpose'

section C! ArticleDBI! 3ducation

-A#I;-AL I-#3+-AL +3B3->3 .;%3;9 5))

#ax .ode

;rani/ation and 9unction o the

*ureau o Internal +evenue

#itle I! -I+. #ax .ode

Income #ax #itle II! -I+. #ax .ode

3state and %onor$s #ax #itle III! -I+. #ax .ode

Balue Added #ax #itle IB! -I+. #ax .ode

;ther Percentae #axes #itle B! -I+. #ax .ode

3xcise #axes #itle BI! -I+. #ax .ode

%ocumentary 2tamp #ax #itle BII! -I+. #ax .ode

+emedies #itle BIII! -I+. #ax .ode

.ompliance +e=uirements #itle ID! -I+. #ax .ode

2tatutory ;0enses and Penalties #itle D! -I+. #ax .ode

Allotment o Internal +evenue #itle DI! -I+. #ax .ode

;versiht .ommittee #itle DII! -I+. #ax .ode

+epealin Provisions #itle DIII! -I+. #ax .ode

9inal Provisions #itle DIB! -I+. #ax .ode

Annexes #ax .ode

#A+I99 E .>2#;F2 .;%3 & #axes on .ustoms Website available at the

@

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/Documentary%20Requirements%20for%20Certificate%20of%20Domicile%20for%20INDIVIDUALS.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/Documentary%20Requirements%20for%20Certificate%20of%20Domicile%20for%20CORPORATIONS.pdf

http://www.bir.gov.ph/index.php/tax-code.html
















http://customs.gov.ph/

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/Documentary%20Requirements%20for%20Certificate%20of%20Domicile%20for%20INDIVIDUALS.pdf

http://www.bir.gov.ph/images/bir_files/international_tax_affairs/Documentary%20Requirements%20for%20Certificate%20of%20Domicile%20for%20CORPORATIONS.pdf

















http://customs.gov.ph/



Importations' *I+ library

L;.AL :;B3+-F3-# #ADA#I;- %IL: Website available at the*I+ library

Local :overnment #axation *oo8 II! #itle I

:eneral Provisions *oo8 II! #itle I!

.hapter I

2pecifc Provisions on the #axin and;ther +evenue,+aisin Powers oLocal :overnment >nits

*oo8 II! #itle I!.hapter II

Provinces *oo8 II! #itle I!.hapter II! Art" 5

Funicipalities *oo8 II! #itle I!.hapter II! Art" @

.ities *oo8 II! #itle I!.hapter II! Art" (

*aranays *oo8 II! #itle I!.hapter II! Art" C

.ommon +evenue +aisin Powers *oo8 II! #itle I!.hapter II! Art" G

.ommunity #ax *oo8 II! #itle I!.hapter II! Art"

.ollection o #axes *oo8 II! #itle I!.hapter III

.ivil +emedies or .ollection o+evenues

*oo8 II! #itle I!.hapter IB

Fiscellaneous Provisions *oo8 II! #itle I!.hapter B

#axpayer$s +emedies *oo8 II! #itle I!.hapter BI

+eal Property #axation *oo8 II! #itle II

:eneral Provisions *oo8 II! #itle II!.hapter I

Appraisal and Assessment o +ealProperty

*oo8 II! #itle II!.hapter II

Assessment Appeals *oo8 II! #itle II!.hapter III

Imposition o +eal Property #ax *oo8 II! #itle II!.hapter IB

2pecial Levies on +eal Property *oo8 II! #itle II!.hapter B

.ollection o +eal Property #ax *oo8 II! #itle II!.hapter BI

%isposition o Proceeds *oo8 II! #itle II!.hapter BII

2pecial Provisions *oo8 II! #itle II!.hapter BIII

2hare o Local :overnment >nits inthe Proceeds o the -ational #axes

*oo8 II! #itle III

Allotment o Internal +evenue *oo8 II! #itle III!.hapter I

2hare o Local :overnment >nits inthe -ational Wealth

*oo8 II! #itle III!.hapter II

2P3.IAL LAW2

#ax law in the Philippines covers national and local taxes" -ational taxes reer tonational internal revenue taxes imposed and collected by the national overnmentthrouh the *ureau o Internal +evenue &*I+' and local taxes reer to those imposedand collected by the local overnment" #he #ax .ode o 5))! +evenue Issuances and*I+ +ulins pertainin to national taxes are posted at the *I+ website"

(

http://www.dilg.gov.ph/

http://www.bir.gov.ph/


http://www.bir.gov.ph/



2ational (a$ 3a

I% 4567 Constit#tion #he 5)6 Philippine .onstitution sets limitations on the exercise o the power to tax"

#he rule o taxation shall be uniorm and e=uitable" #he .onress shall evolve aproressive system o taxation" &Article BI! 2ection @6! pararaph 5'

All money collected on any tax levied or a special purpose shall be treated as aspecial und and paid out or such purpose only" I the purpose or which a specialund was created has been ulflled or abandoned! the balance! i any! shall betranserred to the eneral unds o the :overnment" &Article BI! 2ection @)!pararaph ('

#he .onress may! by law! authori/e the President to fx within specifed limits! andsubject to such limitations and restriction as it may impose! tari0 rates! import andexport =uotas! tonnae and wharae dues! and other duties or imposts within theramewor8 o the national development proram o the :overnment &Article BI!2ection @6! pararaph @' #he President shall have the power to veto any particularitem or items in an appropriation! revenue or tari0 bill! but the veto shall not a0ectthe item or items to which he does not object" &Article BI! 2ection @! secondpararaph'

#he 2upreme .ourt shall have the power to review! revise! reverse! modiy or armon appeal or certiorari! as the law or the +ules o .ourt may provide! fnal judmentsand orders o lower courts in x x x all cases involvin the leality o any tax! impost!assessment! or toll or any penalty imposed in relation thereto" &Article BIII! 2ection G!pararaph'

#ax exemptions are limited to those ranted by law" However! no law rantin anytax exemption shall be passed without the concurrence o a majority o all themembers o the .onress" &Article BI! 2ection @6! par" C'" #he .onstitution expresslyrants tax exemption on certain entities4institutions such as &5' charitableinstitutions! churches! parsonaes or convents appurtenant thereto! mos=ues! andnonproft cemeteries and all lands! buildins and improvements actually! directly andexclusively used or reliious! charitable or educational purposes &Article BI! 2ection@6! pararaph ('J &@' non,stoc8 non,proft educational institutions used actually!directly and exclusively or educational purposes" &Article DBI! 2ection C&(''

In addition to national taxes! the .onstitution provides or local overnment taxation"&Article D! 2ection G' &Article D! 2ection ' Parenthetically! the Local :overnment.ode provides that all local overnment units are ranted eneral tax powers! as wellas other revenue,raisin powers li8e the imposition o service ees and chares! inaddition to those specifcally ranted to each o the local overnment units" *ut nosuch taxes! ees and chares shall be imposed without a public hearin havin been

held prior to the enactment o the ordinance" #he levy must not be unjust excessive!oppressive! confscatory or contrary to a declared national economic policy &2ection56 and 56' 9urther! there are common limitations to the rant o the power to taxto the local overnment! such that taxes li8e income tax! documentary stamp tax!etc" cannot be imposed by the local overnment"

II% 3as #he basic source o Philippine tax law is the -ational Internal +evenue Law! whichcodifes all tax provisions! the latest o which is embodied in +epublic Act -o" 6C@C&K#he #ax +eorm Act o 5))'" It amended previous national internal revenuecodes! which was approved on %ecember 55! 5))" A copy o the #ax +eorm Act o5))! which too8 e0ect on Manuary 5! 5))6! can be ound here"

Local taxation is treated separately in this :uide" #here are! however! special lawsthat separately provide special tax treatment in certain situations" &2ee attachedmatrix on special laws'

III% (reaties #he Philippines has entered into several tax treaties or the avoidance o doubletaxation and prevention o fscal evasion with respect to income taxes" At present!there are (5 Philippine #ax #reaties in orce" .opies are available at the *I+ Library

C





and the International #ax A0airs %ivision o the *I+! which is under the %eputy.ommissioner or Leal and Inspection :roup"

#he Philippine #reaty 2eries! edited and annotated by Haydee <orac and published byLaw Publishin House! >niversity o the Philippines! is available in seven &' volumes!coverin the years 5)CC to 5)6 " #he Philippine #reaty Index! by *enjamin %omino!

covers the years 5)6 to 5)6@" A copy o the Philippine #reaty Index is available inthe %epartment o 9orein A0airs &%9A' Library" #hese publications contain treatiesentered into by the Philippines" #ax privilees and exemptions ranted under treatiesto which the Philippines is a sinatory are reconi/ed under Philippine tax law".opies o treaties entered into by the Philippines with other countries and4orinternational orani/ations! rom 5)6( up to the present! are available at the %9ALibrary"

I8% Administrati9e aterial #he 2ecretary o 9inance! upon the recommendation o the .ommissioner!promulates needul rules and reulations or the e0ective enorcement o theprovisions o the #ax .ode &2ection @CC! #ax .ode o 5))'" #he .ommissioner o Internal +evenue! however! has the exclusive and oriinal power to interpret theprovisions o the #ax .ode! but subject to review by the 2ecretary o 9inance"

Administrative issuances which may be relied upon in interpretin the provisions o the #ax .ode! which are sined by the 2ecretary o 9inance! or the .ommissioner o Internal +evenue! or his duly authori/ed representative! come in the orm o +evenue+eulations! +evenue Femorandum ;rders! +evenue Femorandum +ulins! +evenueFemorandum .irculars! +evenue Femorandum +ulins! and *I+ +ulins"

+evenue +eulations &++s' are issuances sined by the 2ecretary o 9inance! uponrecommendation o the .ommissioner o Internal +evenue! that speciy! prescribe ordefne rules and reulations or the e0ective enorcement o the provisions o the-ational Internal +evenue .ode &-I+.' and related statutes"

+evenue Femorandum ;rders &+F;s' are issuances that provide directives orinstructionsJ prescribe uidelinesJ and outline processes! operations! activities!wor8Nows! methods and procedures necessary in the implementation o statedpolicies! oals! objectives! plans and prorams o the *ureau in all areas o operations! except auditin"

+evenue Femorandum +ulins &+F+s' are rulins! opinions and interpretations o the.ommissioner o Internal +evenue with respect to the provisions o the #ax .ode andother tax laws! as applied to a specifc set o acts! with or without establishedprecedents! and which the .ommissioner may issue rom time to time or thepurpose o providin taxpayers uidance on the tax conse=uences in specifcsituations" *I+ +ulins! thereore! cannot contravene duly issued +F+sJ otherwise!the +ulins are null and void ab initio"

+evenue Femorandum .ircular &+F.s' are issuances that publish pertinent andapplicable portions! as well as amplifcations! o laws! rules! reulations andprecedents issued by the *I+ and other aencies4oces"

*I+ +ulins are the ocial position o the *ureau to =ueries raised by taxpayers andother sta8eholders relative to clarifcation and interpretation o tax laws"+evenue +eulations! +evenue Femorandum ;rders! +evenue Femorandum +ulins!+evenue Femorandum .irculars! +evenue Femorandum +ulins! and *I+ +ulins areound here"

8% Case 3aIn the Philippines! 2upreme .ourt decisions orm part o the law o the land" As such!decisions by the 2upreme .ourt &sc"judiciary"ov"ph' in the exercise o its power to

review! revise! reverse! modiy or arm on appeal or certiorari! as the law or the+ules o .ourt may provide! fnal judments and orders o lower courts casesinvolvin the leality o any tax! impost! assessment! or toll or any penalty imposedin relation thereto are adhered to and reconi/ed as bindin interpretations oPhilippine tax law" .ourt o Appeals and .ourt o #ax Appeals decisions which havebecome fnal and executory are also reconi/ed interpretations o Philippine tax law"

8I% (reatises and other boo!s

G

http://www.bir.gov.ph/index.php/revenue-issuances.html

http://sc.judiciary.gov.ph/

http://www.bir.gov.ph/index.php/revenue-issuances.html

http://sc.judiciary.gov.ph/



#here are no Philippine treatises exclusively devoted to Philippine #ax law but variousPhilippine authors have come up with annotated versions o the #ax .ode" #heseboo8s can be purchased rom +ex *oo8store and .entral Law Publishin! Inc"

8II% PeriodicalsPeriodicals on Philippine tax law are the1

&5' Philippine +evenue 2ervice &copies available in the *I+ Library'! published by the*I+ rom 5)),5)6J&@' Philippine +evenue Mournal &copies available in the *I+ Library' which was bothpublished by the *ureau o Internal +evenue rom 5)) to @J and&(' the #ax Fonthly! published by the -ational #ax +esearch .enter &-#+.' &copiesavailable in the *I+ Library and the -#+.'"

8III% 3ocal 1o9ernment (a$ 3aLocal overnment taxation in the Philippines is based on the constitutional rant o the power to tax to the local overnments"Local taxes may be imposed! as the .onstitution rants! to each local overnmentunit! the power to create its own sources o revenues and to levy taxes! ees! andchares which shall accrue to the local overnments &Article D! 2ection G'" Withrespect to national taxes! local :overnment units shall have a just share! asdetermined by law! in the national taxes which shall be automatically released tothem &Article D! 2ection '"

However! certain taxes! such as the ollowin! may not be imposed by localovernment units1 &2ection 5((! Local :overnment .ode and #ax Law and

Murisprudence by Bitu E Acosta! copyriht @'

&5' Income tax! except when levied on ban8s and other fnancial institutionsJ&@' %ocumentary stamp taxJ&(' #axes on estates! inheritance! its! leacies and other ac=uisitions mortis causa!except as otherwise provided in the Local :overnment .ode &.ode' &except taxeslevied on the transer o real property ownership under 2ection 5(G! and 2ection 5G5o the .ode'J&C' .ustoms duties! reistration ees o vessels &except license ees imposed under2ection 5C)! and 2ection 5G5 o the .ode'! wharae on wharves! tonnae dues andall other 8inds o customs ees! chares and dues except wharae on wharvesconstructed and maintained by the local overnment unit concernedJ&G' #axes! ees! chares and other impositions upon oods carried into or out o! orpassin throuh! the territorial jurisdictions o local overnments in the uise o chares or wharae! tolls or brides or otherwise! or other taxes in any ormwhatever upon such oods or merchandiseJ&' #axes! ees or chares on aricultural and a=uatic products when sold bymarinal armers or fshermenJ&' #axes on business enterprises certifed by the *oard o Investments as pioneer ornon,pioneer or a period o six and our years! respectively! rom the date o reistrationJ

&6' 3xcise taxes on articles enumerated under the -ational Internal +evenue .odeand taxes! ees! or chares on petroleum products! but not a tax on the business o importin! manuacturin or producin said products &Patron vs" Pililla! 5)6 2.+A 6@'J&)' Percentae tax or value,added tax on sales! barters or exchanes o oods orservices or similar transactions thereon &but not fxed raduated taxes on ross salesor on volume o production'J&5' #axes on the ross receipts o transportation contractors and persons enaedin the transportation o passeners or reiht by hire and common carriers by air!land or water except as provided by the .odeJ&55' #axes on premiums paid or reinsurance or retrocessionJ&5@' #axes! ees or chares or the reistration o motor vehicles and or the issuanceo all 8inds o licenses or permits or the drivin thereo! except tricyclesJ&5(' #axes! ees! or other chares on Philippine products actually exported except as

provided by the .ode &the prohibition applies to any local export tax! ee! or levy onPhilippine export products but not to any local tax! ee! or levy that may be imposedon the business o exportin said products'J&5C' #axes! ees or chares on duly orani/ed and reistered .ountryside and*aranay *usiness 3nterprises &+"A" -o" 65' and on cooperatives &+"A" -o" )(6'Jand&5G' #axes! ees or chares o any 8ind on the -ational :overnment! its aencies andinstrumentalities! and local overnment units &2ection 5((! L:.'



#he Local :overnment .ode &www"comelec"ov"ph' or &www"dil"ov"ph4' containsprovisions on the scope and limitation on the exercise o local overnment taxinpower"

(A0-;REE E0C.A21ES O; PROPER(IES PURSUA2( (O SEC(IO2 <=)C*)>* O;(.E 2IRC O; 4557

#ax,ree exchanes reer to those instances enumerated in 2ection C&.'&@' o the-ational Internal +evenue .ode &-I+.' o 5)) that are not subject to Income #ax!.apital :ains #ax! %ocumentary 2tamp #ax and4or Balue,added #ax! as the case maybe"

In eneral! there are two 8inds o tax,ree exchane1&5' transer to a controlled corporationJ and! &@' merer or consolidation"

In the frst instance! no ain or loss shall be reconi/ed i property is transerred to acorporation by a person in exchane or stoc8 or unit o participation in suchcorporation o which as a result o such exchane said person! alone or toether withothers! not exceedin our persons! ains control o said corporation"

In the second instance! no ain or loss shall be reconi/ed i in pursuance o a plan o merer or consolidation ,,, &a' a corporation! which is a party to a merer orconsolidation! exchanes property solely or stoc8 in a corporation! which is a partyto the merer or consolidationJ or! &b' a shareholder exchanes stoc8 in acorporation! which is a party to the merer or consolidation! solely or the stoc8 o another corporation also a party to the merer or consolidationJ or! &c' a securityholder o a corporation! which is a party to the merer or consolidation! exchaneshis securities in such corporation! solely or stoc8 or securities in another corporation!a party to the merer or consolidation"

RE8IEW O; O; O2 BIR A8ERSE RU3I21S

escription"All rulins and issuances o the .ommissioner o Internal +evenue that pertain to theimplementation and interpretation o the #ax .ode o 5)) and other tax laws arevalid" However! the 2ecretary o 9inance has the power to arm! revise! modiy or setaside rulins and issuances o the *ureau o Internal +evenue &*I+' concernin suchimplementation and application o the provisions o the #ax .ode o 5)) and othertax laws"

#he exercise o such power under 2ection C o the #ax .ode o 5))! however! doesnot cover disputed assessments! reunds o internal revenue taxes! ees or otherchares! and penalties imposed in relation thereto! or other matters arisin under the

#ax .ode or other laws or portions thereo administered by the *I+" In these

instances! the .ourt o #ax Appeals has the exclusive appellate jurisdiction pursuantto the second pararaph o the same 2ection C"-either shall the power be exercised to apply to rulins that are deemed void abinitio because they contradict duly issued +evenue +eulations! +evenueFemorandum ;rders! +evenue Femorandum +ulins! and +evenue Femorandum.irculars"It is important to note that only the fnal adverse decision o the .ommissioner maybe brouht to the %epartment o 9inance &%;9' or review"-otwithstandin! the 2ecretary o 9inance may review motu proprio the rulins andissuances o the *ureau o Internal +evenue concernin such implementation andapplication o the provisions o the #ax .ode o 5)) and other tax laws"

3egal Re'erence"

9irst pararaph o Section <! tax .ode o 5))

Period to ;ile AppealWithin thirty &(' days rom the date o receipt o the adverse rulin o the.ommissioner"

http://www.comelec.gov.ph/


http://www.comelec.gov.ph/




ARE REA3 PROPER(IES SO3 U2ER COU2I(? OR(1A1E PRO1RA(A0AB3E"

escription" #he .ommunity Fortae Proram &.FP' is a mortae fnancin proram o the2ocial Housin 9inance .orporation &2H9.' which assists leally orani/ed

associations o underprivileed and homeless citi/ens to purchase and develop atract o land under the concept o community ownership" #he primary objective o theproram is to assist residents o blihted areas to own the lots they occupy! or wherethey choose to relocate to and eventually improve their neihborhood and homes tothe extent o their a0ordability"

>nder +epublic Act &+A' -o" @)! 8nown as the >rban %evelopment and Housin Acto 5))@! the sale o real property which shall be utili/ed or a sociali/ed housinproject under the .FP is exempt rom the .apital :ains #ax or ordinary Income #axand its correspondin creditable withholdin tax" #he said sale however is subject tothe payment o the %ocumentary 2tamp #ax &%2#'"

3egal Re'erence"Section 45@ o the #ax .ode o 5))"Section >)b* o +A @)J

CAPI(A3 1AI2S (A0

escription.apital :ains #ax is a tax imposed on the ains presumed to have been reali/ed bythe seller rom the sale! exchane! or other disposition o capital assets located in thePhilippines! includin pacto de retro sales and other orms o conditional sale"

;inal Capital 1ains (a$ 'or Onero#s (rans'er o' Real Propert& Classi/ed asCapital Assets )(a$able and E$empt*

(a$ Rates9or real property , O"

eadlineWithin ( days ater each sale! exchane! transer or other disposition o realproperty"

Capital 1ains (a$ 'or Onero#s (rans'er o' Shares o' Stoc!s 2ot (raded(hro#gh the 3ocal Stoc! E$change

(a$ Rates

9or 2hares o 2toc8s -ot #raded in the 2toc8 3xchane, -ot over P5! , GO, Any amount in excess o P5! , 5O

eadlineWithin ( days ater each sale or disposition o shares o stoc8s or real property" Incase o installment sale! the return shall be fled within ( days ollowin the receipto the frst down payment and within ( days ollowin the subse=uent installmentpayments" ;nly one return shall be fled or multiple transactions within the day"

Ann#al Capital 1ains (a$ 'or Onero#s (rans'er o' Shares o' Stoc!s 2ot(raded (hro#gh the 3ocal Stoc! E$change

(a$ Rates9or 2hares o 2toc8s -ot #raded in the 2toc8 3xchane, -ot over P5! , GO, Any amount in excess o P5! , 5O

eadlineIndividual #axpayers ;n or beore April 5G o each year coverin all stoc8transactions o the precedin taxable year

6



.orporate #axpayers ;n or beore the fteenth &5G' day o the ourth &C' monthollowin the close o the taxable year coverin all transactions o the precedintaxable year

-ote1 9or onerous transer o real property other than capital asset &includin taxable

and exempt'! a creditable withholdin tax based on the ross sellin price4totalamount o consideration or the air mar8et value determined in accordance with2ection &3' o the .ode! whichever is hiher! paid to the seller4owner or the sale!transer or exchane o real property! other than capital asset! shall be imposed uponthe withholdin aent4buyer" &sec" ( &j'! ++ -;" ,@5'

;re#entl& As!ed #estions

5' What is meant by capital asset?.apital asset means property held by the taxpayer &whether or not connected withhis trade or business'! but does not include a' stoc8 in trade o the taxpayer or other property o a 8ind which would properly be

included in the inventory o the taxpayer i on hand at the close o the taxable yearJorb' property held by the taxpayer primarily or sale to customers in the ordinarycourse o his trade or businessJ orc' property used in the trade or business o a character which is subject to theallowance or depreciation provided in subsection &9' o 2ec" (C o the .odeJ ord' real property used in trade or business o the taxpayer"

@' What is meant by ordinary asset?;rdinary asset reers to all properties specifcally excluded rom the defnition o capital assets under 2ec" () &A'&5' o the -I+."

("' What is meant by 72toc8 classifed as .apital Asset7? &2ec @&a' o ++ ,@6'

#his reers to stoc8s and securities held by taxpayers other than dealers in securities"

C"' What is meant by 7%ealer in 2ecurities7? &2ec @&b' o ++ ,@6'%ealer in 2ecurities reers to a merchant o stoc8s or securities! whether anindividual! partnership or corporation! with an established place o business! reularlyenaed in the purchase o securities and the resale thereo to customersJ that isone! who as merchant buys securities and re,sells them to customers with a view tothe ains and profts that may be derived thererom" 7%ealer in securities7 means anyperson who buys and sells securities or his4her own account in the ordinary course o business &2ec" ("C! 2+.'"

G"' What is meant by real property?+eal property shall have the same meanin attributed to that term under Article C5G

o +epublic Act -o" (6! otherwise 8nown as the K.ivil .ode o the Philippines"

"' What does a real estate dealer reer to?A real estate dealer reers to any person enaed in the business o buyin andsellin or exchanin real properties on his own account as a principal and holdinhimsel out as a ull or part,time dealer in real estate"

"' What does a real estate developer reer to?+eal estate developer reers to any person enaed in the business o developinreal properties into subdivisions! or buildin houses on subdivided lots! orconstructin residential or commercial units! townhouses and other similar units orhis own account and o0erin them or sale or lease"

6"'What does a real estate lessor reer to?+eal estate lessor reers to any person enaed in the business o leasin or rentinreal properties on his own account as a principal and holdin himsel out as a lessoro real properties bein rented out or o0ered or rent"

)"' Who are considered enaed in the real estate business? #axpayers who are considered enaed in the real estate business reer collectivelyto real estate dealers! real estate developers and4or real estate lessors" A taxpayerwhose primary purpose o enain in business! or whose Articles o Incorporation

)



states that its primary purpose is to enae in the real estate business shall bedeemed to be enaed in the real estate business"

5"' Who are considered not enaed in the real estate business? #axpayers who are considered not enaed in the real estate business reer topersons other than real estate dealers! real estate developers and4or real estate

lessors"

55"' Who are considered habitually enaed in the real estate business?+eal estate dealers or real estate developers who are reistered with the Housin andLand >se +eulatory *oard &H>L+*' or H>%..

5@"' How can you determine whether a particular real property is a capital asset or anordinary asset?

a' +eal properties shall be classifed with respect to taxpayers enaed in the realestate business as ollows1i' All real properties ac=uired by the real estate dealer shall be considered as ordinaryassets"ii' All real properties ac=uired by the real estate developer! whether developed orundeveloped as o the time o ac=uisition! and all real properties which are held bythe real estate developer primarily or sale or or lease to customers in the ordinarycourse o his trade or business or which would properly be included in the inventoryo the taxpayer i on hand at the close o the taxable year and all real properties usedin the trade or business! whether in the orm o land! buildin! or otherimprovements! shall be considered as ordinary assets"iii' All real properties o the real estate lessor! whether land! buildin and4orimprovements! which are or lease4rent or bein o0ered or lease4rent! or otherwiseor use or bein used in the trade or business shall li8ewise be considered as ordinaryassets"iv' All real properties ac=uired in the course o trade or business by a taxpayerhabitually enaed in the sale o real property shall be considered as ordinary assets"

-ote1 +eistration with the HL>+* or H>%.. as a real estate dealer or developershall be sucient or a taxpayer to be considered as habitually enaed in the sale o real estate"I the taxpayer is not reistered with the HL>+* or H>%.. as a real estate dealer ordeveloper! he4it may nevertheless be deemed to be enaed in the real estatebusiness throuh the establishment o substantial relevant evidence &such asconsummation durin the precedin year o at least six &' taxable real estate saletransactions! reardless o amountJ reistration as habitually enaed in real estatebusiness with the Local :overnment >nit or the *ureau o Internal +evenue! etc"

A property purchased or uture use in the business! even thouh this purpose is laterthwarted by circumstances beyond the taxpayerQs control! does not lose its characteras an ordinary asset" -or does a mere discontinuance o the active use o the

property chane its character previously established as a business property" &2ec (&a'&C'o ++ ,@('

b' In the case o taxpayer not enaed in the real estate business! real properties!whether land! buildin! or other improvements! which are used or bein used or havebeen previously used in trade or business o the taxpayer shall be considered asordinary assets"

c' In the case o taxpayers who chaned its real estate business to a non,real estatebusiness! real properties held by these taxpayer shall remain to be treated asordinary assets"

d' In the case o taxpayers who oriinally reistered to be enaed in the real estate

business but ailed to subse=uently operate! all real properties ac=uired by them shallcontinue to be treated as ordinary assets"

e' +eal properties ormerly ormin part o the stoc8 in trade o a taxpayer enaedin the real estate business! or ormerly bein used in the trade or business o ataxpayer enaed or not enaed in the real estate business! which were later onabandoned and became idle! shall continue to be treated as ordinary assets" Providedhowever! that properties classifed as ordinary assets or bein used in business by a

5



taxpayer enaed in business other than real estate business are automaticallyconverted into capital assets upon showin proo that the same have not been usedin business or more than two years prior to the consummation o the taxabletransactions involvin said properties

' +eal properties classifed as capital or ordinary asset in the hands o the

seller4transeror may chane their character in the hands o the buyer4transeree" #he classifcation o such property in the hands o the buyer4transeree shall bedetermined in accordance with the ollowin rules1i' +eal property transerred throuh succession or donation to the heir or donee whois not enaed in the real estate business with respect to the real property inheritedor donated! and who does not subse=uently use such property in trade or business!shall be considered as a capital asset in the hands o the heir or donee"ii' +eal property received as dividend by the stoc8holders who are not enaed in thereal estate business and who do not subse=uently use such property in trade orbusiness! shall be considered as a capital asset in the hands o the recipients even i the corporation which declared the real property dividends is enaed in real estatebusiness"iii' #he real property received in an exchane shall be treated as ordinary asset in thehands o the case o a tax,ree exchane by taxpayer not enaed in real estatebusiness to a taxpayer who is enaed in real estate business! or to a taxpayer who!even i not enaed in real estate business! will use in business the property receivedin exchane"

' In the case o involuntary transers o real properties! includin expropriations ororeclosure sale! the involuntariness o such sale shall have no e0ect on theclassifcation o such real property in the hands o the involuntary seller! either ascapital asset or ordinary asset as the case may be"

5("' What is the basis in the valuation o property? #he value o the real property will be based on the sellin price! air mar8et value asdetermined by the .ommissioner &/onal value' or the air mar8et value as shown inthe schedule o values o the Provincial or .ity Assessor! whichever is hiher"

I there is no /onal value! the taxable base is whichever is hiher o the ross sellinprice per sales documents or the air mar8et value that appears in the latest taxdeclaration"

I there is an improvement! the 9FB per latest tax declaration at the time o the saleor disposition! duly certifed by the .ity4Funicipal Assessor shall be used" -oadjustments shall be added on the said value! provided that the tax declaration bearsthe upraded air mar8et value o the said property pursuant to 2ection @5) o +"A"-o" 5! otherwise 8nown as the Local :overnment .ode o 5))5 and the lastpararaph o the Local Assessment +eulations -o" 5,)@ dated ;ctober ! 5))@"

In case the tax declaration bein presented was issued three &(' or more years prior

to the date o sale or disposition o the real property! the seller4transeror shall bere=uired to submit a certifcation rom the .ity4Funicipal Assessor whether or not thesame is still the latest tax declaration coverin the said real property" ;therwise! thetaxpayer shall secure its latest tax declaration and shall submit a copy thereo dulycertifed by the said Assessor" &+AF; 5,@5'9or shares o stoc8s! it will be based on the net capital ains reali/ed rom the sale!barter! exchane or other disposition o shares o stoc8s in a domestic corporation!considered as capital assets not traded throuh the local stoc8 exchane"

5C"' What is meant by 7-et .apital :ains7? &2ec @&o' o ++ ,@6'7-et .apital :ain7 means the excess o the ains rom sales or exchanes o capitalassets over the losses rom such sales or exchanes"

5G"' What are the rules or the determination o amount and reconition o ain orloss in the sale! barter! or exchane o shares o stoc8 not traded throuh the Local2toc8 exchane? &2ec &c ' o ++ ,@6'

&A"' %etermination o 2ellin Price" R In determinin the sellin price! the ollowinrules shall apply1&a"5' In the case o cash sale! the sellin price shall be the total consideration perdeed o sale"

55



&a"@' I the total consideration o the sale or disposition consists partly in money andpartly in 8ind! the sellin price shall be sum o money and the air mar8et value o theproperty received"&a"(' In the case o exchane! the sellin price shall be the air mar8et value o theproperty received"&a"C' In case the air mar8et value o the shares o stoc8 sold! bartered! or exchaned

is reater than the amount o money and4or air mar8et value o the propertyreceived! the excess o the air mar8et value o the shares o stoc8 sold! bartered orexchaned over the amount o money and the air mar8et value o the property! i any! received as consideration shall be deemed a it subject to the donor$s taxunder sec" 5 o the #ax .ode! as amended"

&*"' %efnition o 7air mar8et value7 o the 2hares o 2toc8"&b"5' In the case o listed shares which were sold! transerred or exchaned outside o the tradin system and4or acilities o the Local 2toc8 3xchane! the closin price onthe day when the shares are sold! transerred! or exchaned" When no sale is madein the Local 2toc8 3xchane on the day when the Listed shares are sold! transerred!or exchaned! the closin price on the day nearest to the date o sale! transer orexchane o the shares shall be the air mar8et value" 2ec @ o ++ ,@5(&b"@' In the case o shares o stoc8 not listed and traded in the local stoc8 exchanes!the value o the shares o stoc8 at the time o sale shall be the air mar8et value" Indeterminin the value o the shares! the Adjusted -et Asset Fethod shall be usedwhereby all assets and liabilities are adjusted to air mar8et values" #he net o adjusted asset minus the liability values is the indicated value o the e=uity"

#he appraised value o real property at the time o sale shall be the hiher o &5' #he air mar8et value as determined by the .ommissioner! or&@' #he air mar8et value as shown in the schedule o valued fxed by the Provincialand .ity Assessors! or&(' #he air mar8et value as determined by Independent Appraiser"&b"(' In the case o a unit o participation in any association! recreation oramusement club &such as ol! polo! or similar clubs'! the air mar8et value thereo shall be its sellin price or the bid price nearest published in any newspaper orpublication o eneral circulation! whichever is hiher"

&."' %etermination o :ain or Loss rom 2ale or %isposition o 2hares o 2toc8" R #heain rom the sale or other disposition 2toc8" R #he ain rom the sale or otherdisposition o shares o stoc8 shall be the excess o the amount reali/ed thereromover the basis or adjusted basis or determinin ain! and the loss shall be the excesso the basis or adjusted basis or determinin loss over the amount reali/ed" #heamount reali/ed rom the sale or other disposition o property shall be the sum o money received plus the air mar8et value o the property &other than money'received! i any"

5"' What are the applicable tax rates o .apital :ains #ax under the -ational Internal+evenue .ode o 5))?

a' +eal Properties , Ob' 9or 2hares o 2toc8s not #raded in the 2toc8 3xchane! on the net .apital :ains, -ot over P5! , GO, Any amount in excess o P5! , 5O

5"' Who are re=uired to fle the 9inal .apital :ains #ax return?3very person! whether natural or juridical! resident or non,resident! includin estatesand trusts! who sells! transers! exchanes or disposes real properties located in thePhilippines classifed as capital assets! includin pacto de retro sales and other ormso conditional sales or shares o stoc8s in domestic corporations not traded throuhthe local stoc8 exchane classifed as capital assets"

56"' What is the procedure in the flin o 9inal .apital :ains #ax return?

9ile the 9inal .apital :ains #ax return in triplicate &two copies or the *I+ and onecopy or the taxpayer' with the Authori/ed Aent *an8 &AA*' in the +evenue %istrictwhere the seller or transeror is reistered! or shares o stoc8s or where the propertyis located! or real property" In places where there are no AA*! the return will be fleddirectly with the +evenue .ollection ;cer or Authori/ed .ity or Funicipal #reasurer"

5)"' Who4what are considered exempt rom the payment o 9inal .apital :ains #ax?

•

5@



• %ealer in securities! reularly enaed in the buyin and sellin o securities

• An entity exempt rom the payment o income tax under existininvestment incentives and other special laws

• An individual or non,individual exchanin real property solely orshares o stoc8s resultin in corporate control

• A overnment entity or overnment,owned or controlled corporationsellin real property

• I the disposition o the real property is ratuitous in nature

• Where the disposition is pursuant to the .A+P law

@"' Who are conditionally exempt rom the payment o 9inal .apital :ains #ax?-atural persons who dispose their principal residence! provided that the ollowincriteria are met1

•

• #he proceeds o the sale o the principal residence have been ullyutili/ed in ac=uirin or constructin new principal residence withineihteen &56' calendar months rom the date o sale or dispositionJ

• #he historical cost or adjusted basis o the real property sold ordisposed will be carried over to the new principal residence built orac=uiredJ

• #he .ommissioner has been duly notifed! throuh a prescribed return!within thirty &(' days rom the date o sale or disposition o thepersonQs intention to avail o the tax exemptionJ

• 3xemption was availed only once every ten &5' yearsJ and

• #here is no ull utili/ation o the proceeds o sale or disposition" #heportion o the ain presumed to have been reali/ed rom the sale ordisposition will be subject to .apital :ains #ax"

• In case o sale4transer o principal residence! the *uyer4#ransereeshall withhold rom the seller and shall deduct rom the areed sellinprice4consideration the O capital ains tax which shall be deposited in

cash or manaerQs chec8 in interest,bearin account with anAuthori/ed Aent *an8 &AA*' under an 3scrow Areement between theconcerned +evenue %istrict ;cer! the 2eller and the #ranseree! andthe AA* to the e0ect that the amount so deposited! includin itsinterest yield! shall only be released to such #ranseror uponcertifcation by the said +%; that the proceeds o the sale4dispositionthereo has! in act! been utili/ed in the ac=uisition or construction o the 2eller4#ranserorQs new principal residence within eihteen &56'calendar months rom date o the said sale or disposition" #he date o sale or disposition o a property reers to the date o notari/ation o thedocument evidencin the transer o said property" In eneral! the termK3scrow means a scroll! writin or deed! delivered by the rantor!promisor or oblior into the hands o a third person! to be held by the

latter until the happenin o a continency or perormance o acondition! and then by him delivered to the rantee! promise orobliee"

@5"' What is a .ertifcate Authori/in +eistration?.ertifcate Authori/in +eistration &.A+' is a certifcation issued by the.ommissioner or his duly authori/ed representative attestin that the transer andconveyance o land! buildins4improvements or shares o stoc8 arisin rom sale!barter or exchane have been reported and the taxes due inclusive o thedocumentary stamp tax! have been ully paid"With the implementation o the 3lectronic .ertifcate Authori/in +eistration &e.A+'2ystem! the .A+ shall now be electronically enerated"

@@"' What is e.A+ 2ystem?e.A+ stands or 3lectronic .ertifcate Authori/in +eistration" A web,based acilitythat automates the eneration o .A+ with barcode! e.A+ will also enable electroniclin8ae between the *I+ and the Land +eistration Authority" &Participant :uide'e.A+s shall have a validity o one &5' year rom date o issue" 9or other manuallyissued .A+s that are outstandin and not yet presented to the +eister o %eeds! i"e"!.A+s more than one &5' year rom the date o issuance which are due or revalidationand expired .A+s which are more than two &@' years rom the date o issuance! arenot anymore valid or presentation to the +eistry o %eeds" #he said .A+s shall be

5(



replaced with an e.A+ by the concerned +evenue %istrict ;ces or Lare #axpayers%ivisions" A certifcation ee shall be chared or each released e.A+ issued4reprintedater axture o P5G" %ocumentary 2tamp #ax on .ertifcates &2ec 566 o the -I+.o 5))' and the prescribed .ertifcation 9ee o ;ne Hundred Pesos &P5"' under3xecutive ;rder -o" 5) to the taxpayer4authori/ed representative"

23.) How do we determine the fair market value of shares of stocks not tradedthrough the Local Stock Exchange?

In determining the value of the shares the !d"usted #et !sset $ethod shall %e used

where%& all assets and lia%ilities are ad"usted to fair market values. 'he net ofad"usted asset minus the ad"usted lia%ilit& value is the indicated value of the e(uit&.

or *ur*oses of this item the a**raised value of real *ro*ert& at the time of sale

shall %e the highest among the following+ ,a) 'he fair market value as determined %& the -ommissioner or

,%) 'he fair market value as shown in the schedule of values fixed %& therovincial and -it& !ssessors or

,c) 'he fair market value as determined %& Inde*endent !**raiser. ,// #0. 1243)

DOCUMENTARY STAMP TAX

escription%ocumentary 2tamp #ax is a tax on documents! instruments! loan areements andpapers evidencin the acceptance! assinment! sale or transer o an obliation! rihtor property incident thereto"

eadlines #he %ocumentary 2tamp #ax return &*I+ 9orm @' shall be fled in triplicate &twocopies or the *I+ and one copy or the taxpayer' within fve &G' days ater the closeo the month when the taxable document was made sined! issued! accepted or

transerredJ upon remittance by .ollection Aents o collection rom sale o loosestamps" #he %ocumentary 2tamp #ax shall be paid upon flin o the return"

;re#entl& As!ed #estions5' Who are re=uired to fle %ocumentary 2tamp #ax %eclaration +eturn?a' In case o constructive axture o documentary stamps! by the persons ma8in!sinin! issuin! acceptin or transerrin documents! instruments! loan areementsand papers! acceptances! assinments! sales and conveyances o the obliation!riht or property incident thereto wherever the document is made! sined! issued!accepted or transerred when the obliation or riht arises rom Philippine sources orthe property is situated in the Philippines at the same time such act is done ortransaction hadJb' *y usin the web,based 3lectronic %ocumentary 2tamp #ax &e%2#' 2ystem in thepayment4remittance o its4his4her %2# liabilities and the axture o the prescribeddocumentary stamp on taxable documentsJ andc' *y +evenue .ollection Aent! or remittance o sold loose documentary stamps"-ote1 Wherever one party to the taxable document enjoys exemption rom the taximposed! the other party who is not exempt will be the one directly liable to fle%ocumentary 2tamp #ax %eclaration and pay the applicable stamp tax"

@' Where is the %ocumentary 2tamp #ax %eclaration +eturn fled?In the Authori/ed Aent *an8 &AA*' within the territorial jurisdiction o the +%; whichhas jurisdiction over the residence or principal place o business o the taxpayer orwhere the property is located in case o sale o real property or where the .ollectionAent is assined" In places where there is no Authori/ed Aent *an8! the return willbe fled with the +evenue .ollection ;cer or duly authori/ed .ity or Funicipal

#reasurer where the taxpayer$s residence or principal place o business is located orwhere the property is located in case o sale o real property or where the .ollectionAent is assined"

(' What are the documents4papers not subject to %ocumentary 2tamp #ax? &sec" )!++ -o" 5(,@C'

• Policies o insurance or annuities made or ranted by a raternal or benefciarysociety! order! association or cooperative company! operated on the lode

5C



system or local cooperation plan and orani/ed and conducted solely by themembers thereo or the exclusive beneft o each member and not or proft

• .ertifcates o oaths administered by any overnment ocial in his ocialcapacity or ac8nowledement by any overnment ocial in perormance o his ocial duty

• Written appearance in any court by any overnment ocial in his ocial

capacity• .ertifcates o the administration o oaths to any person as to the authenticity

o any paper re=uired to be fled in court by any person or party thereto!whether the proceedins be civil or criminal

• Papers and documents fled in court by or or the national! provincial! city ormunicipal overnments

• Adavits o poor persons or the purpose o provin poverty

• 2tatements and other compulsory inormation re=uired o persons orcorporations by the rules and reulations o the national! provincial! city ormunicipal overnment exclusively or statistical purposes and which arewholly or the use o the *ureau or oce in which they are fled! and not atthe instance or or the use or beneft o the person flin them

• .ertifed copies and other certifcates placed upon documents! instruments

and papers or the national! provincial! city or municipal overnments made atthe instance and or the sole use o some other branch o the national!provincial! city or municipal overnments

• .ertifcates o the assessed value o lands! not exceedin P@ in valueassessed! urnished by the provincial! city or municipal #reasurer to applicantsor reistration o title to land

• *orrowin and lendin o securities executed under the 2ecurities *orrowinand Lendin Proram o a reistered exchane! or in accordance withreulations prescribed by the appropriate reulatory authority1 Provided!however! #hat any borrowin or lendin o securities areement ascontemplated hereo shall be duly covered by a master securities borrowinand lendin areement acceptable to the appropriate reulatory authority!and which areement is duly reistered and approved by the *ureau o Internal +evenue &*I+'

• Loan areements or promissory notes! the areate o which does notexceed #wo hundred fty thousand pesos &P@G!'! or any such amount asmay be determined by the 2ecretary o 9inance! executed by an individual orhis purchase on installment or his personal use or that o his amily and notor business or resale! barter or hire o a house! lot! motor vehicle! applianceor urniture1 Provided! however! #hat the amount to be set by the 2ecretary o 9inance shall be in accordance with a relevant price index but not to exceedten percent &5O' o the current amount and shall remain in orce at least orthree &(' years

• 2ale! barter or exchane o shares o stoc8 listed and traded throuh the localstoc8 exchane &+"A )C6'

•

Assinment or transer o any mortae! lease or policy o insurance! or therenewal or continuance o any areement! contract! charter! or any evidenceo obliation or indebtedness! i there is no chane in the maturity date orremainin period o coverae rom that o the oriinal instrument"

• 9ixed income and other securities traded in the secondary mar8et or throuhan exchane"

• %erivatives1 Provided! #hat or purposes o this exemption! repurchaseareements and reverse repurchase areements shall be treated similarly asderivatives

• Interbranch or interdepartmental advances within the same leal entity

• All orebearances arisin rom sales or service contracts includin credit cardand trade receivables1 Provided! #hat the exemption be limited to thoseexecuted by the seller or service provider itsel"

• *an8 deposit accounts without a fxed term or maturity• All contracts! deeds! documents and transactions related to the conduct o

business o the *an8o 2entral n Pilipinas• #ranser o property pursuant to 2ection C&.'&@' o the -ational Internal

+evenue .ode o 5))! as amended• Interban8 call loans with maturity o not more than seven &' days to cover

defciency in reserves aainst deposit liabilities! includin those between oramon ban8s and =uasi,ban8s

5G



C' What are the implications o ailure to stamp taxable documents?• #he untaxed document will not be recorded! nor will it or any copy thereo or

any record o transer o the same be admitted or used in evidence in courtuntil the re=uisite stamp or stamps have been axed thereto and cancelled

• -o notary public or other ocer authori/ed to administer oaths will add his

jurat or ac8nowledment to any document subject to %ocumentary 2tamp #axunless the proper documentary stamps are axed thereto and cancelled"

G' What is 3lectronic %ocumentary 2tamp #ax &e%2#' 2ystem? &sec" G &5'! ++ -o" ,@)'

#he e%2# is a web,based application created or taxpayers and the *I+ that iscapable o axin a secured documentary stamp on the taxable documents asdefned under the appropriate provisions under #itle BII o the -ational Internal+evenue .ode o 5))! as amended! thru the use o a computer unit! any laserprinter with at least 5@ dpi resolution! and Internet 3xplorer " It is also capable o providin a (,layer watermar8 on stamps or added security"

' Is %2# Law applicable on 3lectronic %ocuments? &sec" 5! ++ -o" 5(,@C'

#he %2# rates as imposed under the .ode! as amended by +"A" )@C( shall beapplicable on all documents not otherwise expressly exempted by the said law!notwithstandin the act that they are in electronic orm" As provided or by +"A"6)@! otherwise 8nown as the 3lectronic .ommerce Act! electronic documents arethe unctional e=uivalent o a written document under existin laws! and the issuancethereo is thereore tantamount to the issuance o a written document! and thereoresubject to %2#"

' What are the inclusions o a debt instrument? &sec" G! ++ -o" 5(,@C'K%ebt Instrument shall mean instruments representin borrowin and lendintransaction includin but not limited to1

•

• debentures!

• certifcates o indebtedness!• due bills!

• bonds!

• loan areements! includin those sined abroad wherein the object o the contract is located or used in the Philippines!

• instruments and securities issued by the overnment or any o itsinstrumentalities!

• deposit substitute debt instruments!

• certifcates or other evidences o deposits that are drawininstrument sinifcantly hiher than the reular savins deposit ta8ininto consideration the si/e o the deposit and the ris8s involved!

• certifcates or other evidences o deposits that are drawin interest

and havin a specifc maturity date!• promissory notes! whether neotiable or non,neotiable! except ban8

notes issued or circulation"

6' Is any document! transaction or arranement entered into under 9inancial Leasesubject to %ocumentary 2tamp #ax? &+F. -o" C,@5C'9inancial lease is a8in to a debt rather than a lease" A nature o an obliation than alease o personal property" #he mere act o extendin credit is already a means o acilitatin an obliation or advancin in behal o the lessee certain property in lieuo cash in exchane or a defnitive amorti/ation to be paid to the lessor with proftmarin included" 2ection 5) o the -I+.! as amended! covers all debt instruments"

#hereore! bein a nature o an obliation! any document! transaction orarranement entered into under fnancial lease is subject to %2# under such 2ection

o the -I+.! as amended"

DONOR’S TAX

5



escription%onorQs #ax is a tax on a donation or it! and is imposed on the ratuitous transer o property between two or more persons who are livin at the time o the transer" Itshall apply whether the transer is in trust or otherwise! whether the it is direct orindirect and whether the property is real or personal! tanible or intanible"

-otes15" +ate applicable shall be based on the law prevailin at the time o donation"@" When the its are made durin the same calendar year but on di0erent dates! thedonor$s tax shall be computed based on the total net its durin the year"%onation made to a straner is subject to (O o the net it" A straner is a personwho is not a1

•

• brother! sister &whether by whole or hal blood'! spouse! ancestorand lineal descendantsJ or

• relative by consanuinity in the collateral line within the ourthderee o relationship"

eadlines

Within thirty days &(' ater the date the it &donation' is made" A separate returnwill be fled or each it &donation' made on the di0erent dates durin the yearreNectin therein any previous net its made durin the same calendar year"I the it &donation' involves conjual4community4property! each spouse will fleseparate returns correspondin to his4 her respective share in theconjual4community property" #his rule will also apply in the case o co,ownershipover the property"

;re#entl& As!ed #estions5" Who are re=uired to fle the %onorQs #ax +eturn?3very person! whether natural or juridical! resident or non,resident! who transers orcauses to transer property by it! whether in trust or otherwise! whether the it isdirect or indirect and whether the property is real or personal! tanible or intanible"

@" What donations are tax exempt?A" In the .ase o :its made by a +esident &2ec" 55 &A'! -I+. as amended'

•

• %owries or donations made on account o marriae beore itscelebration or within one year thereater! by parents to each o theirleitimate! reconi/ed natural! or adopted children to the extent o thefrst P5!

• :its made to or or the use o the -ational :overnment or any entitycreated by any o its aencies which is not conducted or proft! or toany political subdivision o the said :overnment

• :its in avor o an educational and4or charitable! reliious! cultural orsocial welare corporation! institution! accredited non,overnment

orani/ation! trust or philantrophic orani/ation or research institutionor orani/ation! provided not more than (O o said its will be usedby such donee or administration purposes

*" In the .ase o :its Fade by a -onresident not a .iti/en o the Philippines &2ec"55 &*'! -I+. as amended'

•

• :its made to or or the use o the -ational :overnment or any entitycreated by any o its aencies which is not conducted or proft! or toany political subdivision o the said :overnment

• :its in avor o an educational and4or charitable! reliious! cultural orsocial welare corporation! institution! accredited non,overnmentorani/ation! trust or philantrophic orani/ation or research institutionor orani/ation! provided not more than (O o said its will be usedby such donee or administration purposes

." #ax .redit or %onor$s #axes Paid to a 9orein .ountry &2ec" 55 &.'! -I+. asamended'

•

• In :eneral" , #he tax imposed by this #itle upon a donor who was aciti/en or a resident at the time o donation shall be credited with the

5



amount o any donor$s tax o any character and description imposed bythe authority o a orein country"

• Limitations on .redit" , #he amount o the credit ta8en under this2ection shall be subject to each o the ollowin limitations1

, #he amount o the credit in respect to the tax paid to any country shall not exceedthe same proportion o the tax aainst which such credit is ta8en! which the net its

situated within such country taxable under this #itle bears to his entire net itsJ and

, #he total amount o the credit shall not exceed the same proportion o the taxaainst which such credit is ta8en! which the donor$s net its situated outside thePhilippines taxable under this title bears to his entire net its"

(" What are the bases in the valuation o property?I the it is made in property! the air mar8et value at that time will be consideredthe amount o it"

In case o real property! the taxable base is the air mar8et value as determined bythe .ommissioner o Internal +evenue &Sonal Balue' or air mar8et value as shown inthe latest schedule o values fxed by the provincial and city assessor &FB per #ax

%eclaration'! whichever is hiher" &2ec" 66 and 5@! -I+. as amended'I there is no /onal value! the taxable base is the air mar8et value that appears inthe tax declaration at the time o the it

C" 9or purposes o %onorQs #ax! what does the term K-et :it mean?9or purposes o the donorQs tax! K-3# :I9# shall mean the net economic beneftrom the transer that accrues to the donee" Accordinly! i a mortaed property istranserred as a it! but imposin upon the donee the obliation to pay the mortaeliability! then the net it is measured by deductin rom the air mar8et value o theproperty the amount o mortae assumed" &sec" 55! ++ -o" @,@('

G" >nder +"A" -o" 5! any contribution in cash or in 8ind to any candidate orpolitical party or coalition o parties or campain purposes shall not be subject to the

payment o any it tax" What instance will it be subject to %onorQs #ax? #hose contributions in cash or in 8ind -;# duly reported to the .ommission on3lections &.;F3L3.' shall not be subject to donorQs tax"2ection )) &.' o the #ax .ode! as amended! provides that any contribution in cash orin 8ind or campain purposes shall be overned by +"A" -o" 5 or the 3lection.ode"

2ection 5( o the +"A" -o" 5 specifcally states that any provision o law to thecontrary notwithstandin any contribution in cash or 8ind to any candidate or politicalparty or coalition o parties or campain purposes! duly reported to the .ommissionshall not be subject to the payment o any it tax &donorQs tax'" Accordinly! the *I+can impose donorQs tax on contributions o this nature" &T,5C! +F. -o" (,@)'

" 9or purposes o %onorQs #ax! is a leally adopted child considered straner?A leally adopted child is entitled to all the rihts and obliations provided by law toleitimate children! and thereore! donation to him shall not be considered asdonation made to straner" &sec" 5! ++ -o" @,@('

" 9or purposes o %onorQs #ax! are donations between businesses considereddonations made between straners?%onation made between business orani/ations and those made between anindividual and a business orani/ation shall be considered as donation made to astraner" &sec" 5! ++ -o" @,@('

6" Are ratuitous donations to HomeownersQ Associations subject to %onorQs #ax?:its! donations! and other contributions received by the HomeownersQ Associations&Associations' are subject to the payment o donorQs tax pursuant to 2ection )6 and)) o the #ax .ode! as amended" 3ndowment or its received by such associationsare not exempt rom donorQs tax considerin that its to Associations are not=ualifed or exemption under 2ection 55&A'&(' o the #ax .ode" &II! +F. -o" G(,@5('

)" Is an onerous donation or donation in exchane or oods! services or use or leaseo properties to HomeownersQ Association subject to %onorQs #ax?

56



Pursuant to +F. -o" ),@5(! Associations are subject to the correspondin internalrevenue taxes imposed under the #ax .ode o 5)) on their income o whatever 8indand character" In this reard! contributions to associations in exchane or oods!services and use o properties constitute as other assessments4chares rom activityin exchane or the perormance o a service! use o properties or delivery o anobject" As such! these ees are income on the part o the associations that are subject

to income tax under 2ection @ o the #ax .ode! as amended" &III! +F. -o" G(,@5('

5" What is the proper treatment or transactions involvin transer o property otherthan real property reerred to in 2ection @C &%' or less than ade=uate and ullconsideration?Where property! other than real property reerred to in 2ection @C &%' o the -I+.! asamended! is transerred or less than ade=uate and ull consideration in money ormoneyQs worth! then the amount by which the air mar8et value o the propertyexceeded the value o the consideration shall! or the purpose o %onorQs #ax! bedeemed a it! and shall be included in computin the amount o its made durinthe calendar year" &2ec" 5! -I+.! as amended'

55" What entities are considered exempted rom %onorQs #ax under special laws? #he list below consists o entities considered %onorQs #ax exempt under special lawsincludin! but not limited to the ollowin1

•

• +ural 9arm 2chool &2ec" 5C! +"A" -o" 556'

• PeopleQs #elevision -etwor8! Incorporated &2ec" 5G! +"A" -o" 5()'

• PeopleQs 2urvival 9und &2ec" 5(! +"A" -o" 55C'

• Aurora Pacifc 3conomic Sone and 9reeport Authority &2ec" ! +"A" -o"56('

• :irl 2couts o the Philippines &2ec" 55! +"A" -o" 5('

• Philippine +ed .ross &2ec" G! +"A" -o" 5@'

• #ubbataha +ees -atural Par8 &2ec" 5! +"A" -o" 5'

• -ational .ommission or .ulture and the Arts &2ec" (G! +"A" -o" 5'

• Philippine -ormal >niversity &2ec" ! +"A" -o" )C'

• >niversity o the Philippines &2ec" @G! +"A" -o" )G'

• -ational Water Tuality Fanaement 9und &2ec" )! +"A" -o" )@G'

• Philippine Investors .ommission &2ec" )! +"A" -o" (6G'

• +amon Fasaysay Award 9oundation &2ec" @! +"A" ('

• Philippine,American .ultural 9oundation &2ec" C! P"%" (@'

• International +ice +esearch Institute &Art" G&@'! P% 5@'

• #as8 9orce on Human 2ettlements &2ec" (&b'&6'! 3";" C5)'

• -ational 2ocial Action .ouncil &2ec" C! P"%" @)C'

• A=uaculture %epartment o the 2outheast Asian 9isheries %evelopment.enter &2ec" @! P"%" @)@'

• %evelopment Academy o the Philippines &2ec" 5@! P% @G'

•

Interated *ar o the Philippines &2ec" (! P% 565'

5@" How do we determine the air mar8et value o the unlisted stoc8s?In determining the value of the shares the !d"usted #et !sset $ethod shall %eused where%& all assets and lia%ilities are ad"usted to fair market values. 'he net of

ad"usted asset minus the ad"usted lia%ilit& value is the indicated value of the e(uit&.or *ur*oses of this item the a**raised value of real *ro*ert& at the time of sale

shall %e the highest among the following+,a) 'he fair market value as determined %& the -ommissioner or

,%) 'he fair market value as shown in the schedule of values fixed %& the rovincialand -it& !ssessors or

,c) 'he fair market value as determined %& Inde*endent !**raiser. ,// #0. 1243),!nnex 5)

ESTATE TAX

escription3state #ax is a tax on the riht o the deceased person to transmit his4her estate tohis4her lawul heirs and benefciaries at the time o death and on certain transers!which are made by law as e=uivalent to testamentary disposition" It is not a tax on

5)



property" It is a tax imposed on the privilee o transmittin property upon the deatho the owner" #he 3state #ax is based on the laws in orce at the time o deathnotwithstandin the postponement o the actual possession or enjoyment o theestate by the benefciary"

eadlines

9ile the return within six &' months rom decedent$s death" However! the.ommissioner may! in meritorious cases! rant extension not exceedin thirty &('days"

#he 3state #ax imposed shall be paid at the time the return is fled by the executor oradministrator or the heirs" However! when the .ommissioner fnds that payment onthe due date o the 3state #ax or o any part thereo would impose undue hardshipupon the estate or any o the heirs! he may extend the time or payment o such taxor any part thereo not to exceed fve &G' years! in case the estate is settled throuhthe courts or two &@' years in case the estate is settled extra,judicially"

In all cases o transers subject to tax! or where! thouh exempt rom tax! the rossvalue o the estate exceeds #wenty #housand Pesos &P @!'! 2ection 6) o the-ational Internal +evenue .ode o 5)) &#ax .ode'! as amended! provides that theexecutor! administrator or any o the leal heirs! shall send a written notice o deathto the .ommissioner within two &@' months ater the decedentQs death or within a li8eperiod ater an executor or administrator =ualiy as such" &part II! par"&5'o +F. -o"(C,@5('

Please note that the time o flin will vary dependin on the law applicable at thetime o the decedentQs death"

E$tension o' (ime o' ;iling:When the .ommissioner fnds that the payment o the estate tax or o any partthereo would imposed undue hardship upon the estate or any o the heirs! he mayextend the time or payment o such tax or any part thereo not to exceed fve &G'years in case the estate is settled throuh the courts! or two &@' years in case itsettled extra,judicially"

Where the re=uest or extension is by reason o nelience! intentional disreard o rules and reulations! or raud on the part o the taxpayer! no extension will beranted by the .ommissioner"

I an extension is ranted! the .ommissioner or his duly authori/ed representativemay re=uire the executor! or administrator! or benefciary! as the case may be! tournish a bond in such amount! not exceedin double the amount! not exceedindouble the amount o tax and with such sureties as the .ommissioner deemsnecessary! conditioned upon the payment o the said tax in accordance in the termso extension"

#he re=uest or extension shall be fled with the +evenue %istrict ;cer &+%;' where

the estate is re=uired to secure its #I- and fle the estate tax return" #he applicationshall be approved by the .ommissioner or his duly authori/ed representative"

;re#entl& As!ed #estions5" Who are re=uired to fle the 3state #ax return?

a' #he executor or administrator or any o the leal heirs o the decedent or non,resident o the Philippines under any o the ollowin situation1, In all cases o transer subject to 3state #axJ, Where thouh exempt rom 3state #ax! the ross value o the estate exceeds twohundred thousand P @!"J and, Where reardless o the ross value! the estate consists o reistered or reistrableproperty such as real property! motor vehicle! share o stoc8s or other similar

property or which a clearance rom the *ureau o Internal +evenue &*I+' is re=uiredas a prere=uisite or the transer o ownership thereo in the name o the transeree"&part II par"&5"U(' o +F. -o" (C,@5('

b' Where there is no executor or administrator appointed! =ualifed and actin withinthe Philippines! then any person in actual or constructive possession o any propertyo the decedent must fle the return"

@



c' #he 3state #ax imposed under the #ax .ode shall be paid by the executor oradministrator beore the delivery o the distributive share in the inheritance to anyheir or benefciary" Where there are two or more executors or administrators! all o them are severally liable or the payment o the tax" #he estate tax clearance issuedby the .ommissioner or the +evenue %istrict ;cer &+%;' havin jurisdiction overthe estate! will serve as the authority to distribute the remainin4distributable

properties4share in the inheritance to the heir or benefciary"

d' #he executor or administrator o an estate has the primary obliation to pay theestate tax but the heir or benefciary has subsidiary liability or the payment o thatportion o the estate which his distributive share bears to the value o the total netestate" #he extent o his liability! however! shall in no case exceed the value o hisshare in the inheritance"

@" What are included in ross estate?• 9or resident alien decedents4citi/ens1

a' +eal or immovable property! wherever locatedb' #anible personal property! wherever locatedc' Intanible personal property! wherever located

• 9or non,resident decedent4non,citi/ens1a' +eal or immovable property located in the Philippinesb' #anible personal property located in the Philippinesc' Intanible personal property , with a situs in the Philippines such as1, 9ranchise which must be exercised in the Philippines, 2hares! obliations or bonds issued by corporations orani/ed or constituted in thePhilippines, 2hares! obliations or bonds issued by a orein corporation 6GO o the business owhich is located in the Philippines, 2hares! obliations or bonds issued by a orein corporation i such shares!obliations or bonds have ac=uired a business situs in the Philippines & i" e" they areused in the urtherance o its business in the Philippines'

, 2hares! rihts in any partnership! business or industry established in the Philippines

(" What are excluded rom ross estate?

• :2I2 proceeds4 benefts

• Accruals rom 222

• Proceeds o lie insurance where the benefciary is irrevocably appointed

• Proceeds o lie insurance under a roup insurance ta8en by employer &notta8en out upon his lie'

• War damae payments

• #ranser by way o bona fde sales

• #ranser o property to the -ational :overnment or to any o its politicalsubdivisions

• 2eparate property o the survivin spouse

• Ferer o usuruct in the owner o the na8ed title

• Properties held in trust by the decedent

• Ac=uisition and4or transer expressly declared as not taxable

C" What will be used as basis in the valuation o property?• #he properties subject to 3state #ax shall be appraised based on its air

mar8et value at the time o the decedent$s death"• #he appraised value o the real estate shall be whichever is hiher o the air

mar8et value! as determined by the .ommissioner &/onal value' or the airmar8et value! as shown in the schedule o values fxed by the Provincial or.ity Assessor"

• I there is no /onal value! the taxable base is the air mar8et value that

appears in the latest tax declaration"• I there is an improvement! the value o improvement is the construction cost

per buildin permit or the air mar8et value per latest tax declaration"

G" What are the allowable deductions or 3state #ax Purposes?Applicable or deaths occurrin ater the e0ectivity o +A 6C@C which is Manuary 5!5))6

@5



9or a citi/en or resident alienA" 3xpenses! losses! indebtedness and taxes&5' Actual uneral expenses &whether paid or unpaid' up to the time o interment! oran amount e=ual to fve percent &GO' o the ross estate! whichever is lower! but inno case to exceed P@!"&@' Mudicial expenses o the testamentary or intestate proceedins"

&(' .laims aainst the estate"&C' .laims o the deceased aainst insolvent persons where the value o thedecedentQs interest therein is included in the value o the ross estateJ and!&G' >npaid mortaes! taxes and casualty losses

*" Property previously taxed &Banishin %eduction' &2ection 6&@' o the -I+. asamended by +epublic Act -o" 6C@C'An amount e=ual to the value specifed below o any property ormin a part o theross estate situated in the Philippines o any person who died within fve &G' yearsprior to the death o the decedent! or transerred to the decedent by it within fve&G' years prior to his death! where such property can be identifed as havin beenreceived by the decedent rom the donor by it! or rom such prior decedent by it!be=uest! devise or inheritance! or which can be identifed as havin been ac=uired inexchane or property so received1

;ne hundred percent &5O' o the value! i the prior decedent died within one &5'year prior to the death o the decedent! or i the property was transerred to him byit within the same period prior to his deathJ

3ihty percent &6O' o the value! i the prior decedent died more than one &5' yearbut not more than two &@' years prior to the death o the decedent! or i the propertywas transerred to him by it within the same period prior to his deathJ

2ixty percent &O' o the value! i the prior decedent died more than two &@' yearsbut not more than three &(' years prior to the death o the decedent! or i theproperty was transerred to him by it within the same period prior to his deathJ

9orty percent &CO' o the value! i the prior decedent died more than three &(' yearsbut not more than our &C' years prior to the death o the decedent! or i the propertywas transerred to him by it within the same period prior to his deathJ and

#wenty percent &@O' o the value! i the prior decedent died more than our &C'years but not more than fve &G' years prior to the death o the decedent! or i theproperty was transerred to him by it within the same period prior to his deathJ

#hese deductions shall be allowed only where a donorQs tax or estate tax imposedwas fnally determined and paid by or on behal o such donor! or the estate o suchprior decedent! as the case may be! and only in the amount fnally determined as thevalue o such property in determinin the value o the it! or the ross estate o suchprior decedent! and only to the extent that the value o such property is included in

the decedentQs ross estate! and only i in determinin the value o the estate o theprior decedent! no Property Previously #axed or Banishin %eduction was allowable inrespect o the property or properties iven in exchane thereor" &2ection E o ++@,@('

." #ransers or public use

%" #he amily home , air mar8et value but not to exceed P5!!" #he amily home reers to the dwellin house! includin the land on which it issituated! where the husband and wie! or a head o the amily! and members o theiramily reside! as certifed to by the *aranay .aptain o the locality" #he amily homeis deemed constituted on the house and lot rom the time it is actually occupied as aamily residence and is considered as such or as lon as any o its benefciaries

actually resides therein" &Arts" 5G@ and 5G(! 9amily .ode'

3" 2tandard deduction A deduction in the amount o ;ne Fillion Pesos&P5!!"' shall be allowed as an additional deduction without need o substantiation"

9" Fedical expenses All medical expenses &cost o medicines! hospital bills! doctorQsees! etc"' incurred &whether paid or unpaid' within one &5' year beore the death o

@@



the decedent shall be allowed as a deduction provided that the same are dulysubstantiated with ocial receipts" 9or services rendered by the decedentQs attendinphysicians! invoices! statements o account duly certifed by the hospital! and suchother documents in support thereo and provided! urther! that the total amountthereo! whether paid or unpaid! does not exceed 9ive Hundred #housand Pesos&PG!'"

:" Amount received by heirs under +epublic Act -o" C)5,Any amount received bythe heirs rom the decedentQs employer as a conse=uence o the death o thedecedent,employee in accordance with +epublic Act -o" C)5 is allowed as adeduction provided that the amount o the separation beneft is included as part o the ross estate o the decedent"

H" -et share o the survivin spouse in the conjual partnership or communityproperty9or a non,resident alienA" 3xpenses! losses! indebtedness and taxes*" Property previously taxed." #ransers or public use%" -et share o the survivin spouse in the conjual partnership or communityproperty-o deduction shall be allowed in the case o a non,resident decedent not a citi/en o the Philippines! unless the executor! administrator! or anyone o the heirs! as thecase may be! includes in the return re=uired to be fled in the 2ection ) o the .odethe value at the time o the decedentQs death o that part o his ross estate notsituated in the Philippines"Please note that the allowable deductions will vary dependin on the law applicableat the time o the decedentQs death"

" What does the term 79uneral 3xpenses7 include? &2ec &A'&5' o ++ @,@(' #he term 79>-3+AL 3DP3-2327 is not confned to its ordinary or usual meanin" #heyinclude1&a' #he mournin apparel o the survivin spouse and unmarried minor children o the deceased bouht and used on the occasion o the burialJ&b' 3xpenses or the deceasedQs wa8e! includin ood and drin8sJ&c' Publication chares or death noticesJ&d' #elecommunication expenses incurred in inormin relatives o the deceasedJ&e' .ost o burial plot! tombstones! monument or mausoleum but not their up8eep" Incase the deceased owns a amily estate or several burial lots! only the valuecorrespondin to the plot where he is buried is deductibleJ&' Interment and4or cremation ees and charesJ and&' All other expenses incurred or the perormance o the rites and ceremoniesincident to interment"

3xpenses incurred ater the interment! such as or prayers! masses! entertainment!or the li8e are not deductible" Any portion o the uneral and burial expenses borne or

derayed by relatives and riends o the deceased are not deductible" Actual uneralexpenses shall mean those which are actually incurred in connection with theinterment or burial o the deceased" #he expenses must be duly supported by ocialreceipts or invoices or other evidence to show that they were actually incurred"

" What does the term 7Mudicial 3xpenses7 include? &2ec &A'&@' o ++ @,@('3xpenses allowed as deduction under this cateory are those incurred in theinventory,ta8in o a assets comprisin the ross estate! their administration! thepayment o debts o the estate! as well as the distribution o the estate amon theheirs" In short! these deductible items are expenses incurred durin the settlement o the estate but not beyond the last day prescribed by law! or the extension thereo!or the flin o the estate tax return" Mudicial expenses may include1&a' 9ees o executor or administratorJ

&b' AttorneyQs eesJ&c' .ourt eesJ&d' AccountantQs eesJ&e' AppraiserQs eesJ&' .ler8 hireJ&' .osts o preservin and distributin the estateJ&h' .osts o storin or maintainin property o the estateJ and&i' *ro8erae ees or sellin property o the estate"

@(



Any unpaid amount or the aorementioned cost and expenses claimedunder KMudicial 3xpenses should be supported by a sworn statement o accountissued and sined by the creditor"

6" What are the re=uisites or deductibility o claims aainst the 3state? &2ec &A'&('o ++ @,@('

&a' #he liability represents a personal obliation o the deceased existin at the timeo his death except unpaid obliations incurred incident to his death such as unpaiduneral expenses &i"e"! expenses incurred up to the time o interment' and unpaidmedical expenses which are classifed under a di0erent cateory o deductionspursuant to these +eulationsJ&b' #he liability was contracted in ood aith and or ade=uate and ull considerationin money or moneyQs worthJ&c' #he claim must be a debt or claim which is valid in law and enorceable in courtJ&d' #he indebtedness must not have been condoned by the creditor or the action tocollect rom the decedent must not have prescribed"

6. How do we determine the fair market value of the unlisted stocks? ,// #0. 1

243) ,!nnex 5)In determining the value of the shares the !d"usted #et !sset $ethod shall %e used

where%& all assets and lia%ilities are ad"usted to fair market values. 'he net of ad"usted asset minus the ad"usted lia%ilit& value is the indicated value of the e(uit&.

or *ur*oses of this item the a**raised value of real *ro*ert& at the time of sale

shall %e the highest among the following+ ,a) 'he fair market value as determined %& the -ommissioner or

,%) 'he fair market value as shown in the schedule of values fixed %& therovincial and -it& !ssessors or

,c) 'he fair market value as determined %& Inde*endent !**raiser.

INCOME TAX

escriptionIncome #ax is a tax on a person$s income! emoluments! profts arisin rom property!practice o proession! conduct o trade or business or on the pertinent items o rossincome specifed in the #ax .ode o 5)) &#ax .ode'! as amended! less thedeductions and4or personal and additional exemptions! i any! authori/ed or suchtypes o income! by the #ax .ode! as amended! or other special laws"

Who Are Re#ired (o ;ile Income (a$ Ret#rnsIndi9id#als

• +esident citi/ens receivin income rom sources within or outside thePhilippines

o employees derivin purely compensation income rom @ or moreemployers! concurrently or successively at anytime durin the taxableyear

o employees derivin purely compensation income reardless o theamount! whether rom a sinle or several employers durin thecalendar year! the income tax o which has not been withheld correctly&i"e" tax due is not e=ual to the tax withheld' resultin to collectible orreundable return

o sel,employed individuals receivin income rom the conduct o tradeor business and4or practice o proession

o individuals derivin mixed income! i"e"! compensation income andincome rom the conduct o trade or business and4or practice o proession

o individuals derivin other non,business! non,proessional relatedincome in addition to compensation income not otherwise subject to afnal tax

o individuals receivin purely compensation income rom a sinleemployer! althouh the income o which has been correctly withheld!but whose spouse is not entitled to substituted flin

o marinal income earners

• -on,resident citi/ens receivin income rom sources within the Philippines

@C



• Aliens! whether resident or not! receivin income rom sources within thePhilippines

• .orporation shall include partnerships! no matter how created or orani/ed"

• %omestic corporations receivin income rom sources within and outside thePhilippines

• 9orein corporations receivin income rom sources within the Philippines

• 3states and trusts enaed in trade or business

eadline;n or beore the 5Gth day o April o each year coverin taxable income or theprecedin taxable year

Ann#al Income (a$ ;or Sel'-Emplo&ed Indi9id#als, Estates And (r#sts)Incl#ding (hose With i$ed Income,i%e%, Compensation Income and Income'rom B#siness andor Practice o' Pro'ession *eadline9inal Adjustment +eturn or Annual Income #ax +eturn , ;n or beore the 5Gth day o April o each year coverin income or the precedin year

#arterl& Income (a$ ;or Sel'-Emplo&ed Indi9id#als, Estates And (r#sts)Incl#ding (hose With i$ed Income, I%E%, Compensation Income and Income'rom B#siness andor Practice o' Pro'ession*eadlinesV April 5G or the frst =uarterV Auust 5G or the second =uarterV -ovember 5G or the third =uarter

Ann#al Income (a$ ;or Corporations And Partnerships

eadline9inal Adjustment +eturn or Annual Income #ax +eturn , ;n or beore the 5Gth day o the ourth month ollowin the close o the taxpayerQs taxable year

#arterl& Income (a$ ;or Corporations And Partnershipseadline.orporate Tuarterly %eclaration or Tuarterly Income #ax +eturn , ;n or beore theth day ollowin the close o each o the =uarters o the taxable year

Improperl& Acc#m#lated Earnings (a$ ;or CorporationseadlineWithin fteen &5G' days ater the close o the taxable year

Ann#al Income In'ormation ;orm 'or 1eneral Pro'essional Partnerships2ec" GG" +eturns o :eneral Proessional Partnership &#ax .ode o 5))! as amended'3very eneral proessional partnership shall fle! in duplicate! a return o its income!

except income exempt under 2ection (@ &*' o this #itle! settin orth the items o ross income and o deductions allowed by this #itle! and the names! #axpayerIdentifcation -umbers &#I-'!addresses and shares o each o the partners"

A% ;or Indi9id#als Earning P#rel& Compensation Income and Indi9id#alsEngaged in B#siness and Practice o' Pro'ession

-ote1 When the tax due exceeds P@!"! the taxpayer may elect to pay in two e=ualinstallments! the frst installment to be paid at the time the return is fled and the secondinstallment 5G o the same year at on or beore Muly the Authori/ed Aent *an8 &AA*' withinthe jurisdiction o the +evenue %istrict ;ce &+%;' where the taxpayer is reistered"

TAX RATES

#ax +ate #axable *ase

5" %omestic.orporations1

a" In :eneral (O &e0ective Man" 5! @)' -et taxable income rom all sources

@G



b" Finimum.orporateIncome #ax

@O :ross Income

c" ImproperlyAccumulated3arnins

5O Improperly Accumulated #axableIncome

@" Proprietary3ducationalInstitution

5O -et taxable income provided thatthe ross income rom unrelatedtrade! business or other activitydoes not exceed GO o the totalross income

(" -on,stoc8!-on,proftHospitals

5O -et taxable income provided thatthe ross income rom unrelatedtrade! business or other activitydoes not exceed GO o the totalross income

C" :;..!Aencies E

Instrumentalities

a" In :eneral (O -et taxable income rom all sources


@O :ross Income



G" -ational :ov$t"E L:>s



@O :ross Income



" #axablePartnerships



@O :ross Income



" 3xempt.orporation

a" ;n 3xemptActivities

O

b" ;n #axable

Activities

(O -et taxable income rom all sources

6" :eneralProessionalPartnerships

O

)" .orporationcovered by2pecial Laws

+ate specifed under the respectivespecial laws

@



5" International.arriers

@"GO :ross Philippine *illins

55" +eional;peratin Head

5O #axable Income

5@" ;0shore

*an8in >nits&;*>s'

5O :ross #axable Income ;n 9orein

.urrency #ransaction

(O ;n #axable Income other than9orein .urrency #ransaction

5(" 9orein.urrency%eposit >nits&9.%>'

5O :ross #axable Income ;n 9orein.urrency #ransaction

(O ;n #axable Income other than9orein .urrency #ransaction

*einnin on the Cth year immediately ollowin the year in which such corporationcommenced its business operations! when the minimum corporate income tax isreater than the tax computed usin the normal income tax"

Passive Income

5" Interest rom currency deposits! trust unds and deposit substitutes @O

@" +oyalties &on boo8s as well as literary E musical composition' 5O

, In eneral @O

(" Pri/es &P5! or less ' GO

, In excess o P5! @O

C" Winnins &except rom P.2; and lotto' @O

G" Interest Income o 9orein .urrency %eposit "GO

" .ash and Property %ividends

, #o individuals rom %omestic .orporations 5 O

, #o %omestic .orporations rom Another %omestic .orporations O

" ;n capital ains presumed to have been reali/ed rom sale! exchane orother disposition o real property &capital asset'

O

6" ;n capital ains or shares o stoc8 not traded in the stoc8 exchane

, -ot over P5! GO

, Any amount in excess o P5! 5O

)" Interest Income rom lon,term deposit or investment in the orm o savins! common or individual trust unds! deposit substitutes! investmentmanaement accounts and other investments evidenced by certifcates>pon pretermination beore the fth year ! there should be imposed on theentire income rom the proceeds o the lon,term deposit based on theremainin maturity thereo1Holdin Period

3xempt

, 9our &C' years to less than fve &G' years GO

, #hree &(' years to less than our &C' years 5@O

, Less than three &(' years @O

B% ;or 2on-Resident Aliens Engaged in (rade or B#siness

5" Interest rom currency deposits! trust unds and deposit substitutes @O

@" Interest Income rom lon,term deposit or investment in the orm o savins! common or individual trust unds! deposit substitutes! investmentmanaement accounts and other investments evidenced bycertifcates>pon pretermination beore the fth year! there should beimposed on the entire income rom the proceeds o the lon,term deposit

3xempt

@



based on the remainin maturity thereo1Holdin Period1

,9our &C' years to less than fve &G' years GO

,#hree &(' years to less than our &C' years 5@O

,Less than three &(' years @O

(" ;n capital ains presumed to have been reali/ed rom the sale!exchane or other disposition o real property

O

C" ;n capital ains or shares o stoc8 not traded in the 2toc8 3xchane

, -ot over P5! GO


C* ;or 2on-Resident Aliens 2ot Engaged in (rade or B#siness

5" ;n the ross amount o income derived rom all sources within thePhilippines

@GO

@" ;n capital ains presumed to have been reali/ed rom the exchane orother disposition o real property located in the Phils"

O

(" ;n capital ains or shares o stoc8 not traded in the 2toc8 3xchane

, -ot ;ver P5! GO


* On the gross income in the Philippines o' Aliens Emplo&ed b& Regional.ead#arters )R.* or Area .ead#arters and Regional Operating.ead#arters )RO.*, ODshore Ban!ing Units )OBUs*, Petrole#m Ser9iceContractor and S#bcontractor

;n the ross income in the Philippines o Aliens 3mployed by +eionalHead=uarters &+HT' or Area Head=uarters and +eional ;peratinHead=uarters &+;H'! ;0shore *an8in >nits &;*>s'! Petroleum 2ervice.ontractor and 2ubcontractor

5GO

E* 1eneral Pro'essional Partnerships

:eneral Proessional Partnerships O

;* omestic Corporations

5' a" In :eneral on net taxable income (O

b" Finimum .orporate Income #ax on ross income @O

c" Improperly Accumulated 3arnins on improperly accumulatedtaxable income

5O

@' Proprietary 3ducational Institution and -on,proft Hospitals 5O

, In eneral &on net taxable income' 5O

, I the ross income rom unrelated trade! business or other activityexceeds GO o the total ross income rom all sources

(O

C' :;..! Aencies E Instrumentalities

a" In :eneral , on net taxable income (O



5O

G' #axable Partnerships

a" In :eneral on net taxable income (O

@6





5O

' 3xempt .orporation

a" ;n 3xempt Activities O

b" ;n #axable Activities (O

6' .orporation covered by 2pecial Laws +ate specifedunder therespectivespecial laws

1* Resident ;oreign Corporation

5' a" In :eneral on net taxable income (O



5O

@' International .arriers on ross Philippine billins @"GO

(' +eional ;peratin Head=uarters on ross income 5O

C' .orporation .overed by 2pecial Laws +ate specifedunder therespectivespecial laws

G' ;0shore *an8in >nits &;*>s' on ross income 5O

' 9orein .urrency %eposit >nits &9.%>' on ross income 5O

;re#entl& As!ed #estions5' What is income?Income means all wealth! which Nows into the taxpayer other than as a mere returno capital"

@' What is #axable Income? #axable income means the pertinent items o ross income specifed in the #ax .odeas amended! less the deductions and4or personal and additional exemptions! i any!authori/ed or such types o income! by the #ax .ode or other special laws"

(' What is :ross Income?:ross income means all income derived rom whatever source"

C' What comprises ross income?:ross income includes! but is not limited to the ollowin1

•

• .ompensation or services! in whatever orm paid! includin but notlimited to ees! salaries! waes! commissions and similar item

• :ross income derived rom the conduct o trade or business or theexercise o proession

• :ains derived rom dealins in property

• Interest

• +ents

• +oyalties

• %ividends• Annuities

• Pri/es and winnins

• Pensions

• Partner$s distributive share rom the net income o the eneralproessional partnerships

G' What are some o the exclusions rom ross income?

@)



o

• Lie insurance

• Amount received by insured as return o premium

• :its! be=uests and devises

• .ompensation or injuries or sic8ness

• Income exempt under treaty

• +etirement benefts! pensions! ratuities! etc"• Fiscellaneous items

•

o income derived by orein overnmento income derived by the overnment or its political subdivisiono pri/es and awards in sport competitiono pri/es and awards which met the conditions set in the #ax .odeo 5(th month pay and other beneftso :2I2! 222! Fedicare and other contributionso ain rom the sale o bonds! debentures or other certifcate o

indebtednesso ain rom redemption o shares in mutual und

' What are the allowable deductions rom ross income?3xcept or taxpayers earnin compensation income arisin rom personal servicesrendered under an employer,employee relationships where the only deductionprovided that the ross amily income does not exceed P@G! per amily is thepremium payment on health and4or hospitali/ation insurance! a taxpayer may opt toavail any o the ollowin allowable deductions rom ross income1a';ptional 2tandard %eduction , an amount not exceedin CO o the net sales orindividuals and ross income or corporationsJ orb' Itemi/ed %eductions which include the ollowin1

•

• 3xpenses

• Interest

• #axes• Losses

• *ad %ebts

• %epreciation

• %epletion o ;il and :as Wells and Fines

• .haritable .ontributions and ;ther .ontributions

• +esearch and %evelopment

• Pension #rusts

In addition! individuals who are either earnin compensation income! enaed inbusiness or derivin income rom the practice o proession are entitled to personaland additional exemptions as ollows1

Personal E$emptions:9or sinle individual or married individual judicially decreed as leally separated withno =ualifed dependentsXXXXXXXXXXXXXXXP G!"9or head o amilyXXXXXXXXXXXP G!"9or each married individual XXXXP G!"-ote1 In case o married individuals where only one o the spouses is derivin rossincome! only such spouse will be allowed to claim the personal exemption"

Additional E$emptions:

•

• 9or each =ualifed dependent! an P@G! additional exemption can beclaimed but only up to C =ualifed dependents

#he additional exemption can be claimed by the ollowin1

•

• #he husband who is deemed the head o the amily unless he explicitlywaives his riht in avor o his wie

• #he spouse who has custody o the child or children in case o leallyseparated spouses" Provided! that the total amount o additional

(



exemptions that may be claimed by both shall not exceed themaximum additional exemptions allowed by the #ax .ode"

• #he individuals considered as Head o the 9amily supportin a =ualifeddependent

#he maximum amount o P @!C premium payments on health and4or hospitali/ation

insurance can be claimed i1•

• 9amily ross income yearly should not be more than P @G!

• 9or married individuals! the spouse claimin the additional exemptionsor the =ualifed dependents shall be entitled to this deduction

' Who are re=uired to fle the Income #ax returns?

•

• Individuals

• +esident citi/ens receivin income rom sources within or outside thePhilippines

•

o employees derivin purely compensation income rom @ or moreemployers! concurrently or successively at anytime durin thetaxable year

o employees derivin purely compensation income reardless o theamount! whether rom a sinle or several employers durin thecalendar year! the income tax o which has not been withheldcorrectly &i"e" tax due is not e=ual to the tax withheld' resultin tocollectible or reundable return

o sel,employed individuals receivin income rom the conduct o trade or business and4or practice o proession

o individuals derivin mixed income! i"e"! compensation income andincome rom the conduct o trade or business and4or practice o proession

o

individuals derivin other non,business! non,proessional relatedincome in addition to compensation income not otherwise subjectto a fnal tax

o individuals receivin purely compensation income rom a sinleemployer! althouh the income o which has been correctlywithheld! but whose spouse is not entitled to substituted flin

o marinal income earners

•

• -on,resident citi/ens receivin income rom sources within thePhilippines

• Aliens! whether resident or not! receivin income rom sources withinthe Philippines

• .orporations no matter how created or orani/ed includin

partnerships•

o domestic corporations receivin income rom sources within andoutside the Philippines

o orein corporations receivin income rom sources within thePhilippines

o taxable partnerships

•

• 3states and trusts enaed in trade or business

6' Who are not re=uired to fle Income #ax returns?

a" An individual who is a minimum wae earner

b" An individual whose ross income does not exceed his total personal andadditional exemptions

c" An individual whose compensation income derived rom one employer does notexceed P ! and the income tax on which has been correctly withheld

(5



d" An individual whose income has been subjected to fnal withholdin tax &alienemployee as well as 9ilipino employee occupyin the same position as that o thealien employee o reional head=uarters and reional operatin head=uarters omultinational companies! petroleum service contractors and sub,contractors ando0shore,ban8in units! non,resident aliens not enaed in trade or business'

e" #hose who are =ualifed under Ksubstituted flin" However! substituted flinapplies only i all o the ollowin re=uirements are present 1•

• the employee received purely compensation income &reardless oamount' durin the taxable year

• the employee received the income rom only one employer in thePhilippines durin the taxable year

• the amount o tax due rom the employee at the end o the year e=ualsthe amount o tax withheld by the employer

• the employeeQs spouse also complies with all ( conditions stated above

• the employer fles the annual inormation return &*I+ 9orm -o" 5C,.9'

• the employer issues *I+ 9orm -o" @(5 &;ct @@ 3-.2 version ' to

each employee"

)' Who are exempt rom Income #ax?

• -on,resident citi/en who is1a' A citi/en o the Philippines who establishes to the satisaction o the .ommissionerthe act o his physical presence abroad with a defnite intention to reside thereinb' A citi/en o the Philippines who leaves the Philippines durin the taxable year toreside abroad! either as an immirant or or employment on a permanent basisc' A citi/en o the Philippines who wor8s and derives income rom abroad and whoseemployment thereat re=uires him to be physically present abroad most o the timedurin the taxable yeard' A citi/en who has been previously considered as a non,resident citi/en and whoarrives in the Philippines at any time durin the year to reside permanently in thePhilippines will li8ewise be treated as a non,resident citi/en durin the taxable year inwhich he arrives in the Philippines! with respect to his income derived rom sourcesabroad until the date o his arrival in the Philippines"

• ;verseas 9ilipino Wor8er! includin overseas seaman

An individual citi/en o the Philippines who is wor8in and derivin income romabroad as an overseas 9ilipino wor8er is taxable only on income rom sources withinthe PhilippinesJ provided! that a seaman who is a citi/en o the Philippines and whoreceives compensation or services rendered abroad as a member o the complemento a vessel enaed exclusively in international trade will be treated as an overseas9ilipino wor8er"

-;#31 A 9ilipino employed as Philippine 3mbassy4.onsulate service personnel o thePhilippine 3mbassy4consulate is not treated as a non,resident citi/en! hence hisincome is taxable"

5' What are the procedures in flin Income #ax returns &I#+s'?

• 9or Kwith payment I#+s &*I+ 9orm -os" 5 4 55 4 55T 4 5@ 4 5@T 45C'

9ile the return in triplicate &two copies or the *I+ and one copy or the taxpayer' withthe Authori/ed Aent *an8 &AA*' o the place where taxpayer is reistered orre=uired to be reistered" In places where there are no AA*s! the return will be fleddirectly with the +evenue .ollection ;cer or duly Authori/ed #reasurer o the city ormunicipality in which such person has his leal residence or principal place o business in the Philippines! or i there is none! flin o the return will be at the ;ceo the .ommissioner"

• 9or Kno payment I#+s ,, reundable! brea8,even! exempt and nooperation4transaction! includin returns to be paid on @nd installment andreturns paid throuh a #ax %ebit Femo&#%F'

•

(@



9ile the return with the concerned +evenue %istrict ;ce &+%;' where the taxpayeris reistered" However! 7no payment7 returns fled late shall be accepted by the +%;but instead shall be fled with an Authori/ed Aent *an8 &AA*' or .ollection;cer4%eputi/ed Funicipal #reasurer &in places where there are no AA*s'! orpayment o necessary penalties"

55' How is Income #ax payable o individuals &resident citi/ens and non,residentciti/ens'computed?

:ross Income P YYYYYYYYYYY

Less1 Allowable %eductions &Itemi/ed or ;ptional' YYYYYYYYYYY

-et Income P YYYYYYYYYYY

Less1 Personal E Additional 3xemptions YYYYYYYYYYY

-et #axable Income P YYYYYYYYYYY

Fultiply by #ax +ate &G to (@O' YYYYYYYYYYYY

Income #ax %ue1 #ax withheld &per *I+ 9rom @(54@(C' P YYYYYYYYYYY

Income tax payable PYYYYYYYYYYYY

5@' How is Income #ax paid?

•

• #hrouh withholdino

o

o :enerally 5O or 5GO i the ross annual business orproessional income exceeds P@! per year

o @O , 9ees paid to directors who are not employees and @O oproessional ees paid to non,individuals

o ;ther withholdin tax rates

•

• Pay the balance as you fle the tax return! computed as ollows1

Income #ax %ue P YYYYYYYYYYY

Less1 Withholdin #ax YYYYYYYYYYY

-et Income #ax %ue P YYYYYYYYYYY

5(' Is the Finimum .orporate Income #ax &F.I#' an addition to the reular or normalincome tax?-o! the F.I# is not an additional tax" An F.I# o @O o the ross income as o theend o taxable year &whether calendar or fscal year! dependin on the accountin

period employed' is imposed on a corporation taxable under #itle II o the #ax .ode!as amended! beinnin on the Cth taxable year immediately ollowin the taxableyear in which such corporation commenced its business operations when the F.I# isreater than the reular income tax" #he F.I# is compared with the reular incometax! which is due rom a corporation" I the reular income is hiher than the F.I#!then the corporation does not pay the F.I# but the amount o the reular incometax"

-otwithstandin the above provision! however! the computation and the payment o F.I#! shall li8ewise apply at the time o flin the =uarterly corporate income tax asprescribed under 2ection G and 2ection o the #ax .ode! as amended" #hus! inthe computation o the tax due or the taxable =uarter! i the computed =uarterlyF.I# is hiher than that =uarterly normal income tax! the tax due to be paid or such

taxable =uarter at the time o flin the =uarterly income tax return shall be the F.I#which is two percent &@O' o the ross income as o the end o the taxable =uarter" Inthe payment o said =uarterly F.I#! excess F.I# rom the previous taxable year4sshall not be allowed to be credited" 3xpanded withholdin tax! =uarterly corporateincome tax payments under the normal income tax! and the F.I# paid in theprevious taxable =uarter4s are allowed to be applied aainst the =uarterly F.I# due"

5C' Who are covered by F.I#?

((



#he F.I# covers domestic and resident orein corporations which are subject to thereular income tax" #he term Kreular income tax reers to the reular income taxrates under the #ax .ode" #hus! corporations which are subject to a special corporatetax system do not all within the coverae o the F.I#"

9or corporations whose operations or activities are partly covered by the reular

income tax and partly covered by the preerential rate under special law! the F.I#shall apply on operations by the reular income tax rate" -ewly establishedcorporations or frms which are on their frst ( years o operations are not covered bythe F.I#"

5G' When does a corporation start to be covered by the F.I#?A corporation starts to be covered by the F.I# on the Cth year o its businessoperations" #he period o rec8onin which is the start o its business operations is theyear when the corporation was reistered with the *I+" #his rule will apply reardlesso whether the corporation is usin the calendar year or fscal year as its taxableyear"

5' When is the F.I# reported and paid? Is it =uarterly? #he F.I# is paid on an annual basis and =uarterly basis" #he rules are overned by+evenue +eulations -o" 5@,@"

5' How is F.I# computed? #he F.I# is @O o the ross income o the corporation at the end o the year"

K:ross income means ross sales less sales returns! discounts and cost o oodssold" Passive income! which have been subject to a fnal tax at source do not ormpart o ross income or purposes o the F.I#"

.ost o oods sold includes all business expenses directly incurred to produce themerchandise to brin them to their present location and use"

9or tradin or merchandisin concern! cost o oods sold means the invoice cost o oods sold! plus import duties! reiht in transportin the oods to the place wherethe oods are actually sold! includin insurance while the oods are in transit"

9or a manuacturin concern! cost o oods manuactured and sold means all costs o production o fnished oods such as raw materials used! direct labor andmanuacturin overhead! reiht cost! insurance premiums and other costs incurredto brin the raw materials to the actory or warehouse"

9or sale o services! ross income means ross receipts less sales returns!allowances! discounts and cost o services which cover all direct costs and expensesnecessarily incurred to provide the services re=uired by the customers and clientsincludin1

o

• 2alaries and employees benefts o personnel! consultants andspecialists directly renderin the serviceJ

• .ost o acilities directly utili/ed in providin the service such asdepreciation or rental o e=uipment usedJ

• .ost o supplies

Interest 3xpense is not included as part o cost o service! except in the case o ban8sand other fnancial institutions"

K:ross +eceipts means amounts actually or constructively received durin thetaxable year" However! or taxpayers employin the accrual basis o accountin! itmeans amounts earned as ross income"

56' What is the carry orward provision under the F.I#?Any excess o the F.I# over the normal income tax may be carried orward on anannual basis and be credited aainst the normal income tax or ( immediatelysucceedin taxable years"

5)' How would the F.I# be recorded or accountin purposes?Any amount paid as excess minimum corporate income tax should be recorded in thecorporationQs boo8s as an asset under account title K%eerred chares,F.I#

(C



@' How lon can we amend our income tax return? #here is no prescription period or amendin the return" When the taxpayer has beenissued a Letter o Authority! he can no loner amend the return"

@5' .an a beneactor o a senior citi/en claim him4her as additional dependent in

addition to his4her ( =ualifed dependent children at P @G! each?-o! pursuant to +evenue +eulations @,)C! the beneactor o a senior citi/en cannotclaim the additional exemption"

@@' What is a tax treaty?A tax treaty ormally 8nown as convention or areement or the avoidance o doubletaxation and the prevention o fscal evasion with respect to taxes on income &and oncapital' could be defned in terms o its purpose" 9irst! a tax treaty is intended topromote international trade and investment in several ways! the most important o which is by allocatin taxin jurisdiction between the .ontractin 2tates so as toeliminate or mitiate double taxation o income" 2econd! a tax treaty is intended topermit the .ontractin 2tates to better enorce their domestic laws so as to reducetax evasion" #hese purposes are in act incorporated in the title and the preamble"

@(' What are the e0ective Philippine tax treaties? #he Philippines has thirty,seven &(' e0ective tax treaties" #he ollowin tax treatiesand their dates o e0ectivity as as ollows1

EDecti9e Philippine (a$ (reaties )as o' #ne >=4=*

Co#ntr& ate o' EDecti9it&

ate and 8en#e o' Signat#re

5" Australia Manuary 5!5)6

Fay 55! 5))! Fanila!Philippines

@" Austria Manuary 5!5)6(

April C! 5)65! Bienna! Austria

(" *ahrain Manuary 5!@C

-ovember ! @5! Fanila!Philippines

C" *anladesh Manuary 5!@C

2eptember 6! 5))! Fanila!Philippines

G" *elium Manuary 5!5)65

;ctober @! 5)! Fanila!Philippines

" *ra/il Manuary 5!5))@

2ept" @)! 5)6(! *rasilia! *ra/il

" .anada Manuary 5!5)

Farch 55! 5)! Fanila!Philippines

6" .hina Manuary 5!@@

-ovember 56! 5)))! *eijin!.hina

)" ./ech Manuary 5!@C

-ovember 5(! @! Fanila!Philippines

5" %enmar8 &+eneotiated' Manuary 5!5))6

Mune (! 5))G! .openhaen!%enmar8

55" 9inland Manuary 5!5)6@

;ctober 5(! 5)6! Fanila!Philippines

5@" 9rance Manuary 5!5)6

Manuary )! 5)! Zinston! Mamaica

5(" :ermany Manuary 5!5)6G

Muly @@! 5)6(! Fanila!Philippines

5C" Hunary Manuary 5!5))6

Mune 5(! 5))! *udapest!Hunary

5G" India Manuary 5!5))G

9ebruary 5@! 5))! Fanila!Philippines

(G



5" Indonesia Manuary 5!5)6(

Mune 56! 5)65! Fanila!Philippines

5" Israel Manuary 5!5))

Mune )! 5))@! Fanila!Philippines

56" Italy Manuary 5!

5))

%ecember G! 5)6! +ome! Italy

5)" Mapan Manuary 5!5)65

9ebruary 5(! 5)6! #o8yo! Mapan

@" Zorea Manuary 5!5)6

9ebruary @5! 5)6C! 2eoul!Zorea

@5" Falaysia Manuary 5!5)6G

April @! 5)6@! Fanila!Philippines

@@" -etherlands Manuary 5!5))@

Farch )! 5)6)! Fanila!Philippines

@(" -ew Sealand Manuary 5!

5)65

April @)! 5)6! Fanila!

Philippines

@C" -orway Manuary 5!5))6

Muly )! 5)6! Fanila! Philippines

@G" Pa8istan Manuary 5!5))

9ebruary @@! 5)6! Fanila!Philippines

@" Poland Manuary 5!5))6

2eptember )! 5))@! Fanila!Philippines

@" +omania Manuary 5!5))6

Fay 56! 5))C! *ucharest!+omania

@6" +ussia Manuary 5!

5))6

April @! 5))G! Fanila!

Philippines@)" 2inapore Manuary 5!

5)Auust 5! 5)! Fanila!Philippines

(" 2pain Manuary 5!5))C

Farch 5C! 5)6)! Fanila!Philippines

(5" 2weden &+eneotiated' Manuary 5!@C

Mune @C! 5))6! Fanila!Philippines

(@" 2wit/erland Manuary 5!@@

Mune @C! 5))6! Fanila!Philippines

((" #hailand Manuary 5!5)6(

Muly 5C! 5)6@! Fanila!Philippines

(C" >nited Arab 3mirates Manuary 5!@)

2eptember @5! @(! %ubai!>A3

(G" >nited Zindom o :reat *ritain and-orthern Ireland

Manuary 5!5))

Mune 5! 5)! London! >nitedZindom

(" >nited 2tates o America Manuary 5!5)6(

;ctober 5! 5)! Fanila!Philippines

(" Bietnam Manuary 5!@C

-ovember 5C! @5! Fanila!Philippines

@C' What oce can we in=uire about the said tax treaties?

#he International #ax A0airs %ivision &I#A%'"

@G' What taxes are covered by Philippine tax treaties?Income taxes imposed by the domestic laws o the .ontractin 2tates! includinsubstantially similar taxes that may be imposed later! in addition to! or in place! arecovered by the tax treaties" In the Philippines! this is enerally limited to #itle II &#axon Income' o the -ational Internal +evenue .ode o 5))! as amended"

@' How is business income treated under our tax treaties?

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#he business profts o a resident o a .ontractin 2tate shall not be taxable in thePhilippines unless that enterprise o a resident o a .ontractin 2tate carries onbusiness in the Philippines throuh a permanent establishment"

@' What is the concept o permanent establishment &P3' as used in tax treaties?P3 is defned as a fxed place o business throuh which the business o the

enterprise is wholly or partly carried on" #he concept o permanent establishment isused to determine the rihts o a .ontractin 2tate to tax the business profts o enterprises o the other .ontractin 2tate" >nder this concept! profts o anenterprise o a .ontractin 2tate are not taxable by the other .ontractin 2tate!unless the enterprise carries on business throuh a permanent establishmentsituated in the other .ontractin 2tate"

A list o places! circumstances! and activities which constitute a permanentestablishment is provided under the di0erent tax treaties which the Philippines haswith other countries"

@6' What is the Fost,9avored,-ation clause &F9-'? #he appearance o the F9- clause in the tax treaty means that a .ontractin 2tatewill rant to a resident o the other .ontractin 2tate the same lower rate o tax orexemption the ormer has ranted to a resident o a third 2tate"

@)' What is the tax treatment on immovable property?Income rom an immovable property is taxable in the .ontractin 2tate where theproperty is situated" #his term is enerally defned under the domestic laws o the.ontractin 2tates" However! this is urther defned in the tax treaties"

(' How are capital ains taxed under our tax treaties?:ains rom the alienation o immovable property or movable property ormin part o the business property o a permanent establishment or pertainin to a fxed base aretaxed in the Philippines i the immovable property or permanent establishment orfxed base is located here"

PERCE2(A1E (A0

escription Percentage tax is a business tax imposed on persons or entities/transactions:

a"5" Who sell or lease goods, properties or services in the course of trade or business and are

exempt from value-added tax (VAT under !ection "#$ (% of the &ational 'nternalevenue )ode, as amended, %hose gross annual sales and/or receipts do not exceedPhp ",$"$,*## and %ho are not VAT-registered+ and

@" ngaged in the follo%ing industries/ transactions:

a" )ars for rent or hire driven b the lessee, transportation contractors, including persons

%ho transport passengers for hire, and other domestic carriers of passengers b land(except o%ners of animal-dra%n t%o-%heeled vehicle and .eepers of garages

b" 'nternational air/shipping carriers doing business in the Philippines on their gross

receipts derived from transport of cargo from the Philippines to another countr

c" ranchise grantees of 0

radio and/or television broadcasting %hose gross annual receipts for the

preceding ear do not exceed Php "#,###,###1## and did not opt to register as VATtaxpaers

gas and %ater utilities

d" 2verseas dispatch, message or conversation transmitted from the Philippines, except

those transmitted b the Philippine government, an embass and consular offices of aforeign government, public international organi3ations en4oing exemptions pursuant toan international agreement and ne%s messages to a bona fide correspondent furnishinggeneral ne%s service

e" 5an.s and non-ban. financial intermediaries performing 6uasi-ban.ing functions" 2ther non-ban. financial intermediaries (including pa%nshops

" Person, compan or corporation (except purel cooperative companies or associations

doing life insurance business

h" ire, marine or miscellaneous agents of foreign insurance companies

i" Proprietor, lessee or operator of coc.pits, cabarets, night or da clubs, boxing

exhibitions, professional bas.etball games, 7ai-Alai and racetrac.s, including video.ebars, .arao.e bars, .arao.e televisions, .arao.e boxes and music lounges

j" Winnings in horse races

(



8" !ale, barter or exchange of shares of stoc. listed and traded through the local stoc.

exchange or through initial public offering

Who are required to file Percentage Tax Returns monthly? ver person/entit sub4ect to percentage tax as enumerated in items ", 81a, 81b, 81c, 81e, 81f,81g and 81h above

Who are required to file Percentage Tax Returns quarterly?5"

5" 2perator, manager or person in chage of:

coc.pits,

cabarets, da or night clubs, video.e bars, .arao.e bars, .arao.e

televisions, .arao.e boxes and music lounges boxing exhibitions

professional bas.etball games

7ai-alai and race trac.s

@" Telephone and communication companies on their overseas dispatch, message or

conversation originating and transmitted from the Philippines

onthl& Percentage (a$

When to File/Pay 9anual iling

Within t%ent (8# das follo%ing the end of each month

lectronic iling

or taxpaers enrolled %ith the lectronic iling and Pament !stem (eP!, in accordance %ith theschedule set forth in &o1 8-8##8 as follo%s:

• ;roup A : T%ent five (8* das follo%ing the end of the month

• ;roup 5 : T%ent four (8< das follo%ing the end of the month

• ;roup ) : T%ent three (8= das follo%ing the end of the month

• ;roup > : T%ent t%o (88 das follo%ing end the of the month

• ;roup : T%ent one (8" das follo%ing the end of the month

#arterl& Percentage (a$

When to File/Pay

Within t%ent (8# das after the end of each taxable 6uarter

Percentage (a$ Ret#rn ;or (ransactions In9ol9ing Shares o' Stoc!s 3istedand (raded (hro#gh the 3ocal Stoc!s E$change or (hro#gh Initial andorSecondar& ODeringeadline

•

• 9or tax on sale o shares o stoc8s listed and traded throuh the localstoc8 exchane &L23' within fve &G' ban8in days rom the date o collection

• 9or tax on shares o stoc8s sold or exchaned throuh primary o0erin, within ( days rom the date o listin in the L23

• 9or tax on shares o stoc8s sold or exchaned throuh secondarypublic o0erin , within fve &G' ban8in days rom the date o collection

(a$ Rates

Co9erage Basis (a$Rate

Persons exempt rom BA# under 2ec" 55 :ross 2ales or +eceipts (O

%omestic carriers and 8eepers o araes :ross +eceipts (O

International .arriers1

International air4shippin carriers doinbusiness in the Philippines

:ross +eceipts (O

9ranchise :rantees1

3lectric ! as and water utilities :ross +eceipts @O

+adio and television broadcastin :ross +eceipts (O

(6



companies whose annual ross receipts othe precedin year do not exceed P5!! and did not opt to reisterasBA# taxpayer

*an8s and non,ban8 fnancinintermediaries

Interest! commissions and discountsrom lendin activities as well as

income rom leasin on the basis oremainin maturities o instruments1

V 2hort term maturity &not over @years'

GO

V Fedium term maturity &over @years but not over C years'

(O

V Lon term maturity

[ ;ver C years but not over years 5O

[ ;ver years O

;n %ividends O

;n royalties! rentals o properties! realor personal! profts rom exchaneand all other items treated as rossincome under 2ec" (@ o the .ode

GO

9inance .ompanies ;n interest! discounts and other itemso ross income paid to fnancecompanies and other fnancialintermediaries not perormin =uasiban8in unctions

GO

Interest! commissions and discountspaid rom their loan transactions rom

fnance companies as well as incomerom fnancial leasin shall be taxedbased on the remainin maturities oinstruments1

V 2hort term maturity &not over @years'

GO

V Fedium term &over @ years but notover C years'

(O

V Lon #erm Faturity

[ ;ver C years but not over years 5O

[ ;ver years OLie Insurance .ompanies &except purelycooperative companies or associations'

#otal premiums collected GO

Aents o orein insurance companies1&except reinsurance premium'

#otal premium collected 5O

#otal premium collected GO

Proprietors! lessee or operator o theollowin1

.oc8pits :ross receipts 56O

.abarets! -iht or %ay .lubs :ross receipts 56O

*oxin exhibitions :ross receipts 5O

Proessional bas8etball ames :ross receipts 5GO

Mai,alai and race trac8 &operators shallwithheld tax on winnins'

:ross receipts (O

()



3very stoc8 bro8er who e0ected a sale!barter! exchane or other disposition oshares o stoc8 listed and traded throuhthe Local 2toc8 3xchane &L23' other thanthe sale by a dealer in securities

:ross sellin price or ross value inmoney o shares o stoc8s sold!bartered! exchaned or otherwisedisposed

\ o 5O

A corporate issuer4stoc8 bro8er! whether

domestic o orein! enaed in the sale!barter! exchane or other dispositionthrouh Initial Public ;0erin&IP;'4secondary public o0erin o shares ostoc8 in closely held corporations

:ross sellin price or ross value o in

money o shares o stoc8s sold!bartered! exchaned or otherwisedisposed in accordance with theproportion o stoc8s sold! bartered orexchaned or ater listin in the stoc8exchane

V >p to @G O CO

V ;ver @GO but not over (( 54(O @O

V ;ver (( 54( O 5O

8A3UE AE (A0

ESCRIP(IO2Balue,Added #ax is a orm o sales tax" It is a tax on consumption levied on the sale!barter! exchane or lease o oods or properties and services in the Philippines andon importation o oods into the Philippines" It is an indirect tax! which may beshited or passed on to the buyer! transeree or lessee o oods! properties orservices"

W.O ARE REUIRE (O ;I3E 8A( RE(UR2S

• Any person or entity who! in the course o his trade or business! sells! barters!exchanes! leases oods or properties and renders services subject to BA#! i the areate amount o actual ross sales or receipts exceed ;ne Fillion

-ine Hundred -ineteen #housand 9ive Hundred Pesos &P5!)5)!G"'"• A person re=uired to reister as BA# taxpayer but ailed to reister

• Any person! whether or not made in the course o his trade or business! whoimports oods

O2(.3? 8A( EC3ARA(IO2Seadline

•

• Fanual 9ilin-ot later than the @th day ollowin the end o each month

•

• #hrouh 3lectronic 9ilin and Payment 2ystem &e9P2'1

UAR(ER3? 8A3UE-AE (A0 RE(UR2eadlineWithin twenty fve &@G' days ollowin the close o taxable =uarter"

(A0 RA(ES

• ;n sale o oods and properties , twelve percent &5@O' o the ross sellinprice or ross value in money o the oods or properties sold! bartered orexchaned

• ;n sale o services and use or lease o properties , twelve percent &5@O' o ross receipts derived rom the sale or exchane o services! includin the useor lease o properties

• ;n importation o oods , twelve percent &5@O' based on the total value used

by the *ureau o .ustoms in determinin tari0 and customs duties! pluscustoms duties! excise taxes! i any! and other chares! such as tax to be paidby the importer prior to the release o such oods rom customs custodyJprovided! that where the customs duties are determined on the basis o =uantity or volume o the oods! the BA# shall be based on the landed costplus excise taxes! i any"

• ;n export sales and other /ero,rated sales , O

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https://efps.bir.gov.ph/index.html

https://efps.bir.gov.ph/index.html



;REUE2(3? ASFE UES(IO2SI% 1eneral 8A( #eriesWho are liable to register as 8A( ta$pa&ers"Any person who! in the course o trade or business! sells! barters or exchanes oodsor properties or enaes in the sale or exchane o services shall be liable to reisteri1

a" His ross sales or receipts or the past twelve &5@' months! other than those thatare exempt under 2ection 5) &A' to &>'! have exceeded ;ne Fillion 9ive Hundred #housand Pesos &P5!G!"'1 orb" #here are reasonable rounds to believe that his ross sales or receipts or thenext twelve &5@' months! other than those that are exempt under 2ection 5) &A' to&>'! will exceed ;ne Fillion 9ive Hundred #housand Pesos &P5!G!"'"

When is a ne 8A( ta$pa&er re#ired to appl& 'or registration and pa& theregistration 'ee"-ew BA# taxpayers shall apply or reistration as BA# #axpayers and pay thecorrespondin reistration ee o fve hundred pesos &PG"' usin *I+ 9orm -o"G or every separate or distinct establishment or place o business beore thestart o their business ollowin existin issuances on reistration"

#hereater! taxpayers are re=uired to pay the annual reistration ee o fve hundredpesos &PG"' not later than Manuary (5! every year"

What compliance acti9ities sho#ld a 8A( ta$pa&er, a'ter registration ass#ch, do promptl& or periodicall&"

#he ollowin compliance activities must be perormed by a BA#,reistered taxpayer1a" Pay the annual reistration ee o PG" or every place o business orestablishment that enerates salesJ

b" +eister the boo8s o accounts o the business4occupation4callin! includinpractice o proession! beore usin the sameJ

c" +eister the sales invoices and ocial receipts as BA#,invoices or BA# ocialreceipts or use on transactions subject to BA#" &I there are other transaction notsubject to BA#! a separate set o non,BA# invoices or non,BA# ocial receipts need tobe reistered or use on transactions not subject to BA#'J

d" 9ilin o the Fonthly Balue,added #ax %eclaration on or beore the @th dayollowin the end o the taxable month &or manual flers'4on or beore the prescribeddue dates enunciated in ++ -o" 5,@G &or e,flers' usin *I+ 9orm -o" @GGF ando the Tuarterly BA# +eturn on or beore the @Gth day ollowin the end o the taxable=uarter usin *I+ 9orm -o" @GGT! reNectin therein ross receipts &or seller o service'4 ross sales &or seller o oods' and output tax &BA# on sales'J purchases o oods and services made in the course o trade or business4exercise o proessionand input tax &BA# on purchases'! other allowable tax credits as in the case o advance BA# payment and BA# withheld by overnment payors! and BA# payable orexcess input BA#! whichever is applicable! with the accredited aent ban8s &AA*s' o

the *I+ or +evenue .ollection ;cers &+.;s' o the *I+ &in areas without AA*'! orreturns with payment! or with the +%;4L#%; havin jurisdiction over the taxpayer&home +%;4L#%;'! or returns without payment" &#he monthly BA# %eclaration andthe Tuarterly BA# +eturn shall reNect the consolidated total or all the taxable lines o activity and all the establishments , head oce and branches'J

e" 2ubmit with the +%;4L#%; havin jurisdiction over the taxpayer! on or beore thedeadline set in the flin o the Tuarterly BA# +eturn! the sot copy o the Tuarterly2chedule o Fonthly 2ales and ;utput #ax &i the =uarterly sales exceedP@!G!"'! and the sot copy o the Tuarterly 2chedule o Fonthly %omesticPurchases and Input #ax4 the sot copy o the 2chedule o #ransactional4IndividualImportation & i the =uarterly total purchases exceed P5!!"'! reNectintherein the re=uired data prescribed under existin revenue issuances"

.o do e determine the main or principal b#siness o' a ta$pa&er ho isengaged in mi$ed b#siness acti9ities"In determinin the main or principal business o a taxpayer! we apply thepredominance test" >nder this test! i more than fty &GO' o its ross sales and4orross receipts comes rom its business4es subject to BA#! its main4principal businessalls within the BA# system ma8in its status as a BA# person" ;therwise! he can not

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http://www.bir.gov.ph/index.php/tax-code.html#titleIV


http://www.bir.gov.ph/index.php/bir-forms/payment-remittance-forms.html#prf0605








be considered as a BA# person eliible or the election provided or under 2ection5)&@' o the #ax .ode"

What is the liabilit& o' a ta$pa&er becoming liable to 8A( and did notregister as s#ch"Any person who becomes liable to BA# and ails to reister as such shall be liable to

pay the output tax as i he is a BA#,reistered person! but without the beneft o inputtax credits or the period in which he was not properly reistered"

Who ma& opt to register as 8A( and hat ill be his liabilit&"5" Any person who is BA#,exempt under 2ec" C"5),5 &*' &5' &B' not re=uired toreister or BA# may! in relation to 2ec" C"5),@! elect to be BA#,reistered byreisterin with the +%; that has jurisdiction over the head oce o that person! andpay the annual reistration ee o PG" or every separate and distinctestablishment"@" Any person who is BA#,reistered but enters into transactions which are exemptrom BA# &mixed transactions' may opt that the BA# apply to his transactions whichwould have been exempt under 2ection 5)&5' o the #ax .ode! as amended ]2ec"5)&@'^"(" 9ranchise rantees o radio and4or television broadcastin whose annual rossreceipts o the precedin year do not exceed ten million pesos &P5!!"'derived rom the business covered by the law rantin the ranchise may opt or BA#reistration" #his option! once exercised! shall be irrevocable" &2ec" 55)! #ax .ode'"C" Any person who elects to reister under optional reistration shall not be allowedto cancel his reistration or the next three &(' years"

#he above,stated taxpayers may apply or BA# reistration not later than ten &5'days beore the beinnin o the calendar =uarter and shall pay the reistration eeunless they have already paid at the beinnin o the year" In any case! the.ommissioner o Internal +evenue may! or administrative reason deny anyapplication or reistration" ;nce reistered as a BA# person! the taxpayer shall beliable to output tax and be entitled to input tax credit beinnin on the frst day o the month ollowin reistration"

What are the instances hen a 8A(-registered person ma& cancel his 8A(registration"5" I he ma8es a written application and can demonstrate to the commissioner$ssatisaction that his ross sales or receipts or the ollowin twelve &5@' months!other than those that are exempt under 2ection 5) &A' to &>'! will not exceed onemillion fve hundred thousand pesos &P5!G!"'J or@" I he has ceased to carry on his trade or business! and does not expect torecommence any trade or business within the next twelve &5@' months"

When ill the cancellation 'or registration be eDecti9e" #he cancellation or reistration will be e0ective rom the frst day o the ollowinmonth the cancellation was approved"

What is the in9oicing receipt re#irement o' a 8A(-registered person"A BA# reistered person shall issue 15" A BA# invoice or every sale! barter or exchane o oods or propertiesJ and@" A BA# ocial receipt or every lease o oods or properties and or every sale!barter or exchane o services"

a& a 8A(-registered person iss#e a single in9oice receipt in9ol9ing 8A(and 2on-8A( transactions"

<es" He may issue a sinle invoice4 receipt involvin BA# and non,BA# transactionsprovided that the invoice or receipt shall clearly indicate the brea8,down o the salesprice between its taxable! exempt and /ero,rated components and the calculation o the Balue,Added #ax on each portion o the sale shall be shown on the invoice orreceipt"

a& a 8A(- registered person iss#e separate in9oices receipts in9ol9ing8A( and 2on-8A( transactions"

<es" A BA# reistered person may issue separate invoices4 receipts or the taxable!exempt! and /ero,rated component o its sales provided that i the sales is exemptrom value,added tax! the term 7BA#,3D3FP# 2AL37 shall be written or printedprominently on the invoice or receipt and i the sale is subject to /ero percent &O'

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BA#! the term 7S3+;,+A#3% 2AL37 shall be written or printed prominently on theinvoice or receipt"

.o is the 8al#e-Added (a$ presented in the receipt in9oice" #he amount o the tax shall be shown as a separate item in the invoice or receipt"2ample1

2alesPrice

P5!"

BA# 5@!"Invoice Amount 55@!"

What is the in'ormation that m#st be contained in the 8A( in9oice or 8A(oGcial receipt"5" -ame o 2eller@" *usiness 2tyle o the 2eller(" *usiness Address o the 2ellerC" 2tatement that the seller is a BA#,reistered person! ollowed by his #I-G" -ame o *uyer" *usiness 2tyle o *uyer" Address o *uyer

6" #I- o buyer! i BA#, reistered and amount exceed P5!")" %ate o transaction5" Tuantity55" >nit cost5@" %escription o the oods or properties or nature o the service5(" Purchase price plus the BA#! provided that1

•

• #he amount o tax shall be shown as a separate item in the invoiceor receiptJ

• I the sale is exempt rom BA#! the term 7BA#,3D3FP# 2AL37 shallbe written or printed prominently on the invoice or receiptJ

• I the sale is subject to /ero percent &O' BA#! the term 7S3+;,+A#3% 2AL37 shall be written or printed prominently on the invoicereceiptJ and

• I the sale involves oods! properties or services some o which aresubject to and some o which are /ero,rated or exempt rom BA#!the invoice or receipt shall clearly indicate the brea8down o thesales price between its taxable! exempt and /ero,ratedcomponents! and the calculation o the BA# on each portion o thesale shall be shown on the invoice or receipt"

5C" Authority to Print +eceipt -umber at the lower let corner o the invoice orreceipt"

What is the liabilit& o' a ta$pa&er not registered as 8A( and iss#es a 8A(in9oice receipt"

#he non,BA# reistered person shall! in addition to payin the percentae taxapplicable to his transactions! be liable to BA# imposed in 2ection 5 or 56 o the

#ax .ode without the beneft o any input tax credit plus GO surchare on the BA#payable &output tax'" I the invoice4 receipts contain the re=uired inormation!purchaser shall be allowed to reconi/e an input tax credit"

What is the liabilit& o' a 8A(-registered person in the iss#ance o' a 8A(in9oice receipt 'or 8A(-e$empt transactions"I a BA#,reistered person issues a BA# invoice or BA# ocial receipt or a BA#,exempttransaction but ails to display prominently on the invoice or receipt the words 7BA#,3D3FP# 2AL37! the transaction shall become taxable and the issuer shall be liable topay the BA# thereon" #he purchaser shall be entitled to claim an input tax credit onhis purchase"

What is Ho#tp#t ta$H";utput tax means the BA# due on the sale! lease or exchane o taxable oods orproperties or services by any person reistered or re=uired to reister under 2ection@( o the #ax .ode"

What is Hinp#t ta$H"Input tax means the BA# due on or paid by a BA#,reistered on importation o oodsor local purchase o oods! properties or services! includin lease or use o property

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in the course o his trade or business" It shall also include the transitional input taxdetermined in accordance with 2ection 555 o the #ax .ode! presumptive input taxand deerred input tax rom previous period"

What comprises Hgoods or propertiesH" #he term 7oods or properties7 shall mean all tanible and intanible objects! which

are capable o pecuniary estimation and shall include! amon others1a" +eal properties held primarily or sale to customers or held or lease in theordinary course o trade or businessJb" #he riht or the privilee to use patent! copyriht! desin or model! plan! secretormula or process! oodwill! trademar8! trade brand or other li8e property or rihtJc" #he riht or privilee to use in the Philippines o any industrial! commercial orscientifc e=uipmentJd" #he riht or the privilee to use motion picture flms! flms! tapes and discsJ ande" +adio! television! satellite transmission and cable television time"

What comprises Hsale or e$change o' ser9icesH" #he term 7sale or exchane o services7 means the perormance o all 8inds o services in the Philippines or others or a ee! remuneration or consideration!whether in 8ind or in cash! includin those perormed or rendered by the ollowin1a" .onstruction and service contractorsJb" 2toc8! real estate! commercial! customs and immiration bro8ersJc" Lessors o property! whether personal or realJd" Persons enaed in warehousin servicesJe" Lessors or distributors o cinematoraphic flmsJ" Persons enaed in millin! processin! manuacturin or repac8in oods orothersJ" Proprietors! operators or 8eepers o hotels! motels! rest houses! pension houses!inns! resorts! theatres! and movie housesJh" Proprietors or operators o restaurants! rereshment parlors! caes! and othereatin places! includin clubs and caterersJi" %ealers in securitiesJ

j" Lendin investorsJ8" #ransportation contractors on their transport o oods or caroes! includinpersons who transport oods or caroes or hire and other domestic common carriersby land relative to their transport o oods or caroesJl" .ommon carriers by air and sea relative to their transport o passeners! oods orcaroes rom one place in the Philippines to another place in the PhilippinesJm" 2ales o electricity by eneration! transmission! and4or distribution companiesJn" 9ranchise rantees o electric utilities! telephone and teleraph! radio and4ortelevision broadcastin and all other ranchise rantees! except ranchise rantees o radio and4or television broadcastin whose annual ross receipts o the precedinyear do not exceed #en Fillion Pesos &P5!!"'! and ranchise rantees o asand water utilitiesJo" -on,lie insurance companies &except their crop insurances'! includin surety!fdelity! indemnity and bondin companiesJ and

p" 2imilar services reardless o whether or not the perormance thereo calls or theexercise o use o the physical or mental aculties"

#he phrase 7sale or exchane o services7 shall li8ewise include1a" #he lease o use o or the riht or privilee to use any copyriht! patent! desin ormodel! plan! secret ormula or process! oodwill! trademar8! trade brand or other li8eproperty or rihtJb" #he lease or the use o! or the riht to use o any industrial! commercial orscientifc e=uipmentJc" #he supply o scientifc! technical! industrial or commercial 8nowlede orinormationJd" #he supply o any assistance that is ancillary and subsidiary to and is urnished asa means o enablin the application or enjoyment o any such property! or riht orany such 8nowlede or inormationJ

e" #he supply o services by a nonresident person or his employee in connection withthe use o property or rihts belonin to! or the installation or operation o anybrand! machinery or other apparatus purchased rom such non,resident personJ" #he supply o technical advice! assistance or services rendered in connection withtechnical manaement or administration o any scientifc! industrial or commercialunderta8in! venture! project or schemeJ" #he lease o motion picture flms! flms! tapes and discsJ and

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h" #he lease or the use o or the riht to use radio! television! satellite transmissionand cable television time"

What is a ero-rated sale"It is a sale! barter or exchane o oods! properties and4or services subject to O BA#pursuant to 2ections 5 &A' &@' and 56 &*' o the #ax .ode" It is a taxable

transaction or BA# purposes! but shall not result in any output tax" However! theinput tax on purchases o oods! properties or services! related to such /ero,ratedsales! shall be available as tax credit or reund in accordance with ++ -o" 5,@G"

What transactions are considered as ero-rated sales" #he ollowin services perormed in the Philippines by BA#,reistered person shall besubject to /ero percent &O' rate1a" Processin! manuacturin or repac8in oods or other persons doin businessoutside the Philippines which oods are subse=uently exported where the servicesare paid or in acceptable orein currency and accounted or in accordance with therules and reulations o the *an8o 2entral n Pilipinas &*2P'J

b" 2ervices other than processin! manuacturin or repac8in rendered to a personenaed in business conducted outside the Philippines or to a non,resident personenaed in business who is outside the Philippines when the services are perormed!the consideration or which is paid or in acceptable orein currency and accountedor in accordance with the rules and reulations o the *an8o 2entral n Pilipinas&*2P'J

c" 2ervices rendered to persons or entities whose exemption under special laws orinternational areements to which the Philippines is a sinatory e0ectively subjectsthe supply o such services to /ero percent &O' rateJ

d" 2ervices rendered to persons enaed in international shippin or air transportoperations! includin leases o property or use thereoJ Provided! however! that theservices reerred to herein shall not pertain to those made to common carriers by airand sea relative to their transport o passeners! oods or caroes rom one place inthe Philippines to another place in the Philippines! the same bein subject to twelvepercent &5@O' BA# under 2ec" 56 o the #ax .ode startin 9eb" 5! @J

e" 2ervices perormed by subcontractors and4or contractors in processin!convertin! or manuacturin oods or an enterprise whose export sales exceedsseventy percent &O' o total annual productionJ

" #ransport o passeners and caro by domestic air or sea carriers rom thePhilippines to a orein country" :ross receipts o international air carriers doinbusiness in the Philippines and international sea carriers doin business in thePhilippines are still liable to a percentae tax o three percent &(O' based on theirross receipts as provided or in 2ec" 556 o the #ax .ode but shall not be liable toBA#J and

" 2ale o power or uel enerated throuh renewable sources o enery such as! butnot limited to! biomass! solar! wind! hydropower! eothermal and steam! oceanenery! and other shippin sources usin technoloies such as uel cells andhydroen uelsJ Provided! however that /ero,ratin shall apply strictly to the sale o power or uel enerated throuh renewable sources o enery! and shall not extendto the sale o services related to the maintenance or operation o plants eneratinsaid power "

#he ollowin sales by BA#,reistered persons shall be subject to /ero percent &O'rate1a" 3xport sales

•

• #he sale and actual shipment o oods rom the Philippines toa orein country! irrespective o any shippin arranementthat may be areed upon which may inNuence or determinethe transer o ownership o the oods so exported! paid inacceptable orein currency or its e=uivalent in oods orservices! and accounted or in accordance with the rules andreulations o the *an8o 2entral n Pilipinas &*2P'J

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• #he sale o raw materials or pac8ain materials to a non,resident buyer or delivery to as resident local export,orientedenterprise to be used in manuacturin! processin! pac8inor repac8in in the Philippines o the said buyer$s oods! paidor in acceptable orein currency! and accounted or inaccordance with the rules and reulations o the *2PJ

•

#he sale o raw materials or pac8ain materials to an export,oriented enterprise whose export sales exceed seventypercent &O' o total annual productionJ

• 2ale o old to the *2PJ

• #ransactions considered export sales under 3xecutive ;rder-o" @@! otherwise 8nown as the ;mnibus Investments .odeo 5)6! and other special lawsJ and

• #he sale o oods! supplies! e=uipment and uel to personsenaed in international shippin or international air transportoperationsJ Provided! that the same is limited to oods!supplies! e=uipment and uel pertainin to or attributable tothe transport o oods and passeners rom a port in thePhilippines directly to a orein port! or vice,versa without

doc8in or stoppin at any other port in the Philippines unlessthe doc8in or stoppin at any other Philippine port is or thepurpose o unloadin passeners and4or caroes thatoriinated rom abroad! or to load passeners and4or caroesbound or abroadJ Provided! urther! that i any portion o suchuel! oods or supplies is used or purposes other than thementioned in this pararaph! such portion o uel! oods andsupplies shall be subject to twelve percent &5@O' output BA#"

b" 9orein .urrency %enominated 2ales #he sale to a non,resident o oods! except those mentioned in 2ections 5C) and 5Go the #ax .ode! assembled or manuactured in the Philippines or delivery to aresident in the Philippines! paid or in acceptable orein currency and accounted or

in accordance with the rules and reulations o the *2P"

c" 2ales to Persons or 3ntities %eemed #ax,exempt under 2pecial Law orInternational Areement

2ale o oods or property to persons or entities who are tax,exempt under speciallaws or international areements to which the Philippines is a sinatory! such as!Asian %evelopment *an8 &A%*'! International +ice +esearch Institute &I++I'! etc"

Where ill ta$pa&ers /le their applications 'or 8A( ero-rating" #axpayers shall fle their application directly with the Audit Inormation! #ax3xemption and Incentives %ivision &AI#3I%' under the Assessment 2ervice! or withthe L#AI% I and II! *I+ -ational ;ce! as the case may be"

What is a ContractorJs ;inal Pa&ment Release Certi/cate and here sho#ldta$pa&ers /le their application 'or this"

#he .ontractor$s 9inal Payment +elease .ertifcate is issued by the *I+ beore aovernment contractor is ully paid or his contract with the overnment" #axpayersmay fle their application at the *I+ -ational ;ce at the Audit Inormation! #ax3xemption and Incentives %ivision &AI#3I%'

What transactions are considered deemed sales" #he ollowin transactions are considered as deemed sales1a" #ranser! use or consumption! not in the course o business! o oods or propertiesoriinally intended or sale or or use in the course o business" #ranser o oods orproperties not in the course o business can ta8e place when BA#,reistered person

withdraws oods rom his business or his personal useJb" %istribution or transer to1•

• 2hareholders or investors as share in the profts o the BA#,reistered personJ or

• .reditors in payment o debt or obliation

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c" .onsinment o oods i actual sale is not made within sixty &' days ollowinthe date such oods were consined" .onsined oods returned by the consineewithin the ,day period are not deemed soldJd" +etirement rom or cessation o business! with respect to all oods on hand!whether capital oods! stoc8,in,trade! supplies or materials as o the date o suchretirement or cessation! whether or not the business is continued by the new owner

or successor" #he ollowin circumstances shall! amon others! ive rise totransactions 7deemed sale7J•

• .hane o ownership o the business" #here is a chane in theownership o the business when a sinle proprietorshipincorporatedJ or the proprietor o a sinle proprietorship sellshis entire business"

• %issolution o a partnership and creation o a new partnershipwhich ta8es over the business"

What is 8A(-e$empt sale"It is a sale o oods! properties or service and the use or lease o properties which isnot subject to output tax and whereby the buyer is not allowed any tax credit or input

tax related to such exempt sale"

What are the 8A(-e$empt transactions"a" 2ale or importation o aricultural and marine ood products in their oriinal state!livestoc8 and poultry o a 8ind enerally used as! or yieldin or producin oods orhuman consumptionJ and breedin stoc8 and enetic materials thereoreJb" 2ale or importation o ertili/ersJ seeds! seedlins and fnerlinsJ fsh! prawn!livestoc8 and poultry eeds! includin inredients! whether locally produced orimported! used in the manuacture o fnished eeds &except specialty eeds or racehorses! fhtin coc8s! a=uarium fsh! /oo animals and other animals considered aspets'Jc" Importation o personal and household e0ects belonin to residents o thePhilippines returnin rom abroad and non,resident citi/ens comin to resettle in the

PhilippinesJ Provided! that such oods are exempt rom custom duties under the #ari0 and .ustoms .ode o the PhilippinesJd" Importation o proessional instruments and implements! wearin apparel!domestic animals! and personal household e0ects &except any vehicle! vessel!aircrat! machinery and other oods or use in the manuacture and merchandise o any 8ind in commercial =uantity' belonin to persons comin to settle in thePhilippines! or their own use and not or sale! barter or exchane! accompanyinsuch persons! or arrivin within ninety &)' days beore or ater their arrival! upon theproduction o evidence satisactory to the .ommissioner o Internal +evenue! thatsuch persons are actually comin to settle in the Philippines and that the chane o residence is bonafdeJe" 2ervices subject to percentae tax under #itle B o the .ode! as amendedJ" 2ervices by aricultural contract rowers and millin or others o palay into rice!

corn into rits! and suar cane into raw suarJ" Fedical! dental! hospital and veterinary services except those rendered byproessionalsJh" 3ducational services rendered by private educational institutions duly accreditedby the %epartment o 3ducation &%ep3%'! the .ommission on Hiher 3ducation&.H3%' and the #echnical 3ducation and 28ills %evelopment Authority &#32%A' andthose rendered by the overnment educational institutionsJi" 2ervices rendered by individuals pursuant to an employer,employee relationshipJ

j" 2ervices rendered by reional or area head=uarters established in the Philippinesby multinational corporations which act as supervisory! communications andcoordinatin centers or their aliates! subsidiaries or branches in the Asia,Pacifc+eion and do not earn or derive income rom the PhilippinesJ8" #ransactions which are exempt under international areements to which thePhilippines is a sinatory or under special laws except those ranted under P"%" -o"G@) , Petroleum 3xploration .oncessionaires under the Petroleum Act o 5)C)Jl" 2ales by aricultural cooperatives duly reistered and in ood standin with the.ooperative %evelopment Authority &.%A' to their members! as well as o theirproduce! whether in its oriinal state or processed orm! to non,members! theirimportation o direct arm inputs! machineries and e=uipment! includin spare partsthereo! to be used directly and exclusively in the production and4or processin o their produceJ

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m" :ross receipts rom lendin activities by credit or multi,purpose cooperatives dulyreistered and in ood standin with the .ooperative %evelopment AuthorityJn" 2ales by non,aricultural! non,electric and non,credit cooperatives duly reisteredwith and in ood standin with .%AJ Provided! that the share capital contribution o each member does not exceed 9iteen #housand Pesos &P5G!"' and reardlesso the areate capital and net surplus ratably distributed amon the membersJ

o" 3xport sales by persons who are not BA#,reisteredJp" #he ollowin sales o real properties are exempt rom BA#! namely15" 2ale o real properties not primarily held or sale to customers or held or lease inthe ordinary course o trade or businessJ@" 2ale o real properties utili/ed or low,cost housin as defned by +A -o" @)!otherwise 8nown as the 7>rban %evelopment and Housin Act o 5))@7 and otherrelated laws! such as +A -o" 6(G and +A -o" 6(J(" 2ale o real properties utili/ed or speciali/ed housin as defned under +A -o"@)! and other related laws! such as +A -o" 6(G and +A -o" 6(! wherein priceceilin per unit is P@@G!" or as may rom time to time be determined by theH>%.. and the -3%A and other related lawsJC" 2ale o residential lot valued at ;ne Fillion 9ive Hundred #housand Pesos&P5!G!"' and below! or house and lot and other residential dwellins valued at

#wo Fillion 9ive Hundred #housand Pesos &P@!G!"' and below where theinstrument o sale4 transer4 disposition was executed on or ater Muly 5! @GJProvided! that not later than Manuary (5! @) and every three &(' years thereater!the amounts stated herein shall be adjusted to its present value usin the .onsumerPrice Index! as published by the -ational 2tatistics ;ce &-2;'J Provided! urther!that such adjustment shall be published throuh revenue reulations to be issued notlater than Farch (5 o each year"=" Lease o residential units with a monthly rental per unit not exceedin #en

#housand Pesos &P5!"'! reardless o the amount o areate rentals receivedby the lessor durin the yearJ Provided! that not later than Manuary (5! @) andevery three &(' years thereater! the amount o P5!" shall be adjusted to itspresent value usin the .onsumer Price Index! as published by the -2;Jr" 2ale! importation! printin or publication o boo8s and any newspaper! maa/ine!review or bulletin which appears at reular intervals with fxed prices or subscriptionand sale and which is not devoted principally to the publication o paidadvertisementsJs" 2ale! importation or lease o passener or caro vessels and aircrat! includinenine e=uipment and spare parts thereo or domestic or international transportoperationsJ Provided! that the exemption rom BA# on the importation and localpurchase o passener and4or caro vessels shall be limited to those o one hundredfty &5G' tons and above! includin enine and spare parts o said vesselsJ Provided!urther! that the vessels to be imported shall comply with the ae limit re=uirement!at the time o ac=uisition counted rom the date o the vessel$s oriinalcommissionin! as ollows1 &a' or passener and4or caro vessel! the ae limit isfteen &5G' years old! &b' or tan8ers! the ae limit is ten &5' year old! and &c' orhih,speed passeners crats! the ae limit is fve &G' years oldJ Provided! fnally! thatexemption shall be subject to the provisions o 2ection C o +epublic Act -o" )@)G!

otherwise 8nown as 7#he %omestic 2hippin %evelopment Act o @C7Jt" Importation o lie,savin e=uipment! saety and rescue e=uipment andcommunication and naviational saety e=uipment! steel plates and other metalplates includin marine,rade aluminum plates! used or shippin transportoperationsJ Provided! that the exemption shall be subject to the provisions o 2ectionC o +epublic Act -o" )@)G! otherwise 8nown as 7#he %omestic 2hippin%evelopment Act o @C7"u" Importation o capital e=uipment! machinery! spare parts! lie,savin andnaviational e=uipment! steel plates and other metal plates includin marine,radealuminum plates to be used in the construction! repair! renovation or alteration o any merchant marine vessel operated or to be operated in the domestic trade"Provided! that the exemption shall be subject to the provisions o 2ection 5) o +epublic Act -o" )@)G! otherwise 8nown as the 7#he %omestic 2hippin %evelopment

Act o @C7"v" Importation o uel! oods and supplies enaed in international shippin or airtransport operationsJ Provided! that the said uel! oods and supplies shall be usedexclusively or shall pertain to the transport o oods and4or passener rom a port inthe Philippines directly to a orein port! or vice,versa! without doc8in or stoppin atany other port in the Philippines unless the doc8in or stoppin at any otherPhilippine port is or the purpose o unloadin passeners and4or caroes thatoriinated orm abroad! or to load passeners and4or caroes bound or abroadJ

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Provided! urther! that i any portion o such uel! oods or supplies is used orpurposes other that the mentioned in the pararaph! such portion o uel! oods andsupplies shall be subject to 5@O BA#Jw" 2ervices o ban8s! non,ban8 fnancial intermediaries perormin =uasi,ban8inunctions! and other non,ban8 fnancial intermediaries! such as money chaners andpawnshops! subject to percentae tax under 2ections 5@5 and 5@@! respectively o

the #ax .odeJ andx" 2ale or lease o oods or properties or the perormance o services other than thetransactions mentioned in the precedin pararaphs! the ross annual sales and4orreceipts do not exceed the amount o ;ne Fillion 9ive Hundred #housand Pesos&P5!G!"'" Provided! that not later than Manuary (5! @) and every three &('years thereater! the amount o P5!G!" shall be adjusted to its present valueater usin the .onsumer Price Index! as published by the -2;"

What are the pre9io#sl& e$empt transactions that are no s#b+ect to 8A("

• Fedical services such as dental E veterinary services rendered byproessionalsJ

• Leal servicesJ

• -on,ood aricultural productsJ

• Farine and orest productsJ• .otton and cotton seedsJ

• .oal and natural asJ

• Petroleum productsJ

• Passener caro vessels o more than G! tonsJ

• Wor8 o art! literary wor8s! musical compositionJ

• :eneration! transmission and distribution o electricity includin that o electric cooperativesJ

• 2ale o residential lot valued at more than P5!G!"J

• 2ale o residential house E lot4dwellins valued at more than P@!G!"J

• Lease o residential unit with a monthly rental o more than P5!J

II% RE3IE;-Related #eriesWhat is HRE3IE;H"+3LI39 means +econciliation o Listin or 3norcement" It supports the third partyinormation proram o the *ureau throuh the cross reerencin o third partyinormation rom the taxpayers$ 2ummary Lists o 2ales and Purchases prescribed tobe submitted on a =uarterly basis"

Who are re#ired to s#bmit S#mmar& 3ist o' Sales"BA# taxpayers with =uarterly total sales4receipts &net o BA#'! exceedin #wo Fillion9ive Hundred #housand Pesos &P@!G!"' are re=uired to submit a 2ummary Listo 2ales"

Who are re#ired to s#bmit S#mmar& 3ist o' P#rchases"

BA# taxpayers with =uarterly total purchases &net o BA#' o oods and services!includin importation exceedin ;ne Fillion Pesos &P5!!"' are re=uired tosubmit 2ummary List o Purchases"

What are the S#mmar& 3ists re#ired to be s#bmitted"

•

• Tuarterly 2ummary List o 2ales to +eular *uyers4 .ustomers .asual*uyers4 .ustomers and ;utput #ax

• Tuarterly 2ummary o List o Local Purchases and Input taxJ and

• Tuarterly 2ummary List o Importation"

When is the deadline 'or s#bmission o' the abo9e S#mmar& 3ists" #he 2ummary List o 2ales4Purchases! whichever is applicable! shall be submitted onor beore the twney,fth &@Gth' day o the month ollowin the close o the taxable=uarter ,, calendar =uarter or fscal =uarter"

What are the penalties 'or 'ail#re to s#bmit the S#mmar& 3ists"

•

• 9or ailure to fle! 8eep or supply a statement! list or inormationre=uired on the date prescribed shall pay and administrative penalty o ;ne #housand Pesos &P5!"' or each such ailure! unless it is

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shown that such ailure is due to reasonable cause and not to willulnelectJ and

• An areate amount to be imposed or all such ailures durin ataxable year shall not exceed #wenty,9ive #housand Pesos&P@G!"'"

III% What is the treatment 'or Withholding o' 8A( on 1o9ernment one&Pa&ments"

•

• #he overment or any o its political subdivisions! instrumentalities oraencies! includin overnment,owned or controlled corporations&:;..s' shall! beore ma8in payment on account o each purchase o oods and4or services taxed at twelve percent &5@O' BA# pursuant to2ections 5 and 56 o the #ax .ode! deduct and withhold a 9inal BA#due at the rate o fve percent &GO' o the ross payment"

#he fve percent &GO' fnal BA# withholdin rate shall represent the net BA# payableo the seller" #he remainin seven percent &O' e0ectively accounts or the standardinput BA# or sales o oods or services to overnment or any o its political

subdivisions! instrumentalities or aencies includin :;..s in lieu o the actual inputBA# directly attributable or ratably apportioned to such sales" 2hould actual input BA#attributable to sales to overnment exceeds seven percent &O' o ross payments!the excess may orm part o the sellers$ expense or cost" ;n the other hand! i actualinput BA# attributable to sale to overnment is less than seven percent &O' o rosspayment! the di0erence must be closed to expense or cost"

•

• #he overnment or any o its political subdivisions! instrumentalities oraencies includin :;..s! as well as private corporation! individuals!estates and trusts! whether lare or non,lare taxpayers! shall withholdtwelve percent &5@O' BA# with respect to the ollowin payments1

5" Lease or use o properties or property rihts owned by non,residentsJ and@" ;ther services rendered in the Philippines by non,residents"

I8% In hat gro#nds can the Commissioner o' Internal Re9en#e s#spend theb#siness operations o' a ta$pa&er"

#he .ommissioner or his authori/ed representative is empowered to suspend thebusiness operations and temporarily close the business establishment o any personor any o the ollowin violations1&a' In the case o a BA#,reistered Person1

•

• 9ailure to issue receipts or invoicesJ

• 9ailure to fle a value,added,tax return as re=uired under2ection 55CJ or

• >nderstatement o taxable sales or receipts by thirty percent

&(O' or more o his correct taxable sales or receipts or thetaxable =uarter"&b' 9ailure to any Person to +eister as +e=uired under 2ection @(

•

• #he temporary closure o the establishment shall be or theduration o not less than fve &G' days and shall be lited onlyupon compliance with whatever re=uirements prescribed bythe .ommissioner in the closure order"

WI(..O3I21 (A0

escription

Withholding (a$ on Compensation is the tax withheld rom income payments toindividuals arisin rom an employer,employee relationship"

E$panded Withholding (a$ is a 8ind o withholdin tax which is prescribed oncertain income payments and is creditable aainst the income tax due o the payeeor the taxable =uarter4year in which the particular income was earned"

G



;inal Withholding (a$ is a 8ind o withholdin tax which is prescribed on certainincome payments and is not creditable aainst the income tax due o the payee onother income subject to reular rates o tax or the taxable year" Income #ax withheldconstitutes the ull and fnal payment o the Income #ax due rom the payee on theparticular income subjected to fnal withholdin tax"

Withholding (a$ on 1o9ernment one& Pa&ments )1P* - Percentage (a$es- is the tax withheld by -ational :overnment Aencies &-:As' and instrumentalities!includin overnment,owned and controlled corporations &:;..s' and localovernment units &L:>s'! beore ma8in any payments to non,BA# reisteredtaxpayers4suppliers4payees

Withholding (a$ on 1P - 8al#e Added (a$es )18A(* - is the tax withheld by-ational :overnment Aencies &-:As' and instrumentalities! includin overnment,owned and controlled corporations &:;..s' and local overnment units &L:>s'!beore ma8in any payments to BA# reistered taxpayers4suppliers4payees onaccount o their purchases o oods and services"

onthl& Remittance o' (a$es Withheld on CompensationWho Are Re#ired (o ;ile3very reistered withholdin aent on compensation! which includes! but not limitedto the ollowin15' Individuals enaed in business or practice o proession with employees subjectto income tax@' All Muridical persons &e""! .orporations! eneral partnerships! associations! etc"'whether or not enaed in business"(' :overnment Aencies and Instrumentalities &e""!-:As! :;..s! etc"'! includinlocal overnment units &L:>s'

eadline;iling 8ia E;PS:roup A , 9iteen &5G' days ollowin end o the month:roup * , 9ourteen &5C' days ollowin end o the month:roup . , #hirteen &5(' days ollowin end o the month:roup % , #welve &5@' days ollowin end o the month:roup 3 , 3leven &55' days ollowin end o the month-ote1 #he staered manner o flin is only allowed to taxpayers usin the 3lectronic9ilin and Payment 2ystem &39P2' based on the industry classifcation roupins per++ -o" @,@@"However! the staered flin o returns allowed or withholdin aents4taxpayersenrolled in the 39P2 acility o the *ureau shall not appl& in the case o' the 21Asper RR 4->=4"

Pa&ment 8ia E;PS;n or beore the fteenth &5Gth' day o the month ollowin the month withholdinwas made! except or taxes withheld or the month o %ecember which shall be paidon or beore Manuary @ o the succeedin year"Provided however that! in the case o -:As! all returns must be electronically fled &e,fled' and payment o the tax due must also be made on the same day the return ise,fled which shall be on or beore the 5th day ollowin the month in whichwithholdin was made! except or taxes withheld or the month o %ecember o eachyear! which shall be fled on or beore Manuary 5G o the succeedin year"

an#al ;iling and Pa&ment;n or beore the tenth &5th' day o the month ollowin the month the withholdinwas made! except or taxes withheld or the month o %ecember which shall be fledand paid on or beore Manuary 5G o the succeedin year

onthl& Remittance O' Income (a$es Withheld )E$panded* KE$cept 'or

(ransactions In9ol9ing Onero#s (rans'er o' Real Propert& Classi/ed asOrdinar& AssetLWho Are Re#ired (o ;ile3very reistered withholdin aent on 3xpanded Withholdin #ax! which may include!but not limited to the ollowin15' In eneral! any juridical person! whether or not enaed in trade or business@' An individual! with respect to payments made in connection with his trade orbusiness" However! insoar as taxable sale! exchane or transer o real property is

G5



concerned! individual buyers who are not enaed in trade or business are alsoconstituted as withholdin aents"(' :overnment aencies and instrumentalities &e""! -ational :overnment Aencies!:overnment,;wned or .ontrolled .orporations! Local :overnment >nits! etc"'C' All individuals! juridical persons and political parties! with respect to their incomepayments made as campain expenditures and4or purchase o oods and services

intended as campain contributions"

eadline9ilin Bia 39P2:roup A , 9iteen &5G' days ollowin end o the month:roup * , 9ourteen &5C' days ollowin end o the month:roup . , #hirteen &5(' days ollowin end o the month:roup % , #welve &5@' days ollowin end o the month:roup 3 , 3leven &55' days ollowin end o the month

-ote1 #he staered manner o flin is only allowed to taxpayers usin the 3lectronic9ilin and Payment 2ystem &39P2' based on the industry classifcation roupins per++ -o" @,@@"However! the staered flin o returns allowed or withholdin aents4taxpayersenrolled in the 39P2 acility o the *ureau shall not apply in the case o the -:As per++ 5,@5("

Pa&ment 8ia E;PS;n or beore the fteenth &5Gth' day o the month ollowin the month withholdinwas made! except or taxes withheld or the month o %ecember which shall be paidon or beore Manuary @th o the succeedin year"

Provided however that! in the case o -:As! all returns must be electronically fled &e,fled' and payment o the tax due must also be made on the same day the return ise,fled which shall be on or beore the 5th day ollowin the month in whichwithholdin was made! except or taxes withheld or the month o %ecember o eachyear! which shall be fled on or beore Manuary 5G o the succeedin year"


onthl& Remittance O' 8al#e-Added (a$es And Other Percentage (a$esWithheldWho Are Re#ired (o ;ile5" All overnment oces! bureaus! aencies or instrumentalities! local overnmentunits! overnment owned and controlled corporation on money payments made toprivate individuals! corporations! partnerships! associations and other

judicial4artifcial entities as re=uired under +A -os" 5G5! C)! 6@C5! 6C@C and )(("

@" Payors o income subject to Balue,Added #ax to -on,residents"(" Payors o income to persons! natural or juridical! who opted to remit his4its BA# orpercentae tax throuh the withholdin and remittance o the same by thewithholdin aent4payor which option is maniested by flin the K-otice o Availmento the option to Pay the #ax throuh the Withholdin Process! copy urnished thewithholdin aent,payor and the revenue district oces o both the payor and payee"eadline;n or beore the tenth &5th' day o the month ollowin the month the withholdinwas made! whether 39P2 or manual flin and payment"

onthl& Remittance o' ;inal Income (a$es Withheld

Who Are Re#ired (o ;ile3very withholdin aent4payor who is either an individual or non,individual re=uired

to deduct and withhold taxes on income payments subject to 9inal Withholdin #axes


G@



Remittance Ret#rn o' Percentage (a$ On Winnings And Pries Withheld B&Race (rac! OperatorsWho Are Re#ired (o ;ile, ;perators o race trac8seadlineWithin twenty &@' days rom the date the tax was deducted and withheld

#arterl& Remittance O' ;inal Income (a$es Withheld On ;ringe Bene/tsPaid (o Emplo&ees Other (han Ran! And ;ile

Who Are Re#ired (o ;ile3very withholdin aent4payor who is either an individual or non,individual re=uiredto deduct and withhold taxes on rine benefts urnished to employees other thanran8 and fle employees subject to 9inal Withholdin #axeadline;iling and Pa&ment 8ia E;PS;n or beore the fteenth &5Gth' day o the month ollowin the end o the calendar=uarter in which the rine benefts were ranted to the recipient"Provided howeverthat! in the case o -:As! it shall be e,fled and paid on or beore the 5th day o the

month ollowin the =uarter"an#al ;iling and Pa&ment;n or beore the tenth &5th' day o the month ollowin the end o the calendar=uarter in which the rine benefts were ranted to the recipient"

onthl& Remittance O' ;inal Income (a$es Withheld On Interest Paid And ?ield On eposit S#bstit#tes, (r#st, Etc%

Who Are Re#ired (o ;ile*an8s! non,ban8 fnancial intermediaries! fnance corporations! investment and trustcompanies and other institutions re=uired to withhold fnal income tax on interestpaid4accrued on deposit and yield or any other monetary beneft rom depositssubstitutes and rom trust und and similar arranements"

eadline;iling 8ia E;PS;n or beore the fteenth &5Gth' day o the month ollowin the month withholdinwas madePa&ment 8ia E;PS;n or beore the fteenth &5Gth' day o the month ollowin the month withholdinwas made! except or taxes withheld or the month o %ecember which shall be paidon or beore Manuary @th o the succeedin yearan#al ;iling and Pa&ment;n or beore the tenth &5th' day o the month ollowin the month the withholdinwas made! except or taxes withheld or the month o %ecember which shall be fledand paid on or beore Manuary 5G o the succeedin year"

;re#entl& As!ed #estions5' What are the types o Withholdin #axes?

#here are two main classifcations or types o withholdin tax" #hese are1a' .reditable Withholdin #ax, Withholdin #ax on .ompensation, 3xpanded Withholdin #ax, Withholdin o *usiness #ax &BA# and Percentae'b' 9inal Withholdin #ax

@' What is compensation?It means any remuneration received or services perormed by an employee rom hisemployer under an employee,employer relationship"

(' What are the di0erent 8inds o compensation?a' +eular compensation , includes basic salary! fxed allowances or representation!transportation and others paid to an employeeb' 2upplemental compensation , includes payments to an employee in addition to thereular compensation such as but not limited to the ollowin1, ;vertime Pay, 9ees! includin director$s ees, .ommission

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, Proft 2harin, Foneti/ed Bacation and 2ic8 Leave, 9rine benefts received by ran8 E fle employees, Ha/ard Pay, #axable 5(th month pay and other benefts, ;ther remunerations received rom an employee,employer relationship

C' What are exempted rom Withholdin #ax on .ompensation?5" +emuneration as an incident o employment! such as the ollowin1a" +etirement benefts received under +A C5b" Any amount received by an ocial or employee or by his heirs rom the employerdue to death! sic8ness or other physical disability or or any cause beyond the controlo the said ocial or employee such as retrenchment! redundancy or cessation o businessc" 2ocial security benefts! retirement ratuities! pensions and other similar beneftsd" Payment o benefts due or to become due to any person residin in the Philippinesunder the law o the >2 administered by the >2 Beterans Administratione" Payment o benefts made under the 222 Act o 5)GC! as amended" *enefts received rom the :2I2 Act o 5)(! as amended! and the retirementratuity received by the overnment ocial and employees

@" +emuneration paid or aricultural labor and paid entirely in products o the armwhere the labor is perormed

(" +emuneration or domestic services

C" +emuneration or casual labor not in the course o an employer$s trade or business

G" .ompensation or services by a citi/en or resident o the Philippines or a oreinovernment or an international orani/ation

" Payment or damaes

" Proceeds o Lie Insurance

6" Amount received by the insured as a return o premium

)" .ompensation or injuries or sic8ness

5" Income exempt under #reaty

55" #hirteenth &5(th' month pay and other benefts &not to exceed P (!'

5@" :2I2! 222! Fedicare and other contributions

5(" .ompensation Income o Finimum Wae 3arners &FW3s' with respect to their

2tatutory Finimum Wae &2FW' as fxed by +eional #ripartite Wae and Productivity*oard &+#WP*'4-ational Wae and Productivity .ommission &-WP.'! includinovertime pay! holiday pay! niht shit di0erential and ha/ard pay! applicable to theplace where he4she is assined"

5C" .ompensation Income o employees in the public sector i the same is e=uivalentto or not more than the 2FW in the non,aricultural sector! as fxed by +#WP*4-WP.!includin overtime pay! holiday pay! niht shit di0erential and ha/ard pay!applicable to the place where he4she is assined"

G' What are %e Finimis *enefts?, #hese are acilities and privilees o relatively small value and are o0ered orurnished by the employer to his employees merely as means o promotin their

health! oodwill! contentment or eciency" #he ollowin shall be considered 7%eFinimis7 benefts not subject to income tax! hence not subject to withholdin tax oncompensation income o both manaerial and ran8 and fle employees1V Foneti/ed unused vacation leave credits o private employees not exceedin ten&5' days durin the yearJV Foneti/ed value o vacation and sic8 leave credits paid to overnment ocials andemployees"

GC



V Fedical cash allowance to dependents o employees! not exceedin PG" peremployee per semester or P5@G" per monthJV +ice subsidy o P5!G or one &5' sac8 o G 8" rice per month amountin to notmore than P5!GJV >niorm and clothin allowance not exceedin PG! per annumJV Actual medical assistance! e"" medical allowance to cover medical and healthcare

needs! annual medical4executive chec8,up! maternity assistance! and routineconsultations! not exceedin P5! per annumJV Laundry allowance not exceedin P(" per monthJV 3mployees achievement awards! e""! or lenth o service or saety achievement!which must be in the orm o a tanible personal property other than cash or itcertifcate! with an annual monetary value not exceedin P5! received by theemployee under an established written plan which does not discriminate in avor o hihly paid employeesJV :its iven durin .hristmas and major anniversary celebration not exceedinPG!" per employee perannumJV %aily meal allowance or overtime wor8 and niht4raveyard shit not exceedintwenty,fve percent &@GO' o the basic minimum wae on a per reion basisJ

' What is substituted 9ilin o income tax returns &I#+'?2ubstituted 9ilin o I#+ is the manner by which declaration o income o individualsreceivin purely compensation income the taxes o which have been withheldcorrectly by their employers" Instead o the flin o Individual Income #ax +eturn &*I+9orm 5'! the employerQs annual inormation return &*I+ 9orm -o" 5C,.9' dulystamped received by the *I+ may be considered as the Ksubstitute Income #ax+eturn &I#+' o the employee! inasmuch as the inormation provided therein areexactly the same inormation re=uired to be provided in his income tax return &*I+9orm -o" 5'" However! said employees may still fle I#+ at his4her option"

' Who are =ualifed to avail o the substituted flin o I#+?3mployees who satisfes all o the ollowin conditions1a" +eceivin purely compensation income reardless o amountJb" Wor8in or only one employer in the Philippines or the calendar yearJc" #ax has been withheld correctly by the employer &tax due e=uals tax withheld'Jd" #he employeeQs spouse also complies with all three &(' conditions stated above"e" #he employer fles the annual inormation return &*I+ 9orm -o" 5C,.9'" #he employer issues *I+ 9orm -o" @(5 to each employee"-ote1 9or those employees =ualifed under the substituted flin! the employer

6' What income payments are subject to 3xpanded Withholdin #ax?a' Proessional ees 4 talent ees or services rendered by the ollowin1, #hose individually enaed in the practice o proessions or callins such aslawyersJ certifed public accountantsJ doctors o medicineJ architectsJ civil! electrical!chemical! mechanical! structural! industrial! minin! sanitary! metallurical andeodetic enineersJ marine surveyorsJ doctors o veterinary scienceJ dentistJproessional appraisersJ connoisseurs o tobaccoJ actuariesJ interior decorators!

desiners! real estate service practitioners &+32Ps'! &i" e" real estate consultants! realestate appraisers and real estate bro8ers' re=uirin overnment licensureexamination iven by the +eal 3state 2ervice pursuant to +epublic Act -o" )C andall other proession re=uirin overnment licensure examinations and4or reulated bythe Proessional +eulations .ommission! 2upreme .ourt! etc", Proessional entertainers such as but not limited to actors and actresses! siners!lyricist! composers and emcees, Proessional athletes includin bas8etball players! pelotaris and joc8eys, %irectors and producers involved in movies! stae! radio! television and musicalproductions, Insurance aents and insurance adjusters, Fanaement and technical consultants, *oo88eepin aents and aencies

, ;ther recipient o talent ees, 9ees o directors who are not employees o the company payin such ees whoseduties are confned to attendance at and participation in the meetins o the *oard o %irectorsb' Proessional ees! talent ees! etc or services o taxable juridical personsc' +entals1, +ental o real property used in business, +ental o personal properties in excess o P 5! annually

GG



, +ental o poles! satellites and transmission acilities, +ental o billboardsd' .inematoraphic flm rentals and other paymentse' Income payments to certain contractors, :eneral enineerin contractors, :eneral buildin contractors

, 2pecialty contractors, ;ther contractors li8e15" 9illin! demolition and salvae wor8 contractors and operators o mine drillinapparatus@" ;perators o doc8yards(" Persons enaed in the installation o water system! and as or electric liht! heator powerC" ;perators o stevedorin! warehousin or orwardin establishmentsG" #ransportation .ontractors" Printers! boo8binders! lithoraphers and publishers! except those principallyenaed in the publication or printin o any newspaper! maa/ine! review or bulletinwhich appears at reular intervals! with fxed prices or subscription and sale" Advertisin aencies! exclusive o payments to media6" Fessenerial! janitorial! security! private detective! credit and4or collectionaenciesand other business aencies)" Independent producers o television! radio and stae perormances or shows5" Independent producers o 7jinles755" Labor recruitin aencies and4or Klabor,only contractors5@" Persons enaed in the installation o elevators! central air conditionin units!computer machines and other e=uipment and machineries and the maintenanceservices thereon5(" Persons enaed in the sale o computer services! computer prorammers!sotware developer4desiner! etc"5C" Persons enaed in landscapin services5G" Persons enaed in the collection and disposal o arbae5" #B and radio station operators on sale o #B and radio airtime! and5" #B and radio bloc8timers on sale o #B and radio commercial spots' Income distribution to the benefciaries o estates and trusts' :ross commissions o customs! insurance! stoc8! immiration and commercialbro8ers! ees o aents o proessional entertainers and real estate servicepractitioners &+32Ps'! &i" e" real estate consultants! real estate appraisers and realestate bro8ers' who ailed or did not ta8e up the licensure examination iven by andnot reistered with the +eal 3state 2ervice under the Proessional +eulations.ommissionh' Income payments to partners o eneral proessional partnershipsi' Payments made to medical practitioners

j' :ross sellin price or total amount o consideration or its e=uivalent paid to theseller4owner or the sale! exchane or transer o real property classifed as ordinaryasset8' Additional income payments to overnment personnel rom importers! shippin

and airline companies or their aentsl' .ertain income payments made by credit card companiesm' Income payments made by the top @! private corporations to their purchaseo oods and services rom local4resident suppliers other than those covered by otherrates o withholdinn' Income payments by overnment oces on their purchase o oods and services!rom local4resident suppliers other than those covered by other rates o withholdino' .ommission! rebates! discounts and other similar considerations paid4ranted toindependent and exclusive distributors! medical4technical and sales representativesand mar8etin aents and sub,aents o multi level mar8etin companies"p' #ollin ees paid to refneries=' Payments made by pre,need companies to uneral parlorsr' Payments made to embalmers by uneral parlors

s' Income payments made to suppliers o aricultural products &suspended per ++ (,@C't' Income payments on purchases o mineral! mineral products and =uarry resourcesu' ;n ross amount o reund iven by F3+AL.; to customers with active contractsas classifed by F3+AL.;Jv' Interest income on the reund paid throuh direct payment or application aainstcustomers$ billin by other electric %istribution >tilities in accordance with the rulesembodied in 3+. +esolution -o" 6 series o @6 dated Mune C! @6 overnin the

G



reund o meter deposits which was approved and adopted by 3+. in compliance withthe mandate o Article 6 o the Fana .arta or +esidential 3lectricity .onsumers andArticle ("C"@ o %2;A+ exemptin all electricity consumers! whether residential ornon,residential rom the payment o meter deposit"w' Income payments made by the top G! individual taxpayers to their purchase o oods and services rom their local4resident suppliers other than those covered by

other rates o withholdinx' Income payments made by political parties and candidates o local and nationalelections o all their campain expenditures! and income payments made byindividuals or juridical persons or their purchases o oods and services intended tobe iven as campain contribution to political parties and candidatesy' Interest Income derived rom any other debt instruments not within the coveraeo deposit substitutes and ++ -o" 5C,@5@/' Income payments subject to Withholdin #ax received by +eal 3state Investment

#rust &+3I#' &2ec"5@ o ++ -o" 5(,@55'

)' What income payments are subject to 9inal Withholdin #ax?a' Income Payments to a .iti/en or to a +esident Alien Individual1, Interest on any peso ban8 deposit, +oyalties, Pri/es ]except pri/es amountin to P5! or less which is subject to tax under2ec" @C&A'&5' o the #ax .ode^, Winnins &except winnins rom Philippine .harity 2weepsta8e ;ce and Lotto', Interest income on orein currency deposit, Interest income rom lon term deposit &except those with term o fve years ormore', .ash and4or property dividends, .apital :ains presumed to have been reali/ed rom the sale! exchane or otherdisposition o real propertyb' Income Payments to a -on,+esident Alien 3naed in #rade or *usiness in thePhilippines, ;n .ertain Passive Income, cash and4or property dividend, 2hare in the distributable net income o a partnership, Interest on any ban8 deposits, +oyalties, Pri/es &except pri/es amountin to P5! or less which is subject to tax under2ec" @G&A'&5' o the #ax .ode", Winnins &except rom Philippine .harity 2weepsta8e ;ce and Lotto', Interest on Lon #erm %eposits &except those with term o fve years or more', .apital :ains presumed to have been reali/ed rom the sale! exchane or otherdisposition o real propertyc' Income %erived rom All 2ources Within the Philippines by a -on,+esident AlienIndividual -ot 3naed in #rade or *usiness, ;n ross amount o income derived rom all sources within the Philippines, ;n .apital :ains presumed to have been reali/ed rom the sale! exchane or

disposition o real property located in the Philippinesd' Income %erived by Alien Individual 3mployed by a +eional or Area Head=uartersand +eional ;peratin Head=uarters o Fultinational .ompanies! Income %erived byAlien Individual 3mployed by ;0shore *an8in >nits and Income o Aliens 3mployedby 9orein Petroleum 2ervice .ontractors and 2ubcontractorse' Income Payment to a %omestic .orporation, Interest rom any currency ban8 deposits and yield or any other monetary beneftrom deposit substitutes and rom trust und and similar arranements derived romsources within the Philippines, +oyalties derived rom sources within the Philippines, Interest income derived rom a depository ban8 under the 3xpanded 9orein.urrency %eposit &9.%>' 2ystem, Income derived by a depository ban8 under the 9.%> rom orein transactions with

local commercial ban8s, ;n capital ains presumed to have been reali/ed rom the sale! exchane or otherdisposition o real property located in the Philippines classifed as capital assets!includin pacto de retro sales and other orms o conditional sales based on the rosssellin price or air mar8et value as determined in accordance with 2ec" &3' o the-I+.! whichever is hiher' Income Payments to a +esident 9orein .orporation, ;0shore *an8in >nits

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, #ax on branch Proft +emittances, Interest on any currency ban8 deposits and yield or any other monetary beneftrom deposit substitute and rom trust unds and similar arranements and royaltiesderived rom sources within the Philippines, Interest income on 9.%>, Income derived by a depository ban8 under the expanded orein currency deposits

system rom orein currency transactions with local commercial ban8s' Income %erived rom all 2ources Within the Philippines by a -on,+esident 9orein.orporation, :ross income rom all sources within the Philippines such as interest! dividends!rents! royalties! salaries! premiums &except re,insurance premiums'! annuities!emoluments or other fxed determinable annual! periodic or casual ains! profts andincome or capital ainsJ, :ross income rom all sources within the Philippines derived by a non,residentcinematoraphic flm owner! lessor and distributor, ;n the ross rentals! lease and charter ees derived by a non,resident owner orlessor o vessels rom leases or charters to 9ilipino citi/ens or corporations asapproved by the Faritime Industry Authority, ;n the ross rentals! charter and other ees derived by a non,resident lessor o aircrat! machineries and other e=uipment, Interest on orein loans contracted on or ater Auust 5! 5)6h' 9rine *enefts :ranted to the 3mployee &except +an8 and 9ile', :oods! services or other benefts urnished or ranted in cash or in 8ind by anemployer to an individual employee &except ran8 and fle' such as but not limited tothe ollowin1, Housin, Behicle o any 8ind, Interest on loans, 3xpenses or orein travel, Holiday and vacation expenses, 3ducational assistance to employees or his dependents, Fembership ees! dues and other expense in social and athletic clubs or other, similar orani/ations, Health insurancei' Inormers +eward

j' .ash or property dividends paid by a +eal 3state Investment #rust &+3I#' pursuantto 2ection 5( o ++ 5(,@55

5' Aside rom the re=uired withholdin o income tax by overnment aencies andinstrumentalities on their payments to their suppliers o oods and services! whatother tax types must be withheld by them"a' Balue Added #ax on all income payments subject to BA#b' Percentae #ax on all payments subject to percentae tax such as payments tothe ollowin1, Any person enaed in business whose ross sales or receipts do not exceedP5!)5)!G &++ (,@5@' and who are not BA#,reistered persons" &Persons exempt

rom BA# under 2ec" 5)B o the #ax .ode', %omestic carriers and 8eepers o araes! except owners o bancas and owners o animal drawn two wheeled vehicle, ;perators o international carriers doin business in the Philippines", 9ranchise rantees o electric! as or water utilities, 9ranchise rantees o radio and4or television broadcastin companies whose rossannual receipts o the precedin year do not exceed #en Fillion &P5!!"'Pesos and did not opt to reister as BA# #axpayers, .ommunication providers with reards to overseas dispatch! messaes orconversation rom the Philippines, *an8s and non,ban8 fnancial intermediaries and fnance companies, Lie insurance companies, Aents o orein insurance companies

, Proprietor! lessee! or operator o coc8pits! cabarets! niht or day clubs!video8e48arao8e bars! 8arao8e television! 8arao8e boxes! music lounes and othersimilar establishments! boxin exhibitions! proessional bas8etball ames! jai,alai andrace trac8s, Winners in horse races or owner o winnin race horses, 3very stoc8 bro8er who e0ected a sale! barter! exchane or other disposition o shares o stoc8 listed and traded throuh the Local 2toc8 3xchane &L23' other thanthe sale by a dealer in securities

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, A corporate issuer4stoc8 bro8er! whether domestic or orein! enaed in the sale!barter! exchane or other disposition throuh Initial Public ;0erin &IP;' 4secondarypublic o0erin o shares o stoc8 in closely held corporations

55' Who is a withholdin aent?A withholdin aent is any person or entity who is re=uired to deduct and remit the

taxes withheld to the overnment"

5@' What are the duties and obliations o the withholdin aent? #he ollowin are the duties and obliations o the withholdin aent1a' #o +eister , withholdin aent is re=uired to reister within ten &5' days aterac=uirin such status with the +evenue %istrict oce havin jurisdiction over theplace where the business is locatedb' #o %educt and Withhold , withholdin aent is re=uired to deduct tax rom allmoney payments subject to withholdin taxc' #o +emit the #ax Withheld , withholdin aent is re=uired to remit tax withheld atthe time prescribed by law and reulationsd' #o 9ile Annual +eturn , withholdin aent is re=uired to fle the correspondinAnnual Inormation +eturn at the time prescribed by law and reulationse' #o Issue Withholdin #ax .ertifcates , withholdin aent shall urnish Withholdin

#ax .ertifcates to recipient o income payments subject to withholdin

5(' Who are considered #;P @! .orporate #axpayers? #op twenty thousand &@!' private corporations shall include a corporate taxpayerwho has been determined and notifed by the *ureau o Internal +evenue &*I+' ashavin satisfed any o the ollowin criteria1a' .lassifed and duly notifed by the .ommissioner as a lare taxpayer under+evenue +eulation -o" 5,)6! as amended! or belonin to the top fve thousand&G!' private corporations under ++ 5@,)C! or to the top ten thousand &5!'private corporations under ++ 5,@(! unless previously de,classifed as such or hadalready ceased business operations &automatic inclusion'Jb' BA# payment or payable whichever is hiher! o at least P5! or theprecedin yearJc' Annual income tax due o at least P@! or the precedin yearJd' #otal percentae tax paid o at least P5! or the precedin yearJe' :ross sales o P5!! and above or the precedin yearJ' :ross purchases o PG!! and above or the precedin yearJ' #otal excise tax payment o at least P5! or the precedin year"

5C' What are the obliations o #op @! .orporate #axpayers?a' In addition to the above responsibilities o a withholdin aent! #op @! privatecorporations shall withhold the one percent &5O' creditable expanded withholdin taxon the purchase o oods and two percent &@O' on the purchase o services &otherthan those covered by other withholdin tax rates' rom local suppliers where itreularly ma8es purchases" However! casual purchase o oods shall not be subjectto withholdin tax unless the amount o purchase at any one time involves P5!

or more! in which case! it shall then be re=uired to withhold the tax" #he same ruleapply to local4resident supplier o services other than those covered by separaterates o withholdin tax" Provided! however! that or purchases involvin ariculturalproducts in their oriinal state! the tax re=uired to be withheld shall only apply topurchases in excess o the cumulative amount o P(! within the same taxableyear" 9or this purpose! aricultural products in their oriinal state shall only includecorn! coconut! copra! palay! rice cassava! suar cane! co0ee! ruits! veetables!marine ood products! poultry and livestoc8s"b' #axes withheld shall be remitted usin *I+ 9orm 55,3 on a monthly basis thruthe use o the 3lectronic 9ilin and Payment 2ystem &39P2' on the dates prescribedor e,flers" 9ilin shall be done on a staered basis provided under ++ @,@@ andpayment shall be made every 5Gth day ollowin the end o the month or Man,-ov and

Man" @ o the ollowin year or the month o %ecember"

c' .ertifcate o .reditable #ax Withheld at 2ource &*I+ 9orm -o" @(' shall be issuedto the payees within twenty &@' days ollowin the close o such payeesQ taxable=uarter or upon demand o the payeesJd' A list o reular supplier o oods and4or services shall be submitted on asemestral basis throuh e,submission acility or as an attachment under 3lectronic9ilin and Payment 2ystem &39P2'" %eadline or submission o the list is not later than

Muly (5 and Manuary (5 o each year"

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However! initial list o reular suppliers should be submitted within fteen &5G' daysrom actual receipt hereo"

5G' Who are considered #;P G! Individual #axpayers? #op G! Individual #axpayers shall reer to individual taxpayers enaed in trade orbusiness or exercise o proession who have been determined and notifed by the

*ureau o Internal +evenue &*I+' as havin satisfed any o the ollowin criteria1a' BA# payment or payable whichever is hiher! o at least P5! or theprecedin yearJb' Annual income tax due o at least P@! or the precedin yearJc' #otal percentae tax paid o at least P5! or the precedin yearJd' :ross sales o P5!! and above or the precedin yearJe' :ross purchases o PG!! and above or the precedin yearJ' #otal excise tax payment o at least P5! or the precedin year"

5' What are the obliations o #op G! Individual #axpayers?a' In addition to the obliations o a withholdin aent! #op G! Individual

#axpayers shall withhold the one percent &5O' creditable expanded withholdin onthe purchase o oods and two percent &@O' on the purchase o services &other thanthose covered by other withholdin tax rates' rom local suppliers where it reularlyma8es purchases" However! casual purchase o oods shall not be subject towithholdin tax unless the amount o purchase at any one time involves P5! ormore! in which case! it shall then be re=uired to withhold the tax" #he same ruleapply to local4resident supplier o services other than those covered by separaterates o withholdin tax" Provided! however! that or purchases involvin ariculturalproducts in their oriinal state! the tax re=uired to be withheld shall only apply topurchases in excess o the cumulative amount o P(! within the same taxableyear" 9or this purpose! aricultural products in their oriinal state shall only includecorn! coconut! copra! palay! rice cassava! suar cane! co0ee! ruits! veetables!marine ood products! poultry and livestoc8s"b' #axes withheld shall be remitted under *I+ 9orm 55,3 on a monthly basis thruthe 3lectronic 9ilin and Payment 2ystem &39P2' acility within the prescribed period"c' .ertifcate o .reditable #ax Withheld at 2ource &*I+ 9orm -o" @(' shall be issuedto the payees within twenty &@' days ollowin the close o such payeesQ taxable=uarter or upon demand o the payeesJd' A list o reular supplier o oods and4or services shall be submitted on asemestral basis throuh e,submission acility or as an attachment under 3lectronic9ilin and Payment 2ystem &39P2'" %eadline or submission o the list is not later than

Muly (5 and Manuary (5 o each year"

However! initial list o reular suppliers should be submitted within fteen &5G' daysrom actual receipt hereo"

5' Who are the responsible ocials in the overnment oces chared with the dutyto deduct! withhold and remit withholdin taxes?

#he ollowin ocials are duty bound to deduct! withhold and remit taxes1

a' 9or ;ce o the Provincial :overnment,province, the .hie Accountant! Provincial #reasurer and the :overnorJb' 9or ;ce o the .ity :overnment,cities, the .hie Accountant! .ity #reasurer andthe .ity FayorJc' 9or ;ce o the Funicipal :overnment,municipalities, the .hie Accountant!Funicipal #reasurer and the FayorJd' ;ce o the *aranay,*aranay #reasurer and *aranay .aptaine' 9or -:As! :;..s and other :overnment ;ces! the .hie Accountant and theHead o ;ce or the ;cial holdin the hihest position"

EXCISE TAX

BASIC CO2CEP(1• 3xcise #ax is a tax on the production! sale or consumption o a commodity in a

country"APP3ICABI3I(? 1

• ;n oods manuactured or produced in the Philippines or domestic sale orconsumption or or any other dispositionJ and

• ;n oods imported"



(?PES O; E0CISE (A01

• Speci/c (a$ reers to the excise tax imposed which is based on weiht orvolume capacity or any other physical unit o measurement

• Ad 8alorem (a$ reers to the excise tax which is based on sellin price orother specifed value o the oods4articles

A22ER O; COPU(A(IO21• Speci/c (a$ _ -o" o >nits4other measurements x 2pecifc #ax +ate

• Ad 8alorem (a$ _ -o" o >nits4other measurements x 2ellin Price o anyspecifc value per unit x Ad Balorem #ax +ate

AOR C3ASSI;ICA(IO2 O; E0CISAB3E AR(IC3ES A2 RE3A(E COA3SEC(IO215" Alcohol Prod#cts &2ections 5C5,5C('a" %istilled 2pirits &2ection 5C5'b" Wines &2ection 5C@'c" 9ermented Li=uors &2ection 5C('@" (obacco Prod#cts &2ections 5CC,5C'a" #obacco Products &2ection 5CC'

b" .iars E .iarettes &2ection 5CG'c" Inspection 9ee &2ection 5C'(" Petrole#m Prod#cts &2ection 5C6'C" iscellaneo#s Articles &2ection 5C),5G'a" Automobiles &2ection 5C)'b" -on,essential :oods &2ection 5G'G" ineral Prod#cts &2ections 5G5'

PERSO2S 3IAB3E (O E0CISE (A01In 1eneral1a% On omestic or 3ocal Articles

•

•

• Fanuacturer• Producer

• ;wner or person havin possession o articles removed romthe place o production without the payment o the tax

b% On Imported Articles

•

•

• Importer

• ;wner

• Person who is ound in possession o articles which are exemptrom excise taxes other than those leally entitled to exemption

Others1On Indigeno#s Petrole#m

•

•

• Local 2ale! *arter or #ranser

•

o 9irst buyer! purchaser or transeree

• 3xportation

•

o ;wner! lessee! concessionaire or operator o the mininclaim

(IE O; PA?E2(1

In 1eneralo

•

• ;n domestic products

•

o *eore removal rom the place o production

• ;n imported products

•

5



o *eore release rom the customs$ custody

PENALTIES FOR LATE FILING OF TAX RETURNS

A. For late filing of Tax Returns with Tax Due to be paid, the following penalties will be imposed uponfiling, in addition to the tax due:

1. Surcharge

NIRC SEC. 248. - Civil Penalties.

(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five

percent (25%) of the amount due, in the following cases:

(1) Failure to file any return and pay the tax due thereon as required under the provisions of this Code or

rules and regulations on the date prescribed; or

(2) Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other

than those with whom the return is required to be filed; or

(3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or

(4) Failure to pay the full or part of the amount of tax shown on any return required to be filed under theprovisions of this Code or rules and regulations, or the full amount of tax due for which no return is required

to be filed, on or before the date prescribed for its payment.

2. Interest

NIRC SEC. 249. Interest. -

(A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of

twenty percent (20%) per annum, or such higher rate as may be prescribed by rules and regulations, from

the date prescribed for payment until the amount is fully paid.

3. Compromise

NIRC SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold

and Remit Tax and Refund Excess Taxes Withheld on Compensation. - Any person required under thisCode or by rules and regulations promulgated thereunder to pay any tax make a return, keep any record, or

supply correct the accurate information, who willfully fails to pay such tax, make such return, keep such

record, or supply correct and accurate information, or withhold or remit taxes withheld, or refund excess

taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in

addition to other penalties provided by law, upon conviction thereof, be punished by a fine of not less than

Ten Thousand Pesos (P 10,000) and suffer imprisonment of not less than one (1) year but not more than ten

(10) years.

Any person who attempts to make it appear for any reason that he or another has in fact filed a return or

statement, or actually files a return or statement and subsequently withdraws the same return or statement

after securing the official receiving seal or stamp of receipt of internal revenue office wherein the same was

actually filed shall, upon conviction therefor, be punished by a fine of not less than Ten Thousand Pesos

(P10,000) but not more than Twenty Thousand Pesos (P 20,000) and suffer imprisonment of not less than

one (1) year but not more than three (3) years.

In addition,Annex A of Revenue Memorandum Order (RMO) No. 7-2015 provides for the Revised

Consolidated Schedule of Compromise Penalties for Violations of the National Internal Revenue Code

(NIRC), which can be accessed via this link: Annex

From page 5 of Annex A of RMO No. 7-2015

TAX

CODE

SEC

NATURE OF VIOLATIONCRIMINAL PENALTY

IMPOSEDAMOUNT OF COMPROMISE

255 Failure to file and/or pay

any internal revenue tax at

the time or times required by

law or regulation

Fine of not less than

P10,000 and imprisonment

of not less than one (1)

year but not more than 10

years

If the amount of tax unpaid

ExceedsBut does

not exceed

Compromise

is

P x x x P 5,000 P 1,000

5,000 10,000 3,000

@

http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202015/RMO%20No.%207-2015%20Annex%20A.pdf






10,000 20,000 5,000

20,000 50,000 10,000

50,000 100,000 15,000

100,000 500,000 20,000

500,000 1,000,000 30,000

1,000,000 5,000,000 40,000

5,000,000 x x x 50,000

B. For late filing of Tax Returns with NO Tax Due to be paid, the compromise penalty will be imposed

upon filing of the Tax Return based on the following:

1. For violations of the NIRC provisions which are subject to compromise, the reference is found in page 4 of

Annex A of RMO No. 7-2015.

TAX

CODE

SEC

NATURE OF VIOLATION CRIMINAL PENALTYIMPOSED

AMOUNT OF COMPROMISE

255 Failure to make/file/submit

any return or supply

correct information at the

time or times required by

law or regulation

Fine of not less than

P10,000 and imprisonment

of not less than one (1) year

but not more than ten (10)

years

If gross sales, earnings or receipts;

or gross estate or gift(based on the

subject returns/information for

filing/submission)

ExceedsBut does not

exceedCompromise is

P x x x P 50,000 P 1,000

50,000 100,000 3,000

100,000 500,000 5,000

500,000 5,000,000 10,000

5,000,000 10,000,000 15,000

10,000,000 25,000,000 20,000

25,000,000 x x x 25,000

2. For violations of the NIRC provisions which may be the subject of criminal actions, Section 250 of the

NIRC will apply as follows:

NIRC SEC. 250. Failure to File Certain Information Returns. - In the case of each failure to file aninformation return, statement or list, or keep any record, or supply any information required by this Code or

by the Commissioner on the date prescribed therefor, unless it is shown that such failure is due to

reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commissioner, be

paid by the person failing to file, keep or supply the same, One Thousand Pesos (P 1,000) for each failure:

Provided, however, That the aggregate amount to be imposed for all such failures during a calendar year

shall not exceed Twenty-Five Thousand Pesos (P 25,000).

C. For late filing of Statements/Reports required to be filed with NO Tax Due to be paid, the

compromise penalty will be imposed upon filing of the Tax Return based on the following:

NIRC SEC. 275. Violation of Other Provisions of this Code or Rules and Regulations in General.- Any

person who violates any provision of this Code or any rule or regulation promulgated by the Department of

Finance, for which no specific penalty is provided by law, shall, upon conviction for each act or omission, be

punished by a fine of not more than One Thousand Pesos (P 1,000) or suffer imprisonment of not more than

six (6) months, or both.

1E2ERA3 AUI( PROCEURES A2 OCUE2(A(IO2

5" When does the audit process bein?#he audit process commences with theissuance o a Letter o Authority to a taxpayer who has been selected or audit"

(



@" What is a Letter o Authority? #he Letter o Authority is an ocial document thatempowers a +evenue ;cer to examine and scrutini/e a #axpayerQs boo8s o accounts and other accountin records! in order to determine the #axpayerQs correctinternal revenue tax liabilities"

(" Who issues the Letter o Authority? Letter o Authority! or audit4investiation o taxpayers under the jurisdiction o -ational ;ce! shall be issued and approved bythe .ommissioner o Internal +evenue! while! or taxpayers under the jurisdiction o +eional ;ces! it shall be issued by the +eional %irector"

C" When must a Letter o Authority be served? A Letter o Authority must be served tothe concerned #axpayer within thirty &(' days rom its date o issuance! otherwise! itshall become null and void" #he #axpayer shall then have the riht to reuse theservice o this LA! unless the LA is revalidated"

G" How oten can a Letter o Authority be revalidated? A Letter o Authority isrevalidated throuh the issuance o a new LA" However! a Letter o Authority can berevalidatedR;nly once! or LAs issued in the +evenue +eional ;ces or the +evenue %istrict;cesJ or

#wice! in the case o LAs issued by the -ational ;ce"Any suspended LA&s' must be attached to the new LA issued &+F; (6,66'"

" How much time does a +evenue ;cer have to conduct an audit?A +evenue;cer is allowed only one hundred twenty &5@' days rom the date o receipt o aLetter o Authority by the #axpayer to conduct the audit and submit the re=uiredreport o investiation" I the +evenue ;cer is unable to submit his fnal report o investiation within the 5@,day period! he must then submit a Proress +eport to hisHead o ;ce! and surrender the Letter o Authority or revalidation"

" How is a particular taxpayer selected or audit?;cers o the *ureau &+evenue%istrict ;cers! .hie! Lare #axpayer Assessment %ivision! .hie! 3xcise #axpayer;perations %ivision! .hie! Policy .ases and #ax 9raud %ivision' responsible or theconduct o audit4investiation shall prepare a list o all taxpayer who all within theselection criteria prescribed in a +evenue Femorandum ;rder issued by the .I+ toestablish uidelines or the audit proram o a particular year" #he list o taxpayersshall then be submitted to their respective Assistant .ommissioner or pre,approvaland to the .ommissioner o Internal +evenue or fnal approval" #he list submitted by+%; shall be pre,approved by the +eional %irector and fnally approved by Assistant.ommissioner! Assessment 2ervice &+F;s C,))! ,))! 56,@ and 5),@'"

6" How many times can a taxpayer be subjected to examination and inspection orthe same taxable year? A taxpayerQs boo8s o accounts shall be subjected toexamination and inspection only once or a taxable year! except in the ollowincases1

When the .ommissioner determines that raud! irreularities! or mista8es werecommitted by #axpayerJWhen the #axpayer himsel re=uests a re,investiation or re,examination o his boo8so accountsJWhen there is a need to veriy the #axpayerQs compliance with withholdin and otherinternal revenue taxes as prescribed in a +evenue Femorandum ;rder issued by the.ommissioner o Internal +evenue"When the #axpayerQs capital ains tax liabilities must be verifedJ andWhen the .ommissioner chooses to exercise his power to obtain inormation relativeto the examination o other #axpayers &2ecs" G and @(G! -I+.'"

)" What are some o the powers o the .ommissioner relative to the audit process?Inaddition to the authority o the .ommissioner to examine and inspect the boo8s o

accounts o a #axpayer who is bein audited! the .ommissioner may also1;btain data and inormation rom private parties other than the #axpayer himsel &2ec"G! -I+.'J and.onduct inventory and surveillance! and prescribe presumptive ross sales andreceipts &2ec" ! -I+.'"

5" What is a -otice or Inormal .onerence ?A -otice or Inormal .onerence is awritten notice inormin a #axpayer that the fndins o the audit conducted on his

C



boo8s o accounts and accountin records indicate that additional taxes or defciencyassessments have to be paid"I! ater the culmination o an audit! a +evenue ;cer recommends the imposition o defciency assessments! this recommendation is communicated by the *ureau to the

#axpayer concerned durin an inormal conerence called or this purpose" #he #axpayer shall then have fteen &5G' days rom the date o his receipt o the -otice

or Inormal .onerence to explain his side"

55" Within what time period must an assessment be made?An assessment must bemade within three &(' years rom the last day prescribed by law or the flin o thetax return or the tax that is bein subjected to assessment or rom the day thereturn was fled i fled late" However! in cases involvin tax raud! the *ureau has ten&5' years rom the date o discovery o such raud within which to ma8e theassessment"

Any assessments issued ater the applicable period are deemed to have prescribed!and can no loner be collected rom the #axpayer! unless the #axpayer has previouslyexecuted a Waiver o 2tatute o Limitations"

5@" What is 7Meopardy Assessment7? A Meopardy Assessment is a tax assessmentmade by an authori/ed +evenue ;cer without the beneft o complete or partialaudit! in liht o the +;Qs belie that the assessment and collection o a defciency taxwill be jeopardi/ed by delay caused by the #axpayerQs ailure to1.omply with audit and investiation re=uirements to present his boo8s o accountsand4or pertinent records! or2ubstantiate all or any o the deductions! exemptions or credits claimed in his return"

5(" What is a Pre,Assessment -otice &PA-'? #he Pre,Assessment -otice is acommunication issued by the +eional Assessment %ivision! or any other concerned*I+ ;ce! inormin a #axpayer who has been audited o the fndins o the +evenue;cer! ollowin the review o these fndins"

I the #axpayer disarees with the fndins stated in the PA-! he shall then havefteen &5G' days rom his receipt o the PA- to fle a written reply contestin theproposed assessment"

5C" >nder what instances is PA- no loner re=uired? A Preliminary Assessment -oticeshall not be re=uired in any o the ollowin cases! in which case! issuance o theormal assessment notice or the payment o the taxpayerQs defciency tax liabilityshall be sucient1When the fndin or any defciency tax is the result o mathematical error in thecomputation o the tax appearin on the ace o the tax return fled by the taxpayerJorWhen a discrepancy has been determined between the tax withheld and the amountactually remitted by the withholdin aentJ orWhen a taxpayer who opted to claim a reund or tax credit o excess creditablewithholdin tax or a taxable period was determined to have carried over andautomatically applied the same amount claimed aainst the estimated tax liabilitiesor the taxable =uarter or =uarters o the succeedin taxable yearJ orWhen the excise tax due on excisable articles has not been paidJ orWhen an article locally purchased or imported by an exempt person! such as! but notlimited to! vehicles! capital e=uipment! machineries and spare parts! has been sold!traded or transerred to non,exempt persons"

5G" What is a -otice o Assessment49ormal Letter o %emand?A -otice o Assessment is a declaration o defciency taxes issued to a #axpayer whoails to respond to a Pre,Assessment -otice within the prescribed period o time! orwhose reply to the PA- was ound to be without merit" #he -otice o Assessmentshall inorm the #axpayer o this act! and that the report o investiation submittedby the +evenue ;cer conductin the audit shall be iven due course"

#he ormal letter o demand callin or payment o the taxpayerQs defciency tax ortaxes shall state the acts! the law! rules and reulations! or jurisprudence on whichthe assessment is based! otherwise! the ormal letter o demand and the notice o assessment shall be void"

(A0PA?ERMS OB3I1A(IO2S A2 PRI8I3E1ES

G



5" What is re=uired o a taxpayer who is bein audited?A #axpayerwho is bein audited is oblied to1%uly ac8nowlede his receipt o the appropriate Letter o Authorityupon its presentation by the +evenue ;cer authori/ed to conduct theaudit by axin in the Letter o Authority the name o the recipient

and the date o receipt"Present within a reasonable period o time! his boo8s o accounts andother related accountin records that may be re=uired by the +evenue;cerJ and2ubmit the necessary schedules as may be re=uested by the +evenue;cer within a reasonable amount o time rom his &#axpayerQs'receipt o the Letter o Authority"

5" What is the recourse o a #axpayer who cannot submit thedocuments bein re=uired o him within the prescribed period o time?I a #axpayer! believin that he cannot present his boo8s o accounts

and4or other accountin records! intends to re=uest or more time topresent these documents in order to avoid the issuance o a MeopardyAssessment! the #axpayer may execute what is reerred to as a Waivero the 2tatute o Limitations"

56" What is a Waiver o the 2tatute o Limitations? #he Waiver o the2tatute o Limitations is a sined statement whereby the #axpayerconveys his areement to extend the period within which the *ureaumay validly issue an assessment or defciency taxes" I a #axpayeropts to execute a Waiver o the 2tatute o Limitations! he shall li8ewisebe! in e0ect! waivin his riht to invo8e the deense o prescription or

assessments issued ater the relementary period"-o Waiver o the 2tatute o Limitations shall be considered valid unlessit is accepted by a duly authori/ed *ureau ocial"

5)" I a #axpayer does not aree with the assessment made ollowinan audit! can he protest this Assessment?<es! he can" A #axpayer hasthe riht to contest an assessment! and may do so by flin a letter o protest statin in detail his reasons or contestin the assessment"

@" What are the characteristics o a valid protest? A protest isconsidered valid i it satisfes the ollowin conditions1

It is made in writin! and addressed to the .ommissioner o Internal+evenueJIt contains the inormation! and complies with the conditions re=uiredby 2ec" o +evenue +eulations -o" 5@,6GJ to wit1a"' -ame o the taxpayer and address or the immediate past three &('taxable year"b"' -ature o re=uest whether reinvestiation or reconsiderationspeciyin newly discovered evidence he intends to present i it is are=uest or investiation"c"' #he taxable periods covered"d"' Assessment number"

e"' %ate o receipt o assessment notice or letter o demand""' Itemi/ed statement o the fndins to which the taxpayer arees asa basis or computin the tax due! which amount should be paidimmediately upon the flin o the protest" 9or this purpose! the protestshall not be deemed validly fled unless payment o the areed portiono the tax is paid frst"



"' #he itemi/ed schedule o the adjustments with which the taxpayerdoes not aree"h"' A statement o acts and4or law in support o the protest" #he taxpayer shall state the acts! applicable law! rules and reulationsor jurisprudence on which his protest is based! otherwise! his protest

shall be considered void and without orce and e0ect on the event theletter o protest submitted by the taxpayer is accepted! the taxpayershall submit the re=uired documents in support o his protest withinsixty &' days rom date o flin o his letter o protest! otherwise! theassessment shall become fnal! executory and demandable"It is fled within thirty &(' days rom the #axpayerQs receipt o the-otice o Assessment and ormal Letter o %emand"

@5" In the event the .ommissionerQs duly authori/ed representativedenies a #axpayerQs protest! what alternative course o action is opento the #axpayer? I a protest fled by a #axpayer be denied by the

.ommissionerQs duly authori/ed representative! the #axpayer mayre=uest the .ommissioner or a reconsideration o such denial and thathis tax case be reerred to the *ureauQs Appellate %ivision" #heAppellate %ivision serves as a 7.ourt7! where both parties! i"e" the+evenue ;cer on one hand! and the #axpayer on the other! canpresent testimony and evidence beore a Hearin ;cer! to supporttheir respective claims"

@@" What recourse is open to a #axpayer i his re=uest orreconsideration is denied or his protest is not acted?2hould the #axpayerQs re=uest or reconsideration be denied or his

protest is not acted upon within 56 days rom submission o documents by the .ommissioner! the #axpayer has the riht to appealwith the .ourt o #ax Appeals &.#A'"Any appeal must be done within thirty &(' days rom the date o the #axpayerQs receipt o the .ommissionerQs decision denyin the re=uestor reconsideration or rom the lapse o the 56 day period countedrom the submission o the documents" &2ec" @@6 o the #ax .ode! asamended'"

@(" I the #axpayer is not satisfed with the .#AQs decision! can heappeal the decision to a hiher .ourt? <es! he can" %ecisions o the

.ourt o #ax Appeals may be appealed with the .ourt o Appeals withinfteen &5G' days rom the #axpayerQs receipt o the .#AQs decision" Inthe event that the #axpayer is li8ewise unsatisfed with the decision o the .ourt o Appeals! he may appeal this decision with the 2upreme.ourt"

@C" .an a #axpayer claim a reund or tax credit or erroneously orilleally collected taxes? <es! he can" #he #axpayer may fle such aclaim with the .ommissioner o Internal +evenue &2ec"@@)! -I+.'!within two &@' years rom the payment o the tax or penalty souht tobe reunded" 9ailure o the #axpayer to fle such a claim within this

prescribed period shall result in the oreiture o his riht to the reundor tax credit"

@G" I a #axpayer has fled a claim or reund and the *ureau has yet torender a decision on this claim! can the #axpayer elevate his claim tothe .#A?



<es! he can! i the two &@' year period stated above is about to end! andthe .ommissioner has yet to render a decision on the claim" &:ibbs v".ollector! L,5(CG(! 9ebruary @)! 5)'"

REEIES O; (.E BUREAU I2 (.E AUI( PROCESS A2 CO33EC(IO2 O;E3I2UE2( ACCOU2(S

@" What means are available to the *ureau to compel a #axpayer to produce hisboo8s o accounts and other records? A #axpayer shall be re=uested! in writin! notmore than two &@' times! to produce his boo8s o accounts and other pertinentaccountin records! or inspection" I! ater the #axpayerQs receipt o the secondwritten re=uest! he still ails to comply with the re=uirements o the notice! the*ureau shall then issue him a 2ubpoena %uces #ecum"

@" What course o action shall the *ureau ta8e i the #axpayer ails to comply withthe 2ubpoena %uces #ecum?I! ater the #axpayer ails! reuses! or nelects to comply with the re=uirements o the 2ubpoena %uces #ecum! the *ureau may19ile a criminal case aainst the #axpayer or violation o 2ection G as it relates to

2ections 5C and @! o the -I+.! as amendedJ and4orInitiate proceedins to cite the #axpayer or contempt! under 2ection (&'! +ule 5 o the +evised +ules o .ourt"

@6" What alternatives are open to :overnment or the collection o delin=uentaccounts?;nce an assessment becomes fnal and demandable! the :overnment may employany! or all! o the ollowin remedies or the collection o delin=uent accounts1%istraint o personal propertyJLevy o real property belonin to the #axpayerJ.ivil ActionJ and.riminal Action"

@)" What is 7%istraint o Personal Property7? %istraint o personal property involvesthe sei/ure by the :overnment o personal property , tanible or intanible , toenorce the payment o taxes! ollowed by the public sale o such property! i the

#axpayer ails to pay the taxes voluntarily"

(" What is 7Levy o +eal Property7? Levy o real property reers to the same act o sei/ure! but in this case o real property! and interest in or rihts to such property inorder to enorce the payment o taxes" As in the distraint o personal property! thereal property under levy shall be sold in a public sale! i the taxes involved are notvoluntarily paid ollowin such levy"

(5" In what time period must collection be made? Any internal revenue tax! whichhas been assessed within the period prescribed shall be collected within three &('

years rom date o assessment" However! tax raud cases may be collected bydistraint or levy or by a court proceedin within fve &G' years rom assessment o thetax or rom the last waiver"

bir notes (edited)

Documents