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Name: Vincent Ian B.

De la Cruz 2011 BSN2-Alpha Business Taxes in the Philippines Feb 19, 2011 by Vic

Sept. 21,

Business taxes in the Philippines can either be Value Added Taxes (VAT) or Percentage Taxes. Furthermore, an Excise Tax can also be imposed on certain taxpayers who are in the course of trade or business as an addition to VAT. Unlike an income tax, which is based on the taxpayers net taxable income, business taxes (VAT and percentage taxes) are generally based on gross sales or receipts. This means that you will only pay an income tax if you earn a taxable income. But whether you gain taxable income or incur business losses, as long as you have sales or receipts that are subject to VAT or percentage tax, you may still need to pay for business taxes. In the course of trade or business The phrase in the course of trade or business means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental there to, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity (Section 105, NIRC). Employees and workers who are earning purely from compensation income are not subjected to business taxes. However, employees who are earning mixed income (income from compensation and from business or practice of profession can be subjected to business taxes i.e., VAT or percentage tax.

What are the types of business taxes in the Philippines? The following are considered business taxes in the Philippines: Value Added Tax - Value Added Tax (VAT) is a business tax imposed and collected from the seller in the course of trade or business on every sale of properties (real or personal) lease of goods or properties (real or personal) or vendors of services. It is an indirect tax, thus, it can be passed on to the buyer. Percentage Tax - Percentage Tax is a business tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P1,500,000 and are not VAT-registered. Excise Tax - Excise taxes apply to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported. The excise tax imposed shall be in addition to the value-added tax. Resources: National Internal Revenue Code (NIRC) Republic Act 8424

BIR tax information

Paying Taxes in Philippines Listed below is a detailed summary of the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as measures of administrative burden in paying taxes. The information appearing on this page was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 183 economies. The most recent round of data collection for the project was completed in December 2009. Tax or mandatory Payments contribution (number) Corporate income 1 tax Local business tax 1 Social security contributions 12 38 Notes on Time Payments (hours) online filing 37 Statutory tax rate 30.0% Total tax Notes on rate (% TTR profit) 21.3 8.8 6.6 4.2 1.7 1.7 0.5 0.3 0.2 0.2 0.1 0 0 small amount small amount not included 45.8

Tax base

Real property tax 1 Health insurance 12 Housing 12 development fund Tax on interest 1 community tax 1 certificate Environmental tax 1 Employer's 0 compensation vehicle tax BIR certificate 1 0 paid jointly

paid jointly

Tax on check 1 transactions Tax on insurance 1 contracts Stamp duty 1 online filing 120 195

taxable profit previous 0.5% year turnover 7.02% to gross 7.45% salaries assessed 2.0% property value 1.12%gross 1.25% salaries 2% or P100 gross per worker salaries 20.0% interest fixed fee (P 10,500) P10,000 10P per per month employee basic fee + vehicle 24% weight fixed fee (P 500) P 1.5 per number of check checks P 0.5 per insurance each P 4 premium contract various rates value 12.0% value added

Value added tax 1 (VAT) Totals: 47

The laws governing taxation in the Philippines are contained within the National Internal Revenue Code. This code underwent substantial revision with passage of the Tax Reform Act of 1997. This law took effect on January 1, 1998. Taxation is administered through the Bureau of Internal Revenue which comes under the Department of Finance. The chief executive of the Bureau of Internal Revenue is the Commissioner who has exclusive and original jurisdiction to interpret the provisions of the code and other tax laws. The commissioner also has the powers to decide disputed assessments, grant refunds of taxes, fees and other charges and penalties, modify payment of any internal revenue tax and abate or cancel a tax liability. Taxpayers can appeal decisions by the Commissioner directly to the Court of Tax Appeals. The VAT is equivalent to 12% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged. Any excise tax on these goods is also part of the gross selling price. In the case of imported goods, VAT is based on the total value of the goods as determined by the Bureau of Customs plus customs duties, excise taxes and incidental charges. The VAT is an indirect tax. While the obligation to collect and remit rests with the seller, the cost of the tax may be passed on to the buyer, transferee or lessee of the goods, properties or services. A VAT registered entity may credit the VAT paid on purchases of other goods and services against the tax on its current period sales of goods or services. If the amount of input tax is greater than the amount of output tax, the excess may be credited against succeeding period output VAT. VAT registered entities are required to issue an invoice or receipt for every sale and, in addition to regularly required accounting records, they must maintain subsidiary sales and purchase journals exclusively for VAT purposes. VAT reports must be submitted on a quarterly basis, twenty-five days after the end of the quarter. VAT payments must be made on a monthly basis. The laws governing taxation in the Philippines are contained within the National Internal Revenue Code. This code underwent substantial revision with passage of the Tax Reform Act of 1997. This law took effect on January 1, 1998. Taxation is administered through the Bureau of Internal Revenue which comes under the Department of Finance. The chief executive of the Bureau of Internal Revenue is the Commissioner who has exclusive and original jurisdiction to interpret the provisions of the code and other tax laws. The commissioner also has the powers to decide disputed assessments, grant refunds of taxes, fees and other charges and penalties, modify payment of any internal revenue tax and abate or cancel a tax liability. Taxpayers can appeal decisions by the Commissioner directly to the Court of Tax Appeals. The Philippines has tax treaties with many countries, including the United States, in order to minimise the effects of double taxation. The business profits of a resident of another country with whom the Philippines has a tax treaty are taxable in the Philippines only if the resident has a permanent establishment in the Philippines to which the profits are attributable.

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