“TAXES ARE the lifeblood of the government
and so should be collected without unnecessary hindrance. On the other
hand, such collection should be made in accordance with law as any
arbitrariness will negate the very reason for government itself.” --
Justice Isagani Cruz, Commissioner of Internal Revenue v. Algue
The collection of taxes is an imperious
need. The actions of the Bureau of Internal Revenue (BIR) in recent
years seem to take this tenet to heart. Its most recent regulation on
the due process requirements in the issuance of a deficiency tax
assessment (Revenue Regulation/“RR” 18-13) is no exception.
This new issuance shortens the BIR’s deficiency tax assessment process
by introducing two changes. First, the BIR will no longer conduct
informal conferences before issuing a Preliminary Assessment Notice
(PAN). Second, the BIR will now issue a Final Assessment Notice (FAN)
within 15 days from receiving the taxpayer’s reply to the PAN. These
seemingly procedural changes are not benign. They erode our rights as
taxpayers.
Before RR 18-13, several communications with the taxpayer were required
before a PAN could be issued. First, the revenue officer who made the
audit was required to discuss his findings of deficiency taxes with the
taxpayer and to ask him if he agreed or not. Second, if the taxpayer
disagreed, he would be informed in writing of the discrepancies in his
tax payments. Third, the taxpayer would be invited to an informal
conference to give him an opportunity to present his side. The Supreme
Court and the Court of Tax Appeals recognized these steps as guarantees
of due process that must be strictly complied with. And they did
guarantee due process, at least until RR 18-13.
Now, with the new rule, the taxpayer’s first opportunity to be heard
will be when he replies to the PAN. This reply is based on Section 228
of our tax code. It states that the PAN must require the taxpayer to
reply. It is only when the taxpayer does not reply that a FAN is issued
as a matter of due course. Unfortunately, the new rule may render
illusory this statutory remedy.
This is because RR 18-13 seems to imply that the BIR will issue a FAN as
a matter of due course within 15 days from receiving the taxpayer’s
reply to the PAN. Even if we are to give the BIR the benefit of the
doubt, 15 days will not be enough time to evaluate the correctness of
the assessment in complicated tax cases -- especially when one no longer
has the benefit of an informal conference to thresh out issues that can
be easily resolved. Not to mention that the BIR will be handling
several tax assessments within those 15 days. Under RR 18-13, it is only
when the taxpayer files his protest of the FAN that the BIR will be in a
position to seriously consider his objections to the assessment with
the attention he deserves.
Perhaps to temper the effects of these two changes, RR 18-13 finally
institutionalized the long-standing option of elevating a protest to the
BIR Commissioner from an adverse decision of her duly authorized
representative. There is now an official added layer of administrative
review before recourse to the courts. But this too may be illusory, as
there are instances when the Commissioner herself issues a FAN in lieu
of her authorized representatives. In that case, the taxpayer will
suffer the adverse effects of RR 18-13 without the benefit of the
additional layer of administrative review.
Truly, taxes are an imperious need and are indispensable. Nevertheless,
democratic societies must impose taxes reasonably and in accordance with
the prescribed procedure. No person should be deprived of his property
without due process of law. In an administrative process where the BIR
is the judge, jury, and executioner, can it not give the taxpayer every
opportunity to be heard? After all, isn’t that the essence of due
process?
(The author is an Associate of the Angara Abello Concepcion Regala & Cruz Law Offices. He can be contacted at 830-000 and rjredoble@accralaw.com.
The views and opinions expressed in this article are those of the
author. This article is for general informational and educational
purposes only and not offered as and does not constitute legal advice or
legal opinion).
source: Businessworld
Tuesday, January 14, 2014
Monday, January 13, 2014
Splitting the pie: PEZA ITH or 5% GIT
IS YOUR company one of the more fortunate
enterprises enjoying PEZA (Philippine Economic Zone Authority)
incentives? If it is, then you are enjoying either the Income Tax
Holiday (ITH) incentive or the 5% Gross Income Tax (GIT) regime.
As provided under Republic Act 7916, PEZA-registered enterprises may be entitled to ITH of four to six years, depending on whether the firm has been granted pioneer or non-pioneer status. After the expiration of the ITH period, they shall be subject to the 5% GIT, in lieu of all national and local taxes to which the enterprise is directly liable.
Under the law, the 5% GIT shall be split as follows: 3% to the national government, and 2% to the Local Government Unit (LGU) where the enterprise is located.
So, how do these PEZA enterprises remit the above taxes to the Bureau of Internal Revenue (BIR) and the LGU? Are they required to prepare and file two separate tax returns -- one for the BIR and one for the LGU? What if the enterprise is located in two or more cities/municipalities? How will the 2% share be split?
Under Revenue Regulations No. 01-00, a PEZA-registered enterprise under the 5% GIT regime shall still be required to file only one quarterly and final income tax return. However, after filing the income tax return with the BIR, the taxpayer should submit a copy of the filed return to the LGU for payment of the 2% share.
In case the enterprise is located in more than two sites, the said enterprise shall also submit together with its quarterly/annual income tax return a separate schedule showing (1) the “gross income earned” for the quarter without, however, showing the details on how the same has been computed; (2) the 5% special tax due thereon; (3) the 3% tax share of the National Government; and (4) the share of each city/municipality from the 2% tax share of cities and municipalities.
As provided in the PEZA implementing rules and regulations, the share of each city/municipality covering the area where the enterprise is situated shall be computed based on the ratio of the area of the city/municipality included in the lot occupied by the ecozone-registered enterprise to the total area occupied by the establishment. On the other hand, in case of IT enterprises that have different sites in different cities/municipalities, the share of the different LGUs where the sites are located shall be computed on the taxable income attributed to such sites.
Considering the above rules, it is then very important for PEZA enterprises to make sure that only the 3% share is remitted to the BIR. Any 2% LGU share erroneously paid to the BIR cannot be considered equivalent payment of that due to the LGU/s.
Nonetheless, in case an error has already been committed, the company may opt to apply for refund from the BIR.
In a recent Court of Tax Appeals (CTA) case (CTA Case No. 8465), where both the 3% share of the National Government and 2% of the LGU in the 5% preferential tax rate were remitted to the BIR, the overpayment representing the 2% share of the LGU was considered an erroneously paid tax. Hence, this entitled the PEZA-registered enterprise to a claim for cash refund or issuance of tax credit certificate.
The CTA noted that, unlike with a VAT refund, there is no specific regulation enumerating the documents needed to be presented when filing an administrative claim for refund of erroneous payment of the 5% special income tax for PEZA-registered enterprises. It thus held that so long as a taxpayer is able to fully substantiate the amount to be refunded, as well as show its entitlement for the refund, the taxpayer should be entitled to refund of its overpaid taxes.
In support of its claim for refund, the PEZA-registered enterprise submitted its duly accomplished application for tax credit/refund, BIR certificate of registration, PEZA registration, and pertinent quarterly and annual income tax returns. The CTA deemed the documents sufficient to determine the validity of the taxpayer’s claim for tax refund; hence, the taxpayer was entitled to a refund of its erroneously paid tax.
OTHER LGU REQUIREMENTS
The Jan. 20 deadline for LGU registration renewal is just mere days away.
PEZA law and circular explicitly provides that, regardless of the tax regimes, PEZA enterprises are exempt from the payment of any and all local government imposts, fees, licenses or taxes. However, as we all know, there are still some cities and municipalities that require PEZA-registered entities to obtain local government permits and pay the corresponding permit fees and other regulatory fees, such as zoning fee, garbage fee, and fire safety inspection fee, among others. Hence, we would like to take this opportunity to remind PEZA enterprises to assess their obligation to renew their LGU registration and ensure their compliance.
The author is a manager with the tax advisory and compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.
source: Businessworld
As provided under Republic Act 7916, PEZA-registered enterprises may be entitled to ITH of four to six years, depending on whether the firm has been granted pioneer or non-pioneer status. After the expiration of the ITH period, they shall be subject to the 5% GIT, in lieu of all national and local taxes to which the enterprise is directly liable.
Under the law, the 5% GIT shall be split as follows: 3% to the national government, and 2% to the Local Government Unit (LGU) where the enterprise is located.
So, how do these PEZA enterprises remit the above taxes to the Bureau of Internal Revenue (BIR) and the LGU? Are they required to prepare and file two separate tax returns -- one for the BIR and one for the LGU? What if the enterprise is located in two or more cities/municipalities? How will the 2% share be split?
Under Revenue Regulations No. 01-00, a PEZA-registered enterprise under the 5% GIT regime shall still be required to file only one quarterly and final income tax return. However, after filing the income tax return with the BIR, the taxpayer should submit a copy of the filed return to the LGU for payment of the 2% share.
In case the enterprise is located in more than two sites, the said enterprise shall also submit together with its quarterly/annual income tax return a separate schedule showing (1) the “gross income earned” for the quarter without, however, showing the details on how the same has been computed; (2) the 5% special tax due thereon; (3) the 3% tax share of the National Government; and (4) the share of each city/municipality from the 2% tax share of cities and municipalities.
As provided in the PEZA implementing rules and regulations, the share of each city/municipality covering the area where the enterprise is situated shall be computed based on the ratio of the area of the city/municipality included in the lot occupied by the ecozone-registered enterprise to the total area occupied by the establishment. On the other hand, in case of IT enterprises that have different sites in different cities/municipalities, the share of the different LGUs where the sites are located shall be computed on the taxable income attributed to such sites.
Considering the above rules, it is then very important for PEZA enterprises to make sure that only the 3% share is remitted to the BIR. Any 2% LGU share erroneously paid to the BIR cannot be considered equivalent payment of that due to the LGU/s.
Nonetheless, in case an error has already been committed, the company may opt to apply for refund from the BIR.
In a recent Court of Tax Appeals (CTA) case (CTA Case No. 8465), where both the 3% share of the National Government and 2% of the LGU in the 5% preferential tax rate were remitted to the BIR, the overpayment representing the 2% share of the LGU was considered an erroneously paid tax. Hence, this entitled the PEZA-registered enterprise to a claim for cash refund or issuance of tax credit certificate.
The CTA noted that, unlike with a VAT refund, there is no specific regulation enumerating the documents needed to be presented when filing an administrative claim for refund of erroneous payment of the 5% special income tax for PEZA-registered enterprises. It thus held that so long as a taxpayer is able to fully substantiate the amount to be refunded, as well as show its entitlement for the refund, the taxpayer should be entitled to refund of its overpaid taxes.
In support of its claim for refund, the PEZA-registered enterprise submitted its duly accomplished application for tax credit/refund, BIR certificate of registration, PEZA registration, and pertinent quarterly and annual income tax returns. The CTA deemed the documents sufficient to determine the validity of the taxpayer’s claim for tax refund; hence, the taxpayer was entitled to a refund of its erroneously paid tax.
OTHER LGU REQUIREMENTS
The Jan. 20 deadline for LGU registration renewal is just mere days away.
PEZA law and circular explicitly provides that, regardless of the tax regimes, PEZA enterprises are exempt from the payment of any and all local government imposts, fees, licenses or taxes. However, as we all know, there are still some cities and municipalities that require PEZA-registered entities to obtain local government permits and pay the corresponding permit fees and other regulatory fees, such as zoning fee, garbage fee, and fire safety inspection fee, among others. Hence, we would like to take this opportunity to remind PEZA enterprises to assess their obligation to renew their LGU registration and ensure their compliance.
The author is a manager with the tax advisory and compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.
source: Businessworld
Significant changes to the BIR assessment process
(First of two parts)
WITH the Bureau of Internal Revenue (BIR) ’s intensified focus on enforcement and audits, taxpayers need to understand the investigation and assessment process and the available remedies under the law, particularly now that the recently issued Revenue Regulations (RR) No. 18-2013, dated Nov. 28, 2013 and which took effect on Dec. 15, 2013, introduced major changes to the BIR’s assessment processes.
One amendment that stands out is the removal of what used to be called “Informal Conference” between the BIR and the taxpayer, prior to the issuance of a deficiency tax assessment. Prior to the amendment, the BIR would send the taxpayer a Notice for Informal Conference (NIC), inviting the taxpayer to a conference or meeting with the examiners to give him a chance to present his side and explanations regarding the BIR’s preliminary findings. At this stage, the BIR would not have issued any formal assessment yet and would allow the taxpayer an opportunity to present his arguments and supporting documents.
After the informal conference, the BIR and the taxpayer could go through a series of discussions and document submissions, where the taxpayer would try to convince the BIR of the merits of his arguments. In the end, the taxpayer could opt to pay whatever remains of the proposed deficiency taxes.
Whether the taxpayer agreed or refused to pay the proposed deficiency taxes, the docket of the case would be endorsed for review to the Assessment Division of the Regional Office (in the case of findings on taxpayers registered with the BIR district offices), or to the BIR Commissioner or her duly authorized representative (in the case of large taxpayers and those investigated by the BIR National Office), as the case may be, for possible issuance of a Preliminary Assessment Notice (PAN). It was only when the taxpayer failed to respond to the BIR’s request for a conference that the docket was immediately endorsed to these offices for review and possible issuance of a deficiency tax assessment.
Under the new Regulations, the BIR will no longer issue NICs. This means that the BIR can already issue the PAN showing the proposed deficiency tax assessment, as well the detailed facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based. This shows the BIR’s aim to expedite the investigation process, and what the taxpayer does during the audit investigation stage will largely influence how the case will progress.
Now more than ever, it is important for the taxpayer to respond promptly to the investigating office’s requests for documents and/or explanations. The taxpayer should regularly coordinate with the handling revenue officer to keep abreast of the audit’s progress. He should constantly monitor the progress of the review to address the BIR’s questions in order to limit the issues, before the docket is presented to the reviewing office and being served with a PAN.
PREPARING FOR THE BIR AUDIT
Even before the BIR issues the PAN, or better yet, even before the taxpayer receives a Letter of Authority for a BIR audit, the taxpayer will do well to review his records to ensure that the declarations in his tax returns are reconciled with those disclosed in his financial statements. The taxpayer should also ensure that taxes on relevant expenses and asset acquisitions have been withheld and remitted to the BIR. This exercise will reduce the burden of the BIR audit as it is almost certain that a similar reconciliation will have to be done once the taxpayer receives an assessment from the BIR.
With the informal conference gone, a question that arises is whether the taxpayer will still have the ability to pay the deficiency taxes assessed at the level of the examining office, or whether he should wait until the reviewing office evaluates the docket and issues the PAN.
In the absence of an informal conference, the Revenue District Office, for instance (in the case of a non-large taxpayer), would immediately endorse its report to the regional office with a recommendation for the issuance of a PAN. Hence, it would seem that the taxpayer may now pay the deficiency taxes only after the PAN is issued.
ISSUANCE OF A FINAL ASSESSMENT NOTICE / FORMAL LETTER OF DEMAND
When a PAN is issued, the taxpayer has 15 days to submit his response. If he fails to do so, he is considered in default. The BIR shall then issue a Formal Letter of Demand and Final Assessment Notice (FLD/FAN) calling for the payment of the deficiency tax assessed, inclusive of the applicable penalties.
If the taxpayer submits his response but disagrees with the findings in the PAN, the new rules require the BIR to issue the FLD/FAN within 15 days from the filing of the taxpayer’s response. While the 15-day period clearly indicates the BIR’s goal of moving the process forward, it nevertheless raises the question of whether the taxpayer’s response to the PAN will be given sufficient consideration.
Once the FLD/FAN is issued, it becomes even more critical for the taxpayer to strictly adhere to the new rules prescribed in RR 18-2013, since a misstep may have dire consequences.
As mandated in the Tax Code, the FLD/FAN should state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based; otherwise, the assessment shall be void. Within 30 days from receipt of the FLD/FAN, the taxpayer may file his protest, either by way of a request for reconsideration or reinvestigation.
In the second part of this article next week, we will discuss in more detail the filing of protests and other important procedural information.
Rubina P. Bundoc-Aquino is a tax senior director of SGV & Co.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Monday, January 6, 2014
Planning the year ahead
AS THEY always say, the key to a fruitful
year is to start the year right. Planning for the coming year is a key
to starting it right. Not only do you need to plot your holiday
getaways, you might also want to include in your to-do’s the submission
of tax requirements related to the close of the taxable year that are in
addition to the monthly requirements. Let’s go through the requirements
based on the monthly deadlines.
January. Annual VAT/non-VAT registration fee of P500 is due on the 31st. However, for most companies, this is one of the requirements that is submitted and paid during the first week of the month since this is also one of the requirements for business permit renewal. The renewal of business permit is, on the other hand, due on the 20th. This involves the processing and payment of the local business tax, mayor’s permit fee, sanitary inspection fee, garbage fee, building inspection fee, fire inspection fee, mechanical inspection fee, plumbing inspection fee, business plate registration fee, and other charges imposed by different local government units (LGUs). The community tax certificate (CTC) is also one of the requirements for the renewal of business permit. The basic community tax amounts to P500, and the additional community tax is P2 for every P5,000, but the maximum amount for CTC for corporations is P10,500.
For those companies using a calendar year for its operations, books of accounts are to be submitted in January. The deadlines for submission would vary on what type of books of accounts the company maintains. Loose-leaf books of accounts are due for submission on the 15th, while the computerized books of accounts are due on the 30th.
Another requirement due for submission on the 30th is the list of inventory that remains on hand as of Dec. 31. This list is crucial since the Bureau of Internal Revenue (BIR) compares this with the amount that has been used in computing cost of goods sold in making their assessments. As much as possible, the amount to be declared should be the same as the audited figure or at least is close to the amount declared. For other companies, a notation is marked on the listing: “This is not yet the audited figure. The listing will be amended after audit procedures have been finalized.”
The annual information return of income tax withheld on compensation and final withholding taxes (BIR Form No. 1604CF) is due on the 31st. This contains a summary of withholding taxes related to compensation, final taxes, and fringe benefit taxes remitted to the government. This form includes the alphabetical list of employees for the year. As the form is finalized by the 31st, the BIR would also require the issuance of BIR Form 2316 to employees who are qualified for substituted filing. In 2013, the issue on substituted filing became a hot topic since many of the billionaires were not found on the list of top 500 individuals. To clarify the idea of substituted filing, employees are only entitled to substituted filing if the compensation income has been properly withheld during the year and that the employee receives only income from one employer in the Philippines during the year.
February. By the 28th, the BIR requires the submission of the duplicate copies of BIR Form 2316 that was furnished to its employees in January. This requirement has been disseminated through Revenue Regulations No. (RR) 11-2013. For non-compliance, it provided a penalty of P1,000 for each failure or a maximum of P25,000 for all such failures during the calendar year. However, if the employer fails to comply for two consecutive years, the employers shall be liable to a fine of P10,000 and suffer imprisonment of not less than one year but not more than 10 years upon conviction in addition to the P1,000 penalty for each failure, but this time without any maximum threshold.
March. Another annual information return that is due on the first day of March is your BIR Form 1604E, the summary of taxes withheld for your expanded withholding tax. This would include the alphabetical list of payees for both income payments wherein taxes were withheld and income payments that are exempt from withholding tax. Beware of the common mistake that the alphalist of payees for exempt income payments are not included in the items submitted.
April. On the 15th, the annual income tax return for calendar year 2013 is due for submission for both individuals and corporations. For manual filers, the attachments to the ITR are due for submission on the same day. On the other hand, EFPS filers are given until the 30th to submit all attachments, including audited financial statements, summary alphalist of withholding taxes, certificate of creditable withholding taxes, statement of management’s responsibility for annual ITR,proof of prior year’s excess credit, and proof of other tax payment/credit.
Companies that are unable to finalize their financial statements by April 15 should file a “tentative ITR” just to beat the deadline for submission. The BIR clarified last year through Revenue Memorandum Circular No. (RMC) 50-103 that the tentative ITR is considered the final ITR unless an amended return is submitted before the issuance of a Letter of Authority from the BIR. Once the Letter of Authority has been issued to the taxpayer, the Company can no longer amend the ITR. The Company’s only recourse is to wait for the assessment of the BIR for the deficiency taxes.
With regard to the supplement information to be filled out in the Annual ITR, RMC 21-2013 has clarified that for individual income tax filers, the requirement for the disclosure of supplemental information will be enforceable in taxable year 2013. For companies and other non-individual taxpayers, there have been no announcements yet if such requirement will be deferred. With these, companies must consolidate all information including its passive income for disclosure in the ITR.
With the above requirements plotted alongside our holiday getaways, may we enjoy work-life balance! Cheers to 2014!
The author is a senior with the tax advisory and compliance division of Punongbayan & Araullo (P&A). P&A is a member firm within Grant Thornton International Ltd.
source: Businessworld
January. Annual VAT/non-VAT registration fee of P500 is due on the 31st. However, for most companies, this is one of the requirements that is submitted and paid during the first week of the month since this is also one of the requirements for business permit renewal. The renewal of business permit is, on the other hand, due on the 20th. This involves the processing and payment of the local business tax, mayor’s permit fee, sanitary inspection fee, garbage fee, building inspection fee, fire inspection fee, mechanical inspection fee, plumbing inspection fee, business plate registration fee, and other charges imposed by different local government units (LGUs). The community tax certificate (CTC) is also one of the requirements for the renewal of business permit. The basic community tax amounts to P500, and the additional community tax is P2 for every P5,000, but the maximum amount for CTC for corporations is P10,500.
For those companies using a calendar year for its operations, books of accounts are to be submitted in January. The deadlines for submission would vary on what type of books of accounts the company maintains. Loose-leaf books of accounts are due for submission on the 15th, while the computerized books of accounts are due on the 30th.
Another requirement due for submission on the 30th is the list of inventory that remains on hand as of Dec. 31. This list is crucial since the Bureau of Internal Revenue (BIR) compares this with the amount that has been used in computing cost of goods sold in making their assessments. As much as possible, the amount to be declared should be the same as the audited figure or at least is close to the amount declared. For other companies, a notation is marked on the listing: “This is not yet the audited figure. The listing will be amended after audit procedures have been finalized.”
The annual information return of income tax withheld on compensation and final withholding taxes (BIR Form No. 1604CF) is due on the 31st. This contains a summary of withholding taxes related to compensation, final taxes, and fringe benefit taxes remitted to the government. This form includes the alphabetical list of employees for the year. As the form is finalized by the 31st, the BIR would also require the issuance of BIR Form 2316 to employees who are qualified for substituted filing. In 2013, the issue on substituted filing became a hot topic since many of the billionaires were not found on the list of top 500 individuals. To clarify the idea of substituted filing, employees are only entitled to substituted filing if the compensation income has been properly withheld during the year and that the employee receives only income from one employer in the Philippines during the year.
February. By the 28th, the BIR requires the submission of the duplicate copies of BIR Form 2316 that was furnished to its employees in January. This requirement has been disseminated through Revenue Regulations No. (RR) 11-2013. For non-compliance, it provided a penalty of P1,000 for each failure or a maximum of P25,000 for all such failures during the calendar year. However, if the employer fails to comply for two consecutive years, the employers shall be liable to a fine of P10,000 and suffer imprisonment of not less than one year but not more than 10 years upon conviction in addition to the P1,000 penalty for each failure, but this time without any maximum threshold.
March. Another annual information return that is due on the first day of March is your BIR Form 1604E, the summary of taxes withheld for your expanded withholding tax. This would include the alphabetical list of payees for both income payments wherein taxes were withheld and income payments that are exempt from withholding tax. Beware of the common mistake that the alphalist of payees for exempt income payments are not included in the items submitted.
April. On the 15th, the annual income tax return for calendar year 2013 is due for submission for both individuals and corporations. For manual filers, the attachments to the ITR are due for submission on the same day. On the other hand, EFPS filers are given until the 30th to submit all attachments, including audited financial statements, summary alphalist of withholding taxes, certificate of creditable withholding taxes, statement of management’s responsibility for annual ITR,proof of prior year’s excess credit, and proof of other tax payment/credit.
Companies that are unable to finalize their financial statements by April 15 should file a “tentative ITR” just to beat the deadline for submission. The BIR clarified last year through Revenue Memorandum Circular No. (RMC) 50-103 that the tentative ITR is considered the final ITR unless an amended return is submitted before the issuance of a Letter of Authority from the BIR. Once the Letter of Authority has been issued to the taxpayer, the Company can no longer amend the ITR. The Company’s only recourse is to wait for the assessment of the BIR for the deficiency taxes.
With regard to the supplement information to be filled out in the Annual ITR, RMC 21-2013 has clarified that for individual income tax filers, the requirement for the disclosure of supplemental information will be enforceable in taxable year 2013. For companies and other non-individual taxpayers, there have been no announcements yet if such requirement will be deferred. With these, companies must consolidate all information including its passive income for disclosure in the ITR.
With the above requirements plotted alongside our holiday getaways, may we enjoy work-life balance! Cheers to 2014!
The author is a senior with the tax advisory and compliance division of Punongbayan & Araullo (P&A). P&A is a member firm within Grant Thornton International Ltd.
source: Businessworld
January 06, 2014
Planning the year ahead
AS THEY always say, the key to a fruitful year is to start the year right. Planning for the coming year is a key to starting it right. Not only do you need to plot your holiday getaways, you might also want to include in your to-do’s the submission of tax requirements related to the close of the taxable year that are in addition to the monthly requirements. Let’s go through the requirements based on the monthly deadlines.
January. Annual VAT/non-VAT registration fee of P500 is due on the 31st. However, for most companies, this is one of the requirements that is submitted and paid during the first week of the month since this is also one of the requirements for business permit renewal. The renewal of business permit is, on the other hand, due on the 20th. This involves the processing and payment of the local business tax, mayor’s permit fee, sanitary inspection fee, garbage fee, building inspection fee, fire inspection fee, mechanical inspection fee, plumbing inspection fee, business plate registration fee, and other charges imposed by different local government units (LGUs). The community tax certificate (CTC) is also one of the requirements for the renewal of business permit. The basic community tax amounts to P500, and the additional community tax is P2 for every P5,000, but the maximum amount for CTC for corporations is P10,500.
For those companies using a calendar year for its operations, books of accounts are to be submitted in January. The deadlines for submission would vary on what type of books of accounts the company maintains. Loose-leaf books of accounts are due for submission on the 15th, while the computerized books of accounts are due on the 30th.
Another requirement due for submission on the 30th is the list of inventory that remains on hand as of Dec. 31. This list is crucial since the Bureau of Internal Revenue (BIR) compares this with the amount that has been used in computing cost of goods sold in making their assessments. As much as possible, the amount to be declared should be the same as the audited figure or at least is close to the amount declared. For other companies, a notation is marked on the listing: “This is not yet the audited figure. The listing will be amended after audit procedures have been finalized.”
The annual information return of income tax withheld on compensation and final withholding taxes (BIR Form No. 1604CF) is due on the 31st. This contains a summary of withholding taxes related to compensation, final taxes, and fringe benefit taxes remitted to the government. This form includes the alphabetical list of employees for the year. As the form is finalized by the 31st, the BIR would also require the issuance of BIR Form 2316 to employees who are qualified for substituted filing. In 2013, the issue on substituted filing became a hot topic since many of the billionaires were not found on the list of top 500 individuals. To clarify the idea of substituted filing, employees are only entitled to substituted filing if the compensation income has been properly withheld during the year and that the employee receives only income from one employer in the Philippines during the year.
February. By the 28th, the BIR requires the submission of the duplicate copies of BIR Form 2316 that was furnished to its employees in January. This requirement has been disseminated through Revenue Regulations No. (RR) 11-2013. For non-compliance, it provided a penalty of P1,000 for each failure or a maximum of P25,000 for all such failures during the calendar year. However, if the employer fails to comply for two consecutive years, the employers shall be liable to a fine of P10,000 and suffer imprisonment of not less than one year but not more than 10 years upon conviction in addition to the P1,000 penalty for each failure, but this time without any maximum threshold.
March. Another annual information return that is due on the first day of March is your BIR Form 1604E, the summary of taxes withheld for your expanded withholding tax. This would include the alphabetical list of payees for both income payments wherein taxes were withheld and income payments that are exempt from withholding tax. Beware of the common mistake that the alphalist of payees for exempt income payments are not included in the items submitted.
April. On the 15th, the annual income tax return for calendar year 2013 is due for submission for both individuals and corporations. For manual filers, the attachments to the ITR are due for submission on the same day. On the other hand, EFPS filers are given until the 30th to submit all attachments, including audited financial statements, summary alphalist of withholding taxes, certificate of creditable withholding taxes, statement of management’s responsibility for annual ITR,proof of prior year’s excess credit, and proof of other tax payment/credit.
Companies that are unable to finalize their financial statements by April 15 should file a “tentative ITR” just to beat the deadline for submission. The BIR clarified last year through Revenue Memorandum Circular No. (RMC) 50-103 that the tentative ITR is considered the final ITR unless an amended return is submitted before the issuance of a Letter of Authority from the BIR. Once the Letter of Authority has been issued to the taxpayer, the Company can no longer amend the ITR. The Company’s only recourse is to wait for the assessment of the BIR for the deficiency taxes.
With regard to the supplement information to be filled out in the Annual ITR, RMC 21-2013 has clarified that for individual income tax filers, the requirement for the disclosure of supplemental information will be enforceable in taxable year 2013. For companies and other non-individual taxpayers, there have been no announcements yet if such requirement will be deferred. With these, companies must consolidate all information including its passive income for disclosure in the ITR.
With the above requirements plotted alongside our holiday getaways, may we enjoy work-life balance! Cheers to 2014!
The author is a senior with the tax advisory and compliance division of Punongbayan & Araullo (P&A). P&A is a member firm within Grant Thornton International Ltd.
AS THEY always say, the key to a fruitful year is to start the year right. Planning for the coming year is a key to starting it right. Not only do you need to plot your holiday getaways, you might also want to include in your to-do’s the submission of tax requirements related to the close of the taxable year that are in addition to the monthly requirements. Let’s go through the requirements based on the monthly deadlines.
January. Annual VAT/non-VAT registration fee of P500 is due on the 31st. However, for most companies, this is one of the requirements that is submitted and paid during the first week of the month since this is also one of the requirements for business permit renewal. The renewal of business permit is, on the other hand, due on the 20th. This involves the processing and payment of the local business tax, mayor’s permit fee, sanitary inspection fee, garbage fee, building inspection fee, fire inspection fee, mechanical inspection fee, plumbing inspection fee, business plate registration fee, and other charges imposed by different local government units (LGUs). The community tax certificate (CTC) is also one of the requirements for the renewal of business permit. The basic community tax amounts to P500, and the additional community tax is P2 for every P5,000, but the maximum amount for CTC for corporations is P10,500.
For those companies using a calendar year for its operations, books of accounts are to be submitted in January. The deadlines for submission would vary on what type of books of accounts the company maintains. Loose-leaf books of accounts are due for submission on the 15th, while the computerized books of accounts are due on the 30th.
Another requirement due for submission on the 30th is the list of inventory that remains on hand as of Dec. 31. This list is crucial since the Bureau of Internal Revenue (BIR) compares this with the amount that has been used in computing cost of goods sold in making their assessments. As much as possible, the amount to be declared should be the same as the audited figure or at least is close to the amount declared. For other companies, a notation is marked on the listing: “This is not yet the audited figure. The listing will be amended after audit procedures have been finalized.”
The annual information return of income tax withheld on compensation and final withholding taxes (BIR Form No. 1604CF) is due on the 31st. This contains a summary of withholding taxes related to compensation, final taxes, and fringe benefit taxes remitted to the government. This form includes the alphabetical list of employees for the year. As the form is finalized by the 31st, the BIR would also require the issuance of BIR Form 2316 to employees who are qualified for substituted filing. In 2013, the issue on substituted filing became a hot topic since many of the billionaires were not found on the list of top 500 individuals. To clarify the idea of substituted filing, employees are only entitled to substituted filing if the compensation income has been properly withheld during the year and that the employee receives only income from one employer in the Philippines during the year.
February. By the 28th, the BIR requires the submission of the duplicate copies of BIR Form 2316 that was furnished to its employees in January. This requirement has been disseminated through Revenue Regulations No. (RR) 11-2013. For non-compliance, it provided a penalty of P1,000 for each failure or a maximum of P25,000 for all such failures during the calendar year. However, if the employer fails to comply for two consecutive years, the employers shall be liable to a fine of P10,000 and suffer imprisonment of not less than one year but not more than 10 years upon conviction in addition to the P1,000 penalty for each failure, but this time without any maximum threshold.
March. Another annual information return that is due on the first day of March is your BIR Form 1604E, the summary of taxes withheld for your expanded withholding tax. This would include the alphabetical list of payees for both income payments wherein taxes were withheld and income payments that are exempt from withholding tax. Beware of the common mistake that the alphalist of payees for exempt income payments are not included in the items submitted.
April. On the 15th, the annual income tax return for calendar year 2013 is due for submission for both individuals and corporations. For manual filers, the attachments to the ITR are due for submission on the same day. On the other hand, EFPS filers are given until the 30th to submit all attachments, including audited financial statements, summary alphalist of withholding taxes, certificate of creditable withholding taxes, statement of management’s responsibility for annual ITR,proof of prior year’s excess credit, and proof of other tax payment/credit.
Companies that are unable to finalize their financial statements by April 15 should file a “tentative ITR” just to beat the deadline for submission. The BIR clarified last year through Revenue Memorandum Circular No. (RMC) 50-103 that the tentative ITR is considered the final ITR unless an amended return is submitted before the issuance of a Letter of Authority from the BIR. Once the Letter of Authority has been issued to the taxpayer, the Company can no longer amend the ITR. The Company’s only recourse is to wait for the assessment of the BIR for the deficiency taxes.
With regard to the supplement information to be filled out in the Annual ITR, RMC 21-2013 has clarified that for individual income tax filers, the requirement for the disclosure of supplemental information will be enforceable in taxable year 2013. For companies and other non-individual taxpayers, there have been no announcements yet if such requirement will be deferred. With these, companies must consolidate all information including its passive income for disclosure in the ITR.
With the above requirements plotted alongside our holiday getaways, may we enjoy work-life balance! Cheers to 2014!
The author is a senior with the tax advisory and compliance division of Punongbayan & Araullo (P&A). P&A is a member firm within Grant Thornton International Ltd.
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