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.