Unit 12 Session 8

8/3/2019 Unit 12 Session 8

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UNIT 12

TAXATIONSession 8


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Topics

Review of Last session

Test of baseline knowledge Bases of assessment Corporate Tax

Scope of Corporate Tax

Accounting periods Chargeable profits

Payment DatesGo TopGo Top


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Review of Last Session


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Test ofbaseline

knowledge


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Bases of assessment Corporate Tax

Go TopGo Top


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Capital Gains Taxes

CapitalCapital Gains TaxesGains Taxes on nonon non--listedlisted on the stockon the stock

exchange:exchange:

55% withholding tax on the first% withholding tax on the first PhpPhp 100,000.00 and100,000.00 and

1010% on anything above.% on anything above.

TheThe sale of shares listedand traded on the stocksale of shares listedand traded on the stock

exchange is taxedat of 1 % of the gross selling price.exchange is taxedat of 1 % of the gross selling price.

RealReal Estate Sales are taxedat 6% on the sales price orEstate Sales are taxedat 6% on the sales price or

thethe zonalzonal value; whichever is higher.value; whichever is higher.


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Corporate Income Tax

TheThe tax rate for Domestic Corporations is 30% ontax rate for Domestic Corporations is 30% on

worldwide incomeworldwide income..

Foreign Branch Offices havea tax rate of 30% onForeign Branch Offices havea tax rate of 30% onPhilippines based income.Philippines based income.


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Withholding Taxes

Dividends:

Dividends distributed to non resident entities are subject

to a 15% withholding tax for countries with reciprocal

agreement All dividends are subject to a 30% tax.

Interest:

Interest paid to Non-residents is taxed at 20%.

Royalties: Royalties paid to non-residents are taxed at 30%.

Royalties paid to a domestically to a Filipino entity or a

resident foreign corporation are taxed at 20%.


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Withholding Taxes

Branch Office Profit Remittances:

After tax profits remitted by a branch office to its parent

are taxed at 15%

VAT (Value Added Taxes)

Most sales of goods and services are subject to a value

added tax of 12%


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Tax Incentives - BOI

The company must operateabusiness which hasThe company must operateabusiness which has

been recognizedas a preferredarea of investment inbeen recognizedas a preferredarea of investment in

the Philippines Investment Priority Plan (IPP).the Philippines Investment Priority Plan (IPP).

At least 50% of production / service is forexports, ifAt least 50% of production / service is forexports, if

FilipinoFilipino--ownedenterprise,;andownedenterprise,;and

At least 70% of production / service is forexports, ifAt least 70% of production / service is forexports, ifmajority foreignmajority foreign--ownedenterprise (more than 40%ownedenterprise (more than 40%

foreign equity),foreign equity),


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BOI Incentives

Income TaxIncome Tax HolidayHoliday

Exemption From Taxes And Duties OnExemption From Taxes And Duties On

Imported Spare PartsImported Spare Parts

Exemption FromExemption FromWharfageWharfage Dues And ExportDues And ExportTax, Duty, Impost And FeesTax, Duty, Impost And Fees

Tax Exemption OnTax Exemption On BreedingStocksBreedingStocks AndAnd

Genetic MaterialsGenetic Materials

TaxCreditsTaxCredits

Additional Deductions from TaxableIncome.Additional Deductions from TaxableIncome.


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Tax Incentives - PEZA

Companies that registerandlocate within an areaCompanies that registerandlocate within an area

that is under the Philippine Economic Zone Authoritythat is under the Philippine Economic Zone Authority

(PEZA) areentitled to various tax incentives and(PEZA) areentitled to various tax incentives and

otheradvantages.otheradvantages.

Usually enterprises located in a PEZA approvedUsually enterprises located in a PEZA approved

ecozoneecozone are required to export 100% of theirare required to export 100% of their

production.production.


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PEZA Incentives

100% foreign ownership100% foreign ownership Income TaxIncome Tax Holiday (ITH) orexemption from corporate incomeHoliday (ITH) orexemption from corporate income

tax for 4 years, extendable to a maximum of 8 years;after which atax for 4 years, extendable to a maximum of 8 years;after which a

special5% tax on gross income (sales less direct costs) shallbespecial5% tax on gross income (sales less direct costs) shallbe

paid in lieu ofall nationalandlocal taxes.paid in lieu ofall nationalandlocal taxes.

Exemption from duties and taxes on imported capitalequipment,Exemption from duties and taxes on imported capitalequipment,spare parts, supplies, raw materials.spare parts, supplies, raw materials.

PEZA may grant the right to thelocator on a case to casebasisPEZA may grant the right to thelocator on a case to casebasis

the sale ofup to 30% of production to thedomestic market.the sale ofup to 30% of production to thedomestic market.

Exemption fromExemption from wharfagewharfage dues andexport taxes, imposts anddues andexport taxes, imposts and

fees.fees.

Permanent resident status for foreign investors and immediatePermanent resident status for foreign investors and immediate

family members.family members.

Employment of foreign nationals.Employment of foreign nationals.

Simplified import andexport procedures.Simplified import andexport procedures.

Other incentives under Executive Order 226Other incentives under Executive Order 226


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Scope of Corporate Tax

Go TopGo Top


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General Rule

Companies that are resident of the

Philippines are taxed on worldwide

income.

Non-resident companies are taxed onlyPhilippines income

Dividends received by Philippine

Corporations or resident foreign

corporations are not taxed.


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Accounting periods

Go TopGo Top


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Basic Rules

An accounting period ends on the earliest of the following:

the expiration of 12 months from the beginning of the

accounting period;

an accounting date of the company or, if there is a period

for which the company does not draw up accounts, the

end of that period;

the company beginning or ceasing to trade or to be, in

respect of the trade or (if more than one) of all tradescarried on by it, within the charge to corporation tax;

the company ceasing to be resident;

the company ceasing to be within the schedule to

corporation tax.


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Tax Accounting Periods

Calendar Year

Monthly

Quarterly

Annual Income occurrence

Fiscal Year

Monthly

Quarterly

Annual

Income occurrence


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Chargeable profits

Go TopGo Top


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What is?

Corporation tax is only chargeable on adjusted profits for each

accounting period.

In order to arrive at the figure on which a charge will be levied,

also known as Taxable Income, a number of allowable

expenses must be subtracted from the companys totalincome for the period.

In order to qualify as an allowable expense, a cost must have

been incurred wholly and exclusively for business purposes.

It should also be remembered that the Taxable Income mustinclude any net chargeable capital gains that might have been

accrued over the accounting period.


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Chargeable Profits

1) Compensation for services in whatever form paid, including, but not

limited to fees, salaries, wages, commissions, and similar items;

(2) Gross income derived from the conduct of trade or business or the

exercise of a profession;

(3) Gains derived from dealings in property;(4) Interests;

(5) Rents;

(6) Royalties;

(7) Dividends;

(8) Annuities;

(9) Prizes and winnings;

(10) Pensions; and

(11) Partner's distributive share from the net income of the general

professional partnership.


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Exclusions from Gross Income

(1) Life Insurance. - The proceeds of life insurance policies

paid to the heirs or beneficiaries upon

(2) Amount Received by Insured as Return of Premium. -

The amount received by the insured, as a return ofpremiums

(3) Gifts, Bequests, and Devises. - The value of property

acquired by gift, bequest, devise, or descent:

(4) Compensation for Injuries or Sickness. - amounts

received, through Accident or Health Insurance or under

Workmen's Compensation Acts

(5) Income Exempt under Treaty.


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(6) Retirement Benefits, Pensions, Gratuities, etc.-

(a) Retirement benefits received under Republic Act No. 7641.

(b) Any amount received by an official or employee or by his heirs

from the employer as a consequence of separation of such

official or employee.(c) The provisions of any existing law to the contrary

notwithstanding, social security benefits, retirement gratuities,

pensions and other similar benefits

(d) Payments of benefits administered by the United States

Veterans Administration.(e) Benefits received from or enjoyed under the Social Security

System

(f) Benefits received from the GSIS under Republic Act No. 8291


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7) Miscellaneous Items. -

(a) Income Derived by Foreign Government.

(b) Income Derived by the Government or its Political

Subdivisions. -

(c) Prizes and Awards.(i) The recipient was selected without any action on his part to

enter the contest or proceeding; and

(ii) The recipient is not required to render substantial future

services as a condition to receiving the prize or award.

(d) Prizes and Awards in Sports Competition.(e) 13th Month Pay and Other Benefits.

(f) GSIS, SSS, Medicare and Other Contributions.

(g) Gains from the Sale of Bonds, Debentures or other Certificate

of Indebtedness.

(h) Gains from Redemption of Shares in Mutual Fund


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Tax Dates


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Important Dates and Forms BIR Form 1702 - Annual Income Tax Return (For Corporations and Partnerships)

Final Adjustment Return or Annual Income Tax Return - On or before the 15th day

of the fourth month following the close of the taxpayer's taxable year

BIR Form 1702 Q - Quarterly Income Tax Return (For Corporations and

Partnerships)

Corporate Quarterly Declaration or Quarterly Income Tax Return - On or before the

60th day following the close of each of the quarters of the taxable year


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Important Dates and Forms BIR Form 2551 M - Monthly Percentage Tax Return

Deadline

Manual Filing

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

Filing Through Electronic Filing and Payment System (eFPS)

Group A - Twenty-Five (25) days following the end of the month

Group B - Twenty-Four (24) days following the end of the month

Group C - Twenty-Three (23) days following the end of the month

Group D - Twenty-Two (22) days following the end of the month

Group E - Twenty-One (21) days following the end ofthe month


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Important Dates and Forms BIR Form 2551 QBIR Form 2551 Q -- Quarterly Percentage Tax ReturnQuarterly Percentage Tax Return

DeadlineDeadline

Manual Filing : Not later than 20th day following the end of each quarter Manual Filing : Not later than 20th day following the end of each quarter

Filing Through Electronic Filing and Payment System ( Filing Through Electronic Filing and Payment System (eFPSeFPS) : Not later than the 20th) : Not later than the 20th

day following the end of the quarterday following the end of the quarter

BIR Form 2552BIR Form 2552 -- Percentage Tax Return (For Transactions Involving Shares of Stocks)Percentage Tax Return (For Transactions Involving Shares of Stocks)

DeadlineDeadline

For tax on sale of shares of stocks listed and traded through the local stock exchange For tax on sale of shares of stocks listed and traded through the local stock exchange

(LSE)(LSE) -- within five (5) banking days fromwithin five (5) banking days from the datethe date of collectionof collection

For tax on shares of stocks sold or exchanged through primary offering For tax on shares of stocks sold or exchanged through primary offering -- within 30within 30

daysdays fromthefromthe datedate of listing in the LSEof listing in the LSE

For tax on shares of stocks sold or exchanged through secondary public offering For tax on shares of stocks sold or exchanged through secondary public offering

within five (5) banking days fromwithin five (5) banking days from the datethe date of collectionof collection


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Topics for Research

Documentation requirements

Filling-up of Income Tax Returns

Go TopGo Top


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Required

Calculate the tax liability of a

company and advise onpayment dates

Go TopGo Top

Documents

Unit 12 Session 8