VAT CHRONICLES: ZERO-RATING ON SALES TO PEZA REGISTERED ENTITIES PHILIPPINES

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With the enactment of the Republic Act. No. 10963, otherwise known as Tax Reform and Inclusion Law (TRAIN), and Republic Act No. 11534 otherwise known as Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) amending Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997 (Tax Code), particularly on the imposition and treatment of Value-Added Tax on local purchase of Registered Business Enterprise (RBE) such as those with Philippine Economic Zone (PEZA), VAT zero-rating on sales to PEZA registered entities in the Philippines have drawn so much attention and debates, if not confusion. Let’s take a quick walkthrough of the significant events relative to the VAT Zero-rating of a PEZA Registered Business Enterprise to better appreciate these rules. 1. 0% VAT INCENTIVE ON EXPORT ENTERPRISES Prior to CREATE, VAT zero-rating incentive in the Philippines for purchases from local suppliers was applicable to PEZA-registered entities without

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Ways to Avoid the 3 Common Payroll Errors

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Making mistakes is normal, but making the same mistake repeatedly is unreasonable. Most payroll and HR personnel experience these common errors when preparing their company’s payroll register. Even tenured payroll and HR personnel may tend to be complacent due to the repetitive work and overlook some items when doing the payroll of employees. They may forget to check the timesheet of every employee, excluding overtime, or include undertime. They may forget the treatment of de minimis benefits or the excess of the Php 90,000 limit of the other benefits. They may incorrectly compute the net pay of employees. Payroll registers are easy to prepare, but intricate in terms of the principles or basis used to produce an accurate payroll report. Payroll-related technical knowledge from government agencies should be updated once in a while to avoid common errors in payroll preparation. In this article, we will tackle three of the most

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Helpful Tips on the Philippines  Audit of Salaries and Wages

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Perhaps, one part of the audit that needs close scrutiny is the Salaries and Wages. Why say so? As this account is material to the Income Statement, it is more than merely testing and validating the recording in the books with the payroll register when there is an accrual of wages payable or cash is paid when employee salaries are incurred. An auditor’s consideration on his audit is to look also at the tax compliance side of the payroll preparation if risks of material misstatements are present and thus, affecting the audit procedures done by the auditor. In the Philippines, various returns /information are prepared related to Salaries and Wages to be submitted to the tax authority (BIR) monthly and annually.  Aside from that, certain components of the Salaries and Wages should be identified whether it is a part of a taxable compensation or not. Since the employer is an

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HOW DO YOU SAFEGUARD YOUR CASH?

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Whatever type of financial resource your company owns—cash, money, currency, coins —must be protected from any unscrupulous activities.  Cash fraudsters have always been attracted to it, which has led to corporate losses and, in the worst cases, bankruptcy throughout history. If internal cash control is lacking or inadequate, this minor issue will cause a cascade of problems for your company. Building trust on mediocrity will not help your business grow and flourish.  As no trust issues are put on this writing, a cash misappropriation or errors are inevitable.  But if trust issues rings a bell in your company, then the following general internal cash control measures must be considered: The nature of internal control over cash in a small business set-up varies as that of a corporate business. In support of this, having the business owner with overseeing responsibilities on cash transaction cycles suffices. As a business owner or in-charge

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CASH AUDIT 101: Cash says, “DON’T MISS A CHECK ON ME!”

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By: Joelex L. Cortes, CPA Have you ever wondered why auditors review supporting documentation relating to cash accounts at every audit engagement? And, on occasion, bank confirmation and inquiries are made in order to execute their cash audit? As you read on, you will discover how cash accounts are a critical component of the balance sheet of your company’s financial statements. As cash is one of the most liquid assets, it is reported first on any company’s balance sheet since the latter are presented in the order of highest liquidity. When it comes to paying for any business debts or payables, cash serves as the primary asset. Since cash accounts are highly liquid, the auditor must take this into account when performing the audit because it carries inherent risks and the determination of such risk does not matter with the size of your business.  COMMON CASH FRAUD OR ERRORS Cash

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2022 Annual Income Tax Return Filing Reminders in the Philippines

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By: Kenneth Lanoy, CPA Filing tax returns and payment of tax due, if any, is a recurring obligation of every taxpayer to support the coffers of the government. In the Philippines, accountants, auditors, and staffs are equipped with time, energy, and knowledge for the preparation of the financial statements of the operations during the previous year and of course, the Annual Income Tax Returns (Annual ITR) in the Philippines. Let me share with you some pointers to consider for your 2022 Annual ITR preparation. 1. APPROPRIATE INCOME TAX RATE TO BE USED For individual taxpayers, the income tax rate until December 31, 2022, are shown as follows: For corporate taxpayers, the regular income tax rate in the Philippines of 25% or 20% for the 2022 annual ITR depends on the classification as follows: DOMESTIC CORPORATION In general, Domestic Corporations (DC) are taxed at a rate of twenty-five percent (25%) on

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No Valid Assessment, No Criminal Liability for Willful Failure to Pay Tax under NIRC Philippines

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Last Sept. 21, 2022, Court of Tax Appeals – First Division (CTA) issued its resolution acquitting the President of a petroleum company (Company) that was accused of criminal violation for willful failure to pay tax under Section 255, in relation to Section 253(d) and 256 of the National Internal Revenue Code, as amended (NIRC), for the reason that the 2008 tax assessment issued to the Company was void.

The CTA Ruled that in fine, the first element for criminal liability under Sec. 255 of the NIRC is wanting since the Company is not required to pay the tax liability for taxable year 2008 under the void FLD. The absence thereof negates the presence of second and third elements given that the Company and accused President are justified in not paying tax liability for 2008. Therefore, accused President must be acquitted.

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8 Ways to Get New Quality Clients for Ph CPA Practitioners

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In this article, let me share my personal thoughts, if not experience, on some ways to get new quality clients for CPA practitioners in keeping with professional ethical standards. This may not be an all-inclusive list but hope you get something out of it that you can adopt for your own firm or practice.

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How to Record Foreign Currency Denominated Transactions in the Philippines?

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By: Charlyn Beric In the Philippines, most businesses compete not only locally, but also globally, where they have a great deal of potential and opportunity for expansion and growth. They usually engage in transactions such as buying or selling goods or services, as well as borrowing or lending money in foreign countries. So, when the company transacts in a foreign currency, how do you account for those transactions as an accountant, and what are the tax implications?  What is foreign currency transaction? Foreign currency transactions occur when a company’s transactions are denominated in a currency other than the primary currency, also known as functional currency. Philippines Accounting Standards 21 The Effects of Changes in Foreign Exchange Rates defines functional currency as the currency of the primary economic environment in which the entity operates and reports its financial statements in one currency. Presentation currency on the other hand is the currency

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Why Should You Withhold Taxes on Payments to Digital Freelancers in the Philippines?

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Revenue Regulation 11-2018 specifically states that “Persons engaged in the sale of computer services, computer programmers, software/program developer/designer, internet service providers, web page designing, computer data processing, conversion or base services and other computer related activities” are categorized as Other Contractors and payments made to them should be withheld with 2%.

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