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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Business Registration and Compliance: The Philippine Digital Freelancer’s Milestone to a Long-term Business

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By: Cecile Maglunob-Pagaspas, CPA Freelancing business is the latest trend especially for digital professionals. The unique setting of this career is indeed promising especially for those who enjoy working for their passion at their own pace.  It is however commonly observed that many digital freelancers in the Philippines hide their business or let go the good opportunities due to fear of being caught by the tax authorities while operating without legal documents. Getting Legitimate Many digital freelancers are starting their work through an informal contract with clients. This is totally fine especially on the initial stage of the venture. Staying on the same career path in the long run however will require a complete paper to show one’s business legitimacy. In getting legit, digital freelancers can either register in the Department Trade of Industry (DTI) as Sole Proprietor or Securities and Exchange Commission (SEC) as a corporation. For digital freelancers

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Revenue Regulations No. 09-1998

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This revenue regulation prescribes to implement RA No. 8924 relative to the imposition of the Minimum Corporate Income Tax (MCIT) on domestic corporations and resident foreign corporations. Specifically, an MCIT of 2% of the gross income as of the end of the taxable year is imposed upon any domestic corporation commenced its business operations. The MCIT will be imposed whenever such operation has zero or negative taxable income or whenever the amount of MCIT is greater than the normal income tax due from such operation. In case of a domestic corporation whose operation or activities are partly covered by the regular income tax system and partly covered under a special income tax system, the MCIT will apply on operations covered by the regular income tax system. The Regulations will apply to domestic and resident foreign corporation on their aforementioned taxable income derived beginning January 1, 1998 pursuant to the pertinent

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Tax Incentives of existing PEZA, BOI, etc. entities under RA 11534 CREATE Philippines

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By: Garry Pagaspas, CPA As we are all aware, Republic Act No. 11534 (RA 11534) or Corporate Recovery and Tax Incentives for Enterprises (CREATE) in Philippines has been signed into law last March 26, 2021 with Vetoed Provisions and became effective last April 11, 2021. One notable aspect of RA 11534 CREATE Philippines is the rationalization of incentives thereby harmonizing the available tax incentives that Investment Promotion Agencies could grant (e.g. income tax holiday (ITH), enhanced deductions (ED), and 5% special corporate income tax (SCIT) among others), creating a new set of standards for those who can avail in certain locations throughout the Philippines. Under this, the question is how would RA 11534 CREATE Philippines affect the tax incentives of existing registered business enterprises (RBE) with the fourteen (14) Investment Promotion Agencies (IPA) such as Philippine Economic Zones Authority (PEZA) and Board of Investments (BOI)? To address the above question,

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Vetoed Provisions of RA 11534 CREATE

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March 26, 2021 THE HONORABLE SPEAKER AND  THE LADIES AND GENTLEMEN OF  THE HOUSE OF REPRESENTATIVES In accordance with my firm commitment to uplift the lives of the Filipino people and pave the path for economic recovery and inclusive growth, I sign into law Republic Act (RA) No. 11534, entitled “ AN ACT REFORMING THE CORPORATE INCOME TAX AND INCENTIVES SYSTEM, AMENDING FOR THE PURPOSE SECTIONS 20, 22, 25, 27, 28, 29, 34, 40 57, 109, 116, 204 QND 290 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND CREATING THEREIN NEW TITLE XIII, AND FOR OTHER PURPOSES,” or the “ Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act”. I.GENERAL COMMENTS After more than twenty years of deliberations on the countless versions filed in Congress, corporate income tax reform and fiscal incentives rationalization has finally come to fruition. It comes at an opportune time, since it will

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