Tax Implications of Representative Office in Philippines

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By: Garry S. Pagaspas Multinational companies and foreign corporations are allowed to do business in the Philippines as a representative office in the Philippines under the Corporation Code of the Philippines (Batas Pambansa Bilang 68), Foreign Investments Act (Republic Act No. 7042), and related implementing rules and regulations. Under this, a foreign corporation’s legal entity abroad is being licensed to do business in the Philippines through a formal application form (SEC Form No. F-104 and related documentations) as a representative office of liaison office is a cost center entity fully subsidized by the parent company but could deal directly with clients of the parent company abroad undertaking activities such as but not limited to information dissemination and promotion of parent company’s products as well as quality control of products. Based on such operations, let us take up the Bureau of Internal Revenue (BIR) tax implications of representative office in the

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10 Tax Avoidable Errors on 2017 annual financial statements and income tax returns Philippines

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By: Garry S. Pagaspas, CPA Filing 2017 year-end tax compliance requirements – e.g. 2017 income tax returns  with attached 2017 audited financial statements in the Philippines is fast approaching as the filing dates are unfolding comes April 15, 2018. This is a busy season for accountants, auditors, entrepreneurs, finance and accounting personnel, and taxpayers in the Philippines, in general. During 2017 tax seasons in the Philippines, the following tax mistakes on the audited financial statements (AFS) and annual income tax returns (ITR) in the Philippines should be avoided: 1. Excessive Retained earnings subject to 10% IAET in Philippines Improper accumulation of earnings after tax is subject to 10% improperly accumulated earnings tax (IAET) and an indicator of the same on the face of the audited financial statements is the glaring excessive free retained earnings that is more than the paid-up capitalization. Under Section 43 of the Corporation Code of the Philippines,

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6 Technical Requirements for Input VAT Refund Approval in Philippines

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By: Garry S. Pagaspas Under the current value added tax (VAT) rules in the Philippines, taxpayer’s whose sales are VAT zero-rated goods or services may have the option to apply for input VAT refund in the Philippines such input VAT attributable to VAT zero-rated sales. In filing the application for VAT refund, the BIR has issued guidelines on the list of documentary requirements for input VAT refund on zero-rated sales to be completed and related processing that a taxpayer has to undergo (e.g. Revenue Memorandum Circulars (RMC) No. 17-2018). In this article, let us share you the six (6) technical requirements that the BIR would look into to determine whether or not, your application for input VAT refund on zero rated should be approved or denied. In some court decided input VAT refund from zero-rated cases, such long list of documentary requirements and related processes revolves on the following technical

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2018 BIR Priority Programs in Philippines

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By: Tax and Accounting Center Philippines Under Revenue Memorandum Circular No. 6-2018 (RMC 6-2018) dated December 18, 2017, the Bureau of Internal Revenue (BIR) has published and disseminated its priority programs for calendar year 2018 identified and adopted during its 2018 Annual Planning Session held last December 8-9, 2018 taking into consideration the Tax Reform for Acceleration and Inclusion (TRAIN) Law under Republic Act No. 10963. This RMC will address three (3) principal objectives of the BIR as follows: Attain Collection Targets To attain the BIR’s collection target for calendar year 2018, it would initiate the following programs: Expedite updating of the schedule of zonal values for tax purposes; Intensified audit investigation through CAATs, BEPS, Transfer pricing, examinations  of franchisors, national government agencies, government owned and controlled corporations, small taxpayers, and other industry issues; Enhanced implementation of Arrears Management Program in the Regional Offices; Broaden the tax base by 10% through

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How to process business permit renewal for LGUs in Philippines

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For us to start the year right, we must bear in mind all necessary requirements for the beginning of yet another business calendar year. One of which is the renewal of business permit registration with the Local Government Units (LGU) – city or municipality of business location in the Philippines. Notably, in the absence of a local business permit in the Philippines, your business could be said to be illegal. Under Local Government Code of the Philippines, in general, all local taxes, fees and charges accrues as of January 1 of each year (Section 166) and shall be paid within the first twenty (20) days of January or of each subsequent quarter, as the case may be (Section 167). Failure to renew business permit in the Philippines with the municipal or city treasurer’s city could result to penalties not exceeding 25% of the amount of the unpaid taxes, fees, and charges plus an

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List of 2018 Philippines Holidays Under Proclamation No. 269 of Pres. Duterte

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By: Tax and Accounting Center Philippines The President of the Philippines (President Rodrigo Roa Duterte) issued Proclamation No. 269 dated July 17, 2017 declaring the regular holidays, special (non-working) days, and special holidays for calendar year 2018. Luckily, there are long weekends in the Philippines that each of us could maximize such as going for a land travel, tour overseas, make family vacations, and more. Below are the lists of 2018 holidays in the Philippines: 2015 Regular Holidays Philippines    January 1, 2018 (Monday) – New Year’s Day March 29, 2018 (Thursday) – Maundy Thursday March 30, 2018 (Friday) – Good Friday April 9, 2018 (Monday) – Araw ng Kagitingan May 1, 2018 (Tuesday) – Labor Day June 12, 2018 (Tuesday) – Philippine Independence Day August 27, 2018 (Last Monday of August) – National Heroes Day November 30, 2018 (Friday) – Bonifacio Day December 25, 2018 (Tuesday) – Christmas Day December 30, 2018

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Advantages of Accounting Manual for Companies in the Philippines

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  The 2013 Compilation of Material Findings on Audited Financial Statements Reviewed by the Philippine Securities and Exchange Commission (SEC) shows an average of 25% noted findings related to the absence of the Accounting Policy and deviation from the existing adopted accounting policy. This supports our observation as Public Practitioner in the Philippines of the common problem especially on the Small and Medium Enterprises (SMEs) of the absence on establishing a formal Accounting Policy Manual. Commonly in the Philippines, the processing and recording of transactions and preparation of financial reports and tax returns were based on practices and employee’s own judgement. This leads to misapplications of accounting policies and estimates, lack of financial disclosures on the financial statements and noncompliance with government regulations like Bureau of Internal Revenue (BIR) and SEC. Worst, the whole Finance and Accounting Department process disappears with the resignation of the in-charge employee and the Company

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SEC Security Deposit of Branch Offices in the Philippines

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By: Tax and Accounting Center Philippines Under Section 126 of the Corporation Code of the Philippines, a security deposit is required to be deposited with the Securities and Exchange Commission (SEC) from issuance of License to do Business in the Philippines for the benefit of the  present and future creditors of the Philippine Branch in the Philippines. In simple and plain language, this security deposit is a fund set aside in SEC prescribed investments that would serve as a standby fund of the Philippine Branch for its creditors in the worst case scenario. Upon withdrawal of registration of the Philippine Branch and there remains no liabilities, then, the SEC would release such security deposit. In relation to the above, SEC issued Memorandum Circular No. 2 Series of 2012 (SEC MC No. 2-2012) to provide “Guidelines on Security Deposit of Branch Offices of Foreign Corporations” in the Philippines and we summarized

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September 2015 Tax and Accounting Seminar Workshop Schedules Philippines

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Taxation and accounting rules keeps on changing from time to time. Further enhance your tax and accounting knowledge towards ensuring your tax compliance as a taxpayer moving forward , Tax and Accounting Center, Inc. offers the following seminars and workshops for September 2015 Philippines: Sept. 11-12, 2015 – Friday & Saturday, Basic Business Accounting and BIR VAT Compliance Seminar Workshop Bookkeepers are not always the person you could trust 100%. To determine whether they are delivering what they should be under your terms and agreement with them, you must have a working knowledge on how they are supposed to deliver. Learn in this program how you would handle your accounting and tax compliance of your VAT-registered business. Learn more…Basic Business Accounting and BIR VAT Compliance Seminar Workshop September 18-19, 2015 – Thursday & Friday, Basic Business Accounting and BIR Non-VAT Compliance Seminar Workshop Bookkeepers are not always the person you could trust

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How to Register a Subsidiary of a Foreign Company in Philippines

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By: Tax and Accounting Center Philippines A Philippine subsidiary is essentially a local domestic corporation registered and existing under the laws of the Philippines enjoying the rights, duties, and privileges of a local domestic corporation. It is duly owned and controlled by a foreign entity that is treated as an entity separate and distinct from each other. This ownership and control makes it a subsidiary of the foreign company in the Philippines and you could use this set-up in a number of operations in the Philippines such as in business process outsourcing, consultancies, and more. For the purpose, a foreign corporation will become an investor-stockholder of the local domestic corporation entity of such ownership allowing the same material participation in the management and control of the local company in the Philippines. For registration purposes, percentage of ownership should be to the extent allowed by law in relation such factors as nature

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