Interest on Tax Deficiency under TRAIN Law

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By: Ivan Marx Olarte, CPA Penalties are imposed by the Bureau of Internal Revenue (BIR) for non-compliance or incorrect compliance with the tax laws and regulations in the Philippines. In line with the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the BIR issued the Revenue Regulations (RR) No. 21-2018 which provides for the implementation of the provision of the TRAIN law amending the imposition of deficiency and delinquency interest on unpaid taxes. Under the TRAIN Law, the interest rate for deficiency and delinquency taxes shall be equal to twice the effective legal rate set by the Bangko Sentral ng Pilipinas (BSP) for loans and similar forbearance of money in absence of any express agreement. Currently, the enacted legal interest rate is 6%. Any change in the legal interest rate imposed by BSP will prompt the Commissioner of Internal Revenue (CIR) to issue a Circular regarding such change. Unpaid tax

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Withholding Tax on Professional Fees under TRAIN RA 10963 Philippines

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By: Garry S. Pagaspas, CPA Tax Reform for Acceleration and Inclusion (TRAIN) or Republic Act No. 10963 (RA 10963) which has been effective January 1, 2018 has introduced reforms in withholding taxes in the Philippines. Implementing rules and regulations of TRAIN RA 10963 Philippines or Revenue Regulations No. 11-2018 (RR 11-18) further amending Revenue Regulations No. 2-1998 (RR 2-98, as amended) has not only provided guidelines on such tax reforms, but went beyond by compiling and consolidating such items subject to expanded withholding tax in Philippines under Section 2.57.2, Revenue Regulations No. 2-1998, as amended, from 29 (Sec.2.57.2(A) to AA) items to 21 items (Section 2.57.2(A) to U). Items of professional fees in the Philippines is one of those consolidated and this is what we will tackle here. Withholding tax rates of professional fees under TRAIN RA 10963 Philippines Under RR 11-18 amending Section 2.57.2 of RR 2-98, as amended,

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21 Items Subject to Expanded Withholding Tax under TRAIN RA 10963

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By: Garry S. Pagaspas, CPA To implement the tax reforms on Creditable or Expanded Withholding Tax (EWT) in the Philippines under the Tax Reform for Acceleration and Inclusion (TRAIN) or Republic Act No. 10963 (RA 10963) effective January 1, 2018, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 11-2018 dated January 31, 2018 (RR 11-18) in Philippines amending Revenue Regulations No. 2-1998 (RR 2-98). Below are the 20 items subject to creditable withholding tax in the Philippines under TRAIN or RA 10963): 1. Withholding tax on professional fees, talent fees, etc. for services rendered – 5% /10% individuals or 10%/ 15% corporations (Sec. 2.57.2(A), RR 2-98) By implications of the tax reforms under TRAIN RA 10963 in Philippines, withholding tax on professional fees is now 5% of gross income if annual income not exceeding PhP3M, otherwise, 10% of gross income for individuals, while professional fees to juridical entities

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Updated Tax Exempt De Minimis Benefits under TRAIN RA 10963 Philippines

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De minimis benefits are benefits of relatively small values provided by the employers to the employee on top of the basic compensation intended for the general welfare of the employees. Being of relatively small values, the same is not being considered as a taxable compensation and as such,  not subject to income tax and withholding tax on compensation. The amount of de minimis provided is a deductible salaries expense, while for the employee, it would constitute as an additional salary that is not deducted withholding tax on compensation. To further appreciate the tax exemptions, below is the updated list of de minimis benefits in the Philippines both to managerial and rand-and-file employees with some items updated in amounts by Revenue Regulations No. 29-2025 dated October 27, 2025, amending Revenue Regulations No. 2-1998, as amended (previously amended by Revenue Regulations No. 11 – 2018 (RR 11-2018) implementing the Tax Reform for

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Income Tax Exemption of Religious Institutions or Churches in Philippines

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By: Garry S. Pagaspas Being an entity registered with the Securities and Exchange Commission (SEC) as non-stock religious institution or church in Philippines does not automatically mean income tax exemptions and considering that tax exemption is an exception, extra care should be made on determining the applicable tax exemptions of religious corporations, institutions, associations, or church in the Philippines with respect to its income, receipts, revenues (e.g. tithes and offerings, donations  from members, etc.) from religious operations. By this article, let us tackle the income tax exemptions of religious corporations or institutions or churches in the Philippines imposed by the Bureau of Internal Revenue (BIR). Under Section 30(E), National Internal Revenue Code, as amended, religious institutions or corporations in the Philippines are exempted from income tax, as follows: “Section 30(E). Non-stock corporation or association organized and operated exclusively for religious, xxx, no part of its net income or asset shall

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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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