Penalties of Employer’s Failure to Withhold as Agent in Philippines

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By: Tax and Accounting Center Philippines As we are all aware, employees are being subjected to withholding tax on compensation in the Philippines every payday. Withholding of payroll taxes in the Philippines is the liability of the employer (individual engaged in trade or business, of a juridical entity like corporation) because the employer is automatically appointed by tax rules as withholding agent for the withholding tax on compensation in the Philippines. The following are the Tax Code provisions imposing such obligations: Section  80(A)  of  the  National  Internal  Revenue  Code  (Tax  Code),  as  amended, provides that the employer shall be liable for the withholding and remittance of the correct amount of tax required to be deducted and withheld. Section 79(H) of the Tax Code, provides that on or before the end of the calendar year but prior to the payment of the compensation for the last payroll period, the employer shall

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Tax Assessment by Third Party Letter Notice in Philippines

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By: Tax and Accounting Center Philippines In the Philippines, tax examiners could conduct examination without necessarily and directly dealing with the records of the taxpayers.  The tax examination could be made through the tax returns, reports, and submissions of other taxpayers whom the subject taxpayers had transacted with. This manner of tax examination in the Philippines seems to be a new area the tax authorities are resorting to lately. This normally covers allegations for deficiency income tax liabilities, value added tax or percentage tax liabilities. Revenue Memorandum Order No. 13-2012 dated 29 March 2012 (RMC 13-2012) has been issued to simplify guidelines, procedures and minimize processing time in handling Letter Notices (LNs) generated through the following third-party information (TPI) data matching programs: Reconciliation of Listing for Enforcement System – Summary List of Sales and Purchases (TRS – RELIEF) under RMO No. 30-2003;  Bureau of Customs Data Program (TRS-BOC) under RMO 34-2004;

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Depreciation Expense of Vehicles in the Philippines

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By: Tax and Accounting Center Philippines Under Section 34(F) of the Tax Code of the Philippines, there shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including reasonable allowance for obsolescence) of property used in trade or business. To implement this provision, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 12-2012 dated 12 October 2012 (RR 12-2012) to define depreciation    expenses   relating   to  taxpayer’s    purchase   of  Vehicles  of  all  types   (defined   herein   as passenger  vehicles  of  all type,  whether   by land, water,  or air)  providing  for  limits  on the  deductibility thereof  and all expenses  related thereto,   and the disallowance  of input taxes for disallowed  expenses. Under Section 3 of RR 12-2012, the following   guidelines   shall  be observed  in determining   whether   depreciation   expense  can be claimed  or not  on account  of Vehicles  capitalized  by the taxpayer,  or in claiming  other  expenses and

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Income Taxation of Employees in the Philippines

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By: Tax and Accounting Center Philippines In this article, let us share you an overview on how to compute basic income taxation of employees in the Philippines. For all we know, withholding tax on compensation is made every after payroll throughout the employment but this may not completely pay the income tax liability at the end of the calendar year. Here is how income tax of pure compensation works. Income tax exemptions of Minimum Wage Earners To preserve the minimum living standard of the Filipinos, employees paid minimum wage based on the minimum wage set by the DOLE – Regional Tripartite Wages and Productivity Board (RTWPB) of their location are being exempted from income tax on their compensation income. This covers the following: Basic salary at minimum wage Holiday pays for regular and special holiday pays in the Philippines Hazard pay Overtime pay for work beyond eight hours Night shift differential

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Creditable Withholding Tax Certificate in the Philippines

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By: Tax and Accounting Center Philippines Under Section 2.58(B) of Revenue Regulations No. 2-1998, as amended (RR 2-98), every payor required to deduct and withhold taxes under the regulations shall furnish each payee with a withholding tax statement using BIR Form No. 2307 showing the income payments made and the amount of taxes withheld therefrom, for every month of the quarter. Let us share some features on the creditable withholding tax (CWT) in the Philippines covered by BIR Form No. 2307: CWTs or BIR Form 2307 is an obligation of agent Issuing a creditable withholding tax certificate or BIR Form No. 2307 is an obligation of the payor – withholding tax agent to the payee. In RMC 85-2011, this obligation of withholding tax agent is reiterated. For its failure, the regulations provide that the BIR could conduct a mandatory audit of its tax liabilities. CWTs or BIR Form 2307 are

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Tax Exempt Employee Separation Fees in the Philippines

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Under the Tax Code of the Philippines, separation fees and benefits in the Philippines are exempted from income tax, and consequently, withholding taxes on compensation for separations from employment because of death, sickness or other physical disability or any other causes beyond employee’s control. No one may not really like it being separated from work in any of those circumstances but at times, it comes unexpectedly. This is normally an unfortunate event in one’s employment as this would mean finding new employment to support one’s financial needs to himself and to the family, if any. The Labor Code of the Philippines provides for separation benefits for these unfortunate employees separated from employment. The amount of separation fees in the Philippines would depend on the following factors: The amount of salary prior to separation; The cause of separation – death, sickness, physical disability or other causes; Length of service which must

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My First Brand New Toyota Car in the Philippines

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By: Belle of Tax and Accounting Center Philippines As an employed professional, buying my own brand new car in the Philippines is quite a common desire for varied reasons. One, it would give me convenience in reporting for work and going home any time after overtime. Instead of getting a cab late at night for worries on the road, I have all the reasons to go home anytime. Another factor is family travels and bonding. We are a small family of four (4) with some close relatives and during weekends, family time comes into play. With own car, we can reach the nearby places to go in Metro Manila and its surrounding provinces – Laguna, Cavite, Rizal, etc. We could leave early morning for the ride, roam around, park for lunch time and get back home before sunset or after dinner. Third factor is for personal and professional appointments. Own

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Online Tax Return Filing and Payment in the Philippines

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By: Tax and Accounting Center Philippines To provide a more taxpayer convenient manner of filing and payment of tax liabilities, electronic filing and payment system (EFPS) in the Philippines was introduced early in 2001 under Revenue Regulations No. 9-2001. The online tax payment system also fast tracked the availability of tax revenue for the Bureau of Internal Revenue (BIR) as payment is directly credited to the account of the government. How does online system works? Taxpayers intending to use online facility are required to enrol with the EFPS facility of the BIR. They are likewise required to maintain an online banking facility where the EFPS facility is integrated. Upon successful enrolment with both EFPS and online banking, the EFPS taxpayer will simply access the online facility, fill-out the tax return fields with required details and have it filed online. It is a two-step process and for control purposes, two persons

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BIR Revenue Regulations No. 2 – 2013: Transfer Pricing Guidelines

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REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Quezon City REVENUE REGULATIONS NO. 2-2013 dated January 23, 2013 SUBJECT      :           Transfer Pricing Guidelines TO      :           All Internal Revenue Officers and Others Concerned __________________________________________________________ BACKGROUND.- The dramatic increase in globalization of trade has also led to harmful tax practices that have resulted in tremendous losses of tax revenues for governments. The most significant international tax issue emerging from globalization confronting tax administrations worldwide is transfer pricing. Transfer pricing is generally defined as the pricing of cross-border, intra-firm transactions between related parties or associated enterprises. Typically, a transfer price occurs between a taxpayer of a country with high income taxes and a related or associated enterprise of a country with high income taxes and a related or associated enterprise of a country with low income taxes. In the Philippines, “intra-firm/inter-related” transactions account for a substantial portion of the transfer

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Income Taxation of Expatriates in the Philippines

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By: Tax and Accounting Center Philippines With the boom of the business process outsourcing industry in the Philippines, it is undeniable that foreign expatriates is accordingly increasing in number. Hereunder are the few reminder on how income taxation applies to compensation of expatriates in the Philippines. For better appreciation of this article, we suggest that you read first our article on Income Tax Classification of Expatriates in the Philippines. Withholding tax on compensation of expatriates in Philippines The taxable compensation of expatriate refers to the compensation received by the expatriate for its services performed in the Philippines. For resident expatriate and non-resident expatriate engaged in trade or business, withholding tax on compensation table is used for the purpose. The 2009 withholding tax table is patterned after the income tax rates of 5-32% where the applicable tax rate in any tax bracket corresponds to the level of compensation of expatriates. Yes,

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