Fringe Benefits Tax on Motor Vehicles in the Philippines

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Cars or motor vehicles is a common fringe benefit of employers to managerial and supervisory employees in the Philippines. Usual executive compensation package would provide a car plan under varying terms. For employers, motor vehicles are indispensable to its operations and it has a choice whether to keep it as company property for use of the company or have the motor vehicles specifically used by its employees for use both in business and for personal. Fringe benefits tax applications would then vary depending on the extent of employee benefit – source of fund, ownership under employee, and lease. Hereunder are the fringe benefits tax on motor vehicle variations in the Philippines and the related fringe benefits application: Employer purchased motor vehicle under name of employee If the employer purchases the motor vehicle in the name of the employee, the value of the benefit is the acquisition cost thereof. The monetary

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Documentary Stamp Tax on Shares of Stock in the Philippines

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Documentary stamp tax in the Philippines is imposed on the issuance and transfers of shares of stock in the Philippines, whether a par value shares of stock (with minimum fixed value for issuance in the Articles of Incorporation in the Philippines) or a no par value shares of stock. Documentary stamp tax on shares of stock in the Philippines is imposed upon any party – the issuer corporation / seller stockholder, or the buyer stockholder, based on the subscription of such shares, regardless of the issuance of stock certificates. Documentary stamp tax on original issuance of shares in Philippines On every original issue, whether on organization, reorganization or for any lawful purpose, of shares of stock by any association, company or corporation, there shall be collected a documentary stamp of One peso (P1.00) on each Two hundred pesos (P200), or fractional part thereof based on the following: Par value, of

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Fringe Benefits Tax on Housing Privilege in Philippines

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Housing privilege is a common benefit that is being given by the employer to their managerial and supervisory employees, both to Filipino employees and expatriate employees in the Philippines. As a rule, this is subject to a fringe benefits tax in the Philippines at the following rates based on the grossed up monetary value of the fringe benefit: 32% in general; 25% if the employee is a non-resident alien not engaged in trade or business in the Philippines; 15% for special alien employees in the Philippines Fringe benefits tax on housing privilege would depend on the extent of benefits being enjoyed by the employee, the corresponding business advantage or convenience of the employees, and the ownership or title under which the housing privilege is named. Below  are the basic rules: Employer leased property as usual residence of employee If the employer leases a residential property for the use of his employee and

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2012 Value Added Tax Audit Program in the Philippines

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In an effort to broaden the VAT taxpayer’s base to enhance  taxpayers’ voluntary compliance of value added tax in the Philippines with the end view of increasing the collection, the Bureau of Internal Revenue (BIR) has recently launched a 2012 value added tax (VAT) audit program in the Philippines covering non-large value added taxpayers in the Philippines under Revenue Memorandum Order No. 20-2012 dated August 23, 2012 (RMO No. 20-2012). In general, BIR conducts an audit of value added taxes in the Philippines on an annual basis, and tax audit of value added taxpayers is mostly coupled with examination of other internal revenue taxes – e.g. annual audit of “all internal revenue taxes” or “income and value added tax”. This present 2012 VAT audit program in the Philippines is a new interim audit policy of the BIR to impose strict compliance with the value added tax regulations in the Philippines and improve

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Corporations Exempt from Income Tax in the Philippines

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As a rule, domestic corporations are subject to income tax in the Philippines at the rate of 30% based on their taxable net income after allowable deductions from gross income. Income tax liability is then determined after considering the effect of tax credits such as creditable withholding taxes (BIR Form No. 2307), minimum corporate income taxes paid, and other allowable tax credits. Under Section 30 of the Tax Code of the Philippines, as amended, the following corporations or organizations shall be exempt from income tax in the Philippines in respect to income received by them as such: Labor, agricultural or horticultural organization not organized principally for profit; Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital stock organized and operated for mutual purposes and without profit; A beneficiary society, order or association, operating for the exclusive benefit of the members such as a

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2012 VAT Audit Program for Large Taxpayers in Philippines

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In an effort to enhance  taxpayers’ voluntary compliance of value added tax in the Philippines and prescribe certain audit of VAT returns of large value added taxpayers in the Philippines with the end view of increasing the collection, the Bureau of Internal Revenue (BIR) has recently launched a 2012 value added tax (VAT) audit program in the Philippines covering large taxpayers under Revenue Memorandum Order No. 19-2012 dated July 31 2012 (RMO No. 19-2012). Under RMO No. 19-2012, one (1) e-Letter of Authority (eLA) duly approved  by the ACIR, LTS upon the  recommendation of the VAT Audit Team Heads shall be issued for each taxable  quarter or semester. If a taxpayer has already been issued an eLA for all internal revenue tax liabilities for a particular period and a significant finding/s on VAT was uncovered, it should be communicated to the VAT Audit Team for possible risk identification in the current period

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Taxation of Reimbursable Expenses in the Philippines

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Reimbursable expense is an expense a taxpayer pays for and in behalf of another. It involves two (2) things where tax implications may come in – one is the payment of the expense for and in behalf of another, and the second is the receipt of the reimbursement of such amount. Payment for reimbursable expenses in behalf of another Under this, the agent (the one paying in behalf of another) will pay the third party for and in behalf of the principal (the one actually bound to pay and in whose payment is accommodated by another). The tax implication is the application of withholding taxes on reimbursable expenses in the Philippines. While the amount paid by the agent is not its expense, it is nevertheless bound to account for the withholding taxes (most especially income payments of top twenty thousand principals). Under the rules, the person in control of payment of an

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Dissolution and Liquidation of Corporations in the Philippines

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Not all corporations are successful in its business operations in the Philippines and not all domestic corporations in the Philippines are meant forever. Like humans, corporate life comes to an end and this is what is technically referred to as dissolution and liquidation. Dissolution in the Philippines is the stage of terminating the life of a corporation and liquidation in the Philippines is the process of winding up the affairs, settlement of corporate obligations / debts and distribution of remaining corporate assets through liquidating dividends in the Philippines. Dissolution of a corporation in the Philippines under the Corporation Code of the Philippines (Batas Bambansa Bilang 68 or BP No. 68) could be involuntary upon Securities and Exchange Commission’s (SEC) complaint coupled with a prescribed process of notice and hearing or voluntary based on the application of the corporation with the SEC. Voluntary dissolution of corporation in the Philippines come in

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Taxation of Educational Institutions in the Philippines

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In the prior post, we shares the types of educational institutions in the Philippines. In this article, let us share some points on the taxation of educational institutions in the Philippines – income taxation, value added taxation, and real property taxation. The Constitution of the Philippines provide for tax exemptions and privileges as follows: “Article XIV, Section 4(3). All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law. Proprietary educational institutions, including those cooperatively owned, may likewise be entitled to such exemptions, subject to the limitations provided by law, including restrictions on dividends and provision for reinvestment.” Article XIV, Section 2(4) Subject to conditions prescribed by law, all grants, endowments, donations, or

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Corporate Dividend Declaration in the Philippines

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In a corporate set-up, dividend in the Philippines represents the share of the owners of the corporation – the stockholders. An effective dividend policy in the Philippines would be a coordination of corporate earnings and cash position. A domestic corporation in the Philippines would normally declare dividends in the Philippines to distribute its earnings accumulated through the unrestricted or free retained earnings. More dividend distribution means more earnings for the stockholders and would attract more potential investors. Others would declare dividend as a remedial measure to minimize the impact of 10% improperly accumulated earnings tax in the Philippines (10% IAET), and further avoid SEC sanctions for violation of Section 43 of the Corporation Code of the Philippines on excess of free or unappropriated retained earnings over paid-up capitalization. For some, dividend declaration is simply a capital restructuring device by transferring free retained earnings to capitalization to increase paid-up capitalization in

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