Legal Business Entity Registration in the Philippines

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In registering a legal business entity in the Philippines, hereunder are the normal procedures you may consider: Company name reservation A company name to be used should be reserved with the Securities & Exchange Commission (SEC) for minimal fees – P40.00 for every 30 days up to a maximum of 90 days subject to renewal. For domestic companies, a company named should not be confusingly similar or identical to a registered and protected name, while a similar name of a foreign entity with added suffix is required for those securing a license to do business in the Philippines. Treasurer-in-trust account Using the initial registration papers executed, a treasurer-in-trust (TITF) account with the required paid-up capitalization shall be maintained with the bank as proof of such capitalization evidenced by the bank certificate and inward remittance, if applicable. TITF account is for deposit only and restricted for withdrawal except upon approval of

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Accounting for VAT on Sales to Government in the Philippines

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In this article, let us share sample accounting journal entries related to final value added tax on sales to government in the Philippines. Let us use the sample data on sales to government and let us make some modifications as we go along to illustrate other rules. We disregarded the application of withholding tax on income payments to simplify illustrations and journal entries. For the month of September 2012, A Corp. sold P1,000,000 worth of goods plus 12% VAT or P120,000 to Government Agency (GA). It likewise sold P2,000,000 plus 12% VAT or P240,000 to private buyers. Total purchases of goods and services of  A Corp. from VAT-registered sellers totaled P1,500,000 plus 12% VAT or P180,000. Of such purchases, P500,000 plus 12% VAT or P60,000.00 is used in sales to government, P500,000 plus 12% VAT or P60,000.00 is used for sales to private buyers, and the other P500,000 plus 12%

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Value Added Tax on Sales to Government in Philippines

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Government, any of its political subdivision, instrumentality  or agencies, including government-owned or controlled corporations (GOCCs) is also subject to value added tax in the Philippines, unless otherwise exempted. Sales to government of goods, properties, or services are subject to 12% value added tax.  However, there are some special rules that one must be aware of in dealing with the government sales – final withholding VAT on sales to government in the Philippines, accounting and fill-out of value added tax returns in the Philippines. Final withholding VAT on sales to government As a rule, government or any of its political subdivision, instrumentalities, or agencies, including government-owned or controlled corporations are mandated to withhold 5% (out of the 12% VAT) on VATable sales upon payment to value added tax sellers of goods or services. Such 5% withholding tax shall represent the net VAT payable by the seller to government.  This would mean that

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Foreign Corporations in the Philippines

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With the good business potentials in the Philippines, it is unsurprising that foreign corporations and entities are doing business in the Philippines in a way or another. A foreign corporation in the Philippines could either be a resident foreign corporation (RFC) or a non-resident foreign corporation (NRFC). A non-resident foreign corporation is one which does not have any presence in the Philippines but derives income in the Philippines such as extending foreign loans earning interest income, investing in shares of stocks of domestic corporations earning dividends, or leasing out assets in the country for a fee – aircrafts,sea vessels, cinimatographic films. A resident foreign corporation is one which establishes its physical presence in the Philippines – e.g. through an office,a branch or a sales office. Foreign corporations or entities could do business in the Philippines as a domestic corporation or as a resident foreign corporation. As a domestic corporation or

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Overview of Donor’s Tax in the Philippines

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Donor’s tax is imposed upon any person, natural or juridical, resident or non-resident, who transfers or causes to transfer by gift or donation, whether direct or indirect, in trust or otherwise, real, personal, tangible or intangible property.  Hereunder are some features for your better appreciation. A tax upon one’s gratitude to others Donor’s tax in the Philippines is imposed upon gratuitous transfers of property from one person to another during their lifetime. Gratuitous means that the property is transferred free of charge or that the donee (the receipient) does not pay for it in receiving the property from the donor (the giver). One cited reason for the imposition of donor’s tax in the Philippines is to mitigate the gap between the rich and the poor so that the amount that the more able one’s will give or donate will be lessened by the donor’s tax imposed. Imposed also on indirect donations

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Lin Dong of Hanson Ltd in China and John, a scam?

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We have just been online for a while and has just been starting to explore online opportunities and risks. Last September 18, 2012 we were surprised by an e-mail alleging some internet trademark intellectual property safeguard matters. This is our first time to receive an e-mail of a kind and was alarmed so we were inclined to go attend to the matter to protect our domain. After a while of searching the links and names of involved, we found some articles saying this as a scam. We wish to share the exchange of communication that you may see their modus operandi and avoid being victimized, if indeed, this is a scam. Below are the exchanges of e-mails and sequence of events: ——– Original Message ——– Subject: Internet Keyword & Asia/Cn domain name registration Date: 2012-09-18 12:01 From: “John” <jo*****@yg*******.cn> To: <le***@ta************.org> Subject: notice protect– internet trademark intellectual property safeguard Dear Manager,

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5 Instances of Input VAT Expense in the Philippines

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Under the tax credit mechanism of the value added tax (VAT) system in the Philippines, the value added tax passed on by VAT registered suppliers to VAT registered buyers are deducted from the output VAT on the later sales of the buyers.  In short, input VAT (VAT from purchases) are deducted from output VAT (VAT on sales) in arriving at the VAT due and payable. This however is a general rule and is subject to exemptions because there are instances where input VAT in the Philippines are not deductible from output VAT. In the following instances, an input VAT is treated as a deductible expense for income tax purposes: 1. Input VAT from local purchases of non-VAT registered For a value added tax registered taxpayer in the Philippines, input VAT is an asset and is accounted for separately. As such, it is deductible against output VAT as stated above. For a non-VAT registered

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5 Basic Value Added Tax Compliance in the Philippines

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In the Philippines, business tax registration could either be a value added tax (VAT) or other percentage tax (OPT) – sometimes termed as non-value added tax (non-VAT). In general, Value Added Tax in the Philippines is for a large scale business, while Other Percentage Tax in the Philippines is for small business operations, unless, the industry itself falls under those other percentage tax by nature irregardless of gross sales or gross receipts.  In this article, let us share you the things that a VAT registered taxpayer in the Philippines should be aware of to fully comply with the requirements of the Bureau of Internal Revenue (BIR). 1. Registration of Books of Accounts Duly registered books of accounts of a value added taxpayer in the Philippines could be a manual books of accounts, loose-leaf books of accounts or computerized books of accounts.  It is normally composed of the following: Journal Ledger

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Overview of Certificate Authorizing Registration in the Philippines

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By: Garry S. Pagaspas Certificate Authorizing Registration (CAR) in the Philippines or the now commonly known as electronic certificate authorizing registration or ECAR is one issued by the Bureau of Internal Revenue (BIR) in relation to transfers of certain properties in the Philippines. Hereunder are some of its features for easy reference. A mandatory tax clearance for the transfer of title Electronic Certificate authorizing registration (eCAR) in the Philippines is in effect a tax clearance issued by the Bureau of Internal Revenue (BIR) relative to the transfer of certain properties. Once issued, it would mean that applicable taxes on such transfers of properties are being paid – capital gains tax in the Philippines, documentary stamp tax in the Philippines, creditable withholding tax in the Philippines,  and certification fees, whichever is applicable. It is a mandatory requirement and the title of the property will not be transferred in the absence of

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In-house Tax Seminar at SMEC Philippines

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 Tax and Accounting Center, Inc. continued to share its advocacy on helping out  taxpayers in developing their tax compliance and tax management. Last September 8, 2012, it was engaged to deliver a one-day Comprehensive Taxation Seminar at SMEC Philippines, Inc.’s conference room in Ortigas Center, Pasig City. The in-house tax seminar was handled by our Resource Speaker, Mr. Garry S. Pagaspas, CPA with the following scope: Value-added tax compliance – regular/zero-rating/exempt and government VAT applications, refunds of input taxes, substantiations, related reports and attachments Withholding tax compliance – expanded and final with sample applications Corporate income taxation – taxable income, allowable deductions, tax credits, attachments and the 2011 income tax return Withholding tax on compensation and fringe benefit taxation – technicalities and related attachments Overview of the tax assessment process – tax assessment process, taxpayers alternatives and related prescriptive periods Throughout the in-house seminar at SMEC Philippines participants, questions and clarifications

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