New Tax Clearance on Sale of Certificate of Public Convenience

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Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 50-2012 (RMC No. 50-2012)  dated June 28, 2012 prescribing the issuance of Certificate of Tax Clearance (CTC) as a pre-requisite on the approval of sale and  transfer of Certificate of Public Convenience (CPC) by the Land Transportation Franchising and Regulatory Board (LTFRB). Certificate of Tax Clearance (CTC) is a new requirement in dealing with the LTFRB of public transport operators. This is secured with the Bureau of Internal Revenue (BIR) Revenue District Office (RDO) where the operator is registered. Specifically, CTC will have to be secured on the following transactions with the LTFRB: Approval on the sale, and Approval on the transfer of Certificate of Public Convenience (CPC) In securing the CTC with the Revenue District Office of Registration, the following are the requirements: Duly accomplished and notarized Application Form; LTFRB Certified Copy of the CPC for sale; BIR Certification Fee of

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5 Features of Economic Zones under PEZA in the Philippines

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By: Garry S. Pagaspas, CPA Let me share you my personal views on the features of the economic zones under Philippine Economic Zone Authority (PEZA) under Republic Act No. 7915 or otherwise known as “The Special Economic Zone Act of 1995“. This seems to be a good concept as a government’s foreign investments mechanism for multinational and other foreign investors to relocate and establish business presence in the Philippines. First, is the generation of labor for the labor capital country, Philippines. Second, is the improvement in the interaction of Philippines with the international territories for business and economic ventures. An thirdly, is the revenue generation from the operation of such ecozones within the defined economic zones in the country. As a rule, Philippines is a customs territory so sales going outside of the Philippines is an exportation, while, purchases from abroad are importation. Under the concept of economic zone (or

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Overview of Improperly Accumulated Earnings Tax in the Philippines

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By: Garry S. Pagaspas Improperly accumulated earnings tax (IAET) in the Philippines is imposed upon every corporation formed or availed for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings and earnings and profits to accumulate instead of being divided or distributed. I pity those who are being paid this tax because with proper education and awareness, these could be avoided. You would not want to waste your hard earned business profits from the effects of simple lapses, or worst, ignorance.  Hereunder are its simple features to picture out how it works: Imposed as a penalty tax to recover lost revenue In simple and plain language, improperly accumulated earnings tax is a penalty tax upon a corporate taxpayer for accumulating so much net income after tax  beyond the reasonable needs of the business. Section 43 of the

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6 Benefits Exempt from Fringe Benefits Tax in Philippines

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By: Garry S. Pagaspas Under the Tax Code, fringe benefits subject to fringe benefits tax in the Philippines means any good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee (except rank-and-file employees) such as but not limited to the following: Housing, Expense account, Vehicle of any kind, Household personnel, such as maid, driver and others, Interest on loans at less than market rate to the extent of the difference between the market rate and actual rate granted, Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations, Expense for foreign travel, Holiday and vacation expenses, Educational assistance to the employee or his dependents, and, Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows The above enumeration are

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My First Vacation Experience in Boracay, Philippines

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By: Garry S. Pagaspas I have this conception in mind that Boracay Island, Philippines is a status symbol and only for selection few with the means. It turned out to be wrong with our present Boracay getaway adventure from August 26-29, 2012. It seems that Boracay Island vacation is friendly for backpackers and cost conscious like us. Ooops!!! Do not get me wrong! I am not a great travel blog writer to describe heavens in our Boracay adventure, but would simply just share how we enjoyed that you may get some clues and tips for your dream Boracay experience. Trip to Boracay Philippines from Manila Going to Boracay Island Philippines from Manila is either by sea (via Batangas – Mindoro – Caticlan) or by plane from Manila to Kalibo, Aklan then by land to Caticlan. From Caticlan to Boracay Island Philippines is by boat. There is an alternative route from

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Overview of Deductible Expenses in the Philippines

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By: Garry S. Pagaspas In computing for the income tax in the Philippines, certain deductible expenses are subtracted from gross income. They are technically termed as “allowable deductions from gross income” and they could be under itemized deductions or under optional standard deductions (OSD). In either case, they share the same concept, unless stated hereunder. We share hereunder some features for your deeper understanding. A tool to reasonably measure taxable income In income taxation in the Philippines, a taxpayer is being subjected to income tax because it earned something – be it from business or non-business activities. In business setting, it is admitted that business expenses are necessary to earn a revenue. As such, the allowable deductions from gross income becomes a tool to equitably measure the taxpayers net income from its business undertakings. It would be unfair if the taxpayer would be taxed at gross amount without allowable deductions,

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Overview of Capital Gains Tax in the Philippines

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By: Garry S. Pagaspas Capital gains tax in the Philippines is imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines. To better appreciate this tax type , let us share you the following overview. Tax on non-business asset or capital asset The subject of capital gains tax are actually non-business assets or properties not used  in trade or business or practice of profession. They are technically termed as “capital assets” in the Philippines and are broadly defined as property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of taxable year; property held by the taxpayer primarily for sale to customers in the

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Tax Evasion Cases on Two Sole Proprietors in Construction Business

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By: Garry S. Pagaspas The Philippines’ Bureau of Internal Revenue (BIR) has filed new tax evasion charges last August 16, 2012 under its Run After tax Evader (RATE) program against two (2) sole proprietors engaged in construction business as follows:  The Sole Proprietor of Hoksing Builders (HB) HB is charged for allegedly underdeclaring his income last 2008 and 2010, not declaring income for VAT purposes in 2006 and 3rd Quarter of 2010, failure to file VAT return from 2006 to 3rd quarter of 2010, and allegedly making false and misleading entries in the 2010 fourth quarter VAt return. Alleged total tax liability is P84.8M. Sole Proprietor of Togado Builders (TB) TB, owned and operated by a licensed Architect, is charged for gross under declaration of income by at least P12M, and his alleged estimated aggregate income tax and VAT liability from 2007 to 2009 is P12.2M. As of the above filings, BIR reported

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Tax Savings on Value Added Tax (VAT) or Percentage Tax Registration

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In the previous post – Other Percentage Tax or Value Added Tax registration?, we have discussed the basic things that a new business registrant should be aware of. In this article, let us share some insights on which registration would work at the new business registrant’s advantage. Perhaps at this point, you already have an overview of the value added tax, and an overview of the other percentage tax in the Philippines. To refresh your thoughts, let us state the following: In VAT, a seller add on 12% on every sale because VAT is an indirect tax. For the seller, it is called Output VAT and for the buyer it is Input VAT. At one point, the seller is also a buyer, so he has Output VAT on sales and Input VAT on purchases. VAT payable in computed by a simple deduction, Output VAT less Input VAT. Percentage tax liability is

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Other Percentage Tax (OPT) or Value Added Tax (VAT) Registration?

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For the initial registration with the Bureau of Internal Revenue (BIR) in the Philippines, the simple rules to determine whether an entrepreneur or an entity should register under Other Percentage Tax (OPT) or Value Added Tax (VAT) may be enumerated as follows: OPT by nature. Industry covered by other percentage tax by nature are required to register under OPT regardless of gross receipts or gross sales. Examples of this are common carries – operators of public utility buses, jeepneys, taxis and the likes, life insurance premiums, banks and non-bank finance intermediaries, etc.; VAT by nature Industry covered by the VAT system may either register under OPT or VAT depending on expected gross receipts or gross sales within the 12-month period whether or not it would exceed P1,919,500.00. If expected to exceed the threshold, then may opt to register as VAT. This is optional and irrevocable for a period of three (3) years

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