In-house Seminar Series at MSI – ECS Phils., Inc.

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Once again, Tax and Accounting Center, Inc. (TACI) has been entrusted to deliver a Comprehensive Business Accounting  and Tax Compliance Seminar for a group of IT guys of MSI – ECS Phils., Inc. (MSI-ECS). through their energetic AVP Product Support and MIS Division, Mr. Tom Pascual.  Said seminar is with the end view of developing the bookkeeping skills of participant representatives of MSI-ECS and develop a thorough understanding on the BIR compliance and tax management regulations for purposes of efficient and effective handling of MSI-ECS’ day-to-day software related sales and activities (e.g. oracle systems distribution, installation, and customization). It was a six-day tax and accounting seminar series program and was strategically structured to attain the above objectives.  As usual, the tax and accounting seminars are handled by our Resource Speakers who were actively involved in the practice of profession, and are members of the academe as professors of accounting and taxation in some universities

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Taxation of Software Payments in the Philippines

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Payment of the applicable taxes on software payments based on the classification of the income payment (income tax and/or value added tax), is accounted for as follows depending upon the tax classification of the seller as follows: I. Royalty payments to non-resident foreign licensor Royalty payments for software purchases from foreign licensor is subject to the following taxes: 12% Value added tax (VAT) in the Philippines Royalty payments for the use of a copyright over a softwares are subject to 12% VAT imposed upon the foreign licensor seller. The payor in control of the payment of VAT on the software payments shall be responsible for the withholding of VAT in behalf of the non-resident payee. For the purpose, the payor shall file a separate for and in behalf of the non-resident payee using BIR Form No. 1600 – Monthly Remittance Return of Value-added Tax and Other Percentage Tax Withheld. The duly filed

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Classification of Software Payments in Philippines

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For the tax implication of software payments, the Bureau of Internal Revenue (BIR) has issued guidelines under Revenue Memorandum Circular No. 44-2005 dated September 1, 2005 (RMC 44-05). Hereunder are the basic rules on taxable transactions under RMC 44-05: Transfer of copyright rights Transfer of software is classified as a transfer of copyright if, as a result of the transaction, the buyer acquires any one or more of the following rights: The right to make copies of the software for the purpose of distribution to the public by sale or other transfer of ownership, or by rental, lease or lending; The right to prepare derivative computer programs based on copyrighted software; The right to make public performance of the software; The right to publicly display the computed program; or, Any other rights of the copyright owner, the exercise of which by another without his authority shall constitute infringement of copyright. The determination

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Annual Income Tax Return Reminders for April 2013

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Annual income tax return filing not later than April 2013 for 2013 calendar is fast approaching. Early preparation is best encouraged for a better tax compliance and management. As the saying in the movie, “The Mechanic” goes: “Victory loves preparation.” Listed below are some items we suggest you to take into account for the April 2013 filing of income tax return and audited financial statements in the Philippines: Use of new BIR Forms 1700, 1701, and 1702 For April 2013, November 2011 versions of income tax returns are required to be used, both for manual filing and electronic filing and payment system (EFPS). Please note of the following new things  on said forms: BIR Form No. 1700 and 1701 Shading on filing out; Supplemental information at the back of the income tax return. For transparency purposes, new annual income tax returns for individuals require disclosure of other income not subject

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Personal Exemptions for Income Tax in the Philippines

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Update: Under the TRAIN law, personal exemptions are no longer considered in computing for personal income tax as it updated the income tax-exempt threshold to PhP250,000.00. Please be guided accordingly. As we have learned in our previous article – Overview of Business Expenses in the Philippines, certain expenses are deducted from income to arrive at the taxable net income. Any expense falling under the necessary and ordinary expense in the conduct of trade or business or practice of profession is deductible. To cover the personal, family, and living expenses of individual taxpayers, personal exemptions are put in place and come up with a reasonable taxable base for income taxation in the Philippines. Basic personal expenses (BPE) This is a mandatory deduction allowed to individual citizens in the Philippines regardless of the status at the amount of P50,000.00. This applies to all individual citizen taxpayers engaged in trade or business, practice

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Features of Lending Company in the Philippines

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Lending company in the Philippines under Republic Act No. 9474 ( RA No. 9474 or Lending Company Regulation Act of 2007) is synonymous to lending investors and refer to a corporation engaged in granting loans from its own capital or from funds sourced from not more than nineteen (19) persons. It shall not be deemed to include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law. For easy reference, hereunder are its basic features: Form of legal entity Under the new law (RA No. 9474), a lending company must be a stock corporation. Sole proprietorship and partnerships engaged in lending business are now illegal, after being given a one-year grace period to incorporate with the Securities and Exchange Commission. To learn more about stock corporations, please read more on…Overview of Domestic Corporations in the Philippines. Corporate Name To distinguish

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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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