Overview of Other Percentage Taxes in the Philippines

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By: Garry S. Pagaspas, CPA As the Bureau of Internal Revenue (BIR) defines it, Other Percentage Tax (OPT or non-VAT as commonly termed) is a business tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P1,919,500 (effective 2012), and are not value-added tax (VAT) registered. This simple definition, may a bit confusing in relation to the application of the Value Added Tax (VAT) rules. Thus, we take a few lines to share views on its application. Please see below some of its overview. OPT is a business tax like VAT As a business tax, OPT is imposed upon those engaged in trade or business or practice of profession. You will be taxed either OPT or VAT because you are engaged in trade or business or in the practice of

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Habagat Floods in the Philippines and Taxes

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By: Garry S. Pagaspas The present flooding brought about by habagat winds is my third walk in the floods on my way home – F.B. Harisson near corner Vito Cruz, Manila. Sometime in 2007 typhoon where heavy rains flooded Makati Area giving me no choice but to walk from SM Ayala, Makati to home for about two (2) hours. During thypoon Ondoy where I have to walk from PUP Taguig near SM Bicutan to home  for more than four (4) hours. Last August 6, 2012, was my walkaton from Starbucks Columns, Makati to home for an hour and a half (1.5hrs) going through Buendia Avenue and F.B. Harrison. I could relate how it felt to get wet for a number of hours and to walk over flooded streets with all the risks. In those times I wish for help but would prefer to do it myself so help would go to the more needy

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Overview of Value Added Tax in the Philippines

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By: Garry S. pagaspas Value Added Tax (VAT) in the Philippines is a tax that each and every entreprenuer should be very much aware of. Firstly, it affects all of us consumers. Secondly, it greatly affects business transactions, in a way or another, such as in pricing where goods or services bought and sold contains VAT, maximizing profits when input VAT is minimal, cash flow issues, and more. In reading below, please note the following: Input VAT refers to VAT the buyer pays on purchase from VAT registered and only VAT registered buyers are allowed to claim input VAT; Output VAT refers to the VAT the seller passed on to the buyer; and, VAT due and payable is output VAT less input VAT; In this article, let us discuss some of its features for better and deeper understanding VAT is a business tax As a business tax, it is imposed upon those who

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Overview of Documentary Stamp Tax in the Philippines

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By: Garry S. Pagaspas Under the National International Revenue Code (NIRC), a documentary stamp tax (DST) is imposed upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following Sections of this Title, by the person making, signing, issuing, accepting, or transferring the same wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines, and the same time such act is done or transaction had Whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax. Before

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Overview of Handling BIR Tax Audit in the Philippines

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By: Atty. Pearl Fatima L. Evardone Philippines tax system is anchored on voluntary compliance under pay-as-you file as it is the taxpayer who is responsible for its tax compliance determining which tax should be paid, how to comply with various reports, and when to pay the same. It has a check and balance mechanism where the tax authority (Bureau of Internal Revenue or BIR) has the right to conduct tax assessment or examination within three (3) years from required filing or from late filing (or 10 years, for false or fraudulent returns with intent to evade taxes or if no tax return filed) to determine the extent of compliance of taxpayers. Under this, the BIR is clothed with such power to require taxpayers to submit to its authority for the purpose of determining such tax compliance and do such acts for collection of taxes due from taxpayers. Hereunder is an

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Overview of Domestic Corporations in the Philippines

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In the Philippines, a legal business entity could come in many forms – sole proprietorship, partnership, corporations. Small business operations and start-ups are normally undertaken through a sole proprietorship. Partnerships could either be an ordinary business partnership that may engage in such activities registered to do so, or a general professional partnership for the practice of a common profession like that of certified public accountants for the conduct of statutory audit and other accounting services (e.g. GPP & Co., CPAs), lawyers under the Integrated Bar of the Philippines, engineers, and the likes. Corporations could be domestic or foreign corporations depending on where the same is registered and existing. In this article, let us share you an overview of domestic corporations in the Philippines. A corporation registered and existing under the laws of the Philippines is referred to as a domestic corporation. Company registration or incorporation is necessary to establish a

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Books of Accounts of Taxpayers in the Philippines

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All persons engaged in trade or business, or in the practice of profession registered with the Bureau of internal Revenue (BIR) are required to maintain books of accounts. Books of accounts are required to be registered with the BIR and is where your records all financial transactions about your business.  Entries in the books of accounts are matters of past transactions and events and are required to be supported by documents and papers such as official receipts, sales invoices, vouchers, and other related documents and papers evidencing completed business transactions.  Your books of accounts will tell whether you paid the rightful amount of taxes due to the BIR so extra care and effort should be exerted in preparing the same to avoid unnecessary penalties. The BIR allows three types of books of accounts  – (1) manual books of accounts, (2) computerized books of accounts, and (3) loose-leaf books of accounts. It is

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In-house Seminar at Koyo Manufacturing Philippines

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Tax and Accounting Center, Inc. (TACI) continues its advocacy to educate taxpayers on tax compliance and tax management to ensure compliance, avoid unnecessary penalties, and accordingly, bring about tax savings. On July 21, 2012 TACI was requested by Koyo Manufacturing (Phils.) Corporation (KMPC), in Lima Technology Center, Malvar, Batangas to deliver a one-day in-house Comprehensive Tax Seminar at Koyo’s conference room.  Seminar had been facilitated by our Resource Speaker, Mr. Garry S. Pagaspas, CPA, who shared his wisdom and expertise on the following topics developed from being a member of the academe and as active tax practitioner, to wit: Income taxation as a PEZA-registered manufacturing entity Withholding tax compliance – expanded and final Withholding tax on compensation and fringe benefit taxation Value-added tax  compliance as PEZA registered Overview BIR tax examination process The seminar was participated by nineteen (19) company representatives, more or less, from accounting,  human resource, and other departments. Participants listen

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Accounting for VAT in the Philippines

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By: Garry S. Pagaspas Value Added Tax (VAT) is imposed upon any person who, in the ordinary course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods. It is an indirect tax and the amount of VAT maybe shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. The BIR has mandated under Revenue Regulations No. 18-2011 that VAT shall be shown separately on the sales invoice (SI) for transactions involving goods, or on the official receipts (OR) for transactions involving services, and failure to follow the same is subject to penalties (say, P1,000.00 per SI/OR). This new mandate makes accounting for VAT a bit easier and fun. I should not say its boring, because some technical rules would thrill your brain cells. The VAT you pay on purchases is normally called “input VAT”, while the VAT you add on sales is

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Overview of Financial Statement Analysis

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Accounting is a language of business and communicates through the financial statements. Financial statements provides you a  summary of all the things relating to financial figures and related non-financial information relevant and material to the users of the same. It will provide you information about the properties owned by the business, obligations owed, capitalization made by the owners, results of operations during the period, sources and uses of cash during the period, and related supporting computations. These details are vital to the management and are not decorations, but, is there is for a purpose in understanding about the past, making good the present, and, preparing for the future. Financial statements are required to be certified by the independent certified public accountant (CPA) to determine whether they are prepared in accordance with the Philippine Financial Reporting Standards (PFRS). It will be filed with the Securities and Exchange Commission (SEC) and or as attachment to

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