Taxation of Non-profit Clubs for Pleasure and Recreation

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By: Garry S. Pagaspas The Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular No. 35-2012 (RMC 35-2012) dated August 3, 2012 entitled “Clarifying the Taxability of Clubs Organized and Operated Exclusively for Pleasure, Recreation, and Other Non-profit Purposes”. RMC No. 35-2012 has been issued by the BIR to clarify the income taxation and value added tax of clubs organized and operated exclusively for pleasure, recreation, and other non-profits purposes or “recreational clubs” as follows: Income tax of recreational clubs Under Section 26(H) of Presidential Decree No. 1158 otherwise known as National Internal Revenue Code of 1977, clubs which are organized and operated exclusively for pleasure, recreation, or other non-profit purposes or referred to as recreational clubs are exempt from income tax. However, under the National Internal Revenue Code of  1997, such provision was not included and under the doctrine of “casus pro omisso habendus est” a person or

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Documentary Stamp Tax on CIA Philippines’ Documents

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By: Garry S. Pagaspas The Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular No. 36-2012 (RMC 36-2012)dated August 3, 2012 entitled “Clarification on whether documents mentioned in Section 199 o the Tax Code 0f 1997, as amended by Republic Act No. 9243, are subject to documentary stamp tax (DST) of P15.00 as prescribed in Section 188 of the said Code”. RMC 36-2012 reiterates that only instruments, documents and papers of transactions expressly enumerated in Section 199 of the Tax Code, as amended, and since the certificates and other necessary documents issued by the Construction Industry Authority of the Philippines was not mentioned, the following are subject to the documentary stamp tax of P15.00: Certificate of Registration of Overseas Contractors; Certificates of Renewal of Registration of Overseas Contractors; Contractor’s License (Original); Certificate of whether a certain contractor is licensed; Certified true copies of license certificates; Certified true copies of

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Ways a Small Entrepreneur Appears to be Big

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We have this notion that “SMEs today are the next business icons of the country”. Being small is not permanent and big ones started small, and nobody could tell when and how a small one becomes big. At times, a small business is being pushed to the limits in dealing with the big ones. At times, a big one wants to be assured on the capacity of the small ones in catering their needs, so some tricks are employed to convince them of your capacity to deliver their requirements. In this article however, we will not deal on how to become big. We will only deal with some ways on how your small business will appear to be big to attract the big ones to deal with you and gain more business advantage. We are aware of the cost implications, and thus, we would want you to see the estimates

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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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