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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Fringe Benefits Tax in the Philippines

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Fringe benefit is a special form of benefits you provide your employees on in addition to their salaries and wages.  It means any good, service or other benefit furnished or granted in cash or in kind by an employer – corporate or sole proprietor, to an individual employees. Providing the employees with such fringe benefits may be based on your company policy, or based on the contract with your employees. It could be a business related expense tending to personally benefit the employee like a vehicle to be used for business meetings and for personal travels, or a purely personal expense intended to benefit the employee like housing personnel – house maid or family drivers.  In either case, they are treated as business expenses because they represents your expense payments relative to their employment. However, you have to pay fringe benefits tax in order for you to be allowed to

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Internal Revenue Taxes in the Philippines

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The National Internal Revenue Code of 1997 (Tax Code) under Republic Act No. 8424, as amended or the Tax Reform Act of 1997 enumerates the internal revenue taxes imposed and administered by the Bureau of Internal Revenue (BIR) under Section 21 as follows: SEC. 21. Sources of Revenue. – The following taxes, fees and charges are deemed to be national internal revenue taxes: (a) Income tax; (b) Estate and donor’s taxes; (c) Value-added tax; (d) Other percentage taxes; (e) Excise taxes; (f) Documentary stamp taxes; and (g) Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue. For better understanding, let us give you an overview of each of them. These taxes are of general tax classifications, and may contain sub classifications. In classrooms, these taxes are divided in two (2) parts – Part I for Income Taxes, and Part II – for Transfer

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Tax Compliance of Freelancers in the Philippines

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By: Garry Pagaspas, CPA As Wikipedia.Org defines the term “Freelancer”, and hereunder we quote: “A freelancer, freelance worker, or freelance is somebody who is self-employed and is not committed to a particular employer long term. These workers are often represented by a company or an agency that resells their labor and that of others to its clients with or without project management and labor contributed by its regular employees. Others are completely independent. ‘Independent contractor” would be the term used in a higher register of English. Fields where freelancing is common include;  music, journalism, publishing, screenwriting, film making, acting, photojournalism, cosmetics, fragrances, editing, event planning, event management, copy editing, proofreading, indexing, copy writing, computer programming, web design, graphic design, website development, consulting, tour guiding, video editing, video production and translating.” It seems that the freelancer is a broad term applied to self-employed individuals or individuals hired as independent contractors and not as an employee

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11 Tax Exempt De Minimis Benefits to Employees

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De minimis benefits are benefits of relatively small values provided by the employers to the employee on top of the basic compensation intended for the general welfare of the employees. Being of relatively small values, the same is not being considered as a taxable compensation. This concept has initially been introduced by Revenue Regulations No. 8-2000 sometime in year 2000 amending Revenue Regulations 3-98, and underwent a number of amendments, to include a material impact under Revenue Regulations No. 15-2011 dated March 16, 2011, and Revenue Regulations No. 8-2012 dated May 11, 2012. As of this writing, the latest amendment is Revenue Regulations No. 1-2015 dated January 5, 2015. For the employer, the amount of de minimis provided is a deductible salaries expense, while for the employee, it would constitute as an additional salary that is not deducted withholding tax on compensation. To further appreciate the tax exemptions, let us enumerate the

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8 Features of Withholding Tax on Compensation in the Philippines

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Withholding tax on compensation is an approximate of income tax liability on compensation required to be withheld by the employer upon every payment or accrual or recording of salaries and wages in its books of accounts. It has been said that withholding tax has been a good contributor of internal revenue in the level of individual taxpayers perhaps because the employer automatically deducts the tax upon every payroll and that most sole proprietors are on small scale and once it grows, corporate entity conversion comes into play. For you to further understand the withholding tax on compensation, let us discuss some of its features to serve as a guide for your application. 1. Applies to employer-employee relationship. For this withholding tax on compensation to apply, you must establish the fact that there is an employer-employee relationship between the payor and the payee. In its absence, other tax type may apply

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Accounting for Withholding Taxes in the Philippines

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We had been browsing some search terms leading to our pages, blog posts and articles when we noticed the search phrase “accounting for withholding tax entries“, and this invites our attention to make a simple article on the accounting entries related to withholding taxes.  To start with, please note that under the tax rules, “obligation to withhold arise upon your payment, accrual, or recording in the books of an expense subject to withholding taxes, whichever comes earlier” As such, we show you the sample related accounting entries in the books of the payor-withholding agent and that of the payee. To illustrate: Let us assume that Company A secured the professional services of Mr. Juan de la Cruz amounting to P100,000, exclusive of 12% VAT, or a total of P112,000.00. What are the related accounting entries, assuming Mr. Juan de la Cruz’ income does not exceed P720,000.00 and the withholding tax rate is

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7 Features of Withholding Tax System in the Philippines

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Withholding tax is the most basic tax type that each and every taxpayer engaged in trade or business or in the practice of profession must learn. Upon registration of their respective business entities, withholding tax type is a must and it may come in three (3) tax types as sub classifications as follows: Expanded withholding tax (EWT) or Creditable withholding tax (CWT) under monthly BIR Form No. 1601E and annual BIR Form No. 1604E with Alphalist of Payees; Withholding tax on compensation (WC) under monthly BIR Form No. 1601C and part of annual BIR Form No. 1604CF with Alphalist of Employees; Final withholding tax (FWT) under monthly BIR Form No. 1601F and part of annual BIR No. 1604CF with Alphalist of Employees/Payees; To develop a deeper understanding of the withholding tax system in the Philippines, let us discuss some of its basic features. 1. Automatic constitution of resident payor of

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