Tax Savings on Regional Operating Headquarters

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By: Garry S. Pagaspas Under Section 2(3) of Republic Act  No. 8756, Regional Operating Headquarters (ROHQ)  is defined as a foreign business entity which is allowed to derive income in the Philippines by performing the following qualifying services to its affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Region and in other foreign markets: general administration and planning business planning and coordination sourcing and procurement of raw materials and components corporate finance advisory services marketing control and sales promotion training and personnel management logistic services research and development services and product development technical support and maintenance data processing and communication, and, business development An ROHQ is actually a foreign corporation that is licensed to do business in the Philippines to strictly engage in the above specific and limited services. It shall offer its services only to its affiliates, branches or subsidiaries, as declared in its registration with the

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Basic Income Taxation of Corporations in Philippines

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By: Garry S. Pagaspas, CPA Let me share you an overview on how corporate income taxation applies in the Philippines, in general. Let us start with the understanding of the thing called “corporation” by its nature as defined in the Corporation Code of the Philippines and for tax purposes as defined by the National Internal Revenue Code of the Philippines. Please refer hereunder for easy reference: Corporation Code of the Philippines “Section 2. Corporation defined. – A corporation is an artificial being created by operation of law, having the rights of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.“ National Internal Revenue Code (NIRC), as amended “Section 22(B). The term “corporation” shall include partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participation), association, or insurance companies, but does not include general professional partnerships and joint venture or

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Taxation of Director’s Fees in the Philippines

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Under Section 23 of the Corporation Code of the Philippines, and hereunder we quote: Section 23. The Board of Directors or Trustees. – Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is a no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified. They are the brains and the wisdom of the corporation that their maneuvering greatly affects the success or failure of the corporate venture. In exchange their services as a member of the Board of Directors (BOD), directors may be given monetary considerations. They are not normally being compensated for serving as

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6 Qualities of a Good Bookkeeper

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In practice, a bookkeeper is the term used to refer to a person who handles the books of accounts and tax compliance of a taxpayer business enterprise. A bookkeeper could be an employee hired for the purpose, or an independent person retained by the taxpayer. An independent person could be an individual practitioner or a firm engaged for such bookkeeping activities, either, as a corporation or as an outsourcing group of an accounting firm. Under the present rules, a practitioner who prepares books of accounts and tax returns, or appears/ represents a tax authority for and in behalf of a taxpayer has to be an accredited tax agent in order to bind clients. The purpose of the requirement is to impose accountability for the tax agent and for the Bureau of Internal Revenue (BIR) to regulate their conduct and ensure smooth application of tax rules and regulations for effective tax

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How to Comply with Summary Lists of Sales and Purchases

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Summary List of Purchases (SLP) and Summary List of Sales (SLS) submission has long been prescribed under Revenue Regulations No. 7-95 and was adopted by Revenue Regulations No. 16-2005 – The Consolidated VAT Regulations (RR 16-05), as amended, for VAT-registered taxpayers under the following parameters: Summary List of Sales for VAT taxpayers with sales exceeding P2.5M in any one quarter containing the details of regular buyers/customers of any amount and casual buyers/customers with individual sales of P100,00.00; and Summary List of Sales for VAT taxpayers with purchases of exceeding P1.5M in any one quarter with the details of regular suppliers of any amount and casual supplier with individual purchases P100,00.00; and, Filing the prescribed electronic device with the BIR not later than the 25th day of the month following he end of the quarter, or 3oth day for Large Taxpayers. For the purpose, an electronic facility called a RELIEF (downloadable

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8 Ways to Learn BIR Tax Compliance

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By: Garry S. Pagaspas As the saying goes: “The only things certain in life are death and taxes” – Benjamin Franklin “There is nothing permanent except change” – Heraclitus of Ephesus In my years of tax practice, I have come to embrace the above sayings describing the need to learn taxation as applied to business, and the need for a continuing knowledge to fuel business success. Obviously, knowledge of how taxes apply would be a very big advantage and lack of it would be too risky as resources are at stake to be wasted on penalties. I think, you would not like it when your hard earned money will just be wasted on government coffers through penalties or worst, on private pockets, and you cannot justify non-compliance with a simple ignorance. As our laws puts it: “Ignorance of the law excuses no one from compliance therewith” (Article 3, New Civil

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Tax Savings on Foundations

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By: Garry S. Pagaspas Foundation as an entity is not new to each of us. During calamities, donations and grants from and to foundations and charitable institutions are common. Big companies are now becoming more active in corporate social responsibilities and most of these are coursed through foundations and charitable institutions. In line with this, let us determine the tax side of this entity( or simply – How to tax foundations?) to have some clue on how this became popular now. As Section 1 of SEC Memorandum Circular No. 1, Series of 2006 puts it, and hereunder quoted: “A Foundations is a non-stock, non-profit corporation established for the purpose of extending grants endowments to support its goals or raining funds to accomplish charitable, religious, educational, athletic, cultural, literary, scientific, social welfare or other similar objectives.” Further Section 87 of the Corporation Code defines non-stock as follows, and hereunder we quote:

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Taxation of Joint Venture or Consortium for Construction

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Revenue Regulations No. 10-2012 dated June 1, 2012 (RR 10-12) entitled “Joint Venture or Consortium Formed For The Purpose of Undertaking Construction Projects and Mandatory Enrollment of Local Contractors in the Electronic Filing and Payment System (EFPS) was issued to define the tax exemptions of contractors for construction projects. This will be effective within 15 days after publication and all existing rules and regulations and other issuances or parts thereof which are inconsistent with the provisions of RR 10-12 are hereby modified, amended or revoked accordingly. Under Section 22 (B) of the Tax Code, as amended, a taxable corporation is defined as follows: “Corporation shall include partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participacion), association, or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal,

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5 Advantages of Corporation over Sole Proprietorship

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In business, the use of a proper business entity or structure could bring about more business success, and the wrong choice could prove to be a failure. In most of our seminars on basic business accounting and tax compliance or basic bookkeeping for entrepreneurs, the following question is almost always raised: “Which is better, a SOLE PROPRIETORSHIP or a CORPORATION?” There are a number of ways where we could evaluate the two and no fast rule could answer the question because advantage in one aspect could be coupled with a disadvantage in other aspects so the choice would depend on which aspect gives more weight. Nevertheless, we feel that using a corporate set-up could best be beneficial in the following ways: 1. Limited liability in a corporation. In an instance where corporate assets fell short to pay its obligations and eventually shuts down, stockholders cannot be made liable to the extent

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Tax on Non-redemption of Properties under Involuntary Sale

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Revenue Regulations No. 9-2012 dated June 1, 2012 (RR 9-2012) is entitled as “Implementing Sections 24(D)(1), 27(D)(5), 57, 106 and 196 of the National Internal Revenue Code of 1997 on Non-redemption of Properties Sold During Involuntary Sale.” RR 9-2012 is issued to take immediately in order to guide the buyers and sellers of properties under involuntary sales (e.g. mortgage foreclosure). In case of non-redemption of properties sold during involuntary sales, regardless of the type of proceedings and the personality of the mortgagees/selling persons or entities, hereunder are the rules: Subject property is CAPITAL ASSET: Capital Gains Tax (CGT) within thirty (30) days from the expiration of the applicable statutory redemption period; Documentary Stamp Tax (DST) within five (5) days after the close of the month after the lapse of the applicable statutory redemption period; Subject property is ORDINARY ASSET: Creditable Withholding Tax (CWT) return within ten (10) days after the

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