Overview of Capital Gains Tax in the Philippines

---

By: Garry S. Pagaspas Capital gains tax in the Philippines is imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines. To better appreciate this tax type , let us share you the following overview. Tax on non-business asset or capital asset The subject of capital gains tax are actually non-business assets or properties not used  in trade or business or practice of profession. They are technically termed as “capital assets” in the Philippines and are broadly defined as property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of taxable year; property held by the taxpayer primarily for sale to customers in the

Read More

Tax Evasion Cases on Two Sole Proprietors in Construction Business

---

By: Garry S. Pagaspas The Philippines’ Bureau of Internal Revenue (BIR) has filed new tax evasion charges last August 16, 2012 under its Run After tax Evader (RATE) program against two (2) sole proprietors engaged in construction business as follows:  The Sole Proprietor of Hoksing Builders (HB) HB is charged for allegedly underdeclaring his income last 2008 and 2010, not declaring income for VAT purposes in 2006 and 3rd Quarter of 2010, failure to file VAT return from 2006 to 3rd quarter of 2010, and allegedly making false and misleading entries in the 2010 fourth quarter VAt return. Alleged total tax liability is P84.8M. Sole Proprietor of Togado Builders (TB) TB, owned and operated by a licensed Architect, is charged for gross under declaration of income by at least P12M, and his alleged estimated aggregate income tax and VAT liability from 2007 to 2009 is P12.2M. As of the above filings, BIR reported

Read More

Tax Savings on Value Added Tax (VAT) or Percentage Tax Registration

---

In the previous post – Other Percentage Tax or Value Added Tax registration?, we have discussed the basic things that a new business registrant should be aware of. In this article, let us share some insights on which registration would work at the new business registrant’s advantage. Perhaps at this point, you already have an overview of the value added tax, and an overview of the other percentage tax in the Philippines. To refresh your thoughts, let us state the following: In VAT, a seller add on 12% on every sale because VAT is an indirect tax. For the seller, it is called Output VAT and for the buyer it is Input VAT. At one point, the seller is also a buyer, so he has Output VAT on sales and Input VAT on purchases. VAT payable in computed by a simple deduction, Output VAT less Input VAT. Percentage tax liability is

Read More

Other Percentage Tax (OPT) or Value Added Tax (VAT) Registration?

---

For the initial registration with the Bureau of Internal Revenue (BIR) in the Philippines, the simple rules to determine whether an entrepreneur or an entity should register under Other Percentage Tax (OPT) or Value Added Tax (VAT) may be enumerated as follows: OPT by nature. Industry covered by other percentage tax by nature are required to register under OPT regardless of gross receipts or gross sales. Examples of this are common carries – operators of public utility buses, jeepneys, taxis and the likes, life insurance premiums, banks and non-bank finance intermediaries, etc.; VAT by nature Industry covered by the VAT system may either register under OPT or VAT depending on expected gross receipts or gross sales within the 12-month period whether or not it would exceed P1,919,500.00. If expected to exceed the threshold, then may opt to register as VAT. This is optional and irrevocable for a period of three (3) years

Read More

Taxation of Non-profit Clubs for Pleasure and Recreation

---

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

Read More

Documentary Stamp Tax on CIA Philippines’ Documents

---

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

Read More

Ways a Small Entrepreneur Appears to be Big

---

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

Read More

Overview of Other Percentage Taxes in the Philippines

---

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

Read More

Habagat Floods in the Philippines and Taxes

---

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

Read More

Overview of Value Added Tax in the Philippines

---

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

Read More