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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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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