After setting up and registering your business with the Bureau of Internal Revenue (BIR), how will you know WHAT taxes to pay monthly, quarterly and annually? WHEN are the deadlines for these taxes? WHERE and HOW do I file and pay? These are just a few of the questions that a businessman asks, especially those who are just starting their business.
For you to know your taxes, the first thing you should check is the tax type on your Certificate of Registration (COR) or Form 2303, issued to you upon registering with BIR.
The Common taxes for a regular business are:
Income tax
Withholding tax – Expanded
NOTE: If your COR does not have these tax type, but you lease a property or pay professionals, you might need to amend your COR to include this tax type.
Withholding tax – Compensation
NOTE: If your COR does not have these tax type, but you have employees, you might need to amend your COR to include this tax type.
Percentage OR Value-Added Tax
NOTE: For Percentage Tax and VAT, a business can ONLY choose 1. There are industries that are automatically subject to VAT or automatically subject to Percentage Tax. However, the common rule is if your annual Revenue does not exceed P3 million, you are subject to percentage tax, otherwise you are subject to VAT. To be safe, check your COR. However, if you annual revenue exceeds P3 million, you might need to update your COR and change to VAT.
How often should you file these taxes. For simplicity, let us categorize payment of taxes into monthly, quarterly and annually, and answer the 3 Ws: What, Who, and When of each of these taxes.
Monthly
Withholding tax : Compensation
o Which Form: 1601C
o What: 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.
o Who: Businesses that have employees
o When: Not later than the 10th day following the end of each month
Withholding tax : Expanded
o Which Form: 0619E
o What: Expanded Withholding Tax is a kind of withholding tax which is prescribed on certain income payments and is creditable against the income tax due of the payee for the taxable quarter/year in which the particular income was earned.
o Who: Businesses that pay suppliers that are subject to expanded withholding tax (ex. Rent, professional fees)
o When: Not later than the 10th day following the end of each month
Value-Added Tax :
o Which Form: 2550M
o What: Value-Added Tax (VAT) is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.
o Who: Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties and renders services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed Three Million Pesos (Php3,000,000.00). A person required to register as VAT taxpayer but failed to register. Any person, whether or not made in the course of his trade or business, who imports goods
o When: Not later than the 20th day following the end of each month
Quarterly
Withholding tax : Expanded
o Which Form: 1601EQ
o What: same as 0619E above
o Who: same as 0619E above
o When: Within thirty (30) days after the end of each taxable quarter. (For example, if a Company’s year ends in December, the first quarter ends in March and the deadline of the filing for the 1st quarter is April 30).
Percentage tax
o Which Form: 2551Q
o What: Percentage tax is a business tax imposed on persons, entities, or transactions specified under Sections 116 to 127 of the National Internal Revenue Code of 1997 (also known as Tax Code), as amended, and as required under special laws.
o Who: (a) Persons, who are not VAT-registered, who sell goods, properties or services, whose annual gross sales and/or receipts do not exceed three million pesos (Php3,000,000.00) and are exempt from value-added tax (VAT) under Section 109 (BB) of the National Internal Revenue Code, as amended by Republic Act (RA) No. 10963; (b) Persons who lease residential units where the monthly rental per unit exceeds fifteen thousand pesos (Php15,000.00) but the aggregate of such rentals of the lessor during the year does not exceed three million pesos (Php3,000,000.00); and (c) Persons engaged in specific industries/transactions subject to percentage tax.
o When: Within twenty-five (25) days after the end of each taxable quarter. (For example, if a Company’s year ends in December, the first quarter ends in March and the deadline of the filing for the 1st quarter is April 25).
Value-Added Tax :
o Which Form: 2550Q
o What and Who: same as above 2550M
o When: Within twenty five (25) days following the close of the taxable quarter
Income Tax: (1702Q)
o Which Form: 1702Q
o What: Income Tax is a tax on a person's income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions if any, authorized for such types of income, by the Tax Code, as amended, or other special laws.
o Who:
§ Individuals
· Resident citizens receiving income from sources within or outside the Philippines
· Employees deriving purely compensation income from two or more employers, concurrently or successively at any time during the taxable year
· Employees deriving purely compensation income regardless of the amount, whether from a single or several employers during the calendar year, the income tax of which has not been withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to collectible or refundable return
· Self-employed individuals receiving income from the conduct of trade or business and/or practice of profession
· Individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or business and/or practice of profession
· Individuals deriving other non-business, non-professional related income in addition to compensation income not otherwise subject to a final tax
· Individuals receiving purely compensation income from a single employer, although the income of which has been correctly withheld, but whose spouse is not entitled to substituted filing
· Non-resident citizens receiving income from sources within the Philippines
· Aliens, whether resident or not, receiving income from sources within the Philippines
§ Non-Individuals
· Corporations including partnerships, no matter how created or organized.
· Domestic corporations receiving income from sources within and outside the Philippines
· Foreign corporations receiving income from sources within the Philippines
· Estates and trusts engaged in trade or business
o When: On or before the 60th day following the close of each of the quarters of the taxable year
Annually
Income Tax:
o Which Form: 1702RT, 1702MX OR 1702EX
o What: same as above 1702Q
o Who: same as above 1702Q
o When: On or before the 15th day of April of each year covering taxable income for calendar year 2018 and thereafter
As to the WHERE and HOW of filing these taxes, everything is now done online. Although there are still Revenue District Offices (RDOs) who still accept on-site filing. There are two methods, depending on your registration with the BIR:
1. Electronic Filing and Payment System (EFPS)
· For you to be able to file thru EFPS, you need to create an account and manually apply for it then wait for your approval. You may file it thru the following link:
· After your EFPS account has been created and approve, you may now log-in by entering your credentials
· Choose the return you want to file and the period you are filing for
· Enter the details as indicated in the returns and click Validate
· Once it is validated, click Submit and confirm submission
· You will be redirected to a confirmation page showing the filing reference and an option for you to pay online thru an Authorized Agent Bank
· Click pay and it will redirect you to the page for payment
· Choose your bank and enter the amount
· It will then redirect you to the site of the bank where you can pay online
2. Manual Filing thru eBIR Forms
· For start-ups, this is the usual mode of filing. You should download the platform and install in to your desktop or laptop. You may download it thru the following link: https://www.bir.gov.ph/index.php/eservices/ebirforms.html
· After downloading, create an account by entering your TIN, password, and relevant details.
· Choose the return you want to file and the period you are filing for.
· Enter the details as indicated in the returns and click Validate
· Once it is validated, click Submit and confirm submission
· There will be a confirmation page that it has been submitted and you will also receive an e-mail confirming that the return has been filed
· If there is a payment, print the e-mail confirmation as well as the return and go to your Authorized Agent Bank (ABB) for payment.
· Give the Form and e-mail confirmation to a bank representative and they will stamp your form as received and filed.
· Alternatively, you may pay thru GCASH.
· Also, you may pay online depending on your bank. Ask your banks for more details.
If you are not confident on what numbers you will put on your forms, you may ask assistance from your accountants in Manila or from us, Manila Accountants. We will be glad to assist you.
Information on these articles can be found in the BIR website thru the following link:
https://www.bir.gov.ph/index.php/tax-information/value-added-tax.html