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Overview on the Taxability of Constructors. Presented by: Susan D. Tusoy, CPA, MPS Asst. Chief, Assessment Division Revenue Region 19, Davao City. It is impossible to begin to learn that which one thinks one already knows. - Epictetus. Things to consider i n the conduct of your Business.

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Overview on the taxability of constructors

Overview on the Taxability of Constructors

Presented by:

Susan D. Tusoy, CPA, MPS

Asst. Chief, Assessment Division

Revenue Region 19, Davao City



Things to consider already knows.

in the conduct

of your Business


On registration
On Registration already knows.

  • Register your business

    • On or before the commencement of business

    • Before payment of any tax due

    • Upon filing of a return, statement or declaration as required by the NIRC.


On registration1
On Registration already knows.

  • Register your employee/s

    • within 10 days from date of employment


On registration2
On Registration already knows.

  • Secure Taxpayer Identification Number

  • Multiple TIN is punishable by law.


Registration procedures
Registration Procedures already knows.

PRIMARY

REGISTRATION

SECONDARY REGISTRATION

STAGE 1 STAGE 2

Application &

Issuance of TIN

Registration of

Business/Practice of

Profession/Employment

Registration of books,

Issuance of ATP, CAS

and Loose-leaf


On invoicing requirements
On Invoicing Requirements already knows.

  • Apply for Authority to Print (ATP)

  • After printing, register ORs/Invoices thru Printer’s Certificate of Delivery (PCD)


Invoicing requirements
Invoicing Requirements already knows.

  • Issue sequentially an OR for fees received or Sales Invoice for sale of goods.

  • Each SI shall show the name, address of client, date of transaction, qty, selling price per unit, description of merchandise sold and total amount.

  • The OR/SI shall be accomplished in duplicate, the duplicate retained & preserved in place of business for 3 years from close of taxable year.


On bookkeeping requirements
On Bookkeeping Requirements already knows.

  • Apply for registration of books of accounts, basically a Journal, Ledger, and applicable subsidiary books

  • The BIR records your latest volume in our registration database.

    All of the above to be done within 30 days from date of registration


On bookkeeping requirements1
ON BOOKKEEPING REQUIREMENTS already knows.

  • Preserved within the prescriptive period of 3 yrs

  • Gross receipts exceeding P150k in any given quarter must be audited by a CPA

  • If using Computerized Accounting System

    • Must be approved by the BIR before its use


On bookkeeping requirements2
ON BOOKKEEPING REQUIREMENTS already knows.

  • Transactions for the day must be entered in books on or before 12nn the following day. Balances transferred to the Ledger on day following the end of month

  • It’s not required to register new set of books every year; only before the pages of current book is almost used up.


Constructor s usual tax type
Constructor’s Usual Tax Type already knows.

  • Registration Fee

  • Income Tax

  • Business Tax

    • VAT

    • Percentage Tax

  • Excise Tax

  • Withholding Taxes

    • On Wages

    • Expanded W/tax

    • Wtax on Gov’t. Money Payments

    • Final Withholding Tax

      • Withholding Tax on Fringe Beneftis


REGISTRATION FEES already knows.


On registration3
On Registration already knows.

  • Pay Annual Registration Fee of P500.00 upon registration and every year thereafter on or before Jan. 31

    • for every separate or distinct establishment or place of business, including facility types where sales transactions occur


INCOME TAX already knows.


Income tax rates
Income Tax Rates already knows.

  • Individual (5% - 32%)

  • Corporation

    • Normal Income Tax – 30%

    • Minimum Corporate

      Income Tax – 2%

    • Improperly Accumulated

      Earnings Tax – 10%


Income tax due dates
Income Tax Due Dates already knows.


Percentage Tax already knows.


Percentage tax
Percentage Tax already knows.

  • Rate - 3% of gross revenue

  • if gross revenue do not exceed P1.5M, otherwise subject to VAT

  • Due Date


Value-Added Tax already knows.


Vat defined
VAT defined already knows.

  • It is a tax on the value added to the purchase price or cost in the sale or lease of goods, properties, or services in the course of trade or business.

  • Due Date


Transactions subject to vat

In the course of trade/business already knows.

Sells

barters

Exchanges

Leases goods or properties (including deemed sales)

Renders services

Whether or not it the course of trade or business

Imports goods

provided the aggregate sales/receipts exceeds P1.5M

Transactions subject to VAT


How vat operates
How VAT Operates: already knows.


Vat payable
VAT Payable already knows.

Output Tax ( Sales x 12%) - P x x x

Less Input Tax (Purchases x 12%) - x x x

VAT payable - P x x x


Output tax
Output Tax already knows.

  • Means the value-added tax due on the sale or lease of taxable good or property or services by a VAT-registered person.

  • VAT Rates

    • 12%

    • 0%


Rules on Gross Receipts already knows.

refers to the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits applied as payments for services rendered and advance payments actually or constructively received during the taxable period for the services performed or to be performed for another person, excluding the VAT.


Input tax
INPUT TAX already knows.

  • Is the value added tax due from or paid by a VAT-registered person in the course of his trade or business.

    • Any input tax evidenced by a VAT invoice or official receipt shall be creditable against the output tax.


Sources input tax
Sources Input Tax already knows.

  • Purchase or importation of goods

    • For sale

    • For conversion into or intended to form part of a finished product for sale including packaging materials

    • For use as supplies in the course of business

    • For use as materials supplied in the sale of service

    • For use in trade or business for which deduction for depreciation / amortization is allowed under the Tax Code


Sources of input tax cont
Sources of Input Tax (cont…) already knows.

  • Purchase of real properties for which the VAT was actually paid

  • Purchase of services for which the VAT was actually paid

  • Transitional input tax

  • Presumptive Input tax

  • Standard Input Tax (gov’t. transaction)


Standard input
Standard Input already knows.

  • Rate of 7% effectively accounts for the standard Input VAT for sales of goods or services to government;

  • In lieu of the actual input VAT directly attributable or ratably apportioned to such sale;

  • If the actual input tax exceeds the standard input, the excess may form part of the seller’s expense or cost;

  • If less than the standard, the difference must be closed to expense or cost.


Vat on gov t transactions
VAT on Gov’t. Transactions already knows.

Output Tax (12%) - P 12,000

Less: Standard Input (7%) - 7,000

VAT Payable - P 5,000

Less: Withholding Tax (5%) - 5,000

VAT Payable P -0-


Submission of sls slp
Submission of SLS / SLP already knows.

  • Summary List of Sales

    • All TPs liable to VAT with quarterly total sales/receipts exceeding P2.5M shall submit SLS

  • Summary List of Purchases

    • All TPs liable to VAT with quarterly total purchases exceeding P1.0 M shall submit SLS


Submission of sls slp1
Submission of SLS / SLP already knows.

  • SLS/SLP shall be submitted in softcopy to the RDO having jurisdiction of the taxpayer on or before the 25th day of the month following the close of the taxable quarter

  • For TPs under LTS and those enrolled in eFPS shall submit thru electronic filing facility on or before the 30th day of the following month following the close of the taxable quarter.


Excise Tax already knows.


Excise tax on sand and gravel
Excise Tax on Sand and Gravel already knows.

  • Rate - 2% based on the actual market value of the gross output thereof

  • Due Date - at the time of removal


Withholding Tax on Wages already knows.

(on Minimum Wage Earners)


Tax exemption of minimum wage earners
Tax Exemption of Minimum Wage Earners already knows.

Compensation income of MWEs who work in the private sector and being paid the Statutory Minimum Wageapplicable to the place where he is assignedare exempted from Income Tax and consequently from Withholding Tax



Take note
Take note! already knows.

An employee who receives additional compensation other than SMW, holiday pay, overtime, hazard pay, and night shift differential pay such as:

Commissions

Honoraria

Fringe benefits

Taxable allowances

And other taxable income

shall not enjoy the privilege of being a WME.


Take note1
Take Note! already knows.

MWEs receiving other income from business or practice of profession, except income subject to Final Tax, shall be subject to Income Tax on their entire income

SMW, Holiday pay, overtime pay, night shift differential pay, and hazard pay shall still be exempt from WT


Hazard pay
Hazard Pay already knows.

the amount paid by the employer to MWEs

Actually assigned to danger or strife-torn areas

Disease-infested places

Distressed or isolated stations and camps

which exposed them to great danger or contagion or peril to life

Any hazard pay paid to MWEs which does not satisfy the above criteria is deemed subject to IT and consequently to WT.


Hazardous employment
Hazardous Employment already knows.

The employer shall attach to BIR Form 1601C for the months of March, June, Sept., and Dec.

A copy of the List submitted to the nearest DOLE Regional/Provincial Office showing

the names of the MWEs who received the hazard pay;

period of employment;

amount of hazard pay per month; and

Justification of payment of hazard pay


Caution
Caution already knows.

Any reduction or diminution of wages for purposes of exemption from Income Tax shall constitute misrepresentation and therefore, shall result to automatic disallowance of expense on the part of the employer.



Persons required to deduct withhold
Persons Required to Deduct & withhold already knows.

  • Juridical persons, whether or not engaged in trade or business;

  • Individuals in connection with his trade or business, however, individual buyers of real properties are also constituted as withholding agents;

  • All government offices.




Illustration
Illustration already knows.

  • The Office of the Provincial Capitol of Davao del Sur

    availed your services for the construction of a waiting

    shed with a contract price of P224,000.00.

    Compute for the withholding taxes assuming the contractor is:

    a) Non-VAT registered taxpayer

    b) VAT registered taxpayer



Answer vat contractor
Answer: VAT Contractor already knows.


Final Withholding Tax already knows.


Final withholding tax
Final Withholding Tax already knows.


Fringe Benefit Tax already knows.


Fringe benefit tax
Fringe Benefit Tax already knows.

  • fringe benefit’ – means any goods, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee (except rank and file employees), such as, but not limited to the following:


Benefits subject to fbt
Benefits subject to FBT already knows.

  • Housing;

  • Expense Account;

  • Vehicle of any kind;

  • Household personnel;

  • Interest on loan at less than market rate ;

  • Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs/similar organizations;


Benefits subject to fbt1
Benefits subject to FBT already knows.

7. Expenses for foreign travel;

  • Holiday and vacation expenses;

  • Educational assistance to the employee or his dependents;

  • Life or health insurance and other non-life insurance premiums


Fringe Benefits Granted to the Employee (Except Rank and File Employee) – 32%

on the grossed-up monetary value of fringe benefits granted or furnished by the employer to his employees.


Exception: File Employee) – 32%

if the fringe benefits are required by the nature of or necessary to the trade, business or profession of the employer, or where such fringe benefit is for the convenience and advantage of the employer shall not be subject to the fringe benefits tax.


WITHHOLING TAX REMITTANCE File Employee) – 32%


WITHHOLDING TAX CERTIFICATES File Employee) – 32%


ANNUAL RETURNS File Employee) – 32%


Important
Important! File Employee) – 32%

TP needs to file a return even when there’s no tax due to pay for every tax type he registered.


Electronic filing and payment system efps
Electronic Filing and Payment System (eFPS) File Employee) – 32%

  • Mandatory Enrollment to and availment of eFPS facility (RR 69-2009)

    • Large Taxpayers

    • All government Bidders

    • Corporation with complete computerized system

    • Taxpayers belonging to the list of Top 20,000 Private Corporations

    • Taxpayers belonging to the Top 5,000 individual taxpayers


Original cor and the arn must be conspicuously displayed in the place of busines
Original File Employee) – 32% COR and the ARN must be conspicuously displayed in the place of busines

TCVD: Tax Compliance Verification Drive (Tax mapping)


Original cor and the arn must be conspicuously displayed in the place of business and or office

TCVD: Tax Compliance Verification Drive (Tax mapping) File Employee) – 32%

Original COR and the ARN must be conspicuously displayed in the place of business and/or office


Update registration data
UPDATE REGISTRATION DATA File Employee) – 32%

Accomplish Form 1905 and submit

to your home RDO for:

  • Change of registered address

  • Change of registered activity

  • Change of tax types (cancellation or addition)

  • Additional personal exemption


Most common violations
MOST COMMON VIOLATIONS File Employee) – 32%

  • failure to register (often captured thru TCVD)

  • failure to file return & pay tax due thereon or supply information at times required by law

  • filing a return w/ an RDO other

    than those w/ whom return is

    required to be filed.


Stop filer cases
Stop-filer Cases File Employee) – 32%

  • When a taxpayer fails to file a tax return on the tax types he registered, the Integrated Tax System (ITS) will detect such failure, thus creating a stop-filer case for every failure in returns compliance.

  • Such stop-filer case shall remain open until the corresponding return is duly filed and paid including penalties.


Bir s capability enhancement
BIR’s File Employee) – 32% CAPABILITY ENHANCEMENT

RELIEF – Reconciliation of Listings for

Enforcement resulting to Letter

Notices

TRS – Tax Reconciliation System using 1604-E

resulting to letter notices (LNs)

Tax Compliance Verification Drive (TCVD) - Tax Mapping Operations

Compliance Enhancement – eFPS, e-REG, e-complaints, e-DST, e-submission, e-TIS, etc.


It's what you learn after you know it all that counts. File Employee) – 32%- John Wooden


The end.... File Employee) – 32%


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