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WELCOME PARTICIPANTS TO THE. SEMINAR ON THE BASICS OF TAXATION For TV/Radio Talents/Media Practitioners/Other TPs BIR MULTI-PURPOSE HALL MAY 22, 2014. BUREAU OF INTERNAL REVENUE. Tax Update Seminar with Media Practitioners Revenue Region 19-Davao City May 21, 2014. Presented by:

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Welcome participants to the

WELCOMEPARTICIPANTS TO THE

SEMINAR ON THE BASICS OF TAXATION

For TV/Radio Talents/Media Practitioners/Other TPs

BIR MULTI-PURPOSE HALL

MAY 22, 2014


Welcome participants to the

BUREAU OF INTERNAL REVENUE

Tax Update Seminar with

Media Practitioners

Revenue Region 19-Davao City

May 21, 2014

Presented by:

SUSAN D. TUSOY, CPA, MPS

Asst. Chief, Assessment Division


Topic outline

Topic Outline

  • Registration, Invoicing and Bookkeeping Regulations

  • Applicable Tax Type

    • Registration Fee

    • Income Tax

    • Business Tax (VAT and Percentage)

    • Withholding Tax


Welcome participants to the

REGISTRATION FEES


When to register

When to register

  • 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.

  • Employee: within 10 days from date of employment


Bir registration procedures

BIR Registration Procedures

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 registration

On Registration

  • 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


On registration rr 4 2014

On Registration (RR 4-2014)

  • Submit an affidavit indicating the rates, manner of billings and the factors considered in determining their service fees on or before Jan. 31 every year

    • Transition deadline: May 31, 2014 (RMC 32-2014)


Welcome participants to the

INVOICING REQUIREMENTS


Invoicing requirements

Invoicing Requirements

  • Issue sequentially Official Receipt (OR) for fees received

  • Each OR issued shall indicate the name and address of the client, date of transaction, nature of service rendered and the amount.


Invoicing requirements1

Invoicing Requirements

  • The OR shall be accomplished at least in duplicate

  • The duplicate retained & preserved in place of business for 10 years from close of taxable year (RR 17-2013).


Invoicing requirements rr 4 2014

Invoicing Requirements (RR 4-2014)

In cases no professional fees are charged by the professional and paid by client, a BIR registered receipt, duly acknowledged by the later, shall be issued showing a discount of 100% as substantiation of the “pro-bono” service.

13


Sample of commercial invoice a non vat official receipt

Sample of Commercial Invoice – A Non-VAT Official Receipt


Proper invoicing and receipting of output tax

Proper Invoicing and Receipting of Output Tax

  • Revenue Regulations 18-2011

    • Reiterates Sec. 237 of the Tax Code that VAT-registered taxpayers should separately bill the VAT.

    • The amount shall be shown as a separate item in the invoice or receipt

15


Proper invoicing and receipting of output tax1

Proper Invoicing and Receipting of Output Tax

Ex: If the amount charged is P560.00, it shall be presented in the following manner:

Professional Fee (P560.00/112%) P 500.00

Add12% VAT (12% of P500.00) 60.00

Total Amount charged P 560.00

16


Proper invoicing and receipting of output tax2

Proper Invoicing and Receipting of Output Tax

17


Principal receipts invoices rr 18 2012

A written account evidencing the sale of goods and/or services issued to customers in an ordinary course of business

Principal Receipts/Invoices (RR 18-2012)


Vat sales invoice

  • A written account evidencing the sale of goods and/or properties

  • issued whether cash sales or on account

  • Basis of the output tax liability of the seller and the input tax claim of the buyer

  • Includes Cash Sales Invoices & Charge Sales Invoices

VAT Sales Invoice


Vat official receipt

  • A proof of sale of service and/or leasing of properties

  • Basis of the output tax liability of the seller and the input tax claim of the buyer

VAT Official Receipt


Non vat receipts invoices

  • Non-Vat Sales Invoices

    • A written account evidencing the sale of goods and/or properties, whether cash sales or on account

    • Basis of the Percentage Tax liability of the seller

  • Non-Vat Official Receipts

    • A proof of sale of service and/or leasing of properties

    • Basis of the Percentage Tax liability of the seller

Non-VAT Receipts/Invoices


Supplementary receipts invoices

  • Also known as Commercial Invoices

  • Documents evidencing delivery, agreement to sell or transfer of goods and services

  • Example

    • Delivery Receipt

    • Collection Receipt

Supplementary Receipts/Invoices


Salient features

The approved ATP shall be valid only upon full usage of the inclusive serial numbers of principal and supplementary receipts/invoices reflected in such ATP or five (5) years from issuance of the same, whichever comes first.

Salient Features


Salient features1

ONLY BIR ACCREDITED PRINTERS shall have the exclusive authority to print principal and supplementary receipts/invoices.

Salient Features


Transitory provision

  • Expiring Authority to Print (ATP) for invoices/receipts (principal and supplementary) shall apply for a new ATP not later than 60 days prior to actual expiry date

Transitory Provision


Expired receipts invoices

Expired Receipts/Invoices

  • Those with ATP prior to Jan. 1, 2011 were valid only until Aug. 30, 2013 while those with ATP dated Jan. 1, 2011 to Jan. 17, 2013 were valid only until Oct. 31, 2013.

  • Issuance of receipts/invoices after its validity constitute a violation of Sec. 264 of the NIRC of 1997

  • It is considered as if no receipt/invoice was issued


Expired receipts invoices1

Expired Receipts/Invoices

  • No deduction from gross income shall be allowed using these invoices/receipts as there are not valid proof of substantiation

  • In case of VAT-registered persons, no input tax may be claimed using these receipts/invoices


On issuance of tax clearance rmc 52 2013

On issuance of tax clearance (RMC 52-2013)

  • To fully implement the requirements under RR 18-2012, a certified true copy of the ATP shall be included as attachment

  • No ATP shall be a ground for non-issuance of tax clearance for whatever purposes


The importance of asking for receipts

The importance of Asking for Receipts

  • To support input tax claims

  • Will facilitate audit trail

    • To ascertain that sales transactions are properly recorded

    • Corresponding taxes are paid

  • To support business purchases/expenses

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Welcome participants to the

BOOKKEEPING REQUIREMENTS


Bookkeeping requirements

BOOKKEEPING REQUIREMENTS

  • Required to register books of accounts

    • Journal

    • Ledger

    • Subsidiary Ledger

  • Preserved within the prescriptive

    period of 10 yrs

  • Gross receipts exceeding P150,000 in any given quarter must be audited by a CPA


Bookkeeping requirements1

BOOKKEEPING REQUIREMENTS

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


For medical dental practitioners patients log book a subsidiary book

For Medical/Dental PractitionersPATIENTS’ LOG BOOK (A subsidiary book)

  • Daily list of clients w/ the corresponding fees including those free of charge, per branch

    • Name and address

    • Date

    • Official receipt no.

    • Amount charge

  • Must be registered with the BIR


For restaurants drugstores and the like

For Restaurants/Drugstores and the like

  • Maintain subsidiary book

    • For Senior Citizens Discount

    • For Persons with Disability


For all professionals official appointment books rr 4 2014

For all professionalsOfficial Appointment Books (RR 4-2014)

  • Shall be registered with the BIR

    • Transition: not later than May 31, 2014 (RR 32-2014)

  • Shall contain

    • Names of the client

    • Date/time of the meeting


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Original Certificate of Registration, Registration Fee and the Ask for Receipt Notice must be conspicuously displayed in the physician’s place of business and/or clinic

Tax Compliance Verification Drive

(Tax mapping)


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Income Tax


Sample computation itemized deduction

Sample Computation – Itemized Deduction

Gross Receipts P2,000,000

Less: Allowable Deductions (itemized)

Rent P 500,000

Fuel and Oil 50,000

Communication 20,000

Supplies 280,000

Professional Fees 100,000 950,000

Net Income P1,050,000

Less: Personal Exemption 50,000

Additional Exemption (2 dep.) 50,000 100,000

Net Taxable Income P 950,000

Tax Due P 269,000

Tax Withheld (1st to 4thQtr) Form 2307 212,500

Quarterly Income Tax Payment 50,000 262,500

Payable P 6,500


Income tax table

INCOME TAX TABLE

OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER

Not over 10,0000 5%

10,000 30,000 500 + 10% 10,000

30,000 70,000 2,500 + 15% 30,000

70,000 140,000 8,500 + 20% 70,000

140,000 250,000 22,500 + 25% 140,000

250,000 500,000 50,000 + 30% 250,000

500,000 over 125,000 + 32% 500,000


Business expenses

Business Expenses:

  • To be deductible, business expense must:

    • constitute ordinary and necessary expense;

    • to be paid or incurred during the taxable year in carrying on or directly attributable to operation and/or conduct of trade, business, or profession;

    • be reasonable in amount;

    • be sustained by adequate proof;

    • not be against law or public policy


Rr 12 2013 requirements for deductibility

RR 12-2013 – Requirements for Deductibility

  • Any income payment allowable as deduction shall only be allowed to be deducted if:

    • The income tax required to be withheld has been paid to the BIR

    • No deduction shall be allowed notwithstanding payments of WTAX at the time of investigation


Sample computation optional standard deduction

Sample Computation –Optional Standard Deduction

Gross Receipts P2,000,000

Less: Optional Standard Deduction(40%) 800,000

Net Income P 1,200,000

Less: Personal Exemption 50,000

Additional Exemption (2 dep.) 50,000 100,000

Net Taxable Income P 1,100,000

Tax Due P 317,000

Tax Withheld (1st to 4thQtr) 212,500

Quarterly Income Tax Payment 50,000 262,500

Payable P 54,500


Advantages of using optional standard deduction for individual taxpayers

Advantages of using optional standard deduction (for individual taxpayers)

  • shall not be required to submit with his tax return such financial statements otherwise required under the Code

  • shall keep such records pertaining to his gross sales or gross receipts,


Income tax due dates

Income Tax Due Dates


Welcome participants to the

Value Added Tax/

Percentage Tax


Vat vs non vat

VAT vs. NON-VAT

Value Added Tax (12%)

  • Medical/dental services rendered by professionals whose gross receipts exceed the threshold of P1,919,500

    Non-VAT

  • If gross receipts do not exceed the threshold

  • Subject to 3% percentage tax


Vat defined

VAT defined

  • 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


Vat payable

VATPayable

Output Tax ( P100,000 x 12%) - P12,000.00

Less Input Tax (60,000 x 12%) - 7,200.00

VAT payable - P 4,800.00


How to compute vat gov t transaction

HOW TO COMPUTE VAT-gov’t transaction

Formula:

Output Tax (12% of Gross receipts ) P xxx

Less Standard Input Tax (7% of gross receipts) xxx

VAT Payable P xxx

Less 5% withholding tax xxx

VAT Payable P xxx

49

49


Sources of input tax

Sources of Input Tax

  • Purchase of goods/services for which the VAT was actually paid, like:

    • Rentals on office

    • Purchase of medical supplies

    • Communication expenses

    • Fuel

    • Professional services

    • etc


Submission of summary list of sales and purchases

Submission of Summary List of Sales and Purchases

  • RR 1-2012

    • Mandatory submission of Quarterly Summary List of Sales and Purchases by all VAT registered taxpayers effective Jan. 1, 2012

  • Due Date:

    On or before the 25th day of the month

    following the close of the taxable

    quarter.


Submission of sls slp

Submission of SLS / SLP

  • 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


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Percentage Tax


Percentage tax

Percentage Tax

  • Rate - 3% of gross revenue

  • if gross revenue do not exceed P1.5M (now P1,919,500 pursuant to RR 16-2011) otherwise subject to VAT

  • Due Date – every 20th day of the following month

  • Professional Fee – P 100,000 x 3% = P3,000.00


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Withholding Tax


Professionals as withholding agents as payor

  • Required to deduct Expanded Withholding Tax

    • Rentals – 5%

    • Contractors – 2%

    • Professional fees -10% or 15%

    • etc. (see BIR Form 1601E)

Professionals as Withholding Agents (as payor)


Professionals as w holding agents as payor

  • Example: Dr. A is renting a clinic space at P10,000/mo.*

    Expanded Withholding Tax is P 10,000 x 5% = P500.00

    Due date: Every 10th day of the following month except

    for the month of Dec., which shall be due on

    Jan. 15 of the ff year

    *net of VAT

Professionals as W/holding Agents (as payor)


Professionals as withholding agents as payor1

  • Consequence if not remitted on time:

    Computation:

    Basic Tax (P10,000 x 5%) P 500.00

    Add: 25% surcharge P 125.00

    20% interest per annum* 8.21

    comp. pen for late payment 200.00 333.21

    Total Payable P 833.21

    *assuming payment was delayed for 30 days (P500 x 20% x 30/365 days)

Professionals as Withholding Agents (As payor)


Professionals as withholding agents as payor2

  • Withholding Tax on Wages

    • Salary of employees, if paying more than the Minimum Wage

Professionals as Withholding Agents (as payor)


Prof are subject to withholding tax as payee on their p rofessional fees

Prof are Subject to Withholding Tax (as payee) on their Professional Fees

Expanded Withholding Tax (EWT)

creditable against Income Tax

15% if exceeding P720T, 10% for less than

Disclosure Requirement (RR 12-01)

Using the Notarized Sworn Declaration (Annex A of RR 12-01)

Submit to the Collection Division

Due on June 30 each year or within 15 days when the income reaches P720,000 whichever comes first


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On Government Money Payments

(Ex: Payments of PHIC to medical doctors)

5% of Gross Income if VAT Registered Taxpayer

(creditable against VAT liability)

3% of Gross Receipts for Non-VAT Taxpayer

(creditable against Percentage Tax liability)

Prof are Subject to Withholding Tax (as payee) on their Professional Fees


Duty and responsibility of the hospitals clinics hmos rr 14 2013

  • To withhold and remit taxes due on the professional fees of their respective accredited medical practitioners, paid by patients who were admitted and confined to such hospitals and clinics

  • Must ensure that correct taxes due on the PF have been withheld and timely remitted to the BIR

duty and responsibility of the hospitals, clinics, HMOs (RR 14-2013)


Duty and responsibility of the hospitals clinics hmos

  • Shall NOT allow their medical practitioners to receive payment of professional fees directly from patients who were admitted and confined

  • Must include the PF in the total medical bill of the patient which shall be payable directly to the hospital/clinic

duty and responsibility of the hospitals, clinics, HMOs


Exception

  • The wtax shall not apply whenever there is no PF has in fact been charged

    • There must be a sworn declaration jointly executed by the medical practitioner and the patient

    • The hospital administrator shall inform the RDO having jurisdiction over such hospital or clinic if fails or refuses to execute within 10 days from date of occurrence.

      (The doctor must still issue an OR indicating

      100% discount – RR 4-2014)

Exception


Responsibility of hosp clinics hmos

  • Shall be responsible for the correct computation and timely remittance of Wtax

    • include in the 1604E

    • Issue 2307 every 20th day ff the close of the quarter or upon request of the payee

Responsibility of Hosp./Clinics/HMOs


Responsibility of hosp clinics hmos1

  • Shall submit a sworn statement executed by the pres./managing partner as to the complete and updated list of medical practitioners accredited with them

    • Where: Collection Div / LT-CollDiv / LTDO

    • 2 copies for the BIR and 1 copy for the TP

Responsibility of Hosp./Clinics/HMOs


Reports to be submitted by hospitals clinics

  • Submit the names and addresses of medical practitioners whose:

    • PF was paid by the patients directly to the hospital/clinic

    • Medical practitioners who did not charge any PF from their patients

  • every 15th day after the end of each calendar quarter to the Collection Div.

Reports to be submitted by Hospitals/Clinics


The importance of withholding tax certificates form 2306 2307

The importance of Withholding Tax Certificates (Form 2306/2307)

  • To support tax credit claims per return

    • No certificate, no tax credit allowed

  • Serve as proof of transaction

    Note: Be conscientious in gathering the

    withholding tax certificates on time

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Stop filer cases

Stop filer Cases

  • Can be detected in our system

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


On marginal income earners rmc 7 2014

On Marginal Income Earners (RMC 7-2014)

  • MIE – shall refer to those individual whose business do not realize gross sales or receipts exceeding P100,000 in any 12-month period

    • Not deriving compensation

    • Only self-employed with gross sales/receipts not exceeding P100,000


On marginal income earners rmc 7 20141

On Marginal Income Earners (RMC 7-2014)

  • Shall include but not limited to:

    • Agricultural growers/producers (farmers/fishermen)

    • Selling directly to ultimate consumers

      • Small sari-sari stores

      • Small carinderias or turo-turos

      • Drivers/operators of a single unit tricycle

    • Shall not include licensed professionals, consultants, artists, sales agents, brokers and others similarly situated


On marginal income earners rmc 7 20142

On Marginal Income Earners (RMC 7-2014)

  • Privileges/minimum requirements

    • Registration

      • Sworn Statement (Annex A)

      • NSO certified /local civil registry birth certificate

    • Exemption from ARF

    • Registration of books (2 col journal or simplified books)

    • Issuance of registered principal receipts/invoices

    • Filing/payment of ITR

    • Exemption from Percentage tax / VAT


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