1 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 2 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 3 4 Topic Outline Registration, Invoicing and Bookkeeping Regulations 2. Applicable Tax Type a. Registration Fee b. Income Tax c. Business Tax (VAT and Percentage) d. Withholding Tax 1. REGISTRATION FEES 6 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 7 BIR Registration Procedures PRIMARY REGISTRATION STAGE 1 Application & Issuance of TIN SECONDARY REGISTRATION STAGE 2 Registration of Business/Practice of Profession/Employment Registration of books, Issuance of ATP, CAS and Loose-leaf 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) 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) 10 INVOICING REQUIREMENTS 11 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. 12 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). 13 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 ONLY 15 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 16 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%) Add12% VAT (12% of P500.00) Total Amount charged P 500.00 60.00 P 560.00 16 17 Proper Invoicing and Receipting of Output Tax SAMPLE ONLY 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 18 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 19 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 20 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 21 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 22 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. 23 Salient Features • ONLY BIR ACCREDITED PRINTERS shall have the exclusive authority to print principal and supplementary receipts/invoices. 24 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 25 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/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) • 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 29 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 29 BOOKKEEPING REQUIREMENTS 30 31 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 32 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. 33 For Medical/Dental Practitioners PATIENTS’ 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 34 For Restaurants/Drugstores and the like • Maintain subsidiary book • For Senior Citizens Discount • For Persons with Disability 35 For all professionals Official 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 36 Tax Compliance Verification Drive (Tax mapping) 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 Income Tax Sample Computation – Itemized Deduction Gross Receipts Less: Allowable Deductions (itemized) Rent Fuel and Oil Communication Supplies Professional Fees Net Income Less: Personal Exemption Additional Exemption (2 dep.) Net Taxable Income Tax Due Tax Withheld (1st to 4th Qtr) Form 2307 Quarterly Income Tax Payment Payable P2,000,000 P 500,000 50,000 20,000 280,000 100,000 50,000 50,000 950,000 P1,050,000 100,000 P 950,000 P 269,000 212,500 50,000 262,500 P 6,500 INCOME TAX TABLE OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER Not over 10,000 30,000 70,000 140,000 250,000 500,000 10,0000 30,000 70,000 140,000 250,000 500,000 over 500 + 2,500 + 8,500 + 22,500 + 50,000 + 125,000 + 5% 10% 15% 20% 25% 30% 32% 10,000 30,000 70,000 140,000 250,000 500,000 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 • 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 Gross Receipts Less: Optional Standard Deduction (40%) P2,000,000 800,000 Net Income Less: Personal Exemption Additional Exemption (2 dep.) Net Taxable Income P 1,200,000 Tax Due Tax Withheld (1st to 4th Qtr) Quarterly Income Tax Payment Payable 50,000 50,000 100,000 P 1,100,000 P 212,500 50,000 317,000 262,500 P 54,500 43 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 Period 1st Quarter 2nd Quarter 3rd Quarter Annual Return Due Date Individual April 15 Aug. 15 Nov. 15 April 15 Value Added Tax/ Percentage Tax 46 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 47 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 48 VAT Payable Output Tax ( P100,000 x 12%) - P12,000.00 Less Input Tax (60,000 x 12%) VAT payable - 7,200.00 P 4,800.00 49 HOW TO COMPUTE VAT-gov’t transaction Formula: Output Tax (12% of Gross receipts ) Less Standard Input Tax (7% of gross receipts) VAT Payable Less 5% withholding tax VAT Payable P xxx xxx P xxx xxx P xxx 49 50 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 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 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 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 Withholding Tax 56 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) 57 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 58 Professionals as Withholding Agents (As payor) Consequence if not remitted on time: Computation: Basic Tax (P10,000 x 5%) Add: 25% surcharge 20% interest per annum* comp. pen for late payment Total Payable P 125.00 8.21 200.00 P 500.00 333.21 P 833.21 *assuming payment was delayed for 30 days (P500 x 20% x 30/365 days) 59 Professionals as Withholding Agents (as payor) Withholding Tax on Wages Salary of employees, if paying more than the Minimum Wage 60 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 61 Prof are Subject to Withholding Tax (as payee) on their Professional Fees 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) 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 • 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 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) 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 • 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-Coll Div / LTDO • 2 copies for the BIR and 1 copy for the TP 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. 74 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 74 75 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. 96 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 12month period • Not deriving compensation • Only self-employed with gross sales/receipts not exceeding P100,000 97 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 98 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 www.them egallery.c om Thank you!