Who Are Not Required and Exempt To File An Income Tax Return?

Did you know that there are individuals who are not required and exempt to file an Income Tax Return? 

You may consider the standard that you are not required to file an income tax return as follows: 

1. Compensations income of Minimum Wage Earners (MWEs) who work in the private sector and being paid the Statutory Minimum Wage (SMW), as fixed by Regional Tripartite Wage and Productivity Board (RTWPB)/National Wages and Productivity Commission (NWPC), applicable to the place where he/she is assigned. (Revenue Regulations (RR) No. 10-2008 (B) (13) / Revenue Memorandum Circular (RMC) No. 91-2010)

2. Your gross income (total earned for the past year) does not exceed your total personal and additional exemptions. (In General)

3. Your income derived from a single employer does not exceed P60,000 and the income tax on which has been correctly withheld.

4. Your income has been subjected to final withholding tax. Final Withholding Tax is a kind of withholding tax which is prescribed on certain income payments and is not creditable against the income tax due of the payee on other income subject to regular rates of tax for the taxable year. Income Tax withheld constitutes the full and final payment of the Income Tax due from the payee on the particular income subjected to final withholding tax.

5. You are qualified for substituted filing. 

Requirements:

5.1 You are employed by a single employer during the taxable year.

5.2 You earn purely compensation income from that single employer.

5.3 Your tax due at the year’s end equals the tax withheld by the employer.

5.4 If you are married, your spouse also complies with the above conditions.

5.5 Your employer files the annual information return (BIR Form No.1604-CF).

5.6 Your employer issues BIR Form No.2316 to every employee.

You are exempt from filing income tax returns if:

You are a non-resident citizen who is:

1. A Filipino citizen not residing in the Philippines, but who has established with the BIR that you wish to remain living outside the country.

2. A Filipino citizen who leaves the Philippines during the taxable year to reside abroad, either as an immigrant of for permanent employment.

3. A Filipino citizen who works and earns income abroad.

4. A Filipino citizen previously considered a non-resident citizen.

5. You are an overseas Filipino worker whose income is derived solely from sources outside the Philippines.

6. If you are Filipino citizen working as an overseas seaman, your vessel must be engaged exclusively in international trade.

SOURCE: http://www.gov.ph/2014/04/01/who-are-required-to-file-income-tax-returns/; http://www.bir.gov.ph/images/bir_files/old_files/pdf/42126rr%20no.%2010-2008.pdf; http://www.bir.gov.ph/index.php/tax-information/withholding-tax.html

Basis for the Imposition of Tax on the Sale, Exchange or Other Disposition of Real Property

Recently, the bureau has issued Revenue Memorandum Circular (RMC) No. 27-2017 to clarify the basis for the imposition of tax on the sale, exchange or other disposition of real property whether classified as capital asset or ordinary asset.

It is stated in Section 6(E) of Republic Act (RA) 8424, Tax Reform Act of 1997, also known as the National Internal Revenue Code of 1997, has provided the following:

"SEC. 6. Power of the Commissioner to Make Assessment and Prescribe Additional Requirements for Tax Administration and Enforcement. - 

XXX         XXX         XXX

(E) Authority of the Commissioner to Prescribe Real Property Values. - The Commissioner is hereby authorized to divide the Philippines into different zones or areas and shall, upon consultation with competent appraisers both from the private and public sectors, determine the fair market value of real properties located in each zone area. For purposes of computing any internal revenue tax, the value of the property shall be, whichever is the higher of:

(1) The fair market value as determined by the Commissioner; or

(2) The fair market value as shown in the schedule of values of the Provincial and City Assessors."

For purposes of imposing the tax Sec. 24(D)(1) and 27(D)(5) of the same Act, as implemented by Revenue Regulations Nos. 2-98 and 7-2003, provide that it shall be based on the gross selling price or current fair market value as determined in accordance with Sec. 6(E) of the Code, whichever is higher.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2027-2017.pdf of the full text of RMC No. 27-2017.

Income Payments Exempt From Withholding Tax But Subject To Income Tax

Have you explored the Alphalist Data Entry and Validation Module Version 5.1 (New) with regards to the Income Payments Exempt From Withholding Tax But Subject To Income Tax Reported Under BIR Form No. 2304 - Certificate of Income Payment Not Subject to Withholding Tax (Excluding Compensation Income)? 

BIR Form No. 2304 is a Certificate to be accomplished and issued by a Payor to recipients of income not subject to withholding tax. This Certificate should be attached to the Annual Income Tax Return - BIR Form 1701 for individuals, or BIR Form 1702 for non-individuals.

Filing Date

Payor must furnish the payee on or before January 31 of the year following the year in which the income payment was made.

Below is the list of Income Payments Exempt From Withholding Tax But Not Subject To Income Tax Reported Under BIR Form No. 2304: 

Alphanumeric Tax Code (ATC) / Income Payment

1. DI900 - DEFAULT INCOME

2. EI900 - EXCESS INCOME TAX

3. FP010 - FINES & PENALTIES - ON TAX ON INCOME

4. IC010 - INCOME TAX - ORDINARY DOMESTIC CORP.

5. IC011 - NON-STOCK NON-PROFIT ORGANIZATION

6. IC020 - PARTNERSHIP IN TRADE INCOME TAX

7. IC021 - PROFESSIONAL FEES PAID TO GENERAL PROFESSIONAL PARTNERSHIPS (EXCEPT TO PARTNERSHIP OF MEDICINE)

8. IC030 - PRIVATE EDUCATIONAL INSTITUTION, STOCK OR NONSTOCK

9. IC031 - NON STOCK, NON PROFIT HOSPITALS

10. IC040 - GOVERNMENT OWNED OR CONTROLLED CORPORATION

11. IC041 - NATIONAL & LOCAL GOVERNMENT UNIT (FOR PROPRIETARY ACTIVITIES) EXCEPT PUBS

12. IC050 - INCOME TAX - MUTUAL LIFE INSURANCE COMPANIES

13. IC055 - MINIMUM CORPORATE INCOME TAX

14. IC060 - INCOME TAX - FCDU

15. IC070 - ORDINARY RESIDENT FOREIGN CORP

16. IC080 - RFC - INTERNATIONAL CARRIERS

17. IC090 - FOREIGN MUTUAL LIFE INSURANCE CO.

18. IC100 - FOREIGN OBU/FCDU

19. IC101 - REGIONAL OPERATING HEADQUARTERS OF MULTINATIONALCOMP

20. IC120 - PRIZES REGARDLESS OF AMOUNT

21. IC130 - RENT - PERSONAL PROPERTY REGARDLESS OF AMOUNT (CORPORATE)

22. IC140 - PREMIUM AND ANNUITY - (CORPORATE PAYEES)

23. IC150 - OTHES (SPECIFY) - (CORPORATE PAYEES)

24. IC160 - TRANSPO CONTR (CORPORATE) CARRIAGE OF GOODS AND MECHANDISE BELOW P2000

25. IC170 - INTEREST - (CORPORATE PAYEES)

26. IC190 - OFFSHORE BANKING UNITS (OBUS)

27. IC191 - FOREIGN CURRENCY DEPOSIT UNITS (FCDUS)

28. IC370 - ON IMPROPERLY ACCUMULATED EARNINGS TAX

29. II010 - INCOME FROM COMP. ANDBUS/PROF.

30. II011 - PURE COMPENSATION INCOME - CITIZENS

31. II012 - RESIDENT ALIEN - PURE BUSINESS

32. II013 - ESTATES AND TRUST-MIXED INCOME

33. II020 - NRC INCOME

34. II050 - RENT FOR REAL PROPERTY BELOW P500 MONTH (USED IN BUSINESS)

35. II051 - RENT - PERSONAL PROPERTY REGARDLESS OF AMOUNT (INDIVIDUAL)

36. II060 - PREMIUM AND ANNUITY - (INDIVIDUAL PAYEES)

37. II070 - PENSIONS

38. II080 - OTHERS (SPECIFY) - (INDIVIDUAL PAYEES)

39. II090 - TRANSPO CONTR (INDIVIDUAL) CARRIAGE OF GOODS AND MERCHANDISE BELOW 2,000

40. II110 - INEREST - (INDIVIDUAL PAYEES)

41. II120 - PRIZES AMOUNTING TO: 10,000 OR LESS

42. II130 - PARTNERS DISTRIBUTION SHARE OF NET INCOME OF GENERAL PARTNERSHIP

43. II420 - CGT ON SALE OF REAL PROPERTY (CAPITAL ASSETS) FOR INDIVIDUAL

44. MC010 - TAX AMNESTY ON INCOME (INDIVIDUAL)

45. MC011 - INDIVIDUAL TAXPAYERS

46. MC020 - TAX AMNESTY ON INCOME (CORPORATE)

47. MC021 - CORPORATE TAXPAYERS

48. MC030 - COMPENSATION PAYMENTS ON DELINQUENT ACCOUNTS & DISP. ASSESSMENTS

49. MC040 INCOME FROM FORFEITED PROPERTIES

SOURCE: BIR ALPHALIST 5.1  and http://www.bir.gov.ph/index.php/bir-forms/certificates.html#c2304 

Addition to RMC 14-2017 on the Temporary Suspension of Enrollment to Electronic Filing and Payment System (eFPS)

Revenue Memorandum Circular (RMC) No. 24-2017 has issued by the bureau recently with regards to the addendum to RMC 14-2017 on the Temporary Suspension of Enrollment to Electronic Filing and Payment System (eFPS).

The Circular supplements RMC No. 14-2017, as follows:

1. Taxpayers required to secure the BIR Importer's Clearance Certificate (ICC) and Broker's Clearance Certificate (BCC) and Government Bidder's Tax Clearance are exempted from the provisions of Revenue Memorandum Circular No. 14-2017 suspending eFPS enrollment during the period of March 1 to April 30 of every year.

2. The Revenue District Office (RDO) concerned shall continue to process eFPS application/s of the aforementioned taxpayer/s and shall activate their eFPS account/s immediately, upon verification of the completeness of documents submitted. Thereafter, taxpayer/s shall receive an auto-email notification/confirmation of successful eFPS enrollment.

3. Aforementioned taxpayer/s successfully enrolled/activated to eFPS shall file their returns through te eFPS facility. If said taxpayers do not receive an auto-email notification/confirmation of successful eFPS enrollment/activation within twenty-four (24) hours upon enrollment, they shall their tax return/s thru the eBIRForms facility, until such time that the aforesaid auto-email notification/confirmation is received from BIR.

These conditions shall apply only for the duration of the suspension of eFPS enrollment from March 1 to April 30 of every year.

SOURCE: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2024-2017.pdf

Objectives for the Implementation of Taxpayer Registration System (TRS) Under the Electronic Tax Information Systems-1 (eTIS-1)

In the past few days, the bureau has issued Revenue Memorandum Order (RMO) No. 5-2017 about the Functional Guidelines Relative to the Implementation of the Taxpayer Registration System (TRS) Under the Electronic Tax Information Systems-1 (eTIS-1). The eTIS-1 is a web-based application which shall consist of eight (8) modules, namely: Taxpayer Registration System (TRS), Returns Filing and Processing (RFP), Collection, Remittance and Reconciliation (CRR), Audit, Case Management System (CMS), Taxpayer Accounting System (TAS), Batch Architecture Module (BAM) and System Administration Management (SAM).

The Objectives of the Implementation of TRS in eTIS-1 is as follows:

Section 2. OBJECTIVES. The implementation of TRS in eTIS-1 is aimed to increase the Bureau’s efficiency in terms of capturing and monitoring taxpayer’s registration information, as well as the Bureau's reporting requirements in order to support the core functions of collecting revenues. Thus, this Order is issued for TRS under eTIS-1 to: 

1. Prescribe the functional guidelines and procedures in its implementation; 

2. Redefine procedures in the Registration Processes to harmonize with subject functionality; 

3. Adapt the following enhancements on the Registration System: 

a. Five (5) digit Philippine Standard Industrial Classification (PSIC) / Philippine Standard Occupational Classification (PSOC) Codes, upon update of the list of Alphanumeric Tax Code (ATC); 

b. Five (5) digit branch code and facility code;  

c. Tagging and un-tagging of Inactive/Black-listed taxpayers; 

d. Tagging of taxpayers under the Taxpayer Account Management Program (TAMP) and Very Important Person (VIP), whether natural or juridical person; 

e. Uploading of required attachments; 

f. Generation of reports and correspondences such as but not limited to direct printing of TIN Cards; 

g. Prescribe the revised system-generated Authority to Print (Annex A), Certificate of Registration (BIR Form No. 2303, Revised November 2014) (Annex B) and use of Certificate of Registration for Facility (BIR Form No. 2303-F) (Annex C) for registered facility types in eTIS-1 pilot sites; 

h. Capture additional registration information such as incentives type, list of stockholders/members/partners, contact details, relationships (i.e. agent or authorized representative, employer, subsidiary companies), and exemptions details; and 

4. Adopt and implement the enhanced version of the following application for registration forms pursuant to Revenue Memorandum Circular (RMC) No. 09-2015: 

BIR Form No. 1901 - Application for Registration for Self-Employed (Single Proprietor/ Professional/Mixed Income Earner) Marginal Income Earner, Nonresident Alien Engaged in Trade / Business, Estate and Trust 

BIR Form No. 1902 - Application for Registration for Individuals Earning Purely Compensation Income and Resident Alien Employee 

BIR Form No. 1903 - Application for Registration for Corporations/Partnerships (Taxable/Non- Taxable) including Government Agencies and Instrumentalities (GAIs), Local Government Units (LGUs), Cooperatives and Associations 

BIR Form No. 1904 - Application for Taxpayer Identification Number (TIN) under Executive Order (E.O.) 98 

BIR Form No. 1905 - Application for Registration Information Update/Correction/ Cancellation 

BIR Form No. 2305 - Certificate of Update of Exemption of Employer’s and Employee’s Information

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202017/RMO%20No.%205-2017.pdf of the full text of RMO No. 5-2017.

Consolidated Schedule of Fees and Charges Per SEC Memorandum Circular No. 3 Series of 2017

Have you read the Securities and Exchange Commission (SEC) PH Memorandum Circular No. 3 Series of 2017? 

The circular is related to the Consolidated Schedule of Fees and Charges as approved by the Department of Finance (DOF) to be imposed and collected by the Securities and Exchange Commission as follows:

REGISTRATION AND FILINGS FEES:

PREPARATION OF STATISTICAL REPORTS, COMPANY LISTINGS AND RELATED INFORMATION ON SEC-REGISTERED ENTITIES:

It is also stated that all other circulars, rules, orders and issuances, or part thereof inconsistent with the Memorandum Circular are hereby repealed or modified accordingly.

A Legal Research Fee (LRF) equivalent to 1% of the Filing Fee but not less than Ten Pesos (P10.00) shall be paid at the time of filing of application for Registration, Licensing, Accreditation, and Other Related Transactions.

Please refer:  http://www.sec.gov.ph/wp-content/uploads/2017/03/2017MCno03.pdf of the full text of SEC Memrnadum Circular No. 3 Series of 2017.

Issuance of Authority to Release Imported Goods for Imported Automobiles Already Released from Customs Custody

The bureau has issued Revenue Regulations (RR) No. 2-2016 amending certain provisions of RR No. 2-2016 particularly in the issuance of Authority to Release Imported Goods for imported automobiles already released from customs custody. 

Section 2. AMENDMENTS. - Items III and IV of Revenue Regulations No. 2-2016 shall be amended as follows:

III. Legal Basis

Finally, under the provisions of effective international Agreements and the principle of reciprocity, Recognized International Organizations and Foreign Emphasis in the Philippines are exempted from all taxes, hence, the exemption from requirement of securing an ATRIG.

IV. When and under circumstances ATRIG issued

However, Foreign Embassies and Recognized International Organizations are exempted from securing ATRIG pursuant to the principle of reciprocity and international agreements to which the Philippine is a signatory, respectively.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202017/RR%20No.%204-2017.pdf of the full text of RR No. 2-2016 and additional requirements.

New VAT Exemption Identification Card (VEIC) Issued to Qualified Diplomats, Officials and Dependents of the US Embassy

The New Value-Added Tax (VAT) Exemption Identification Card (VEIC) issued to Qualified Diplomats, Officials and Dependents of the Embassy of the United States of America (US Embassy) under Revenue Memorandum Circular (RMC) No. 23-2017 pursuant to Revenue Memorandum Order (RMO) No. 22-2004 of May 24, 2016, entitles, "Value-Added Tax (VAT) Exemption Certificate/Identification Card Issued to Qualified Foreign Embassies and Their Qualified Personnel Amending/Modifying RMC 81-99".

Currently, only the US Embassy's qualified personnel and the latter's qualified dependents are being issued VEICs by the Bureau of Internal Revenue (BIR). It is use on personal purchase of goods and services to the business establishments.

Attached, as Annex "A" is a template of the VEiC which shall be issued by the BIR to US Embassy qualified personnel and their qualified dependents, as approved by its duly authorized signatory. Nonetheless, all VEICs duly issued before the issuance of this RMC shall rernain valid until their expiry dates. For comparison purposes, attached, as Annex "8", is a sarnple copy of the earlier version of the VEIC. 

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2023-2017.pdf / http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/Annex%20A_RMC%2023-2017.pdf and http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/Annex%20B_RMC%2023-2017.pdf of the full text of RMC No. 23-2017, Annex "A" and "Annex "8", respectively.

Measures To Consider For Every Establishment With Regards To Tax Compliance Verification Drive

Tax Compliance Verification Drive is one of the programs of the Bureau of Internal Revenue inspecting business establishments across the country, to verify compliance with registration, invoicing and bookkeeping requirements provided for under existing internal revenue laws, rules and regulations. 

However, the issuance of Reminder Letter to all business establishments during tax mapping operations is a requirement to be able to have an ample time for all businesses to prepare the important requirements at the time of tax mapping.

Needs to Do for Every Establishment of the Tax Compliance Verification Drive as follows:

1. Register your business with the BIR.

2. Display the BIR Certificate of Registration, the Registration Fee for the Current Year and "Notice to the Public/Ask for Receipt" signage in the place of business.

3. Issue registered invoices/receipts for sales of goods or services. Register the Cash Register Machines, Point-Of Sale machines, or other similar devices (if any).

4. Register and maintain Books of Accounts in the business premises.

5. Withhold taxes on compensation of employees, and on payments subject to final and expanded withholding tax and remit the correct tax as withheld.

6. File the necessary returns and pay the corresponding correct taxes at time/s required by law. 

Please refer http://www.bir.gov.ph/images/bir_files/old_files/others/annex_d_page1.jpg and http://www.bir.gov.ph/images/bir_files/old_files/others/annex_d_page2.jpg of the full text of Tax Compliance Verification Drive and detailed BIR Requirements, respectively. 

Policies and Procedures in the Issuance of eLA for VAT Credit/Refund Claims Filed with the VCAD

To answer the question regarding the policies and procedures in the issuance of (Electronic Letters (eLA) for Value-Added Tax (VAT) Credit/Refund claims filed by Direct Exporters filed with the VAT Credit Audit Division (VCAD), the bureau has issued Revenue Memorandum Circular (RMC) No. 19-2017 recently amending question and answer to Number 12 of RMC No. 80-2010 to read as follows:

Q12: What are the policies and procedures in the issuance of eLA for VAT credit/refund claims with the VCAD?

A12: The following policies and procedures shall be observed:

1. The Chief of the VCAD shall use the Electronic Letter of Authority Monitoring System (eLAMS) in requesting for the issuance of eLAs, as well as in updating of the status of the same, until the Case Management System (CMS) of the Electronic Tax Information System (eTIS) is rolled-out in the National Office.

2. The Assistant Commissioner, Assessment Service shall be authorized approving official/signatory for eLAs issued covering VAT credit/refund claims filed with the VCAD.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2017/RMC%20No%2019-2017.pdf of the full text of RMC No. 19-2017