Pag-IBIG (Pagtutulungan sa kinabukasan: Ikaw, Bangko, Industriya at Gobyerno) Fund Tax Exemptions

The Bureau of Internal Revenue has issued the Revenue Memorandum Circular No. 43-2011 dated September 28, 2011 to make widely known to the public about the Section 19 of Republic Act. No. 9679 known as the "Human Development Mutual Fund Law of 2009," with details as follows:

"SEC. 19. Exemption from Tax, Legal Process and Lien. - All laws to the contrary notwithstanding, the Fund and all its assets and properties, all contributions collected and all accruals thereto and income or investment earnings therefrom, as well as all supplies, equipment, papers or documents shall exempt from any tax, assessment, fee, charge, or customs or import duty; and all benefit payments made by the Pag-IBIG Fund shall likewise be exempt from all kinds of taxes, fees or charges, and shall not be liable to attachments, garnishments, levy or seizure by or under any legal or equitable process whatsoever, either before or after receipt by the person or persons entitled thereto, except to pay any debt of the member to the Fund. No tax measure of whatever nature enacted shall apply to the Fund, unless it expressly revokes the declared policy of the State in Section 2 hereof granting tax exemption to the Fund. Any tax assessment against the Fund shall be null and void."

RA No. 9679 was signed into law on July 21, 2009. The Implementing Rules and Regulations was made effective on January 1, 2010 after its publication.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/60284RMC%20No%2043-2011.pdf of the full text of RMC No. 43-2011.

Department of Trade and Industry (DTI) Launches Electronic Payment (E-Payment) for Business Name Registration for Sole Proprietorship

The Department of Industry (DTI) just recently announced the electronic payment (e-payment) facility for business name registration last January 20, 2014 to make it faster and easier for entrepreneurs to start a business in the Philippines.

According to DTI Secretary Gregory L Domingo, the e-payment facility for business name registration is one of the projects that the DTI is implementing to simplify the process of dealing with the government as entrepreneurs start and run their businesses. Besides, he also added that the DTI's goal is to make the Philippines a favorable environment for both foreign and local business to flourish.

The entrepreneurs can apply and renew their business name without going to the DTI offices, and enjoy the convenience of paying the applicable fees online through their computer or mobile phones. Sole proprietors can now apply online through the BNRS website at bnrs.dti.gov.ph completing the registration of about 15 minutes and they can opt to download and print their business name certificates.

In addition, the registration of a business name can also be done online through the PBRS website at business.gov.ph where entrepreneurs can also avail of other government-related services such as Taxpayer Identification Number (TIN) validation and/or creation with the Bureau of Internal Revenue and application of Employer's Registration Number (ERN) with Pag-IBIG Fund, PhilHealth and Social Security System (SSS) in less than 40 minutes.

Please refer http://www.dti.gov.ph/dti/index.php?p=154&type=2&sec=2&aid=1264 of the article published by DTI with regards to e-payment for business name registration.

Tax Implications and Recording of Deposits/Advances as Part of Gross Receipts (Outright Income) or Claim for Deduction of Expenses (Outright Expense) Received or Paid by Taxpayers Other Than General Professional Partnerships (GPP)

Last February 8, 2013, the Bureau has issued the Revenue Memorandum Circular No. 16-2013 to provide guidelines to observed in accounting and recording of deposits/advances for the payment of the pertinent expenses received by the taxpayers other than General Professional Partnerships (GPP) covered by Revenue memorandum Circular (RMC) No. 89-2012 dated December 28, 2012.

The Policies and Guidelines is with details as follows:

1. Deposits/Advances Part of Gross Receipts

When cash deposits or advances are received by taxpayers other than GPP covered by RMC 89-2012 from the Client/Customer, a corresponding Official Receipt shall be issued. the amount received shall be booked as Income and shall form part of the Gross Receipts and subject to Valued-added Tax (VAT) or Percentage Tax (Gross Receipt Tax), if applicable, and shall in turn be deductible as expense by the Client/Customer provided that it is duly substantiated by Official Receipts pursuant to section 34 (A) (1) of the Tax Code.

2. Claim for Deduction of Expenses

Receipts incurred, paid for and issued in the name of the taxpayer shall be recorded as its own expenses for income tax purposes. These expenses shall be claimed as deductions from gross income provided these are duly substantiated by Official Receipts/Invoices issued by third-party establishments.

3. Income Payment are Subject to Appropriate Withholding Taxes

All Client/Customer shall, upon payment of deposits/advances, withhold tax at the rate prescribed in Revenue Regulations No. (RR) 2-98, as amended, which shall be remitted/paid on or before the 10th day of the following month using the Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) (BIR Form No. 1601E) except for taxes withheld for the month of December of each year, which shall be filed on or before January 15 of the following year pursuant to RR 2-98, as amended. For those filing using the Electronic Filing and Payment System (EFPS), the regulations pertaining to EFPS filers shall apply.

4. Issuing Official Receipts for the Deposit and Advances

An Official Receipt shall be issued for every deposit and advances pursuant to Section 113 of the Tax Code. The Official Receipt shall cover the entire amount which the client/Customer pays.

For VAT Taxpayers, the VAT Official Receipt will constitute the Output Tax for taxpayers other than GPP and in turn, the input tax of its client/customer.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/68486RMC%20No%2016-2013.pdf of the PRO-FORMA ENTRIES and full text of the Revenue Memorandum Circular No. 16-2013.

Clarification on the Issuance of Official Receipt as Required by Government Auditors as Evidence of Receipt of Payment for Disbursements

With the numerous questions received by the Bureau regarding the requirement of Government Auditors on the issuance of Official Receipt as the acceptable evidence of receipt of payment for disbursement where the payee/recipient is a dealer, supplier or business establishment required by the BIR to issue the same in the sale/lease of goods or properties, and/or sale of services has issued the Revenue Memorandum Circular No. 2-2014 to clarify or make easier to understand with regards to this matter.

In the memorandum, it is stated that Revenue Regulations No. 18-2012 and Revenue Memorandum Order (RMO) No. 12-2013 in relation to Sections 106, 108, 113 and other pertinent provisions of the National Internal Revenue Code (NIRC), as amended, mandate that:

1. Sales Invoice (Cash or Charge) shall be issued as Principal evidence in the sale of goods and/or properties;

2. Official Receipt shall be issued as Principal evidence in the sale of services and/or lease of properties; and

3. Commercial Receipts/Invoices such as delivery receipts, order slips, purchase orders, provisional receipts, acknowledgment receipts, collection receipts, credit/debit memo, job orders and other similar documents that form part of the accounting records of the taxpayer and/or issued to their customers evidencing delivery, agreement to sell or transfer of goods and services, shall be Supplementary evidence only.

In relation thereto, Section II (H) of RMO No. 12-2013 provides that:

II. POLICIES

H. The buyer of goods on account or credit evidenced by a Charge-Sales Invoice shall be entitled to claim input taxes. Upon collection of the account by the seller, a Collection Receipt (Supplementary Receipt) shall be issued to the client/buyer to evidence the receipt thereof;

Base on the just stated, the Sales Invoice shall serve in lieu of Official Receipt in the sale of goods or properties for evidentiary purposes in terms of audit.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/81011RMC%20No%202-2014.pdf of the full text of the Revenue Memorandum Circular No. 2-2014. 

Persons with Disability shall be Entitled to Claim at Least 20% Discount from the Following Establishments

Republic Act (RA) No. 9442, entitled "An Act Amending Republic Act 7277, Otherwise Known as the Magna Carta for Persons with Disability," relative to the tax privileges of persons with disability and tax incentives for establishments granting sales discount has been implemented by the Bureau under Revenue Regulations No. 1-2009.

Under the regulations, persons with disability shall be entitled to claim at least 20% discount from the following establishments relative to the sale of goods or services for their exclusive use or enjoyment, viz:

a. Hotels and similar lodging establishments and restaurants;

b. Sports and recreation centers;

c. Theaters, cinema houses, concert halls, circuses, carnivals and other similar places of culture, leisure and amusement;

d. All drugstores regarding purchase of medicine;

e. Medical and dental privileges in government and private facilities, such ash but not limited to diagnostic and laboratory fees (e.g., x-rays, computerized tomography scans and blood tests), including professional fees of attending doctors (in private facilities), subject to guidelines to be issued by the Department of Health, in coordination with the Philippine Health Insurance Corporation (Philhealth);

f. Domestic air and sea transportation based on the actual fare except promotional fare. If the promotional fare discount is higher than the 20% discount privilege, the person with disability may choose the promotional fare and should no longer be entitled to the 20% discount privilege; and

g. Land transportation privileges in bus fares such as ordinary, aircon fares and on public railways (such as LRT, MRT, PNR), and such other similar infrastructure that will be constructed, established and operated by public or private entity. Toll fees of skyways and expressways are likewise subject to at least 20% discount, however, this privilege can availed only by a person with disability owning the vehicle.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/44005rr%201-2009.pdf the full text Revenue Regulations No. 1-2009 "Rules and Regulations Implementing Republic Act No. 9442, entitled "An Act Amending Republic Act 7277, Otherwise Known as the Magna Carta for Persons with Disability," Relative to the Tax Privileges of Persons with Disability and Tax Incentives for Establishments Granting Sales Discount.

Submission of Alphabetical List of Employees/Payees of Income Payments as Amended under Revenue Regulations No. 1-2014

The BIR just recently issued Revenue Regulations No. 1-2014 amending the provisions of Revenue Regulations (RR) No. 2-98, as Further Amended by RR No. 10-2008, Specifically on the Submission of Alphabetical List of Employees/Payees of Income Payments as follows:

“Section 2.83.3 Requirement for list of payees – All withholding agents shall, regardless of the number of employees and payees, whether the employees/payees are exempt or not, submit an alphabetical list of employees and list of payees on income payments subject to creditable and final withholding taxes which are required to be attached as integral part of the Annual Information Returns (BIR Form No. 1604CF/1604E) and Monthly Remittance Returns (BIR Form No. 1601C, etc.), under the following modes:

(1) As attachment in the Electronic Filing and Payment System (eFPS);

(2) Through Electronic Submission using the BIR’s website address at esubmission@bir.gov.ph; and

(3) Through Electronic Mail (email) at dedicated BIR addresses using the prescribed CSV data file format, the details of which shall be issued in a separate revenue issuance.

“In cases where any withholding agent does not have its own internet facility or unavailability of commercial establishments with internet connection within the location of the withholding agent, the alphalist prescribed herein may be electronically mailed (e-mail) thru the e-lounge facility of the nearest revenue district office or revenue region of the BIR.”

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/80937RR%201-2014.pdf of the full text of the Revenue Regulations No. 1-2014.

But there're issues arises with the new Revenue Regulation No. 1-2014 (Submission of Alphabetical List of Employees/Payees of Income Payments) issued by the Commissioner of Internal Revenue (CIR): First (1) Under this regulation imposes a higher penalty compared to Section 250 of the NIRC. Failure to file for every BIR return related to the regulation is subject to P1,000 fine and failure to comply with the technical/substantial requirements shall not qualify as a deductible expense for income tax purposes. Secondly, (2) Under the current EFPS does not allow for attachments. Thirdly (3) The currently Alphalist is not required to be submitted with BIR 1601-C. Technical issues and penalty issues...

Requirements and Procedure Flow in the Application of Professional Tax Receipt (PTR) in Makati City

The Miscellaneous Tax Office in Makati City has posted the requirements and procedural flow in the application of Professional Tax Receipt (PTR)  to make it generally known as reference to taxpayers. 

For New Application, Taxpayers are required to first fill up the Application Form (FRM04) and need to present the required documents of the Original I. D. Card (license) from the Philippine Regulatory Commission (PRC) to the authorized person. For Lawyer, Insurance Agent, Masseur and Real Estate Appraiser need to present also the Certificate of Membership from the Supreme Court, License from the Insurance Commission, License from the Department of Health (DOH) and License from the Department of Trade & Industry, respectively.

While, for Renewal, taxpayers are required to present the previous Professional Tax Receipt (PTR) for verification.

After the required documents are presented, the authorized person will encode the details and issue billing for payment of the Professional Tax Receipt (PTR).

Finally, the last procedure flow is the issuance of Professional Tax Receipt (PTR) from the authorized person.

Tax Guide for Professionals: Who are Required to Pay Professional Tax Receipt?

According to the Tax Guide for Professionals authored by the Bureau of Internal Revenue, defined Professional, classified as self-employed, refers to individual or a group, practicing his or their profession or calling, with or without license under a regulatory board or body.

For individuals, one of the registration and documentary requirements is the payment of Professional Tax Receipt (PTR) from the local government, if applicable. If the professional is registered in Makati, Professional Tax Receipt (PTR) is payable annually on or before January 31. Persons engaged  in the practice of profession requiring government examination is levied an annual professional tax of P300, except those exclusively employed in the government. Please refer http://www.makati.gov.ph/portal/uploads/staticmenu/docs/taxes_and_fees.pdf of the full text of paying miscellaneous taxes, fees and charges.

It also includes BIR requirements in the payment of Annual Registration Fee (RF) of P500 and other related taxes.

Aside from that, Professionals are required to maintain books of accounts using any acceptable method of accounting (accrual or cash basis) in a consistent manner. Their books of accounts are to be audited and examined by an independent Certified Public Accountant (CPA) in order to give an independent opinion regarding its financial condition as required by the Bureau with certain conditions and requirements.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/taxguide.pdf of the full text of the Tax Guide for Professionals

and http://www.dilg.gov.ph/PDF_File/resources/DILG-Resources-201162-e82508a484.pdf of the Full Text of Local Government Taxation.

New SSS and PHILHEALTH Contribution Schedule is Effective in the Applicable Month of January 2014

The Social Security System has issued the Circular No. 2013-010 last October 2, 2013 related to the revised schedule of contributions, including the Maximum Monthly Salary Credit (MSCs) and corresponding amount of contributions effective in the applicable month of January 2014 to all Employers, Employees, Self-employed, Voluntary and Overseas Filipino Workers (OFW) members. 

Upon recommendation of the Social Security Commission, the President of the Philippines has approved the increase of the contribution rate from 10.4% to 11%, and the MSC, from P15,000 to P16,000.

Please refer http://www.sss.gov.ph/sss/uploaded_images/circular/Circular2013_010_Hi.pdf of the full text of the Circular including the new SSS Contribution Schedule effective in the applicable month of January 2014.

Besides, the Philippine Health Insurance Corporation (PHIC) also issued last September 30, 2013 the Philhealth Circular No. 0027, s-2013 of the increase of premium contributions of all members effective January 2014.

Please refer http://www.philhealth.gov.ph/circulars/2013/circ27_2013.pdf of the full text of the Circular including the new Philhealth Contribution Schedule effective in the applicable month of January 2014.

The adjustments will increase the maximum daily allowance for illness, maximum daily allowance of maternity benefits, increase in monthly pensions for retirement pensions, decreases the withholding tax of employed employees and other related advantages.

We hope that the  Bureau of Internal Revenue (BIR) / Department of Finance (DOF) / Legislature will also increase the Basic Personal Exemption  and Additional Exemption for Dependents of Individual Taxpayers.

Resolution of the Retention Period and Guidelines on the Preservation of Books of Accounts and Other Accounting Records

The Bureau has issued last September 27, 2013 of Revenue Regulations No. 17-2013 which clarifies the clarifies the retention period and prescribes the guidelines on the preservation of books of accounts and other accounting records. 

With this, Individual and Non-Individual taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting records for a period of ten (10) years counted from the day following the deadline in filing a return or if filed after the deadline, from the date of filing of the return, for the taxable year when the last entry was made in the books of accounts. 

Under the regulation, it is stated that if the taxpayer has any pending protest or claim for tax credit/refund of taxes, and the books and records concerned are material to the case, the taxpayer is required to preserve his/its books of accounts and other accounting records until the case is finally resolved. 

Unless the National Internal Revenue Code (NIRC) or other relevant laws requires a longer period of retention, the independent Certified Public Accountant who audited the records and certified the financial statements of the taxpayer, is the same manner as the taxpayer, has the responsibility to maintain and preserve copies of the audited and certified financial statements for a period of 10 years from the due date of filing the annual Income Tax return or the actual date of filing thereof, whichever comes later.

Taxpayers are required to kept at all times of all books, registers and other records, and vouchers and other supporting papers at the place of business of the taxpayer, subject to inspection by any internal revenue officer, and upon demand, the same must be immediately produced and submitted for inspection for purposes of regular audit or extraordinary audit, requests for exchange of information by a foreign tax authority under Sections 6 and 71 of the NIRC, and in the exercise of the Commissioner’s power to obtain information under Section 5 of the NIRC, along with others. 

Besides, the regulations also stated that the examination and inspection of books of accounts and other accounting records shall be done in the taxpayer’s office or place of business or in the office of the BIR. Any violation of the provisions of these regulations shall be subject to penalties provided in Sections 266, 275 and, other pertinent provisions of the NIRC; and Section 6 of Republic Act 

No. 10021 (the “Exchange of Information on Tax Matters Act of 2009”). 

Reference: Revenue Regulations No. 17-2013.