Minimum Corporate Income Tax on Domestic Corporations

The Revenue Regulations 12-2007 was issued by the bureau as amended with regards to Minimum Corporate Income Tax on Domestic Corporations: 

1. Imposition of Tax - A minimum corporate income tax of two percent (2%) of the gross income as of the end of the taxable year, beginning of the fourth taxable year immediately following the year in which such corporation commenced its business operations, when the minimum income tax is greater than normal income tax.

2. Carry Forward of Excess Minimum Tax - any excess of the minimum corporate income tax over the normal income tax shall be carried forward and credited against the normal income tax four the three (3) immediately succeeding taxable years.

But the minimum corporate income tax shall not be imposed upon any of the following:

1. Domestic corporations operating as proprietory educational institutions subject to tax at ten percent (10%) on their taxable income; or

2. Domestic corporations engaged in hospital operations which are nonprofit subject to tax at ten (10%) on their taxable income; and

3. Corporations engaged in business as depository banks under expanded foreign currency deposits system, otherwise known as Foreign Currency Deposit Units

4. Firms that are taxed under a special income tax regime

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/37123rr%20no.%2012-2007.pdf of the full text of Revenue Regulations 12-2007.

Value of Shares of Stock at the Time of Sale Not Listed and Traded in the Local Stock Exchanges and Requirements in Compliance for the Issuance of Certificate Authorizing Registration (CAR) from the BIR

Last April 11, 2013, the bureau has issued Revenue Regulations No. 06-2013 amending Certain Provision of Revenue Regulations No. 06-2008 Entitled Consolidated Regulations Prescribing the Rules on the Taxation of Sale, Barter, Exchange or Other Disposition of Shares of Stock Held as Capital Assets.

Under Section 2 of these Regulations as amended, Section 7 of RR No. 06-2008, (c.2.2) In the case of share of stock not listed and traded in the local stock exchanges, the value of the shares of stock at the time of sale shall be the fair market value. In determining the value of the shares, the Adjusted Net Asset Method shall be used whereby all assets and liabilities are adjusted to fair market values. The net of adjusted asset minus the liability values is the indicated value of the equity. For the purposes of this section, the appraised value of real property at the time of sale shall be 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 value fixed by the Provincial and City Assessors, or

3. The fair market value as determined by Independent Appraiser.

Illustrations:

For the purpose in securing a Certificate Authorizing Registration (CAR) from the Bureau of Internal Revenue (BIR) with regards to Onerous Transfer of Shares of Stock Not Traded Through the Local Stock Exchange, the taxpayer should comply the requirements and pay related taxes and fees as follows:

1. Certification Fee (BIR Form 0605); 

2. Documentary Stamp Tax (BIR Form 2000-OT); - Deadline is within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred.

3. Capital Gains Tax (if any but still required to file BIR Form 1707 showing the computation) - Deadline is within thirty (30) days after each sale, barter, exchange or other disposition of shares of stock not traded through the local stock exchange;

4. Donors Tax (if the Fair Market Value of the Shares Sold is lower than the Adjusted Book Value of the Issuing Corporation which will result a deemed donated transactions)

The Adjusted Book Value of the Issuing Corporation is computed as Adjusted Book Value Per Share Multiply by Cost of the Shares of Stocks Sold. The Adjusted Book Value Per Share is computed as Total Adjusted Net Asset (please refer to the illustrations) Divided by Issued and Outstanding Shares (Issued Shares Less Treasury Shares).

If the Adjusted Book Value is greater than the Cost of the Shares of Stocks Sold, then there's Net Capital Gain which is subject to Capital Gains Tax (Tax Due is 5% on the first 100,000; 10% over 100,000). 

The Documentary Stamp Tax is computed as Total Par Value (Cost of Shares of Stock(s) Sold) Divided by P200.00 Multiply by P1.50 for every P200.00 or a fraction thereof.

If the Adjusted Book Value of the Issuing Corporation is greater than the Cost of the Shares Sold, it is considered as a deemed donation transactions which is subject to Donors Tax as a Stranger computed as Adjusted Book Value of the Issuing Corporation Less Fair Market Value of the Shares Sold Multiply by 30%.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/70201RR%206-2013.pdf of the full text RR Nos. 6-2013.

Issuance of Principal Receipts / Invoices for the Purpose of Value Added Tax (VAT) & Percentage Tax and Supplementary Receipts / Invoices or Commercial Invoices

Under Revenue Regulations No. 18-2012, Section 2 defines PRINCIPAL RECEIPTS / INVOICES as a written account evidencing the sale of goods and/or services issued to customers in  an ordinary course of business which necessary includes the following:

1. VAT SALES INVOICE - for the purposes of Value Added Tax (VAT) pursuant to Section 106 of the NIRC, as amended, it is written account evidencing the sale of goods and/or properties issued to customers in an ordinary course of business, whether cash sales or on account (credit) which shall be the basis of the output tax liability of the seller and the input tax claim of the buyer. Cash Sales Invoices and Charge Sales Invoices falls under this definition.

2. VAT OFFICIAL RECEIPT - for purposes of Value Added Tax (VAT) pursuant to Section 108 of the NIRC as amended it s a proof of sale of service and/or leasing of properties which shall be the basis of the output tax liability of the seller and the input tax claim of the buyer. It is a written admission or acknowledgment of the fact that the money has been paid and received for the payment or settlement persons rendering services and its customers.

3. NON-VAT SALES INVOICES - for purposes of Percentage tax pursuant to Section 116 of the NIRC, as amended, it is a written account evidencing the sale of goods and/or properties issued to customers in an ordinary course of business, whether cash sales or on account (credit) which shall be the basis of the Percentage Tax liability of the seller.

3. NON-VAT OFFICIAL RECEIPTS - for purposes of Percentage Tax pursuant to TITLE V of the NIRC, as amended, it is a proof of sale of service and/or leasing of properties which shall be the basis of the Percentage Tax liability of the seller. It is written admission or acknowledgment of the fact that money has been paid and received for the payment or settlement persons rendering services and its customers.

Besides, under Section 3 of these regulations, also stated the SUPPLEMENTARY RECEIPTS / INVOICES which are also known as COMMERCIAL INVOICES, a written account evidencing that a transaction has been made between the seller and the buyer of goods and/or services, forming part of the books of accounts of a business taxpayer for recording, monitoring and control purposes.

It is a document evidencing delivery, agreement to sell or transfer of goods and services which includes but are not limited to delivery receipts, order slips, debit and/or credit memo, purchase order, job order, provisional/temporary receipt, acknowledgement receipt, collection receipt, cash receipt, bill of lading, billing statement, statement of account, and any other documents, by whatever name it is known or called, whether prepared manually (handwritten information) or pre-printed/pre-numbered loose-leaf (information typed using excel program or typewriter) or computerized as long as it is used in the ordinary course of business being issued to customers or otherwise.

Supplementary receipts/invoices, for the purposes of Value-Added Tax, are not valid proof to support the claim of Input Taxes by buyers of goods and/or services.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/67524RR%2018-2012.pdf of the full text of RR Nos. 18-2012.

Issuance of TIN Card and the Transfer of Registration

With regards to the issuance of TIN Card and the transfer of Registration, the bureau has issued the Revenue Regulations No. 5-2010 amending Sections 3 (D) and 12 of Revenue Regulations No. 11-2008.

For the issuance of TIN Card, once application is approved and a TIN is assigned, the corresponding TIN Card shall be issued. the same must be processed and released to the applicant within the same day the complete documentary requirements as prescribed in Item C (2) above have been submitted to the concerned RDO.

While, for the Transfer of Registration, in case a registered person decides to transfer his registered address, or business address of his head office or branches, it shall be his duty to inform the RDO where he is registered by filing the prescribed BIR Form specifying therein the complete address where he intends to transfer.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/51752RR%205-2010%20ON%20TRANSFER%20OF%20REGISTRATION.pdf of the full text of RR No. 5-2010

Who are exempt from the Imposition of Annual Registration Fee from BIR?

Revenue Regulations No. 11-2008 Section 10, stated that every separate or distinct establishment or place of business shall be paid upon registration and every year thereafter on or before January 31 by every person subject to any internal revenue tax with Annual Registration Fee (RF) in the amount of Five Hundred Pesos (P500.00).

However, the following shall be exempt from the imposition of annual registration fee:

1. Cooperative duly registered with the CDA;

2. Individuals earning purely compensation income whether locally or abroad;

3. Overseas Workers;

4. GAIs, in the discharge of their governmental functions;

5. Marginal Income Earners;

6. LGUs, in the discharge of their governmental functions;

7. Tax exempt persons such as those enumerated under Section 30 of the Code, as amended, in pursuance of tax-exempt activities;

8. Non-stock/non-profit organizations not engaged in business;

9. Persons subject to tax under one-time transactions; and

10. Facility/ies where no sales transaction occur.

Marginal Income Earner refer to those individuals whose business do not realize gross sales or receipts exceeding P100,000 in any 12-month period.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/42151rr%20no.%2011-2008.pdf of the full text of the regulations.

Primary Registration of Employment, Business and Other Undertakings with the Bureau of Internal Revenue (BIR)

Under Revenue Regulations 11-2008, Section 2 (A), Primary Registration shall mean the process by which a person whether individual, including estate and trusts, or a corporation and other juridical entities upon application and full compliance with the registration requirements prescribed in these Regulations, is registered with and consequently included in the registration database of the Bureau of Internal Revenue (BIR).

Section 5 of the regulations stated that the every person subject to any internal revenue tax, which is expected to be paid periodically with the BIR as follows:

A. Employees: Withinh ten (10) days from the date of employment.

B. Self-employed individuals, professionals, estate and trusts and their branches, if any; branches of corporation: On or before the commencement of business.

C. Corporation (Taxable or Non-taxable): Before payment of any tax due.

In the case of corporation where documentary stamp tax (DST) is required to be paid on the original issuance of shares of stock to the shareholders or subscription of shares of stock, within five (5) days after the close of the month.

D. Partnerships, Associations, Cooperatives, Government Agencies and instrumentalities: Before or upon filing of any applicable tax return, statement or declaration as required by the Code, as amended.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/42151rr%20no.%2011-2008.pdf of the full text of the regulations.

Persons Who Are Required or Who May Secure Taxpayer Identification Number (TIN)

Based on Revenue Regulations No. 11-2008 Section 3 (B), provides or stated the Persons who are required or who may secure Tax Identification Number (TIN) as follows:

1. Every persons subject to any national internal revenue tax namely: income tax, estate tax and donor's taxes, value-added tax, percentage tax, excise tax, and documentary stamp tax, including its branches;

2. Any person who, although exempt from the imposition the taxes is required to withhold taxes on account of his/its income payments made to taxable individuals or entities;

3. Pursuant to Section 236(J) of the Code, as amended, any person required under the authority of said Code, as amended, to make, render or file a return, statement or other document whereby he/it is rquired to indicate his/its TIN in such return, statement or document filed with the BIR for his/its proper identification for tax purposes, and which he/it shall indicate in certain documents, such as, but not limited to the following:

a. Sugar quedans, refined sugar release order or similar instruments to reflect the TIN of the owner or seller of the sugar;

b. Domestic bills of lading to reflect the TINs of the ships and consignees of commercial value shipment;

c. Documents to be registered with the Registry of Deeds or Assessor's Office, to reflect the TINs of owners;

d. Registration certificates of transportation equipment by land, sea or air, to reflect the TINs of owners;

e. Documents to be filed or registered with the Securities and Exchange Commission (SEC);

f. Building construction permits to reflect the TINs of owners and contractors of buildings and civil works;

g. and others...

4. Any person required to secure TIN by reason of the provisions of Executive Order No. 98. - as prescribed by this law, persons, whether natural or juridical, dealing with all government agencies and instrumentalities, including Government-Owned and/or controlled Corporations (GOCCs), and all Local Government Units (LGUs), are thereby required to incorporate the Taxpayer Identification Number (TIN+) in all forms, permits, licenses, clearances, official paper and documents which they secure these government agencies, instrumentalities including GOCCS and LGUs.

Section 2 (D) of the regulations, Taxpayer Identification Number (TIN) shall pertain to the reference index number issued and assigned by the BIR to each and every person registered in its database. In all of the business and/or personal transactions of the registered person whether these be with government office or otherwise, this reference index number is required to be indicated.

The TIN comprises of a 9 to 13 digit numeric code where the first 9 digits is the TIN proper and the last 4 digits is the branch code (in case of business entities).

A TIN for the estate of a deceased person under judicial settlement and/or a trust under an irrevocable trust agreement shall be secured separate from the TIN of the deceased person and/or trustee.

Issuance of TIN card for the first time shall be free of charge. Minors who are earning and shall be supplied with TIN.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/42151rr%20no.%2011-2008.pdf of the full text of the said regulations.

Effectivity of Threshold Amounts for Sale of Residential Lot, Sale of House and Lot, Lease of Residential Unit and Sale or Lease of Goods or Properties or Performance of Services

The Revenue Regulations No. 3-2012 has issued by the Bureau dated February 20, 2012 to informed the public the effectivity of Threshold Amounts for Sale of Residential Lot, Sale of House and Lot, Lease of Residential Unit and Sale or Lease of Goods or Properties or Performance of Services covered by Section 109 (p), (Q) and (V) of the Tax Code of 1997, as amended provides the amounts stated therein shall be adjusted to their present values using the Consumer Price Index as published by the National Statistics Office (NSO). 

With the issuance of Revenue Regulations No. 16-2011 dated October 27, 2011, the threshold amounts has been adjusted as follows:

The new threshold amounts shall be made effective for instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed and notarized on or after January 1, 2012.

In addition with, pertinent portions of Section 4.106-3 of revenue Regulations no. 16-2005, as amended by Revenue Regulations No. 16-2011 should properly be worded as follows:

"Section 4.106-3 Sale of Real Properties. - sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to VAT.

Sale of residential lot with gross selling price exceeding P1,919,500.00, residential house and lot or other residential dwellings with gross selling price exceeding P3,199,200.00 where the instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed and notarized on or after January 1, 2012 and shall be subject to twelve percent (12%) output VAT.

However, for instruments of sale executed and notarized on or after November 1, 2005 but prior to January 1, 2013, the threshold amounts should appropriately be P1,500,000 and P2,500,000 respectively, and excess thereof shall be subject to ten percent (10%) output VAT, and starting February 1, 2006, to twelve percent (12%) output VAT.

Besides, Sections 4.109.-1 (B)(1), (p)(4) of Revenue Regulations No. 16-2005, as amended by Revenue Regulations No. 16-2011 should properly be worded as follows:

"(p) The following sales of real properties are exempt from VAT, namely:

(4) Sale of residential lot valued at One Million Nine Hundred Nineteen Thousand five Hundred Pesos (P1,919,500.00) and below, or house & lot and other residential dwellings valued at Three Million One Hundred Ninety-Nine Thousand Two Hundred Pesos (P3,199,200.00) and below where the instrument of sale/transfer/disposition was executed and  notarized on or after January 1, 2012;

However, for instrument executed and notarized on or after Nov. 1, 2005 but prior to January 1, 2012, the threshold amounts should appropriately be P1,500,000 and P2,500,000 respectively.

Provided, that every three (3) years thereafter, the amounts stated herein shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); Provided, further, that such adjustment shall be published through revenue regulations to be issued not later than March 31 of each year.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/62308RR%203-2012.pdf of the full text of the Revenue Regulations No. 3-2012.

Clarification of the Tax Treatment of Payouts by Employee Pension Plans

The Commissioner of Internal Revenue just recently issued the Revenue Memorandum Circular No. 39-2014 for the purpose in clarifying the Tax Treatment of Payouts by Employee Pension Plans.

Based on the circular, there are pension, stock bonus and profit-sharing plans that are permitted by their charters to disburse benefits (i. e., dividends) to the beneficiary-employees. As a general rule, Section 60(a) of the National Internal Revenue Code (NIRC) of 1997, as amended, subjects the income of any kind of property held in trust to income tax. By way of exception, Section 60(B) exempts from income tax an employee's trust which forms part of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees subject to the following conditions:

1. Contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan; and

2. Under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees.

3. As an exception to the above exception, Section 60(b) subjects to income tax, in the year in which so distributed, any amount actually distributed to any employee or distributee to the extent that it exceeds the amount contributed by such employee or distributee.

Prescinding from the foregoing, the entire amounts of benefits paid by a pension, stock bonus or profit-sharing plan of an employer for the benefit of employees are taxable on the part of the employees in the year so distributed. This tax treatment, however, does not apply to payouts representing a return of an employee's personal contributions to the fund and to retirement benefits exempt under Section 32(B)(6)(a) of the NIRC.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/86328RMC%20No%2039-2014.pdf for the illustrations and full text of RMC No. 39-2014.

Filing/Submission of Hard Copy of the Certificate of Compensation Payment/Tax Withheld (BIR Form 2316)

Last May 20, 2013. the BIR has issued the Revenue Regulations No. 11-2013 which took effect beginning with the calendar year 2013 requiring the employer for the filing/submission of hard copy of the Certificate of Compensation Payment/Tax Withheld (BIR Form 2316) covering employees who are qualified for substituted filing.

The regulations is hereby amending Section 2.83 of RR 2-98 to read as follows:

"Sec. 2.83 Statement and Returns. - 

Section 2.83.1. Employees Withholding Statements (BIR Form No. 2316). - In general, every employer or other person who is required to deduct and withhold the tax on compensation including fringe benefits given to rank and file employees, shall furnish every employee from whose compensation taxes have been withheld the Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316) on or before January 31 of the succeeding calendar year, or if employment is terminated before the close of such calendar year, on the day on which the last payment of compensation is made. Failure to furnish the same shall be a ground for the mandatory audit of payor's income tax liabilities (including withholding tax) upon verified complaint of the payee.

Employers of MWEs are still required to issued BIR Form nO. 2316 (June 2008 Encs version) to the MWEs on or before January 31 of the following year.

As a rule, the employer shall furnish each employee with the original and duplicate copies of the BIR Form No. 2316 showing the name and address of the employer; employer's TIN; name and address of the employee; employee's TIN; amount of exemptions claimed, amount of premium payments on health and/or hospitalization insurance not exceeding P2,400.00, if any; the sum of compensation paid including the non-taxable benefits; the amount of statutory minimum wage received by MWEs; Overtime pay, holiday pay, night shift differential pay and hazard pay received by MWEs; the amount of tax due; the amount of tax withheld during the calendar year and such other information as may be required. The statement must be signed by both the employer or other authorized office and the employee, and shall contain a written declaration that is made under the penalties of perjury. If the employer is the Government of the Philippines, its political subdivision, agency or instrumentality or government-owned or controlled corporation, the statement shall be signed by the duly designated officer or employee.

However, in cases covered by substituted filing, the employer shall furnish each employee with the original copy of BIR Form No. 2316 and file/submit to the BIR the duplicate copy not later than February 28 following the close of the calendar year. xxxx         xxxx          xxxx"

Besides, it also stated in the regulations that under Section 250 of the Tax Code reading, "In the case of each failure to file an information return, statement or list, or keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed therefor, unless it is shown by this Code or by the Commissioner on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commissioner, be paid by the (P1,000) for each such failure; Provided, however, That the aggregate amount to be imposed for all such failures during a calendar year shall not exceed twenty-five thousand pesos (P25,000).

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/71821RR%2011-2013.pdf of the full text of the Revenue Regulations No. 11-2013.