Secrets of Tax Minimization: How To Reduce Tax Legally and Ethically

Tax Avoidance or Tax Minimization is the available to cover escaped accomplished by legal procedure which may be contrary to the intent of the tax law's sponsors but nevertheless do not violate the law.

The following are suggestions on how to reduce tax legally and ethically:

1. Effective Tax Management - To maximize Tax Benefits we have to do the following:

a. To optimize Tax Deductions, 

b. To minimize Taxable Income

c. To avail all Tax Incentives

d. To avail Tax Remedies under code

e. To comply all the requirements of the Bureau of Internal Revenue

2. Master the National Internal Revenue Code (NIRC) and be updated with regards to Revenue Regulations, Circulars and Orders.

a. Know the tax rules

b. Know how the rules

c. Maintain a high level of tax compliance

d. Know you rights and remedies

e. Know the rules and process the assessment

f. Know best practices of handling assessment

g. Study and define your strategy

h. Consider favorable settlement such as amnesty, abatement and compromise settlement

3. Make A Tax Planning and Strategies in Your Business

4. Make an Investment On Passive Income (Interest Income From Banks, Inter-Corporate Dividends Other Income Subject To Final Tax and Others)

5. Attend Seminars for Continuing Professional Education (CPE)

6. Ask help to Tax Consultant.

Manny Pacquiao Ranks No. 1 of the Top Individual Taxpayers for Taxable Year 2013 Based on Regular Income Taxes Paid to the Government of the Philippines

Did you know that Emmanuel "Manny" D. Pacquiao Ranks No. 1 among of the Top 500 Individual Taxpayers for Taxable Year 2013 with Regular Income Taxes paid to the Government of the Philippines.?

The Bureau of Internal Revenue just announced the Top Individual Taxpayers for Taxable Year 2013 based on Regular Income Taxes paid to the Government of the Philippines as of November 24 2014.

Emmanuel "Manny" D. Pacquiao paid Regular Income Taxes of  Php168,841,863 to the Government of the Philippines.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/Advisory/TOP_500_Individual_arranged%20by%20rank_copy.pdf of the complete list of the Top Individual Taxpayers for Taxable Year 2013.

Interest Income from Long-Term Deposit or Investment Is Exempted From Income Tax With Certain Conditions

Revenue Memorandum Circular No. 7-2015 was issued by the Bureau of Internal Revenue to state again the Tax Treatment of Interest Income Derived from Long-Term Deposits or Investments Certificates as Described in Revenue Regulations No. 14-2012 and Clarified in Revenue Memorandum Circular Nos. 77-2012 and 81-2012.

In order for the interest income from long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP) to be exempted from income tax, the following characteristics/conditions must be present:

1. The depositor or investor is an individual citizen (resident or non-resident) or resident alien or non-resident alien engaged in trade or business in the Philippines;

2. The long-term deposits or investment must be in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidences by certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP);

3. The long-term deposits or investments must be in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP);

4.The long-term deposits or investments must be issued by banks only and not by other entities or individuals;

5. The long-term deposits or investments must have a maturity period of not less than five (5) years;

6. The long-term deposits or investment must be in denominations of Ten Thousand Pesos (P10,000) and other denominations as may be prescribed by the BSP;

7. The long-term deposit or investment should not be terminated by the original investor before the fifth (5th) year, otherwise they shall be subjected to the graduated rates of 5%, 12% or 20% on interest income earnings; and

8. Except those specifically exempted by law or regulations, any other income such as gains from trading, foreign exchange gain shall not be covered by income tax exemption.

Provided, that for interest income derived by individuals investing in common or individuals trust finds or investment management accounts to be exempted from income tax, the following additional characteristics/conditions must ALL be present:

1. The investment of the individual investor in the common or individual trust fund or investment management account must be actually held/management by the bank for the named individual at leat five (5) years without interruption. The term "bank" referred to herein are banks duly licensed as such by the Bangko Sentral ng Pilipinas;

2. The underlying investments of the common or individual trust account or investment management accounts must comply with the requirements of Section 22(FF) of the NIRC of 1997, as amended, as well as the requirements mentioned above;

3. The common or individual trust account or investment management account must hold on to such underlying investment in continuous and uninterrupted period for at least five (5) years.

In case of pre-termination, transfer or negotiation of said long-term deposit or investment by the depositor or investor before the fifth (5th) year, the interest income shall be subjected to the following graduated rates of Final Withholding Tax(FWT) on the entire income and shall be deducted and withheld by the depository bank from the proceeds of the long-term deposit or investment certificate based on the remaining maturity thereof as follows:

Four (4) years to less than five (5) years - 5%;

Three (3) years to less than for (4) years - 12%; and

Less than three (3) years - 20%.

For nonresident alien not engaged in trade or business in the Philippines, interest income received from long-term deposit or investment shall be subject to a Final Withholding Tax (FWT) at the rate of twenty five percent (25%) pursuant to Section 25 (B) of the NIRC of 1997, as amended.

For nonresident foreign corporation, interest income received from long-term deposit or investment shall be subject to a Final Withholding Tax (FWT) at the rate of thirty percent (30%) pursuant to Section 28 (B) (1) of the NIRC of 1997, as amended. However, interest income from long-term deposit or investment shall be subject to regular income at the rate of thirty percent (30%) if received by a domestic corporation and resident foreign corporation pursuant to Sections 27 (A) and 28 (A) (1) of the NIRC of 1997, as amended.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMC%20No%207-2015.pdf to see the illustrations and the full text of RMC No. 7-2015.

Imposition of Penalties for Failure to File Returns Under the Electronic Systems of the BIR by Taxpayers Mandatorily Covered by eFPS or eBIRForms

The BIR has issued Revenue Regulations No. 5-2015 to amend Section 3 paragraph 2 of RR No. 6-2014 as follows:

2. Non-eFPS filers, covered by Section 4 herein, shall mandatorily use the eBIR Forms facility in electronically submitting and filing all their tax returns.

All taxpayers, under existing , who are mandatorily covered to file their returns using eFPS or eBIRForms, who fail to do so, shall be imposed a penalty of One Thousand Pesos (P1,000) per return to Section 250 of the NIRC of 1997, as amended.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202015/RR%205-2015/RR%205-2015.pdf of the full text of Revenue Regulations No. 5-2015.

Republic Act No. 10653: Increase of the Total Amount of Exclusion to P82,000.00 for 13th Month Pay and Other Benefits from Gross Income under RR No. 3-2015

Recently, the Bureau of Internal Revenue finally issued the Revenue Regulations No. 3-2015 implementing the Provisions of Republic Act No. 10653. "An act Adjusting the 13th Month Pay and Other Benefits Ceiling Excluded from the Computation of Gross Income for Purposes of Income Taxation.

Amending the provision on Revenue Regulations No. 2-98 - The amount of Thirty Thousand Pesos (P30,000.00), specifically referring to the total amount of 13th month pay and other benefits as one of the exclusions from gross compensation income received by an employee prescribed under the pertinent provisions, including the example computations of revenue Regulations (RR) No. 2-98, as amended, is hereby increased to "Eighty Two Thousand Pesos (P82,000.00)", pursuant to the provisions of RA No. 10653.

The amount of P82,000.00 shall ONLY apply to the 13th month pay and other benefits prescribed under the provisions of section 2.78.1.(B)(11) of RR No. employee under an employer-employee relationship, such as basic salary and other allowances. It must be emphasized that this exclusion from gross income is not applicable to self-employed individuals and income generated from business.

The amount of P82,000.00 shall apply to the 13th month pay and other benefits paid or accrued beginning January 1, 2015.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202015/RR%20No%20%203-2015.pdf of the full text of Revenue Regulations No. 3-2015.

Checklist and Notice on the Submission of Audited Financial Statements (AFS) at SEC during 2015

Have you read yet about the notice issued by Securities and Exchange Commission (SEC) about the checklist and notice on the submission of Audited Financial Statements (AFS) this year 2015?

It was stated in the notice that no pre-screening shall be done on the General Information Sheet (GIS) and Audited Financial Statements (AFS) submitted at the Central Receiving UNIT (CRU), ERMD.

But, the form and contents of reports shall be subject to review by the Commission which may impose fines and/or penalties for verified violation of existing laws, SEC rules and regulations.

All filers should ensure that the reports submitted is complete.

Checklist for Components of Financial Statements For Stock Corporations:

1. Four (4) copies including Original set

2. Cover Sheet

3. Original BIR / bank stamp "RECEIVED" on: Auditor's Report, Balance Sheet/Statement of Financial Position and Income Statement.

4. BOA registration number of external auditor with expiration date.

5. Statement of Management's Responsibility (SMR) over the Financial Statements signed by ALL of the of the ff: President/Chief Executive Office, Chairman of the Board, Treasurer/Chief Finance Officer and Officer/s holding positions equivalent to the aforementioned as may be authorized in the By-Laws

6. Auditor's Report originally signed

7. Balance Sheet/Statement of Financial Position

8. Income Statement

9. Cash Flow Statement

10. Statement of Changes in Equity

11. Notes to Financial Statements

12. Supplemental written statement of External Auditor on the number of stockholders

13. Soft copy of General Form for Financial Statements (GFFS) or Special Form for Financial Statements (SFFS)

Please refer http://www.sec.gov.ph/docs_home/NOTICE-Checklist.pdf of the full text of the checklist and notice. 

SEC Disclaimer With regards to EMGOLDEX Philippines

The Securities and Exchange Commission (SEC) issued a disclaimer that the Commission has received information about the proliferation of bogus SEC public advisories concerning EMGOLDEX Philippines that bear the SEC logo or appear to have been issued by the Commission or signed by any of its officials.

With this, the public is warned that all other purported public advisories regarding EMGOLDEX that allegedly carry the name of SEC or any of its officials are unauthorized, fictitious and  fabricated, especially if these are not found or posted in sec.gov.ph.

The Commission reiterates its official Advisory, that per existing records, EMGOLDEX Philippines is not a registered corporation or partnership in the Philippines and not also licensed or authorized to solicit investments from the public in the Philippines. Without prior license or permit from SEC is strictly prohibited by law and may be penalized by imprisonment and/or fine whether the investment offering is made through the internet or in a commercial or public place.

Please refer http://www.sec.gov.ph/docs_home/SEC_DISCLAIMER(EMGOLDEX%20PHILIPPINES).pdf of the full text SEC disclaimer (EMGOLDEX PHILIPPINES)

SEC Warned the Public Concerning the Investment Taking Activities by ONE LIGHTNING CORPORATION and Its Related Affiliates

The Securities and Exchange Commission (SEC) recently issued an advisory to the warned the public concerning the investment taking activities being undertaken by ONE LIGHTING CORPORATION and its related affiliates. ONE LIGHTING CORPORATION has not been issued by the Commission a secondary license to publicly offer or sell securities and not to solicit investment from the public.

It is stated in the advisory that as part of its modus operandi, the said Company  invites people to invest in its cosmetics and healthcare products by promising huge returns on their investment through what it claims is a revolutionary compensation plan that the Company provides to its distributors which consists of sharing 70% of the Company's profits to investors.

Please refer http://www.sec.gov.ph/docs_home/2015Advisory_One_Lightning_Corp.pdf of the full text of the SEC Advisory.

Amendments to the Mandatory Submission of SAWT, MAP, BIR Form No. 2307 and BIR Form N. 2316 under RR No. 2-2015

The Bureau of Internal Revenue (BIR) recently issued Revenue Regulations (RR) No. 2-2015 to amend the pertinent provisions of RR No. 2-2006 and No. 11-2013 with regards to the submission of copies of BIR Form Nos. 2307 and 2316.

The provisions of Section 2.D. of RR No. 2-2006 are amended as follows:

Section 2. Mandatory Submission of Summary Alphalist of Withholding Agents of Income Payments Subjected To Creditable Withholding Taxes (SAWT) by the Payee/Income Recipient and of Monthly Alphalist of Payees (MAP) Subjected to Withholding Tax by the Withholding Agent/Income Payor as attachment to their filed returns. 

D. Return required to be filed with SAWT and Certificate of Creditable Tax Withheld at Source.

Provided, however, that the SAWT shall be submitted through the applicable modes of submission prescribed under RR No. 1-2014, using the entry and validation module of the BIR. On the other hand, in lieu of the submission of hard copies of Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) as an attachment to SAWT, the following procedures shall be strictly obeserved:

1. Scan the original copies of BIR Form No. 2307 through a scanning machine of device;

2. Store the soft copies of BIR Form No. 2307 using the "PDF" file format with the file names alphabetically arranged in a Digital Versatile Disk-Recordable (DVR-R). The file name shall contain the following information separated by an underline:

a. BIR-registered name of the taxpayer-payor;

b. Taxpayer Identification Number (TIN), including the head office code or branch of the payor, whichever is applicable; and

c. Taxable Period.

Example: Rizal Mfg. Corp_131885220000_09312014);

3. Label the DVD-R containing the soft copies of the said BIR forms in accordance with the format prescribed in Annex "A" of these Regulations; and

4. Submit the duly accomplished DVR-R to the BIR Office where the taxpayer is duly registered, together with a notarized Certification, using the format in Annex "C" of these Regulations, duly signed by the authorized representative of the taxpayer certifying that the soft copies of the said BIR form contained in the DVD-R are the complete and exact copies of the original thereof.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202015/RR%202-2015/RR%20No%202-2015.pdf of the full text of Revenue Regulations No. 2-2015.

BIR eREGISTRATION SYSTEM

Have you explored the BIR eREGISTRATION SYSTEM?

The eREGISTRATION (eREG) system is a web application system for various taxpayer registration services that includes TIN issuance, payment of registration fee and issuance of Certificate of Registration.

Single Proprietors and Professionals may apply TIN straight to the eTIN. Each user should have a unique and valid email address through which the TIN and other instructions on taxpayer registration shall be sent.

While Employees may secure their TINs from their respective employers who in turn must be enrolled in the eTIN. Empolyers may enroll in the eREG by clicking on Create Employer User Account.

Please visit https://ereg.bir.gov.ph/ereg/welcome.do and https://ereg.bir.gov.ph/ereg/employerterms.do of the full text, instructions and other informations.