Reckoning Point for Valuation of Gifts Made in Property

May be taxpayers and other concerns will ask when is the action of calculating for valuation of gifts made in property?

The bureau recently issued Revenue Regulations (RR) No. 17-2018 amending RR No. 12-2018 Particularly Section 13 Thereof.

The amendment is stated in Section 2 of RR No. 17-2018 to read as follows:

"SECTION 13. VALUATION OF GIFTS MADE IN PROPERTY. - The valuation of gifts in the form of property shall follow the rules set forth in Section 5 of these regulations: Provided, That the reckoning point for valuation shall be the date when the donation is made."

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No%2017-2018.pdf of the full text of RR No. 17-2018.

Requirements for deductibility of certain expenses

In general, all expenses are deductible unless stated by law or regulations that are nondeductible or it requires certain requirements for deductibility of such expenses.

Requirements for deductibility of certain expenses is an intriguing tax issue based on Revenue Regulations (RR) No. 6-2018 that was issued by the bureau in the previous months. These regulations revokes RR No. 12-2013 Thereby Reinstating the Provisions of Section 2.58.5 of RR No. 14-2002, as Amended by RR No. 17-2003 of the Requirements for Deductiblity of Certain Expenses to read as follows:

"Sec. 2.58.5. Requirements for Deductiblity. - Any income payment which is otherwise deductible under the Code shall be allowed as a deduction from the payor's gross income only if it is shown that the income tax required to be withheld has been paid to the Bureau in accordance with Secs. 57 and 58 of the Code.

A deduction will also be allowed in the following cases where no withholding of tax was made:

(A) The payee reported the income and pays the tax due thereon and the withholding agent pays the tax including the interest incident to the failure to withhold the tax. and surcharges, if applicable, at the time of the audit/investigation or reinvestigation/reconsideration.

(B) The recipient/payee failed to report the income on the due date thereof. but the withholding agent/taxpayer pays the tax. including the interest incident to the failure to withhold the tax and surcharges" if applicable at the time of audit/investigation or reinvestigation/reconsideration.

(C ) The withholding agent erroneously underwithheld the tax but pays the difference between the correct amount and the amount of tax withheld including the interest. incident to such error. and surcharges, if applicable, at the time of the audit investigation or reinvestigation/reconsideration.

Items of deduction representing return of capital such as those pertaining to purchases of raw materials forming part of finished product or purchases of goods for resale. shall be allowed as deductions upon withholding agent's payment of the basic withholding tax and penalties incident to non-withholding or underwithholding.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%206-2018.pdf of the full text of RR No. 6-2018.

The Importance on the Use of Non-Thermal Paper for All Cash Register Machines (CRMs) / Point of Sales (POS) Machines and Other lnvoice / Receipt Generating Machine / Software

Why all business establishments and others need to know the importance on the Use of Non-Thermal Paper for All Cash Register Machines (CRMs) / Point of Sales (POS) Machines and Other lnvoice / Receipt Generating Machine / Software?

Recently, the bureau has issued Revenue Regulations (RR) No. 16-2018 amending RR No. 10-2015 as amended by RR Nos. 12-2015, 14-2015 and 6-2016. In Section 2 of these Regulations stated the AMENDMENTS of Sections 2, 3, 4, 5 and 6 of RR 10-2015 to read as follows:

All taxpayers using CRM/POS machines or other invoice/receipt generating machine/software shall have the option to use the type of paper depending on their business requirements, subject to the retention and preservation of accounting records for a period within which the Commissioner is authorized to make an assessment and collection of taxes, as prescribed in Section 203 and 222 of the 1997 National Internal Revenue code, as amended. 

All tape receipts issued and the data printed on the tape receipts shall show the information required under Section 5 of RR l-0-201-5, as amended, namely: 

1. Taxpayer's (TP) Registered Name; 

2. TP's BLrsiness Name/style, if any;

3. A statement that the taxpayer is VAT or NON VAT registered followed by the Taxpayers Identification Number (TIN) and 4-digit branch code. Example: VAT Registered TIN 123-456-789-0000; 

4. Machine Identification Number (MIN); 

5. Serial number of the CRM/PoS machine; 

6. Detailed business address where such Official Receipts (ORs) / Sales Invoices (SIs) / Commercial Invoices (CIs) shall be used/located; 

7. Date of transaction; 

8. Serial Number of the OR/SI/CI printed prominently; 

9. A space provided for the Name, Address and TIN of the buyer; 

10. Description of the items/goods or nature of service; 

11. Quantity; 

12. Unit cost 

13. Total cost; 

14. VAT amount (if transaction is subject to 12%V AT); 

15. If the VAT taxpayer is engaged in mixed transactions, the amounts involved shall be broken down to: VATable sales, VAT Amount, Zero Rated Sales, and VAT Exempt Sales; 

16. For Non-VAT ORs/Sls and Cls (VAT or NON-VAT) 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 the customers, in addition to the above-enumerated applicable information, the phrase "THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX" in bold letters, shall be conspicuously printed at the bottom of the NON VAT ORs/SIs/CIs; 

17. Taxpayers whose transactions are not subject to VAT or Percentage Tax shall issue NON-VAT principal receipts/invoices indicating prominently at the face of such receipts/invoices the word'EXEMPT'; 

18, If the taxpayer is subject to percentage tax under Title V of the 1997 NIRC, as amended, but also sells goods/services under Section 109 (A) to (W), excluding (E) of the same Code, as amended by Republic Act (RA) No. 10378, the non-VAT principal receipts/invoices shall indicate the breakdown of Sales Subject to Percentage Tax (SSPT) and Exempt Sales; 

19. The following shall be printed at the bottom portion of the OR/SI/CI: 

* Name, address and TIN of the accredited supplier of CRM/POS/Other similar machines/software; 

* Accreditation number and the date of accreditation (date issued "mm/dd/yyyy" and valid until "mm/dd/yyyy") of the accredited supplier; 

* BIR Final Permit To Use (PTU) Number; 

* The phrase "THIS INVOICE/RECEIPT SHALL BE VALID FOR FIVE (5) YEARS FROM THE DATE OF THE PERMIT TO USE." 

20. For taxpayers transacting with a Senior Citizen (SC) and/or Person/s With Disability (PWD) pursuant to RA 9994 (Expanded Senior citizens Act of 2010) and RA 10754 [(An Act Expanding the Benefits and Privileges of Persons With Disability (PWD)], respectively, a space for the following shall also be required: 

* Senior Citizen/PwD TIN; 

* OSCA lD No./PWD ID No.

* Senior Citizen / PWD discount (show detailed breakdown of the 20% discount and/or 12%VAT exemption, whichever is applicable; and 

* Signature of the SC/PWD. 

However, for taxpayers whose transactions ore not covered by RA 9994 / 70754, the above information may not be indicated, Moreover, the buyer/customer who maybe needing proof of such payment to be able to claim for expense (for income tax purposes) or input tax (for VAT purposes), may return the issued tape receipt to the seller and request for issuance of a manual invoice or receipt. Whenever so requested by the buyer/ customer, the seller shall issue the manual receipt/invoice, whichever is applicable, to replace the previously issued tape receipt. 

Sales generated from CRM / POS machines where tape receipts issued were replaced by manual invoice / receipt shall be deducted from the sales to be reported in the eSALES system of the BIR. This deduction shall be reflected as an adjustment in the CRM Sales Book/Back end report. 

The returned tape receipt shall be attached to the duplicate copy of the manually issued invoice / receipt and shall be the basis in adjusting the sales. However, the sales that were replaced with manual invoice / receipt shall still be included but separately indicated in the Summary List of Sales (SLS) required to be submitted by VAT registered taxpayers.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2016-2018.pdf of the full text of RR No. 16-2018.

Submission of the Quarterly Alphabetical List of Payees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) [BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ)

Are you aware of the Submission of the Quarterly Alphabetical List of Payees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) [BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ)?

In Section 2.58 of Section 5 of Revenue Regulations (RR) No. 11-2018 describes the Returns and Payments of Taxes Withheld. Besides, it also identifies the Manner, Venue and Time of Filing of Withholding Tax Returns and Payment of Taxes Withheld at Source to read as follows:

Taxpayers mandated to electronically file and pay shall use the BIR’s electronic system, while those not mandated has the option to either use the said electronic system, or file with the Authorized Agent Banks (AABs) under the jurisdiction of the Revenue District Office where they are registered. Withholding agents located at municipalities where there is no AAB, the returns shall be filed with the Revenue Collection Officer assigned in the said municipality. The filing of the withholding tax returns (BIR Form No. 1601EQ for creditable withholding tax and Form Nos. 1602 for final tax on interest on bank deposits, 1603 for final tax withheld on fringe benefits, and 1601FQ for all other final withholding taxes) and payment of the taxes withheld at source shall be made not later than the last day of the month following the close of the quarter during which the withholding was made. 

For this purpose, the quarter shall follow the calendar quarter, e.g., for taxes withheld during the quarter ending March 31, the same shall be remitted by the withholding agent on or before April 30. The return filed shall be accompanied by the Quarterly Alphabetical List of Payees (QAP), reflecting the name of income payees, Taxpayer Identification Number (TIN), the amount of income paid segregated per month with total for the quarter (all income payments prescribed as subject to withholding tax under these regulations, whether actually subjected to withholding tax or not subjected due to exemption), and the total amount of taxes withheld, if any.

The bureau recently issued a Tax Advisory with regards to the submission of Quarterly Alphabetical List of Payees (QAP) to read as follows:

In line with the submission of the Quarterly Alphabetical List of Pavees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ), please be informed that the Alphalist Data Entry and Validation module Version 6.0 is now available for use. This can be downloaded from the Bureau's website at www.bir.gov.ph as follows: 

1. Click on the "Downloadables" button at the lower left side of the web page; 

2. Scroll down to search the the section showing the "Alphalist Data Entry and Validation Module Version 6.0 (new)"; and 

3. Follow the instructions stated on the said section to install the module. The QAP shall be submitted either through the eSubrnission facility (esubmission@bir.gov.ph) of the Bureau or through the dedicated email account of the Revenue District Officer having jurisdiction over the withholding agent's registered address. This is required to be submitted on or before the last day of the month following the close of the quarter as an "attachment" to the quarterly withholding tax returns prescribed under Revenue Regulations No. 1 1-201 B, as amended.

Please refer the full text of the regulations and tax advisory as follows: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2011-2018/RR%20No.%2011-2018.pdf and https://www.bir.gov.ph/images/bir_files/internal_communications_1/Advisory/Advisory-Alphalist%20data%20entry.pdf

Taxpayers Who Are Not Qualified Of The 8% Income Tax Rate

Do you consider to avail of the 8% Income Tax rate? If not, taxpayers may consider of the following individuals who are not qualified to avail of the 8% Income Tax Rate as follows:

1. Purely compensation income earners;

2. VAT-registered taxpayers, regardless of the amount of gross sales/receipts and other non-operating income;

3. Non-VAT taxpayers whose gross sales/receipts and other non-operating income exceeded the P3,000,000.00 VAT threshold;

4. Taxpayers who are subject to Other Percentage Taxes under Title V of the Tax Code, as amended, except those under Section 116 of the same title;

5. Partners of  a General Professional Partnership (GPP) since their distributive share from the GPP is already net of costs and expenses; and

6. Individuals enjoying income tax exemption such as those registered under the Barangay Micro Business Enterprises (BMBEs), etc., since taxpayers are not allowed to avail of double or multiple tax exemptions under different laws, unless specifically provided by law.

The above mentioned is stated in Revenue Memorandum Circular (RMC) No. 50-2018 that clarifies certain provisions of Revenue Regulations (RR) Nos. 8-2018 and 11-2018 Implementing the Income Tax Provisions of Republic Act (R. A.) No. 10963, Otherwise Known as the "Tax Reform for Acceleration and Inclusion (TRAIN)" Act. 

Benefits Classified/Considered As "De Minimis" Not Subject To Income Tax As Well As Withholding Tax

Revenue Memorandum Circular (RMC) No. 50-2018 is a circular that clarifies certain provisions of Revenue Regulations (RR) No. 8-2018 and 11-2018 as amended by RR Nos. 15-2018 and 14-2018, respectively.  The stated RRs were issued to implement the TRAIN law's income tax provisions including its consequent withholding tax. 

As of January 1, 2018, the following are the "de minimis" benefits:

a. Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year; 

b. Monetized value of vacation and sick leave credits paid to government officials and employees; 

c. Medical cash allowance to dependents of employees not exceeding P 1,500.00 per employee per semester or P250.00 per month; 

d. Rice subsidy of P2.000.00 or one (1) sack of 50 kg. rice per month amounting to not more than P2,000.00; 

e. Uniform and clothing allowance not exceeding P6,000.00 per annum; 

f. Actual medical assistance, e.g., medical allowance to cover medical and healthcare needs. annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10.000.00 per annum;

g. Laundry allowance not exceeding P300.00 per rnonth; 

h. Employees achievement awards, e.g., for length of service or safety achievement, which must be in the form of a tangible personal property other tl-ran cash or gift certificate, with an annual monetary value not exceeding P10,000.00 received by the employee under an established written plan which does not discriminate in favor of highly paid employees; 

i. Gifts given during Christmas and major anniversary celebrations not exceeding P5.000.00 per employee per annum

j. Daily, meal allowance for overtime work and night/grave yard shift not exceeding twenty-five percent (25%) of the basic minimum wage on a per a region basis; and 

k. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes provided that the total annual monetary value received from both CBA and productivity incentive schemes combined do not exceed ten thousand pesos (P10,000) per employee per taxable year. 

All other benefits given by employers which are not included in the above enumeration shall not be considered as "de minimis'' benefits and hence, shall be subject to income tax as well as withholding tax.

The benefits given in excess of the maximum amount allowed as "de minimis" benefits shall be included as part of "other benefits" which is subject to the P90.000.00 ceiling. Any amount in excess of the P90,000 shall be subject to income tax and consequently, to the withholding tax on compensation. 

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2018/RMC%20No%2050-2018.pdf of RMC No. 50-2018.

Gross Annual Sales, Earnings, Receipts Or Output Required For Taxpayer's Books Of Accounts Audited & Examined Yearly By Independent CPAs

Republic Act (RA) No. 10963 shall be known as the "Tax Reform for Acceleration and Inclusion (TRAIN)" with effectivity date of January 01, 2018.

Sec. 71 of RA No. 10963 further amends Section 232 of the NIRC as follows:

"SEC. 232. Keeping of Books of Accounts. - 

"(A) Corporations, Companies, Partnerships or Persons Required to Keep Books of Accounts. - All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep and use relevant and appropriate set of bookkeeping records duly authorized by the Secretary of Finance wherein all transactions and results operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the year: Provided, That Corporations, companies, partnerships or persons whose gross annual sales, earnings, receipts or output exceed Three million pesos (P3,000,000), shall have their books of accounts audited and examined yearly by independent Certified Public Accountants and their income tax returns accompanied with a duly accomplished Account Information Form (AIF) which shall contain, among others, information lifted from certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding income therefrom and other relevant statements.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/TRAIN%20matters/RA-10963-RRD.pdf of the full text of RA No. 10963.

New Rule: Lease of Residential Units Exempt From VAT & Exempt From The 3% Percentage Tax

Revenue Regulations (RR) No. 13-2018 are Regulations Implementing the Value-Added  Tax Provisions under the Republic Act (RA) No. 10963, or the “Tax Reform for Acceleration and Inclusion (TRAIN),” Further Amending Revenue Regulations (RR) No. 16-2005 (Consolidated Value-Added Tax Regulations of 2005), as Amended.

Taxpayers and other concerns need to know the updates with regards to tax rule in Lease of Residential Units. In these regulations, Lease of Residential Units is considered as VAT Exempt Transactions stated in Sec. 4. 109-1, B (q) as follows:

(q) Lease of residential units with a monthly rental per unit not exceeding Fifteen Thousand Pesos (P15,000.00). 

The foregoing notwithstanding, lease of residential units where the monthly rental per unit exceeds Fifteen Thousand Pesos (P15,000.00), but the aggregate of such rentals of the lessor during the year do not exceed Three Million Pesos (P3,000,000.00) shall likewise be exempt from VAT; however, the same shall be subject to three percent (3%) percentage tax under Section 116 of the Tax Code. 

In cases where a lessor has several residential units for lease, some are leased out for a monthly rental per unit of not exceeding P15,000.00 while others are leased out for more than P15,000.00 per unit, his tax liability will be as follows:

1. The gross receipts from rentals not exceeding P15,000.00 per month per unit shall be exempt from VAT regardless of the aggregate annual gross receipts. It is also exempt from the 3% percentage tax. 

2. The gross receipts from rentals exceeding P15,000.00 per month per unit shall be subject to VAT if the aggregate annual gross receipts from said units only exceeds P3,000,000.00. Otherwise, the gross receipts will be subject to the 3% tax imposed under Section 116 of the Tax Code.

In case of mixed transactions, the above-mentioned rule should be observed. 

The term ‘residential units’ shall refer to apartments and houses & lots used for residential purposes, and buildings or parts or units thereof used solely as dwelling places (e.g., dormitories, rooms and bed spaces) except motels, motel rooms, hotels and hotel rooms, lodging houses, inns and pension houses. 

The term ‘unit’ shall mean an apartment unit in the case of apartments, house in the case of residential houses; per person in the case of dormitories, boarding houses and bed spaces; and per room in case of rooms for rent.

Please refer https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2013-2018%20Corrected%20Copy.pdf of the full text of RR No. 13-2018 and illustrations.

Revised Creditable Income Tax Rates on Professional Fees, Talent Fees, Etc. For Services Rendered

Revenue Regulations (RR) No. 14-2018 are regulations to amend certain provisions of RR No. 11-2018 particularly Section 2 & 14.

SECTION 2. AMENDATORY PROVISIONS - The provisions of Sections 2 and,14 of RR 11- 2018, are hereby amended as follows: 

"SECTION 2. Certatn items of Section 2.57.2 of RR No. 2-98 is hereby renumbered and further amended to read as follows: 

SECTION 2.57.2, Income Payments Subject to Creditable Withholding Tax and Rates Prescribed Thereon. - Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: 

(A) Professional fees, talent fees, etc. for services rendered - on the gross professional, promotional, and talent fees or any other form of remuneration for the services rendered by the following: 

Individual payee: 

If gross income for the current )rear did not exceed P3M - Five percent (5%) 

If gross income is more than P3M or VAT Registered regardless of amount - Ten percent (10%)

Non-individual payee: 

Ten percenl (10%) s income for the current year did not exceed P720.000-Ten percent (10%); If gross income exceeds P720.000  - Fifteen percent (15%) 

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2014-2018.pdf of the full text of RR No. 20-2018.

Newly Revised BIR Form No. 1701Q (Quarterly Income Tax Return) for Individuals, Estates and Trusts)

Revenue Memorandum Circular (RMC) No. 32-2018 is a circular issued by the bureau circularizing the Availability of the Newly Revised BIR Form no. 1701Q (Quarterly Income Tax Return for Individuals, Estates and Trusts) which was revised due to the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

The newly revised return shall be used by the taxpayers in filling and paying the quarterly income tax return starting the first quarter of 2018.

To dowload the Manual Form, please click https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2018/1701Q%20Jan%202018.pdf and guide https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2018/1701Q%20Guide%20Jan%202018.pdf

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2018/RMC%20No%2032-2018.pdf of the full text of RMC No. 32-2018