TA X CL ASS

B U S I N E S S & T R A N S F E R TA X E S
MEETING 4:
I N T R O TO B U S I N E S S TA X E S
SEPTEMBER 18, 2022
I N S T RU C TO R : D R E I B I S A R E S
DO A QUICK RECAP
OF OUR PREVIOUS
MEETING.
RECAP

I. Concept of VAT
II. VAT versus Other Consumption Taxes
III. VAT Rates in the Philippines
IV. VAT on Sales of Goods, Services & Importation
V. Exempt Sales & Importation
THOUGHTS TO LIVE BY

“Always begin with the

end in mind.”
– Steven R. Covey
INTRODUCTION
TO
BUSINESS TAXES
OBJECTIVES -
KNOW & UNDERSTAND THE FOLLOWING:
• THE CONCEPT OF BUSINESS & BUSINESS TAXES.
• THE TAXES TO BE IMPOSED WHEN OPERATING A
BUSINESS
• THE FACTORS TO CONSIDER IN
UNDERSTANDING THE IMPOSITION OF
BUSINESS TAXES.
• BASICS ON HOW TO COMPUTE BUSINESS
TAXES.
WHAT IS BUSINESS?

•Synonymous to “Trade” or used

interchangeably with the phrase “Trade or
Business.”
•A Regular Commercial activity
•Involving Sale of Goods or Services
•To Earn a Profit.
W H AT A R E T O 2
I M P O R TA N T
ELEMENTS OF A
BUSINESS?
ANSWER
• Regularity/Habitual
•Commercial Activity
IMPORTANT CONSIDERATIONS
RELATED TO BUSINESS TAXES:
• Casual sale is not a business.
• How about “Tiangge”?
–Taxable if > 15 days
• How about “Marginal Income Earners?
–Exempt from business taxes.
–With a gross annual sales of not > 100K.
IMPORTANT CONSIDERATIONS
RELATED TO BUSINESS TAXES:
• Not considered Businesses:
–Government Agencies
–Non-Profit Organizations (NGOs)
–Directorship
–Subsistence Income
• An annual income of not > 100K
W H AT I S T H E
EXCEPTION TO THE
RULE ON REGULARITY
& COMMERCIAL
ACTIVITY?
ANSWER
•Sale of Services by a Non-
Resident Person
•Subject to FWT
–Final Withholding Tax
ARE THERE ENTITIES
EXEMPT FROM INCOME
TA X B U T S U B J E C T T O
B U S I N E S S TA X E S ?
WHY?
ANSWER: YES
•General Professional Partnership
•Joint Venture engaged in construction
& oil exploration
•Local Water Districts
•Barangay Micro Business Enterprises
CAN YOU IMPOSE
B U S I N E S S TA X E S
E V E N I F I T R E S U LT E D
TO A LOSS?
ANSWER
• Yes.
• Why?
–The object of taxation in business taxation
is the “Activity.”
–Business taxes are based on gross sales or
receipts.
 CO N CE P T O F
BUS IN ES S TA X ES
W H AT A R E T H E T Y P E S
OF BUSINESS
ACTIVITIES SUBJECT
T O B U S I N E S S TA X E S ?
ANSWER
1. Sale of Goods
2. Sale of Services
3. Importation
W H AT A R E T H E T Y P E S
O F B U S I N E S S TA X E S ?
ANSWER
1. Value-Added Tax (12% and 0%)
2. Percentage Tax (3% or 0.60 to 30%)
3. Excise Taxes
ØImportant Reminder:
qEither VAT or % Tax + Excise, if excisable item.
CAN WE IMPOSE
B U S I N E S S TA X E S E V E N
IF THE BUSINESS IS
NOT REGISTERED?
ANSWER
• Yes.
–It is not an excuse.
W H AT A R E T H E T Y P E S
OF BUSINESS
TA X P AY E R S ?
TYPES OF BUSINESS TAXPAYERS

1) VAT Taxpayers
2) Non-VAT Taxpayers
VAT-REGISTERED TAXPAYERS
qTypes of VAT Taxpayers:
üVAT registered
o Optional VAT-registered
o Mandatory VAT-registered
üVAT Registrable
ØExceeded the threshold but did not yet register
qRates:
ü12%
ü0%
qThresholds:
üGeneral threshold – 3M
üSpecial threshold – 10M (Franchise Grantees)
NON-VAT REGISTERED TAXPAYERS
qTypes of Non-VAT Taxpayers:
üSpecific Percentage Taxpayers
üGeneral Percentage Taxpayers
qRates:
üGeneral Rate – 3%
üSpecific Rates - 0.06 to 30%
qThresholds:
üGeneral threshold – 3M & Below
üSpecial threshold – 10M & Below (Franchise Grantees)
W H AT I S A TA X A B L E
BASE?
ANSWER
qThe amount or value
on which the VAT Rate
will be applied.
W H AT I S T H E
TA X A B L E B A S E I N
COMPUTING THE
B U S I N E S S TA X E S ?
ANSWER
qGoods:
üGross Selling Price (Billed Price)
üComputed under the Accrual Method of
Accounting
üFor VAT Taxpayers – should be Net of VAT
üFor Non-VAT – Gross Selling Price
üIncluding Excise Taxes, if any.
ANSWER
qProperties:
ØReal Properties (Registrable Properties)
üHighest Value of the Selling Price or FMV
per Tax Declaration or the Zonal Value
üCapital Asset versus Ordinary Asset
üOnly Sales of Ordinary Assets are
subject to VAT
ANSWER
qServices:
üGross Receipts (Billed Price)
üCash Basis of Accounting
üFor VAT Taxpayers – should be Net
of VAT
üFor Non-VAT – Gross Receipts
ANSWER
qImportation (Generally VAT except purchase of service subject to FWT)
qBased on Landed Cost
üIncludes the following:
ØInvoice Amount + Shipping Costs (Freight + Insurance + Bank
Charges)
ØTariff & Customs Duties
ØExcise taxes, if any
ØAdditional charges before the release of goods from the
Bureau of Customs. (IPF + Arrastre + Brokerage Fee +
Wharfage + DST)
W H AT A R E T H E
ALLOWABLE
DEDUCTIONS FROM
GROSS SELLING
PRICE?
ANSWER
qSales Discounts
üOnly discounts that are granted and determinable
at the time of sale and not dependent on any
condition
üOnly Trade Discount is allowed
qSales Returns and Allowances
üMade during the month or Quarter
W H AT I S T H E E F F E C T
O F W I T H H O L D I N G TA X
IN THE
D E T E R M I N AT I O N O F
T H E TA X A B L E B A S E ?
ANSWER
qThe amount withheld forms part of the Gross Selling Price
or Gross Receipts.
qAlways the Billed Price (Grossed-up Value)
qWithholding tax deducted is an advance estimated tax of
the SELLER collected and remitted only by the BUYER
(Withholding Agent). – use it as TAX CREDIT.
ØTop Withholding Agents (TWA) determined by the BIR
ØRequired to withhold on the their purchases of goods (1%) and
services (2%)
W H AT A R E T H E R U L E S T O
FOLLOW WHEN CHANGING
T H E R E G I S T R AT I O N O F T H E
TA X PAY E R ?
ANSWER
qChange from Non-VAT to VAT Registration:
üVoluntary VAT Registration - Month of VAT Registration
üMandatory VAT Registration – the following month after exceeding
the VAT Threshold (3M)
ØPenalty for late registration – 1,000
üFrom Option 8% (Exempt from Business Tax before)
ØThe following month once the 3M is exceeded, and
ØSales from the previous months are subject to % Tax.
o Beginning of the year up to the month that the 3M was breached.
ANSWER
qChange from VAT to Non-VAT Registration:
üLock-in period of 3 years
üDid exceed the 3M VAT Threshold in the 3
preceding years.
I S V AT R E G I S T R AT I O N
REVOCABLE?
ANSWER
qFranchise Grantees:
üNo, it's perpetually irrevocable.
qOther VAT-Registered Taxpayer:
üYes, but with conditions:
Ø3-year Lock-in period
ØDid not exceed the 3M VAT Threshold for the
last 3 years
W H E N T O PAY T H E
BUSINESS TA XES?
WHEN TO FILE?
qVALUE ADDED TAX:
ØMonthly (BIR Form 2550M)– 1st 2 months of the Quarter
üEstimated tax only
üDeadline: 20th Day of the following month
ØQuarterly (BIR Form 2550Q)– end of the Quarter
üFinal VAT Return
üDEADLINE: 25th day of the following month
WHEN TO FILE?
qPERCENTAGE TAX: (3% or
0.6 to 30%)
ØQuarterly (BIR Form 2551Q)–
end of the Quarter
üDEADLINE: 25 day of the
th

following month
WHEN TO FILE?
qEXCISE TAX:
ØBIR Form:
ü2200 –A (Alcohol)
ü2200 – AN (Automobile & Non-Essential Goods)
ü2200 –C (Cosmetic Procedures)
ü2200 – M (Mineral Products)
ü2200 – P (Petroleum)
ü2200 – S (Sweetened Beverages)
ü2200 – T (Tobacco Products)
ØDEADLINE: Before the withdrawal of goods/Point of Production
WHERE TO FILE
B U S I N E S S TA X E S :
WHERE TO FILE
qVAT:
üRevenue District Office(RDO) of the Head Office
qPercentage Tax:
üHead Office or Branch
qExcise Tax:
üRDO 121, 124 and Large Taxpayer Division or the
Accredited Agent Banks located in the BIR National
Office or other Chosen Banks.
GOT QUESTIONS?
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Email Ad: andreibisares@gmail.com
Contact: 09178461730
ANNOUNCEMENT/ASSIGNMENT:
•Quiz later
•With Time-Limit
THANK YOU!
“Success is not something you pursue. It is
something you attract by becoming an
attractive person.” – Jim Rohn

THANK YOU! See you again next

meeting.