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Reviewer 5 (BUSINESS TAXATION)

Overview

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68 views3 pages

Reviewer 5 (BUSINESS TAXATION)

Overview

Uploaded by

jessatinagan.va
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Business Taxation Review Guide for the Philippines

1. Overview of Business Taxation

1.1. Definition:

● Business Taxation: Refers to the various taxes imposed on businesses and their
operations, including income tax, value-added tax, and local taxes.

1.2. Purpose:

● Revenue generation for government services.


● Regulation of economic activity.
● Ensuring fair competition among businesses.

2. Types of Business Taxes

**2.1. National Taxes:

● Corporate Income Tax:


○ Rate: Generally 25% of net taxable income; 20% for micro, small, and medium
enterprises (MSMEs).
○ Net Taxable Income: Gross income minus allowable deductions.
● Value-Added Tax (VAT):
○ Rate: 12% on the sale of goods and services.
○ Input VAT: Tax paid on purchases that can be credited against output VAT.
○ Filing: Monthly (BIR Form 2550M) and quarterly (BIR Form 2550Q).
● Excise Tax:
○ Levied on specific goods (e.g., alcohol, tobacco, petroleum) based on quantity or
value.
● Percentage Tax:
○ A 3% tax on gross sales or receipts for businesses not registered under VAT.

**2.2. Local Taxes:

● Business Tax:
○ Levied by local government units (LGUs) based on gross sales or receipts, rates
vary by locality.
● Real Property Tax (RPT):
○ Imposed on real properties based on assessed value.
● Community Tax:
○ A local tax for individuals and corporations residing in a municipality.

3. Tax Compliance for Businesses

**3.1. Tax Identification Number (TIN):

● Required for all business entities to file taxes and comply with BIR requirements.

**3.2. Filing Requirements:


● Annual Income Tax Return (BIR Form 1702): Must be filed by corporations and
partnerships.
● Monthly VAT Returns (BIR Form 2550M): For businesses registered under VAT.
● Quarterly VAT Returns (BIR Form 2550Q): For additional VAT compliance.
● Withholding Tax Returns: Depending on the type of withholding (expanded or final).

**3.3. Payment of Taxes:

● Taxes can be paid through accredited banks or online platforms, depending on the BIR
guidelines.

4. Deductions and Allowable Expenses

**4.1. Allowable Deductions:

● Ordinary and necessary expenses incurred in the course of business operations.


● Examples include:
○ Salaries and wages
○ Rent
○ Utilities
○ Depreciation of fixed assets

**4.2. Non-Deductible Expenses:

● Personal, living, or family expenses.


● Fines and penalties for violations of law.

5. Special Tax Incentives

**5.1. Investment Incentives:

● Provided by the Board of Investments (BOI) for qualifying projects, which may include:
○ Income tax holidays
○ Exemption from VAT
○ Import duty exemptions

**5.2. Special Economic Zones:

● Businesses located in ecozones may enjoy lower tax rates and additional incentives.

6. Tax Administration and Enforcement

**6.1. Bureau of Internal Revenue (BIR):

● The main agency responsible for tax collection and enforcement in the Philippines.

**6.2. Tax Audits:

● The BIR conducts audits to ensure compliance, which may include reviewing books of
accounts, records, and other relevant documents.

**6.3. Penalties for Non-Compliance:


● Failure to file or pay taxes on time can result in penalties, including fines, interest on
unpaid taxes, and possible legal action.

7. Recent Developments in Business Taxation

**7.1. Tax Reform for Acceleration and Inclusion (TRAIN) Law:

● Implemented to simplify the tax system and increase revenue, affecting individual
income tax and excise taxes.

**7.2. Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law:

● Provides reduced corporate income tax rates and expanded tax incentives, particularly
for businesses affected by the COVID-19 pandemic.

8. Taxation Ethics and Professional Practice

**8.1. Ethical Standards:

● Integrity: Ensure truthful reporting of income and compliance with tax laws.
● Transparency: Maintain clear communication with stakeholders regarding tax
obligations.

**8.2. Role of Tax Professionals:

● Offer guidance on tax compliance, planning, and dispute resolution.


● Assist businesses in understanding complex tax regulations and optimizing their tax
position.
●

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