TRAIN

RA 10963
January 23, 2018

Amnesty program – will be released first quarter of this year

If covered by substituted filing [only one employer in a year] - no need for filing

Corporations – simplify ITR forms to 4 pages

Breakeven salary – 11.833M (2018-2022)

P10417 and above – 20%

De minimis benefits – non-tax

Personal exemption and additional exemption, premium on health/hospitalization insurance
(2,400) – deleted
Bonus exempt – P90,000
P250,000 – no tax

Fringe benefits tax – paid by employer, increased from 32% to 35% (housing, paid vacation,
etc.), monetary value benefits [FBT] /65% x 35%

Creditable withholding tax rate from suppliers - Max of 15% rate

Payment to Individuals, consultants withholding tax rate– reduced at 8%
General Professional Partnership (Auditors) – no withholding tax

File withholding tax quarterly

Passive income (bank deposits) – increased from 7.5% to 15% interest rates

Estate tax – Before 5-20%, now reduced 6%; P10M value of family home of decedent
Pay estate tax 1 year upon death, no need to inform BIR about the death
Pay less tax if the title is not in your name yet, 6% donor’s tax

Once the BIR release the VAT refund scheme, sale of Goods to PEZA company may be subject to
VAT; Sale of service is still zero until the BIR says otherwise
Sales of good and services under special law [PEZA]– provisions under separate customs
territory [get clearance from PEZA, issue certification of Zero rating with additional note that the
Veto of the president has no effect on the sales of the company]

House and Lot VAT exemption – threshold increased

PWD – vat exempt [Meds for diabetes, high chole, hypertension]

Quarterly filing of VAT return on 2023

Excise tax on Cigars and Cigarettes

Excise tax on Petroleum products

Excise tax on Automobiles – except battery operated

High valued cars – decreased excise tax

Excise tax on non-essential services – facial surgery

High Fructose corn syrup – higher tax since it’s hazardous [not affected milk, coffee, juice drink]

Excise tax on mineral products

Within 5 years, electronic invoices and esales reporting system for Exporters will be required

Failure or refusal to issue receipts/invoices [penalty] – if not registered with BIR

Attempt to evade or defeat tax [penalty]

Repeal – amended, deleted/inserted

Vetoed – cancelled provisions as part of the new law

TRAIN – thrust of the government is to collect more taxes, will go to the infrastructure projects
[Build, build, build] of the government [70%] and 30% to education, health etc.

Social benefit card – 10% discounts on fare, be given to poor of the poor

Poorest of the poor – subsidy of P200/year

EXPANDED WITHHOLDING TAX [EWT]

EWT – tax on revenues

- Whatever tax liability that the other party withhold from us will reduce our EWT
PEZA entity should not withhold from our revenues
Tax credits are only withheld from entity that are subject to regular tax

Almost all payments are subject to EWT

EWT is not a final tax
EWT vs FWT (final withholding tax)
Payee – person earning the revenue

Withholding agents – Honda Parts

Employees purchasing on behalf of Honda should withhold tax from supplier
BIR 2307 to reflect the amount of EWT withheld from the restaurant

If the payment for the purchase of goods or services is thru a company issued credit card, not
subject to withholding tax
Just show the credit card slips to BIR during audit

General Professional Partnerships should not be subject to withholding tax

Effects of failure to withhold

Compromised penalty – P5,000 to 50,000

RR No. 6-2018 revokes RR 12-13 – good deal for taxpayers

Purchases with supplier must be documented with valid OR [name, amount of purchase, nature
etc.]

Timing of withholding
Common Payments subject to EWT

Taxable individuals [PRC ID] - 8%

Taxable Juridical Persons – 15% unless declaration of P720,000.00, Jan. 1 to June 10%
Do not issue BIR 2307 for the meantime, wait for BIR regulation

Rentals of Real Property

Security deposit does not form part of the income of that entity

Contractors – 2% EWT,
Manpower agency – withhold whole amount
Security agency – notarized sworn declaration that the security agency withholds the tax from
guards’ salaries
Payment for security services – maintain 2 accounts: payment to security agency and payment
to salary of security guards

Driver – transportation contractor

Billing statement indicate includes the service of the driver

Brokers – corporation 10%

Individual or commercial broker 8%

RMC No. 9-2006

Failure of broker to provide non-vat acknowledgement receipt is tantamount to the company
10% of the whole amount
Third party invoice amount should be attached also to that non-vat acknowledgement

Payments by credit card companies will be subject to tax base of ½ of gross payments
Payments to the credit card companies except penalties

Payments to regular supplier not exceeding P10,000.00 no need to withhold, e.g. divisoria
Regular supplier if you have at least 6 transactions with a supplier in a year
Prove to BIR that it’s not a regular supplier

Payment to Meralco, Globe subject to 2% EWT

Life and non-life insurance subject to 2% EWT on the premium only

Payments to bank – withhold 2% EWT

Interest payments to entities other than banks – 20%

Foreign currency – 10%

Hotel during outings 2% EWT

Newspaper as purchase of goods 1% EWT

Cars for benefit to employee – 1% EWT

RMC No. 8-2014
Payments to vat exempt companies, ask for certificate of Tax Exempt
Under TRAIN, no monthly payment/filing of withholding taxes, only quarterly

Submit monthly alphalist of employees and semestral list of regular suppliers

Issuance of BIR Form no. 2307

RR No. 1-2014 Submission of Alpha list of Employees/Payees of Income payments

RMC No. 100-2017 [revokes RR No. 1-2014] – admin fine of P1,000.00 if failed to submit
alphalist

Value Added Tax [VAT]

Nature of VAT and underlying laws

Seller is burdened by consumers

Services provided by auditors are exempted of EWT but still subject to VAT

Services subject to percentage tax must not be subjected to VAT

Purchase to international carriers [airline] not subject to VAT

Purchase of services no changes, purchase of goods there might be issues but we can

Sale of services

Payments to non-residents – cross allocation from abroad. [Why there is no final withholding
tax?]

Input tax

If no permanent establishment, no need to subject to withholding tax [but need to prove to BIR]
– tax treaty relief

Payment to non-resident – BIR is extra vigilant

RR No. 16-2005, as amended

Treatment of excess input tax

Carry-over
Claim for refund
Tax Credit

Claim for refund can only made from the end of quarter date

Filing of returns – 24th day of the month

If deadline falls on a weekend or a holiday, the deadline will be moved the next day