Financial Management: Taxation

Tax – lifeblood of the government Disadvantages of Sole

Proprietorship:
OPLAN KANDADO - As reiterated in Revenue
Memorandum Order No. 3-2009, “Oplan - Limited access to credit
Kandado” is an initiative involving the - Many run out of money
strengthening of BIR’s imposition of prescribed - The owner may not have the
administrative sanctions for non-compliance necessary skills
with such essential requisites as: the issuance of - The business ends when the
receipts, filing of returns, declaration of taxable owner dies
transactions, taxpayer registration, and paying
the correct amount of taxes as mandated by the  Partnership
norms/standards of their particular industry or Advantages of a Partnership:
line of business. - Easy to start
- Easier to obtain capital
 The average threshold for VAT - Easier to obtain credit
compliance is 3% of gross receipts or - Not dependent on a sole person
revenues. But this may vary depending - Only taxed once
on your industry or line of business as - Diversity in skills
determined by BIR.
Disadvantages of a Partnership:
TAXATION – power inherent in every sovereign
State to impose a charge or burden upon - Unlimited legal and financial liability
persons, properties, or rights to raise revenues is shared
for the use and support of the government to - If one partner makes a mistake, all
enable it to discharge its appropriate functions partners are responsible
-
R.A. 10963 – Tax Reform for Acceleration and  Corporation
Inclusion (TRAIN)

Types of Business Ownership

 Sole Proprietorship
Advantages of Sole Proprietorship:
- Easy to start
- Proprietors are in charge
- Proprietors keep all the profits
- Taxes are lower than a
Advantages of a Corporation:
corporation’s
- Limited liability
- Ability to raise money by selling
stock
- Business does not end when an
owner dies

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 Disadvantages of a Corporation:
- Double taxation (Income is taxed,
Stockholders pay taxes on profits
issued to them)
- More government regulation
- Difficult and costly to start
BIR Registration
Registration Requirements
1) Certification
• DTI Certification (Single Proprietor)
• Articles of Partnership SEC (Partnership)
•Certificate of Incorporation SEC (Corporation)
•Tax Identification Number TIN
(Professional/Consultant)
2) Contract of Lease or Land Title
Contract of Lease – if you rent the place
Land Title / Tax Declaration – if you own the
place
3) Mayor’s Permit
Barangay Clearance
Kinds of Taxes
 Income Tax
 Tax on all yearly profits arising form
property, possessions, trades or
offices
 Tax on a person’s income,
emoluments and profits
 Business Taxes
 can either be Value Added Taxes
(VAT) or Percentage Taxes. Unlike
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an income tax, which is based on
the taxpayer’s net taxable income,
business taxes (VAT and percentage
taxes) are generally based on gross
sales or receipts.
 Value Added Tax (VAT)
⁻ is a business tax imposed and
collected from the seller in the
course of trade or business on
every sale of properties (real or
personal) lease of goods or
properties (real or personal) or
vendors of services. It is an indirect
tax, thus, it can be passed on to the
buyer.
 Percentage Tax
⁻ is a business tax imposed on
persons or entities who sell or lease
goods, properties or services in the
course of trade or business whose
gross annual sales or receipts do
not exceed P3,000,000 and are not
VAT-registered.
 Withholding Taxes
Final Withholding Tax – a kind of
withholding tax which is prescribed only
for certain payors and is not creditable
against the income tax due of the payee
for the taxable year. Tax withheld
constitutes the full and final payment of
the Income tax due from the payee on
the said income.
Expanded Withholding Tax - a kind of
withholding tax which is prescribed only
for certain payors and is creditable
against the income tax due of the payee
for the taxable quarter year.
Value Added Tax RR No. 13-2018 on VAT
 12% of the gross selling price or
gross value in money of the goods
or property sold, bartered or
exchanged, or deemed sold in the
Philippines
•Output VAT - VAT on sales passed on
to the customer
•Input VAT - VAT already passed on (on
Purchases)
•VAT Payable = Output VAT - Input VAT
WHO ARE REQUIRED TO REGISTER AS VAT
TAXPAYERS?
 basically, if gross sales/receipts for
the past 12 months have exceeded
P3,000,000 or there are reasonable
grounds to believe that his gross
sales/receipts for the next 12
months will exceed P3,000,000.
 application for registration using
BIR Form No. 0605
 any person required to register as
VAT taxpayer but failed to register
 any person, whether or not made in
the course of his trade or business,
imports goods
BMBE Act of 2002 R.A. 9178
 The “BMBEs Act of 2002” encourages
the formation and growth of barangay
micro business enterprises by granting
them incentives and other benefits.
 A BMBE is defined as any business
enterprise engaged in production,
processing, or manufacturing of
products, including agro-processing, as
well as trading and services, with total
assets of not more than P3 million. Such
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assets shall include those arising from
loans but not the land on which the
plant and equipment are located.
 For the purpose of the Act, “services”
shall exclude those rendered by any
one, who is duly licensed by the
government after having passed a
government licensure examination, in
connection with the exercise of one’s
profession (e.g., Accountant, Lawyer,
Doctor, etc.).
 BMBEs are essential to the country’s
economic development since they
effectively serve as seedbeds of Filipino
entrepreneurial talent. Thus, the Act
primarily aims to integrate micro
enterprises in the informal sector into
the mainstream of the economy.
Strengthening BMBEs would mean
more jobs and livelihood, and a better
quality of life for Filipinos.
BMBE Act of 2002 Incentives
•Registered BMBEs can avail of the following
incentives:
•Income tax exemption from income arising
from the operations of the enterprise;
•Exemption from the coverage of the Minimum
Wage Law (BMBE employees will still receive
the same social security and health care
benefits as other employees);
•Priority to a special credit window set up
specifically for the financing requirements of
BMBEs; and
•Technology transfer, production and
management training, and marketing assistance
programs for BMBE beneficiaries.
The LGUs are also encouraged to either reduce
the amount of local taxes, fees, and charges
imposed or exempt the BMBEs from local taxes,
fees, and charges.

Who may avail of the special credit window for

BMBEs?

- Only registered BMBEs may take advantage of

the credit facility and other benefits granted
under the law. This means that the enterprise
must first have a Certificate of Authority which
authorizes it to operate as a BMBE.

GO Negosyo Act R.A. 10644

• Act that seeks to strengthen micro, small and

medium enterprises (MSMEs) to create more
job opportunities in the country.

• “The Go Negosyo Act gives Filipinos – from a

simple housewife to ordinary employee – a
chance to establish their own business that will
help sustain their everyday needs and for their
families.”

•Declaration of Policy

⊸ to foster national development

⊸ promote inclusive growth

⊸ reduce poverty

**by encouraging the establishment of MSMEs

that facilitate local job creation, production and
trade in the country.

Functions of Negosyo Centers

a.Business Registration Assistance

b.Business Advisory Services

c.Business Information and Advocacy

d.Monitoring and Evaluation

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