Lease or rent payment is subject to withholding tax

Another taxable year just ended and only at this point of time we realized that , being the business owner, bookkeeper or an accountant, we had not subjected rent to withholding. 

For whatever reasons we had, we do not need any justification for such negligence, the only thing to do is to comply late with a penalty. There was a very nice commercial slogan used before by a pizza delivery, "If it is late, it is free", but that is good for a pizza; for the Bureau of Internal Revenue, ''if it is late, deal with it with a penalty". 

It has been... been... been, yes! in the past we were taught that in doing business, rent is subject to Expanded Withholding Tax. 

Some of the reasons, Why and How?,  a no withholding on rent happens;

1. Negligence
2. Contract is Silent about withholding  
3. TIN of property owner is not available, or;
4. Simply the property owner is not registered with the BIR, and;
5. Therefore can not issue an Official Receipt

Reason No. 1 - Negligence if everyone involved in the processing of payments forgot to deduct from the monthly payment the corresponding EWT, most of the time this scenario happens when the landlord or lessor requires a post dated  check - PDC be issued in advance for the entire year.

Reason No. 2 - The contract has no stipulations about who will cover the EWT. is it for lessor or tenant account? My own practice of doing so, if the contract is silent and I am not a party to the contract, the EWT is deductible from the lessor. If the landlord disputes, then they have to rectify the contract.

Reason No. 3 - The rent payment was processed with EWT deduction, but no way to remit it to the BIR, because the property owner does not issue Official Receipt, because of non-registration with the BIR.

There may be other reasons for  non-withholding on rent, but based on experience the above are common.

Bear in mind that March 1, preceding every taxable year, is the filing to the BIR, the Alphalist of Payees Subjected to Expanded Withholding TAX, and before that, everything related to EWT, its application and remittance to BIR should have been cleared; otherwise, more problems will be encountered if the financial statement with the corresponding Income Tax Returns was filed and received by the BIR noting only the non-compliance and did nothing to correct it.

There are more issues about EWT that are not discussed in this topic so hold on for the coming discussions about it.

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Income Tax Return - ITR needed to Obtain Loans

Ang Income Tax Return - ITR ay isa sa mga pangunahing hinahanap kung nais natin mag-loan sa bangko o kahit sa iba pang mga Financial Institutions o Lending company.

Dahil ang ITR ang magpapatunay na tayo at may Source of Income at nakapagbayad ng katumbas na  Buwis o Tax mula rito. Mula rin sa ITR makikita ang magiging kakayahan natin na mabayaran ang loan na gusto nating makuha.

Ngunit dapat natin tandaan na magkakaroon lamang tayo ng ITR kung tayo ay may kinita mula sa Trabaho, Negosyo o Business at kung may ibang pinagkakakitaan mula sa mga special skills na meron tayo.

Dapat din tandaan na dahil ang pagbabayad ng buwis ay tungkulin ng isa mabuting mamamayan, ang mga panuntunan nito ay pinagtibay at ginagabayan ng mga BATAS na ipinatutupad ng Bureau of Internal Revenue - BIR.

Ang mga ITR forms tulad ng mga sumusunod ay ginagamit upang maipakita ang mga naging batayan ng binabayaran na INCOME TAX.

1. 1700 o katumbas na Tax Certificate BIR Form 2316  - para sa mga individual na may trabaho at Employer
2. 1701 - para sa may iba't ibang pinanggagalingan ng kita o income
3. 1701A - para sa mga may kinita mula sa pagnenegosyo o business.
4. 1702 - para sa mga Corporation at iba pang mga kompanya na nabuo sa pamamagitan ng batas.

Tandaan ang mga forms na ito ay mula sa BIR, pag ito ay ating ginamit at mai-file sa BIR ito ay nagiging Public Document kung kaya pwede na itong gamitin sa mga legal na pangangailangan, tulad ng pagkuha ng loans.

Hindi pwedeng gamitin ninuman ang mga ITR forms na nabanggit kung walang basehan na kita o walang pinangagalingan ang mga nakasaad dito.

Mahalaga na may tatak ng BIR ang ITR bago ito magamit sa iba't-ibang pamamaraang legal.

Ang tatak ng BIR ang magpapatunay na ang ang ITR na ipini-present natin ay OFFICIAL at may katumbas na kopya na tinanggap ng BIR. 

Hindi naman ibig sabihin na hindi na tayo pwede mag-apply ng loan kung wala tayong  ITR. Maari pa rin tayo mag loan, subalit mababang halaga (Small Personal Loan) lamang  ang maaarin nating ma-loan. Karaniwang proof of income lamang ang kailangan, maliban sa mga personal na detalye.

Ang mga Minimum Wage Earners, MWE ay exempted sa sa pagbabayad ng Income Tax at hindi na kailangan mag-file ng ITR, pwede pa rin sila mag-avail ng loan gamit ang BIR form 2316, Certificate of Withholding, na ibinibigay ng mga employer tuwing natatapos ang taon

Kung nais ninyo ng mga gabay o tulong para makapag-loan mula sa iba't ibang Financial Institutions kung ito man ay Personal Loan, Business o Housing Loan. Mag email lamang kayo sa amin;

Kami ay  handang tulungan kayo.

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Ano Ang Dapat Unang Gawin BIR Registration o Business Permit?

Ano nga ang dapat maunang gawin Bir Registration o pagkuha ng Business Permit?

I answered that question several times already with clients. 

For ease and convenience, the Bureau of Internal Revenue (BIR) released Revenue Memorandum Circular (RMC) No. 57-2020 removing Mayor’s Permit as one of the mandatory requirements for registering a business with the agency. The removal is part of the streamlined registration requirements and revised documentary requirements checklist to further ease doing business in the Philippines. and;

As a matter of fact, anyone can register their business conveniently online with the BIR's NewBizReg Portal.

I need to answer a client's inquiry straight to the point not citing convenience, but a more substantiated answer is required even if my answer might go against their will.

I always say for me.... better to do your business permit first. WHY?

BIR registration is easy to do and complications of getting the business permit sometimes derail the timeline or the target schedule the business should start. What if your supposed business might have issues against some of the municipality ordinances or simply your landlord does not want to sign a lease agreement. These scenarios might delay the business to commence for say one month, two months or more while resolving issues and other matters about the proposed business. and;

You already register the business with the BIR ,so you need to comply by submitting related tax returns while the business is still not in operation.

You can submit a no payment return. NO PROBLEM.. but what if you overlooked the BIR registration because you are busy resolving issues with your business permit processing. Take note that non submission of returns on time entails a penalty of P1000.00 per return.

But then it is for the client to decide, I just answered the question in my own opinion. 

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Income Tax Return Forms for Individual Taxpayers - as provided for by the New Tax Reform Laws (TRAIN)

April 15, 2023 Income Tax Filing is fast approaching and for that note, I would  like to highlight important issues about ITR filing of individual taxpayers.

There are three (3) types of ITR forms (Shown Below) available for individuals which were introduced in the new Tax Reform Laws (TRAIN) using any of these depending on the activities being performed by the taxpayer and depending on the manner of determining the tax due.

• The Form 1700 – is to be used by individuals earned purely compensation income, but their earnings came from various employers during the year, as such they did not qualify for substituted filing. With this form, all income generated from various employment has to be summed up, to get the taxable income; refer to the applicable tax table to determine the tax rate applicable to come up with the TAX DUE; from the computed tax due all the taxes withheld by the employer(s) supported by a withholding tax certificates (BIR Form 2316) is to be deducted and the remaining if any has to be paid on or before April 15, of the filing year. 
  
  
• The Form 1701 – to be used by individuals who have mixed income, Estate and Trusts.
  
  Mixed Income means the individual taxpayer earned from employment and the same time from running a business on the side. 
  
  Trusts and Estates are legal structures that administer assets while the transfer is in progress going to the heirs and beneficiaries.
  
  Use this form 1701 if there's income to combine side by side from other sources, the most relevant example is income from employment and business; and when the taxpayer opted to use  the Graduated Tax Rate with an Itemized Deduction Method.
  
  
• Form 1701A – to be used by individuals earning only from business and or profession. This form is to be used also by individual taxpayers who opted for the Optional Standard Deduction Method (OSD) or those taxpayers who availed of the 8% flat rate vs the gross income lieu of percentage tax and income tax.
I hope that this simple presentation helps individual taxpayers shed out confusions which form to use for their ITR filing for the year ended 2022. 

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Mga Dapat Malaman Bago Simulan ang Planong Negosyo

Kung ikaw ay may mallit na Negosyo dito sa Pilipinas, o di kaya naman ay nagbabalak magtayo ng Negosyo o Business. Dapat mong alamin ang ilang importanting mga bagay paano ang tamang pagnenegosyo.

Ang mga sumusunod ang basic na dapat gawin para sa maunlad na negosyo.

1.   May Puhunan
   
   
2. Tamang pag-aaral o kaalaman tungkol sa Business na gustong gawin. “Feasibility Study”
   
   
3. Pagrerehistro, Permit at mga lisensya
   
   
4. Pamamahala o Management
   
   
5. Accounting at mga Pag-uulat na pinansyal “Financial Report”
   
   
6. Pagbubuwis o Tax Compliance 
   
   

May puhunan o “capital” maaaring ito ay  galing sa matagal na  pag-iipun o kaya naman ay galling sa kamag-anak, o pwede rin na Loan ito mula sa mga bangko o iba pang mga Financial Institution na nagpapautang o kaya naman ay pautang mula sa mga proyekto ng gobyerno o pamahalaan.

Kung mayroon ka nang idea sa gusto mong business o negosyo, mahalaga pa rin mayroon kang malawak na pag-aaral tungkol dito. Tulad ng kung paano ito simulan, location kung saan ang tamang lugar, sino ang mga target na customer, suppliers at marami pang iba.

Pagrerehistro, kung ready na tayong simulan ang planong negosyo;, mahalagang irehistro muna ito sa Deparment of Trade and Industry-DTI kung Sole proprietor, at sa Securities and Exchange Commision-SEC, naman kung Corporation.

Sapagkat para lamang sa maliliit na negosyong pinoy ang topic na ito, hindi natin tatalakaying ang anumang tungkol sa Corporation.

Mahalagang ipinaparehistro sa DTI ang business name upang maiwasan ang pagkakapareho sa mga pangalan ng business sa buong Pilipinas.

Kung mayroon ka nang DTI certificate, pwede ka nang kumuha ng business permit to operate sa lugar kung saan mo gusto itayo ang negosyo mo.

Kailangan din i-register sa Bureau of Internal Revenue-BIR ang business, para sa pagbubuwis.

Pamamahala o Management, pagkatapos mo gawin ang mga steps bago ang pagsisimula ng business, ngayun ready ka na “Open for Business” na ang negosyo mo, ang pamamahala at pagpapa-unlad nito ay nakasalalay sa mahusay na diskarte mo bilang may-ari.

Accounting, nakapaloob sa accounting ang tamang pagpapahalaga sa lahat ng mga kaganapang may kinalaman sa pananalapi o pinansyal ng isang negosyo.

Ano nga ba ang ACCOUNTING?

Ang pinaka-matandang definition ng ACCOUNTING, na alam ko bilang accountant at memorized ko pa hanggang ngayon.

Accounting is "the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof"

Kung ako ang magbibigay ng kahulugan nito sa tagalog ito ay;

Ang accounting ay "ang sining ng pagtatala, pag-uuri at pagbubuod sa makabuluhang pamamaraan at pagtalakay sa mga tuntunin at mga transaksyon na may kinalaman sa pananalapi, mga kaganapang may lakip na pinansiyal na katangian at pagbibigay-kahulugan sa mga resulta nito"

Kung babasahin sa tagalog, mahirap pa rin intindihin kaya para sa lahat, ang pinakasimpleng pwede kong ibahagi na definition ng accounting sa tagalog ay “Pagku-kwenta o pagtutuos ”.

Pagku-kwenta o pagtutuos  kasama ang mga proseso ng pare-record, pagsukat, at pagbabahagi sa pamamagitan ng mga report na pinansyal at iba pang impormasyon tungkol sa negosyo.

Ang “Accounting” ay profession? Bilang Business owner kailangan ko ba talaga gawin ito?

Ang sagot ay, Oo, sapagkat kahit gaano man kaliit ang isang negosyo, bilang may-ari, dapat alam natin kung magkano ang kinikita nito, o kung ito ba ay nalulugi. Kaya nga sa mga tulad natin na may  maliit lang na negosyo simple lang ang kailangan marunong tayo mag-kwenta.

Pagbubuwis o Tax Compliance, mga dapat bayaran sa gobyerno. Napakahalaga na malaman ng mga business owners ang  mga panuntunan ng pagbubuwis, o TAX COMPLIANCE, kung hindi ito masusundan ng tama, ito ay maaaring maging isa sa mga dahilan sa pagsasara ng negosyo. Sapagkat ang pagbubuwis ay tungkulin ng bawat mamamayan, ang mga alituntunin nito ay nakasaad sa batas at ang pagsuway sa batas ay may mga kalakip na kaparasuhan o penalties.

Dapat tandaan. Ang Tax na dapat babayaran ay yun lamang may tamang basehan na sinusuportahan ng mga transactions receipts at nai-record sa books of accounts upang maiwasan ng mga under declaration na maari din namang makita ng mga examiner ng BIR kung mag- Audit ang mga ito. 

Marami pa tayong dapat malaman tungkol sa accounting at tax compliance kaya abangan nyo pa ang mga topic ko tunkol dito.

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Simple Tax Compliance for Self Employed - Part 1

Self-employed are working individuals who do not have regular employers as such they specifically earn through their own efforts and expertise. 

Let us first define who are under the category of self-employed. 

1. A Sole Proprietor is simply as a business-owner who utilizes their resources as capital for profit. It is sufficient that they are knowledgeable with any kind of business they are interested in. 
   
   
2. Freelancers or Independent Service Contractors are people with acquired, enhanced and special skills. They render their time, skills and expertise for a fee. Examples are IT/Programmers, sales agents, bookkeepers, masseurs etc., these service providers usually work on their own. 
   
   
3. Professionals may be similar to freelancers, the big difference is that prior to practicing their profession publicly they should have passed a board examination administered by Professional Regulation Commission; after passing the board exam they are called Professional with PRC identification card and certificate. 

All persons who work on their own, and not limited to the above as discussed, and includes others who earn by rendering a special kind of job or services are considered self-employed. 

Generated income from business, jobs and services rendered are taxable, as such self-employed individuals must secure registration and licenses to operate. 

SOLE PROPRIETOR’s undergoes business name registration with the Department of Trade and Industry, DTI. Must secure a business permit to operate from the Local Government Unit - LGU, and must register with the Bureau of Internal Revenue-BIR. Compliance to those requirements make Sole Proprietor as a business entity. 

FREELANCERS AND OTHER SERVICES PROVIDERS must secure Occupational Tax Receipts (OTR) from the Local Government Unit - LGU for them to be able to register with the BIR.

Why is it important that a Freelancer and other services provider be registered with the BIR?

Freelancers, like any other business, must be registered with the Bureau of Internal Revenue (BIR). It is stated in Section 74 in the Philippine Tax Code that if an individual is receiving income from sources within or outside the Philippines, they are required to pay taxes.

PROFESSIONALS must secure Professional Tax Receipt (PTR) and must also register with the BIR with the same reason as freelancers. 

It is important to note that freelancers must have an OTR; and a professional have PTR. 

Now that you are able to identify yourself as to what type of self-employed you are, then you may go to the BIR and register. Take note that once you register with the BIR you must religiously comply with all the tax types indicated  in BIR Certificate of Registration BIR form 2303 because non-compliance requires no explanation but penalty and sanctions may be imposed without recourse. 

Below are the usual compliance for self-employed;

SOLE PROPRIETOR

1. Annual BIR registration renewal – 0605
   
   
2. Quarterly Percentage Tax BIR form 2551Q for Non-Vat or;
   
   
3. 2550Q for VAT registered
   
   
4. Quarterly Income Tax Returns
   
   
5. Withholding Tax on compensation 1601C if with employees
   
   
6. Expanded Withholding Tax 0619E for monthly and 1601EQ for quarterly payment
   
   
7. Invoice and or Official Receipts with approved Authority to print
   
   
8. Books of accounts
   
   
9. Annual Inventory
   
   
10. Annual Alphalist of payee withholding for both Compensation and EWT
    
    
11. Income Tax Return with Audited Financial Statement if Sales exceeded the Three Million Threshold.

FREELANCERS and PROFESSIONALS

1. Annual Registration
   
   
2. Official Receipt
   
   
3. Books of Account
   
   
4. Quarterly ITR
   
   
5. Annual ITR
   
   

Detailed discussion about actual tax computations and examples will be discussed in a separate blog.

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Income Tax Return Filing - File ITR Early to Avoid Penalty...

Income Tax Filing na naman sa April 15, 2023  dapat January pa lang o simula ng bagong taon na-markahan na sa kalendaryo ang petsang ito, at dapat hanggat maaga makapag-file tayo ng ating ITR o Income Tax Returns.

We should avoid yun habit na kung kailan deadline na saka dumadagsa ang mga tao sa BIR to file their ITR. Naku ito pa, ngayong 2023, ang last day of filing ng ITR ay April 17, 2023. pumatak na Sabado ang April 15, at syempre extended ang filing, at karamihan ikinatutuwa ang ganyang mga extension.

We all know that everyone who has earnings during the year needs to file an Income Tax Returns which includes employed individuals, self employed and yun mga kompanya. Kaya marami talaga ang pumupunta sa BIR lalo kung malapit na ang deadline and even more sa mismong deadline.

Even the BIR has implemented several ways of ITR filing like the SUBSTITUTED filing, EFPS and ebirforms to speed up the filing of ITR, still peoples crowds in almost all RDO's nationwide. 

Why?

The main reason is that the ITR including its attachments has to be stamped RECEIVED by the BIR to make it official, authentic and reliable for other users like the SEC, banks and other interested party. 

Siguro sometimes may fault din tayo, because many of us nakaugalian na yun "MANYANA" habit o saka na.. 

Karamihan pa niyan, kung kailan deadline saka pa may kailangan ipa-notaryo, ise-xerox, bibili ng docs stamp at syempre habang nasa pila magdidikit pa ng docs stamp at kung mamalasin pa pagdating sa receiving window REJECT ang submission because of missing  or lacking documents.

We should avoid the same situations mentioned above, let us be more organized, dapat sa preparation pa lang ng ITR , we should ensure that the content of the ITR can be traced from the source, the books of accounts. Good accounting and audit practices been done and sufficient documentations was prepared and attached to the ITR as required. 

Everyone who earns by doing jobs or business is liable to pay income tax and file a tax return on time provided for by the tax code. Failure to do so incurs penalty.

Except for employed individuals who earns purely compensation from jobs and their supposed to be income tax due were withheld and remitted in advance to the BIR, this type of taxpayers are given withholding tax certificate (BIR Form 2316) that can be as good as ITR already; as such they are no longer required to file the ITR provided that correct amount of tax was deducted from their salary and the same were remitted to the BIR, and;

Minimum wage earners - MWE who are exempted from paying income tax are not bothered about ITR filing, simply because exempted nga sila.

Who really are required to file income tax returns and pay income tax due on or before April 15, deadline every year?

1.  Working individuals who have other sources of income on top of their regular job or those who had multiple employers during the year and that  all their earnings from various employers needs to be consolidated into an ITR. Example is an employee who have multiple employers and at the same time running a personal business. 
2. Self-employed  are actually business owners who utilizes capital in order to profit, and income from business is subject to income tax. Recording of business transactions and accounting is necessary to accurately calculate taxable income.
3. A Company in the form of partnership and corporation. These are legal entities formed by means of laws. They are classified as non-individual taxpayers with more complicated tax and reportorial compliances than individual taxpayers. Because this type of taxpayers employs people to do the bookkeeping, accounting and audit, and even lawyers are hired whose task is to determine and express tax implications and ensure tax compliances are in accordance with the tax code. 
   
   

Most of the time the reason for delay in filing the ITR is the essence of time, it seems that the three (3) months after the end of a taxable year isn't enough. Let's be honest among ourselves di kaya napapa-petiks-petiks talaga tayo habang hindi pa deadline? Bato bato sa langit ang tamaan ay ngumiti na lang.

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