When we attend tax seminars in the Philippines, we usually think about the price, comfort level, convenience, time, and distance. But sometimes, we forget the most important thing about seminars: the quality of the topics speakers are going to choose to cover. Ask yourself: Is the seminar detailed? Are the topics relevant?
These questions are especially important when it comes to choosing what tax seminar in the Philippines to attend. Taxes are a complicated topic to talk about because they are big financial responsibilities in themselves. We pay taxes to help our country grow and because of this, these liabilities have political and financial implications in our lives.
When you go to a tax seminar, make sure they discuss these important topics:
Basic Business Taxes
One of the first things all tax seminars in the Philippines should cover is the subject of business taxes. Every business owner should pay these expenses because it is part of their duty as a Filipino citizen. It doesn’t matter if you manage a small enterprise or a corporation of 100 employees. Our taxes go to the country’s economic development and therefore we should go the different types all companies have to cover.
All working citizens must have a portion of their personal salaries deducted so they can pay their “income tax”. Since TRAIN Law has happened, this has become less of a problem for all of us since now it is only generally imposed on middle- to high-earners. All businesses should make sure that their employees are able to pay for income tax by supplying a tax identification number for all of them.
Your income tax rate varies according to how much you are earning annually:
|Up to PHP 250,000||0%|
|PHP250,000 to PHP 400,000||20% of their specific income|
|PHP 400,000 to PHP 800,000||PHP 30,000 + 25% of their specific income|
|PHP 800,000 to PHP 2,000,000||PHP 130,000 + 30% of their specific income|
|PHP 2,000,000 to PHP 8,000,000||PHP 490,000 + 32% of their specific income|
|PHP 8,000,000 to above||PHP 2.41 million + 35% of their specific income|
Value Added Tax (VAT)
It is a sales tax which is implemented in a business’s products and services by being added to their prices. Because they are added to the prices of everything sold in the Philippines, consumers end up indirectly paying for it.
All Filipino companies are required to file for VAT if they:
- Earn more than Php1,919,500.00 in sales annually
- Sell to a local market
To pay for VAT, companies should submit payments made by their consumers to the BIR (Bureau of Internal Revenue) on their own. Currently, the VAT rate is 12% of gross sales.
Percentage Tax is meant for businesses who don’t earn as much as their VAT counterparts. In fact, the ones who file for this should only be earning less than or equal to Php1,919,500.00 annually. Additionally, those who do not engage in the selling of goods need to file percentage tax, including real estate agents, stock brokers, and carriers in the country.
This is an indirect tax implemented on products and services that are manufactured in the Philippines and made to be consumed locally. It doesn’t affect all products, only companies that are selling any of these things:
- Petroleum products
- Sugary beverages (drinks outside of coffee and tea that use sugar, non-caloric sweeteners, and high fructose corn syrup)
- Automobiles (Pick-up trucks and electric vehicles are exempted)
- Tobacco products
- Cosmetic surgery products
When it comes to your employees, it is required that you and other businesses make sure that they pay their income tax. To do this, you can choose to file for withholding tax. Instead of them having to file for their income tax, companies can do it for them by withholding the required portion to pay it from their salary in advance. This leads to workers having deductions in their salaries.
Thanks to TRAIN Law, there have been some changes in the withholding tax table:
|Up to PHP 20,833||0%|
|PHP 20,833 to PHP 33,332||20% of their specific income|
|PHP 33,333 to PHP 66,666||PHP 2,500 + 25% of their specific income|
|PHP 66,667 to PHP 166,666||PHP 10,833.33 + 30% of their specific income|
|PHP 166,667 to PHP 666,666||PHP 40,833.33 + 32% of their specific income|
|PHP 666,667 to above||PHP 200,833.33 + 35% of their specific income|
How to Be Organized with Your Taxes
All tax seminars in the Philippines will agree that payment deadlines are the worst. Before the dreaded dates arrive, you have to read through your account books, receipts, and prepare the needed documents and cash. If all of these are not prepared before the time comes, you may end up missing the deadline. And not paying on time will lead to costly fines.
Therefore, you need to be organized with your taxes all year round. You should deal with all the associated responsibilities monthly, weekly, and daily if possible.
Reconcile your BIR declarations with proof
What you may have been written in your book of accounts may not coincide with reality. The reality here being receipts representing transactions with customers, invoices for liabilities and expenses paid, and amount of inventory in your warehouse. When you the BIR sees you have false statements, they may think you are hiding something. They may assume that you are not showing them all your assets and expenses because you do not want to pay the right amount of tax liability. Being assumed of this can lead to costly fines.
So you can reconcile your declarations, you should keep these documents all year-round
- Receipts of sales with customers — These will help with reconciling VAT declarations
- Receipts of company purchases and expenses — These will help with reconciling asset and expenses declarations
- Inventory in list — these will help with reconciling inventory written in your books
Choose to go electronic
You can take advantage of technology when it comes to your books of accounts and filing of taxes. First of all, BIR allows you to track your financial statements through a computer program. Second, a lot of online tax calculators will submit your taxes for you after you file them on their websites, as long as you pay their rates.
When you go electronic, you avoid human error. When we write things such as our expenses on paper, there is always a huge possibility of displacement. On the other hand, we can forget to pay on time our financial responsibilities, or we may not have enough time to do so.
Get a good accountant
Every tax seminar in the Philippines will tell you that an accountant is one of the best investments for any business. Why is this so?
One, they can make it less difficult when tax season comes because they have the knowledge and expertise to create financial statements for your books daily. You can attend to your other business related responsibilities. Second, they can reconcile your book declarations with proof, assuring that your company is not committing fraud. Third, they can give an overall audit of your situation before the actual BIR audit happens.
How to Reduce Taxes the Right Way
Tax seminars in the Philippines should teach us how to reduce our tax liabilities in the right way. The “right way”, for this matter, is the most legal way possible. While taxes are seen as mandatory financial responsibilities of every professional Filipino, the government does understand that there may be times when we cannot pay those expenses due to a myriad of reasons. Yet, it does not mean you should avoid paying your taxes at all or resort to illegal activities in order to pay it. Therefore, it is good to know the different options we can choose from for reducing our taxes ethically.
Donate to charities
The BIR (Bureau of Internal Revenue) recognizes the compassion of company taxpayers when they choose to donate their hard-earned money to accredited charities by lowering their gross income. When you give money to causes, your taxes can be reduced since your gross income shrinks as well. However, the BIR still decides if your donor transactions are legitimate enough for tax-exemptions
If you want to pursue this option, you should prepare the following documents:
- Financial statement, showing the acquisition cost and book value of the donation
- Deed of sale, proving donor bought the given donation
- Certificate of Donation (BIR Form 2332)
- Should have the signature of the donee group
- Should have the description of items donated
- Date of the transaction between company and donee group
When it comes to charities to contribute to, BIR allows corporations to donate to those that are exempt from donor’s tax and the groups that include:
- Accredited non-government organizations (NGOs)
- Non-profit subdivisions of the National Government
- Philanthropic organizations specializing in education, social, economic or scientific development
- international organizations
- Foreign institutions
Tax relief for casualty losses
There may come a time when you will lose inventory or have your business-related property destroyed by casualties such as typhoons, floods, or earthquakes. While situations like these are very negative, they can, fortunately, give you ample reason to deduct your company’s income taxes.
Under BIR Revenue Memorandum Order Number 31-2009, you have to fulfill these requirements before applying for tax relief:
- The destroyed or lost property is used for business purposes
- The properties were already stated as assets in accounting books
- The loss cannot be compensated by insurance
- Deduction of property should also be tracked properly in book accounts
Besides filling the requirements, you will have to submit the needed documents at maximum 45 days after the catastrophic event:
- Financial statement (a year before the disaster)
- A letter describing the catastrophic event, the damage it caused to the property, and the specific time it happened. Also included in this description is the property’s original value before the event, its value in the aftermath and the cost needed to repair them.
- Submit proof of what happened (photographs, receipts, vouchers)
The optional standard deduction for income tax
Taxpayers, individuals, and freelancers are allowed to get a 40% reduction in income tax based on their gross receipts and sales. On the other hand, taxpayers under a corporation can get a 40% deduction based on the gross income of the company they work under. When you choose to pursue OSD, you have no choice but to pay for the first quarter of the taxable year.
Tax seminars in the Philippines will point out the consequences that come to people who evade paying their taxes, whether out of true motivation or ignorance. The BIR can choose to file against individuals and businesses who fail to pay their tax liabilities, as a way to show equality, that everyone should equally contribute to the economic development within their own capability.
We can all be accused of evasion if, we do all or either of these actions:
- Failure to pay taxes
- Failure to file tax returns on time
- Under declaring or over declaring of your expenses by 30%
- Hiding assets
- Hiding income
- Keeping a set of a book of accounts unregistered to BIR
The hardest thing about being accused by the BIR of tax evasion is that people close to you can also be affected. There are cases when only individuals are imprisoned for tax evasions, but there are also frequent cases where the majority of the people in a group or corporation are considered liable for the violation; CEOs, managers, secretaries, even employees.
What are the charges that come with being prosecuted with tax evasion? It will depend on the severity of your illegal offense.
If you didn’t pay because you missed the deadline, you will be charged with paying the amount you were supposed to with the addition of fines:
= original tax amount + (20% interest of original amount*(days you paid after deadline/360)) +(25% sub-charge of original tax amount).
If you were found out to have purposely ignored filing tax returns, your penalty becomes higher. The equation instead will be:
= original tax amount + (50% interest of original amount*(days you paid after deadline/360)) +(25% sub-charge of original tax amount).
Join Powermax’s Tax Seminars in the Philippines
PowerMax’s tax seminars in the Philippines will teach us all these important topics because first, they have a lot of credible professionals in their consulting group. This because all of them have a ton of experience in the fields of accounting and taxes and they share it all with their participants. Second, tax and accounting seminars in the Philippines cover a diverse range of tax-related topics such as liability reduction, the different types of taxes, and more!
Check out PowerMax Consulting Group to gain the knowledge you will need about your taxes through tax summits in the Philippines. Click here to find out more!