BASIC TAXATION

TAXATION, DEFINED AND ITS PURPOSE

Taxation is the inherent power of the sovereign, exercised through the

legislature, to impose burdens upon subjects and objects within its
jurisdiction for the purpose of raising revenues to carry out the
legitimate objects of government.

Taxes are the enforced proportional contributions from persons and

property levied by the law-making body of the State by virtue of its
sovereignty for the support of the government and all public needs.

The primary purpose of taxation on the part of the government is to

provide funds or property with which to promote the general welfare
and the protection of its citizens and to enable it to finance its
multifarious activities.
 TAXATION, DEFINED AND ITS PURPOSE

TAX REVENUES

INTERNAL REVENUES EXTERNAL REVENUES

BUREAU OF INTERNAL BUREAU OF CUSTOMS

REVENUE

LOCAL GOVERNMENT
UNITS
 BIR COMPLIANCE

Registration Bookkeeping Tax filings

Invoicing Other compliance Penalties

requirements
REGISTRATION

BIR Form 0605- Payment Form. Upon

payment of annual registration fee for
new business and for renewals.

Deadline:
On or before January 31 annually
 TAX FILINGS
Tax Type Description Computation
Income Tax is a tax on all yearly profits arising from property, Tax due shall be computed
profession, trades or offices or as a tax on a person’s income, based on the taxable
INCOME TAX
emoluments, profits and the like. income using the applicable
income tax table.

Percentage Tax is a business tax imposed on persons or

Gross sales / receipts x 1%
PERCENTAGE entities who sell or lease goods, properties or services in the
Percentage Tax =
TAX course of trade or business whose gross annual sales or
Percentage Tax Due
receipts do not exceed P3,000,000 and are not VAT-registered.

Value-Added Tax is a business tax imposed and collected from

the seller in the course of trade or business on every sale of
VALUE ADDED Output VAT – Input VAT =
properties (real or personal) lease of goods or properties (real
TAX VAT Liability
or personal) or vendors of services. It is an indirect tax, thus, it
can be passed on to the buyer.
 TAX FILINGS
Tax Type Description Computation
Tax due shall be computed based on
Withholding Tax on Compensation is the tax
WITHHOLDING TAX the taxable income using the
withheld from individuals receiving purely
WAGES applicable withholding tax table and
compensation income.
income tax table.

Expanded Withholding Tax is a kind of

Tax due shall be computed using the
EXPANDED withholding tax which is prescribed only for certain
applicable EWT rate multiplied by the
WITHHOLDING TAX payors and is creditable against the income tax
tax base.
due of the payee for the taxable quarter year.

Documentary Stamp Tax is a tax on documents,

instruments, loan agreements and papers Tax due shall be computed using the
DOCUMENTARY
evidencing the acceptance, assignment, sale or applicable DST rate multiplied by the
STAMP TAX transfer of an obligation, rights, or property tax base.
incident thereto.
 INCOME TAX FOR INDIVIDUALS

INCOME TAX MODEL (ITEMIZED) As a rule, an expense may be

deducted from the income if the
Total gross sales/receipts P XXXX following requisites concur:
Less: Cost of sales XXXX
(1) the expenses must be ordinary
Gross income P XXXX and necessary,
(2) it must have been paid or
Less: Operating expenses XXXX incurred during the taxable year,
(3) it must have been paid or
Taxable income P XXXX incurred in the trade or business of
the taxpayer, and
(4) it must be substantiated by
Tax due shall be computed based on the taxable receipts, records and other
income using the applicable income tax table. pertinent papers.
INCOME TAX FOR INDIVIDUALS
INCOME TAX FOR INDIVIDUALS
 INCOME TAX FOR INDIVIDUALS

HOW TO COMPUTE FOR INCOME TAX DUE?

Taxable income (2021) P 450,000

Basic Tax P 30,000

Additional: (P450,000 – P400,000) x 25% 12,500

Tax due P 42,500

 PERCENTAGE TAX
HOW TO COMPUTE FOR PERCENTAGE TAX DUE?

Billed Collected

Gross sales (Goods) 500,000 300,000

Gross revenues (Services) 800,000 200,000

Gross sales (Goods)- Billed 500,000

Gross revenues (Services) - Collected 200,000

Total taxable sales/revenues 700,000

Percentage Tax Rate 1%

Percentage Tax Due 7,000

 VALUE ADDED TAX
HOW TO COMPUTE FOR VAT LIABILITY?

Billed Collected

Gross sales (Goods)- Output VAT 10,000 7,000

Gross revenues (Services)- Output VAT 5,000 3,000

Gross sales (Goods)- Output VAT Billed 10,000

Gross revenues (Services) – Output VAT - Collected 3,000

Total Output VAT 13,000

Less: Input VAT 5,000

VAT Liability 8,000

WITHHOLDING TAX ON WAGES
 WITHHOLDING TAX ON WAGES
HOW TO COMPUTE FOR WITHHOLDING TAX ON WAGES?
Gross Taxable Non-taxable

Basic Salary (Semi-monthly) 17,667 17,667 0

De minimis benefits 3000 0 3,000

Total 20,667 17,667 3,000

Basic Tax 1,250

Additional (17,667 – 16,667) x 25% 250

Total Withholding Tax on Wages 1,500

 EXPANDED WITHHOLDING TAX
WHEN TO SUBJECT INCOME PAYMENTS TO EXPANDED WITHHOLDING TAX?

When the business itself is required to

When the transaction itself requires
withhold

 Professional fees, talent fees, etc

 Income payment to partners of
for individuals - 5-10%
GPP 10 – 15%
 Professional fees, talent fees, etc
 Top Withholding Agents – 1% for
for non-individuals - 10-15%
goods 2% for services
 Rentals – 5%
• Income payments made by the
 Income payment to certain
government to local suppliers – 1%
contractors – 2%
for goods 2% for services
 Agricultural products – 1%
 EXPANDED WITHHOLDING TAX
HOW TO COMPUTE FOR EXPANDED WITHHOLDING TAX?

RENTAL EXPENSE

VAT INCLUSIVE 112,000

Per Revenue Regulations No. 2-98, as
LESS: VAT 12,000
amended, rentals of personal and real
VAT EXCLUSIVE 100,000 properties are subject to 5%
withholding tax.
LESS: 5% EWT 5,000

ADD: VAT 12,000

AMOUNT DUE 107,000

 TAX FILING DEADLINES
Tax Type BIR Form Deadline
1701Q Within 45 days following the end of the quarter: Q1
INCOME TAX (Quarterly) - May 15, Q2 - August 15, Q3 - November 15

INCOME TAX 1701 April 15

(Annually)

PERCENTAGE 2551Q Within 25 days following the end of the quarter

TAX (Quarterly)

VALUE ADDED 2550M Within 20 days following the end of each month
TAX (Monthly)

VALUE ADDED 2550Q Within 25 day of the month following the end of the
TAX (Quarterly) quarter
 TAX FILING DEADLINES

Tax type BIR Form Deadline

WITHHOLDING TAX 1601C Within 10 days following the end of the month
WAGES (Monthly) end except for December; every January 15

EXPANDED 0619E Within 10 days following the end of the month

WITHHOLDING TAX (Monthly)

EXPANDED 0601E Last day of the month following the end of the
WITHHOLDING TAX (Quarterly) quarter
 TAX FILINGS
ILLUSTRATION:

The following pertains to Juan Dela Cruz Sari-Sari Store’s income and expenses for the
taxable year ended 2021.

Amount

Gross sales P1,100,000.00, P275,000 of which

was earned during Q4

Cost of Sales 600,000.00

Operating expenses 200,000.00

Expanded Withholding Tax (December 2021) 500.00

Withholding Tax On Wages (December 2021) 500.00

 TAX FILINGS

Compute for the following:

1. Income Tax Due using

a) Itemized Deduction;
b) Optional Standard Deduction; and
c) 8% Income Tax
2. Percentage Tax Payable
3. EWT Payable
4. WTW Payable
5. Total Tax Payable
 TAX FILINGS
ILLUSTRATION:
ITEMIZED DEDUCTION Income Tax Due P 10,000.00

Total gross sales/receipts P 1,100,000.00 Percentage Tax 2,750.00

(P275,000 x 1%)
Less: Cost of sales 600,000.00
EWT Payable 500.00
Gross income P 500,000.00
WTW Payable 500.00
Less: Operating expenses 200,000.00
Total Tax Payable P 13,750.00
Taxable income P 300,000.00

Income Tax Due* P 10,000.00

*Please refer to Tax Table

 TAX FILINGS

ILLUSTRATION:
OPTIONAL STANDARD DEDUCTION Income Tax Due P 95,000.00

Total gross sales/receipts P 1,100,000.00 Percentage Tax 2,750.00

(P275,000 x 1%)
Less: OSD (40%) 440,000.00
EWT Payable 500.00
Taxable Income P 660,000.00
WTW Payable 500.00

Income Tax Due* P 95,000.00 Total Tax Payable P98,750.00

*Please refer to Tax Table

 TAX FILINGS

ILLUSTRATION:

8% Income Tax Rate Income Tax Due P 68,000.00

Total gross sales/receipts P 1,100,000.00 Percentage Tax -

Less: Deduction 250,000.00 EWT Payable 500.00

Taxable Income P 850,000.00 WTW Payable 500.00

Multiply: 8% Income Tax Rate 8% Total Tax Payable P 69,000.00

Income Tax Due P 68,000.00

 TAX FILINGS

HOW TO FILE TAXES

Manually

eBIR forms

EFPS (Electronic Filing and Payment System)

 TAX FILINGS

WAYS TO PAY TAXES

Online Banking Channels GCash app

LANDBANK Link.BizPortal PayMaya app

DBP Pay Tax Online Moneygment app

UnionBank Online app Central Business Portal

 INVOICING
SEC. 237 of the Tax Code

Issuance of Receipts or Sales or Commercial Invoices. –

(A) Issuance. - All persons subject to an internal revenue tax shall, at the
point of each sale and transfer of merchandise or for services rendered
valued at One hundred pesos (P100.00) or more, issue duly registered
receipts or sales or commercial invoices, showing the date of
transaction, quantity, unit cost and description of merchandise or
nature of service: Provided, however, That where the receipt is issued to
cover payment made as rentals, commissions, compensations, fees,
receipts or invoices shall be issued which shall show the name, business
style, if any, and address of the purchaser, customer or client: Provided,
further, That where the purchaser is a VAT-registered person, in addition
to the information herein required, the invoice or receipt shall further show
the Taxpayer Identification Number (TIN) of the purchaser.
INVOICING

✔ Taxpayer’s registered name

✔ Business address
✔ Business style
✔ VAT or non-VAT registration
✔ Tax Identification Number (TIN)
✔ VAT amount (if subject to VAT)
✔ date of transaction, quantity,
unit cost and description of
merchandise or nature of service
 OTHER COMPLIANCE REQUIREMENTS
These must be exhibited conspicuously in the place of business:

BIR Form 0605

Certificate of Registration Notice
(ARF)
 OTHER COMPLIANCE REQUIREMENTS

TAX MAPPING ACTIVITIES OF THE BIR

Bookkeeping Invoicing Registration

 PENALTIES

1. Surcharge

For late filing of Tax Returns with Tax Due to be paid, the following penalties will be
imposed upon filing, in addition to the tax due:

25% of the amount due, due to the following cases:

(1) Failure to file returns and pay the tax due on deadline;

(2) Filing a return with an unauthorized person; or

(3) Failure to pay the deficiency tax within the time prescribed in NOA; or

(4) Failure to pay the full or part of the amount of tax shown on any return
 PENALTIES

2. Interest

Beginning Jan. 1, 2018 (the effectivity date of the TRAIN Act), the interest penalty for
any unpaid amount of tax was 12% per annum calculated from the date prescribed
for tax payment until the amount is fully paid.
 PENALTIES

3. Compromise (RMO 7-2015 Annex A)