TAX SEMINAR Year-End Adjustment Substituted Filing Registration

TAX SEMINAR • • Year-End Adjustment/Substituted Filing Registration Updates on Registration of POS/CRM Consolidated Revenue Regulation of Special Economic Zones

ANNUALIZED WITHHOLDING TAX (Year-End Adjustment)

Year-End Adjustment OBJECTIVES: • Compute for the correct Annualized Withholding Tax (Year-End Adjustment) on Compensation • Understand explain the guidelines and procedures for substituted filing of Income Tax Return (BIR Form 1700) by employees receiving purely compensation income • Identify the different withholding tax returns to be accomplished; and • State the manner and time of filing of said returns

Year-End Adjustment PURPOSE: Tax Due = Tax Withheld WHEN: – On or before the end of the calendar year, prior to the payment of compensation for the last payroll period – If terminated, on the day on which the last payment of compensation is made.

Year-End Adjustment - Formula Gross compensation Income (present+previous employer) Less: Non-taxable/Exempt Compensation Income 1. ) 13 th month pay & other benefits xx 2. ) Other non-taxable benefits xx 3. ) SSS, GSIS, PHIC and Union Dues(Employees share only) xx Pxxx xxx Less: Exemptions 1. Personal and Additional Exemptions xx 2. Health/Hospitalization premium payment (if applicable) xx xxx Taxable Compensation Income xxx Tax Due xxx Tax Withheld (Jan. – Dec. ) or (Jan. – Termination) xxx Collectible: Tax Due > Tax Withheld -------Collect before payment of last wage Refund: Tax Due < Tax Withheld----Refund on or before Jan. 15 of the ff. year/ last payment of wage Break-even: Tax Due = Tax Withheld-------Do not withhold for December Salary

Annual Information Return (BIR Form 1604 CF /1604 -E) Including the Alphabetical List of Employees and Income Recipient 1. 2. Manual Submission – 3 copies of 1604 CF / 1604 E + alphalist of employees and income payees. Diskette Submission – ten (10) or more number of employees or payees who are recipient of income payments subject to creditable and final withholding tax, are required to submit 3. 5 inch floppy disk using any of the following options: 1. Excel Format Provided under Revenue Regulations No. 7 -2000 with the technical specifications with validation module prescribed by BIR. 2. Own extract program that shall meet the requirements specified in RR 7 -2000 with validation module prescribed by the BIR. 3. Data Entry Module using Visual Fox Pro.

Annual Information Return (BIR Form 1604 CF / 1604 E) Including the Alphabetical List of Employees and Income Recipient • What to use 1604 CF • When to submit On or before Jan. 31 of the ff. year • Where to submit RDO 1604 E+Alphalist On or before March 1 of the ff. year LTDO LTAD • Retention RDO LTAD 3 years in a diskette

Substituted Filing of Income Tax Returns (ITR) BIR Form 1700

Individuals qualified for substituted filing and must not file BIR Form No. 1700 1. 2. 3. 4. 5. Receiving purely compensation income regardless of amount; Working for only one employer in the Philippines for the calendar year; Income tax has been withheld correctly by the employer (tax due equals tax withheld) The employee’s spouse also complies with all the three conditions stated above, and Employer filed to BIR the Annual Information Returns on Income Taxes Withheld (BIR Form 1604 -CF) Note: All of the above requisites must be present. The Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes (BIR Form 1604 -CF) filed by their respective employers duly stamped “Received”, shall be tantamount to the substituted filing of Income Tax returns by said employees.

Individuals NOT qualified for substituted filing and must file BIR Form No. 1700 1. 2. 3. 4. 5. Individuals with two or more employees concurrently and successively at anytime during the taxable year. Employees whose income tax has not been withheld correctly resulting to collectible or refundable return. Employees whose monthly gross income does not exceed P 5, 000 or the statutory minimum wage, whichever is higher and opted for non-withholding of tax on said income Individuals deriving other non-business, non-professionrelated income in addition to compensation income not otherwise subject to a final tax. Individuals receiving purely compensation from a single employer whose income tax has been correctly withheld but whose spouse does not qualify for substituted filing.

Individuals NOT qualified for substituted filing and must file BIR Form No. 1700 6. Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income or compensation income and other non-business, non-professional related income. Note: In case of married individuals who are still required to file returns, only ONE RETURN FOR THE TAXABLE YEAR SHALL BE FILED by either of the spouses to cover income of both. It shall be SIGNED BY HUSBAND WIFE unless physically impossible to do so, in which case, signature of one of the spouse would suffice

Employees Withholding Statements • What to issue: • • Certificate of Compensation Payment/ Tax Withheld – Substituted Filing Who to issue: Employer When to issue: a) On or before Jan. 31 of the ff. year b) On the day of last payment of salary if terminated Number of copies: Three copies Signed by: Both employer and employee (under the penalty of perjury) Note: An extra copy shall be furnished by the employer duly certified by him to his NEW employer in cases of transfer of employment within the taxable year.

Certificate of Compensation Payment/Tax Withheld Uses of Certificate of Compensation Payment/Tax Withheld 1. Proof of financial capacity for the purpose of loan, credit card or other applications 2. Proof of payment of tax or for availing tax credit in the employee’s home country; 3. Securing travel tax exemption, when necessary; and 4. Other purposes with various government agencies

Application for Registration Information and Exemption Update (BIR Form 1905 and 2305)

Registration Information Update • • • Closure of Business/Cancellation of TIN Change in Registered Address Replacement of Certificate of Registration Replacement/Cancellation of Authority to Print Receipts and Invoices Replacement of Tax Clearance Certificate for Tax Liabilities Replacement of Lost/Damaged TIN Card Change in Registered Activities Change in Registered Name/Trade Name Change in Tax Type Details Change in Accounting Period

Exemption Update • Change in Status • Change in the Number of Qualified Dependents • Claim for Additional Exemptions and Premium deduction

RR 2 -2005: Consolidated Revenue. Regulations Implementing • RA 7227 (BCDA Act of 1992) • RA 7916 (SPEZ Act of 1995) • RA 7903 (Zamboanga City SEZ Act of 1995) • RA 7922 (Cagayan SEZ Act of 1995)

RR 2 -2005: Consolidated Implementing Rules on ECOZONEs • National Tax Exemption and Incentives to Zone-Registered Enterprises a. Exempt from taxes on importations of raw materials b. Exempt from Gross Receipts Tax, VAT, ad valorem, and excise taxes on their sales of goods and services except local sales c. Exempt from franchise, and common carrier or VAT and % on public and service utilities within the Zone d. Preferential tax treatment on income earned/derived from business operations within the Zone e. Purchases of raw materials from enterprises in the Customs Territory shall be considered effectively zero-rated or exempt from VAT f. May generate income from sources within the Customs Territory but up to 30% of its total income from all sources only. g. Carriers shall be bonded in an amount to be determined by the Authorities which shall not be less than P 50, 000. h. Articles which are manufactured in the Zone and exported to a foreign country, upon subsequent importation into customs territory, be subject to the laws on importation applicable to like articles manufactured in a foreign country.

Tax and Fiscal Obligations RA 7727 Subic-Ecozone (1) (2) (3) 3% to the (1) National Gov’t. 1% to the (2) LGU 1% to the Special Dev’t. Fundfor the development of municipalities outside Olongapo and Subic RA 7916 Econzone 3% to the National Gov”t: 2% which shall be directly remitted by the business to the treausrer’s office where it is located RA 7903 Zambo-Ecozone (1) (2) (3) 2%to the National Govt 2% to the City of Zamboanga 1% development fund of the barangays within the City of Zamboanga RA 7922 Cagayan-Ecozone (1) (2) (3) (4) 2% to the NG 1% to the Province of Cagayan ½% to be shared by the affected municipalities 1 ½% to the CEZA

Tax and Fiscal Obligations • • The equivalent amount to tax paid/payable to the National Government shall be considered for purposes of any claim for credit against taxes paid to foreign government. Articles received by Zone registered enterprises which cannot be accounted shall be presumed to have been transferred to the Customs Territory w/o permit and therefore subject to tax. All zone registered enterprises operating within the zone shall be constituted as withholding agents. Interest from any Philippine currency bank deposits and yield by a zone registered enterprise shall be subject to internal revenue

RR 2 -2005: Consolidated Implementing Rules on ECOZONEs • Removal or Withdrawal from Zone to Customs Territory – Shall be subject to the payment of customs duties and internal revenue taxes as ordinary importations. Articles removed shall be presumed to be foreign unless there is sufficient evidence that they are domestic articles

RR 2 -2005: Consolidated Implementing Rules on ECOZONEs • Service Establishments: – All income derived by qualified ECOZONE Service Enterprises, whether registered or not, for services rendered within the ECOZONES shall be subject to all internal revenue taxes under the NIRC – However, ECOZONE locators which export their services or are rendering their services abroad shall enjoy the 5% preferential tax rate.

RR 2 -2005: Consolidated Implementing Rules on ECOZONEs • Gross Income – Shall refer to the gross sales or gross revenue net of sales discount, sales returns and allowances minus cost of sales and direct costs but before any deductions for administrative, marketing, selling, operating expenses, or incidental losses during a given taxable year – It shall include interest income, gains from sales and other income

For ECOZONES under RA 7916 Export Enterprises, Free trade Developer/Operator, Facilities, Enterprises and Domestic Market Utilities and Tourism Enterprises • • • Direct salaries, wages or labor expenses Production supervision salaries Raw materials used in prod. Decrease of Goods in Process Account Decrease in Finish Goods Account Supplies and Fuels used in prod. Depreciation of machinery and equipment used in production Rent and utility charges associated with building, equipment and warehouse used in prod. Financing Charges associated with fixed assets used in production which were not capitalized • • • Direct salaries, wages or labor expenses Service supervision salaries Direct materials, supplies used Depreciation of machinery and equipment used in registered activities Financing Charges associated with fixed assets used in registered activites which were not capitalized Rent and utility charges associated with buildings and capital equipment used in undertaking registered activities.

Registration Information Update • APPLICATION FOR CLOSURE OF BUSINESS/CANCELLATION OF TIN • Documentary Requirements 1) Letter of request stating reason for termination of business 2) Original Certificate of Registration 3) Books of Accounts 4) Inventory List of Unused Receipts and Invoices 5) Unused Receipts and Invoices for cancellation 6) Board Resolution / Notice of Dissolution (if Corporation / Partnership) • Additional Requirements in Case of Death of Individual Taxpayer: • 1) Death Certificate • 2) Payment of Estate Tax, if any

Registration Information Update • APPLICATION FOR CHANGE IN REGISTERED ADDRESS • Documentary Requirements 1) Original Certificate of Registration 2) Inventory List of Unused Receipts and Invoices 3) Unused Receipts and Invoices for cancellation 4) Latest DTI Certificate (for individual) or SEC Registration (for Corporation / Partnership) 5) Proof of Application for Mayor’s Permit under new business address 6) Sketch of Place of Production (if excise taxpayer)

Registration Information Update • APPLICATION FOR REPLACEMENT OF CERTIFICATE OF REGISTRATION • Documentary Requirements – a) Old Certificate of Registration, for replacement; – b) Affidavit of Loss, if lost; and – c) Proof of Payment of Certification Fee and Documentary stamp- to be submitted before the issuance of the New Certificate of Registration

Registration Information Update • APPLICATION FOR REPLACEMENT/CANCELLATION OF AUTHORITY TO PRINT RECEIPTS AND INVOICES • Documentary Requirements – a) Original Authority to Print Receipts and Invoices; and – b) New Application Form 1906, if applicable

Registration Information Update • APPLICATION FOR REPLACEMENT OF TAX CLEARANCE CERTIFICATE FOR TAX LIABILITIES • Documentary Requirements – a) Affidavit of Loss, if applicable; and – b) Proof of payment of Certification Fee and Documentary Stamp Tax – to be submitted before the issuance of the New Tax Clearance Certificate

Registration Information Update • APPLICATION FOR REPLACEMENT OF LOST/DAMAGED TIN CARD • Documentary Requirements – a) Affidavit of Loss, if lost; and – b) Old TIN Card (if replacement is due to damaged card

Registration Information Update • APPLICATION FOR CHANGE IN REGISTERED ACTIVITIES • Documentary Requirements – Original Certificate of Registration

Registration Information Update • APPLICATION FOR CHANGE IN REGISTERED NAME/TRADE NAME • Documentary Requirements – a) Amended SEC Registration/DTI Certificate; and – b) Original Certificate of Registration

Registration Information Update • APPLICATION FOR CHANGE IN TAX TYPE DETAILS • Documentary Requirements – Original Certificate of Registration

Registration Information Update • APPLICATION FOR CHANGE IN ACCOUNTING PERIOD • Documentary Requirements – a) BIR written approval of the change – b) Photocopy of short period return