The month of January is one of the busiest months, in so far as taxes are concerned. It is the month when businesses need to process and renew business permits with the local government units where they are doing business. Part of that is the payment of the local business taxes due for the year. This will allow them to continue operating within the jurisdiction of the LGU where permit is granted.
Happy New Year!
The withholding tax system of collecting taxes by the Bureau of Internal Revenue (BIR) has been in place for a long time. Under the said system, the taxes due from the income earners are collected in advance at source—from the payors of the income who are constituted as the withholding tax agents.
With today’s state of competition, companies are competing not only on the marketing of their products and services but also in attracting recruits for employment. And so, they would oftentimes offer attractive remuneration packages. This includes interest and consciousness on the correct tax treatment that comes with the employees’ benefits.
Since the Covid-19 pandemic began, numerous discussions about the imposition of taxes on digital transactions have been rolling. The government particularly eyes VAT on transactions made online as a great potential source of revenue.
Our country has been continuously pursuing reforms to attract foreign investments and to improve ease of doing business in the Philippines. We have recently seen the removal of the minimum number of incorporators to establish a corporation, the digitalization and streamlining of the registration process and requirements, the liberalization of foreign participation in some sectors, and the decrease of our corporate income tax.
The power of taxation, along with the power of eminent domain and police power, is one of the inherent powers of the government. It is an inherent attribute of sovereignty. This means that it exists simply because the State exists.
The equity or capital of a corporation is divided into shares of stock, which are owned by the so-called stockholders or shareholders. The stockholders realize the profits earned by the entity in the form of dividends distributed to them.
The Court of Tax Appeals (CTA) is a court of special jurisdiction. It is the country’s court that specializes in tax and customs cases. But it can only act on matters that have been conferred to it by law, i.e., Republic Act 1125, as amended by RA 9282 and 9503.
Last year, the Bureau of Internal Revenue issued Revenue Memorandum Order 14-2021, streamlining the procedures for the availment of tax treaty benefits. This RMO updated the guidelines and procedures and supposedly reformat the manner of confirming the entitlement to treaty benefits.
The withholding tax system is a mechanism for which taxes are collected at source as payment of the taxes due from the income recipients. Taxes withheld are advance payments as the taxes are deducted from the income and paid to the tax authority even before the income earner is required to file its tax return. The source of the income is constituted as both a representative of the income recipient for the remittance of taxes and a representative of the government for the collection of taxes. In fact, the withholding agent may be penalized for not doing that obligation.
The reduction starting this year of the corporate income tax rate applicable on income derived from sources within the Philippines by non-resident foreign corporations (NRFCs) to 25 percent necessarily reduced the final withholding tax rate to the same rate. The income subject to the new rate includes dividends. It follows that the final withholding tax rate that should generally be used by the Philippine investee corporations when paying dividends to their corporate foreign shareholder shall be 25 percent.
Tax is as certain as death. Tax is a natural consequence of death for individuals leaving significant amount of assets to their loved ones. Some people are able to plan ahead to manage their asset base in the event of death. Tax may not be the primary driver but it is always a key factor to consider.
The recent issuances on the value-added tax (VAT) treatment of sale transactions made to enterprises enjoying tax incentives, especially those registered and located in special economic zones, are causing confusions. Even experts on the matter have varying opinions. Let me not add to that confusion, although I have my own opinion on the matter. In the meantime, I’ll limit this discussion to what is considered export sales under Executive Order (EO) 226 as it applies to export processing zones.
ONE of the significant changes introduced by the Revised Corporation Code of the Philippines in the corporation law is a modification on the provision on corporate term. Under this RCC, a corporation shall have perpetual existence unless its articles of incorporation provides otherwise. This means that a corporation shall have unlimited life unless its articles of incorporation provides for a specific period of existence, in which case, its life can only be extended through an amendment of the articles of incorporation.
THERE are many items that the Bureau of Internal Revenue usually focus on and are the usual suspects when the BIR conducts an audit. But there are also court decisions (although some are only by the CTA, thus not yet final) debunking these findings. These are the usual suspects that never go away.
The advent of today’s technology, such as the Internet, has clearly changed the way businesses offer their products and services, as well as the way consumers avail themselves of them. Back then, we usually become aware of new products only after watching television commercials. But now, most, if not everything, that you need to know about a particular product can be searched online. Online shopping is the new trend.
In general, gains on sales or exchanges of properties are recognized and subjected to tax.
The Foreign Investments Act of 1991 declared it as a policy of the state to attract, promote and welcome productive investments from foreign investors in activities or areas which significantly contribute to the national industrialization and socioeconomic development. Foreign investments are encouraged in enterprises that significantly expand livelihood and employment opportunities; enhance economic value of farm products; promote the welfare of consumers; expand the scope, quality and volume of exports and their access to foreign markets; and/or transfer relevant technologies in agriculture, industry and support services.
