Overview on the Taxability of Contractors Presented by: Susan D. Tusoy, CPA, MPS Asst. Chief, Assessment Division Revenue Region 19, Davao City

It is impossible to begin to learn that which one thinks one already knows. - Epictetus

Things to consider In the conduct of your Business

On Registration Register your business On or before the commencement of business Before payment of any tax due Upon filing of a return, statement or declaration as required by the NIRC.

On Registration Pay Annual Registration Fee of P500.00 upon registration and every year thereafter on or before Jan. 31 for every separate or distinct establishment or place of business, including facility types where sales transactions occur

On Registration Register your employee/s within 10 days from date of employment

On Registration Secure Taxpayer Identification Number Multiple TIN is punishable by law.

Registration Procedures PRIMARY REGISTRATION SECONDARY REGISTRATION STAGE 1 STAGE 2 Application & Issuance of TIN Registration of Business/Practice of Profession/Employment Registration of books, Issuance of ATP, CAS and Loose-leaf

On Invoicing Requirements Apply for Authority to Print (ATP) After printing, register ORs/Invoices thru Printer’s Certificate of Delivery (PCD)

Invoicing Requirements Issue sequentially an OR for fees received or Sales Invoice for sale of goods. Each SI shall show the name, address of client, date of transaction, qty, selling price per unit, description of merchandise sold and total amount. The OR/SI shall be accomplished in duplicate, the duplicate retained & preserved in place of business for 3 years from close of taxable year.

On Bookkeeping Requirements Apply for registration of books of accounts, basically a Journal, Ledger, and applicable subsidiary books The BIR records your latest volume in your reg’n database.  All of the above to be done within 30 days from date of registration

ON BOOKKEEPING REQUIREMENTS Preserved within the prescriptive period of 3 yrs Gross receipts exceeding P150k in any given quarter must be audited by a CPA If using Computerized Accounting System Must be approved by the BIR before its use

ON BOOKKEEPING REQUIREMENTS Transactions for the day must be entered in books on or before 12nn the following day. Balances transferred to the Ledger on day following the end of month It’s not required to register new set of books every year; only before the pages of current book is almost used up.

Contractor’s Usual Tax Types Registration Fee (RF) P500.00 due – Jan. 31 Income Tax Individual (5% - 32%) Corporation Normal Income Tax – 30% Minimum Corporate Income Tax – 2% Improperly Accumulated Earnings Tax – 10%

Contractor’s Usual Tax Types Income Tax Due Dates Income Tax Period Due Date Individual Corporation 1st Quarter April 15 60 days after the end of the quarter 2nd Quarter Aug. 15 3rd Quarter Nov. 15 Annual Return 15th day of the 4th month after the end of the accounting period Improperly Accumulated Earnings Tax 15th day after the end of the year following the close of the taxable year

Contractor’s Usual Tax Types Business Tax VAT – 12% if gross annual revenue exceed 1.5M Formula : Output Tax (Sales x 12%) - P x x x Less Input Tax (purchases x 12%) - x x x VAT Payable - P x x x Return Period Due Date Monthly Return 20th day ff taxable month Quarterly Return 25th day after end of quarter

VAT on Gov’t. Transactions Output Tax (12%) - P 12,000 Less: Standard Input (7%) - 7,000 VAT Payable - P 5,000 Less: Withholding Tax (5%) - 5,000 VAT Payable P -0-

Contractor’s Usual Tax Types Business Tax Percentage tax – 3% on the gross, if gross annual revenue is below 1.5M Return Period Due Date Monthly Percentage Tax 2oth day ff taxable month

Contractor’s Usual Tax Types Withholding Taxes Kind of Withholding Tax Due Date Withholding Tax on Wages 10th day of the ff month exempt for the month of Dec. which is due on the 15th day of Jan. Expanded Withholding Tax On Gov’t. Money Payments - 3% for Non-VAT - 5% for VAT 10th day of the following month

Contractor’s Usual Tax Types Submission of Annual Information Returns Annual Info Return Form Due Date (With soft copy) On Compensation 1604 CF Jan. 31 On Expanded WT 1604 E March 1

Common Transaction of Expanded Withholding Tax Rentals of Real /Personal Property - 5% Payment to Certain Contractors - 2% Professional fees - 10%/15% Income payments made by top 20k corp and 5k individual taxpayers - 1% /2% Income payments on purchases of mineral products/quarry resources - 10% Etc… please refer to BIR form 1601E (back portion)

Important! TP needs to file a return even when there’s no tax due to pay for every tax type he registered.

Excise Tax on Sand and Gravel Rate - 2% based on the actual market value of the gross output thereof Due Date - at the time of removal

Electronic Filing and Payment System (eFPS) Mandatory Enrollment to and availment of eFPS facility (RR 69-2009) Large Taxpayers All government Bidders Corporation with complete computerized system Taxpayers belonging to the list of Top 20,000 Private Corporations Taxpayers belonging to the Top 5,000 individual taxpayers

TCVD: Tax Compliance Verification Drive (Tax mapping) Original COR and the ARN must be conspicuously displayed in the place of busines

TCVD: Tax Compliance Verification Drive (Tax mapping) Original COR and the ARN must be conspicuously displayed in the place of business and/or office

UPDATE REGISTRATION DATA Accomplish Form 1905 and submit to your home RDO for: Change of registered address Change of registered activity Change of tax types (cancellation or addition) Additional personal exemption

MOST COMMON VIOLATIONS failure to register (often captured thru TCVD) failure to file return & pay tax due thereon or supply information at times required by law filing a return w/ an RDO other than those w/ whom return is required to be filed.

Stop-filer Cases When a taxpayer fails to file a tax return on the tax types he registered, the Integrated Tax System (ITS) will detect such failure, thus creating a stop-filer case for every failure in returns compliance. Such stop-filer case shall remain open until the corresponding return is duly filed and paid including penalties.

BIR’s CAPABILITY ENHANCEMENT RELIEF – Reconciliation of Listings for Enforcement resulting to Letter Notices TRS – Tax Reconciliation System using 1604-E resulting to letter notices (LNs) Tax Compliance Verification Drive (TCVD) - Tax Mapping Operations Compliance Enhancement – eFPS, e-REG, e-complaints, e-DST, e-submission, e-TIS, etc. 30

It's what you learn after you know it all that counts. - John Wooden

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