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

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

3. Things to consider In the conduct of your Business

4. 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.

5. On Registration
Pay Annual Registration Fee of P 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

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

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

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

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

10. 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.

11. 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

12. 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

13. 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.

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

15. 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

16. 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

17. 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-

18. 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

19. 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

20. 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

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

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

23. 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

24. Electronic Filing and Payment System (eFPS)
Mandatory Enrollment to and availment of eFPS facility (RR )
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

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

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

27. 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

28. 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.

29. 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.

30. 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

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

32. The end....