Filing and Paying Taxes
The Small Enterprise Knowledge Center provides a complete guide in starting and managing a business. Through the basic business modules, the Center aims to equip you with knowledge on the key aspects of a business. All materials published in the Center were based from the U.S. Small Business Administration website (www.sba.gov) and adapted to suit the local Philippine situation and laws.
Filing and Paying Taxes
Are you thinking about starting a business of your own? Explore the modules below to learn the aspects of starting a business and find ways on how to succeed.
Businesses are mandated by the law to make compulsory contribution to the government in the form of tax. Establishing a business requires you to be knowledgeable on the appropriate guidelines in paying your tax.
The Bureau of Internal Revenue (BIR) is the primary government agency that is in-charge in registering and reminding tax payers of their obligations. There are different types of tax that is collected by BIR. These include the following:
- Capital Gains Tax is a tax collected based on the gains of the seller from the sale, exchange, or other disposition of capital assets located in the Philippines.
- Documentary Stamp Tax is tax on documents, instruments, loan agreements and papers that shows evidence of acceptance, assignment, sale or transfer of an obligation, rights, or property incident.
- Donor’s Tax is tax on donation or gift and on free transfer of property.
- Estate Tax is tax on the properties transmitted from a deceased person to his/her lawful heirs and beneficiaries.
- Income Tax is tax on all yearly profits arising from property, profession, trades or offices or as a tax on a person’s income, benefits, profits and the like.
- Percentage Tax is a business tax based on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P550,000 and are not VAT-registered.
- Value-Added Tax is a business tax collected from the seller in the course of trade or business on every sale of properties (real or personal), lease of goods or properties (real or personal) or vendors of services. It is an indirect tax. Thus, it can be passed on to the buyer.
- Withholding Tax on Compensation is the tax from individuals receiving purely compensation income.
- Expanded Withholding Tax is a withholding tax which is required only for certain payors and is creditable against the income tax due of the payee for the taxable quarter year.
- Final Withholding Tax is a withholding tax which is required only for certain payors and is not creditable against the income tax due of the payee for the taxable year.
- Withholding Tax on Government Money Payments is a withholding tax of government offices and entities, including government-owned or -controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations.
After identifying which among these taxes are applicable to you, you can now register to the BIR. The agency provides a complete list of requirements on their website. Each is categorized based on different types of entities which include the following:
- For self-employed and mixed income individuals
- Estates (under judicial settlement)
- Individuals earning purely compensation income
- Non-residents citizens
- OCWs/Seamen earning purely foreign-sourced income
- Corporations/partnerships (including government-owned and controlled corporations) (taxabe/non-taxable)
- Government Agencies and Instrumentalities
- Local Government Units
- One time taxpayers (with no previously issued TIN)
- Persons registering under E.O 98 (securing a TIN to be able to transact with any government office, e.g. LTO, NBI, DFA, etc.)
In addition, the website provides tax forms and specifies procedures and deadlines based on the abovementioned classification. You can also determine your tax schedule using BIR’s tax calendar on their website.
Source: Bureau of Internal Revenue