Taxation of individuals and business entities 2016 pdf
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- Substantial Income of Wealthy Households Escapes Annual Taxation Or Enjoys Special Tax Breaks
- Business tax laws in the Philippines
- Tax return for individuals (supplementary section) 2016
- Taxation of Individuals and Business Entities
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Substantial Income of Wealthy Households Escapes Annual Taxation Or Enjoys Special Tax Breaks
At the national level, taxes are imposed and collected pursuant to the National Internal Revenue Code, the Tariff and Customs Code, and several special laws. There are four main types of national internal revenue taxes: income, indirect value-added and percentage taxes , excise and documentary stamp taxes, all of which are administered by the Bureau of Internal Revenue BIR.
At the local level, governments have some autonomy to impose taxes on business and ownership of real property. There is a territorial system of taxation for foreign corporations and individuals, as well as non-resident citizens. Only Philippine-sourced income is subject to Philippine taxes for the latter group. Corporations incorporated under Philippine laws and resident citizens are subject to income tax on their worldwide income. Allowable expenses in computing the gross income subject to MCIT for certain business activities have been enumerated.
The tax is calculated on gross income instead of net income. Exemptions apply pursuant to tax treaty provisions. Certain types of income and corporations are subject to special tax rates and are as follows:.
These entities are not allowed to generate income from Philippine sources nor solicit or market goods and services on behalf of their head office or affiliates. They are authorised to act as supervisory, communications and coordinating centres for their affiliates;. Taxable income is calculated in accordance with the accounting method employed by the company.
Where there are differences in financial and tax reporting on the recognition of income and expenses, the differences are recognised as reconciling items on the income tax return. All expenses incurred in connection with the conduct of business are allowed to be claimed as deductions when calculating net income subject to tax. The tax code lists the following deductions: ordinary and necessary expenses; interest; taxes; losses; bad debts; depreciation; depletion of oil and gas wells and mines; charitable and other contributions; research and development; and contributions to employee pension trusts.
Deductibility of certain expenses is subject to limitations. Interest paid by corporations to a majority individual shareholder is non-deductible. Entertainment and recreation expenses of a business are subject to a limit of 0. Income tax in a foreign country by a domestic corporation on foreign-sourced income may be claimed as a deductible expense or as a tax credit against Philippine income tax due on such income.
Property losses sustained in relation to the business and not indemnified by insurance or other means are deductible from gross income. The net operating loss incurred in any taxable year can be carried forward to the three succeeding taxable years.
Capital losses can be offset only against capital gains. Losses from wash sales of stock or securities are not deductible. Research and development expenses may be claimed as a deduction during the year they are incurred. The taxpayer has an option to amortise the expense over a period of not less than 60 months, beginning with the month when the benefits from such expenditure were realised.
Contributions to a qualified employee pension trust are deductible to the extent of the excess of the contribution needed to cover the pension liability accruing during the taxable year.
The amount shall be apportioned equally over a period of 10 years. The plan should be pre-qualified by the tax authorities. Expenses must be substantiated with official receipts. Expenses may be disallowed as a deduction if the prescribed withholding tax on payments made for such expenses is not withheld and paid to the tax authorities.
The option to claim the OSD may be changed every year but the choice, once made in the first quarter, is irrevocable for the taxable year. A corporation may choose a calendar or fiscal year for its taxable year, depending on which schedule more accurately reflects its taxable income.
Prior approval from the BIR is required to change the accounting period. For tax purposes, each company is an independent entity and, as such, must file its own tax return and pay its own taxes. The filing of consolidated tax returns or the relieving of losses within a group of companies is not allowed. The documentation shall be submitted to the tax authorities upon notification. Domestic and resident foreign corporations must file their quarterly income tax returns within 60 days of the end of each taxable quarter.
They must also file a final adjusted return on or before the 15th of the fourth month following the end of the tax year — April 15 for taxpayers on calendar year. Non-resident foreign corporations are not required to file income tax returns.
Taxes due on their Philippine-sourced income are withheld at the source by the Philippine-based company making the payment. Excess income taxes paid during the year may be applied for refund or the amount may be carried over to the succeeding quarter.
The latter option shall be irrevocable for that taxable year and no application for cash refund shall be allowed. Tax credit certificates TCCs may only be used to pay for certain direct internal revenue tax liabilities of the holder, and are prohibited from being transferred to any person. In the Philippine government implemented a monetisation programme running from to that allows all value-added tax VAT TCCs to be converted to cash.
The improperly accumulated earnings tax IAET is essentially a penalty that is levied against closely held corporations for the unreasonable accumulation of its earnings resulting in the non-distribution of dividends to shareholders and, consequently, to deferred payment of dividends tax. Paid up capital refers to the par value, excluding any premium paid.
Banks, insurance companies, publicly held corporations and companies registered with — and enjoying preferential tax treatment in — special economic and freeport zones are not covered by the IAET.
The IAET is due one year and 15 days following the close of the taxable year and is covered by a separate tax return. Dividends from a domestic corporation are tax-exempt in the hands of other domestic corporations. Dividends received by domestic corporations from foreign corporations form part of the income subject to RCIT. The tax is based on total profits that are applied to remittance without any deduction for the tax component.
The tax is not waived even if the profits for remittance are reinvested in the Philippines. Branches registered in the special economic zones are exempt from this tax. Preferential rates of branch profits remittance tax are available under treaties. Tax treaties allow preferential rates. This tax is imposed on the cumulative net gain from the sale of shares during the taxable year.
Gains from the sale or disposition of capital assets other than land or buildings and shares in domestic corporations are taxed as business income.
Capital losses are deductible only to the extent of gains made. Foreign nationals and non-residents are subject to income tax only on income from Philippine sources. Only residents or citizens are taxed on worldwide income. If engaged in business or the practice of a profession, the net taxable income is calculated in the same manner as that for corporations.
For individuals, the tax year is the calendar year and income tax is due on or before April 15 of the following year. The tax liabilities of spouses are calculated separately, although spouses are required to file their tax returns jointly. Individuals filing income tax returns are required to disclose in their annual income tax returns the amounts and sources of other income that is exempt from tax or already subjected to final taxes.
For employees receiving only compensation, employers are relied upon to ensure that the correct tax for the year is fully withheld. Employees qualifying under the substituted filing scheme are exempt from filing annual income tax returns.
Employees receiving only the statutory minimum wage are exempt from the payment of income tax if they do not earn other taxable income, whether from the conduct of business or from other employment. Employers are not required to withhold tax from them. Non-resident aliens not engaged in business are not required to file an annual income tax return. Most income is subject to withholding of taxes. Withholding taxes on income subject to the RCIT are creditable against the calculated liability.
Most passive income is subject to final withholding taxes. For corporate taxpayers, this is disclosed as income that is no longer subject to regular income tax. Income payments to non-resident foreign corporations are withheld at the source as final taxes. Hence, non-resident foreign corporations are not required to file annual income tax returns.
The net amount is the VAT payable. Exempt status is granted to certain transactions and entities. Instead, the VAT paid forms part of the deductible costs of the business. A VAT taxpayer files monthly declarations and quarterly returns that serve as the final adjusted return for the period. The VAT on services performed in the Philippines by non-resident foreign corporations, as well as the VAT on royalties and rentals payable to such non-resident foreign corporations, is withheld by the paying local company.
Imports are subject to VAT unless specifically exempted. VAT is paid whether or not the importer conducts business. Percentage taxes on gross receipts apply to most services and transactions not subject to VAT, such as:.
In addition to VAT, excise taxes are imposed on the following: alcohol, tobacco, petroleum products, automobiles, mineral products, and non-essential goods such as jewellery and precious stones, perfumes, yachts and other sport vessels. A documentary stamp tax DST is required for certain documents, transactions or instruments specified in the tax code when the obligation or right arises from Philippine sources or when the property is situated in the Philippines.
These include:. The period allowed for tax authorities to audit companies and assess deficiency taxes is three years from the date of filing of the final return.
If fraud is alleged, this period may extend to 10 years from the date of discovery of the possible fraud. The deficiency tax may be collected within five years from the date when the assessment becomes final. Assessments may be contested in courts. In the case of taxes that have been excessively or erroneously paid, a taxpayer may apply for refund or the issuance of TCCs within two years from the date of payment.
For purposes of the creditable taxes withheld, the option to carry forward the excess credits generated shall be irrevocable once chosen. A VAT-registered taxpayer may apply for the refund of any excess VAT when the taxpayer shifts to a non-VAT activity or ceases to be in business or when such input taxes arise from zero-rated sales. All business entities subject to internal revenue taxes are required to maintain books of account.
These consist of a journal, a ledger and subsidiary records required for the business. Entities subject to VAT are also required to keep subsidiary sales and purchase journals.
Accounting records may be kept in either English or Spanish. The books and records must be preserved for a period of at least 10 years.
Business tax laws in the Philippines
This return shall be filed by every resident citizen deriving compensation income from all sources, or resident alien and non-resident citizen with respect to compensation income from within the Philippines, except the following:. An individual whose gross compensation income does not exceed his total personal and additional exemptions. An individual with respect to pure compensation income, as defined in Section 32 A 1 derived from sources within the Philippines, the income tax on which has been correctly withheld tax due equals tax withheld under the provisions of Section 79 of the Code: Provided, that an individual deriving compensation concurrently from two or more employers at any time during the taxable year shall file an income tax return. An individual whose income has been subjected to final withholding tax alien employee as well as Filipino employee occupying the same position as that of the alien employee of regional or area headquarters and regional operating headquarters of multinational companies, petroleum service contractors and sub-contractors, and offshore banking units; non-resident alien not engaged in trade or business. This return is filed on or before April 15 of each year covering income for the preceding taxable year.
At the national level, taxes are imposed and collected pursuant to the National Internal Revenue Code, the Tariff and Customs Code, and several special laws. There are four main types of national internal revenue taxes: income, indirect value-added and percentage taxes , excise and documentary stamp taxes, all of which are administered by the Bureau of Internal Revenue BIR. At the local level, governments have some autonomy to impose taxes on business and ownership of real property. There is a territorial system of taxation for foreign corporations and individuals, as well as non-resident citizens. Only Philippine-sourced income is subject to Philippine taxes for the latter group.
Tax return for individuals (supplementary section) 2016
The Individual Income Tax Returns Bulletin article and related statistical tables are published in the SOI Bulletin and contain summary statistics based on a sample of individual income tax returns Forms , A and EZ, including electronically-filed returns filed during the calendar year. Two versions of this data are made available during the year and they are described below:. A free Excel viewer is available for download, if needed.
High-income, and especially high-wealth, filers enjoy a number of generous tax benefits that can dramatically lower their tax bills. Eliminating or limiting these preferences would make the tax code more progressive and push back against inequality. Wealthy individuals can wait to sell until it makes the most sense for them, such as a year in which they will have large capital losses to offset the gain.
Income taxes in the United States are imposed by the federal , most states , and many local governments. The income taxes are determined by applying a tax rate, which may increase as income increases , to taxable income , which is the total income less allowable deductions. Income is broadly defined. Individuals and corporations are directly taxable, and estates and trusts may be taxable on undistributed income.
Taxation of Individuals and Business Entities
Filing status e. Can she request an extension to file her return? By what date must she do so? Assuming she requests an extension, what is the latest date that she could file her return this year without penalty? Benita can file an automatic six month extension to file her tax return. This extension must be filed by April 15th. October 15th is the latest date she can file her return without penalty.
Until the passage of Proposition E, San Francisco levied a 1. San Francisco was the only city in California to base its business tax on payroll expense. In , voters approved a shift from the payroll expense tax to one based on gross receipts.