Philippine taxation is already one of the most discussed topics on this blog. I have observed that many Filipinos are still confused when it comes to knowing and understanding their tax obligations to the government. I can’t blame them because taxation, especially income tax computation, is not an easy knowledge to learn. One might require hiring an accountant or a tax consultant to analyze, compute and prepare their tax returns with the BIR. But for small taxpayers, who can’t afford to get the service of an accountant or a tax preparer, they resort to preparing their tax return on their own.
Employees, who have been withheld with tax on compensation, may also ask how their employers compute their withholding tax. Thus, they also look for information that may answer their tax questions. The Bureau of Internal Revenue (BIR) is the government agency that is supposed to assist taxpayers in all their queries about national taxes. But some of the taxpayers that visited our blog said that they are not accommodated by the BIR. I’m not sure if it’s true, perhaps, they are not just comfortable talking face to face with a revenue officer who may interview them about the details of their income and related accounts. Maybe they are also telling the truth.
According to our Tax Code, income tax is a tax on a person’s income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income, by the Tax Code, as amended, or other special laws. As the name “income tax” suggests, it is a tax imposed on income. Thus, if you are earning income from your business, practice of profession, employment, or any other activities that will result to taxable income, you may become liable to income tax in the Philippines.
Many of our blog’s visitors are coming here in search for answers to their questions about income tax. These people consist of business owners, practicing professionals, and employees who have queries on how to compute their income tax. If you are one of the people who search the Internet to learn such information, you can visit and read the following articles to learn more about income taxation in the Philippines.
How to Compute Income Tax for Self-employed Individual
This is an article that will guide self-employed individual taxpayers in computing and preparing their annual income tax returns (BIR Form 1701). These individual taxpayers include owners of single proprietorship business and individuals who practice their profession.
How to Compute Quarterly Income Tax for Self-employed Individual
This is an additional post to the article above. This is a guide for computing and preparing quarterly income tax return (BIR Form 1701Q) for self-employed individuals. It also discusses the taxpayers required to file, the deadlines for filing, and the procedures for filing and paying the tax payable with the BIR or its authorized agents.
How to Compute Income Tax for Corporations and Partnerships
If you are filing annual income tax for corporations and partnerships this article shall guide you. Domestic corporations receiving income from sources within and outside the Philippines, foreign corporations receiving income from sources within the Philippines, and taxable partnerships are taxed and required to file annual income tax using BIR Form 1702 (BIR Form 1702Q for quarterly income tax).
How to Compute Withholding Tax on Compensation
If you’re an employee whose compensation income is deducted with withholding tax by you employer, you might be wondering how your employer’s accountant is computing the withholding tax. This article will guide and give you an idea about the computation of withholding tax on compensation in the Philippines. It discusses some of the methods stated in the BIR’s Revised Withholding Tax table.
You can also check out our other tax articles found in our tax guide post. Our blog will continue to publish useful articles about taxation in the Philippines, not only on income taxation, but also on other tax discussions that may help our readers and visitors. Hence, always visit us to learn new things everyday. Thank you for always visiting us.
Victorino Q. Abrugar is a marketing strategist and business consultant from Tacloban City, Philippines. Vic has been in the online marketing industry for more than 7 years, practicing problogging, web development, content marketing, SEO, social media marketing, and consulting.
Hi Vic, I will be computing my cousin’s ITR for the first time and I have a few questions though I’ve learned this from school, it’s a lot different in real life. She is a dermatologist. Here are my questions:
1) How do I fill out Sec 29 (sch 2) of the form? I’m confused because it needs the name of the payors but my cousin got her income from different people. Do I need to fill it all out or just put in the total amount?
2) For Sec 40C – tax payments for the first three quarters:
a) does it include penalties or just the amount of tax due?
b) what if it’s a negative amount? since my cousin has a lot of 2307’s?
c) for 1701Q, can we carry over a negative tax payable to the next quarter?
3) If Sec 43C, if it’s an overpayment, what do u advise, a) to be refunded b) to be issued TCC or c) to be carried over as tax credit next year. And what are the consequences?
4) If both husband and wife are professionals or the other one owns a business, who will file 1701? (I’m thinking that I will make my cousin’s computations (the derma) and have it given to her hubby’s accountant)
5) Is it ok if my cousin uses OSD while and her husband uses Itemized deduction?
Vic, please enlighten me. This is my first time doing it and I don’t want to make a mistake. My cousin will recommend me to her other friends if I do this right 🙂
Hi Vic. May I request for your assistance. My friends and I are in the same situation.
We resigned from company A last March 2011 and started working for company B on March 2011 as well. We have submitted our latest ITR prior to getting our backpay to company B. Company B was requesting for us to submit the ITR from company A after getting our backpay. One of my friends who complied and submitted the ITR from company A with the backpay computation experienced considerable increase in her taxes so we didn’t do the same.
Today we received the ITR from company B with the instruction that we should consolidate our income with our previous employer and go to BIR. We’re afraid that if we do it, our taxes might skyrocket. What is the penalty if we don’t fill out the form 1700? Thanks in advance
Hi Joyce. The ITR you are referring to is the BIR Form No. 2316 and the tax withheld thereon is deductible against your annual tax due. For employees with multiple employers are required to annualize their compensation income to determine the total annual tax due. If withholding were less, then, there is an additional tax due. Should you fail to file and pay the required tax, you may be assessed and get penalized – 25% surcharge, 20% interest, and compromise penalty, or worst, sued for tax evasion if they would found it intentional and wanton disregard.
We actually have a seminar workshop on individual income taxation and filling out the NEW ITR FORMS for 2011. You may opt to attend for more learnings.
hi!
What are the tax consequences if sales are recorded un the subsidiary sales book upon collection rather than the time it was made? Will I be penalized for it? How do I remedy it? Thank you so much in advance!
Hi Grace. If you are a seller of goods, VAT liability will have a timing difference and as such may be charged penalty for late filing. If you are a seller of service, then, there will be no problem with that for VAT purposes.
For income tax purposes, it will pose a problem under accrual basis.
Good day!
Can you please let me know what are the differences for the income taxation of Non-stock, non-profit educational institution and corporate income tax
Thank you
Hi Thirdy. Do you mean income taxation of non-stock, non-profit educational institution and proprietary educational institution? Non-stock, non-profit educational institution is exempt from income tax, while proprietary educational institution is subject to 10% corporate income tax. The non-stock do not declare dividends so members may have hard times getting their share in return for their efforts, while in proprietary, the stockholders can receive dividends from the retained earnings and such dividend is subject to 10% final withholding tax.
We have a seminar program on Income Taxation of Corporations and the New ITR you may be interested to participate. Please click on the link for more details – http://taxacctgcenter.org/programs/basic-income-taxation-for-corporations-under-new-itr/. Thanks