Comparison of RA No and RA No. 8424, as amended

Transcription

1 Comparison of RA No and RA No. 8424, as amended Rotary Club of Manila January 25, 2018 This report is solely for the use of client personnel. No part of it may be circulated, quoted or reproduced for distribution outside the client organization without prior written approval from Reyes Tacandong & Co.

2 Background of the Tax Reform The Tax Reform for Acceleration and Inclusion amends certain provisions of Republic Act No (The National Internal Revenue Code of 1997), as amended. The enrolled bill was sent to President Duterte for approval and was signed into law as Republic Act No on December 19, The law takes effect this January 1, 2018 following its complete publication in the Official Gazette last December 27, The President has issued a separate letter vetoing 5 provisions of the signed Law. The law is just the first tax reform package. The second package (reduction of corporate income tax and rationalization of fiscal incentives) is estimated to be released by early SL - 2

3 Key amendments The amendments focus on: Individual Income Tax Final Income Tax Estate Tax Donor s Tax Value Added Tax Excise Tax on: Automobiles Petroleum products Sweetened beverages Mineral products Cosmetic surgeries (non-essential services) Documentary Stamp Tax Some administrative provisions Penalties SL - 3

4 Power and authority of the Commissioner

5 Power and authority of the Commissioner Section 5 (B) Power of the Commissioner to obtain information, and to summon, examine and take testimony of persons Provides for the authority of the Commissioner to obtain information from national and local governments, government agencies and instrumentalities Additional provision: The Cooperative Development Authority shall submit a report on tax incentives availed by cooperatives to the BIR and DOF. These information shall be included in the Tax Incentives Management and Transparency Act (TIMTA) database. SL - 5

6 Power and authority of the Commissioner Section 6 Power of the Commissioner to make assessments and prescribe additional requirements for tax administration and enforcement The Commissioner has the authority to determine fair market value of real properties. In exercising this authority, the following shall be observed: 1. Mandatory consultation with both private and public competent appraisers before division of the Philippines into zones. 2. Prior notice to affected taxpayers before the determination of fair market values of the real properties. 3. Publication or posting of adjustments in zonal value in a newspaper of general circulation in the province, city or municipality concerned. 4. The basis of valuation and records of consultation shall be public records open to the inquiry of any taxpayer. 5. Zonal valuations shall be automatically adjusted once every three years. SL - 6

7 Personal and/or Corporate Income Tax

8 Personal Income Tax Section 24 Income tax rates on Individual Citizen and Individual Resident Alien of the Philippines Taxable income of individuals are subject to the following graduated rates: Not over 10,000 Over 10,000 but not over 30,000 Over 30,000 but not over 70,000 Over 70,000 but not over 140,000 Over 140,000 but not over 250,000 TAX SCHEDULE 5% % of the excess over 10,000 2, % of the excess over 30,000 8, % of the excess over 70,000 22, % of the excess over 140,000 The amendment provides for revised personal income tax brackets for : TAX SCHEDULE EFFECTIVE JANUARY 1, 2018 TO DECEMBER 31, 2022 Not over 0% 250,000 SL - 8

9 Personal Income Tax Section 24 Income tax rates on Individual Citizen and Individual Resident Alien of the Philippines Taxable income of individuals are subject to the following graduated rates: Over 250,000 but not over 500,000 Over 500,000 TAX SCHEDULE 50, % of the excess over 250, , % of the excess over 500,000 The amendment provides for revised personal income tax brackets for : TAX SCHEDULE EFFECTIVE JANUARY 1, 2018 TO DECEMBER 31, 2022 Over 250,000 but not over 400,000 Over 400,000 but not over 800,000 Over 800,000 but not over 2M Over 2M but not over 8M Over 8M 20% of the excess over 250,000 30, % of the excess over 400, , % of the excess over 800, , % of the excess over 2M 2,410, % of the excess over 8M SL - 9

10 Personal Income Tax Section 24 Income tax rates on Individual Citizen and Individual Resident Alien of the Philippines For 2023 onwards: TAX SCHEDULE EFFECTIVE JANUARY 1, 2023 onwards Not over 250,000 Over 250,000 but not over 400,000 Over 400,000 but not over 800,000 Over 800,000 but not over 2,000,000 Over 2M but not over 8M Over 8M 0% 15% of the excess over 250,000 22, % of the excess over 400, , % of the excess over 800, , % of the excess over 2M 2,202, % of the excess over 8M SL - 10

11 Personal Income Tax Section 24 Income tax rates on Individual Citizen and Individual Resident Alien of the Philippines Note that the BIR issued through Revenue Memorandum Circular No the revised withholding tax on compensation table. SL - 11

12 Personal Income Tax Section 24 Income tax of selfemployed and/or professionals Taxable income is subject to the same graduated rates. For Purely Self-employed and/or Professionals whose gross sales/receipts and other non-operating income do not exceed the VAT threshold of 3M, the tax shall be, at the taxpayer s option, either: 1. 8% income tax on gross sales or gross receipts in excess of 250,000 in lieu of the graduated income tax rates and the percentage tax; OR 2. Income tax based on the graduated income tax rates for individuals. SL - 12

13 Personal Income Tax Section 24 Income tax of mixed income earners Taxable income is subject to the same graduated rates. For mixed income earners (earning both compensation income and income from business or practice of profession, their income taxes shall be: 1. For income from compensation Graduated income tax rates for individuals, AND SL - 13

14 Personal Income Tax Section 24 Income tax of mixed income earners Taxable income is subject to the same graduated rates. 2. For income from business or practice of profession: a. Gross sales/receipts which do not exceed the VAT threshold of 3M 8% income tax on gross sales/receipts and other non-operating income income OR graduated income tax rates on taxable income, at the taxpayer s option b. Gross sales/receipts and other non-operating income which exceeds the VAT threshold of 3M graduated income tax rates for individuals. SL - 14

15 Personal Income Tax Section 24 (B)(1) Final tax on winnings Philippine Charity Sweepstakes and Lotto winnings is exempt from the 20% final tax. Philippine Charity Sweepstakes and Lotto winnings in excess of 10,000 shall be subject to the 20% final tax. SL - 15

16 Personal Income Tax Section 24 (B)(1) Final tax on interest on foreign currency deposit Interest income received by an individual taxpayer (except a non-resident individual) from a depository bank under the expanded foreign currency deposit (EFCD) system is subject to 7.5% final tax. The rate of final tax on interest income received by resident individual taxpayer under the expanded foreign currency deposit system increased from 7.5% to 15% final tax. SL - 16

17 Personal Income Tax Section 24 (C) Capital gains tax on sale of shares not traded through the stock exchange The capital gains tax on net capital gains realized from sale, barter, or exchange or other disposition of shares of stock in a domestic corporation not traded through the stock exchange is: Not over 100,000 5% The final tax rate for net capital gains tax on the sale, barter, exchange or other disposition of shares of stock in a domestic corporation not traded through the stock exchange is increased from the 5/10% CGT to a flat rate of 15% CGT. On any amount in excess of 100,000 10% SL - 17

18 Personal Income Tax Section 25 (C), (D), (E) Preferential tax rate for individuals employed by RHQ, ROHQ, OBU and Petroleum Contractors and subcontractors Alien individuals and qualified Filipino employees employed by 1. Regional or area and Regional Operating headquarters of multinational companies (RHQs and ROHQs) [Subsection (C)] 2. Offshore banking units (OBUs) [Subsection (D)] 3. Petroleum Service contractor and subcontractor [Subsection (E)] are subject to a preferential tax of 15% final withholding tax on gross compensation income. Additional provision [Subsection (F)]: The 15% preferential tax rate provided in Subsections (C), (D), and (E) shall not be applicable to RHQs, ROHQs, OBUs or Petroleum service contractor and subcontractor registering with the SEC after January 1, But existing RHQs, ROHQs, OBUs or Petroleum service contractor and subcontractor shall continuously be entitled to avail of the preferential tax treatment for their present and future qualified employees. SL - 18

19 Personal Income Tax Section 25 (C), (D), (E) Preferential tax rate for individuals employed by RHQ, ROHQ, OBU and Petroleum Contractors and subcontractors Presidential Veto: The President vetoed this line item under Subsection (F): But existing RHQs, ROHQs, OBUs or Petroleum service contractor and subcontractor shall continuously be entitled to avail of the preferential tax treatment for their present and future qualified employees. for being violative of equal protection. The President stated in his letter that [g]iven the significant reduction in the personal income tax, the employees of these firms should follow the regular tax rates applicable to other individual taxpayers. SL - 19

20 Personal Income Tax Section 31 Definition of Taxable Income Means the pertinent items of gross income specified in this Code, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income by this Code or other special laws The phrase and/or personal and additional exemptions is removed in the definition. SL - 20

21 Personal Income Tax Section 35 Personal Exemptions Individual taxpayers are entitled to: Basic Personal Exemption 50,000 and Additional Exemption 25,000 per qualified dependent child. The Basic Personal and Additional Exemptions of individual taxpayers are removed. The related provision on furnishing of exemption certificate is likewise removed. SL - 21

22 Personal Income Tax Section 32 (B) Tax exempt 13th month pay The amount of tax-exempt 13th month pay and other benefits is 82,000. The amount of tax-exempt 13th month pay and other benefits is increased to 90,000. SL - 22

23 Personal Income Tax Section 33 (A) Tax on fringe benefits given to non-rank and file employees Fringe benefits given to nonrank and file employees are subject to 32% final tax. The grossed up monetary value of the fringe benefit given to non-rank and file employees shall be determined by dividing the actual monetary value by 68%. The Fringe Benefits Tax is increased to 35% effective January 1, The grossed up monetary value of the fringe benefit given to non-rank and file employees shall be determined by dividing the actual monetary value by 65%. SL - 23

24 Personal Income Tax Section 34 (M) Allowable deduction for premium payments on health and/or hospitalization insurance The allowable deduction for premium payments on health and/or hospitalization insurance of an individual taxpayer is 2400 per year or 200 per month, subject to a gross family income threshold of 250,000. Allowable deduction for premium payments on health and/or hospitalization insurance of an individual taxpayer is removed. SL - 24

25 Personal Income Tax Section 51 Filing of individual income tax return An individual whose gross income does not exceed his total personal and additional exemptions for dependents are not required to file income tax return (ITR). Individual taxpayers whose taxable income is subject to zero percent under the new graduated tax table (i.e., does not exceed 250,000) shall not be required to file an income tax return. SL - 25

26 Personal Income Tax Additional provision: The ITR shall consist of a maximum of four (4) pages in paper OR electronic form. It shall only contain the following information: Personal profile and information Gross sales receipts or income from compensation, from business, or from exercise of profession (except income subject to final tax) Allowable deductions Taxable income Income tax due and payable SL - 26

27 Personal Income Tax Section 51-A Substituted Filing of Income tax returns by employees receiving purely compensation income from only one employer in the Philippines No provision. Substituted filing of ITRs is available for: Individual taxpayers Receiving purely compensation income, regardless of amount From only one employer in the Philippines for the calendar year The income tax of which has been correctly withheld by the employer (i.e. tax due = tax withheld) The Certificate of Withholding filed by the employers duly stamped received by the BIR shall be the substituted filing by such employers. SL - 27

28 Personal Income Tax Section 56 (A)(2) Installment Payment of tax due for individuals and corporations When tax due exceeds 2,000, the taxpayer (other than a corporation) may elect to pay the tax in two equal installments. Payment of installments: First installment time of filing of return Second installment on or before July 15 following the close of the calendar year. The new deadline of payment of second installment is October 15 following the close of the calendar year. SL - 28

29 Personal Income Tax Section 62 Exemption for estates and trusts There is an allowed personal exemption of 50,000 from the income of the estate or trust. The exemption for estates and trusts is removed. SL - 29

30 Personal Income Tax Section 74 Declaration of Income tax for individuals Every individual subject to income tax shall make and file a declaration of his estimated income for the current taxable year on or before April 15 of the same taxable year. The amount of estimated income with respect to which a declaration is required shall be paid in four (4) installments: First at time of declaration Second August 15 Third November 15 Fourth on or before April 15 of the following calendar year when the final adjusted income tax return is due to be filed. The deadline for filing of declaration estimated income for the current taxable year is on or before May 15 of the same taxable year. The payment of the four installments shall be: First May 15 Second August 15 Third November 15 Fourth on or before May 15 of the following calendar year when the final adjusted income tax return is due to be filed. SL - 30

31 Personal and Corporate Income Tax Section 34 (L) Optional Standard Deduction Individual taxpayers (except non-resident alien) and corporations may elect a standard deduction not exceeding 40% of gross sales/receipts or of gross income, as the case may be, in lieu of itemized allowable deductions. For GPPs and the partners comprising them, OSD may be availed only once, i.e., either by the GPP itself or by the partners comprising the GPP. SL - 31

32 Personal and Corporate Income Tax Section 57 Withholding of creditable tax at source The rate of withholding tax on items of income payable by payor-corporations/persons shall be not less than one percent (1%) but not more than thirty-two percent (32%). The tax withheld shall be credited against the income tax liability of the taxpayer. Beginning January 1, 2019, the rate of withholding tax shall be not less than one percent (1%) but not more than fifteen percent (15%). Revenue Memorandum Circular No provides that the applicable EWT rate on income payments to selfemployed individuals/ professionals is 8%. SL - 32

33 Corporate Income Tax Section 27 (C) Exemption Government-owned or -Controlled Corporations, Agencies or Instrumentalities The Philippine Charity Sweepstakes Office (PCSO) is among the list of GOCCs, agencies, or instrumentalities that are exempt from payment of corporate income tax. PCSO is not anymore exempt from payment of corporate income tax. SL - 33

34 Corporate Income Tax Section 27 (D)(1) Final Tax on interest on foreign currency deposit Interest income received by a domestic corporation from a depository bank under the expanded foreign currency deposit (EFCD) system is subject to 7.5% final tax. The rate of final tax on interest income received by domestic corporation under the expanded foreign currency deposit system increased from 7.5% to 15% final tax. SL - 34

35 Corporate Income Tax Section 27 (D)(2) Capital gains tax on sale of shares not traded through the stock exchange The capital gains tax on net capital gains realized from sale, barter, or exchange or other disposition of shares of stock in a domestic corporation not traded through the stock exchange is: Not over 100,000 5% The final tax rate for net capital gains tax on the sale, barter, exchange or other disposition of shares of stock in a domestic corporation not traded through the stock exchange is increased from the 5/10% CGT to a flat rate of 15% CGT. On any amount in excess of 100,000 10% SL - 35

36 Corporate Income Tax Section 52 Filing of corporate income tax return Every corporation subject to tax, except foreign corporations not engaged in trade or business in the Philippines, shall render in duplicate, a true and accurate quarterly income tax return; AND Final or adjustment return. Additional provision: The ITR shall consist a maximum of four (4) pages in paper OR electronic form. It shall also only contain the information as required in ITRs of individual taxpayers. These requirements shall not affect the implementation of TIMTA. SL - 36

37 Final Withholding Tax and Expanded Withholding Tax Returns Section 58 Return and payments of taxes withheld at source The return for FWT and the return for creditable withholding taxes (EWT returns) shall be filed within ten (10) days after the end of each month [Sec of RR No. 2-98)] FWT and EWT returns shall be filed and the payment made not later than the last day of the month following the close of the quarter during which the withholding was made. The provision that the Commissioner may require the payment of the taxes withheld at more frequent intervals is removed. SL - 37

38 Estate Tax

39 Estate Tax Section 84 Rates of estate tax SL - 39 The estate tax rate is based on a graduated schedule. NET ESTATE Not over 200,000 Over 200,000 but not over 500,000 Over 500,000 but not over 2M Over 2M but not over 5M Over 5M but not over 10M TAX Exempt 5% of the excess over 200,000 15, % of the excess over 500, , % of the excess over 2M 465, % of the excess over 5M Over 10M 1,215, % of the excess over 10M The estate tax rate is fixed at 6% based on the value of the net estate.

40 Estate Tax Section 86 (A) Allowable deductions from the gross estate of a citizen or resident The value of the net estate of a resident or citizen is determined by deducting the following from the gross estate: 1. Standard deduction of 1,000,000; 2. Expenses, losses, indebtedness, and taxes a. Funeral expenses b. Judicial expenses c. Claims against the estate d. Claims against insolvent persons e. Unpaid mortgages The following are the allowable deductions from the gross estate of a resident or citizen: 1. Standard deduction of 5,000,000; 2. Claims against the estate; 3. Claims against insolvent persons; 4. Unpaid mortgage or indebtedness on property; SL - 40

41 Estate Tax Section 86 (A) Allowable deductions from the gross estate of a citizen or resident 5. Property previously taxed; 6. Transfers for public use; 7. Family home in the amount of 1,000,000; 8. Medical expenses, not exceeding 500, Amount received by heirs under RA No (Retirement benefits of private firm employees) 5. Property previously taxed; 6. Transfers for public use; 7. Family home, in the increased amount of 10,000,000; 8. Amounts received by heirs under RA No (Retirement benefits of private firm employees) SL - 41

42 Estate Tax Section 86 (B) Allowable deductions from the gross estate of a non-resident The value of the net estate of a non-resident is determined by deducting the following from the gross estate: 1. Expenses, losses, indebtedness, and taxes in proportion to the value of the entire gross estate situated in the Philippines; 2. Property previously taxed; 3. Transfers for public use For Non-residents: 1. Standard deduction in the amount of 500, Value of Claims against the estate Claims against insolvent person Unpaid mortgages In proportion to the value of the entire gross estate situated in the Philippines 3. Property previously taxed 4. Transfer for public use SL - 42

43 Estate Tax Section 86 (D) Miscellaneous provision for nonresidents No deduction shall be allowed in the case of a nonresident not a citizen of the Philippines, unless the executor, administrator, or anyone of the heirs, as the case may be, includes in the return required to be filed under Section 90 the value at the time of his death of that part of the gross estate of the nonresident not situated in the Philippines. Miscellaneous provision is deleted. SL - 43

44 Estate Tax Section 89 Notice of death Notice of decedent s death shall be filed by the executor, administrator, or any of the legal heirs within two months after death or after qualifying as such executor or administrator: In all cases of transfers subject to tax In cases where though exempt from tax, the gross value of the estate exceeds 20,000. Requirement for filing of notice of death is removed. SL - 44

45 Estate Tax Section 90 Attachment to Estate Tax Return - CPA certification Estate tax returns showing a gross value exceeding 2,000,000 shall be supported with a statement duly certified by a CPA. The threshold amount for the requirement of attaching a statement duly certified by a CPA is increased to 5,000,000 (from 2,000,000). SL - 45

46 Estate Tax Section 90 (B) Time of filing of estate tax return Estate tax returns shall be filed within six (6) months from the decedent s death. The filing of estate tax returns shall be within one (1) year from the decedent s death. SL - 46

47 Estate Tax Section 91 (C) Payment by installment of estate tax [new] No provision In case the available cash of the estate is insufficient to pay the total estate tax due, payment by installment shall be allowed within two (2) years from the statutory date of payment, without civil penalty and interest. SL - 47

48 Estate Tax Section 97 Payment of tax antecedent to the transfer of shares, bonds, or rights If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account unless the Commissioner has certified that the taxes imposed thereon have been paid. If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall allow any withdrawal from the said deposit account, subject to a final withholding tax of (6%). SL - 48

49 Donor s Tax

50 Donor s Tax Section 99 Rates of tax The donor s tax for each calendar year shall be computed on the basis of the total net gifts made during the calendar year in accordance with the graduated tax table. The donor s tax is fixed at 6% based on annual total gifts exceeding 250,000 (exempt gift), regardless of whether the donee is a stranger or not. NET GIFT Not over 100,000 Over 100,000 but not over 200,000 Over 200,000 but not over 500,000 Over 500,000 but not over 1M TAX Exempt 2% of the excess over 100,000 2, % of the excess over 200,000 14, % of the excess over 500,000 NET GIFT Over 1M but not over 3M Over 3M but not over 5M Over 5M but not over 10M TAX 44, % of the excess over 1M 204, % of the excess over 3M 404, % of the excess over 5M Over 10M 1,004, % of the excess over 10M SL - 50

51 Donor s Tax Section 99 Rates of tax The donor s tax shall be 30% of the net gifts when the donee or beneficiary is a stranger. The donor s tax is fixed at 6% based on annual total gifts exceeding 250,000 (exempt gift), regardless of whether the donee is a stranger or not. SL - 51

52 Donor s Tax Section 100 Transfer for less than adequate consideration The amount by which the fair market value of the property transferred exceeded the value of the consideration received for such transfer, shall for purpose of donor s tax, be deemed a gift, and included in computing the amount of gifts made during the year. Additional proviso: Even if the sale, exchange, or other transfer of property is for an insufficient consideration, the same will still be considered made for adequate and full consideration provided that such transfer is made in the ordinary course of business, i.e.: a bona fide transaction; at arm s length; and free from donative intent. SL - 52

53 Donor s Tax Section 101 Exemption of certain gifts Dowries or gifts made on account of marriage by parents to each of their legitimate, recognized, natural, or adopted children to the extent of the first 10,000 shall be exempt from donor s tax. The exemption of dowries (gifts made on account of marriage) is removed. SL - 53

54 Value-Added Tax

55 Value-Added Tax Section 106 (A)(2) Zero-rated sale of goods or properties The following are entitled to VAT zero-rating: 1. The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement, and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules of the BSP; The following sales by VATregistered persons shall be subject to zero percent 0% rate: 1. The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement, and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules of the BSP; SL - 55

56 Value-Added Tax Section 106 (A)(2) Zero-rated sale of goods or properties 2. Sale and delivery of goods to: Registered enterprises within a separate customs territory Registered enterprises within enterprise zones (The above provision was vetoed by President Duterte because this go against the principle of limiting the VAT zero-rating to direct exporters.) SL - 56

57 Value-Added Tax Section 106 (A)(2) Zero-rated sale of goods or properties 2. Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packaging or repackaging and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; 3. Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packaging or repackaging and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; SL - 57

58 Value-Added Tax Section 106 (A)(2) Zero-rated sale of goods or properties 3. Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; 4. Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; 4. Sale of gold to BSP; SL - 58

59 Value-Added Tax Section 106 (A)(2) Zero-rated sale of goods or properties SL Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 198, and other special laws; 6. The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air-transport operations; 5. Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 198, and other special laws; and 6. The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air-transport; provided that the goods, supplies, equipment and fuel have been sold and used for international shipping and air-transport operations;

60 Value-Added Tax Section 106 (A)(2) Zero-rated sale of goods or properties Additional provision: Items 3, 4, and 5 shall be subject to 12% VAT and no longer be considered export sales subject to 0% VAT upon the satisfaction of the following conditions: There is a successful establishment and implementation of an enhanced vat refund system that grants refunds of creditable input tax within 90 days from the filing of the vat refund application with the Bureau All pending VAT refund claims as of December 31, 2017 shall be fully paid in cash by December 31, SL - 60

61 Value-Added Tax Section 106 (A)(2) Zero-rated sale of goods or properties Deleted provision: The following shall no longer be subject to 0% VAT: 1. Sale of gold to BSP 2. Foreign-currency denominated sales SL - 61

62 Value-Added Tax Section 108 (A) Definition of sale or exchange of services Sale or exchange of services include sales of electricity by generation companies, transmission, and distribution companies. Sale or exchange of services include sales of electricity by generation companies, transmission by any entity, and distribution companies, including electric Cooperatives. SL - 62

63 Value-Added Tax Section 108 (B) Zero-rated sale of services The following are entitled to VAT zero-rating: 1. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); The following are entitled to VAT zero-rating: 1. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); SL - 63

64 Value-Added Tax Section 108 (B) Zero-rated sale of services 2. Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); 2. Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); SL - 64

65 Value-Added Tax Section 108 (B) Zero-rated sale of services 3. Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; 4. Services rendered to persons engaged in international shipping or international air transport operations, including leases of property for use thereof; 3. Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; 4. Services rendered to persons engaged in international shipping or international air transport operations, including leases of property for use thereof; provided, that these services shall be exclusively for international shipping or air transport operations; SL - 65

66 Value-Added Tax Section 108 (B) Zero-rated sale of services 5. Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production are no longer entitled to VAT zerorating. 5. Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production are no longer entitled to VAT zerorating. SL - 66

67 Value-Added Tax Section 108 (B) Zero-rated sale of services 6. Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign country; 7. Sale of power or fuel generated through renewable sourced of energy such as but not limited to biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels 6. Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign country; 7. Sale of power or fuel generated through renewable sourced of energy such as but not limited to biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels SL - 67

68 Value-Added Tax Section 108 (B) Zero-rated sale of services 8. Services rendered to: Registered enterprises within a separate customs territory Registered enterprises within tourism enterprise zones (Above provision was vetoed by President Duterte) SL - 68

69 Value-Added Tax Section 108 (B) Zero-rated sale of services Additional provision: Items 1 and 5 shall be subject to 12% VAT and no longer be considered export sales subject to 0% VAT upon the satisfaction of the following conditions: There is a successful establishment and implementation of an enhanced vat refund system that grants refunds of creditable input tax within 90 days from the filing of the vat refund application with the Bureau All pending VAT refund claims as of December 31, 2017 shall be fully paid in cash by December 31, SL - 69

70 Value-Added Tax Section 108 Zero-rated sale of goods or properties and zero-rated sale of services Additional provision: The Department of Finance shall establish a VAT Refund Center in the BIR and BOC that will handle the processing and granting of cash refunds or creditable input tax. 5% of the total VAT collection of the BIR and BOC from the immediately preceding year shall be automatically appropriated annually treated as a special account in the General Fund or as trust receipts to fund claims for VAT refund. SL - 70

71 Value-Added Tax Section 108 Zero-rated sale of goods or properties and zero-rated sale of services Additional provision: The BIR and BOC shall submit to the Congressional Oversight Committee on the Comprehensive Tax Reform Program a quarterly report of all pending claims for refund and unused fund. SL - 71

72 Value-Added Tax Section 109 VAT-exempt transactions Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing, residential lot valued at 1,919,500 and below; house and lot, and other residential dwellings valued at 3,199,200 and below. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing, residential lot valued at 1,500,000 and below; house and lot, and other residential dwellings valued at 2,500,000 and below. Beginning January 1, 2021: the VAT exemption shall not anymore apply to Sale of Low-cost housing Sale of residential lot The threshold selling price amount for sale of house and lot, and other residential dwellings shall be 2,000,000 SL - 72

73 Value-Added Tax Section 109 VAT-exempt transactions (Q) Lease of a residential unit with a monthly rental not exceeding 12,800 (Q) Lease of residential unit with monthly rental not exceeding 15,000. (U) Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations. (U) Additional proviso: xxx Provided, That the fuel, goods, and supplies shall be used for international shipping or air transport operations; SL - 73

74 Value-Added Tax Section 109 VAT-exempt transactions Additional exempt transactions: (W) Sale or lease of goods and services to senior citizens and persons with disabilities; (X) Transfer of property pursuant to Section 40 (C)(2) of the, as amended; (Y) Association dues, membership fees, and other assessments and charges collected by homeowners associations and condominium corporations; SL - 74

75 Value-Added Tax Section 109 VAT-exempt transactions (W) Sale or lease of goods or properties or the performance of sevices other than the transactions specifically mentioned as VAT-exempt, the gross annual sales and/or receipts do not exceed the amount of 1,919,500 (as amended). (Z) Sale of gold to the BSP (AA) Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension beginning January 1, 2019 Now (BB) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of 3,000,000 SL - 75

76 Value-Added Tax Section 110 (A)(2)(b) Amortization of input VAT from purchases of capital goods The input tax on the purchase of capital goods with a cost exceeding 1,000,000 shall be amortized based on its useful life or 60 months, whichever is shorter. Amortization of input VAT shall only be allowed until December 31, After such date, taxpayers with unutilized input vat on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized. SL - 76

77 Value-Added Tax Section 112 Refunds or tax credits of input VAT The Commissioner shall grant a refund or issue a tax credit certificate for creditable input taxes within 120 days from the date of submission of complete documents. The period of granting by the Commissioner of refunds is decreased to 90 days (from 120 days) from the date of submission of complete documents in support of the application. The granting of tax credit instead of refund is removed. SL - 77 Additional proviso: Should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial.

78 Value-Added Tax Section 112 Refunds or tax credits of input VAT Failure on the part of the Commissioner to act on the application within the period prescribed shall be deemed a denial of the application. The deemed denial of failure to act on the application is removed. Additional proviso: Failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (90)-day period shall be punishable under Section 269 of the Tax Code (administrative fine and imprisonment). SL - 78

79 Value-Added Tax Section 114 (A) Return and payment of VAT VAT taxpayers shall file quarterly returns within 25 days following the close of each taxable quarter, while payment of the VAT shall be made on a monthly basis upon filing of monthly VAT declaratin. Beginning January 1, 2023, the filing and payment shall be done within 25 days following the close of each taxable quarter. SL - 79

80 Other Percentage Taxes

81 Other Percentage Taxes Section 116 3% gross receipts tax of persons exempt from the VAT Cooperatives are exempt from the 3% gross receipts tax. Additional exemption: Beginning January 1, 2019, self-employed and professionals with total annual gross sales and/or gross receipts not exceeding 500,000 shall be exempt from the 3% gross receipts tax. (The above provision was vetoed by President Duterte because the proposed exemption will result in unnecessary erosion of revenues and would lead to abuse and leakages.) SL - 81

82 Other Percentage Taxes Section 127 Stock transaction tax Sale, barter or exchange of shares of stock listed and traded through the local stock exchange shall be subject to a tax of ½ of 1% of the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed. The rate of the stock transaction tax is increased to 6/10 of 1%. SL - 82

83 Excise Taxes

84 Excise Taxes Section 129 Goods and services subject to excise taxes Excise taxes apply to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported. Excise tax shall also be imposed to services performed in the Philippines. SL - 84

85 Excise Taxes Section 145 (B) and (C) Excise tax on cigarettes packed by hand and by machine Effective Jan 1, 2018 Jun 30, 2018 Jul 1, 2018 Dec 31, 2019 Jan 1, 2020 Dec 31, 2021 Jan 1, 2022 Dec 31, 2023 Tax per pack per pack per pack per pack The rates of excise tax shall be increased by 4% every year effective January 1, 2024, through revenue regulations issued by the Secretary of Finance. Duly registered cigarettes packed by hand shall only be packed in 20s [previously allowed in 30s] and other packaging combinations of not more than 20. SL - 85

86 Excise Taxes Section 148 Excise tax on petroleum products Manufactured Oils and Other Fuels Lubricating oils and greases (per liter) Processed gas (per liter) Waxes and petroleum (per kg) Denatured alcohol (per liter) Naphtha, regular gasoline, pyrolysis gasoline and other similar products of distillation (per liter)* Effective 1-Jan Jan Jan *Provided that the production of petroleum products, whether or not classified as products of distillation and use solely for production of gasoline shall be exempt from excise tax. SL - 86

87 Excise Taxes Section 148 Excise tax on petroleum products SL - 87 Manufactured Oils Effective and Other Fuels 1-Jan Jan Jan-2020 Leaded premium gasoline (per liter) 5.35 No provision No provision No provision Unleaded premium gasoline (per liter) Aviation turbo jet fuel (per liter) Kerosene (per liter) Diesel fuel oil (per liter) Liquefied Petroleum Gas (per liter) Asphalt (per kg) Bunker fuel oil (per liter) Petroleum coke (per metric ton)* No provision *Provided, however, that, petroleum coke, when used as feedstock to any power generating facility, per metric ton, is 0.00

88 Excise Taxes Section 148 Excise tax on petroleum products Additional proviso: Naphtha and pyrolisis gasoline will also be subject to zero excise tax when used in the refining of petroleum products. The production of petroleum products, whether or not they are classified as products of distillation and for use solely for the production of gasoline shall be exempt from excise Tax. Liquefied petroleum gas when used as raw material in the production of petrochemical products, subject to the rules and regulations to be promulgated by the Secretary of Finance, shall be taxed zero per kilogram. The excise taxes paid on the purchased basestock (bunker) used in the manufacture of excisable articles and forming part thereof shall be credited against the excise tax due therefrom. SL - 88 Petroleum coke is now subject to excise tax. But, when used as feedstock to any power generating facility, it shall be taxed at zero per metric ton.

89 Excise Taxes Section 148 Excise tax on petroleum products Additional proviso: Zero excise tax for Petroleum products, including naphtha, LPG, petroleum coke, refinery fuel and other products of distillation, when used as input, feedstock or as raw material in the manufacturing of petrochemical products, or in the refining of petroleum products, or as replacement fuel for natural-gas-fired-combined cycle power plant (The above provision was vetoed by President Duterte because of the risk of being too general which may be subject to abuse by taxpayers.) SL - 89

90 Excise Taxes Section 148-A Marking of petroleum products [new] No provision The Secretary of Finance shall require the use of an official fuel marking or similar technology on petroleum products that are refined, manufactured or imported into the Philippines, and that are subject to the payment of taxes and duties. SL - 90

91 Excise Taxes Section 148-A Marking of petroleum products [new] No provision Absence of official or dilution of the official marker on petroleum products shall raise the presumption that the products were withdrawn with the intention to evade the payment of the taxes and duties thereon. The use of fraudulent marker on the petroleum products shall be considered prima facie evidence that the same have been withdrawn or imported without the payment of taxes and duties due thereon. SL - 91

92 Excise Taxes Section 149 Excise tax on automobiles SL - 92 Over/Up to Up to 600,000 2% Over 600,000 Up to 1,100,000 Over 1,100,000 Up to 2,100,000 Excise Tax Rate 12, % of value in excess of 600, , % of value in excess of 1,100,000 Over 2,100, , % of value in excess of 2,100,000 Effective January 1, 2018: Over/Up to Excise Tax Rate Up to 600,000 4% Over 600,000 10% Up to 1,000,000 Over 1,000,000 20% Up to 4,000,000 Over 4,000,000 50% Hybrid vehicles shall be subject to 50% of the applicable taxes. Purely electric vehicles and pickups shall be exempt from excise tax on automobiles.

93 Excise Taxes Section 149 Excise tax on automobiles Hybrid electric vehicle a motor vehicle powered by electric energy, with or without provision for off-vehicle charging, in combination with gasoline, diesel, or any other motive power, and one that must be able to propel itself from a stationary condition using solely electric motor. SL - 93

94 Excise Taxes Section 150-A On non-essential services [new] No provision Invasive cosmetic procedures, surgeries, and body enhancements for aesthetic reasons shall be subject to 5% excise tax based on the gross receipts derived from the performance of services, net of excise tax and VAT. Body enhancements shall refer to those: Directed solely towards improving, altering or enhancing a patient s appearance, That do not meaningfully promote the function of the body or prevent or treat illness or disease. SL - 94

95 Excise Taxes Section 150-A On non-essential services [new] The tax shall not apply to nor cover: 1. Procedures necessary to ameliorate a deformity arising from, or directly related to: a congenital or developmental defect or abnormality a personal injury resulting from an accident or trauma a disfiguring disease, tumor, virus or infection 2. Cases or treatments covered by the National Health Insurance Program SL - 95

96 Excise Taxes Section 150-B On sweetened beverages [new] No provision Effective January 1, 2018: Basis Sweetened beverages using purely caloric sweeteners and purely non-caloric sweeteners, or a mix of caloric and non-caloric sweeteners Sweetened beverages using purely high fructose corn syrup or in combination with any caloric or non-caloric sweetener Tax (Per Liter of Volume Capacity) SL - 96

97 Excise Taxes Section 150-B On sweetened beverages [new] No provision The rate of 6.00 shall not apply to sweetened beverages using high fructose corn syrup Exempt: Sweetened beverages using 1. purely coconut sap sugar 2. purely steviol glycosides SL - 97

98 Excise Taxes Section 150-B On sweetened beverages [new] No provision Sweetened beverages nonalcoholic beverages of any constitution (liquid, powder, or concentrates) pre-packaged and sealed according to FDA standards, containing caloric and/or non-caloric sweeteners added by the manufacturers. SL - 98

99 Excise Taxes Section 150-B On sweetened beverages [new] No provision List of sweetened beverages (not exclusive): 1. Sweetened juice drinks 2. Sweetened tea 3. All carbonated beverages 4. Flavored water 5. Energy and sports drink 6. Other powdered drinks not classified as milk, juice, tea, and coffee 7. Cereal and grain beverages 8. Other non-alcoholic beverages that contain added sugar SL - 99

100 Excise Taxes Section 150-B On sweetened beverages [new] No provision Excluded products: 1. All milk products, including plain milk, infant formula milk, follow-on milk, and growing up milk, powdered milk, ready to drink milk and flavored milk, fermented milk, soymilk, and flavored soymilk % natural fruit juices % natural vegetable juices 4. Meal replacement and medically indicated beverages 5. Ground coffee, instant soluble coffee, and pre-packaged powdered coffee products (with or without added sugar) SL - 100

101 Excise Taxes Section 150-B (D)(2) Manufacturer s or Producer s Sworn Statement No provision Penalties and fines for misrepresentation or misdeclaration in the required Manufacturer s or Producer s Sworn Statement summary cancellation or withdrawal of the permit to engage in business as manufacturer or importer of sweetened beverages For corporation, association, or partnership: fine of triple the amount of deficiency taxes, surcharges, and interest Criminal liability For non-resident: immediate deportation after serving sentence SL - 101

102 Excise Taxes Section 151 Excise tax on mineral products Mineral Products Coal and coke Nonmetallic mineral and quarry resources Copper and other metallic minerals Tax 10 per metric ton 2% 2% Gold and chromite 2% Indigenous 3% petroleum Mineral Products Domestic and imported Coal and coke, notwithstanding any incentives granted in any law or special law Nonmetallic mineral and quarry resources Copper and other metallic minerals Tax Per metric ton: % 4% Gold and chromite 4% Indigenous 6% petroleum SL - 102

103 Excise Taxes Section 155 Mandatory metering devices Manufacturers of articles subject to excise tax shall provide themselves with counting or metering devices to determine as accurately as possible the volume, quantity, or number of the articles produced, to be complied with before commencement of operations. Importers are likewise required to provide themselves with such Bureau-accredited counting or metering devices to determine volume, quantity or number of articles imported. SL - 103