BIR AND OTHER REGULATORY

REQUIREMENTS

PRINCIPLES FOR GOOD GOVERNANCE

AND ETHICAL PRACTICEPrinciples for Good Governance and Ethical Practice

Source: Panel on the Nonprofit Sector, October 2007

M. Cass WheelerChief Executive OfficerAmerican Heart Association

Listed as one of the two Co-Conveners

PRINCIPLE 1: LAWS AND REGULATIONS

Principle Statement

• [An] … organization must comply with all applicable … laws and regulations …

• … organizations are subject to a range of … laws. An organization’s governing board is ultimately responsible for overseeing and ensuring that the organization complies with all its legal obligations and for detecting and remedying wrongdoing by management. While board members are not required to have specialized legal knowledge, they should be familiar with the basic rules and requirements with which their organization must comply and secure the necessary legal advice and assistance to structure appropriate monitoring and oversight mechanisms.

COMPLIANCE WITH LAWS AND REGULATIONS

Applicable to PCP as an organization

Applicable also to members meaning PCPofficers and members must comply with existingLaws and regulations be these:

• National• Local (Province, City or Municipality)• General• Special

GOVERNMENT AGENCIES TO DEAL WITH

• Professional Regulation Commission (PRC)

• Local Government Units (LGUs) – Barangay, City or Municipality• Bureau of Internal Revenue (BIR)

-Revenue District Office

-National Office, Diliman, Quezon City• Department of Trade and Industry (DTI)

As sole proprietor, Name / Brand [e.g., Reyes Clinic]

• Securities and Exchange Commission (SEC)Partner(s), stockholders

LGU and BIR

List of LGU and BIR requirements may be comprehensive but not all-inclusive

LOCAL GOVERNMENT UNIT (LGU)

What Basis / Amount Due Date WhereBarangay clearance

P500

Community tax certificate

Basic of P1.00P5.00 for inhabitants who own real property with an aggregate assessed value of One thousand pesos (P1,000.00) or more, or who is required by law to file an income tax return shall pay an annualAdditional tax of One peso (P1.00) for every One thousand pesos (P1,000.00) of income but not to exceed P5,000.00

Last day of February of each year

Place of residence or principal place of business

Lease contract, certificate of title, deed of sale, occupancy permit

Privilege tax P300 January 31 City/Municipality of principal office

LOCAL GOVERNMENT UNIT (LGU)

What Basis / Amount Due Date Where

Local business tax 2% of receipts of the preceding calendar year – Sec 143(h)Commensurate with the cost of regulation, inspection and licensing before any person may engage in business or occupation, or practice profession or calling. – Sec 147

January 20 City or municipality

Mayor’s permit and fees (sanitary, health, garbage fees, etc.)

January 20 City or Municipality

Real property tax

Note: LBT and RPT are major taxes to be paid in the local level.

Province – not exceeding one percent (1%) of the assessed value of real propertyCity or a municipality within the Metropolitan Manila Area – not exceeding two percent (2%) of the assessed value of real propertySpecial Education Fund of one percent (1%) on the assessed value of real property

1st installment –March 312nd installment – June 303rd installment –September 30 Last installment --December 31Advance payment with 20% discount

City or Municipality

BIR REGISTRATION REQUIREMENTS BEFORE COMMENCEMENT OF THE

PRACTICE OF PROFESSION:• Obtain Tax Identification Number

• Obtain Certificate of Registration

• Register Books of Accounts

• Obtain Authority to Print Invoice

COMPLIANCE WITH THE BIR FILING REQUIREMENTS:

BIR Filing Requirements Due Date / Frequency1. Issue receipts on income Daily2. Keep receipts or support of expenses Daily3. Summarize and prepare financial statements Monthly4. CPA Certificate Annual5. Prepare tax returns and pay tax due Monthly, Quarterly, Annual6. Quarterly Income Tax Return (BIR Form 1701 Q) 1st Qtr – April 15

2nd Qtr – in August 15 3rd Qtr -- November 15

7. Annual Income Tax Return (BIR Form 1701) April 15 of the following year8. Monthly VAT Declaration 20 days after the end of each month9. Quarterly VAT

Return (BIR Form 2550Q)25 days after the close of the taxable quarter

10. Percentage Tax Return (BIR Form 2551M) 20 days after the end of the month11. Monthly Remittance Return of Income taxes Withheld (Expanded)

[BIR Form 1601 E]10 days after the end of the month

12. Annual Information Return of Creditable Income Taxes Withheld (Expanded) [BIR Form No. 1604 E]

March 31 of the following year

13. Monthly Remittance Return of Income Taxes Withheld on Compensation (BIR Form No. 1601 C)

10 days after the end of the month

14. Annual Information Return of Income Tax Withheld on Compensation and Final Withholding Taxes (BIR Form No. 1604CF)

January 31 of the following year

ALLOWABLE EXPENSES/DEDUCTIONS FROM INCOME

For income received/earned: Issue Official Receipt

Second: Claim expensesPersonal exemption

Single individual or married individual judicially decreed as legally separated – P20,000

Head of family -- P25,000For each married individual -- P32,000

Additional -- P8,000 for each dependent not exceeding four (4)

Optional standard deduction40% of receiptsNo need to keep receipts or support of expenses

Itemized Deductions (Sec. 34)

HEAD OF THE FAMILY AND DEDUCTIONS

Head of the family means an unmarried or legally separated man or womanwith one or both parents, or with one or more brothers or sisters, or with one or more legitimate, recognized natural or legally adopted children livingwith and dependent upon him for their chief support, where such brothersor sisters or children are not more than twenty-one (21) years of age,unmarried and not gainfully employed or where such children, brothers orsisters, regardless of age are incapable of self-support because of mental orphysical defect.

Provision of the National Internal RevenueCode (NIRC or Tax Code)

"SECTION 34.Deductions from Gross Income. —…there shall be allowed the following deductions from gross income:

"(A)EXPENSES. —"(1) Ordinary and Necessary Trade, Business or Professional Expenses. —

"(a) In General. — There shall be allowed as deduction from gross income all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on or which are directly attributable to, the development, management, operation and/or conduct of the trade, business or exercise of a profession, including:

"(i) A reasonable allowance for salaries, wages..

"(ii) A reasonable allowance for travel expenses, here and abroad, while away from home in the pursuit of trade, business or profession;

"(iii) A reasonable allowance for rentals…

"(iv) A reasonable allowance for entertainment, amusement and recreationexpenses…

(B) SUBSTANTIATION REQUIREMENTS.—

• No deduction from gross income shall be allowed under Subsection (A) hereof unless the taxpayer shall substantiate with sufficient evidence, such as official receipts or other adequate records: (i) the amount of the expense being deducted, and (ii) the direct connection or relation of the expense being deducted to the development, management, operation and/or conduct of the trade, business or profession of the taxpayer.

REQUIREMENTS FOR DEDUCTIBILITY -- THE EXPENSES

BEING CLAIMED AS DEDUCTION MUST BE:

Ordinary and necessary business or professional expenses

Reasonable in amount

Substantiated with sufficient evidence

Bribes, kickbacks and other similar payments are not allowed

ITEMIZED DEDUCTIONS OR ALLOWABLE DEDUCTIONS LISTED UNDER THE MANDATORY ATTACHMENT TO BIR FORM NO. 1701

Advertising and promotionsAmortizationBad debtsCharitable contributionsCommissionCommunication, light and waterDepletionDepreciationFringe benefitsFuel and oilInsuranceInterestJanitorial and messengerial services

ITEMIZED OR ALLOWABLE DEDUCTIONS

MiscellaneousOffice suppliesOther servicesProfessional feesRentalRepairs and maintenance-laborRepairs and maintenance-materials/suppliesRepresentation and entertainmentResearch and developmentRoyaltiesSalaries and allowancesSecurity servicesSSS, GSIS, Medicare, HDMF and other contributionsTaxes and licensesTolling feesTrainings and seminarsTransportation and travelOthers (specify)

REVIEW AND TAX MAPPING

Review:

LGU –Barangay clearance, CTC, PTR, LBT, Mayor’s permit andfees, RPT

BIR• Registration requirements before commencing practice –TIN, Apply for

registration, COR, Register books, ATAP• BIR Filing Requirements including reporting of income and expenses

Tax Mapping Operations (RMO 9-2006 dated Dec.11, 2005)

• Books of accounts• Invoices• Registration Requirements

TAX MAPPING AND BIR EXAMINATION

Dealing with BIR examiners• Be nice and cooperative• Involve your accountant/bookkeeper• Know what they need and verify with LOA

Costs of Non-cooperation

Bigger deficiency assessments• Income• Expenses

Higher professional fees

Negative impression by the BIR examiner

COMPLIANCE OF PCP MAIN OFFICE BIR COMPLIANCE REQUIREMENTS

Certificate of Registration [Note: Sometimes not complete or need to be updated.]

BIR Filing Requirements Due Date / Frequency1. Quarterly Income Tax Return Q1 – Oct 30

Q2 – Jan 29Q3 – Apr 2960 days after the end of the quarter

2. Annual Income Tax Return Sep 1515th of the 4th month after FY

3. Monthly Percentage Tax Return 20 days after end of each month

4. Quarterly Percentage Tax Return 20 days after the end of each month

5. Monthly VAT Declaration 20 days after the close of the month

6. Quarterly VAT Return 25 days after the close of the quarter

7. Monthly Remittance Return – Expanded Withholding tax

10 days after the end of the month

8. Annual Information Return – Expanded Withholding Tax

March 1 after the end of the calendar year

9. Monthly Remittance Return – Withholding Tax on Compensation

10 days after the end of the month

10. Annual Information Return – Withholding Tax on Compensation

Jan 31 after the end of the calendar year

11. Annual Registration Fee Jan 31

OTHER REGULATORY REQUIREMENTS

SEC – Audited Financial Statements

Sep 28 [120 days after FY]

Mayor’s Permit and Fees January 20

SSS, Philhealth, HDMF/Pag-IBIG

10 days after the end of the month

COMPLIANCE OF CHAPTERSSEC Registration, TIN

Chapters SEC Registered TIN

1 ILOCOS-ABRA yes 008-148-647-000

2 Lower North Eastern Luzon not yet

3 Northern Luzon yes 261-269-010-000

4 North Western Luzon

5 Upper North Eastern Luzon

6 BICOL yes 006-099-946-0007 Central Luzon yes8 RIZAL yes

9 Southern Luzon yes 006-720-712-000

10 BOHOL yes 294-781-503

11 CAPIZ-AKLAN yes 425-031-231-00012 Central Visayas yes13 Eastern Visayas yes 006-168-417

14 Negros Oriental yes

15West Visayas-Negros Occidental yes 006-262-762-000

16 West Visayas-PANAY yes 006-231-962.

17 CARAGA

18 Northern Mindanao

19 North Western Mindanao

20 SOCSKSARGEN not yet

21 Southern Mindanao not yet

22 Western Mindanao not yet

23 CAMANAVA not yet24 MANILA yes25 MARIKINA yes26 MATAPAT yes27 PAMUNLAS yes28 PASAY29 (PASJMAN yes 008-156-761-00030 Quezon City yes

30 CHAPTERS

19 Registered with the SEC• 10 with TIN• 9 without TIN

11 No SEC registration and no TINServices Needed

• Bookkeeper / Accountant• Independent CPA to certify the financial

statements• Rate

Q & A