BUSINESS TAXES

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IntroductionThe objectives of this discussion are the

following:• To define business• To identify nature of business• To identify the different types of

business• To define business tax.• To identify the different business taxes.• To identify businesses subject to

business taxes.04/21/23 2

Topics of Discussion

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Nature of business Characteristics/Nature of

business Different types of business Definition of business tax. Different business taxes. Businesses subject to business

taxes.

NATURE OF BUSINESS

Business or “in the course of trade of business”

– the regular conduct or pursuit of commercial or economic activity including transactions incidental thereto, by any person or government entity.

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NATURE OF BUSINESSRequisites of business:1. A commercial or economic activity

- conducted for profit or income2. Regularity in the conduct or pursuit of

commercial or economic activity- more thbban one isolated transaction

3. Must be a lawful economic activity

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EXCEPTIONS

• IMPORTATION OF GOODS FOR PERSONAL USE

• PERSONAL OVERSEAS CALL • SERVICES RENDERED BY A NON-

RESIDENT FOREIGN NATIONAL• ACTIVITY WITH GROSS SALES OR

EARNINGS NOT EXCEEDING P100,000

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EXCEPTIONS

• SALE OF HOUSE AND LOT & OTHER RESIDENTIAL DWELLINGS VALUED OVER P3,199,200

• WINNINGS IN HORSE RACING OR JAI-ALAI

• SINGLE SALE OF STOCK THRU A LOCAL STOCK EXCHANGE

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TYPES OF BUSINESS

• According to Nature–Trading or Merchandising–Manufacturing–Service

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TYPES OF BUSINESS

• According to Form–Sole Proprietorship–Partnership–Corporation–Cooperatives

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BUSINESS TAX

• Definition of Business Taxa tax on the onerous transfer of goods, properties or rights in the normal conduct of business.Basis of Business Tax:Net Sales – for the sale of goods whether collected or notGross Receipts – for the sale of serviceswhether earned or not

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CLASSIFICATION OF BUSINESS TAXES

• Excise Tax on “sin products”levied on the production and importation of products generally harmful to the health, the consumption of natural resources and non-essential products

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CLASSIFICATION OF BUSINESS TAXES

• Percentage Tax (3%)- a general consumption tax- basically levied on retail sales before consumption.- based on 3% sales or gross receipts of a non-VAT business

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CLASSIFICATION OF BUSINESS TAXES

• Value Added Tax (12%)- levied on the consumption of goods and the utilization of services in the Philippines.- applied in every stage of distribution.- allows tax credit.

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EXCEPTIONS TO THE REQUIREMENT OF ECONOMIC ACTIVITY AND REGULARITY OF ACTIVITY TO CONSTITUTE DOING BUSINESS

• Not an economic activity but subject to business taxa) importation of goods for personal use VATb) overseas communication even not

business-related PTx• Not a regular activity but subject to business tax

a) services rendered in the Philippinesby non-resident foreign person VAT

b) isolated transactionsb-1) importation of goods for personal use VAT b-2) sale of house and lot and other residential

dwellings valued at OVER P2.5M VATb-3) single overseas call PTxb-4) single winning in horse racing/jai-a-lai PTxb-5) single sale of shares of stock of a domestic corp. thru local stock exchangePTx

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BUSINESS REGISTRATION

• Annual Registration– Before start of its operation and renewal must be

before January 31.• Registration fee is P500 for every separate or

distinct business establishment.• Separate or distinct establishment includes a

branch, warehouse or facility

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BUSINESS REGISTRATION

• Exempted from Registration Fee– Cooperatives– Individuals earning purely compensation income– Overseas workers– Self-employed individuals where the gross sales or

receipts do not exceed P100,000 per year

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BUSINESS REGISTRATION• VAT-REGISTERED

– With gross receipts or gross sales of more than P1,919,500 per year

– With gross receipts or gross sales of P1,919,500 and below per year and opted to be registered as VAT

• NON-VAT-REGISTERED– With gross

sales/receipts of P1,919,500 and below and opted to register as Non-VAT

– Other percentage taxes under Section 116.

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GENERAL REQUIREMENTS• Invoices and Receipts

– Taxpayer must apply for the Authority to Print with the BIR before the printing of business invoice and receipts.

– Invoices and Receipts must be registered with the BIR

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GENERAL REQUIREMENTS• Cash register machines and cash register sales

books or its equivalent must be first registered with the RDO before use.

• Cash register machines must show– Proprietor’s business name– Business address– VAT or Non-VAT TIN Number– Amount and date of transaction

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EXCISE TAX• IMPOSED ON

– Manufacturers– Importersof any of the following categories of goods or articles:1. Alcohol products – distilled spirits, wines,

fermented liquors2. Tobacco Products – cigars, cigarettes3. Petroleum products 4. Miscellaneous imported articles and non-essential

goods5. Mineral products

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EMPHASIS ON EXCISE TAX• Not all manufacturers or importers are subject to

excise tax. Only when an article is in any of the categories subject to excise tax.

• Not all those who handle the articles in any of the categories mentioned will be subject to excise tax. Only manufacturers or importers of the articles in the categories mentioned.

• Excise taxes are on articles or goods. Articles or goods are movable properties.

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PERCENTAGE TAX• Imposed on the sale or lease of goods or

properties or the performance of services on non-VAT registered person, other than the transactions mentioned in paragraphs (A) to (U) of section 109 of the tax code, the gross receipts or sales of which do not exceed P1,919,500 per year.

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PERCENTAGE TAX• Businesses subject to Percentage Tax

– Domestic carriers and keepers of garages– Franchise– Overseas dispatch or message from the

Philippines– Bank and Non-bank Financial Institutions– Life Insurance Companies– Amusement Places– Sale of shares of stocks in the local stock

exchange– Businesses with annual sales of P1,919,500 and

below

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