Local Business Tax.docx

COMPLIANCE REQUIREMENTS: Filing for refund for overpayment of taxes shall be made within 2 years from the DATE OF PAYMENT (except for VAT). *VAT Input tax refund: within 2 years from the close of the taxable quarter Notices that can be received by the BIR: -

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Tax verification Letter notices o TRS-RELIEF o Bureau of Customs Data Program o Tax reconciliation system Electronic letter of authority (ELOA) [manual letter of authority is no longer allowed]

Terms: Best obtainable evidence rule -

Applies when the taxpayer can’t provide the sufficient evidence or documentation requirements Provide for 50% disallowance of deductions

Jeopardy Assessment -

A Jeopardy Assessment is a tax assessment made by an authorized Revenue Officer without the benefit of complete or partial audit, in light of the RO’s belief that the assessment and collection of a deficiency tax will be jeopardized by delay caused by the Taxpayer’s failure to: o Comply with audit and investigation requirements to present his books of accounts and/or pertinent records, or o Substantiate all or any of the deductions, exemptions or credits claimed in his return.

Assessment Period -

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An assessment must be made within three (3) years from the last day prescribed by law for the filing of the tax return for the tax that is being subjected to assessment or from the day the return was filed if filed late. However, in cases involving tax fraud, the Bureau has ten (10) years from the date of discovery of such fraud within which to make the assessment. Any assessments issued after the applicable period are deemed to have prescribed, and can no longer be collected from the Taxpayer, unless the Taxpayer has previously executed a Waiver of Statute of Limitations.

Due process steps: 1. Letter of Authority (LOA)

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an official document that empowers a Revenue Officer to examine and scrutinize a Taxpayer's books of accounts and other accounting records, in order to determine the Taxpayer's correct internal revenue tax liabilities - the LOA must be served within 30 days from its date of issuance, otherwise it shall become null and void - a Revenue Officer is allowed only one hundred twenty (120) days from the date of receipt of a Letter of Authority by the Taxpayer to conduct the audit and submit the required report of investigation 2. Notice of Informal Conference a. The taxpayer shall reply on the notice of informal conference within 15 days from the receipt. b. Informal conference shall not extend beyond 30 days from the receipt of NIC c. If the taxpayer is still not amenable, the RDO etc. shall endorse the case within 7 days from the conclusion of Informal Conference to the Assessment Division of the Revenue Regional Office or to the Commissioner 3. Preliminary Assessment Notice a. The taxpayer is given 15 days to respond and protest against the PAN b. Failure to respond makes the taxpayer in default, and FAN/FLD will be issued Cases where PAN is not required: i. ii. iii.

iv. v.

When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the tax return filed by the taxpayer When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year When the excise tax due on excisable articles has not been paid When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons

4. Formal Letter of Demand and Final Assessment Notice a. This shall be issued 15 days after submission of protest of taxpayer, or after the lapse of 15 days given to taxpayer without reply or protest Notes: -

FAN/FLD shall state the facts, law, rules and regulations, or jurisprudence on which the assessment is based; otherwise the assessment shall be VOID 5. Disputed Assessment

a. The taxpayer, within 30 days, may protest administratively against FAN/FLD b. If the taxpayer fails to file a valid protest against FAN within 30 days from the date of receipt, the assessment shall become final, executory, and demandable c. Protest may be: i. Request for reconsideration: reevaluation of assessment based on existing records ii. Request for reinvestigation: reevaluation of assessment based on new or additional records/documents 1. The taxpayer shall submit all relevant documents within 60 days from the date of filing of his letter of protest Notes: -

The taxpayer shall state in his protest (i) the nature of protest whether reconsideration or reinvestigation, specifying newly discovered or additional evidence he intends to present if it is a request for reinvestigation, (ii) date of the assessment notice, and (iii) the applicable law, rules and regulations, or jurisprudence on which his protest is based, otherwise, his protest shall be considered void and without force and effect

6. Final Decision on Disputed Assessment (FDDA) - The BIR has 180 days to consider the dispute of the taxpayer a. If the protest is: i. Denied by the Commissioner’s representative 1. The taxpayer can appeal to the CTA within 30 days or; 2. The taxpayer can elevate the protest to the Commissioner within 30 days ii. Not acted upon by the Commissioner’s representative within 180 days from the filing of protest (in case of reconsideration) or within 180 days after submission of documents (in case of reinvestigation) 1. The taxpayer can appeal to the CTA within 30 days after the expiration of 180 days, or; 2. Await the final decision of the Commissioner’s representative iii. Denied by the Commissioner 1. The taxpayer can appeal to the CTA within 30 days iv. Not acted upon by the Commissioner within 180 days from the filing of protest 1. The taxpayer can appeal to the CTA within 30 days after the expiration of 180 days, or; 2. Await the final decision of the Commissioner FILING AND PAYMENT OPT OLD

NEW

Manual

20th of the

25th of the month ff the end of the quarter 25th of the month ff the end of the quarter

Filing

Deadline for filing or actual filing whichever is later Annual Per transaction Per transaction Per transaction Monthly/Quarterly Monthly Quarterly Monthly/Quarterly Monthly Per transaction

Income tax CGT Estate tax Donor’s tax EWT/FWT WTW VAT % Tax DST Excise tax

PENALTIES, SURCHARGES, AND INTERESTS General rules: If there is tax assessment: -

25% surcharge applies if no tax return was filed No surcharge if a tax return if filed

If fraudulent return, a surcharge of 50% will apply. Returns can be amended within 3 years from the deadline of filing or actual filing whichever is later. Example: Pension expense Tax rate Basic deficiency tax Surcharge Interest (20%) Interest (12%)

712,328.77 675,616.44

Assessment 16,666,667 30% 5,000,000

Amendment

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1,250,000

1,387,945.2 6,387,945.5

1,387,945.2 7,637,945.2

5,000,000

Under OLD LAW, surcharge is based on the basic deficiency tax including interest.

Under NEW LAW, the interest is based on the basic deficiency tax. While the surcharge is based on the basic deficiency tax including interest. The delinquency interest shall be based on basic plus surcharge. LOCAL BUSINESS TAX PROVINCES Transfer of real property Printing and publication

Franchise tax

Sand and gravel tax

Professional tax Amusement tax Tax per delivery truck or van

Rate shall not exceed 50% of 1% of total consideration or FMV, whichever is higher Rate shall not exceed 50% of 1% of the gross annual receipts of preceding year; Newly started: shall not exceed 1/20 of 1% of capital investment Rate shall not exceed 50% of 1% of the gross annual receipts of preceding year; Newly started: shall not exceed 1/20 of 1% of capital investment Fee of not more than 10% of FMV in the locality Proceeds shall be distributed as follows:  Province: 30%  City or municipality: 30%  Barangay: 40% Fee shall not exceed P300 Rate not more than 10% of gross receipts Amount not exceeding P500

MUNICIPALITIES Manufacturers, assemblers, repackers etc. of liquor, wines etc. On wholesalers, distributors, or dealers On exporters, manufacturers, millers of essential commodities

See tax table

On retailers

Gross sales or receipts of:  P400,000 or less: 2% p.a.  More than P400,000: 1% p.a. See tax table Rate not exceeding 50% of 1% Rate not exceeding P50 per peddler

On contractors Banks and other financial institution Peddlers

See tax table Rate shall not exceed ½ of the rates prescribed for non-essential commodities

CITIES Rates by the city may exceed the municipality by not more than 50% except for professional and amusement taxes

BARANGAYS  

Stores, retailers in city: 1% of P50,000 or less Stores, retailers in municipality: 1% of P30,000 or less

SITUS OF TAXATION Rules: 1. Branch sales: 100% allocated to branch 2. Factory, plant, plantation: 30% Principal office, 70% factory, plant 3. Separate factory and plantation: 60% factory, 40% plantation