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Tax Update Seminar/Dialogue with

Medical and Dental PractitionersRevenue Region 19-Davao City

April 5, 20141:00 – 5:00 pm

Presented by:

SUSAN D. TUSOY, CPA, MPSAsst. Chief, Assessment Division

TOPIC OUTLINE

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1. Registration, Invoicing and Bookkeeping Regulations

2. Applicable Tax Typea. Registration Feeb. Income Taxc. Business Tax (VAT and Percentage) d. Withholding Tax

• As Payor• As Payee

REGISTRATION FEES

WHEN TO REGISTER

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On or before the commencement of business

Before payment of any tax dueUpon filing of a return, statement or

declaration as required by the NIRC.Employee: within 10 days from date of

employment

BIR REGISTRATION PROCEDURES

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PRIMARY REGISTRATION

SECONDARY REGISTRATION

Application &Issuance of TIN

Registration of Business/Practice of Profession/Employment

Registration of books, Issuance of ATP, CAS and Loose-leaf

STAGE 1 STAGE 2

ON REGISTRATION

• Pay Annual Registration Fee of P500.00 upon registration and every year thereafter on or before Jan. 31

Medical practitioners are also required to register and pay the corresponding Registration Fee for each separate

or distinct establishment.

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REGISTRATION OF BRANCH

ON REGISTRATION

RR 4-2014All self-employed professionals shall submit an affidavit indicating the rates, manner of billings and the factors they may consider in determining their feesDue date

Upon registration and every year thereafter on or before Jan. 31

Transitory provision Affidavit to be submitted within 30 days from

effectivity of this Regulation8

INVOICING REQUIREMENTS

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INVOICING REQUIREMENTS Issue sequentially Official Receipt (OR) for

fees received Sales Invoice for sale of goods (medicines).

Each OR issued shall indicate the name and address of the client, date of transaction, nature of service rendered and the amount.

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INVOICING REQUIREMENTS The OR shall be accomplished at least in

duplicate

The duplicate retained & preserved in place of business for 10 years from close of taxable year (RR 17-2013).

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SAMPLE OF COMMERCIAL INVOICE – A NON-VAT OFFICIAL RECEIPT

SAMPLE ONLY

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PROPER INVOICING AND RECEIPTING OF OUTPUT TAX

Revenue Regulations 18-2011

Reiterates Sec. 237 of the Tax Code that VAT-registered taxpayers should separately bill the VAT.

The amount shall be shown as a separate item in the invoice or receipt

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PROPER INVOICING AND RECEIPTING OF OUTPUT TAX

Ex: If the amount charged is P560.00, it shall be presented in the following manner:

Professional Fee (P560.00/112%) P 500.00Add12% VAT (12% of P500.00) 60.00Total Amount charged P 560.00

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SAMPLE OF VAT OFFICIAL RECEIPT

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SAMPLE ONLY

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PROPER INVOICING

Revenue Regulations 4-2014

In cases when no professional fees are charged by the professional and paid by client, a BIR registered receipt, duly acknowledged by the latter, shall be issued showing a discount of 100% as substantiation of the “pro-bono” service.

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PRINCIPAL RECEIPTS VS. SUPPLEMENTARY INVOICES (RR 18-2012)

PrincipalA written account evidencing the sale

of goods and/or services issued to customers in an ordinary course of business

Official ReceiptSales Invoice

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PRINCIPAL RECEIPTS VS. SUPPLEMENTARY INVOICES (RR 18-2012)

SupplementaryAlso a commercial invoiceAlso to be registered in the BIREx: Delivery Receipt, Collection

Receipt, Billing Statement, Statement of Accounts, Acknowledgement Receipt, etc.

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VAT SALES INVOICE

A written account evidencing the sale of goods and/or properties

issued whether cash sales or on account

Basis of the output tax liability of the seller and the input tax claim of the buyer

Includes Cash Sales Invoices & Charge Sales Invoices 19

VAT OFFICIAL RECEIPT

A proof of sale of service and/or leasing of properties

Basis of the output tax liability of the seller and the input tax claim of the buyer

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NON-VAT RECEIPTS/INVOICES

Non-Vat Sales Invoices A written account evidencing the sale of goods

and/or properties, whether cash sales or on account

Basis of the Percentage Tax liability of the seller

Non-Vat Official Receipts A proof of sale of service and/or leasing of

properties Basis of the Percentage Tax liability of the seller21

SALIENT FEATURES

The approved ATP shall be valid only upon full usage of the inclusive serial

numbers orfive (5) years from issuance of

the same, whichever comes first.

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SALIENT FEATURES

ONLY BIR ACCREDITED PRINTERS shall have the exclusive authority to print principal and supplementary receipts/invoices.

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TRANSITORY PROVISION

Expiring Authority to Print (ATP) for invoices/receipts (principal and supplementary) shall apply for a new ATP not later than 60 days prior to actual expiry date

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EXPIRED RECEIPTS/INVOICES

Those with ATP prior to Jan. 1, 2011 were valid only until Aug. 30, 2013 while those with ATP dated Jan. 1, 2011 to Jan. 17, 2013 were valid only until Oct. 31, 2013.

Issuance of receipts/invoices after its validity constitute a violation of Sec. 264 of the NIRC of 1997

It is considered as if no receipt/invoice was issued

EXPIRED RECEIPTS/INVOICES

No deduction from gross income shall be allowed using these invoices/receipts as there are not valid proof of substantiation

In case of VAT-registered persons, no input tax may be claimed using these receipts/invoices

BOOKKEEPING REQUIREMENTS

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BOOKKEEPING REQUIREMENTS

Preserve within the prescriptive period of 10 yrs.

Gross receipts exceeding P150,000 in any given quarter must be audited by a CPA 28

BOOKKEEPING REQUIREMENTS

It’s not required to register new set of books every year; only before the pages of current book is almost used up.LedgerJournal

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PATIENTS’ LOG BOOK (A SUBSIDIARY BOOK)

Daily list of clients w/ the corresponding fees including those free of charge, per branchName and addressDateOfficial receipt no.Amount charge

Must be registered with the BIR

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OFFICIAL APPOINTMENT BOOKS (RR 4-2014)

Shall contain only the names of the client and the date/time of the meeting

Due date Within 30 days from effectivity of this regulation

Published on March 21, 2014 !5 days effectivity : April 5, 2014 Due date: May 5, 2014

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ORIGINAL CERTIFICATE OF REGISTRATION, REGISTRATION FEE AND THE ASK FOR RECEIPT NOTICE MUST BE CONSPICUOUSLY DISPLAYED IN THE PHYSICIAN’S PLACE OF BUSINESS AND/OR CLINIC

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Tax Compliance Verification Drive (Tax mapping)

Income Tax

SAMPLE COMPUTATION – ITEMIZED DEDUCTIONGross Receipts P2,000,000Less: Allowable Deductions (itemized)

Rent P 500,000 Fuel and Oil 50,000 Communication 20,000 Supplies 280,000 Professional Fees 100,000 950,000

Net Income P1,050,000Less: Personal Exemption 50,000 Additional Exemption (2 dep.) 50,000

100,000Net Taxable Compensation P

950,000

Tax Due P 269,000Tax Withheld (1st to 4th Qtr) Form 2307 212,500 Quarterly Income Tax Payment 50,000 262,500

Payable P 6,500

INCOME TAX TABLE

OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER

Not over 10,0000 5%

10,000 30,000 500 + 10% 10,000

30,000 70,000 2,500 + 15% 30,000

70,000 140,000 8,500 + 20% 70,000

140,000 250,000 22,500 + 25% 140,000

250,000 500,000 50,000 + 30% 250,000

500,000 over 125,000 + 32% 500,000

BUSINESS EXPENSES:

To be deductible, business expense must:constitute ordinary and necessary

expense;to be paid or incurred during the taxable

year in carrying on or directly attributable to operation and/or conduct of trade, business, or profession;

be reasonable in amount;be sustained by adequate proof;not be against law or public policy

RR 12-2013 – REQUIREMENTS FOR DEDUCTIBILITY

Any income payment allowable as deduction shall only be allowed to be deducted if:

The income tax required to be withheld has been paid to the BIR

No deduction shall be allowed notwithstanding payments of WTAX at the time of investigation

SAMPLE COMPUTATION – ITEMIZED DEDUCTIONGross Receipts P2,000,000Less: Allowable Deductions (itemized)

Rent P 500,000 Fuel and Oil 50,000 Communication 20,000 Supplies 280,000 Professional Fees 100,000 950,000

Net Income P1,050,000Less: Personal Exemption 50,000 Additional Exemption (2 dep.) 50,000

100,000Net Taxable Compensation P

950,000

Tax Due P 269,000Tax Withheld (1st to 4th Qtr) Form 2307 212,500 Quarterly Income Tax Payment 50,000 262,500

Payable P 6,500

SAMPLE COMPUTATION – OPTIONAL STANDARD DEDUCTION

Gross Receipts P2,000,000Less: Optional Standard Deduction (40%)

800,000

Net Income P 1,200,000Less: Personal Exemption 50,000 Additional Exemption (2 dep.) 50,000

100,000Net Taxable Compensation P

1,100,000

Tax Due P 317,000Tax Withheld (1st to 4th Qtr) 212,500 Quarterly Income Tax Payment 50,000 262,500

Payable P 54,500

ADVANTAGES OF USING OPTIONAL STANDARD DEDUCTION (FOR INDIVIDUAL TAXPAYERS)

shall not be required to submit with his tax return such financial statements otherwise required under the Code

shall keep such records pertaining only to his gross sales or gross receipts,

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INCOME TAX DUE DATES

Income Tax Period

Due Date Individual

1st Quarter April 15

2nd Quarter Aug. 15

3rd Quarter Nov. 15

Annual Return April 15

Value Added Tax/Percentage Tax

VAT VS. NON-VAT

Value Added Tax (12%)• Medical/dental services rendered by

professionals whose gross receipts exceed the threshold of P1,919,500

Non-VAT • If gross receipts do not exceed the threshold• Subject to 3% percentage tax

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VAT DEFINED

It is a tax on the value added to the purchase price or cost in the sale or lease of goods, properties, or services in the course of trade or business.

Due Date

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VAT PAYABLE

Output Tax ( P100,000* x 12%) - P12,000.00

Less Input Tax (60,000 **x 12%) - 7,200.00

VAT payable - P 4,800.00

• P112,000/112% = P100,000** P67,200/112% = P 60,000

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HOW TO COMPUTE VAT-GOV’T TRANSACTION (PHIC)

Formula:Output Tax (12% of Gross receipts ) P xxxLess Standard Input Tax (7% of gross receipts) xxx

VAT Payable P xxx Less 5% withholding tax xxx VAT Payable P xxx

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SOURCES OF INPUT TAX

Purchase of goods/services for which the VAT was actually paid, like: Rentals on clinic Purchase of medical supplies Communication expenses Fuel Professional services etc

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SUBMISSION OF SUMMARY LIST OF SALES AND PURCHASES

RR 1-2012– Mandatory submission of Quarterly

Summary List of Sales and Purchases by all VAT registered taxpayers effective Jan. 1, 2012

Due Date:On or before the 25th day of the month

following the close of the taxable quarter.

SUBMISSION OF SLS / SLP

SLS/SLP shall be submitted in softcopy to the RDO having jurisdiction of the taxpayer on or before the 25th day of the month following the close of the taxable quarter

Percentage Tax

PERCENTAGE TAX

Rate - 3% of gross revenue

if gross revenue do not exceed P1.5M (now P1,919,500

pursuant to RR 16-2011) otherwise subject to VAT

Due Date – every 20th day of the following month

Professional Fee – P 100,000 x 3% = P3,000.00

Withholding Tax

DOCTORS AS WITHHOLDING AGENT (AS PAYOR)

Required to deduct Expanded Withholding TaxRentals – 5%Contractors – 2%Professional fees -10% or 15% etc. (see BIR Form 1601E)

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DOCTORS AS WITHHOLDING AGENT (AS PAYOR)

Example: Dr. A is renting a clinic space at P10,000/mo.*

Expanded Withholding Tax is P 10,000 x 5% = P500.00

Due date: Every 10th day of the following month except for the month of Dec., which shall be due on Jan. 15 of the ff year

*net of VAT 54

DOCTORS AS WITHHOLDING AGENT (AS PAYOR)

Consequence if not remitted on time:

Computation: Basic Tax (P10,000 x 5%) P 500.00 Add: 25% surcharge P 125.00 20% interest per annum* 8.21 comp. pen for late payment 200.00 333.21 Total Payable P 833.21

*assuming payment was delayed for 30 days (P500 x 20% x 30/365 days)

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DOCTORS AS WITHHOLDING AGENT (AS PAYOR)

Withholding Tax on Wages Salary of employees, if paying more than the

Minimum Wage

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DOCTORS ARE SUBJECT TO WITHHOLDING TAX (AS PAYEE) ON THEIR PROFESSIONAL FEES

Expanded Withholding Tax (EWT) creditable against Income Tax

15% if exceeding P720T, 10% for less than Disclosure Requirement (RR 12-01)

Using the Notarized Sworn Declaration (Annex A of RR 12-01)

Submit to the Collection Division Due on June 30 each year or within 15 days when the

income reaches P720,000 whichever comes first

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On Government Money Payments (Ex: Payments of PHIC to medical doctors)

5% of Gross Income if VAT Registered Taxpayer (creditable against VAT liability)

3% of Gross Receipts for Non-VAT Taxpayer (creditable against Percentage Tax liability)

Doctors are Subject to Withholding Tax (as payee) on their Professional Fees

DUTY AND RESPONSIBILITY OF THE HOSPITALS, CLINICS, HMOS (RR 14-2013)

To withhold and remit taxes due on the professional fees of their respective accredited medical practitioners, paid by patients who were admitted and confined to such hospitals and clinics

Must ensure that correct taxes due on the PF have been withheld and timely remitted to the BIR

DUTY AND RESPONSIBILITY OF THE HOSPITALS, CLINICS, HMOS

Shall NOT allow their medical practitioners to receive payment of professional fees directly from patients who were admitted and confined

Must include the PF in the total medical bill of the patient which shall be payable directly to the hospital/clinic

EXCEPTION

The wtax shall not apply whenever there is no PF has in fact been charged

There must be a sworn declaration jointly executed by the medical practitioner and the patient

The hospital administrator shall inform the RDO having jurisdiction over such hospital or clinic if fails or refuses to execute within 10 days from date of occurrence.

(The doctor must still issue an OR indicating 100% discount – RR 4-2014)

RESPONSIBILITY OF HOSP./CLINICS/HMOS

• Shall be responsible for the correct computation and timely remittance of Wtax• include in the 1604E• Issue 2307 every 20th day ff the close of

the quarter or upon request of the payee

RESPONSIBILITY OF HOSP./CLINICS/HMOS

• Shall submit a sworn statement executed by the pres./managing partner as to the complete and updated list of medical practitioners accredited with them• Where: Collection Div / LT-Coll Div / LTDO• 2 copies for the BIR and 1 copy for the TP

REPORTS TO BE SUBMITTED BY HOSPITALS/CLINICS

Submit the names and addresses of medical practitioners whose: PF was paid by the patients directly to the

hospital/clinic Medical practitioners who did not charge any PF

from their patients every 15th day after the end of each calendar

quarter to the Collection Div.

RMC 38-2011 / RMC 49-2011

On the obligation of PHIC to withhold taxes from medical practitioners10% or 15% Expanded Withholding

Tax5% Withholding Tax on VAT or 3% for

Non-VAT practitioner

ILLUSTRATION 1 – FOR PAYMENT OF FEES NOT COVERED BY THE CASE RATE PROGRAM

Assume that PHIC paid P4,000 to a VAT registered doctor representing professional fees

Income Tax Withholding (EWT) P4000* /112% = P3,571.43 x 15%** = P 535.71

VAT Withholding P4000* /112% = P3,571.43 x 5% = P 178.57

assumptions*Inclusive of VAT** No sworn declaration of income was submitted

ILLUSTRATION 2 – FOR PAYMENT OF FEES NOT COVERED BY THE CASE RATE PROGRAM

Assume that PHIC paid P4,000 to a NON-VAT registered doctor representing professional fees

Income Tax Withholding (EWT) P4000 x 15%* = P 600.00`

PercentageTax Withholding P4000 x 3% = P120.00

assumption* No sworn declaration of income was submitted

ILLUSTRATION 2: COVERED BY THE CASE RATE PROGRAM

The entire case rate shall be paid to the concerned facility provider PHIC to withhold 2% EWT on the entire amount

The hospital will pay the professional fee Shall withhold 10% or 15% EWTNo 5% VAT or 3% PT withholding for non-

government hospitalGovernment hospital is required to withhold 5%

for VAT or 3% PT

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THE IMPORTANCE OF WITHHOLDING TAX CERTIFICATES (FORM 2306/2307)

To support tax credit claims per return No certificate, no tax credit allowed

Serve as proof of transaction

Note: Be conscientious in gathering the withholding tax certificates on time

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STOP FILER CASES

Can be detected in our systemSuch stop-filer case shall remain open until the

corresponding return is duly filed and paid including penalties.

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DATA

RDO 132

RDO 113

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Thank you!

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