accounting & taxation on real estate transactions by ddv nov 2015
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TAX ON REAL ESTATE TRANSACTIONS (AND POSESSION)
Tax impositions on Philippine real estate transactions and possession are covered
principally by the National Internal Revenue Code (NIRC) and Local Government Code
(section on local taxation) under the state’s power of taxation.
NATIONAL TAXATION (PER NIRC)
A. TAX ON INCOME (Title II)
1. Income Tax is a tax on a person's income, emoluments, profits arising from property,
practice of profession, conduct of trade or business or on the pertinent items of gross
income specified in the Tax Code of
2. Minimum Corporate Income Tax (MCIT) RA No. 9337, Sec. 1 (E)
(MCIT is not an additional tax. An MCIT of 2% of the gross income as of the end of
taxable year.
3. Tax on improperly accumulated earnings: 10% - Net taxable income provided that
the gross income from unrelated trade, business or other activity does not exceed 50%
of the total gross income.
B. CAPITAL GAINS TAX (final tax) (Sec.1 (D)(5), RA 9337, amending NIRC of 1997)
Tax Rate: For real property - 6%
Capital Gains Tax is a tax imposed on the gains presumed to have been realized by the
seller from the sale, exchange, or other disposition of capital assets located in the
Philippines, including pacto de retro sales and other forms of conditional sale.
Final Capital Gains Tax for Onerous Transfer of Real Property Classified as Capital Assets
(Taxable and Exempt)Tax Form: BIR Form 1706 – Final Capital Gains Tax Return (For Onerous Transfer
of Real Property Classified as Capital Assets -Taxable and Exempt)
(What is ONEROUS? A contract, lease, share, or other right is said to be “onerous” when the obligationsattaching to it counter-balance or exceed the advantage to be derived from it, either absolutely or with referenceto the particular possessor. Sweet. As used in the civil law and In the systems derived from it, (French, Scotch,Spanish, Mexican.) the term also means based upon, supported by, or relating to a good and valuable - ONEROUS- consideration, i. e., one which imposes a burden or charge in return for the benefit conferred.)
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Documentary Requirements:
1) One original copy and one photocopy of the Notarized Deed of Sale or Exchange
2) Photocopy of the TCT; Original Certificate of Title; or Condominium CT)
3) Certified True Copy of the tax declaration on the lot and/or improvement duringnearest time of sale
4) “Certificate of No Improvement” issued by the Assessor’s office where the property
has no declared improvement, if applicable or Sworn Declaration/Affidavit of No
Improvement by at least one (1) of the transferees
5) Copy of BIR Ruling for tax exemption confirmed by BIR, if applicable
6) Duly approved Tax Debit Memo, if applicable
7) “Sworn Declaration of Interest” as prescribed under Revenue Regulations 13-99, if
the transaction is tax-exempt
8) Documents supporting the exemption.
Procedures:
File the Capital Gains Tax return in triplicate (two copies for the BIR and one copy for
the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where the
property is located. In places where there are no AAB, the return will be filed directly
with the Revenue Collection Officer or Authorized City or Municipal Treasurer.
.
Deadline: Within 30 days after each sale, exchange, transfer or other disposition of real
property.
Frequently Asked Questions
1) What is meant by capital asset? - Capital asset means property held by the taxpayer
(whether or not connected with his trade or business), but does not include:
a) stock in trade of the taxpayer or other property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable year; or
b) property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or business; or
c) property used in the trade or business of a character which is subject to the
allowance for depreciation provided in subsection (F) of Sec. 34 of the Code; or
d) real property used in trade or business of the taxpayer
2) What is meant by ordinary asset?
Ordinary asset refers to all properties specifically excluded from the definition of capital
assets under Sec. 39 (A)(1) of the NIRC.
3) What is meant by real property? - Real property shall have the same meaning
attributed to that term under Article 415 of Republic Act No. 386, otherwise known as
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the “Civil Code of the Philippines.
4) What does a real estate dealer refer to? - A real estate dealer refers to any person
engaged in the business of buying and selling or exchanging real properties on his own
account as a principal and holding himself out as a full or part-time dealer in real estate.5) What does a real estate developer refer to? - Real estate developer refers to any
person engaged in the business of developing real properties into subdivisions, or
building houses on subdivided lots, or constructing residential or commercial units,
townhouses and other similar units for his own account and offering them for sale or
lease.
6) What does a real estate lessor refer to? - Real estate lessor refers to any person
engaged in the business of leasing or renting real properties on his own account as a
principal and holding himself out as a lessor of real properties being rented out or
offered for rent.7) Who are considered engaged in the real estate business? - Taxpayers who are
considered engaged in the real estate business refer collectively to real estate dealers,
real estate developers and/or real estate lessors. A taxpayer whose primary purpose of
engaging in business, or whose Articles of Incorporation states that its primary purpose
is to engage in the real estate business shall be deemed to be engaged in the real estate
business.
8) Who are considered not engaged in the real estate business? -Taxpayers who are
considered not engaged in the real estate business refer to persons other than real
estate dealers, real estate developers and/or real estate lessors.9) Who are considered habitually engaged in the real estate business? - Real estate
dealers or real estate developers who are registered with the Housing and Land Use
Regulatory Board (HULRB) or HUDCC
10) How can you determine whether a particular real property is a capital asset or an
ordinary asset?
a) Real properties shall be classified with respect to taxpayers engaged in the real estate
business as follows:
i) All real properties acquired by the real estate dealer shall be considered as ordinary
assets.
ii) All real properties acquired by the real estate developer, whether developed or
undeveloped as of the time of acquisition, and all real properties which are held by the
real estate developer primarily for sale or for lease to customers in the ordinary course
of his trade or business or which would properly be included in the inventory of the
taxpayer if on hand at the close of the taxable year and all real properties used in the
trade or business, whether in the form of land, building, or other improvements, shall
be considered as ordinary assets.
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iii) All real properties of the real estate lessor, whether land, building and/or
improvements, which are for lease/rent or being offered for lease/rent, or otherwise for
use or being used in the trade or business shall likewise be considered as ordinary
assets.iv) All real properties acquired in the course of trade or business by a taxpayer
habitually engaged in the sale of real property shall be considered as ordinary assets.
Note: Registration with the HLURB or HUDCC as a real estate dealer or developer shall
be sufficient for a taxpayer to be considered as habitually engaged in the sale of real
estate.
If the taxpayer is not registered with the HLURB or HUDCC as a real estate dealer or
developer, he/it may nevertheless be deemed to be engaged in the real estate business
through the establishment of substantial relevant evidence (such as consummation
during the preceding year of at least six (6) taxable real estate sale transactions,regardless of amount; registration as habitually engaged in real estate business with the
Local Government Unit or the Bureau of Internal Revenue, etc.)
b) In the case of taxpayer not engaged in the real estate business, real properties,
whether land, building, or other improvements, which are used or being used or have
been previously used in trade or business of the taxpayer shall be considered as
ordinary assets.
c) In the case of taxpayers who changed its real estate business to a non-real estate
business, real properties held by these taxpayer shall remain to be treated as ordinary
assets.d) In the case of taxpayers who originally registered to be engaged in the real estate
business but failed to subsequently operate, all real properties acquired by them shall
continue to be treated as ordinary assets.
e) Real properties formerly forming part of the stock in trade of a taxpayer engaged in
the real estate business, or formerly being used in the trade or business of a taxpayer
engaged or not engaged in the real estate business, which were later on abandoned and
became idle, shall continue to be treated as ordinary assets. Provided however, that
properties classified as ordinary assets for being used in business by a taxpayer engaged
in business other than real estate business are automatically converted into capital
assets upon showing proof that the same have not been used in business for more than
two years prior to the consummation of the taxable transactions involving said
properties
f) Real properties classified as capital or ordinary asset in the hands of the
seller/transferor may change their character in the hands of the buyer/transferee. The
classification of such property in the hands of the buyer/transferee shall be determined
in accordance with the following rules:
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i) Real property transferred through succession or donation to the heir or donee who is
not engaged in the real estate business with respect to the real property inherited or
donated, and who does not subsequently use such property in trade or business, shall
be considered as a capital asset in the hands of the heir or donee.ii) Real property received as dividend by the stockholders who are not engaged in the
real estate business and who do not subsequently use such property in trade or
business, shall be considered as a capital asset in the hands of the recipients even if the
corporation which declared the real property dividends is engaged in real estate
business.
iii) The real property received in an exchange shall be treated as ordinary asset in the
hands of the case of a tax-free exchange by taxpayer not engaged in real estate business
to a taxpayer who is engaged in real estate business, or to a taxpayer who, even if not
engaged in real estate business, will use in business the property received in exchange.g) In the case of involuntary transfers of real properties, including expropriations or
foreclosure sale, the involuntariness of such sale shall have no effect on the
classification of such real property in the hands of the involuntary seller, either as
capital asset or ordinary asset as the case may be.
11. What is the basis in the valuation of property?
The value of the real property will be based on the selling price, fair market value as
determined by the Commissioner (zonal value) or the fair market value as shown in the
Assessor’s schedule of values, whichever is higher. If there is no zonal value, the taxable
base is whichever is higher of the gross selling price per sales documents or the fairmarket value that appears in the latest tax declaration.
If there is an improvement, the FMV per latest tax declaration at the time of the sale or
disposition, duly certified by the City/Municipal Assessor shall be used. No adjustments
shall be added on the said value, provided that the tax declaration bears the upgraded
fair market value of the said property pursuant to Section 219 of R.A. No. 7160,
otherwise known as the Local Government Code of 1991 and the last paragraph of the
Local Assessment Regulations No. 1-92 dated October 6, 1992. In case the tax
declaration being presented was issued three (3) or more years prior to the date of sale
or disposition of the real property, the seller/transferor shall be required to submit a
certification from the City/Municipal Assessor whether or not the same is still the latest
tax declaration covering the said real property. Otherwise, the taxpayer shall secure its
latest tax declaration and shall submit a copy thereof duly certified by the said Assessor.
(RAMO 1-2001)
13. Who are required to file the Final Capital Gains Tax return?
Every person, whether natural or juridical, resident or non-resident, including estates
and trusts, who sells, transfers, exchanges or disposes real properties located in the
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Philippines classified as capital assets, including pacto de retro sales and other forms of
conditional sales or shares of stocks in domestic corporations not traded through the
local stock exchange classified as capital assets.
14) What is the procedure in the filing of Final Capital Gains Tax return?File the Final Capital Gains Tax return in triplicate (two copies for the BIR and one copy
for the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where
the seller or transferor is registered, for shares of stocks or where the property is
located, for real property. In places where there are no AAB, the return will be filed
directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer.
15) Who/what are considered exempt from the payment of Final Capital Gains Tax?
An entity exempt from the payment of income tax under existing investment incentives
and other special laws.
An individual or non-individual exchanging real property solely for shares of stocksresulting in corporate control
A government entity or government-owned or controlled corporation selling real
property
If the disposition of the real property is gratuitous in nature
Where the disposition is pursuant to the CARP law
Who are conditionally exempt from the payment of Final Capital Gains Tax?
Natural persons who dispose their principal residence, provided that the following
criteria are met:
a. The proceeds of the sale of the principal residence have been fully utilized inacquiring or constructing new principal residence within eighteen (18) calendar months
from the date of sale or disposition;
b. The historical cost or adjusted basis of the real property sold or disposed will be
carried over to the new principal residence built or acquired;
c. The Commissioner has been duly notified, through a prescribed return, within thirty
(30) days from the date of sale or disposition of the person’s intention to avail of the tax
exemption;
d. Exemption was availed only once every ten (10) years; and
e. There is no full utilization of the proceeds of sale or disposition. The portion of the
gain presumed to have been realized from the sale or disposition will be subject to
Capital Gains Tax.
In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from
the seller and shall deduct from the agreed selling price/consideration the 6% capital
gains tax which shall be deposited in cash or manager’s check in interest-bearing
account with an Authorized Agent Bank (AAB) under an Escrow Agreement between
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the concerned Revenue District Officer, the Seller and the Transferee, and the AAB to
the effect that the amount so deposited, including its interest yield, shall only be
released to such Transferor upon certification by the said RDO that the proceeds of the
sale/disposition thereof has, in fact, been utilized in the acquisition or construction ofthe Seller/Transferor’s new principal residence within eighteen (18) calendar months
from date of the said sale or disposition. The date of sale or disposition of a property
refers to the date of notarization of the document evidencing the transfer of said
property. In general, the term “Escrow” means a scroll, writing or deed, delivered by
the grantor, promisor or obligor into the hands of a third person, to be held by the
latter until the happening of a contingency or performance of a condition, and then by
him delivered to the grantee, promise or obligee.
16. What is a Certificate Authorizing Registration (CAR)?
CAR is a certification issued by the Commissioner or his duly authorized representativeattesting that the transfer and conveyance of land, buildings/improvements or shares of
stock arising from sale, barter or exchange have been reported and the taxes due
inclusive of the documentary stamp tax, have been fully paid. CARs shall now have a
validity of one (1) year from date of issue. In case of failure to present the same to the
Registry of Deeds (RD) within the one (1) year period, the same shall be presented for
revalidation to the District Office where the CAR was issued. The revalidation, evidenced
by stamping the phrase "revalidated on __________ to expire on ___________" in a
conspicuous space in the CAR, shall be good for another one-year period, after which
the CAR losses its validity. (RMO 15-2003)
C. Estate Tax (Observe that many estates still remain in the names of the deceased ancestors due to
the financial inability of the heirs to pay the estate taxes (inheritance taxes) which are
quite substantial.)
The current estate tax rates range from 5% to 20% of the net estate, per table .
The estate tax is payable upon the transfer of the net estate of every decedent,whether a resident or nonresident of the Philippines. However, if the decedent was
neither a resident nor a citizen of the Philippines at the time of his or her death, only
the portion of the estate in the Philippines shall be included in the taxable estate. For
example, if the decedent was a resident of the United States and became a naturalized
U.S. citizen before death, then only the properties in the Philippines will be subject to
estate tax. The properties in the United States would not be covered by Philippine
estate tax.
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Basis and computation of the net estate tax:
The estate shall be appraised at its fair market value as of the time of death, which iseither the fair market value as determined by the Commissioner (the “zonal value”, or
the fair market value as shown in the schedule of values fixed by the Provincial and City
Assessors (the “assessed value”), whichever is higher.
So, if the decedent died in 1991, then the estate tax will be computed based on its zonal
or assessed value (whichever is higher) in 1991. It is also possible that at that time, the
BIR had not yet come out with a zonal valuation of the property, thus the computation
will have to be based on its 1991 assessed value.
Deadline to file the estate tax return:
Six (6) months from the decedent’s death. This may still be extended. when the
Commissioner finds that the payment on the due date of the estate tax or of any part
thereof would impose undue hardship upon the estate or any of the heirs,
not to exceed five (5) years, in case the estate is settled through the courts, or
two (2) years in case the estate is settled extrajudicially.
ESTATE TAX is a tax on the right or privilege of the deceased person to
transmit his/her estate to his/her lawful heirs and beneficiaries at thetime of death and on certain transfers, which are made by law as
equivalent to testamentary disposition. It is not a tax on property. The Tax
is based on the laws in force at the time of death notwithstanding the
postponement of the actual possession or enjoyment of the estate by the
beneficiary.
Tax Form: BIR Form 1801 - Estate Tax Return
Documentary Requirements1. Notice of Death duly received by the BIR, if gross estate exceeds
P20,000 for deaths occurring on or after Jan. 1, 1998; or if the gross estate
exceeds P3,000 for deaths occurring prior to January 1, 1998
2. Certified true copy of the Death Certificate
3. Deed of Extra-Judicial Settlement of the Estate, if the estate is settled
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Procedures
The heirs/authorized representative/administrator/executor shall file the
estate tax return (BIR Form 1801) and pay the corresponding estate tax.
Deadlines
File the return within six (6) months from decedent's death. However, the
Commissioner may, in meritorious cases, grant extension not exceeding
thirty (30) days.
Frequently Asked Questions
1. Who are required to file the Estate Tax return?
a) The executor or administrator or any of the legal heirs of the decedent
3. What are included in gross estate?4. What are excluded from gross estate?
5. What will be used as basis in the valuation of property?
The properties shall be appraised based on its fair market value at the time
of the decedent's death.
6. What are the allowable deductions for Estate Tax purposes?
D. VALUE-ADDED TAX (VAT)
Value-Added Tax is a form of sales tax on consumption levied on the sale, barter,
exchange or lease of goods or properties and services in the Philippines and on
importation of goods into the Philippines. It is an indirect tax, which may be shifted or
passed on to the buyer, transferee or lessee of goods, properties or services.
Tax Rates
On sale of goods and properties - twelve percent (12%) of the gross selling price or
gross value in money of the goods or properties sold, bartered or exchanged
On sale of services and use or lease of properties - twelve percent (12%) of gross
receipts derived from the sale or exchange of services, including the use or lease of
properties
Who Are Required To File VAT Returns
Any person or entity who, in the course of his trade or business, sells, barters,
exchanges, leases goods or properties and renders services subject to VAT, if the
aggregate amount of actual gross sales or receipts exceed One Million Five Hundred
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Thousand Pesos (P1,500,000.00).
A person required to register as VAT taxpayer but failed to register
Any person, whether or not made in the course of his trade or business, who imports
goods
Monthly VAT Declarations
Tax Form: BIR Form 2550 M - Monthly Value-Added Tax Declaration (February 2007
ENCS)
Documentary Requirements
1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form No. 2307), if
applicable
2. Summary Alphalist of Withholding Agents of Income Payments Subjected to
Withholding Tax At Source (SAWT), if applicable
3. Duly approved Tax Debit Memo, if applicable
4. Duly approved Tax Credit Certificate, if applicable
5. Authorization letter, if return is filed by authorized representative.
Procedures
1. Fill-up BIR Form No. 2550 M in triplicate copies (two copies for the BIR and one copy
for the taxpayer)
2. If there is payment:
File the Monthly VAT declaration, together with the required attachments, and pay the
VAT due thereon with any Authorized Agent Bank (AAB) under the jurisdiction of the
Revenue District Office (RDO)/Large Taxpayers District Office (LTDO) where the
taxpayer (head office of the business establishment) is registered or required to be
registered.
3. If there is no payment: File the Quarterly VAT Return, together with the required attachments with the
RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized
Municipal/City Treasurer of Municipality/City where the taxpayer (head office of the
business establishment) is registered or required to be registered.
Reminders:
1. Only one consolidated Monthly VAT Declaration/Quarterly VAT Return shall be filed
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covering the results of operation of the head office as well as the branches for all lines
of business subject to VAT.
2. The Quarterly List of Sales and Purchases shall be submitted in magnetic form using
3.5-inch floppy diskette following the format provided under Section 4.114-3(g) of RR
No. 16-2005.
3. The Quarterly List of Sales and Purchases shall be submitted through electronic filing
acility for taxpayers under the jurisdiction of the Large Taxpayers Service (LTS) and
those enrolled under the eFPS.
Deadline
Within twenty five (25) days following the close of taxable quarter.
Frequently Asked QuestionsI. General VAT Queries
Who are liable to register as VAT taxpayers?
Any person who, in the course of trade or business, sells, barters or exchanges
goods or properties or engages in the sale or exchange of services shall be liable to
register if:
His gross sales or receipts for the past twelve (12) months, other than those that
are exempt under Section 109 (A) to (U), have exceeded One Million Five Hundred
Thousand Pesos (P1,500,000.00): or
There are reasonable grounds to believe that his gross sales or receipts for the
next twelve (12) months, other than those that are exempt under Section 109 (A)
to (U), will exceed One Million Five Hundred Thousand Pesos (P1,500,000.00).
When is a new VAT taxpayer required to apply for registration and pay the
registration fee?
New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the
corresponding registration fee of five hundred pesos (P500.00) using BIR Form No.
0605 for every separate or distinct establishment or place of business before the
start of their business following existing issuances on registration.
Thereafter, taxpayers are required to pay the annual registration fee of five
hundred pesos (P500.00) not later than January 31, every year.
What compliance activities should a VAT taxpayer, after registration as such, do
promptly or periodically?
The following compliance activities must be performed by a VAT-registered
taxpayer:
Pay the annual registration fee of P500.00 for every place of business or
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establishment that generates sales;
Register the books of accounts of the business/occupation/calling, including
practice of profession, before using the same;
Register the sales invoices and official receipts as VAT-invoices or VAT official
receipts for use on transactions subject to VAT. (If there are other transaction not
subject to VAT, a separate set of non-VAT invoices or non-VAT official receipts need
to be registered for use on transactions not subject to VAT);
Filing of the Monthly Value-added Tax Declaration on or before the 20th day
following the end of the taxable month (for manual filers)/on or before the
prescribed due dates enunciated in RR No. 16-2005 (for e-filers) using BIR Form No.
2550M and of the Quarterly VAT Return on or before the 25th day following the
end of the taxable quarter using BIR Form No. 2550Q, reflecting therein gross
receipts (for seller of service)/ gross sales (for seller of goods) and output tax (VATon sales); purchases of goods and services made in the course of trade or
business/exercise of profession and input tax (VAT on purchases), other allowable
tax credits as in the case of advance VAT payment and VAT withheld by
government payors, and VAT payable or excess input VAT, whichever is applicable,
with the accredited agent banks (AABs) of the BIR or Revenue Collection Officers
(RCOs) of the BIR (in areas without AAB), for returns with payment, or with the
RDO/LTDO having jurisdiction over the taxpayer (home RDO/LTDO), for returns
without payment. (The monthly VAT Declaration and the Quarterly VAT Return
shall reflect the consolidated total for all the taxable lines of activity and all theestablishments - head office and branches);
Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the
deadline set in the filing of the Quarterly VAT Return, the soft copy of the Quarterly
Schedule of Monthly Sales and Output Tax (if the quarterly sales exceed
P2,500,000.00), and the soft copy of the Quarterly Schedule of Monthly Domestic
Purchases and Input Tax/ the soft copy of the Schedule of Transactional/Individual
Importation ( if the quarterly total purchases exceed P1,000,000.00), reflecting
therein the required data prescribed under existing revenue issuances.
How do we determine the main or principal business of a taxpayer who isengaged in mixed business activities?
In determining the main or principal business of a taxpayer, we apply the
predominance test: if more than fifty (50%) of its gross sales and/or gross receipts
comes from its business/es subject to VAT, its main/principal business falls within
the VAT system making its status as a VAT person. Otherwise, he can not be
considered as a VAT person eligible for the election provided for under Section
109(2) of the Tax Code.
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What is the liability of a taxpayer becoming liable to VAT and did not register as
such?
Any person who becomes liable to VAT and fails to register as such shall be liable to
pay the output tax as if he is a VAT-registered person, but without the benefit of
input tax credits for the period in which he was not properly registered.
Who may opt to register as VAT and what will be his liability?
Any person who is VAT-exempt under Sec. 4.109-1 (B) (1) (V) not required to
register for VAT may, in relation to Sec. 4.109-2, elect to be VAT-registered by
registering with the RDO that has jurisdiction over the head office of that person,
and pay the annual registration fee of P500.00 for every separate and distinct
establishment.
Any person who is VAT-registered but enters into transactions which are exemptfrom VAT (mixed transactions) may opt that the VAT apply to his transactions which
would have been exempt under Section 109(1) of the Tax Code, as amended [Sec.
109(2)].
Franchise grantees of radio and/or television broadcasting whose annual gross
receipts of the preceding year do not exceed ten million pesos (P10,000,000.00)
derived from the business covered by the law granting the franchise may opt for
VAT registration. This option, once exercised, shall be irrevocable. (Sec. 119, Tax
Code).
Any person who elects to register under optional registration shall not be allowed
to cancel his registration for the next three (3) years.
The above-stated taxpayers may apply for VAT registration not later than ten (10)
days before the beginning of the calendar quarter and shall pay the registration fee
unless they have already paid at the beginning of the year. In any case, the
Commissioner of Internal Revenue may, for administrative reason deny any
application for registration. Once registered as a VAT person, the taxpayer shall be
liable to output tax and be entitled to input tax credit beginning on the first day of
the month following registration.
What are the instances when a VAT-registered person may cancel his VAT
registration?
If he makes a written application and can demonstrate to the commissioner's
satisfaction that his gross sales or receipts for the following twelve (12) months,
other than those that are exempt under Section 109 (A) to (U), will not exceed one
million five hundred thousand pesos (P1,500,000.00); or
If he has ceased to carry on his trade or business, and does not expect to
recommence any trade or business within the next twelve (12) months.
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When will the cancellation for registration be effective?
The cancellation for registration will be effective from the first day of the following
month the cancellation was approved.
What is the invoicing/ receipt requirement of a VAT-registered person?
A VAT registered person shall issue :
A VAT invoice for every sale, barter or exchange of goods or properties; and
A VAT official receipt for every lease of goods or properties and for every sale,
barter or exchange of services.
May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-
VAT transactions?
Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions
provided that the invoice or receipt shall clearly indicate the break-down of thesales price between its taxable, exempt and zero-rated components and the
calculation of the Value-Added Tax on each portion of the sale shall be shown on
the invoice or receipt.
May a VAT- registered person issue separate invoices/ receipts involving VAT and
Non-VAT transactions?
Yes. A VAT registered person may issue separate invoices/ receipts for the taxable,
exempt, and zero-rated component of its sales provided that if the sales is exempt
from value-added tax, the term "VAT-EXEMPT SALE" shall be written or printed
prominently on the invoice or receipt and if the sale is subject to zero percent (0%)
VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the
invoice or receipt.
How is the Value-Added Tax presented in the receipt/ invoice?
The amount of the tax shall be shown as a separate item in the invoice or receipt.
Sample:
Sales Price P 100,000.00
VAT 12,000.00
Invoice Amount P112,000.00
What is the information that must be contained in the VAT invoice or VAT official
receipt?
Name of Seller
Business Style of the Seller
Business Address of the Seller
Statement that the seller is a VAT-registered person, followed by his TIN
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Name of Buyer
Business Style of Buyer
Address of Buyer
TIN of buyer, if VAT- registered and amount exceed P1,000.00
Date of transaction
Quantity
Unit cost
Description of the goods or properties or nature of the service
Purchase price plus the VAT, provided that:
The amount of tax shall be shown as a separate item in the invoice or receipt;
If the sale is exempt from VAT, the term "VAT-EXEMPT SALE" shall be written or
printed prominently on the invoice or receipt;
If the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shallbe written or printed prominently on the invoice receipt; and
If the sale involves goods, properties or services some of which are subject to and
some of which are zero-rated or exempt from VAT, the invoice or receipt shall
clearly indicate the breakdown of the sales price between its taxable, exempt and
zero-rated components, and the calculation of the VAT on each portion of the sale
shall be shown on the invoice or receipt.
Authority to Print Receipt Number at the lower left corner of the invoice or receipt.
What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/
receipt?
The non-VAT registered person shall, in addition to paying the percentage tax
applicable to his transactions, be liable to VAT imposed in Section 106 or 108 of the
Tax Code without the benefit of any input tax credit plus 50% surcharge on the VAT
payable (output tax). If the invoice/ receipts contain the required information,
purchaser shall be allowed to recognize an input tax credit.
What is the liability of a VAT-registered person in the issuance of a VAT invoice/
receipt for VAT-exempt transactions?
If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-
exempt transaction but fails to display prominently on the invoice or receipt the
words "VAT-EXEMPT SALE", the transaction shall become taxable and the issuer
shall be liable to pay the VAT thereon. The purchaser shall be entitled to claim an
input tax credit on his purchase.
What is "output tax"?
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Output tax means the VAT due on the sale, lease or exchange of taxable goods or
properties or services by any person registered or required to register under
Section 236 of the Tax Code.
What is "input tax"?
Input tax means the VAT due on or paid by a VAT-registered on importation of
goods or local purchase of goods, properties or services, including lease or use of
property in the course of his trade or business. It shall also include the transitional
input tax determined in accordance with Section 111 of the Tax Code, presumptive
input tax and deferred input tax from previous period.
What comprises "goods or properties"?
The term "goods or properties" shall mean all tangible and intangible objects,
which are capable of pecuniary estimation and shall include, among others:
Real properties held primarily for sale to customers or held for lease in the
ordinary course of trade or business;
The right or the privilege to use motion picture films, films, tapes and discs; and
Radio, television, satellite transmission and cable television time.
What comprises "sale or exchange of services"?
The term "sale or exchange of services" means the performance of all kinds of
services in the Philippines for others for a fee, remuneration or consideration,
whether in kind or in cash, including those performed or rendered by the following:Construction and service contractors;
Stock, real estate, commercial, customs and immigration brokers;
Lessors of property, whether personal or real;
Persons engaged in warehousing services;
Proprietors, operators or keepers of hotels, motels, rest houses, pension houses,
inns, resorts, theatres, and movie houses;
What is a zero-rated sale?
It is a sale, barter or exchange of goods, properties and/or services subject to 0%VAT pursuant to Sections 106 (A) (2) and 108 (B) of the Tax Code. It is a taxable
transaction for VAT purposes, but shall not result in any output tax. However, the
input tax on purchases of goods, properties or services, related to such zero-rated
sales, shall be available as tax credit or refund in accordance with RR No. 16-2005.
What is a Contractor's Final Payment Release Certificate and where should
taxpayers file their application for this?
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The Contractor's Final Payment Release Certificate is issued by the BIR before a
government contractor is fully paid for his contract with the government. Taxpayers
may file their application at the BIR National Office at the Audit Information, Tax
Exemption and Incentives Division (AITEID)
What transactions are considered deemed sales?
The following transactions are considered as deemed sales:
Transfer, use or consumption, not in the course of business, of goods or properties
originally intended for sale or for use in the course of business. Transfer of goods or
properties not in the course of business can take place when VAT-registered person
withdraws goods from his business for his personal use;
Distribution or transfer to:
Shareholders or investors as share in the profits of the VAT-registered person; orCreditors in payment of debt or obligation
Consignment of goods if actual sale is not made within sixty (60) days following the
date such goods were consigned. Consigned goods returned by the consignee
within the 60-day period are not deemed sold;
Retirement from or cessation of business, with respect to all goods on hand,
whether capital goods, stock-in-trade, supplies or materials as of the date of such
retirement or cessation, whether or not the business is continued by the new
owner or successor. The following circumstances shall, among others, give rise to
transactions "deemed sale";
Change of ownership of the business. There is a change in the ownership of the
business when a single proprietorship incorporated; or the proprietor of a single
proprietorship sells his entire business.
Dissolution of a partnership and creation of a new partnership which takes over the
business.
What is VAT-exempt sale?
It is a sale of goods, properties or service and the use or lease of properties which is
not subject to output tax and whereby the buyer is not allowed any tax credit or
input tax related to such exempt sale.What are the VAT-exempt transactions?
Services subject to percentage tax under Title V of the Code, as amended;
Services by agricultural contract growers and milling for others of palay into rice,
corn into grits, and sugar cane into raw sugar;
Educational services rendered by private educational institutions duly accredited by
the Department of Education (DepED), the Commission on Higher Education (CHED)
and the Technical Education and Skills Development Authority (TESDA) and those
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rendered by the government educational institutions;
Services rendered by individuals pursuant to an employer-employee relationship;
Services rendered by regional or area headquarters established in the Philippines
by multinational corporations which act as supervisory, communications and
coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific
Region and do not earn or derive income from the Philippines;
Transactions which are exempt under international agreements to which the
Philippines is a signatory or under special laws except those granted under P.D. No.
529 - Petroleum Exploration Concessionaires under the Petroleum Act of 1949;
Sales by agricultural cooperatives duly registered and in good standing with the
Cooperative Development Authority (CDA) to their members, as well as of their
produce, whether in its original state or processed form, to non-members, their
importation of direct farm inputs, machineries and equipment, including spareparts thereof, to be used directly and exclusively in the production and/or
processing of their produce;
Gross receipts from lending activities by credit or multi-purpose cooperatives duly
registered and in good standing with the Cooperative Development Authority;
Sales by non-agricultural, non-electric and non-credit cooperatives duly registered
with and in good standing with CDA; Provided, that the share capital contribution
of each member does not exceed Fifteen Thousand Pesos (P15,000.00) and
regardless of the aggregate capital and net surplus ratably distributed among the
members;Export sales by persons who are not VAT-registered;
The following sales of real properties are exempt from VAT, namely:
Sale of real properties not primarily held for sale to customers or held for lease in
the ordinary course of trade or business;
Sale of real properties utilized for low-cost housing as defined by RA No. 7279,
otherwise known as the "Urban Development and Housing Act of 1992" and other
related laws, such as RA No. 7835 and RA No. 8763;
Sale of real properties utilized for specialized housing as defined under RA No.
7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein priceceiling per unit is P225,000.00 or as may from time to time be determined by the
HUDCC and the NEDA and other related laws;
Sale of residential lot valued at One Million Five Hundred Thousand Pesos
(P1,500,000.00) and below, or house and lot and other residential dwellings valued
at Two Million Five Hundred Thousand Pesos (P2,500,000.00) and below where the
instrument of sale/ transfer/ disposition was executed on or after July 1, 2005;
Provided, that not later than January 31, 2009 and every three (3) years thereafter,
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the amounts stated herein shall be adjusted to its present value using the
Consumer Price Index, as published by the National Statistics Office (NSO);
Provided, further, that such adjustment shall be published through revenue
regulations to be issued not later than March 31 of each year.
Lease of residential units with a monthly rental per unit not exceeding Ten
Thousand Pesos (P10,000.00), regardless of the amount of aggregate rentals
received by the lessor during the year; Provided, that not later than January 31,
2009 and every three (3) years thereafter, the amount of P10,000.00 shall be
adjusted to its present value using the Consumer Price Index, as published by the
NSO;
Sale, importation, printing or publication of books and any newspaper, magazine,
review or bulletin which appears at regular intervals with fixed prices for
subscription and sale and which is not devoted principally to the publication of paidadvertisements;
Sale, importation or lease of passenger or cargo vessels and aircraft, including
engine equipment and spare parts thereof for domestic or international transport
operations; Provided, that the exemption from VAT on the importation and local
purchase of passenger and/or cargo vessels shall be limited to those of one
hundred fifty (150) tons and above, including engine and spare parts of said vessels;
Provided, further, that the vessels to be imported shall comply with the age limit
requirement, at the time of acquisition counted from the date of the vessel's
original commissioning, as follows: (a) for passenger and/or cargo vessel, the agelimit is fifteen (15) years old, (b) for tankers, the age limit is ten (10) year old, and
(c) for high-speed passengers crafts, the age limit is five (5) years old; Provided,
finally, that exemption shall be subject to the provisions of Section 4 of Republic
Act No. 9295, otherwise known as "The Domestic Shipping Development Act of
2004";
Importation of life-saving equipment, safety and rescue equipment and
communication and navigational safety equipment, steel plates and other metal
plates including marine-grade aluminum plates, used for shipping transport
operations; Provided, that the exemption shall be subject to the provisions ofSection 4 of Republic Act No. 9295, otherwise known as "The Domestic Shipping
Development Act of 2004".
Importation of capital equipment, machinery, spare parts, life-saving and
navigational equipment, steel plates and other metal plates including marine-grade
aluminum plates to be used in the construction, repair, renovation or alteration of
any merchant marine vessel operated or to be operated in the domestic trade.
Provided, that the exemption shall be subject to the provisions of Section 19 of
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Republic Act No. 9295, otherwise known as the "The Domestic Shipping
Development Act of 2004".
Importation of fuel, goods and supplies engaged in international shipping or air
transport operations; Provided, that the said fuel, goods and supplies shall be used
exclusively or shall pertain to the transport of goods and/or passenger from a port
in the Philippines directly to a foreign port, or vice-versa, without docking or
stopping at any other port in the Philippines unless the docking or stopping at any
other Philippine port is for the purpose of unloading passengers and/or cargoes
that originated form abroad, or to load passengers and/or cargoes bound for
abroad; Provided, further, that if any portion of such fuel, goods or supplies is used
for purposes other that the mentioned in the paragraph, such portion of fuel,
goods and supplies shall be subject to 12% VAT;
Services of banks, non-bank financial intermediaries performing quasi-bankingfunctions, and other non-bank financial intermediaries, such as money changers
and pawnshops, subject to percentage tax under Sections 121 and 122, respectively
of the Tax Code; and
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 P1,500,000.00. Provided, that not later than
January 31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00
shall be adjusted to its present value after using the Consumer Price Index, as
published by the NSO.
What are the previously exempt transactions that are now subject to VAT?
Sale of residential lot valued at more than P1,500,000.00;
Sale of residential house & lot/dwellings valued at more than P2,500,000.00;
Lease of residential unit with a monthly rental of more than P10,000;
II. RELIEF-Related Queries
What is "RELIEF"?
RELIEF means Reconciliation of Listing for Enforcement. It supports the third partyinformation program of the Bureau through the cross referencing of third party
information from the taxpayers' Summary Lists of Sales and Purchases prescribed
to be submitted on a quarterly basis.
Who are required to submit Summary List of Sales?
VAT taxpayers with quarterly total sales/receipts (net of VAT), exceeding Two
Million Five Hundred Thousand Pesos (P2,500,000.00) are required to submit a
Summary List of Sales.
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Who are required to submit Summary List of Purchases?
VAT taxpayers with quarterly total purchases (net of VAT) of goods and services,
including importation exceeding One Million Pesos (P1,000,000.00) are required to
submit Summary List of Purchases.
What are the Summary Lists required to be submitted?
Quarterly Summary List of Sales to Regular Buyers/ Customers Casual Buyers/
Customers and Output Tax
Quarterly Summary of List of Local Purchases and Input tax; and
Quarterly Summary List of Importation.
When is the deadline for submission of the above Summary Lists?
The Summary List of Sales/Purchases, whichever is applicable, shall be submitted on or
before the twney-fifth (25th) day of the month following the close of the taxablequarter -- calendar quarter or fiscal quarter.
What are the penalties for failure to submit the Summary Lists?
For failure to file, keep or supply a statement, list or information required on the date
prescribed shall pay and administrative penalty of One Thousand Pesos (P1,000.00) for
each such failure, unless it is shown that such failure is due to reasonable cause and
not to willful neglect; and
An aggregate amount to be imposed for all such failures during a taxable year shall not
exceed Twenty-Five Thousand Pesos (P25,000.00).
III. What is the treatment for Withholding of VAT on Government Money Payments?
The government or any of its political subdivisions, instrumentalities or agencies,
including government-owned or controlled corporations (GOCCs) shall, before making
payment on account of each purchase of goods and/or services taxed at twelve percent
(12%) VAT pursuant to Sections 106 and 108 of the Tax Code, deduct and withhold a
Final VAT due at the rate of five percent (5%) of the gross payment.
The five percent (5%) final VAT withholding rate shall represent the net VAT payable of
the seller. The remaining seven percent (7%) effectively accounts for the standard
input VAT for sales of goods or services to government or any of its politicalsubdivisions, instrumentalities or agencies including GOCCs in lieu of the actual input
VAT directly attributable or ratably apportioned to such sales. Should actual input VAT
attributable to sales to government exceeds seven percent (7%) of gross payments, the
excess may form part of the sellers' expense or cost. On the other hand, if actual input
VAT attributable to sale to government is less than seven percent (7%) of gross
payment, the difference must be closed to expense or cost.
The government or any of its political subdivisions, instrumentalities or agencies
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including GOCCs, as well as private corporation, individuals, estates and trusts, whether
large or non-large taxpayers, shall withhold twelve percent (12%) VAT with respect to
the following payments:
Lease or use of properties or property rights owned by non-residents; andOther services rendered in the Philippines by non-residents.
IV. In what grounds can the Commissioner of Internal Revenue suspend the business
operations of a taxpayer?
The Commissioner or his authorized representative is empowered to suspend the
business operations and temporarily close the business establishment of any person
for any of the following violations:
(a) In the case of a VAT-registered Person:
Failure to issue receipts or invoices;
Failure to file a value-added-tax return as required under Section 114; orUnderstatement of taxable sales or receipts by thirty percent (30%) or more of his
correct taxable sales or receipts for the taxable quarter.
(b) Failure to any Person to Register as Required under Section 236
The temporary closure of the establishment shall be for the duration of not less than
five (5) days and shall be lifted only upon compliance with whatever requirements
prescribed by the Commissioner in the closure order.
E. PERCENTAGE TAX
Description: Percentage tax is a business tax imposed on persons or entities who sell
or lease goods, properties or services in the course of trade or business whose gross
annual sales and/or receipts do not exceed P750,000 and who are not VAT-registered.
Who Are Required To File Percentage Tax Returns
Any person who is not a VAT-registered person (persons exempt from VAT
under Sec. 109z of the Tax Code)
Monthly Percentage Tax
Tax Form: BIR Form 2551 M - Monthly Percentage Tax Return
Documentary Requirements
1. Duly issued Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if
applicable
2. Duly approved Tax Debit Memo, if applicable
3. Copy of Certificate of Registration issued by Cooperative Development Authority
for cooperatives and from the National Electrification Administration for electric
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cooperatives
4. Previously filed return and proof of payment, for amended return
Procedures
1. Fill-up BIR Form 2551 M in triplicate copies2. If there is payment:
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District
Office where taxpayer is required to register and present the duly accomplished BIR
Form 2551 M, together with the required attachments and payment. (The Percentage
Tax imposed shall be paid at the time the return is filed by the taxpayer.)
In places where there are no AABs, the duly accomplished BIR Form 2551 M,
together with the required attachments and payment, shall be filed/paid with the
Revenue Collection Officer or duly Authorized Treasurer of the city or municipalitywhere said business or principal place of business is located.
Receive taxpayer's copy of the duly stamped and validated form from the teller
of the AAB/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.
3. If there is no payment:
Proceed to the Revenue District Office where taxpayer is required to register
and present the duly accomplished BIR Form 2551M, together with the required
attachments.
Receive taxpayer's copy of the duly stamped and validated form from the RDOrepresentative.
Note: "No payment" returns filed late shall be imposed the necessary penalties by the
RDO, which shall be paid at the concerned AAB.
Deadline
Manual Filing
Not later than 20th day following the end of each month
Quarterly Percentage TaxTax Form: BIR Form 2551 Q - Quarterly Percentage Tax Return
Documentary Requirements
1. Duly issued Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if
applicable
2. Duly approved Tax Debit Memo, if applicable
3. Copy of Certificate of Registration issued by Cooperative Development Authority
for cooperatives and from the National Electrification Administration for electric
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cooperatives
4. Previously filed return and proof of payment, for amended return
Procedures
1. Fill-up BIR Form 2551 Q in triplicate copies.2. If there is payment:
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District
Office where taxpayer is required to register and present the duly accomplished BIR
Form 2551Q, together with the required attachments and payment. (The Percentage
Tax imposed shall be paid at the time the return is filed by the taxpayer.)
In places where there are no AABs, the accomplished BIR Form 2551 Q,
together with the required attachments and payment, shall be filed/paid with the
Revenue Collection Officer or duly Authorized Treasurer of the city or municipality
where said business or principal place of business is located. Receive taxpayer's copy of the duly stamped and validated form from the teller
of the AAB/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.
3. If there is no payment:
Proceed to the Revenue District Office where taxpayer is required to register and
present the duly accomplished BIR Form 2551Q, together with the required
attachments.
Receive taxpayer's copy of the duly stamped and validated form from the RDO
representative.
Note: "No payment" returns filed late shall be imposed the necessary penalties by theRDO, which shall be paid at the concerned AAB.
Deadline
Manual Filing
Not later than 20th day following the end of each quarter
Filing Through Electronic Filing and Payment System (eFPS)
Not later than the 20th day following the end of the quarter
DONORS TAX (Sec. 98, NIRC)Tax Rates
Effective January 1, 1998 to present (Ranges from 2% to 15%)
Notes:
1. Rate applicable shall be based on the law prevailing at the time of donation.
2. When the gifts are made during the same calendar year but on different dates,
the donor's tax computed on the total net gifts during the year.
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Donation made to a stranger is subject to 30% of the net gift. A stranger is a person who
is not a:
• brother, sister (whether by whole or half blood), spouse, ancestor and lineal
descendants; or
•. relative by consanguinity in the collateral line within the fourth degree of
relationship (up to first cousin).
Donation made to a stranger is subject to 10% of the net gift. A stranger is a person who
is not a:
• brother, sister (whether by whole or half blood), spouse, ancestor and lineal
descendants; or
•. relative by consanguinity in the collateral line within the fourth degree of
relationship (up to first cousin).
Effective before July 28, 1992
Description : Donor’s Tax is a tax on a donation or gift, and is imposed on the
gratuitous transfer of property between two or more persons who are living at the time
of the transfer. It shall apply whether the transfer is in trust or otherwise, whether the
gift is direct or indirect and whether the property is real or personal, tangible or
intangible.
Tax Form : BIR Form 1800 – Donor’s Tax Return
Documentary Requirements
The following requirements must be submitted upon field or office audit of the tax case
before the Tax Clearance Certificate/Certificate Authorizing Registration can be
released:
1. Deed of Donation2. Sworn Statement of the relationship of the donor to the donee
3. Proof of tax credit, if applicable
4. Certified true copy(ies) of the Original/Transfer/Condominium Certificate of Title
(front and back ) of lot and/or improvement donated, if applicable
5. Certified true copy(ies) of the latest Tax Declaration (front and back pages) of lot
and/or improvement, if applicable
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6. “Certificate of No Improvement” issued by the Assessor’s office where the
properties have no declared improvement, if applicable
7. Proof of valuation of shares of stocks at the time of donation, if applicable
• For listed stocks - newspaper clippings or certification issued by the Stock
Exchange as to the par value per share
• For unlisted stocks - latest audited Financial Statements of the issuing
corporation with computation of the book value per share
8. Proof of valuation of other types of personal properties, if applicable
9. Proof of claimed deductions, if applicable
10. Copy of Tax Debit Memo used as payment, if applicable
Additional requirements may be requested for presentation during audit of the tax casedepending upon existing audit procedures.
Procedures
File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with
any Authorized Agent Bank (AAB) of the RDO having jurisdiction over the place of the
domicile of the donor at the time of the transfer. In places where there are no AAB, the
return will be filed directly with the Revenue Collection Officer or duly Authorized City
or Municipal Treasurer where the donor was domiciled at the time of the transfer, or ifthere is no legal residence in the Philippines, with Revenue District No. 39 - South
Quezon City.
In the case of gifts made by a non-resident alien, the return may be filed with Revenue
District No. 39 - South Quezon City, or with the Philippine Embassy or Consulate in the
country where donor is domiciled at the time of the transfer.
Submit all documentary requirements and proof of payment to the Revenue District
Office having jurisdiction over the place of residence of the donor.
Deadlines
Within thirty days (30) after the date the gift (donation) is made. A separate return will
be filed for each gift (donation) made on the different dates during the year reflecting
therein any previous net gifts made during the same calendar year.
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If the gift (donation) involves conjugal/community/property, each spouse will file
separate returns corresponding to his/ her respective share in the conjugal/community
property. This rule will also apply in the case of co-ownership over the property.
Frequently Asked Questions
1. Who are required to file the Donor’s Tax Return?
Every person, whether natural or juridical, resident or non-resident, who transfers or
causes to transfer property by gift, whether in trust or otherwise, whether the gift is
direct or indirect and whether the property is real or personal, tangible or intangible.
2. What are the procedures in filing the Donor’s Tax return?
File the return in triplicate (two copies for the BIR and one copy for the taxpayer) withany Authorized Agent Bank (AAB) of the RDO having jurisdiction over the place of the
domicile of the donor at the time of the transfer. In places where there are no AAB, the
return will be filed directly with the Revenue Collection Officer or duly Authorized City
or Municipal Treasurer where the donor was domiciled at the time of the transfer, or if
there is no legal residence in the Philippines, with Revenue District No. 39 - South
Quezon City.
In the case of gifts made by a non-resident alien, the return may be filed with Revenue
District No. 39 - South Quezon City, or with the Philippine Embassy or Consulate in thecountry where donor is domiciled at the time of the transfer.
Submit all documentary requirements and proof of payment to the Revenue District
Office having jurisdiction over the place of residence of the donor.
3. What donations are tax exempt?
• Dowries or donations made on account of marriage before its celebration or within
one year thereafter, by parents to each of their legitimate, recognized natural, or
adopted children to the extent of the first P10,000• Gifts made to or for the use of the National Government or any entity created by
any of its agencies which is not conducted for profit, or to any political subdivision of
the said Government
• Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited non-government organization, trust or
philantrophic organization or research institution or organization, provided not
more than 30% of said gifts will be used by such donee for administration purposes
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• Encumbrances on the property donated if assumed by the donee in the deed of
donation
• Donations made to the following entities as exempted under special laws:
- Aquaculture Department of the Southeast Asian Fisheries Development Center of
the Philippines
- Development Academy of the Philippines
- Integrated Bar of the Philippines
- International Rice Research Institute
- National Social Action Council
- Ramon Magsaysay Foundation
- Philippine Inventor’s Commission
- Philippine American Cultural Foundation
- Task Force on Human Settlement on the donation of equipment, materials and
services
4. What are the bases in the valuation of property?
If the gift is made in property, the fair market value at that time will be considered the
amount of gift
In case of real property, the taxable base is the fair market value as determined by the
Commissioner of Internal Revenue (Zonal Value) or fair market value as shown in the
latest schedule of values of the provincial and city assessor (MV per Tax Declaration),
whichever is higher
If there is no zonal value, the taxable base is the fair market value that appears in the
latest tax declaration
If there is an improvement, the value of improvement is the construction cost per
building permit and or occupancy permit plus 10% per year after year of construction,
or the market value per latest tax declaration.
F. DOCUMENTARY STAMP TAX (Title VII)
Description: Documentary Stamp Tax is a tax on documents, instruments, loan
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agreements and papers evidencing the acceptance, assignment, sale or transfer of an
obligation, right or property incident thereto.
Tax Form: BIR Form 2000 (Documentary Stamp Tax Declaration Return)
Documentary Requirements
1) Photocopy of document(s) to which the documentary stamp shall be affixed, in case
of constructive affixture of Documentary Stamp Tax
2) For metering machine users, a schedule of the details of usage or consumption of
documentary stamp
3) Proof of exemption under special law, if applicable
4) Duly approved Tax Debit Memo, if applicable
Tax Rates
Tax
Code
Section
Document Taxable UnitTax Due
Per Unit
% of
UnitTaxable Base
174
Debentures and
Certificates of
Indebtedness
P200.00 or
fraction
thereof
P1.50 .75%Face value of
Document
175
Original Issue of
Shares of Stock
with par value
Original Issue of
Shares of Stock
without par
value
P200.00 or
fraction
thereof
P200.00 or
fraction
thereof
based on
actual
consideration
2.00
2.00
1%
1%
Par value of shares of
stocks actual
consideration for the
issuance of shares of
stocks
176
Sales,Agreements to
Sell, Memoranda
of Sales,
Deliveries or
Transfer of Due-
bills, Certificate
of Obligation, or
P200.00 or
fraction
thereof
1.50 .75%
Par value of such due-
bills, certificate of
obligation or stocks
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Shares or
Certificates of
Stock
177
Bonds,
Debentures,
Certificate of
Stock or
Indebtedness
issued in foreign
Countries
P200.00 or
fraction
thereof
1.50 .75%
Par value of such
bonds, debentures or
Certificate of Stocks
178
Certificate of
Profits or Interestin Property or
Accumulation
P200.00 or
fractionthereof
.50 .25%
Face value of such
certificate /memorandum
179
Bank Checks,
Drafts, Certificate
of Deposit not
bearing interest
and other
Instruments
On each
Document1.50
180
Bonds, LoanAgreements,
Promissory
Notes, Bills of
Exchange, Drafts,
Instruments and
Securities Issued
by the
Government or
any of itsInstrumentalities,
Deposit
Substitutes Debt
Instrument,
Certificates of
Deposit bearing
interest and
P200.00 or
fraction
thereof
.30 .15%Face value of the
instrument/document
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others not
payable on sight
or demand
(except loan
agreement or
promissory notes
exceeding
P250,000.00 for
personal use or
family use)
181
Bills of Exchange
or order drawn inforeign country
but payable in
the Philippines
P200.00 orfraction
thereof
.30 .15%
Face value of such bill
of exchange or order
or the equivalent of
such value, if
expressed in foreign
currency
182
Foreign Bills of
Exchange and
Letter of Credit
P200.00 or
fraction
thereof
.30 .15%
Face value of such bill
of exchange or order
or the equivalent of
such value, if
expressed in foreign
currency
183Life Insurance
Policies
P200.00 or
fraction
thereof
.50 .25%Amount Insured by
the Policy
184
Policies Of
Insurance upon
Property
P4.00
premium or
fraction
thereof
.50 12.5% Premium charged
185
Fidelity Bondsand other
Insurance
Policies
P4.00premium or
fraction
thereof
.50 12.5% Premium charged
186
Policies of
Annuities,
Annuity or other
instruments
P200.00 or
fraction
thereof
1.50 75%
Capital of annuity, or
if unknown 33 1/3
times the annual
income
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186 Pre-Need Plans
P500.00 or
fraction
thereof
.50 .10%Value or amount of
the Plan
187 Indemnity Bonds
P4.00 or
fraction
thereof
.30 7.5% Premium charged
188
Certificates of
Damage or
otherwise and
Certificate or
document issued
by any customsofficers, marine
surveyor, notary
public and
certificate
required by law
or by rules and
regulations of a
public office
Each
Certificate15.00
193Powers of
Attorney
Each
Document5.00
194
Lease and other
Hiring
agreements ofmemorandum or
contract for hire,
use or rent of
any land or
tenements or
portions thereof
First 2,000
For every
P1,000 or
fractionalpart thereof
in excess of
the first
P2,000 for
each year of
the term of
the contract
3.00
1.001.5%
1%
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or agreement
195
Mortgages
Pledges of lands,
estate, or
property and
Deeds of Trust
First 5,000
On each
P5,000 or
fractional
part thereof
in excess of
5,000
20.00
10.00
.4%
.2%
Amount Secured
Amount Secured
196
Deed of Sale,
instrument or
writing and
Conveyances ofReal Property
(except grants,
patents or
original
certificate of the
government)
First 1,000
For each
additionalP1,000 or
fractional
part thereof
in excess of
P1,000
15.00
15.00
1.5%
1.5%
Consideration or Fair
Market Value,whichever is higher (if
government is a
party, basis shall be
the consideration)
ProceduresFile BIR Form No. 2000 in triplicate (two copies for the BIR and one copy for the
taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where the seller
or transferor is registered, for shares of stocks or where the property is located, for real
property. In places where there are no AAB, the return will be filed directly with the
Revenue Collection Officer or Authorized City or Municipal Treasurer.
Submit all documentary requirements and proof of payment to the Revenue District
Office having jurisdiction over the place of residence of the seller.
DeadlinesThe Documentary Stamp Tax return (BIR Form 2000) shall be filed in triplicate (two
copies for the BIR and one copy for the taxpayer) within five (5) days after the close of
the month when the taxable document was made signed, issued, accepted or
transferred; when reloading a metering machine becomes necessary; or upon
remittance by Collection Agents of collection from sale of loose stamps. The
Documentary Stamp Tax shall be paid upon filing of the return.
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Frequently Asked Questions
1) Who are required to file Documentary Stamp Tax Declaration Return?
a) In case of constructive affixture of documentary stamps, by the persons making,
signing, issuing, accepting or transferring documents, instruments, loan agreements andpapers, acceptances, assignments, sales and conveyances of the obligation, right or
property incident thereto wherever the document is made, signed, issued, accepted or
transferred when the obligation or right arises from Philippine sources or the property is
situated in the Philippines at the same time such act is done or transaction had;
b) By metering machine user who imprints the Documentary Stamp Tax due on the
taxable documents; and
c) By Revenue Collection Agent, for remittance of sold loose documentary stamps.
Note: Wherever one party to the taxable document enjoys exemption from the tax
imposed, the other party who is not exempt will be the one directly liable to fileDocumentary Stamp Tax Declaration and pay the applicable stamp tax.
2) Where is the Documentary Stamp Tax Declaration Return filed?
In the Authorized Agent Bank (AAB) within the territorial jurisdiction of the RDO which
has jurisdiction over the residence or principal place of business of the taxpayer or
where the property is located in case of sale of real property or where the Collection
Agent is assigned. In places where there is no Authorized Agent Bank, the return will be
filed with the Revenue Collection Officer or duly authorized City or Municipal Treasurer
where the taxpayer's residence or principal place of business is located or where theproperty is located in case of sale of real property or where the Collection Agent is
assigned.
3) What are the documents/papers not subject to Documentary Stamp Tax?
Policies of insurance or annuities made or granted by a fraternal or beneficiary society,
order, association or cooperative company, operated on the lodge system or local
cooperation plan and organized and conducted solely by the members thereof for the
exclusive benefit of each member and not for profit
Certificates of oaths administered by any government official in his official capacity or
acknowledgement by any government official in performance of his official duty
Written appearance in any court by any government official in his official capacity
Certificates of the administration of oaths to any person as to the authenticity of any
paper required to be filed in court by any person or party thereto, whether the
proceedings be civil or criminal
Papers and documents filed in court by or for the national, provincial, city or municipal
governments
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Affidavits of poor persons for the purpose of proving poverty
Statements and other compulsory information required of persons or corporations by
the rules and regulations of the national, provincial, city or municipal government
exclusively for statistical purposes and which are wholly for the use of the Bureau oroffice in which they are filed, and not at the instance or for the use or benefit of the
person filing them
Certified copies and other certificates placed upon documents, instruments and papers
for the national, provincial, city or municipal governments made at the instance and for
the sole use of some other branch of the national, provincial, city or municipal
governments
Certificates of the assessed value of lands, not exceeding P200 in value assessed,
furnished by the provincial, city or municipal Treasurer to applicants for registration of
title to land
4) What are the implications of failure to stamp taxable documents?
The untaxed document will not be recorded, nor will it or any copy thereof or any
record of transfer of the same be admitted or used in evidence in court until the
requisite stamp or stamps have been affixed thereto and cancelled
No notary public or other officer authorized to administer oaths will add his jurat or
acknowledgment to any document subject to Documentary Stamp Tax unless the
proper documentary stamps are affixed thereto and cancelled.
H. WITHHOLDING TAX
Description: Withholding Tax on Compensation is the tax withheld from income
payments to individuals arising from an employer-employee relationship.
Expanded Withholding Tax is a kind of withholding tax which is prescribed on certain
income payments and is creditable against the income tax due of the payee for the
taxable quarter/year in which the particular income was earned.
Final Withholding Tax is a kind of withholding tax which is prescribed on certain incomepayments and is not creditable against the income tax due of the payee on other
income subject to regular rates of tax for the taxable year. Income Tax withheld
constitutes the full and final payment of the Income Tax due from the payee on the
particular income subjected to final withholding tax.
Withholding Tax on Government Money Payments (GMP) - Percentage Taxes - is the tax
withheld by National Government Agencies (NGAs) and instrumentalities, including
government-owned and controlled corporations (GOCCs) and local government units
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(LGUs), before making any payments to non-VAT registered taxpayers/suppliers/payees
Withholding Tax on GMP - Value Added Taxes (GVAT) - is the tax withheld by
National Government Agencies (NGAs) and instrumentalities, including government-owned and controlled corporations (GOCCs) and local government units (LGUs), before
making any payments to VAT registered taxpayers/suppliers/payees on account of their
purchases of goods and services.
Monthly Remittance of Taxes Withheld on Compensation
Tax Form
BIR Form 1601-C : Monthly Remittance Return of Income Taxes Withheld on
Compensation
Who Are Required To FileEvery registered withholding agent on compensation, which includes, but not limited to
the following:
1) Individuals engaged in business or practice of profession with employees subject to
income tax
2) All Juridical persons (e.g., Corporations, general partnerships, associations,
etc.) whether or not
engaged in business.
3) Government Agencies and Instrumentalities (e.g.,NGAs, GOCCs, etc.), including local
government units (LGUs)
Documentary Requirements/Attachments to the tax return:
1) For amended return, proof of remittance and the return previously filed.
2) For those with advance payments, BIR Form No. 0605
3) For Private Sector, copy of the list of MWEs who received hazard pay submitted to
the DOLE Regional/Provincial Offices-Operations Division/Unit, for the return period
March, June, September and December, if applicable.
4) For Public Sector, copy of Department of Budget and Management (DBM) circular/s
or equivalent on MWEs allowed to receive hazard pay, for the return period March,
June, September and December, if applicable.
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5) Electronic Tax Remittance Advice (eTRA) previously Tax Remittance Advice (TRA) for
National Government Agencies (NGAs) as required under DOF-DBM Joint Circular No. 1-
2000A and RR 1-2003 .
Procedures for Filing and Payment
1. Read instructions indicated in the tax return.
2. Accomplish correctly BIR Form 1601-C in triplicate copies.
3. If there is tax required to be remitted:
- Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office
(RDO) where you are registered or withholding agent is registered and present the duly
accomplished BIR Form No. 1601-C, together with the required attachments (if
applicable) and your payment.
- In places where there are no AABs, proceed to the Revenue Collection Officer or dulyAuthorized City or Municipal Treasurer located within the Revenue District Office where
you are registered or withholding agent is registered and present the duly accomplished
BIR Form No. 1601- C, together with the required attachments (if applicable) and your
payment.
- Receive your copy of the duly stamped and validated form from the teller of the
AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.
4. If there is no tax required to be remitted:
- Proceed to the Revenue District Office where you are registered or where thewithholding agent is registered and present the duly accomplished BIR Form 1601