An easy guide to taxation for startup entrepreneurs

Wanting to put up your own business but still confused how to get registered with the BI R? Are you still lost
and confused about tax filing? Now, it is made easier for you.
By: Christele J. Amoyan | May 19, 2014 20:00 pm



Taxation works as easy as RFP, says Rhea
Alamodin fromthe Bureau of Internal
Revenue (BIR) during a recent
entrepreneurship seminar facilitated by
the Department of Trade and Industry--Bureau
of Micro and Small Medium
Enterprise Development (DTI-BSMED). She
explained tax processing from registration to
filing, down to actual payment of tax return
rates.

Register-File-Pay or RFP is BIRs latest
campaign that provides better awareness to
taxpayers on their responsibility to pay taxes.
Moreover, this unified drive targets a P1.4 trillion-tax collection by the end of this year.

Register

If you are an individual who wishes to establish your own business or a self-employed professional,
it is a must go to your Revenue District Office (RDO) to register.

To register, you should have to first accomplish the following important documentary requirements:
1) Birth Certificate issued by the National Statistics Office (NSO); 2) Mayors Permit; 3) DTI
Certificate of Business Name; 4) Professional Regulation Commission (PRC) ID; and 5) Payment of
Professional Tax Receipt (PTR).

Having all these document files at hand, submit
them together with a filled up BIR Form 1901 or
the Tax Treaty Relief Application to the RDO of
your town or city that has jurisdiction over your
business location.

There is a registration fee of P 500.00 to the
Authorized Agent Bank (AAB). Use the BIR
Form 0605 payment form for this transaction.
You should also attend the taxpayers briefing at
the RDO.

A Certificate of Registration will be issued to you. This is your access if you have to file tax
return and pay. Do not forget to ask for a receipt and then fill up BIR Form 1906 (Authority to Print).
Register books of accounts. Have your journal/ledger/subsidiary books of accounts stamped by your
registered RDO.

File

Tax return filing should be made even if there is no payment to be made. There are three types of
tax returns, so dont get confused, especially, on the deadlines.

Percentage tax. Percentage tax return is filed every 20th of the month with an accomplished BIR
Form No. 2551Q.

Income tax. This is due monthly, on the 20th day, and quarterly, on the 15th of April, August, and
November. Income tax is required for self-employed individuals, real estate, and trusts, including
those with both business and compensation income. For the quarterly filing, you are required to fill
up BIR Form No. 1701Q. For annual income tax filing, you are required to have BIR Form No. 1701.

Value added tax. You need to file for a value added tax return on or before the 20th day of every
following month. For a quarterly basis, filing is due on the 25th of the months of April, August, and
November.

Pay

Here is where the computation comes in for your tax payables.

Income tax. The rates may range from 5% to 32%. However, this is not yet fixed so it may vary
depending on your net taxable income. The income tax table is provided at the back of your ITR.

Allowable deductions. The method of allowable deduction allows taxpayers (businesses or
individuals in professional practices) to choose between optional and itemized deductions. For
the optional standard deduction (OSD), trimming
of an amount not exceeding 40% of gross sales
or receipts is allowed.

On the other hand, for the itemized deduction,
all the ordinary and necessary expenses paid or
incurred during the taxable year are deducted
from the gross income. It includes employees
benefits (salary and wages), employers share
(for SSS, Medicare, HDMF, and other
contributions), rentals, insurance expenses, and
other expenses stated in the Tax Code.

Personal exemptions. Personal, living, or family
expenses are items not deductible. This means
that there is no deduction from your gross income, unless otherwise proven with substantiated
evidence.

Expanded Withholding Tax (EWT). The Expanded Withholding Tax (EWT) serves as an advance
payment of the income tax of the income recipient. It can be credited against income tax due. In
other words, this is only partial and NOT the full payment of the income tax.

To get more details, visit BIRs official website at www.bir.gov.ph/.