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  • Tax and Accounting 2

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    Jerrom Duque
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    This document summarizes key tax and accounting reconciliation concepts in the Philippines, including: 1. VAT return liability is determined based on when revenue from the sale of goods or services is earned or collected. 2. Expenses can be recognized using accrual or cash basis of accounting depending on certain criteria for deductibility such as being ordinary and necessary, directly attributable to business, and substantiated with proof. 3. Representation expenses are subject to annual limitations based on a percentage of revenue from sale of goods or services.

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    Tax and accounting reconciliation notes summary part 2

    Original Title

    TAX AND ACCOUNTING 2

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    This document summarizes key tax and accounting reconciliation concepts in the Philippines, including: 1. VAT return liability is determined based on when revenue from the sale of goods or services is earned or collected. 2. Expenses can be recognized using accrual or cash basis of accounting depending on certain criteria for deductibility such as being ordinary and necessary, directly attributable to business, and substantiated with proof. 3. Representation expenses are subject to annual limitations based on a percentage of revenue from sale of goods or services.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Download as docx, pdf, or txt
    3 views2 pages

    Tax and Accounting 2

    Uploaded by

    Jerrom Duque
    This document summarizes key tax and accounting reconciliation concepts in the Philippines, including: 1. VAT return liability is determined based on when revenue from the sale of goods or services is earned or collected. 2. Expenses can be recognized using accrual or cash basis of accounting depending on certain criteria for deductibility such as being ordinary and necessary, directly attributable to business, and substantiated with proof. 3. Representation expenses are subject to annual limitations based on a percentage of revenue from sale of goods or services.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    TAX & ACCOUNTING RECONCILIATION

    VAT return Liability


    - Sale of Goods (When earned)
    - Sale of Serives (When collected)

    Expenses
    Recognized using accrual basis of accounting Criteria for deductibility
    - Associating cause and effect (Same - Ordinary & Necessary (very subjective)
    period when Revenue is recognized) - Paid/Incurred during the taxable year
    sample: Commission - Directly attributable to the conduct of
    - Systematic & rational allocation Trade/Business
    sample: Depreciation of asset for - Reasonable in amount
    multiple use. - Not contrary to law or public policy
    - Immediate Recognition (if with future - Substantiated with sufficient evidence
    benefit, asset) sample: Utility payment (PROOF!)
    - Appropriate tax is withheld

    Represntation Expense
    Recognized as expense in the period it is incurred Subject to limitation (RR 10-02)
    1. Sale of Goods - .5% of revenue
    2. Sale of Services – 1% of revenue

    Interest Expense
    Criteria for deductibility
    - Recognized as expense using effective - There must be of the taxpayer stipulated
    interest method. (If for qualifying asset, in writing.
    capitalized) At least 1 year to be ready for - There must be an interest expense paid
    its intended purpose. or incurred.
    (Sample: Building for construction, not - The indebtedness must be business
    yet generating income) all other cost, related
    expense immediately. - Must be legally due
    - - Interest payment arrangement must not
    be between related taxpayers as
    mandated in Sec 34(B)(2)(b) in relation to
    Section 36 (B) of the Tax Code.

    Interest Capitalization
    - Incurred in connection with construction At the option of the taxpayer, interest incurred to
    or production of a qualifying asset. acquire property used in trade, business or
    - Ceases when the asset is substantially profession may be allowed as a capital
    complete expenditure.

    Interest Arbitrage
    TAX & ACCOUNTING RECONCILIATION
    Interest incurred or paid by the taxpayer on all
    unpaid business related taxes shall be fully
    deductible.

    Interest Income (Final Tax)


    Interest Expense (Income tax rate)

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