WEEK 2 INTRODUCTION TO BUSINESS TAXES

After this chapter, readers are expected to:

 1. Describe the concept and nature of a business from
the point of view of taxation
 2. Identify the various exceptions in classifying
whether an activity is a business activity or not
 3. Discuss the concept of business taxes and
transactions
 4. Explain the invoicing and accounting requirements
for vat and non-vat registered taxpayers Identifying
different transactions subject to business taxes
NATURE AND CONCEPT OF BUSINESS TAXES

To engage in business means to employ or involve

oneself in employment, occupation, profession,
or commercial activity for gain or livelihood.
The term “engage” connotes more than a signle
act or isolated transactions; it involves same
continuity of action.
National Internal Revenue Taxes (NIRT)
1. Income tax
2. Business taxes
3. Transfer taxes
4. Documentary stamp tax

 NIRT are collected by the Bureau of Internal

Revenue (BIR), the government’s agency
primarily in charges to assess and collect all taxes
and charges imposed by the NIRC, other laws
and regulations
 INCOME TAXES
 Income tax is the tax imposed on taxpayer’s
earnings.

 Kinds of Income Taxes

a. Regular Income Taxes
b. Final Income Taxes
 BUSINESS TAXES

 Business taxes is the tax imposed on the right or privilege

to engage in an onerous transfer of goods or services in
the normal conduct of business.
 Practically, all business taxes are indirect taxes because
the taxable amount of this tax is based on the amount of
gross sales (sales of goods) or gross receipts (sale of
services). The tax burden could be passed on to the
buyers
TYPES OF BUSINESS TAXES
 

The Tax Code commonly classified business taxes as:

a. Value-added tax (VAT)- 12% of gross sales/receipts which
is usually passed on to the buyers.
b. Other Percentage taxes (OPT)- ranging from 0% to 30% of
gross sales/receipts. The most common is 3%. The seller
may opt to include the tax burden as past of the selling price
c. Excise taxes (ET)- various tax rates, if specific, it may start
from P1.00 or if ad valorem from 0% to 60% which is
usually passed on to the buyers.
  
TRANSFER TAXES

 
 Transfer tax is the tax imposed on one’s right to
make casual and gratuitious transfer of one’s
property to the other person.

 Classification of Transfer Taxes

a. Donor’s tax
b. Estate tax
 DOCUMENTARY STAMP TAX (DST)
 
 Documentary stamp tax is the tax imposed on the
right to enter into a transaction that is described
in the document needed to be filed in any
government office.
  
 Business Transactions
 A business transaction is an economic event with
a third party that is recorded in an organization's
accounting system. Such a transaction must be
measurable in money.
EXAMPLES OF BUSINESS TRANSACTIONS ARE:

a. Buying insurance from an insurer

b. Buying inventory from a supplier
c. Selling goods to a customer for cash
d. Selling goods to a customer on credit
e. Paying wages to employees
f. Obtaining a loan from a lender
g. Selling shares to an investor