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DONOR’S TAX Contents Description Tax Forms Documentary Requirements Tax Rates Procedures Dealines Related Revenue Issuances Codal References Frequently Asked Questions 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.

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 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 o For listed stocks - newspaper clippings or certification issued by the Stock Exchange as to the par value per share o 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 case depending upon existing audit procedures.

TAX FORM BIR Form 1800 – Donor’s Tax Return

TAX RATES DOCUMENTARY REQUIREMENTS Effective January 1, 1998 to present 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. 2. 3. 4. Deed of Donation Sworn Statement of the relationship of the donor to the donee Proof of tax credit, if applicable Certified true copy(ies) of the Original/Transfer/Condominium Certificate

Net Gift Over

But not Over

The Tax Shall be

Plus

O

Exc

P100,000.00 100,000.00 200,000.00 200,000.00 500,000.00

exempt 0 P 2,000.00 2% 4%

100

200

500,000.00 1,000,000.00 3,000,000.00 5,000,000.00 10,000,000.00

1,000,000.00 3,000,000.00 5,000,000.00 10,000,000.00 and over

14,000.00 44,000.00 204,000.00 404,000.00 1,004,000.00

6% 8% 10% 12% 15%

500,000.00 500,000.00

1,000,000.00

18,750.00 58,750.00 258,750.00 558,750.00

8% 10% 15% 20%

500,000.00 1,000,000.00 3,000,000.00 5,000,000.00

1,000,000.00 1,000,000.00 3,000,000.00 3,000,000.00 3,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 10,000,000.00 and over

Notes: 1. 2. Rate applicable shall be based on the law prevailing at the time of donation. 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.

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

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)

Effective before July 28, 1992

Net Gift Over

But not Over

The Tax Shall be

Plus

Of the Excess Over

P1,000.00 Effective July 28, 1992 to December 31, 1997 1,000.00 Plus Of the Excess Over 50,000.00 75,000.00 100,000.00 50,000.00 3% 5% 100,000.00 200,000.00 150,000.00 200,000.00 300,000.00 50,000.00 75,000.00 100,000.00 150,000.00 200,000.00 300,000.00 400,000.00

Exempt 1.5% P 735.00 1,360.00 2,110.00 5,110.00 9,610.00 21,610.00 2.5% 3% 6% 9% 12% 15% 1,000.00 50,000.00 75,000.00 100,000.00 150,000.00 200,000.00 300,000.00

Net Gift Over

But not Over

The Tax Shall be

P50,000.00 50,000.00 100,000.00 200,000.00 100,000.00 200,000.00 500,000.00

Exempt 1.5% P 750.00 3,750.00

400,000.00 500,000.00 625,000.00 750,000.00 875,000.00 1,000,000.00 2,000,000.00 3,000,000.00

500,000.00 625,000.00 750,000.00 875,000.00 1,000,000.00 2,000,000.00 3,000,000.00

36,610.00 54,610.00 80,860.00 110,860.00 145,860.00 185,860.00 545,860.00 925,860.00

18% 21% 24% 28% 32% 36% 38% 40%

400,000.00 500,000.00 625,000.00 750,000.00 875,000.00 1,000,000.00 2,000,000.00 3,000,000.00 RELATED REVENUE ISSUANCES 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 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 coownership over the property

Donation made to a stranger is subject to 20% of the net gift. A stranger is a person who is not a:

RR No. 2-2003 and RMO No. 1-98

 

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

CODAL REFERENCE Sec. 98 to Sec. 104 of the National Internal Revenue Code

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 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 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. 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) 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 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 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.

-

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 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 · 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: Contents Description Tax Forms Documentary Requirements Tax Rates Procedures 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 ESTATE TAX

- Aquaculture Department of the Southeast Asian Fisheries Development Center of the Philippines Development Academy of the Philippines Integrated Bar of the Philippines

Dealines Related Revenue Issuances Codal References Frequently Asked Questions

7) Certified true copy(ies) of the Transfer/Original/Condominium Certificate of Title(s) of real property(ies) (front and back pages), if applicable 8) Certified true copy of the latest Tax Declaration of real properties at the time of death, if applicable 9) "Certificate of No Improvement" issued by the Assessor's Office declared properties have no declared improvement or Sworn Declaration/Affidavit of No Improvement by at least one (1) of the transferees 10)Certificate of Deposit/Investment/Indebtedness owned by the decedent and the surviving spouse, if applicable 11)Photo copy of Certificate of Registration of vehicles and other proofs showing the correct value of the same, if applicable 12)Photo copy of certificate of stocks, if applicable

DESCRIPTION Estate Tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition. It is not a tax on property. It is a tax imposed on the privilege of transmitting property upon the death of the owner. The Estate 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

13)Proof of valuation of shares of stocks at the time of death, if applicable - For listed stocks - newspaper clippings or certification from the Stock Exchange DOCUMENTARY REQUIREMENTS 1) Notice of Death duly received by the BIR, if gross estate exceeds P 20,000 for deaths occurring on or after Jan. 1, 1998; or if the gross estate exceeds P 3000 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 extra judicially 4) Court Orders/Decision, if the estate is settled judicially; 17)Certification of Barangay Captain for claimed Family Home 5) Affidavit of Self-Adjudication and Sworn Declaration of all properties of the Estate 6) A certified true copy of the schedule of partition of the estate and the order of the court approving the same, if applicable 18)Duly notarized Promissory Note for "Claims against the Estate" arising from Contract of Loan 19)Accounting of the proceeds of loan contracted within three (3) years prior to death of the decedent - For unlisted stocks - latest audited Financial Statement of issuing corporation with computation of book value per share 14)Proof of valuation of other types of personal property, if applicable 15)Proof of claimed tax credit, if applicable 16)CPA Statement on the itemized assets of the decedent, itemized deductions from gross estate and the amount due if the gross value of the estate exceeds two million pesos, if applicable

20)Proof of the claimed "Property Previously Taxed" 21)Proof of claimed "Transfer for Public Use"

Over

But not Over

The Tax Shall be Exempt 3% P 1,200.00 2,200.00 3,450.00 8,450.00 15,950.00 35,950.00 60,950.00 90,950.00 134,700.00 184,700.00 240,950.00 303,450.00 833,450.00 1,393,450.00

Plus

Of the Excess Over P 10,000.00 50,000.00 75,000.00 100,000.00 150,000.00 200,000.00 300,000.00 400,000.00 500,000.00 625,000.00 750,000.00 875,000.00 1,000,000.00 2,000,000.00 3,000,000.00

P 22)Copy of Tax Debit Memo used as payment, if applicable Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures. TAX RATES P 10,000.00 50,000.00 75,000.00 100,000.00 150,000.00 200,000.00 300,000.00 400,000.00 500,000.00 625,000.00 750,000.00 875,000.00 1,000,000.00 2,000,000.00 3,000,000.00

Effective January 1, 1998 up to Present If the Net Estate is Over But not Over The Tax Shall be Exempt 0 P 15,,000.00 135,000.00 465,000.00 1,2l5,000.00 Plus Of the Excess Over 5% 8% 11 % 15 % 20 % P 200,000.00 500,000.00 2,000,000.00 5,000,000.00 10,000,000.00

10,000.00 50,000.00 75,000.00 100,000.00 150,000.00 200,000.00 300,000.00 400,000.00 500,000.00 625,000.00 750,000.00 875,000.00 1,000,000.00 2,000,000.00 3,000,000.00

4% 5% 10% 15 % 20% 25% 30% 35% 40% 45% 50% 53% 56% 60%

P P 200,000.00 500,000.00 2,000,000.00 5,000,000.00 10,000,000.00

200,000.00 500,000.00 2,000,000.00 5,000,000.00 10,000,000.00

Effective September 15, 1950 to December 31, 1972

Effective After July 28, 1992 up to December 31, 1997 If the Net Estate is Over But not Over The Tax Shall be P P 200,000.00 500,000.00 2,000,000.00 5,000,000.00 10,000,000.00 200,000.00 500,000.00 2,000,000.00 5,000,000.00 10,000,000.00 0% 5% 8% 12 % 21% 35 % Plus Of the Excess Over P 200,000.00 500,000.00 2,000,000.00 5,000,000.00 10,000,000.00

Estate and Inheritance Tax From 5,000.00 7,000.00 18,000.00 20,000.00 20,000.00 30,000.00 50,000.00 100,000.00 250,000.00 500,000.00 0 5,000.00 12,000.00 30,000.00 50,000.00 70,000.00 100,000.00 150,000.00 250,000.00 500,000.00 1,000,000.00 To 5,000.00 12,000.00 30,000.00 50,000.00 70,000.00 100,000.00 150,000.00 250,000.00 500,000.00 1,000,000.00 over ESTATE Exempt 1.0% 2.0% 2.5% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% INHERITANCE Exempt 2% 4% 6% 8% 12% 14% 16% 18% 20% 22%

P 15,000.00 135,000.00 495,000.00 1,545,000.00

Effective Before July 28, 1992 If the Net Estate is

Effective October 1, 1946 to September 14, 1950

Inheritance Tax From 0 50,000.00 250,000.00 500,000.00 To 50,000.00 250,000.00 500,000.00 over INHERITANCE 1% 1.5% 2.5% 4.0%

Estate and Inheritance Tax From 3,000.00 7,000.00 20,000.00 20,000.00 30,000.00 30,000.00 40,000.00 40,000.00 50,000.00 0 3,000.00 10,000.00 30,000.00 50,000.00 80,000.00 110,000.00 150,000.00 190,000.00 To 3,000.00 10,000.00 30,000.00 50,000.00 80,000.00 110,000.00 150,000.00 190,000.00 240,000.00 ESTATE Exempt 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5.0% INHERITANCE Exempt 2% 4% 6% 8% 10% 12% 14% 15%

Effective 1916 to March 9, 1922

Inheritance Tax From 0 10,000.00 30,000.00 60,000.00 100,000.00 150,000.00 To 10,000.00 30,000.00 60,000.00 100,000.00 150,000.00 250,000.00 INHERITANCE 1% 2.0% 3.0% 4.0% 5.0% 6.0%

Effective July 1, 1939 to September 30, 1946

Estate and Inheritance Tax FROM 0 3,000.00 10,000.00 30,000.00 50,000.00 80,000.00 110,000.00 150,000.00 190,000.00 TO 3,000.00 10,000.00 30,000.00 50,000.00 80,000.00 110,000.00 150,000.00 190,000.00 240,000.00 Exempt 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5.0% Exempt 1% 2% 3% 4% 5% 6% 7% 8% PROCEDURES The Estate Tax Return (BIR Form 1801) shall be filed and payment be made with an Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at the time of his/her death. If there is no AAB within the residence of the decedent, the Estate Tax Return must be filed and the payment made with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the RDO having jurisdiction over the place of residence of the decedent. If the required filer has no legal residence in the Philippines, the Estate Tax return shall be filed and paid with:

Effective March 10, 1922 to October 28, 1936

(a) The Office of the Revenue District Officer, Revenue District Office No. 39, South Quezon City; or (b) The Philippine Embassy or Consulate in the country where decedent is residing at the time of his/her death.

application shall be approved by the Commissioner or his duly authorized representative. RELATED REVENUE ISSUANCES RR No. 2-2003, RMO No. 26-82, RMO No. 31-82, RMC No. 1-98,

DEADLINES CODAL REFERENCE 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. The Estate Tax imposed shall be paid at the time the return is filed by the executor or administrator or the heirs. However, when the Commissioner finds that 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, he may extend the time for payment of such tax or any part thereof 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 extra-judicially. Extension of Time of Filing: When the Commissioner finds that the payment of the estate tax or of any part thereof would imposed undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years in case the estate is settled through the courts, or two (2) years in case it settled extra-judicially. Where the request for extension is by reason of negligence, intentional disregard of rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by the Commissioner. If an extension is granted, the Commissioner or his duly authorized representative may require the executor, or administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not exceeding double the amount, not exceeding double the amount of tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance in the terms of extension. The request for extension shall be filed with the Revenue District Officer (RDO) where the estate is required to secure its TIN and file the estate tax return. The Sec. 84 to Sec. 97 of the National Internal Revenue Code

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 or non-resident of the Philippines under any of the following situation: In all cases of transfer subject to Estate Tax;

- Where though exempt from Estate Tax, the gross value of the estate exceeds two hundred thousand P 200,000.00; and - Where regardless of the gross value, the estate consists of registered or registrable property such as real property, motor vehicle, share of stocks or other similar property for which a clearance from the Bureau of Internal Revenue (BIR) is required as a condition precedent for the transfer of ownership thereof in the name of the transferee. b) Where there is no executor or administrator appointed, qualified and acting within the Philippines, then any person in actual or constructive possession of any property of the decedent must file the return. c) The Estate Tax imposed under the Tax Code shall be paid by the executor or administrator before the delivery of the distributive share in the inheritance to any

heir or beneficiary. Where there are two or more executors or administrators, all of them are severally liable for the payment of the tax. The estate tax clearance issued by the Commissioner or the Revenue District Officer (RDO) having jurisdiction over the estate, will serve as the authority to distribute the remaining/distributable properties/share in the inheritance to the heir or beneficiary. d) The executor or administrator of an estate has the primary obligation to pay the estate tax but the heir or beneficiary has subsidiary liability for the payment of that portion of the estate which his distributive share bears to the value of the total net estate. The extent of his liability, however, shall in no case exceed the value of his share in the inheritance.

e) Payment of Estate tax by installment -In case the available cash of the estate is not sufficient to pay its total estate tax liability, the estate may be allowed to pay the tax by installment and a clearance shall be released only with respect to the property, the corresponding/computed tax on which has been paid.

3) What are included in gross estate?

·

For resident alien decedents/citizens:

a) Real or immovable property, wherever located 2) What are the procedures in the filing of the Estate Tax Return and payment of the corresponding taxes? b) Tangible personal property, wherever located c) Intangible personal property, wherever located a) The Estate Tax Return (BIR Form 1801) shall be filed and payment made with an Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at the time of his/her death. b) If there is no AAB within the residence of the decedent, the Estate Tax Return must be filed and the payment made with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the RDO having jurisdiction over the place of residence of the decedent. c) If the required filer has no legal residence in the Philippines, the Estate Tax return will be filed and payment be made with: - The Office of the Revenue District Officer, Revenue District Office No. 39, South Quezon City; or - The Philippine Embassy or Consulate in the country where decedent is residing at the time of his/her death. d) Submit all documentary requirements and proof of payment to the Revenue District Office having jurisdiction over the place of residence of the decedent. · For non-resident decedent/non-citizens:

a) Real or immovable property located in the Philippines b) Tangible personal property located in the Philippines c) Intangible personal property - with a situs in the Philippines such as: Franchise which must be exercised in the Philippines

- Shares, obligations or bonds issued by corporations organized or constituted in the Philippines - Shares, obligations or bonds issued by a foreign corporation 85% of the business of which is located in the Philippines - Shares, obligations or bonds issued by a foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines ( i. e. they are used in the furtherance of its business in the Philippines) Shares, rights in any partnership, business or industry established in the

Philippines

market value at the time of the decedent's death. · The appraised value of the real estate shall be whichever is higher of the fair market value, as determined by the Commissioner (zonal value) or the fair market value, as shown in the schedule of values fixed by the Provincial or City Assessor. · If there is no zonal value, the taxable base is the fair market value that appears in the latest tax declaration.

4) What are excluded from gross estate?

· · ·

GSIS proceeds/ benefits Accruals from SSS Proceeds of life insurance where the beneficiary is irrevocably appointed 6) What are the allowable deductions for Estate Tax purposes? · If there is an improvement, the value of improvement is the construction cost per building permit or the fair market value per latest tax declaration.

· Proceeds of life insurance under a group insurance taken by employer (not taken out upon his life) · · War damage payments

For Resident Decedent Transfer by way of bona fide sales

· Transfer of property to the National Government or to any of its political subdivisions · · · · Separate property of the surviving spouse Merger of usufruct in the owner of the naked title Properties held in trust by the decedent Acquisition and/or transfer expressly declared as not taxable

· a) i)

Expenses, losses, indebtedness and taxes Funeral Expenses CA 466 - 5 % of gross estate (up to Dec. 31, 1972)

ii) PD 69 - 5 % of gross estate but not exceeding P 50,000 (Jan. 1, 1973 to July 27, 1992) iii) RA 7499 - 5 % of gross estate but not exceeding P 100,000 (July 28, 1992 to December 3l, 1997)

5) What will be used as basis in the valuation of property?

iv)

RA 8424 - 5% of gross estate but not exceeding P 200,000 (Jan. 1,1998)

b) Judicial expenses of the testamentary/intestate proceedings · The properties subject to Estate Tax shall be appraised based on its fair c) Valid claims against the estate

d) Claims against insolvent person e) Unpaid mortgages/indebtedness f) Unpaid taxes

l) Family Home - fair market value but not to exceed P 1,000,000.013) Standard Deduction - an amount equivalent to P1,000,000.00 (applicable only for death occurring after the effectivity of RA 8424 which is January 1, 1998.) · Amount received by the heirs under Republic Act No. 4917 (applicable only for death occurring after the effectivity of RA 8424 which is January 1, 1998)

g) Casualty losses h) Property previously taxed or vanishing deductions

Non-Resident Decedent, not a citizen of the Philippines · Expenses, losses, indebtedness, taxes Property previously taxed Transfer for public use Share in the conjugal property PERCENTAGE TAX Description Who are Required to File Percentage Tax Returns Monthly Percentage Tax Quarterly Percentage Tax Percentage Tax for Transactions Involving Shares of Stocks Listed and Traded Through The Local Stock Exchange Or Through Initial and/or Secondary Offering Tax Rates Related Revenue Issuances Codal Reference Frequently Asked Questions

Requisites: o Present decedent must have died within five (5) years from date of death of prior decedent or date of gift o The property with respect to which the deduction is claimed must have formed part of the gross estate situated in the Philippines of the prior decedent or taxable gift of the donor o The property must be identified as the same property received from prior decedent or donor or the one received in exchange therefore o The estate taxes on the transmission of the prior estate or the donors tax on the gift must have been finally determined and paid o No vanishing deduction on the property or the property given in exchange therefore was allowed to the prior estate i) j) Transfer for public purpose Share of surviving spouse

· · ·

k) Medical expenses - those incurred by the decedent within one (1) year prior to his/her death which shall be substantiated with receipts (NOTE: Amount allowable as deduction depends on the law prevailing at the time of death of the decedent).

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 or receipts do not exceed P 550,000 and are not VATregistered. top of the page

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) -Domestic carriers and keepers of garages, except owners of bancas and owners of animal drawn two- wheeled vehicle -Operators of international carriers doing business in the Philippines -Franchise grantees of electric, gas or water utilities -Franchise grantees of radio and/or television broadcasting companies whose gross annual receipts for the preceding year do not exceed Ten Million Pesos (P 10,000,000.00) and did not opt to register as VAT taxpayers -Operators of communication equipment sending overseas dispatch, messages, or conversations from the Philippines, except on services involving the following: · Government of the Philippines - for messages transmitted by the Government of the Republic of the Philippines or any of its political subdivisions and instrumentalities · Diplomatic services - for messages transmitted by any embassy and consular offices of a foreign government · International organizations - for messages transmitted by a public international organization or any of its agencies based in the Philippines enjoying privileges and immunities pursuant to an international agreement · News Services - for messages from any newspaper, press association, radio or television newspaper broadcasting agency, or newsticker services to any other newspaper, press association, radio or television newspaper broadcasting agency or newsticker services or to bonafide correspondents, which messages deal exclusively with the collection of news items for, or the dissemination of news items through public press, radio or television broadcasting or a newsticker service furnishing a general news service similar to that of the public press -Banks and non-bank financial intermediaries and finance companies -Life insurance companies -Agents of foreign insurance companies -Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, jai-alai and race tracks -Every stock broker who effected a sale, barter, exchange or other disposition of

shares of stock listed and traded through the Local Stock Exchange (LSE) other than the sale by a dealer in securities -A corporate issuer / stock broker, whether domestic of foreign, engaged in the sale, barter, exchange or other disposition through Initial Public Offering (IPO) seller in secondary public offering of shares of stock in closely held corporations top of the page 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 cooperatives 4. Previously filed return and proof of payment, for amended return Procedures 1. Fill-up BIR Form 2551 M in triplicate copies. 2. If there is payment: · Proceed to the nearest Authorized Agents Banks (AABs) 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 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 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 2551M, 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 the RDO, which shall be paid at the concerned AAB. Deadline Manual Filing Not later than 20th day following the end of each month Filing Through eFPS Group A - Twenty-Five (25) days following the end of the month Group B - Twenty-Four (24) days following the end of the month Group C - Twenty-Three (23) days following the end of the month Group D - Twenty-Two (22) days following the end of the month Group D - Twenty-One (21) days following the end of the month

Procedures 1. Fill-up BIR Form 2551 Q in triplicate copies. 2. If there is payment: · Proceed to the nearest Authorized Agents Banks (AABs) 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 the RDO, which shall be paid at the concerned AAB. Deadline

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Quarterly Percentage Tax Tax 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 cooperatives 4. Previously filed return and proof of payment, for amended return

Not later than 20th day following the end of each quarter top of the page

Percentage Tax For Transactions Involving Shares of Stocks Listed and Traded Through the Local Stock Exchange or Through Initial and/or Secondary Offering Tax Form BIR Form 2552 - Percentage Tax Return (For Transactions Involving Shares of Stocks Listed and Traded Through the Local Stock Exchange or Through Initial and/or Secondary Offering) Documentary Requirements

1. Duly issued Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable 2. Proof of Exemption for transactions not subject to tax, if applicable 3. Duly approved Tax Debit Memo, if applicable 4. Previously filed return and proof of payment, for amended return Procedures 1. Fill-up BIR Form 2552 in triplicate copies. 2. If there is payment: · Proceed to the nearest Authorized Agents Banks (AABs) of the Revenue District Office where the local stock exchange is located and present the duly accomplished BIR Form 2552, together with the required attachments and payment. (The Percentage Tax imposed shall be paid at the time the return is filed by the taxpayer.) · Receive taxpayer's copy of the duly stamped and validated form from the teller of the AAB 3. If there is no payment: · Proceed to the Revenue District Office where the local stock exchange is located and present the duly accomplished BIR Form 2552, 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 the RDO, which shall be paid at the concerned AAB. Deadline - For tax on Sale of Shares of Stocks Listed and Traded Through the Local Stock Exchange (LSE) - within 5 banking days from the date of collection -For tax on Shares of Stocks Sold or Exchanged Through Primary Offering within 30 days from the date of listing in the LSE -For tax on Shares of Stocks Sold or Exchanged Through Secondary Public Offering - within 5 banking days from the date of collection top of the page RELATED REVENUE ISSUANCES RR No. 4-95, RR No. 5-97, RR No. 2-98, RR No. 7-95, RR No. 6-2001, RR No. 12-2001, RR No. 4-2002, RR No. 26-2002

CODAL REFERENCE Sections 116 to 128 of the National Internal Revenue Code top of the page

FREQUENTLY ASKED QUESTIONS 1) 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) Ø Domestic carriers and keepers of garages, except owners of bancas and owners of animal drawn two- wheeled vehicle Ø Operators of international carriers doing business in the Philippines Ø Franchise grantees of electric, gas or water utilities Ø Franchise grantees of radio and/or television broadcasting companies whose gross annual receipts for the preceding year do not exceed Ten Million Pesos (P 10,000,000.00) and did not opt to register as VAT taxpayers Ø Operators of communication equipment sending overseas dispatch, messages, or conversations from the Philippines, except on services involving the following: · Government of the Philippines - for messages transmitted by the Government of the Republic of the Philippines or any of its political subdivisions and instrumentalities · Diplomatic services - for messages transmitted by any embassy and consular offices of a foreign government · International organizations - for messages transmitted by a public international organization or any of its agencies based in the Philippines enjoying privileges and immunities pursuant to an international agreement · News Services - for messages from any newspaper, press association, radio or television newspaper broadcasting agency, or newsticker services to any other newspaper, press association, radio or television newspaper broadcasting

Tax Rates

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agency or newsticker services or to bonafide correspondents, which messages deal exclusively with the collection of news items for, or the dissemination of news items through public press, radio or television broadcasting or a newsticker service furnishing a general news service similar to that of the public press Ø Banks and non-bank financial intermediaries and finance companies Ø Life insurance companies Ø Agents of foreign insurance companies Ø Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, jai-alai and race tracks Ø Every stock broker who effected a sale, barter, exchange or other disposition of shares of stock listed and traded through the Local Stock Exchange (LSE) other than the sale by a dealer in securities Ø A corporate issuer / stock broker, whether domestic of foreign, engaged in the sale, barter, exchange or other disposition through Initial Public Offering (IPO) seller in secondary public offering of shares of stock in closely held corporations 2) What are the procedures in the filing of the Percentage Tax returns and payment of the corresponding taxes? Ø BIR Form 2551M -The return shall be filed with any Authorized Agent Bank (AAB) located within the Revenue District Office (RDO) where the taxpayer is registered. In places where there are no AABs, the return shall be filed with the Revenue Collection Officer or duly Authorized Treasurer of the city or municipality where said business or principal place of business is located. The Percentage Tax imposed shall be paid at the time the return is filed by the taxpayer. Ø BIR Form 2551Q -The return shall be filed with any Authorized Agent Bank (AAB) located within the Revenue District Office (RDO) where the taxpayer is registered. In places where there are no AABs, the return shall be filed with the Revenue Collection Officer or duly Authorized Treasurer of the city or municipality where said business or principal place of business is located. The Percentage Tax imposed shall be paid at the time the return is filed by the taxpayer. Ø BIR Form 2552 - The return shall be filed with any AAB of the RDO where the local stock exchange is located. The Percentage Tax imposed shall be paid at the time the return is filed by the taxpayer. All "no payment" returns shall be filed with the Revenue District Office (RDO) where the taxpayer is registered/local stock exchange is located (For BIR Form 2552). "No payment" returns filed late shall be imposed the necessary penalties by the RDO, which shall be paid at the concerned AAB/Revenue Collection Officer or duly Authorized City or Municipal Treasurer (in places where there are no AABs). VALUE-ADDED TAX

Description Who are Required To File VAT Returns Monthly VAT Declarations Quarterly VAT Returns Tax Rates Related Revenue Issuances Codal Reference Frequently Asked Questions - General VAT Queries - RELIEF Related Queries - RELIEF Technical Queries - VAT on Professionals - VAT on Doctors - VAT on Lawyers - VAT on Insurance Agents - Other Professional Practitioners

DESCRIPTION Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale of goods and services and on the imports of goods into the Philippines. It is an indirect tax, which can be passed on to the buyer. top of the page

WHO ARE REQUIRED TO FILE VAT RETURNS Every person or entity who in the course of his trade or business, sells or leases goods, properties and services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed Five Hundred Fifty Thousand Pesos (P 550,000.00) for any twelve month period A person required to register as VAT taxpayer but failed to register A person who imports goods Professional practitioners Professional Practitioners (PPs) are formerly classified as non-VAT taxpayers and were exempt from the Value-Added Tax and Percentage taxes under Section 109 of the National Internal Revenue Code (hereinafter referred to as the Code), until December 31, 2002. Prior to this date, they were subject only to Income Tax under Section 24 of the Code. Effective January 1, 2003, however, by virtue of Republic Act Nos. 7716 and 9010, which were implemented by Revenue Regulation Nos. 1-2003 and 3-2003,

services of PPs are also subject to either VAT (if gross professional fees exceed P 550,000.00 for a 12-month period) or 3% Percentage Tax (if gross professional fees totals P 550,000 and below for a 12-month period), depending on their gross professional fee for a twelve (12) - month period. "Professional Practitioners" include the following: · Certified Public Accountants · Lawyers · Doctors · Insurance Agents (Life & Non-life) · Other Professional Practitioners required to pass the government examination · Others

AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer. 3. If there is no payment: · Proceed to the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 M, together with the required attachments. · Receive your copy of the duly stamped and validated form from the RDO representative Deadline Manual Filing

top of the page Monthly VAT Declarations Tax Form BIR Form 2550 M - Monthly VAT Declarations

Not later than the 20th day following the end of each month Filing Through eFPS Group A - within twenty five (25) days following the end of the month Group B - within twenty four (24) days following the end of the month Group C - within twenty three (23) days following the end of the month Group D - within twenty two (22) days following the end of the month Group D - within twenty one (21) days following the end of the month

Documentary Requirements 1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable 2. Duly approved Tax Debit Memo, if applicable 3. Duly approved Tax Compliance Certificate, if applicable 4. Previously filed return and proof of payment, for amended return Procedures 1. Fill-up BIR Form 2550 M in triplicate copies. 2. If there is payment: · Proceed to the nearest Authorized Agents Banks (AAB's) of the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 M, together with the required attachments and your payment. · In places where there are no AAB's, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 M, together with the required attachments and your payment. · Receive your copy of the duly stamped and validated form from the teller of the

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Quarterly VAT Returns Tax Form BIR Form 2550 Q - Quarterly VAT Returns Documentary Requirements 1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable 2. Duly approved Tax Debit Memo, if applicable 3. Duly approved Tax Compliance Certificate, if applicable 4. Previously filed return and proof of payment, for amended return 5. Summary List of Sales (if quarterly total Sales/Receipts (net of VAT) exceeds

P 2,500,000) with the following information: a) BIR-registered name of the buyer who is engaged in business/exercise of profession; b) Taxpayer Identification Number (TIN) of the buyer (Only for sales that are subject to VAT); c) Exempt Sales; d) Zero-rates Sales; e) Sales subject to VAT (exclusive of VAT); and f) Output Tax (VAT on Sales) 6. Summary List of Purchases (if quarterly total purchases (net of VAT) exceeds P 1,000,000) with the following information: a) BIR-registered name of the seller/supplier/service-provider; b) Address of seller/supplier/service-provider; c) Taxpayer Identification Number (TIN) of seller/supplier/service-provider d) Exempt purchases; e) Zero-rated purchases; f) Purchases subject to VAT (exclusive of VAT) - on services; g) Purchases subject to VAT (exclusive of VAT) - on capital goods; h) Purchases subject to VAT (exclusive of VAT) - on goods other than capital goods i) Creditable Input Tax j) Non-creditable Input Tax NOTE: Creditable input taxes and non-creditable input taxes are to be computed not on a per supplier basis but on a per month basis. 7. The Quarterly Summary List of Importation with the following information: a) Import Entry Declaration; b) Assessment/Release Date; c) Date of Importation; d) Name of the Seller; e) Country of Origin; f) Dutiable Value; g) All Charges Before Release from Customs Custody; h) Landed Cost: i) Exempt j) Taxable (Subject to VAT) k) VAT paid; l) Official Receipt (OR) Number of the Official Receipt evidencing payment of tax; and m) Date of VAT payment Procedures 1. Fill-up BIR Form 2550 Q in triplicate copies. 2. If there is payment:

· Proceed to the nearest Authorized Agents Banks (AAB's) of the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 Q with the required attachments and your payment. · In places where there are no AAB's, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 Q, together with the required attachments 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. 3. If there is no payment: · Proceed to the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 Q, together with the required attachments. · Receive your copy of the duly stamped and validated form from the RDO representative. NOTE: 1. For taxpayers with branches, only one consolidated return shall be filed for the principal place of business or head office and all the branches. 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 4.1104 (Subsection G) of RR 8-2002.

Deadline Within twenty five (25) days following the close of taxable quarter of the taxpayer (both for manual filing and filing through eFPS)

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Tax Rates · For output tax (0% or 10%) · For input tax 1. 0% or 10% 2. Transitional input tax rates (8% or 10%) 3. Presumptive input tax rate (1-1/2%) and 4. Creditable VAT withheld by the Government and the licensee or lessee (3%, 6%, 8.5% and 10%)

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· RR No. 4-2000 - Prescribes the posting in place of business of a notice on the requirement for the issuance of sales/commercial invoices and/or official receipts by persons engaged in trade or business, including the exercise of profession · RR No. 6-2001 - Amends pertinent pro1visions of certain revenue issuances relative to the inclusion of additional taxpayers to be subject to Final Withholding Tax, revision of the Withholding Tax rates on certain income payments subject to Creditable Withholding Tax, time for the filing of various tax returns and payment of the taxes due thereon and others · RR No. 11-2003 - Extends further the deadline for registration and other compliance requirements during the transitory period of the imposition of ValueAdded Tax (VAT) on sale of services by professionals and brokers · RR No. 12-2003 -Amends certain provisions of RR No. 18-99 which governs the imposition of VAT on services of banks, non-bank financial intermediaries and finance companies beginning January 1, 2003 · RR No. 14-2003 - Amending Revenue Regulations No. 2-98, as amended, in order to simplify the collection of tax, through withholding at the source, on sales of goods or services subject to 3% percentage tax under Section 116 of the Code, and/or to the value-added tax (VAT) under Sections 106 and 108 of the same Code

RELATED REVENUE ISSUANCES · RR No. 5-87-Regulations implementing the provisions of Title IV of the Tax Code imposing VAT on importation of goods and sales and services · RR No. 3-89 - Regulations governing the imposition of 10% VAT on deposits for returnable containers · RR No. 5-93 - Implementing guidelines requiring the monthly payment of VAT and amending thereby Section 110 of the Tax Code · RR No. 7-95 - Consolidated Value-Added Tax Regulations · RR No. 5-96 - Amendment to Sections 245 of the Tax Code in relation to Revenue Regulations No. 7716 - Export Services and Importation of Meat to WTO Member VAT exempt. · RR No. 6-97 - Implementing Republic Act. No. 2241 An Act Amending Republic Act no. 7716, otherwise known as the Expanded Value-Added Tax Law, and other pertinent provisions of the National Internal Revenue Code, as amended and further amending Revenue Regulations No. 7-95, as amended otherwise known as the Consolidated Value-Added Tax Regulations · RR No. 13-97 - Amending further Revenue Regulations No. 7-95 as last amended by Revenue Regulations No. 6-97 · RR No. 7-99 - Amends further Revenue Regulations No. 7-95 relative to the submission of the Summary Lists of Sales and Purchases in magnetic form · RR No. 8-99 - Provides penalties for violation of the requirement that output tax on sale of goods and services should not be separately indicated in the sales invoice or official receipt · RR No. 18-99 - Prescribes the regulations relative to the imposition of VAT on services of banks, non-bank financial intermediaries and finance companies beginning January 1, 2000 · RR No. 19-99 - Prescribes the regulations relative to the imposition of VAT beginning January 1, 2000 on the sale of services by persons engaged in the practice of profession or calling and professional services rendered by general professional partnerships; services rendered by actors, actresses, talents, singers, and emcees; radio and television broadcasters and choreographers; musical, radio, movie, televisions and stage directors; and professional athletes

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CODAL REFERENCE Sections 105 to 115 of the National Internal Revenue Code top of the page

FREQUENTLY ASKED QUESTIONS I. General VAT Queries 1) Who are required to file VAT returns and/or pay VAT? · Every person or entity who in the course of his trade or business, sells or leases goods, properties and services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed Five Hundred Fifty Thousand Pesos (P 550,000.00) for any twelve month period

· A person required to register as VAT taxpayer but failed to register · A person who imports goods 2) Where are VAT returns filed? The Monthly VAT Declaration (BIR Form 2550M) and Quarterly VAT Return (BIR Form 2550Q) shall be filed with any Authorized Agent Bank (AAB) in the place where the taxpayer is registered or required to be registered. In cases of no-payment, the return shall be filed with the Revenue District Office (RDO)/LTDO and LTAD where the taxpayer is registered or required to be registered. In places where there are no AABs, it shall be filed with and the tax paid to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the place where the RDO is located. 3) What is "output tax"? 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. 4) What is "input tax"? Input tax means the VAT paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code 5) What comprises "goods or properties"?

d) The right or the privilege to use motion picture film, films, tapes and discs e) Radio, television, satellite transmission and cable television time 6) 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, including those performed or rendered by the following: a) Construction and service contractors b) Stock, real estate, commercial, customs and immigration brokers c) Lessors of property, whether personal or real d) Warehousing services e) Lessors or distributors of cinematographic films f) Persons engaged in milling, processing, manufacturing or repacking goods for others g) Proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts h) Proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers i) Dealers in securities j) Lending investors k) Transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land, air and water relative to their transport of goods or cargoes l) Services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of the Tax Code m) Services of banks, non-bank financial intermediaries and finance companies n) Services of non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies o) Similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties The phrase "sale or exchange of services" shall include:

The term "goods or properties" shall mean all tangible and intangible objects, which are capable of pecuniary estimation and shall include: a) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business b) The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right c) The right or the privilege to use in the Philippines any industrial, commercial or scientific equipment

a) The lease or the use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right b) The lease or the use of, or the right to use of any industrial, commercial or scientific equipment c) The supply of scientific, technical, industrial or commercial knowledge or information d) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such

property, or right or any such knowledge or information e) The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such non-resident person f) The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme g) The lease of motion picture films, films, tapes and discs h) The lease or the use of or the right to use radio, television, satellite transmission and cable television time 7) 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. 8) What transactions are considered as zero-rated sales? The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: a) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) b) Services other than those mentioned in the preceding paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) c) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate d) Services rendered to vessels engaged exclusively in international shipping e) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceeds seventy percent (70%) of total annual production · The following sales shall be subject to zero percent (0%) rate: a) Sale of goods which are directly shipped by a VAT-registered resident to a place outside the Philippines b) Sale of goods which are considered as "deemed" export sales by a VAT-

registered person to certain entities who are also residents of the Philippines: · Sales to export-oriented enterprises which the Code considers as export sales at the level of the supplier of raw materials · Sales to entities, the exemption of which, under a special law or an international agreement with the Government of the Philippines, effectively zero rates such sales · Sales of gold to the Bangko Sentral ng Pilipinas · Foreign currency denominated sales of goods c) Sales considered as exportation of goods under a special law such as Executive Order No. 226 (Omnibus Investments Code of 1987) and Republic Act No. 7916 (PEZA Law) 9) Where will taxpayers file their applications for VAT zero-rating? Taxpayers may file their application with the Audit Information, Tax Exemption and Incentives Division (AITEID) at the BIR National Office. 10) What is a Contractor's Final Payment Release Certificate and where should taxpayers file their application for this? 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) 11) What transactions are considered as deemed sales? The following transactions are considered as deemed sales: a) 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 b) Distribution or transfer to: · Shareholders or investors as share in the profits of the VAT-registered person; or · Creditors in payment of debt c) Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned d) Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation 12) 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. 13) What are the VAT-exempt transactions? a) Sale of non-food agricultural products, marine and forest products in their original state by the primary producer or owner of the land where the same were produced b) Sale of cotton and cotton seeds in their original state and copra c) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption and breeding stock and generic materials thereof d) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets) e) Sale or importation of coal and natural gas, in whatever form or estate, and petroleum products (except lubricating oil, processed gas, grease, wax and petrolatum) subject to the Excise Taxes imposed under Title VI of the Tax Code f) Sale or importation of raw materials to be used by the buyer or importer himself in the manufacture of petroleum products subject to excise tax, except lubricating oil, processed gas, grease, wax and petrolatum g) Importation of passenger and/or cargo vessels of more than five thousand tons, whether coastwise or ocean-going, including engine and spare parts of said vessel to be used by the importer himself as operator thereof h) Importation of personal and household effects belonging to residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines; Provided, that such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines i) Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery, other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide j) Services subject to percentage tax under Title V of the Code k) Services by the agricultural contract growers and milling for others of palay into rice, corn into grits, and sugar cane into raw cane sugar l) Medical, dental, hospital and veterinary services subject to the provisions of Sec. 17 of RA 7716, as amended m) Educational services rendered by private educational institutions, duly accredited by the Dept. of Education Culture and Sports (DECS), and

Commission on Higher Education (CHED), and those rendered by the government educational institutions n) Sale by the artist himself of his works of art, literary works, musical compositions and similar creations, or his services performed for the production of such works o) Services rendered by individuals pursuant to an employer-employee relationship p) 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 q) Transactions which are exempt under international agreements to which the Philippines is a signatory, or under special laws, except those under the following laws: · P.D. No. 66 - Export Processing Zone Authority (EPZA) registered firms · P.D. No. 529 - Petroleum Exploration Concessionaires under the Petroleum Act of 1949 · P.D. No. 1590 - Philippine Airlines (PAL) relative to domestic transport of goods or cargoes r) Sales by agricultural cooperatives duly registered with the Cooperative Development Authority (CDA) to their members as well as sale of their produce, whether in its original state or processed form, to non-members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce s) Sales by electric cooperatives duly registered with the Cooperative Development Authority (CDA) or National Electrification Administration (NEA), relative to the generation and distribution of electricity, as well as their importation of machineries and equipment, including spare parts, which shall be directly used in the generation and distribution of electricity t) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the Cooperative Development Authority (CDA) whose lending operation is limited to their members u) Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with the Cooperative Development Authority: Provided, that the share capital contribution of each member does not exceed Fifteen Thousand Pesos (P 15,000) and regardless of the aggregate capital and net surplus ratably distributed among the members v) Export sales by persons who are not VAT-registered w) Lease of a residential unit with a monthly rental not exceeding Eight Thousand Pesos (P 8,000.00), regardless of the amount of aggregate rentals received by the lessor during the year, provided that the exemptions likewise applies to lease of residential units where the monthly rental per unit exceeds P 8,000.00 but the aggregate rentals of the lessor during the year do not exceed P 550,000.00. x) 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 paid advertisements y) 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 does not exceed the amount of P 550,000.00 z) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992 and other related laws, house and lot and other residential dwelling valued at P 1,000,000 and below. II. RELIEF-Related Queries 1) What is 'RELIEF"? RELIEF means Reconciliation of Listings for Enforcement. It supports the third party information 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. 2) 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 (P 2,500,000) are required to submit a Summary List of Sales. 3) Who are required to submit Summary List of Purchases? VAT taxpayers with quarterly total purchases (net of VAT) exceeding One Million Pesos (P 1,000,000) are required to submit Summary List of Purchases. 4) What are the Summary Lists required to be submitted? a) Quarterly Summary List of Sales to Regular Buyers/Customers and Casual Buyers/Customers and Output Tax; b) Quarterly Summary List of Local Purchases and Input tax; and c) Quarterly Summary List of Importation 5) Who are "Casual Buyers/Customers?" Casual Buyers/Customers refer to buyers/customers who are engaged in business/ exercise of profession but did not qualify as regular buyers/customers,

the amount of individual transaction is P 100,000 or more but did not qualify as regular buyers/customers. 6) Who are "Regular Buyers/Customers"? They shall refer to buyers/customers who are engaged in business or exercise of profession with whom the taxpayer has transacted at least six (6) transactions in the previous year or current year, regardless of the amount of sale per transaction. 7) What are the contents of the Quarterly Summary List of Sales to Regular Buyers/Customers and Casual Buyers/Customers and Output Tax? The Quarterly Summary List of Sales to regular buyers/customers and casual buyers/customers and output tax shall indicate the following: a) BIR Registered Name of the Buyer who is engaged in business/exercise of profession b) TIN of the Buyer for sales subject to VAT c) Exempt Sales d) Zero-Rated Sales e) Sales Subject to VAT (exclusive of VAT) f) Output Tax (VAT on Sales) 8) What are the contents of the Quarterly Summary List of Local Purchases and Input Tax? The Quarterly Summary List of Local Purchases and Input Tax shall indicate the following: a) BIR Registered Name of the Seller/Supplier/Service Provider b) Address of Seller/Supplier/Service Provider c) Taxpayer Identification Number (TIN) of the Seller d) Exempt Purchases e) Zero-Rated Purchases f) Purchases Subject to VAT (Exclusive of VAT) · On Services · On Capital Goods · On Goods and Other than Capital Goods g) Creditable Input Tax h) Non-Creditable Input Tax 9) What are the contents of the Quarterly Summary List of Importations?

The Quarterly Summary List of Importations shall indicate the following: a) Import Entry Declaration Number b) Assessment /Release Date c) Date of importation d) Name of Seller e) Country of Origin f) Dutiable Value g) All Charges Before release from the Customs' Custody h) Landed Cost: · Exempt · Taxable (Subject to VAT) i) VAT Paid j) Official Receipt (OR) No. of the Official Receipt Evidencing Payment of the Tax k) Date of VAT Payment 10) When and where will taxpayers file/submit the Quarterly Summary List of Sales and Purchases? The quarterly summary list of sales or purchases whichever is applicable shall be submitted to the RDO or LTDO or LTAD having jurisdiction over the taxpayer on or before the twenty-fifth (25th) day of the month following the close of each taxable quarter. 11) Can the VAT withheld and paid for the non-resident recipient, which VAT is passed on to the resident withholding agent by the non-resident recipient of the income, be claimed as an input tax? Yes. It can be claimed as an input tax by the said VAT registered Withholding Agent upon filing his own VAT return, subject to the rules on allocation of input tax among taxable, zero-rated and exempt sales. 12) Are all Value Added Taxpayers required to mandatorily file the summary list in magnetic form using 3.5 inch floppy diskette? Yes. Submission of the summary list in diskette form shall be required for the taxable quarter where the total sales (taxable net of VAT, zero-rated, exempt) exceed P 2,500,000 or total purchases (taxable net of VAT, zero-rated, exempt) exceed P 1,000,000. 13) What is the clear-cut rule on the mandatory submission of summary lists in diskette form?

The following are the rules in the submission of the said summary lists: a) They are required to submit the said summary lists in diskette form for the taxable quarter where the total sales (taxable net of VAT, zero-rated, exempt) exceed P 2,500,000 or total purchases (taxable net of VAT, zero-rated, exempt) exceed P 1,000,000. b) Those who did not meet the threshold need not file summary lists; however, if there is a taxable quarter where aforesaid VAT taxpayers meet or exceed the threshold, they will be required to submit the prescribed electronic format on such taxable quarter and on the next three (3) succeeding taxable quarters, regardless of whether or NOT such succeeding taxable quarter sales and/or purchases meet/exceed the threshold. 14) What is the penalty for failure to submit the quarterly summary list in the prescribed manner? Administrative Penalty P 1,000 - For each failure to file, keep or supply the required documents Aggregate amount not to exceed P 25,000 for the taxable year Criminal Penalty Willful failure to keep any record or to supply the information at the time or times required shall be subject to the criminal penalty under the Tax Code of 1997. *Compromise on such violation SHALL NOT relieve the violating taxpayer from the obligation to submit the required documents. III. RELIEF Technical Queries 1) What needs to be done to resolve errors occurring during the use of the RELIEF system? Make sure that there is only one session of RELIEF active at all times. Close all RELIEFsessions and re-activate again. Make sure that a clean copy of the installer disk is on hand. Get the latest copy from a nearest Revenue District Office or Revenue Data Center or download from the BIR website at www.bir.gov.ph. 2) Is it possible to use the system for more than one company in a single PC? (For accounting and law firms taking charge of transactions of numerous companies)

Yes. Create new folder/s in your root directory. Rename the folder/s with the company name for identification purposes. Copy all the contents of the folder BIR_RLF and paste into each of the newly created folders. Then create shortcuts for the BIRRLF.EXE file found in each folder and paste them to your desktop. It is also recommended to rename these files affixing them with the name of the company (for example: ABC Company_Data Entry). Make sure that Owner Information is changed/updated for newly created folders. 3) How can the user resolve the error "The Input Tax/Output Tax must be equivalent to 10% of the transaction" that occurs during validation? If this is the only error, the user could ignore this error and proceed to submitting the summary lists since the RDO has the updated validation module. The user could also request for a copy of the URLFVALID.EXE file from the RDO to update their RELIEF Validation module. They only need to decompress the file in the root directory of their PC. 4) What is the prescribed screen resolution for the user to view all available options/buttons after selecting a type of transaction? Check the settings of the screen display (desktop) by going to the Control Panel then go to Display and adjust the screen setting to 800x600 or 1024x768 resolution. 5) Can the user submit their summary list using their own extract program? The user may use their own extract program provided that their system has the ability to convert the database files into comma delimited text files. Have their IT department develop a script within their database program to do this. Please refer to the prescribed templates / file formats available at RDO or they can download the technical annexes from the BIR website. User can also submit using the excel format as long as it conforms with the BIR file format under RMC 24-2002. User can ask their RDO for a copy of the Excel templates for their guidance. 6) Where can the users get the RELIEF installer, technical annexes and jobaids? They can get copies from the RDO or RDC. If they have access to the internet, they can access the BIR webpage (www.bir.gov.ph) then go to BIR FORMS. Click on the 2550Q form to go to the location of the downloadable installers, annexes and job-aids.

7) How can the user successfully validate a generated file (.DAT) if upon clicking the Validate File button, a BIR System Message stating "Command contains unrecognized phrase/keyword. Error Number: 36" appeared? The user must make sure that the generated file is not located inside a folder where the foldername contains spaces. The user can rename the folder wherein blank spaces are replaced with underscores. The user can get the update patch from his RDO or from the web to update their Validation module. 8) How will the user remove or uninstall the RELIEF program from the computer? Select RUN from the Taskbar Start Menu then type C:\BIR_RLF\SETUP\SETUP.EXE, press the Enter key and follow the prompts. 9) For users who will submit using the Excel format, what is the prescribed formula for computations? Users always encounter the "Header not equal to total details" Error during validation. All computations in the Excel format must be rounded off to the nearest 2 decimal places. (For example: L3=J3*K3 - it must be L3=round(J3*K3,2)) 10) In case of detailed explanations for questions, where can the user seek help? User can get in touch with the Taxpayer Service Section of their RDO or contact the BIR Helpdesk at 926-9630, 981-7050 to 51, 925-2015-17 or email at [email protected]. IV. VAT on Professionals 1) How to compute the VAT on professionals The general formula is: Output Taxes - Input Taxes = VAT Payable Fees and Expenses including VAT: (a) Professional Fee with VAT x 1/11 Output Tax Less: Profession-related Expenses x 1/11 (with VAT Receipts) Input Tax Difference VAT Payable

Fees and Expenses excluding VAT: (b) Professional Fee x 10% Output Tax Less: Profession-related Expenses x 10% (with VAT Receipts) Input Tax Difference VAT Payable NOTE: (a) Computation is in accordance with Secs. 106D and 108C of the Code. (b) Computation per VAT Return presentation. VAT Payable in (a) and (b) computations should be the same. 2) What are the allowable Input VAT? · 10% of purchase price, exclusive of VAT or 1/11 of total VAT invoice/OR amount on: · Office Supplies / Equipment · Rental of office · Accountant's fees · Other purchases of Goods and Services related to professional fees earned Note: 1) Supplier of goods/services must be VAT registered 2) Substantiated with VAT OR/invoice 3) Illustrations of VAT Computation Assumption 1: PP absorbs the VAT In CY 2002, Professional Fee for Services was P 1,000,000 In CY 2003, Professional Fee for Services is P 1,000,000 Treatment: CY 2002: Income is P 1,000,000.00 CY 2003: Income is 10/11 of P 1,000,000 P 909,091.00 Output VAT is 1/11 of P 1,000,000 90,909.00 Gross Receipt from Clients/Px + VAT P 1,000,000.00 Assumption 2: Payor absorbs the VAT In CY 2002, Professional Fee for Services was P 1,000,000 In CY 2003, Professional Fee for Services is P 1,000,000, plus 10% VAT of P 100,000 Treatment: CY 2002: Income is P 1,000,000.00 CY 2003: Income P 1,000,000.00

Income P1M x 10% Output tax 100,000.00 Gross Receipt from Clients/ Px + VAT P1,100,000.000 4) How can I compute the 20% Withholding Tax using Assumptions 1 and 2? CY 2002: Income P 1,000,000.00 20% Withholding Tax 200,000.00 Net Amount Received from Payor P 800,000.00

CY 2003: (PP absorbs the VAT) Income P 909,091.00 Add: 10% VAT 90,909.00 Gross Amount Rec'd. from Payor P 1,000,000.00 Less: 20% of P 909,091.00 181,818.00 Net Amount Received from Payor P 818,182.00 CY 2003: (Payor Absorbs the VAT) Income P 1,000,000.00 Add: 10% VAT 100,000.00 Gross Amount Rec'd. from Payor P 1,100,000.00 Less: 20% of P 1,000,000 200,000.00 Net Amount Received from Payor P 900,000.00 5) How to record the professional fee in the Books of Accounts of the Professional Practitioner Debit: Cash 900,000 Debit: Creditable W/Tax 200,000 Credit: Professional Fees 1,000,000 Credit: Output VAT Payable 100,000 6) How to record the professional fee in the Books of Accounts of the Clients/Patients Debit: Expenses 1,000,000 Debit: Input VAT Credit 100,000 Credit: Cash 900,000 Credit: Withholding Tax Payable 200,000 7) How to issue a VAT Official Receipt by the Professional Practitioner

CLICK to View tthe Receipt The invoice or official receipt of a VAT-registered PP must show his name, address, TIN, and professional fee, with VAT and other particulars. 8) Compliance Requirements for PPs · Payment of P 500 annual registration fee, and every year thereafter, on or before January 31. · Printing and registration of VAT Official Receipts · Registration and keeping of Books of Accounts · Filing of monthly VAT declarations and quarterly VAT returns · If applicable, submission of the Summary List of Sales and Purchases in softcopies (diskettes). Please use the BIR data entry module. Registration as a VAT Taxpayer · File Form 1901 (Application for Registration) and Form 1925 (TIN Capture Form) for new taxpayers with the RDO having jurisdiction over PP's registered address. (By April 2003, TIN application was made available through the Internet, via the BIR Website at www.bir.gov.ph.) · For old taxpayers registered as Non-VAT, file Form 1905 (Update Form) to change registration to VAT, or from NV-Exempt to NV-3%. · Each registrant (for new or for change of registration) must indicate their specific profession (i.e., doctor, lawyer, CPA, etc.) in the appropriate registration form. Registration of Official Receipts · Submit Inventory of Non-VAT unused receipts (as of December 31, 2002) number of booklets and serial numbers not later than March 19, 2003. · Stamp unused receipts with "VAT-registered as of ________" on ALL copies, and use only until June 30, 2003 · For new Official Receipts, secure BIR Permit to Print Registration and Keeping of Books of Accounts · Journal · Ledger · Subsidiary Professional Income Book · Subsidiary Purchases / Expenses Book Filing and Payment of VAT

Forms to be used: · Form 2550M (Monthly VAT Declaration) · Form 2550Q (Quarterly VAT Return) Period/Form1st Month of the Quarter (Form 2550M) Due dates20th day of the next month 2nd Month of the Quarter (Form 2550M) 20th day of the next month 3rd Month, con-solidated for the Quarter (Form 2550Q) 25th day of the next month Where to File and Pay the VAT Pay to the Accredited Agent Bank (AAB) within the Revenue District Office (RDO) where the PP is registered. In areas where there are no AABs, pay to the Collection Agent in the municipality of the RDO where registered. If without VAT payment, file return with the RDO. Other Transitional Requirements · Submit Billings for Uncollected Professional fee for Sale of Services Rendered on or before December 31, 2002, not later than March 19, 2003. · Submit Inventory of Goods (other than Capital Goods), Materials, and Supplies, as of December 31, 2002, not later than March 19, 2003, to claim transitional (presumptive) input VAT. V. VAT on Doctors 1) If a doctor has several clinics located in different districts, should he register and pay the corresponding fee for each of the clinics? Yes, the doctor should register and pay the corresponding fee for each of the clinic located in different districts, as each clinic is considered a separate and distinct establishment. 2) What is the tax treatment for a doctor who has no clinic but is affiliated with several hospitals? The doctor is considered a professional, subject to 10% VAT provided the gross professional fees is more than P= 550,000.00 and 3% Percentage Tax if P= 550,000.00 and below. He should register his clinic but not his affiliations.

3) A doctor operates a clinic and at the same time hires (as employees) several doctors as part of his staff. For the services provided to patients, the clinic issues the official receipt of the clinic. How will the VAT be charged when the clinic later gives to the individual doctors their professional fees? If the hired doctors are employees receiving compensation income, they are not subject to VAT. If, however, they share in the professional fees, then there exists a professional partnership and their income/fee is subject to VAT. Any amount they receive from the clinic shall be considered as inclusive of VAT. But the clinic is exempt from VAT as far as medical services are concerned, but the professional fee received is subject to VAT. 4) Can a professional doctor claim input VAT? What are the sources of input taxes? Yes, he can claim input VAT on his purchases that are related to the practice of profession and supported with a VAT invoice/official receipts issued in his name. 5) Is a doctor with a maximum of 10 consultations a year required to have his own receipts printed? Is this not too costly for him? Yes, the determining factor is his practice of profession and not the number of transactions in a year. Section 237 of the Tax Code provides that all persons subject to internal revenue tax shall for each sale/transfer of merchandise or for services rendered valued at P= 25.00 or more must issue a duly registered receipt or sales invoice. 6) Are the fees of physical therapists, not a GPP, subject to VAT? Yes, they are subject to 10% VAT if their gross receipt is more than P= 550,000.00. If their gross receipt is P= 550,000.00 or less they are subject to 3% Percentage Tax, unless they opt to register as VAT taxpayer. VI. VAT on Lawyers 1) What constitute gross receipts of lawyers that is subject to VAT? The gross receipts of lawyers may constitute of, but not limited to the following: retainers' fees, acceptance fees, appearance fees, consultation fees, notarial fees and the like 2) If a lawyer, employed in the government, provides/operates a notarial service,

is he required to register as VAT taxpayer with regard to his notarial fees? Yes, because his notarial fees is part of his professional income and not earned under an employee-employer relationship. VII. VAT on Insurance Agents 1) An agent of a life insurance company has been registered as a Non- VAT Taxpayer, is it necessary for him to register as VAT Taxpayer? An agent is required to register as VAT taxpayer if he is earning more than P= 550,000.00 in any twelve-month period. If his expected income for the 12-month period is P= 550,000.00 or less, he is subject to 3% Percentage Tax, unless he opts to register as a VAT taxpayer. 2) Is the P= 500.00 registration fee a one-time payment only? Will it apply to the succeeding years? The P= 500.00 is a registration fee payable annually on or before January 31 of each year. 3) What particular books of accounts are necessary for taxation purposes? Generally, the books of accounts necessary for taxation purposes are Journals and Ledgers. Professional taxpayers however, are required to keep Subsidiary Professional Income Book and Subsidiary Purchases/Expense Book for their gross sales/gross receipts and purchases/expenses. 4) Are they required to issue Official Receipts? Yes, Section 237 of the Tax Code provides that all persons subject to internal revenue tax shall for each sale/transfer of merchandise or for services rendered valued at P= 25.00 or more must issue a duly registered receipt or sales invoice. In addition, in order to claim Input VAT, the name, address and TIN of the purchaser/client must be indicated in the receipt/invoice. VIII. Other Professional Practitioners 1) What about other individuals who practice certain calling but need not undergo government exam?

Said individuals are subject to VAT if their gross receipts/income is more than P= 550,000.00. They are subject to 3% Percentage Tax if their gross receipts/income is P= 550,000.00 or less, unless they opt to register as VAT taxpayer. However, if their service is rendered under an employee-employer relationship, then they are not subject to VAT nor to Percentage Tax. Examples of individuals who practice certain calling are tourist guides, trainers, masseurs, brokers and other individuals who are paying occupational tax in the local or municipal government, and there exist No employer-employee relationship. DOCUMENTARY STAMP TAX Contents Description Tax Forms Documentary Requirements Tax Rates Procedures Dealines Related Revenue Issuances Codal References Frequently Asked Questions

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 Tax Due Per Unit P1.50

Document

Taxable Unit

% of Unit

Taxable Base

174

Debentures and P200.00 or Certificates of fraction Indebtedness thereof

.75%

Face value of Document

DESCRIPTION Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. 175

P200.00 or fraction Original Issue of thereof Shares of Stock with par value 2.00 P200.00 or fraction Original Issue of thereof 2.00 Shares of Stock based on without par actual value consideration Sales, Agreements to Sell, Memoranda of P200.00 or Sales, fraction Deliveries or thereof Transfer of Duebills, Certificate of Obligation, or Shares or

1% 1%

Par value of shares of stocks actual consideration for the issuance of shares of stocks

TAX FORM BIR Form 2000 (Documentary Stamp Tax Declaration Return) 176

1.50

.75%

Par value of such due-bills, certificate of obligation or stocks

DOCUMENTARY REQUIREMENTS

Certificates of Stock Bonds, Debentures, Certificate of P200.00 or Stock or fraction Indebtedness thereof issued in foreign Countries Certificate of Profits or Interest in Property or Accumulation Bank Checks, Drafts, Certificate of Deposit not bearing interest and other Instruments P200.00 or fraction thereof Par value of such bonds, debentures or Certificate of Stocks

notes exceeding P250,000.00 for personal use or family use) 1.50 .75% Bills of Exchange or order drawn in foreign country but payable in the Philippines Foreign Bills of Exchange and Letter of Credit P200.00 or fraction thereof Face value of such bill of exchange or order or the equivalent of such value, if expressed in foreign currency Face value of such bill of exchange or order or the equivalent of such value, if expressed in foreign currency Amount Insured by the Policy

177

181

.30

.15%

178

.50

.25%

Face value of such certificate / memorandum

182

P200.00 or fraction thereof P200.00 or fraction thereof P4.00 premium or fraction thereof P4.00 premium or fraction thereof

.30

.15%

179

On each Document

1.50

183

Life Insurance Policies Policies Of Insurance upon Property Fidelity Bonds and other Insurance Policies

.50

.25%

180

Bonds, Loan Agreements, Promissory Notes, Bills of Exchange, Drafts, Instruments and Securities Issued by the Government or any of its P200.00 or Instrumentalities fraction , Deposit thereof Substitutes Debt Instrument, Certificates of Deposit bearing interest and others not payable on sight or demand (except loan agreement or promissory

184

.50

12.5 %

Premium charged

185

.50

12.5 %

Premium charged Capital of annuity, or if unknown 33 1/3 times the annual income Value or amount of the Plan Premium charged

186 Face value of the instrument/documen t

Policies of P200.00 or Annuities, fraction Annuity or other thereof instruments P500.00 or Pre-Need Plans fraction thereof Indemnity Bonds Certificates of Damage or otherwise and Certificate or document P4.00 or fraction thereof Each Certificate

1.50

75%

.30

.15%

186

.50

.10%

187

.30

7.5%

188

15.00

issued by any customs officers, marine surveyor, notary public and certificate required by law or by rules and regulations of a public office Warehouse Receipts (except if value Each Receipt 15.00 does not exceed P200.00) P1.00 cost of ticket and Jai-alai, Horse Race Tickets, lotto or Other Authorized Number Games Additional P0.10 on every P1.00 .10 or fraction thereof if cost of ticket exceeds P1.00

the contract or agreement First 5,000 Mortgages Pledges of lands, estate, or property and Deeds of Trust On each 20.00 P5,000 or fractional part 10.00 thereof in excess of 5,000 First 1,000 For each 15.00 additional P1,000 or fractional part 15.00 thereof in excess of P1,000 1,000 tons and below P500.0 0 for the first 6 months PlusP5 0 each month or fraction thereof in excess of 6 months Consideration or Fair Market Value, whichever is higher (if government is a party, basis shall be the consideration) .4% .2% Amount Secured Amount Secured

195

189

196

190

10%

Cost of the ticket

Deed of Sale, instrument or writing and Conveyances of Real Property (except grants, patents or original certificate of the government)

1.5% 1.5%

Bills of Lading or Receipts 191 (except charter party) 193 Powers of Attorney Lease and other Hiring agreements of memorandum or contract for hire, use or rent of any land or tenements or portions thereof Each Document First 2,000 For every P1,000 or 3.00 fractional part thereof in 1.00 excess of the first P2,000 for each year of the term of 197 5.00 Each Proxy 15.00 Charter parties and Similar Instruments

1,001 to 10,000 tons

Tonnage and duration of the contract

1.5% 1%

194

P1,000 for the first 6 months Plus P100

Over 10,000 tons

each month or fraction thereof in excess of 6 months

DEADLINES The 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.

P1,500 for the first 6 months Plus P150 each month or fraction thereof in excess of 6 months

RELATED REVENUE ISSUANCES RR No. 6-2001, RMO No. 8-98, RMO No. 15-2001

CODAL REFERENCE Sec. 173 to Sec. 201 of the National Internal Revenue Code

FREQUENTLY ASKED QUESTIONS 1) Who are required to file Documentary Stamp Tax Declaration Return? PROCEDURES File 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. a) In case of constructive affixture of documentary stamps, by the persons making, signing, issuing, accepting or transferring documents, instruments, loan agreements and papers, 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 file Documentary Stamp Tax Declaration and pay the applicable stamp tax.

· 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 or office 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

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 the property is located in case of sale of real property or where the Collection Agent is assigned.

4) What are the implications of failure to stamp taxable documents? 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 · Affidavits of poor persons for the purpose of proving poverty · 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.

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