Category Archives: TAX UPDATES

AFFIDAVIT ON HOW RATES OF SERVICES ARE COMPUTED REQUIRED BY BIR (FOR SELF-EMPLOYED PROFESSIONALS)

BASIS: REVENUE REGULATIONS 4-2014 SUBJECT    :  Guidelines and Policies for the Monitoring of Service fees of Professionals

What is the RR 4-2014 all about?

The BIR is imposing a new policy regarding the additional requirements in filing the Income tax return for self-employed professionals. They wanted the self-employed professionals to submit an affidavit(written statement or in words) showing their rates, how they are billing their clients and the factors that they consider in determining their professional fees.

The simple guidelines are as follows: “Policies and Guidelines (excerpts from RR 4-2014) 

1. Self-employed professionals shall register and pay the annual registration fee (ARF) with the RDO/LTDO having jurisdiction over them. In addition to the requirements for annual registration, all self-employed professionals shall submit an affidavit indicating the rates, manner of billings and the factors they consider in determining their service fees upon registration and every year thereafter on or before January 31. 

2. .Self-employed professionals are obligated to register the books of accounts and official appointment books of their practice of profession /occupation/calling before using the same. The official appointment books shall contain only the names of the client and the date/time of the meeting. They are likewise obligated to register their sales invoices and official receipts (VAT or non-VAT) before using them in any transactions.

 3. In cases when no professional fees are charged by the professional and paid by client, a BIR registered receipt, duly acknowledged by the latter, shall be issued showing a discount of 100% as substantiation of the ** “pro-bono’ service. “

*”pro-bono ” defined as doing something voluntarily; work donated for the common good

 Special Note: There is a TRO (Temporary restraining order for LAWYERS ONLY)

TRO

 ” The Supreme Court issued yesterday (April 22) a temporary restraining order (TRO) that stopped the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) from implementing Revenue Regulations No. 4-2014 that requires self-employed professionals to submit a notarized affidavit of their fixed service rates. However, said TRO was issued only as against LAWYERS. “

(excerpts from “Tax Management Association of the Philippines”)

 

 

 

 

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WAIVER OF PENALTIES IMPOSED FOR eFPS FILED APRIL 16,2014

EFPS

 BASIS:( REVENUE MEMORANDUM CIRCULAR NO. 28-2014  )

SUBJECT: WAIVER OF PENALTIES FOR ELECTRONIC FILING AND PAYMENT SYSTEM (EFPS)

What is RMC No. 28-2014 all about?

There is a waiver of late penalties imposed on the ITR being filed, during the taxable year ended December 31, 2013 and quarter ended March 31, 2014. These are for those who use the eFPS system of the BIR and filed dated April 16, 2014.

Why there is a waiver?

There was a system downtime yesterday April 15, 2014, due to the volume of the tax payers/filing thru eFPS.

Exceptions and resolution:

The eFPS filers who are enrolled and have manually filed and paid their income tax due for above taxable periods will not be imposed of penalties, and are advice to file again using eFPS until April 25, 2014.

Please avoid tentative ITR

Revenue Memorandum Circular 50-2013

SUBJECT:   Clarification Regarding “Tentative Annual Income Tax Returns” Being Filed by Certain Taxpayers

 What do you mean by “Tentative Annual Income Tax Returns” being filed by tax payers?

These are the Income tax returns that are being filed by the taxpayers but there is incompleteness or non-finality of the data. The issue is not literally as being “tentative”, but as an incomplete data of ITR submitted at the DEADLINE of the tax filing.

How is this possible? Why are there incomplete data of financial statements?

During the season of income tax filing, the financial statements or income statements that serve as the basis for the taxable income were not yet completed by the book keepers or accountant of the withholding agent.  External factors like poor internal control of accounting system (especially SMEs), other than willful neglect of non-compliance may be a reason. More so, the hassle in beating the tax deadline has cause the rise of tentative filing of income tax returns.

What does the responsibility of the taxpayer in accordance with RMC 50-2013?

Whenever the taxpayer affixes his or her signature in the ITR the taxpayer is also declaring that the tax return is made in good faith, true and correct, hence in accordance with the provisions of the National Internal Revenue Code (Tax Code), as amended and existing regulations. The taxpayer should know that in doing so, the filing of amended tax returns and finalization of its audited financial statements should be a priority by the tax payer. The filing of amended tax returns has the effect of extending the three (3) year period within which the Bureau of Internal Revenue is allowed to examine the books of the taxpayers.

 Why should the taxpayer give importance in preventing “Tentative filing of ITR”?

For purposes of the RMC 50-2013, a “Tentative Tax Return” shall be considered as a final return, unless a final amended return is filed by the concerned taxpayer. However, once an electronic Letter of Authority or any other notice of audit is received, taxpayers are barred from making amendments to the tentative tax returns filed. This emphasizes that income tax returns marked as “Tentative” may also be the subject of examination pursuant to Section 6(A) of the Tax Code, as amended.

BIR Form 2316 or Certificate of Compensation Payment/Tax Withheld to submit to BIR

2316-2BIRLOGO

Revenue Regulations 11-2013

Filing  or Submission of Hard Copy of the Certificate of Compensation Payment/Tax Withheld (BIR Form 2316) Covering Employees who are Qualified for Substituted filing.

 What is meant by Employees Qualified for Substituted filing?

These are the employees receiving purely compensation income from one employer for one taxable year whose tax due is equal to tax withheld and an individual-payee whose compensation income is subject to FWT (final withholding tax) .They shall no longer file an income tax return since BIR form No. 1604-CF shall be considered as a substituted return filed by the employer. The BIR Form No. 2316 duly certified by both employee and employer shall serve the same purpose as if the BIR Form No. 1700(Form use for those who are earning purely compensation income)  had been filed.

 The BIR FORM 2316 is NOW NEEDED TO SUBMIT TO THE BIR  

  1. The BIR Form 2316 previously serves as a Certificate of Compensation Payment/Tax Withheld for the purposes of personal file of the employees covered by substituted filing, is not only limited as a proof of financial capacity whenever loan application, credit card application or for the purpose of availing tax credit in the employees home country.
  2. The employer-withholding agent requires to not only furnish the employee the original copy of BIR Form No. 2316 but also file/submit to the BIR the duplicate copy not later than February 28 following close of the calendar year. 

What if I do not submit the BIR Form 2316 to the BIR?

You will have to pay P 1,000 for each failure of submission of the BIR Form 2316 but with a maximum threshold of up to P 25,000.00, provided however that failure is due to reasonable cause not to willful neglect. 

What if I do not submit the BIR Form 2316 for two consecutive years?

TECHNICALLY the law says in the RR 11-2013:

“However, any employer/withholding agent, including the government or any of its political subdivisions and government owned and controlled corporations, who/which fails to comply with the above filing/submission of BIR Form 2316 within the time required by this Regulations for two consecutive years may be dealt with in accordance with Section 255 which provides in part that “ “Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax, make any return, keep any record, or supply correct and accurate information, who wilfully fails to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refundexcess taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a fine of not less than Ten Thousand Pesos (P10,000.00) and suffer imprisonment of not less than one (1) year but not more than ten (10) years.”

 (Don’t get intimidated by the law scroll down for alternative) 

OR

You will have to pay P 1,000 for each BIR Form No. 2316 not filed WITHOUT THE BENEFIT of maximum threshold amounting to P 25,000 as a compromise.

 TIP: Just follow what is practical and convenient, I mean these are the rules but we have a mind for judgment right?

 REMINDER: The employer-withholding agent and employees are required to retain copies of the duly signed BIR Form No. 2316 for a period of three (3) years as required under the Tax Code.