As a business owner, part of your job is to think of the taxes you are mandated by law to pay. There are consequences for failing to file the required taxes ranging from tax evasion charges to hefty penalties. And so, like every business owner, you ought to strive hard to avoid the situation where representatives of the Bureau of Internal Revenue or BIR comes and performs an audit and investigation. Even minor mistakes in supporting documents or errors in computations of tax dues can result in tax problems.
As a busy entrepreneur, it’s understandable why you would feel confused and overwhelmed about what type of taxes you should file. After all, the Tax Code is very complex, with constant updates on revenue regulations. So to help you, it would help to take advantage of tax and accounting services in the Philippines. Moreover, it is highly beneficial if you familiarize yourself with the most common taxes you should file as a business owner.
Notably, the most common type of taxes is categorized into two: national and local. The national taxes include withholding tax compensation, withholding tax expanded, VAT or percentage tax, and income tax. The local taxes include local business tax and real estate tax. Let’s take a look at them in detail below:
Withholding Tax Compensation
This is the tax you get from your employee’s income. You need to deduct and retain a percentage of your employee’s salary. Every cut-off date, you must remit the retained amount to the Bureau of Internal Revenue. To facilitate this process, it would be advantageous to seek help from tax and audit services in the Philippines.
Withholding Tax Expanded
Withholding Tax Expanded is a withholding tax prescribed on certain income payments. This is deducted from your products or services to your suppliers. You credit this against income tax that is due for the taxable quarter or year where you particularly earned that income. You remit this to BIR on a monthly and quarterly basis.
Value-added Tax or Percentage Tax
Value-added Tax or VAT is a form of tax that is levied on the sale, barter, exchange, lease of goods, properties, or services on the importation of goods. If your business is VAT registered and earns a gross sale of more than 3 million pesos every year, you need to pay monthly and quarterly. On the other hand, if your business is not VAT registered, the percentage tax is levied quarterly. If you need help monitoring these details, seek help from reputable tax services in Manila.
You calculate income tax on the basis of your gross net income, so accounting is essential to your operations. You need to pay your income tax quarterly and annually to the BIR. If you are a sole proprietor or a professional whose gross receipts are not more than 3 million pesos VAT threshold and are not subject to other kinds of percentage tax, an 8% tax rate will be applicable to you.
Annual Registration Fee
The annual registration fee is 500 pesos. It is a tax filing requirement that needs to be done annually for taxpayers doing business like you who pay these fees in the BIR RDO where you are duly registered. Usually, this is nearest the place of your business. Bear in mind, you can only have one TIN even if you have multiple businesses. After you file and pay, you must display it together with your other business permits and licenses.
Local Business Tax
The local business tax is imposed by LGUs or Local Government Units, usually collected by the City Treasurer’s Office. They base it on the gross sales or receipts of the previous fiscal year. The rate depends on the location, but it generally is not more than 3%. This is required for you to renew your Mayor’s permit.
Real Estate Tax
If you own your business address, you are required to pay the annual property tax. You also have to include paying for all the other real properties that your business owns.
There could be other taxes BIR imposes on business owners, depending on the nature of your operations. But the above-mentioned are the most common ones. It’s crucial that you are knowledgeable and compliant with this to avoid the worry and stress that you feel when you hear the phrase, “BIR Audit.” If you are confident with your accounting and tax records, you should not fret. Unless you are a tax evader, there is no reason to fear BIR Audit. If you need expert assistance, call our tax and accounting services in Pasig. We are comprised of a team of CPAs and finance experts who have been working in this industry for decades.