Taxation 2 in the Philippines

• Taxation 2 in the Philippines focuses on business taxation and transfer taxes as defined by the National Internal Revenue Code (NIRC).
• It deals with indirect taxes such as Value-Added Tax (VAT), Percentage Tax, and Excise Tax.
• Estate tax and donor’s tax on wealth transfers are included.

Business Taxes

• Business taxes encompass Value-Added Tax (VAT), Percentage Tax, and Excise Tax.

Value-Added Tax (VAT)

• VAT is an indirect tax on the sale of goods, services, and imports, with the tax burden borne by the final consumer.
• The VAT rate is 12% of the gross selling price or gross receipts.
• Businesses with gross annual sales/receipts exceeding ₱3 million must register for VAT.
• VAT-registered entities are required to file monthly and quarterly VAT returns and issue VAT invoices/receipts.
• VAT is imposed on the sale of goods or properties within the Philippines.
• VAT is imposed on the sale of services such as professional fees and rentals.
• VAT is imposed on the Importation of goods, whether by VAT-registered or non-VAT taxpayers.

Zero-Rated Sales

• On zero-rated sales, a 12% VAT applies, but sellers can claim input VAT refunds.
• Examples include exports and sales to PEZA-registered entities.

VAT-Exempt Sales

• On VAT-exempt sales, no VAT is charged, and the seller cannot claim input VAT credits.
• Examples include basic food items like fresh vegetables and rice, educational services, and medical/hospital services.

Percentage Tax

• Percentage Tax applies to non-VAT-registered taxpayers with annual sales/receipts not exceeding ₱3 million.
• The tax rate is 3% on gross sales/receipts.
• Small retailers, service providers, domestic carriers, and keepers of garages are subject to Percentage Tax.
• Banks and non-bank financial intermediaries have percentage tax rates of 5%-15%.

Excise Tax

• Excise Tax is imposed on specific goods considered luxuries or harmful to health and the environment.
• Specific Tax is based on quantity, such as per liter of alcohol.
• Ad Valorem Tax is based on selling price, such as a percentage of the value of cars.
• Alcohol: Specific tax rate of ₱42 per liter (varies by type).
• Cigarettes: Specific tax rate of ₱60 per pack (increasing annually).
• Gasoline: Specific tax rate of ₱10 per liter.
• Cars (above ₱2M): Ad Valorem tax rate of 20%.

Transfer Taxes

• Transfer taxes include Estate Tax

Estate Tax

• Estate Tax is imposed on the transfer of a deceased person’s estate to their heirs.
• The rate is 6% of the net taxable estate.
• Net taxable estate is calculated as Gross estate less Deductions
• Standard deduction: ₱5 million
• Family home exemption: ₱10 million
• Deductions from Gross Estate include unpaid debts, medical expenses with documentation, and donations to charitable institutions.
• The deadline for filing and payment is within one (1) year from the decedent’s death.
• Installment payments are allowed for financial hardship.

Taxation 2 in the Philippines covers business and transfer taxes under the National Internal Revenue Code (NIRC). It focuses on indirect taxes like Value-Added Tax (VAT), Percentage Tax, and Excise Tax. Estate tax and donor’s tax concerning wealth transfers are also discussed.