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Prepared by: Marivic A. Galban Office of the Commissioner Revenue Regulations No. 2-2011.

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Presentation on theme: "Prepared by: Marivic A. Galban Office of the Commissioner Revenue Regulations No. 2-2011."— Presentation transcript:

1 Prepared by: Marivic A. Galban Office of the Commissioner Revenue Regulations No

2 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 1. Background  These Regulations are issued in order to prescribe the returns to be filed by taxpayers in compliance with their duty to report income under the law.

3 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 2. Scope  Pursuant to Section 244 in relation to Sections 6(H), 51(A)(1), 51(A)(2), 51(A)(3) and 65 of the NIRC of 1997 (Tax Code), as amended, these Regulations are hereby promulgated to prescribe the filing of:  Income Tax Return (ITR) and/or  Annual Information Return (AIR)

4 Prepared by: Marivic A. Galban Office of the Commissioner Legal Basis Sec Authority of the Secretary of Finance to Promulgate Rules and Regulations. Sec. 6 (H) - Authority of the Commissioner to Prescribe Additional Procedural or Documentary Requirements Sec. 51(A)(1) – Individuals required to file ITR Sec. 51(A)(2) – Individuals not required to file ITR Sec. 51(A)(3) – The foregoing notwithstanding, any individual not required to file income tax return may nevertheless be required to file an information return pursuant to rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner.

5 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 2. Scope  Filing by certain INDIVIDUAL  Citizens, (including estates and trusts),  Resident aliens, and  Non-resident aliens engaged in trade or business in the Philippines.

6 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 3. Filing of ITR with AIR  Starting with taxable year 2010, individuals, estates and trusts required under the law and existing issuances to file an ITR should file said ITR together with the AIR (BIR Form No – Annex “A”).

7 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 3. Filing of ITR with AIR or ALL INDIVIDUALS required to file ITR must attach AIR starting taxable year 2010.

8 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 3. Filing of ITR with AIR  AIR shall include :  Income subject to FINAL withholding tax and  EXCLUSIONS from gross income under Section 32(B) of the Tax Code, as amended. New BIR Form No. 1705

9 Prepared by: Marivic A. Galban Office of the Commissioner SCHEDULES in the AIR Gross Amount of Income / Receipts Amount 30 Passive Income (Schedule 1) 31 Sale/Exchange or Real Property (Schedule 2) 32 Properties Received thru Gifts, Bequests, and Devises (Schedule 3) 33 Other Sources (Schedule 4) 34 TOTAL

10 Prepared by: Marivic A. Galban Office of the Commissioner

11 Prepared by: Marivic A. Galban Office of the Commissioner

12 Prepared by: Marivic A. Galban Office of the Commissioner

13 Prepared by: Marivic A. Galban Office of the Commissioner INDIVIDUALS REQUIRED TO FILE ITR BIR Form No The following INDIVIDUALS shall file BIR Form No regardless of the amount of gross income: 1. Resident Citizen engaged in trade, business, or practice of profession within or without the Philippines. 2. Resident alien, non-resident citizen or non-resident alien individual engaged in trade, business or practice of profession within the Philippines. 3. Estates and trusts engaged in trade or business, regardless of the amount of gross income. 4. Estates and trusts not engaged in trade or business and whose income has been subjected to final withholding tax pursuant to Section 57(A) of the Tax Code, as amended, as implemented RR No

14 Prepared by: Marivic A. Galban Office of the Commissioner 1.Individuals with two or more employers concurrently or successively at anytime during the taxable year. 2.Employees whose income tax has not been withheld correctly resulting to collectible or refundable return. 3.Employees whose monthly gross income does not exceed P5, or the statutory minimum wage, whichever is higher, and opted for non-withholding of tax on said income. Individuals required to file ITR (BIR Form No. 1700/1701) and NOT qualified for substituted filing (RR , as amended ) Note : Under RA 9504, MINIMUM WAGE EARNERS shall be exempt from the payment of income tax on their statutory minimum wage, including holiday pay, overtime pay, night shift differential pay and hazard pay.

15 Prepared by: Marivic A. Galban Office of the Commissioner 4. Individuals deriving other non-business, non- profession-related income in addition to compensation income not otherwise subject to a final tax. 5.Individuals receiving purely compensation income from a single employer whose income tax has been correctly withheld but whose spouse does not qualify for substituted filing. Individuals required to file ITR (BIR Form No. 1700/1701) and NOT qualified for substituted filing (RR , as amended )

16 Prepared by: Marivic A. Galban Office of the Commissioner 6. Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income or compensation income and other non-business, non- professional-related income. Note : In case of married individuals who are still required to file returns, only ONE RETURN FOR THE TAXABLE YEAR SHALL BE FILED by either of the spouses to cover income of both. It shall be SIGNED BY HUSBAND AND WIFE unless physically impossible to do so, in which case, signature of one of the spouses would suffice. Individuals required to file ITR (BIR Form No. 1700/1701) and NOT qualified for substituted filing (RR , as amended )

17 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 4. Filing of AIR only a) An individual with respect to pure compensation income, as defined in Section 32(A)(1), derived from sources within the Philippines, the income tax on which has been correctly withheld under the provisions of Section 79 of the Tax Code, as amended, whose ANNUAL TAXABLE INCOME EXCEEDS P500,000.00* :  Provided, That an individual deriving compensation concurrently from two or more employers at any time during the taxable year shall file an income tax return; b) Individuals, estates and trusts whose sole income has been subjected to final withholding tax under Section 57 (A) of the Tax Code, as amended, with aggregate FINAL TAX WITHHELD EXCEEDING P125,000.00* ANNUALLY, whether or not remitted to the BIR ; and c) Individuals whose sole income is exempt from income tax and WHOSE TOTAL ANNUAL INCOME (EXEMPT) exceeds P500,000.00*. Graduated Schedule of Income Tax Rates for Individuals under Sec 24A Taxable income Over 500,000 taxable income ---- with income tax of P125, % of the excess

18 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 4. Filing of AIR only a. pure compensation income b. sole income has been subjected to final withholding tax c. sole income is exempt from income tax a. ANNUAL TAXABLE INCOME EXCEEDS P500, b. aggregate FINAL TAX WITHHELD EXCEEDING P125, ANNUALLY c. TOTAL ANNUAL INCOME (EXEMPT) exceeds P500,000.00

19 Prepared by: Marivic A. Galban Office of the Commissioner On sole income has been subjected to final withholding tax under Section 57 (A) of the Tax Code SEC. 57(A). Withholding of Tax at Source. – (A) Withholding of Final Tax on Certain Incomes. - Subject to rules and regulations the Secretary of Finance may promulgate, upon the recommendation of the Commissioner, requiring the filing of income tax return by certain income payees, the tax imposed or prescribed by Sections 24(B)(1), 24(B)(2), 24(C), 24(D)(1); 25(A)(2), 25(A)(3), 25(B), 25(C), 25(D), 25(E), 27(D)(1), 27(D)(2), 27(D)(3), 27(D)(5), 28 (A)(4), 28(A)(5), 28(A)(7)(a), 28(A)(7)(b), 28(A)(7)(c), 28(B)(1), 28(B)(2), 28(B)(3), 28(B)(4), 28(B)(5)(a), 28(B)(5)(b), 28(B)(5)(c); 33; and 282 of this Code on specified items of income shall be withheld by payor-corporation and/or person and paid in the same manner and subject to the same conditions as provided in Section 58 of this Code.

20 Prepared by: Marivic A. Galban Office of the Commissioner DEFINITION for purposes of Section 4  “Fair market value” as determined in accordance with Section 6(E) of the Tax Code, as amended, shall be used in reporting the non-cash income and receipts in the AIR.  “Individual whose compensation income has been subjected to final withholding tax” shall include aliens or Filipino citizens occupying the same positions as the alien employees, as the case may be, who are employed by:  regional operating headquarters (ROHQ),  regional or area headquarters (RHQ)  offshore banking units (OBU),  petroleum service contractors and sub-contractors, pursuant to pertinent provisions of Sections 25 (C), (D), (E), and 57 (A),  including those subject to Fringe Benefit Tax (FBT) under Section 33 of the Tax Code, as amended, Republic Act No. 8756, Presidential Decree No. 1354, and other pertinent laws.

21 Prepared by: Marivic A. Galban Office of the Commissioner Are ALL pure compensation income earners with tax due equal tax withheld and qualified under substituted filing required to file AIR only?  No, only pure compensation income earners whose ANNUAL TAXABLE INCOME EXCEEDS P500, are required to file AIR only. EXAMPLE: Gross Compensation income from Present employer Less: Non-taxable/exempt (including 13 th mo. & other benefits, de minimis benefits etc.) GROSS TAXABLE compensation income Less: Personal and Additional Exemption Premium paid on health or hospitalization insurance (if applicable) NET TAXABLE COMPENSATION INCOME EXCEEDS P500,000 Tax due Amount of taxes Withheld BIR Form No (AIR) BIR Form No. 2316

22 Prepared by: Marivic A. Galban Office of the Commissioner  BIR Form No shall be attached to the AIR to those receiving sole compensation income whose ANNUAL TAXABLE INCOME EXCEEDS P500, An employee, single, received pure compensation income from one employer for the year with annual taxable income of P600,000 and tax due equal tax withheld scenario. She does not have any income subject to final tax or exclusions from gross income for the year. What will be attached to the AIR?

23 Prepared by: Marivic A. Galban Office of the Commissioner An employee, single, received pure compensation income from one employer for the year with annual taxable income of P300,000 and tax due equal tax withheld scenario. Should she file a) ITR with AIR or b)AIR only ?  This employee need not file a) ITR with AIR or b) AIR only because the annual taxable income is only P300,000 (not exceeding P500,000) and qualified under substituted filing. EXAMPLE: Gross Compensation income from Present employer Less: Non-taxable/exempt (including 13 th mo. & other benefits, de minimis benefits etc.) GROSS TAXABLE compensation income Less: Personal and Additional Exemption Premium paid on health or hospitalization insurance (if applicable) NET TAXABLE COMPENSATION INCOME P300,000 Tax due Amount of taxes Withheld NOT REQUIRED TO FILE ITR WITH AIR NOT REQUIRED TO FILE AIR ONLY

24 Prepared by: Marivic A. Galban Office of the Commissioner Sole income has been subjected to final withholding tax exceeds P125,000 annually SOURCETINAMOUNT OF INCOME FINAL TAX WITHHELD EXEMPT DIVIDENDABC COMPANY ,000,000100,000 DIVIDENDXYZ CORP ,00050,000 WINNINGSEXAMPLE CORP ,0004,000 TOTAL 154,000 Example:

25 Prepared by: Marivic A. Galban Office of the Commissioner Sole income is exempt from income tax exceeds P500,000 annually SOURCETIN AMOUNTCREDITABLE/ FINAL TAX WITHHELD EXEMPT RETURN OF PREMIUM PHILAMLIFE ,000X RETIREMENT PAY DPWH- MANILA ,000X COMPENSATION FOR INJURIES OR SICKNESS ETON CORP ,000X TOTAL 750,000

26 Prepared by: Marivic A. Galban Office of the Commissioner Are mixed income earners (compensation and business income) with tax due equal tax withheld required to file AIR only?  No, mixed income earners are required to file ITR with AIR (BIR Form No. 1701) regardless of the Gross Income received.

27 Prepared by: Marivic A. Galban Office of the Commissioner Are employees deriving compensation concurrently from two or more employers at any time during the taxable year with tax due equal tax withheld required to file AIR only?  Employees with compensation concurrently from two or more employers at any time during the taxable year with tax due equal tax withheld are required to file ITR with attached AIR regardless of the annual taxable income. ABC UNIVERSITY JAN TO DEC TAXABLE INCOME 100,000 GALBAN UNIVERSITY JAN TO DEC TAXABLE INCOME 200,000 MARIVIC UNIVERSITY JAN TO DEC TAXABLE INCOME 100,000

28 Prepared by: Marivic A. Galban Office of the Commissioner Are employees with successive employers receiving pure compensation income with tax due equal tax withheld required to file AIR only?  Employees with successive employers receiving pure compensation income with tax due equal tax withheld are required to file ITR with attached AIR regardless of the Annual Taxable Income. Example: Gross Compensation income from Present employer Less: Non-taxable/exempt (including 13 th mo. & other benefits, de minimis benefits etc.) Taxable Income from Present Employer Add: Taxable Income from previous employer GROSS TAXABLE compensation income Less: Personal and Additional Exemption Premium paid on health or hospitalization insurance (if applicable) NET TAXABLE COMPENSATION INCOME Tax due Amount of taxes Withheld Withheld by present employer Withheld by previous employer Total Amount of Taxes Withheld as adjusted ABC CO JAN-JUNE TAXABLE INCOME p100,000 XYZ CO. JULY-DEC TAXABLE INCOME p200,000

29 Prepared by: Marivic A. Galban Office of the Commissioner 1.Receiving purely compensation income regardless of amount; 2.Working for only one employer in the Philippines for the calendar year; 3.Income tax has been withheld correctly by the employer (tax due equals tax withheld); 4.The employee’s spouse also complies with all the three conditions stated above; 5. Employer filed to BIR the Annual Information Returns on Income Taxes Withheld (BIR Form 1604-CF); 6.The employer issues each employee BIR Form No (October 2002 ENCS or any later version). Requisites for individuals qualified for substituted filing and must NOT file BIR Form No (RR , as amended ) Note: All of the above requisites must be present. The Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes (BIR Form No CF) filed by their respective employers duly stamped “Received”, shall be tantamount to the substituted filing of income tax returns by said employee s. BIR Form No. 2316, duly certified by both employee and employer, shall serve the same purpose as if a BIR Form No had been filed.

30 Prepared by: Marivic A. Galban Office of the Commissioner Individuals not required to file ITR or those qualified for substituted filing may file ITR  individuals not required to file ITR or  those qualified for substituted filing, may file an ITR for purposes of:  loans,  foreign travel requirements,  Proof of financial capacity for credit card, or other applications etc.  However, if they file an ITR, they should likewise attach a duly accomplished AIR.

31 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 5. Filing of ITR with AIR WHAT TO FILE: ITR (BIR Form Nos or 1701) and/or AIR (BIR Form No ) Number of Copies: Triplicate copies  BIR file copy  BIR encoding copy  TAXPAYER FILE COPY WHERE TO FILE: RDO  where the individual, including estates and trusts, is required to register or  where the individual has his legal residence or  place of business WHEN : on or before the April 15 of each year covering income for the preceding taxable year.

32 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 5. Filing of AIR only under Sec 4. WHAT TO FILE: AIR only (BIR Form No ) Number of Copies: Triplicate copies  BIR file copy  BIR encoding copy  TAXPAYER FILE COPY WHERE TO FILE: RDO  where the individual, including estates and trusts, is required to register or  where the individual has his legal residence or  place of business WHEN : on or before the May 15 of each year covering income for the preceding taxable year.

33 Prepared by: Marivic A. Galban Office of the Commissioner Filing of ITR & AIR or AIR only MANUAL FILING OF ITR and/or AIR  Individuals, including estates and trusts, required to file the AIR and attach the same to the ITR (BIR Form No or 1701) which shall be accomplished and submitted manually in hard copy until such time that electronic filing thereof is available in the Electronic Filing and Payment System (eFPS). eFPS FILING OF ITR and/or AIR  Individuals already availing of the eFPS services, and who have been required under these Regulations to attach an AIR, they shall continue filing electronically their ITR  submit the hard copy of the e-filed return together with the hard copy of the AIR  Submit to the RDO  within 10 days from the filing of their electronic return.

34 Prepared by: Marivic A. Galban Office of the Commissioner OTHER ATTACHMENTS to the ITR, if applicable 1. Annual Information Return (BIR Form No ); 2. Account Information Form/Financial Statements (FS) with Notes to Financial Statements and the Certificate of the independent CPA except for taxpayers who opted for the Optional Standard Deduction. (The CPA Certificate is required if the gross quarterly sales, earnings, receipts or output exceed P 150, ); 3. Statement of Management Responsibility (SMR);

35 Prepared by: Marivic A. Galban Office of the Commissioner OTHER ATTACHMENTS to the ITR, if applicable 4. BIR Form No Certificate of Compensation Payment/Tax Withheld for Compensation with or without Tax Withheld 5. BIR Form No Certificate of Final Tax Withheld 6. BIR Form No Certificate of Income Payments Not Subjected to Withholding Tax 7. BIR Form No Certificate of Creditable Tax Withheld at Source

36 Prepared by: Marivic A. Galban Office of the Commissioner 8. Duly Approved Tax Debit Memo (TDM); 9. Waiver of husband's right to claim additional exemption; 10. Proof of prior years' excess credits; 11. Proof of Foreign Tax Credits; 12. For amended return, proof of tax payment and the return previously filed; 13. Authorization letter, if return is filed by authorized representative; 14. Proof of other payment/s made; 15. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax at Source (SAWT); and 16. Other pertinent documents as may be required by the Commissioner. Note: For income earned starting taxable year OTHER ATTACHMENTS to the ITR, if applicable

37 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 6. Transitory Provisions (Procedure of attaching AIR with ITR)  The procedure of attaching the AIR with the ITR shall cover income earned for taxable year 2010 or until such time that its details are integrated in the enhanced version of the ITR (BIR Form No or 1701).

38 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 7. Repealing Clause  All existing regulations and other issuances or portions thereof which are inconsistent with the provisions of these Regulations are hereby repealed, amended or modified accordingly.

39 Prepared by: Marivic A. Galban Office of the Commissioner SEC. 8. Effectivity  These Regulations shall take effect covering income earned for taxable year 2010.

40 Prepared by: Marivic A. Galban Office of the Commissioner THANK Y OU For inquiries/questions, please contact the nearest: Revenue District Office (RDO) Regional Directors Office Taxpayer Assistance Service BIR Contact Center : (02)


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