Category

Tax reform

Brand New 2551Q Form (Quarterly Percentage Tax) with 8% Opt In

Brand New 2551Q Form (Quarterly Percentage Tax) with 8% Opt In

By | Tax reform, TRAIN | No Comments

On April 25, on the deadline of filing the Quarterly Percentage Tax Form, the BIR released RMC 26-2018 which has the new 2551Q form and the submission procedures for manual, eBIRForms, and eFPS.

The new 2551Q Form now has a field where you can indicate whether you’re opting in to the 8% Flat Income Tax Rate. Also, SPOILER ALERT: 2551Q is not yet updated on eBIRForms and eFPS.

Related downloads:

So for the procrastinators who put off their tax filing until the very last day of the deadline, congratulations!  😉

For the rest of us, it’s unlikely that the BIR will penalize us for not using the new 2551Q form when we submitted given the timing when they released this RMC. Moving forward, though, we have to make sure we’re filing this new one. The next deadline is on July 2018.

While we’re on the topic, if you missed filing your 2551Q, then you may no longer be eligible for the 8% Flat Income Tax Rate anymore. Basing on RR 08-2018, you had to make sure you filed your 2551Q on time. You can read more about our breakdown of that RR and how to opt in to 8% by visiting this article:

How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts

Having said that, there is a glimmer of hope. We noticed that the RDO’s are implementing things differently. If so, perhaps your RDO doesn’t see missing your 2551Q filing as a reason for ineligibility. To be sure, it would be best to call your RDO.

We here at Taxumo are constantly updating ourselves with the latest forms and procedures so you don’t have to! Sign up to Taxumo now to start focusing on your passion instead of worrying about your taxes!

 

Withholding Tax Table 2018 for Freelancers / Professionals OR How much should my client withhold?

Withholding Tax Table 2018 for Freelancers / Professionals OR How much should my client withhold?

By | Tax reform, Thoughtpieces, TRAIN | No Comments

What is this “withheld” amount? Why did my client not pay the full amount? What is this 2307? Is this the “ITR”? When you get your check from your client and, specially, if this is the first you’re getting paid, you probably have these questions in mind. So let us help you understand how withheld taxes work in the PH context. In this article, we’ll share the updated withholding tax table 2018 specifically for Freelancers and Professionals (not employees).

Read on to find out more about withheld taxes…

changing-TRAIN-8-income-tax-rate-gross-sales-receipts

How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts

By | How To, Tax reform, TRAIN | 35 Comments

Income Tax for 2018 in the Philippines has been an interesting space lately because of the TRAIN Law (aka R.A. 10963). For self-employed individuals, it has been of particular interest because they now have an option to avail of a simpler 8% Income Tax Rate Option.

The BIR released Revenue Regulation 8-2018 which details how the income tax changes as per TRAIN will be applied. It answers a LOT of questions but it still leaves a few unanswered.

Find out how to opt in here

Tax Reform TRAIN Changing from VAT to Non-VAT

Tax Reform: How to Change from VAT to Non-VAT

By | Tax reform, TRAIN | 55 Comments

The Tax Reform for Acceleration and Inclusion, more popularly known as TRAIN, has amended the tax code to increase the VAT Threshold from P1.919 Million to P3.0 Million. If you are a registered VAT taxpayer earning less than P3.0 Million, you may now opt to be non-vat instead. This is great for services and high margin businesses as this will most likely result in tax savings.

Find out how to change your tax type to Non-VAT here…

A Primer on the TRAIN Tax Reform Law

TRAIN Law Primer or So what do I file now?

By | Tax reform, TRAIN | 146 Comments

The Income Tax Reform Law (Tax Reform for Acceleration and Inclusion of TRAIN) (RA No. 10963 + veto message) changes a lot of things for the DIY taxpayer. Aside from the forms themselves, the tax reform law also changes the frequency, the processes, and the formula & tax tables that we’ve all gotten used to. As a freelancer, professional, or self-employed individual, this can be a confusing change. This article aims to make the tax TRAIN easier to understand.

Read more about the biggest changes from TRAIN…

Pay Taxes online and cut back on forms and lines with Taxumo

TRAIN’s New 8% Tax – Does it really save you money?

By | Tax reform, Tax Rules, Tax Savings | 52 Comments

The Tax Reform for Acceleration and Inclusion (more popularly known as TRAIN, less popularly known as RA No. 10963) has been signed.  This has opened up more options for Individuals, SME’s, Professionals, and Freelancers when it comes to paying taxes.

TRAIN’s New Tax Option

In particular, TRAIN gives us a new 8% Gross Receipt Tax that you can choose to file instead of filing the Percentage & Income Taxes. This is an intriguing choice as it definitely makes computing easier. Just multiply your total income (above 250K) by 8%! Then I asked myself, yes it’s easy but is it cheaper? Will I get out ahead if I just opt to pay 8%?

Read on to see if the new 8% Tax will save you money…

High local business taxes in the Philippines

What Can We Do with High Local Taxes in the Philippines?

By | Tax reform, Tax Savings | No Comments

High local business taxes in the Philippines

The proposed income tax reforms have been hogging the headlines lately. Based on the latest draft at end of February 2017, an annual basic salary of P250,000 that used to be taxed as high as P37,500, will now be ZERO (not a typo). Everyone can’t wait for this to happen. It’s about time to experience a tax REDUCTION for a change.

But while national taxes (e.g. income taxes) are getting all the media attention, there is set of taxes that are under the radar, and have risen significantly in recent years. I’m referring to city/municipal or “local” taxes.

Read More

Duterte's Solution to Philippine Debt Despite Lower Income Taxes

With Lower Income Taxes, How Will Duterte Deal with the Philippines’ Huge National Debt?

By | Economy, Tax reform, Tax Rules | No Comments
Duterte's Solution to Philippine Debt Despite Lower Income Taxes

President Duterte’s photo taken from DuterteNews.com

The Duterte administration is aware of the potential risk of lowering Philippine income taxes. This is how he might manage the Philippines’ tremendous national debt—in the face of rising interest rates.

Ever wondered how much is the Philippines’ total debt?

Can you guess without Googling it? No?

Read More

Lower tax rates for the Philippines

How can we get lower taxes in the Philippines?

By | Tax reform, Tax Rules | No Comments
Lower tax rates for the Philippines

Lowering taxes for Filipino businesses is possible, but it will take a lot of compromise

Lowering taxes in the Philippines is possible, but it will take a lot of compromise for us to move things forward.

HOW CAN IT BE DONE?

There’s been several proposals of late aiming to lower the tax rates for the Philippines’ middle class. These include, among others, lessening the individual income tax rates, exemptions for start-ups, and one-time exemptions from the estate tax.  People are certainly having their fingers (and toes?) crossed as taxes here are universally acknowledged to be quite high.

Lowering the rates like tax exemption on all income below P240,000 (based on current proposal) would be a godsend.  Small businesses, meanwhile, need all the support to compete with the big boys, and a tax holiday can be that booster shot. And increasing the threshold for estate taxes would surely help certain families avoid having to borrow or worse be forced sell their ancestral home, just to pay the estate tax bill.  But as you lower income taxes on one end, the government needs to be certain that the total tax receipts will not decline significantly AND abruptly, that it negatively impacts delivery of basic social services. And this need to find immediate alternative sources to go along is where things get complicated.

IS TAX REFORM THE ANSWER?

The proposed tax reform package include revenue “raising” measures to offset the income tax reduction for the middle class. Like introducing a higher 35% (yes 35%) rate for any income exceeding P1,450,000 in the year 2018, elimination of VAT exemptions for seniors and PWDs, and raising VAT on petroleum products.  As expected, there is now considerable pushback to the notion of increasing VAT as this would hurt the poor. Because they’re more likely to save less and spend a greater portion of their income on consumption (and VAT).  So here we are now, stuck yet again. Some are now wondering if the promise of lower taxes is just that, an empty promise.

Many members of Congress (including some allied with the administration) are against raising the VAT, with some suggesting we should just tax the rich further. But think about this for a moment. The 2016 Forbes billionaires list has eleven Filipinos with a total wealth of $42.75 billion or approximately P2 trillion, and all that wealth, all of it, is not even enough to finance our government’s 2017 budget of P3.3 trillion. Suppose we seize all their wealth, what’s next and who’s next after we’ve spent all of it? Do we then target the next eleven richest families?

EFFICIENCY OF TAX COLLECTION

The obvious answer is we go after tax evaders.  But it would be foolish to expect President Duterte (or any administration) to be able to eradicate tax evasion within months or years.  With the millions of self-employed individuals and businesses, it may even take a generation to change this culture that one can get away without paying taxes.  We may have to consider introducing a fair tax amnesty plan to encourage people out of the shadows.  But this can’t be free pass and must go along with very tough penalties for dodging taxes going forward. Plus, a law that will prevent succeeding administrations from granting further tax amnesties as such would defeat the purpose.

Various self-proclaimed tax experts have a laundry list of suggestions, but one item that is absolutely necessary, however unpopular, is the need to expand the tax base. Expanding the tax base will likely include removing certain tax exemptions, and will impact certain industries and lower-income households.  But taxing the rich alone simply is not enough. The math doesn’t work at all.

So how do we get things done? How can we reduce taxes without putting a big hole in our government’s budget, a budget that for many is still not enough to address our country’s infrastructure needs and increasing welfare costs?  There’s only so much taxes the rich or anyone can stomach. No one would wish our business people to choose to invest elsewhere.

ROLE OF THE CURRENT ADMINISTRATION

Hopefully, the Duterte administration with its current favorable trust ratings can effectively explain to the public why expanding the tax base now, i.e. increases to VAT (but maybe a bit less than what is currently proposed) is the right long-term solution.

On the other hand, maybe they would have to scale down the proposed income tax cuts. I’m sure everyone would be happy with a lower income tax cut, rather than us being stuck and nothing happening.

This is no easy task.  Every sector and every business group wants a bigger slice of the “tax-cut” pie. Virtually no one wants a tax increase if it affects them.  We need to compromise for us to move things forward. We need this to finally implement sensible reforms that will finally grant much needed tax relief to our middle class in a manner that:

  • does not take away funding for our infrastructure backlog;
  • through tax cuts that are sustainable;
  • and will not impact our country’s fiscal health and credit rating.

Our country has gone from the “sick man of Asia” to one of the world’s fastest growing economies. We can surely make this work by coming together.

Yes we can!