What do you need to know about filing BIR Form No. 2551Q or Quarterly Percentage Tax?
Taxation in the Philippines has undergone major transformations and new laws were implemented at the beginning of the fiscal year 2018. For those that use an online tax calculator in the Philippines, don’t be too alarmed. We’re sure companies will learn to adapt and change their algorithm appropriately.
That said, even if you do use online tax calculators or don’t handle your own taxes, you still have to remain informed. The TRAIN law changed a lot of things regarding tax computations and filing. One change in particular and the one we’ll be discussing today is the revised BIR Form No. 2551Q or the quarterly percentage tax return.
The BIR released this form last April 25, 2018 – the last day of filing quarterly percentage tax returns – and many were left confused. If you’re a freelancer or sole proprietor, then we can definitely help you out. Below is a simplified yet comprehensive version for freelancers and sole proprietors which simplifies the guidelines and instructions that the BIR released.
Hopefully, this helps you understand everything about BIR Form No. 2551Q. Read on!
What Is BIR Form 2551Q?
BIR Form 2551Q, also known as the Quarterly Percentage Tax return, is a business tax imposed on your business’s gross receipts or sales for an entire quarter. This form is usually filed by individuals or businesses which have not opted for the 8% Income Tax Rate or are classified as Non-VAT taxpayers whose gross annual sales do not exceed ₱3 million.
Who Can File Percentage Tax?
If you haven’t opted for the 8% Income Tax Rate, then your COR (Certificate of Registration) should indicate that you are required to file for percentage tax.
BIR Form No. 2551Q should be filed by:
- Non-VAT taxpayers with gross annual revenues not exceeding P3M ( most freelancers and sole proprietors who are just starting out fall under this category).
- Domestic and international carriers except those who use bancas and animal-drawn vehicles
- Franchisees of either of the following: gas or water utilities; radio and/or TV broadcasting companies whose gross annual revenues do not exceed P10M; services that send overseas dispatch, messages, or conversations from the Philippines
- Proprietors, lessees, or operators of cockpits, cabarets, racetracks, night or day clubs, professional basketball games, etc.
- Banks, non-bank financial intermediaries, and finance companies
- Life insurance companies and agents of foreign insurance companies
Difference between 2551Q and 1701Q
The main difference between Form 2551Q and 1701Q is that 2551Q is for filing percentage tax and 1701Q is for income tax.
Depending on your situation you may have to file both if you’ve opted into the Graduated Income Tax Rate. But, if you’ve chosen the 8% income tax rate, then you will no longer have to file Form 2551Q .
Value-Added Tax (VAT) vs Percentage Tax
While both Value-Added Tax (VAT) and Percentage Tax are business taxes imposed on the sale of goods and services, there are differences on who should file these taxes.
VAT is usually filed by businesses whose annual gross revenues exceed ₱3 million annually. Percentage tax, on the other hand, is filed when businesses have less than ₱3 million in annual gross sales.
So, if your sales for the year haven’t reached ₱3 million yet, then you’re most likely filing Percentage Tax.
But to be 100% sure whether you need to file VAT or Percentage Tax, just check your Certificate of Registration from the BIR.
Another difference is in the rate and computations. The rate of VAT in the Philippines is 12%. And, to calculate how much you need to remit to the BIR, you deduct the input VAT (VAT from your sales) from output VAT (VAT from your business expenses).
Percentage Tax is much simpler. You simply multiply the Percentage Tax rate against your gross sales and that amount is your tax dues payable to the BIR.
CREATE Law and Percentage Tax
What is the CREATE Law?
The CREATE or Comprehensive Recovery and Tax Incentives for Enterprises is a law that seeks to assist businesses as a response to the pandemic with retroactive provisions and lower tax rates.
How can I take advantage of the CREATE Law with my Percentage Tax filing?
One of the taxes that benefit from CREATE is the Percentage Tax which is submitted through Form 2551Q. From the usual 3% tax rate, taxpayers can now use the new 1% rate for their taxes. This tax rate is also retroactive meaning this can be applied to your previously filed taxes from July 2020.
However, this tax rate is only effective until June 30, 2023. After which, the percentage tax will default back again to 3%.
How to Calculate Quarterly Percentage Tax?
Your quarterly percentage tax is calculated by multiplying 1% to your quarterly gross sales or receipts. By “Gross Receipts” or “Gross Receipts”, this would mean all the earnings or revenues you have actually received from your client/business.
Here’s how the formula would look like:
Quarterly Percentage Tax Due = Gross Receipts x 1%
Sample computation of Percentage Tax Due and Payable
Let’s say you’re running a consultancy business, earning less than 3M annually, and receive a quarterly income of P180,000. In that case, if you’ve opted for the quarterly percentage tax option (as reflected in your COR), then the calculation would be something like this:
Percentage Tax Due = ₱180,000 x 1% Percentage Tax Due = ₱1,800
Hence, P1,800 would be your total quarterly percentage tax payable.
How to Compute Excess Percentage Tax
We’ve mentioned earlier that the new 1% tax rate is retroactive and can be applied to your 2020 Q3 and Q4 filings. This means that the excess amounts you’ve paid to the BIR can be used as tax credits to pay for your future percentage tax payments.
To compute, check your 2551Q filings for 2020 Q3 (due on October 2020) and 2020 Q4 (due on January 2021). Refer to the latest amendment if you’ve made amendments.
Look for the values tagged against the Alphanumeric Tax Code PT010 on Page 2 of the form.
Multiply the amounts tagged as PT010 in your forms and multiply it by 1%. This is the amount you should have paid as per the retroactive rules of CREATE.
After this, deduct this amount (1%) from the Total Tax Dues tagged against PT010 in your forms.
Say for example you have a total of ₱100,000 as your amounts tagged as PT010 in your Q3 and Q4 filings. This is how you’ll calculate how much you should have paid as per the CREATE Law.
Excess Percentage Tax = 3% Amount - 1% Amount Excess Percentage Tax = ₱3,000 - ₱1,000 Excess Percentage Tax - ₱2,000
This means that you have ₱2,000 you can use as credits to pay for your future 2551Q payments.
When and Where Can You File?
You can file your BIR Form No. 2551Q with any Authorized Agent Banks (AAB) of the Revenue District Office (RDO) where you are registered or are conducting business. In case there are no AABs, then this form shall be filed with the Revenue Collection Officer (RCO) of your RDO.
If you’re the owner of a franchise, you can file a separate return for your head office and for each branch or you can file a consolidated return for the head office and included branches.
Note, that this is how you do it if you opt to do it the manual way. If you prefer to do it online, check out this local app that simplifies the whole filing process.
The Deadlines for Filing Form 2551Q in 2021
|1st Quarter: January to March||On or before April 25|
|2nd Quarter: April to June||On or before July 25|
|3rd Quarter: July to September||On or before October 25|
|4th Quarter: October to December||On or before January 25|
How Can Payment Be Made?
Payment can be made manually or electronically. If you’re opting for manual payment, you can do what was mentioned above. Head to the AAB located in your area that is within the jurisdiction of the RDO or file your return with the RCO.
Online payment, on the other hand, can be accomplished using GCash Mobile Payment, Landbank’s Linkbiz Portal or DBP’s Tax Online. Note that you would still have to manually calculate your corresponding tax dues, as these channels require you to already enter said tax due amount.
If you prefer to skip the manual calculations, you can try out Taxumo, a local web-based tax app, that auto-calculates your tax dues, auto-fills your tax forms, and lets you file online with just a click of a button.
What Penalties Will Be Imposed Upon Failure of Filing?
The taxpayer will incur interest of 25% plus surcharge plus compromise fee in cases where he/she:
- Failed to file and pay their quarterly percentage tax return on or before the deadline
- Filed a return with the wrong person or officer
- Failed to pay the full or part of the amount of tax due; or
- Failed to pay the deficiency tax
The taxpayer will incur a surcharge of 25% plus surcharge plus compromise fee in cases where he/she:
- Willfully neglected to file the quarterly percentage tax within the prescribed period; or
- Willfully made a false and fraudulent return
CREATE Law-ready Filing on Taxumo
The great thing is that whether you’re a new or existing Taxumo user, the 1% tax rate change has been applied to our 2551Q forms and your tax dues will be computed based on this new tax rate.
We’ve also fixed this to be the default now so even new Taxumo subscribers can utilize the 1% rate with our 2551Q forms. There’s no need to worry about re-calculating stuff to take advantage of this!
Even better, though, is if you filed your Quarterly Percentage Tax forms for 2020 Q3 and Q4 in Taxumo, Taxumo will compute the excess you paid and then use those as credits starting 2021 Q1. To do that, simply file your Quarterly Percentage Tax form (2551Q) for 2021 Q2, due this coming July 23, and Taxumo will automatically compute it for you.
Pretty neat, right? Our aim has always been to make tax filing easier for Filipinos, which is why we make sure that we are always updated with BIR’s changes (such as this) so you can maximize the service that we give you.
To take advantage of this new rate, head on over to your Taxumo account and file your 2551Q on or before July 23, 2021 11:59PM (PHT). If you don’t have a Taxumo account yet, now’s a good time to sign-up and subscribe for a hassle-free tax filing experience!
Watch our webinar below to see how you can easily file your BIR Form 2551Q on Taxumo!
Outside of the math and computations, that’s practically everything you need to know about BIR Form No. 2551Q. Whether or not you use an online tax calculator in the Philippines, it is important that you are aware of the changes made in how we file our taxes.
The BIR has yet to iron out other processes, so more changes are sure to come over the year. If you don’t stay on top of things, then you might find yourself struggling with the transition. And always remember that one misstep can land you in a lot of trouble, so stay informed and updated!
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