CONCEPT OF BUSINESS AND BUSINESS
TAXES
BUSINESS
- trade/commercial activities
- related to trade/profession/business
- within the PH
- not exempt by law
Characteristics of Taxable Business Transactions
1. Regular Transaction
2. Incidental Transaction
3. Non-Profit/Profit Transaction
4. Within the PH
5. Lawful
REGULAR TRANSACTIONS
- Habitual, systematic, continuous, regular
income generating activities
- Commercial activities engaged into by dealers
Sale of Services/Goods by Nonresident Foreign Person
- In course of business w/o regard to the ”rule of
regularity”
INCIDENTAL TRANSACTIONS
- Accompanying transactions
1. Sale of scrap materials
2. Sale of ordinary assets other than inventory
3. Transactions deemed sales
a. Personal consumption of inventory by
seller-taxpayer
b. Profit share of inventory
c. Inventory payment to creditors
d. Consigned goods not sold in 60 days
e. Remaining inventory upon business
retirement
TRANSACTIONS PURSUED BY PROFIT OR NONDPROFIT
ENTITY
- Exempt from income and business tax if it
obtained a Certificate of Tax Exemption (3
years)
- Subject to VAT on the sale of goods or services
TRANSACTIONS CONSUMMATED IN THE PHILIPPINES
The place of sale is presumed to be the place of
consumption.
If outside the PH, either 0% VAT, VAT-exempt, or OPT-
exempt.
Doctrine of Cross Border – no business tax shall be
imposed on products or services destined for
consumption outside the territorial border of taxing
authority
LAWFUL TRANSACTIONS
1. Legally registered - non-registration = illegal
2. Not contrary to law, morals, good customs,
public order or public policy
Non-Business Transactions Subject to Business Taxes
 Importation of goods/services (gen.)
 Sale of shares of stock
 Overseas dispatch, communication originating
from the PH
 Horse race winning
 Jai-alai
Economic Activities not Subject to Tax
 Outside PH – 0% or exempt
 Exempt commercial transactions within
 Subsistence or livelihood activities –
unemployed individuals or unlicensed pro
(<100,000 in 12 mos. Period) a.k.a. Marginal
Income Earners
 Privilege stores – tiangges (<15 days)
 Casual Sales
 Compensation and other benefits from
employment
BUSINESS REGISTRATION
Nonregistration of business is illegal.
Initial registration is in RDO of business. TIN
Annual registration fee of P500 for every separate Sale of house and lot of realtor P3,199,200
establishment must be paid on or before January 31. Sale by nonresident person Any amount
Annual registration renewal not later than Jan. 31.
Optional VAT-Registration
BIR Certificate of Registration (COR) is a basic 1. Not exceeding P1,919,500
requirement (must be seen). 2. VAT persons with mixed transactions who
opted to apply Vat on his VAT exempt
Exempt from Registration Fee 3. Franchise grantees…. Who do not exceed P10M.
1. Individuals earning purely compensation
income Non-VAT Registration
2. Overseas workers Subject to OPT
3. Cooperatives
4. Marginal Income Earners The VAT-Registered Taxpayers
1. Regular VAT
Input VAT – Output VAT = Net VAT Payable
BUSINESS TRANSACTIONS From purchased – from sold
2. 0% VAT
Classifications of Business Transactions No Output Tax
1. Vatable Transactions He can:
2. 0% VAT a. Claim creditable input VAT from other
3. Exempt Transactions output VAT
4. Subject to OPT Transactions b. Carry over excess Input VAT
5. Mixed Transactions c. Claim as VAT refund or convert to Tax
6. Transactions with the Gov’t Unit Credit Certificate the excess

The Non-VAT Registered Taxpayers

BUSINESS TAXES 1. Non-VAT subject to 12% VAT – not exempt on
1. VAT – on gross sales/receipts; P1,919,500 per VAT/OPT
year They are not allowed to:
2. OPT – non-VAT registered; a. Charge/collect 12% VAT from customers
3. Excise Tax b. Deduct input VAT from output VAT
a. Harmful to health 2. VAT-exempt subject to OPT
b. Non-essential goods 3. VAT & OPT exempt
c. Products that deplete natural resources
d. Some imported products VAT Registration Period
1. Original VAT Reg.
Note: VAT and OPT are simultaneous except when a 2. Optional VAT Reg.
Non-VAT registered taxpayer collects VAT. 3. Transitional VAT Reg.
a. Within 10 days (within the year)
b. Within 30 days at end of calendar year
Mandatory VAT-Registration
Cancellation of VAT Registration
When the realized or expected gross receipts/sales > 1. Change of ownership (sole pro)
P1,919,500. 2. Dissolution (part./corp.)
3. Merger/Consolidation (dissolved corp.)
Persons/Transactions Threshold 4. VAT registered but did not start the business
Franchise grantees of radio/tv
P10,000,000
broadcasting co.
Update of Business Registration 2. Boxing 10%
Registration Update Form (BIR Form No. 1905) 3. Cabarets, day or night clubs 18%
1. Person’s business become exempted 4. Cockpits 18%
2. Change in nature of business 5. Professional Basketball 15%
3. A VAT exempt person who registered for VAT, 6. Jai-alai and race tracts 30%
after 3 years applies for cancellation
4. VAT registered < P1,919,500 for 3 years
Non-VAT Person Collecting VAT
A non-VAT person who issues VAT invoice/official
Effectivity of Cancelled VAT Registration receipt shall pay the ff.:
1. OPT applicable
1. 1st day of following month (from approval date) 2. VAT due (sec 106/108) w/o input tax credit
a. Ceased the business (next 12 months) 3. 50% surcharge
b. VAT registered but < P1,919,500 for 3 years

2. VAT cancellable only after “3-year lock-in INVOICES AND RECEIPTS

period” – those who opted for VAT registered
are irrevocable for 3 years.
3. VAT permanently non-cancellable – franchise
grantees of radio/TV broadcasting
General Requirements
Taxpayer shall apply for Authority to Print with the BIR.
Cash reg. machines, cash reg. sales books should be first
reg. with appropriate RDO.

Filing and Payment of VAT Taxpayers with Mixed Business Transactions

Both are filed The greater 50% determines if Vatable or not.
Schedule BIR Form Due Date
20th day after Taxpayers with Mixed Activities
Monthly 2550M
month Issue either single or separate invoices/receipt.
25th day after
Quarterly 2550Q
quarter

Consolidated Report: (monthly and quarterly) should

reflect the consolidated total

Filing and Payment of OPT

Either are filed
Schedule BIR Form Due Date
20th day after
Monthly 2551M
month
th
25 day after
Quarterly 2551Q
quarter

In general, Non-VAT taxpayers are required to file

monthly.

Required quarterly OPT:

1. Overseas dispatch… 10%