Basic Guide to Filing Taxes in the Philippines

Is it not amazing that a word as short as “taxes” possess a huge weight on our lives? As Filipino citizens, you have a responsibility to file for your income tax returns to prevent any legal penalties.

 

An income tax is the levy put on the individual’s income and profits arising from practice of profession, trade, business, property, or from other specified items on the National Internal Revenue Code of 1997.

 

The amount of the income tax must include deductions or additional exemptions authorized for such types of income under the law.

 

Authority

  Bureau of Internal Revenue Basic Guide to Filing Taxes in the Philippines  

The Bureau of Internal Revenue (BIR), an agency of Department of Finance, has the power to assess and collect all internal revenue taxes or fees and enforce all penalties or forfeitures connected to it. Since the start of President Noynoy Aquino’s administration, Kim Jacinto-Henares has been the BIR Commissioner.

 

Eligibility

  Eligibility Basic Guide to Filing Taxes in the Philippines  

You are required to file for income tax returns in the Philippines (PH) if you are…

 
  1. a resident Filipino citizen that receives income from sources within or outside the PH,

  2. a non-resident citizen that receives income from sources within the PH,

  3. a Filipino citizen working overseas and receiving income from sources within the PH,

  4. a foreign corporation receiving income from sources within the PH,

  5. an individual receiving compensation income from 2 or more employers,

  6. an employee who opted for non-withholding of tax,

  7. an individual deriving non-professional, non-business related income in addition to compensation income,

  8. a domestic corporation receiving income from sources within and outside PH,

  9. a corporation including general professional partnerships,

  10. a resident Filipino citizen that is married, employed by a single employer, and your income has been correctly withheld but your spouse is not entitled to substituted filing,

  11. and estates and trusts engaged in business or trade.

 

Exemptions

  Exemptions Basic Guide to Filing Taxes in the Philippines  

Let us start with the good news first. An Overseas Filipino Workers’ income is exempted from income tax. Thus, OFWs are not obligated to file income tax returns. The only taxable OFW income are from the sources within the PH.

 

Aside from the OFWs, here are other individuals who are not required to file income tax returns:

 
  1. You are a minimum wage earner.

  2. Your gross income does not exceed your additional and total personal exemptions.

  3. Your income derived from a single employer does not exceed P60,000 and said income has been correctly withheld.

  4. Your income has been subjected to final withholding tax.

  5. You are qualified for substituted filing.

 

Procedures

 
Tax Procedures Basic Guide to Filing Taxes in the Philippines

Image Credit: Shutterstock

 

To file your taxes, you must first accomplish and make three identical copies of the BIR Form that is applicable to you (BIR Form 1700, 1701 or 1702). Attach the documentary requirements of each form accordingly.

 

If there is payment, go to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered. Otherwise, you can go to the Revenue Collection Officer, duly Authorized City, or Municipal Treasurer located within the Revenue District Office where you are registered. You must bring your accomplished BIR Forms and other requirements during payment.

 

Afterwards, you will receive a copy of the duly stamped and validated form from the teller.

 

If there is no payment, go to the Revenue District Office where you are registered or any Tax Filing Center established by the BIR. Bring along your accomplished BIR Forms and other requirements. Similarly, you will receive a copy of the duly stamped and validated form from the representative.

 

Penalties

 
penalties Basic Guide to Filing Taxes in the Philippines

Image Credit: proboxinginsider

 

Tax evasion occurs when a person or a corporation uses illegal means to avoid paying taxes or its whole amount. Tax evaders will be fined with no more than Php100,000 and no less than Php 30,000. They will also suffer imprisonment of 2-4 years.

 

One of the famous cases of Tax evasion in the Philippines is that of Pacman’s. After his US$20 million win over Timothy Bradley in 2014, he faced BIR and United States’ Internal Revenue Service all at once. Pacman claimed that he paid his income taxes for 2008-2009 in the United States and that a two-country treaty protects his wealth from being taxed twice.

 

To avoid being in a sticky situation with the law, visit bir.gov.ph for more information about the penalties, Tax Code, AAB, and BIR forms.

Anna Agoncillo

Anna is a Registered Psychometrician and a graduate of Cardiff Metropolitan University, United Kingdom. Earning a bachelor's degree with honors in Psychological Studies, lead her to a career of writing and teaching. She is also the author of the new book entitled Psychology of Love, Money, & Life.

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