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COMPROMISE PENALTY SHOULD NOT FORM PART OF ASSESSMENT NOTICE FOR DEFICIENCY BASIC TAX, SURCHARGE, AND INTEREST BUT SHOULD APPEAR IN A SEPARATE ASSESSMENT NOTICE/DEMAND

COMPROMISE PENALTY SHOULD NOT FORM PART OF ASSESSMENT NOTICE FOR DEFICIENCY BASIC TAX, SURCHARGE, AND INTEREST BUT SHOULD APPEAR IN A SEPARATE ASSESSMENT NOTICE/DEMAND (Revenue Memorandum Circular No. 3-2022, January 14, 2022)

  • Compromise penalties are amounts collected in lieu of criminal prosecution for violation committed by the taxpayer, where payment is based on a compromise agreement validly entered into between the taxpayer and the Commissioner of Internal Revenue.
  • Compromise penalties should not form part of assessment notice for deficiency basic tax, surcharge and interest but should appear in a separate assessment notice/demand as the amount suggested is in lieu of criminal prosecution.
  • Preliminary Assessment Notice (PAN) and Formal Letter of Demand shall now be composed of Part I and Part II, as follows:
    • Part I shall pertain to deficiency basic tax(es) and civil penalties
    • Part II shall pertain to the assessed compromise penalty(ies) relative to the violations uncovered during the conduct of audit.

 

DOCUMENTARY STAMP TAX IS IMPOSED ON THE TRANSFER OF SHARES (A) BY WAY OF DONATION; (B) BY WILL; AND (C) WHEN THERE IS RENUNCIATION/WAIVER OF SHARE OF INHERITANCE (Revenue Memorandum Circular No. 6-2022, January 18, 2022)

 

 Documentary stamp tax is imposed on all sales, agreements to sell,  memoranda of sales, deliveries, or transfer of shores or certificates of stock

  • There shall be collected a documentary stamp tax of one peso and fifty centavos (P1.50) on each Two hundred pesos (P200), or fractional port thereof, of the per value of such stock.
  • DST is levied on the exercise by a person of certain privileges conferred by law for the creation, revision or termination of specific legal relationship through execution of specific instruments.
  • The following transfer of stock shall also be subject to DST:
    • Transfer pursuant to Deed of Donation
    • Transfer pursuant to a Will of the Decedent as approved by the probate court in a Judicial Settlement of the estate
    • Generally, transfer of shares stock from the decedent’s estate to the heirs through intestate succession (without a Will) is not subject to DST. However, in case of Judicial or Extra-Judicial Settlement of Estate (both without a Will), renunciation of an heir of his/her share over the inheritance in favor of another heir shall also be subject to DST.

 

CREATION OF ALPHANUMERIC TAX CODE (ATC) FOR REVENUE SOURCE UNDER REPUBLIC ACT (RA) NO. 9505, OTHERWISE KNOWN AS PERSONAL EQUITY AND RETIREMENT ACCOUNT (PERA) ACT OF 2008 (Revenue Memorandum Order No. 3-2022, January 14, 2022)

 

ATC Description Tax Rate Legal Basis BIR Form No.
WI730 Total income earned from the time of its opening to its withdrawal under the Personal Equity and Retirement Account (PERA) Act of 2008 20% RA No. 9505/ RR No. 6-2021 1601-FQ

 

MODIFICATION OF ALPHANUMERIC TAX CODE (ATC) OF SELECTED REVENUE SOURCE UNDER REPUBLIC ACT (RA) NO. 11534, OTHERWISE KNOWN AS CORPORATE RECOVERY AND TAX INCENTIVES FOR ENTERPRISE (CREATE) ACT (RevenueMemorandum Order No. 4-2022, January 14, 2022)

 

EXISTING (per ATC Handbook) MODIFIED/ NEW
ATC Description Tax Rate BIR Form No.   Legal Basis Tax Rate
IC010 Domestic Corporation, in general July 01, 2020 onwards 30%     25% or 20%
IC030 Proprietary Educational Institutions

July 01, 2020 to June 30, 2023

July 01, 2023 onwards

Proprietary Educational Institutions whose gross income from unrelated trade, business or other activity exceeds fifty percent (50%) of the total gross income from all sources

July 01, 2020 onwards

10%      
        1%

10%

  30%     25% or 20%
    1702Q/

1702-RT/

 

RA No. 11534

RR No. 5-2021

 
    1702-MX    
IC031 Non-Stock, Non-Profit Hospitals July 01, 2020 to June 30, 2023

July 01, 2023 onwards

 

Non-Stock, Non-Profit Hospitals whose gross income from unrelated trade, business or other activity exceeds fifty percent (50%) of the total gross income from all sources

July 01, 2020 onwards

10%      
        1%

10%

  30%      

25% or 20%

IC040 GOCC, Agencies & Instrumentalities July 01, 2020 onwards 30%     25% or 20%

 

 

 

EXISTING (per ATC Handbook)

MODIFIED/ NEW
ATC Description Tax Rate BIR Form No. Legal Basis Tax Rate
IC041 National Government and LGUs July 01, 2020 onwards 30%     25% or20%
IC020 Taxable Partnership

July 01, 2020 onwards

30%     25% or 20%
IC055

 

 

 

Minimum Corporate Income Tax (MCIT)

July 01, 2020 to June 30, 2023

July 01, 2023 onwards

2%      
      1%
      2%
  1702Q/

1702-RT/

1702-MX

RA No. 11534

RR No. 5-2021

 
IC070 Resident Foreign Corporation, In General 30% 25%
IC190

 

 

Offshore Banking Units (OBU’s)

Foreign Currency Transaction not subjected to Final Tax

Other Than Foreign Currency Transaction

       
10%     25%
30%     25%
IC101 Regional Operating Headquarters January 01, 2022 10%     25%
IC191

 

 

Foreign Currency Deposit Units (FCDUs)

Foreign Currency Transaction not subjected to Final Tax

Other Than Foreign Currency Transaction

       
10%     25%
30%     25%

 

BIR RULINGS

  • Income received directly in connection with its sale of approved number of socialized house and lot units for residential and dwelling purposes registered with the Board of Investment for a given period (whichever is later between actual start of commercial operations/selling or January 2021 but in no case earlier than the date of registration of the project) is exempt from income tax and creditable withholding tax (CWT), provided that the selling price of house and lot units does not exceed P2,000,000.00 per house and lot.
    • Moreover, the sale by the company of residential lot valued at P1,919,500.00 and below, or house and lot and other residential dwellings valued at P3,199,200.00 and below, is exempt from value-added tax (VAT), provided, however, that beginning January 01, 2021, the exemption from VAT shall only apply to sale of house and lot and other residential dwellings valued at P3,199,200.00.
    • Sale of house and lot units in excess of the approved number of house and lot units, including those used for commercial purposes, such as leasing, retail stores, offices, etc. shall be subject to the payment of appropriate taxes.(Certificate of Tax Exemption No. BOI-LEH-320-21; BOI-LEH-321-2021; BOI-LEH-322-2021).
  • Income received directly in connection with its sale of socialized house and lot units for residential and dwelling purposes to qualified beneficiaries, is exempt from income tax and creditable withholding tax (CWT), provided that the selling price of said house and lot units does not exceed P580,000.00 per house and lot packages. Moreover, the sale by the company of residential lot valued at P1,919,500.00 and below, or house and lot and other residential dwellings valued at P3,199,200.00 and below, is exempt from value-added tax (VAT), provided, however, that beginning January 01, 2021, the exemption from VAT shall only apply to sale of house and lot and other residential dwellings with selling price of not more than P3,199,200.00.
    • However, that documentary stamp tax (DST) is not of the taxes covered by the tax exemption, the documents conveying the properties shall be subject to DST. (Certificate of Tax Exemption No. PSH-325-2021, August 31, 2021).

 

 

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