Thursday, July 23, 2009

Tax Treatment of Sale of Good and Services from the Custom Territory to Freeport Zone

Query - What is the VAT treatment of sale of goods/services from Custom Territory (outside freeport zone) to Freeport Zone like Subic Freeport Zone (SPZ), Clark Freeport Zone (CFZ), Poro Poro Freeport Zone (PPFZ)?

Answer - If the seller is VAT registered person, the sale is considered zero-rated, if the seller is non VAT taxpayer, the sale is VAT exempt. The Freeport zone cannot claim input VAT on this purchase.

Please see RMC 50-07 for more info

Although the RMC did not mention PEZA, I believe that the RMC also applies to PEZA company.

Magbayad ng wastong buwis. Help Philippines.

Juan Dela Cruz

Wednesday, July 22, 2009

Interest Expense Deduction

Interest expense deduction limitation is very interesting. In Philippine tax, a corporation cannot deduct the entire interest expense if that corporation earned interest income subject to final tax. There is a limitation computation that a taxpayer should follow. This is based on Section 34(B) of the Tax Code as amended. The interest expense amount shall be reduced by 33% of the interest income subject to final tax.

Why do the government made this rule?

The reason is more on preventing the taxpayer to evade tax. To illustrate this please see below:

Assuming that the no interest expense limitation yet and you have the following interest expense and interest income

Interest Expense - P10,000
Interest Income - P10,000

The interest expense can be claimed as deduction at a rate of 30% which P3,000. However, the interest income only subject to P20% final tax which is P2,000. So effectively, the taxpayer gained P1,000 (P3,000-P2,000). The limitation aims to prevent the taxpayer from manipulating the tax law in placed for its own gain.

Related Regulations - Revenue Regulation 13-00.

Magbayad ng wastong buwis. Consider this as your charity to the Philippines.

Juan Dela Cruz

Monday, July 20, 2009

How to get Tax Identification Number from BIR

Its your first job. You are very excited and happy to wear new office barong or your new shoes. When you get to the HR department, the assistant to the assistant manager of HR told you that you cant start just yet. You have to secure your TIN or your Tax Identification Number. So guys this is the step by step instruction in how to secure your TIN.


a) Accomplish BIR Form 1902 (you can download this from BIR Website and submit the same, together with the required attachments to the employer.

b) The employer shall accomplish the applicable sections of the application form.

c) Submit BIR Form 1902 to the RDO having jurisdiction over the place of residence of the applicant or to the RDO having jurisdiction over the business address of the employer.

d) The registrant-employee shall inquire from the TSS of the RDO when the TIN can be issued and received by the applicant.

- New employees shall accomplish and file the application within ten (10) days from the date of commencement of employment

Documentary Requirements
- Birth certificate or any valid identification showing name, address and birth date of the applicant employee
-Certificate of employment or valid Company ID

The above procedure is for those who are earning purely compensation income meaning walang ibang kita kung hindi and sweldo lang.

Visit for more info.

Magbayad ng wastong buwis. Consider this as your charity work to the Philippines.