What if we tell you can pay a lower tax or NO TAX (as in ZERO) at all, would you believe us?

No this is no scam and it is perfectly legal it is through a scheme called TAX AVOIDANCE.

What is tax avoidance and Why is it legal?

Tax avoidance is the use by the taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income in order to avoid or reduce tax liability.

CIR vs. Estate of Benigno Toda, G.R. 147188, Sept. 14, 2004

So basically in tax avoidance you are just using the law or the Tax Code (to be exact) to your advantage making it perfectly legal. In short it is just like a HACK a TAX HACK if you may.

Seems odd right? But it is true, you just need to know how tax works but of course it seems easier said than done.

How is it different from Tax Evasion?

Tax evasion is a scheme used outside of those lawful means and when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities.

CIR vs. Estate of Benigno Toda, G.R. 147188, Sept. 14, 2004

Many businesses resort to the following illegal ways of reducing taxes:

1. Under declaration of sales
2. Not issuing the receipts.
3. Over declaration of expenses.
4. Non -filing of tax returns
5. And many more

All of which you can be criminally liable of the tax code under Sec. 254 of the Tax Code which states:

Any person who willfully attempts in any manner to evade or defeat any tax imposed under this Code or the payment thereof shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a fine not less than Five hundred thousand pesos (P500,000) but not more than Ten million pesos (P10,000,000) and suffer imprisonment of not less than six (6) years but not more than Ten (10) years: Provided, That the conviction or acquittal obtained under this Section shall not be a bar to the filing of a civil suit for the collection of taxes.

Section 254 of National Internal Revenue Code (as amended)

So how do you avoid or minimize paying taxes legally?

We listed down below a few ways to help you lower down your tax payments :

1. Business or Legal Structure of your Business

Choosing whether to register as Sole Prop or establish a corporation (One Person/ Less than 5 incorporators or Regular 5 incorporators) will have a large impact on your tax savings.

Here is a quick snapshot on how individuals and corporations are taxed on their INCOME (INCOME TAX) differently:

Individual (DTI Registered)	Corporations (SEC Registered)
Net Income BELOW Php 250,000 is EXEMPT	Net income is taxed regardless of amount
Tax rate for net income ABOVE Php 250,000 is taxed at 20% -35%	Corporate income tax rate is a flat tax rate which could be either at 25% or 20%
Individuals availing of the 40% Optional Standard Deduction are not allowed to deduct Cost of Sales or Cost of Services	Corporations availing of the 40% Optional Standard Deduction are allowed to deduct Cost of Sales or Cost of Services

To know more about business structure you may watch this video:

2. Maximize your ALLOWABLE DEDUCTIONS (expense accounts)

As much as possible you must maximize your expense in order to lower your net income and thereby lowering your income tax payments.

You may either choose between Itemized Deductions or Optional Standard Deduction.

If you want which will be better for you can watch this video on the advantages and disadvantages of the two.

3. Tax Incentive Devices

The government has provided entrepreneurs both sole proprietors or corporation equal opportunities to claim tax saving devices which will let you avoid paying taxes just like your Barangay Microbusiness Entity (BMBE) incentive.

It is a tax incentive given to all qualified entities which will let registered entities be exempt from paying INCOME TAXES for TWO YEARS and can be renewed for another TWO YEARS.

Learn more about BMBEs like the qualification and how to avail it by reading it here: BMBE Demystified

By being a BMBE registered entity you will not be hesitant in declaring your true sales since you will not worry about paying a large INCOME TAX (note: you will still need to pay percentage tax or value added tax , whichever will apply to you).

A true and high declaration of sales will help you when taking out a loan either for personal (like car and housing loans) or business (business loans) use.

Final Words

A penny saved is a penny earned

Benjamin Franklin

Consequently, whatever we save from paying taxes is penny earned that can be used to recapitalize and grow our business or invest in a new one so you can build your own empire (eventually 🙂 )

One final thing, you can only take advantage of the above ways ONLY IF you do what we call TAX PLANNING. That is planning your steps knowing that whatever decision you make has a tax implication. So what we are saying do TAX PLANNING or if you don’t know how consult a tax accountant or tax lawyer to help you.

Want to know more ways on how to save on taxes and stay rich using TAX and ACCOUNTING? Come join our seminar entitiled:

” GROW RICH, STAY RICH using TAX and ACCOUNTING”

When: June 19, 2021 (Saturday) 2PM-4PM

Register Here: https://forms.gle/EGGSzoykZ33nwpm99

Early Bird Rate Php 1,000 -until June 5,2021

Regular Rate – Php 3,000

Entrepreneur Help Group Member – Pay only 1,000 (even after June 5,2021)

Not yet a Entrepreneur Help Group Member , JOIN HERE:

https://www.facebook.com/groups/1093713714415595

Remember to answer the questions to be admitted.

Are you a newly registered business/professional/freelancer with the BIR? Were you surprised that you now have to file your own taxes. Didn’t know what taxes needs to be filed, when and how it to file and pay them?

Well don’t worry, we have your back. Here’s a list of videos that could help you understand your tax obligations.

Income Tax

8% Tax Rate

Withholding Tax on Compensation and Expanded Withholding Tax

Business Taxes

One of the frequently asked question that we get is this:

Pwede po ba silipin ni BIR yung bank accounts namin?

(Can the BIR look into our bank accounts?)

-Anonymous Unregistered Business Owner (but will register later on…)

The answer to that is a big resounding

Yes! But on certain instances only.

Let us get into the details.

Power of the Commissioner

Section 6(F) of the National Internal Revenue Code (NIRC/Tax Code), gives the Commissioner the “Authority of the Commissioner to Inquire into Bank Deposit Accounts and Other Related information held by Financial Institutions.“

Summarily stated the Commissioner is ONLY allowed to inquire into bank deposit:

-A decedent to determine his gross estate

(because when you die you need to pay estate taxes, well generally)

-Any taxpayer who has filed an application for compromise of his tax liability under Section 204(A)(2) of this Code by reason of financial incapacity to pay his tax liability.

(to sufficiently prove you are not able to pay the your tax liabilities)

-A specific taxpayer or taxpayers subject of a request for the supply of tax information from a foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of: Provided, That the information obtained from the banks and other financial institutions may be used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes.

(since the BIR is obliged to cooperate with foreign tax authority of other signatory countries)

So if you are not yet dead, you are still financially capable of paying taxes, or if you don’t have any foreign tax agencies watching then you are:

SAFE!

Why is this so? Because of :

Bank Secrecy Law

As stated in Republic Act 1405 or Bank Secrecy Law(Sec. 2), that:

All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and MAY NOT be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

So thank you to Bank Secrecy Law we are totally safe!

Case study

This was tested in a recent 2019 Court of Tax of Appeals case in People v. Spouses Jacinto and Erlinda Ligot (Sps. Ligot) where the BIR thru the Anti – Money Laundering Council (AMLC) was able to look into the deposits of Sps Ligot. They saw that the Sps. Ligot had 12M deposits and was able to make amortizations to properties however have not reported the same amount or any amount income in the income tax return.

Banking on the evidence gathered from the AMLC, the BIR filed a criminal case against the Sps. Ligot.

However, the CTA Third Division decided in favor and ACQUITED the Spouses Ligot since the court did not admit the evidence gathered especially from the bank deposits as it was not within the exception given by the Bank Secrecy Law and not within the Powers of the Commissioner (enumerated above).

Personally, we were also able to use this kind of defense when one of our clients was subpoenaed and a copy of the bank statements was one of the requested documents. Using the Bank Secrecy Law and the Sps. Ligot Case, we were able to argue our side why we are not required to present such documents and eventually the BIR officer did not insist on it anymore 😉

So that settles it!

The BIR cannot inquire or look into your bank accounts unless and until you fall into these exceptions:

• You waived or permitted the BIR to look into your account
• You are already dead
• You are asking for a compromise on your the tax liabilities because financial incapability
• A foreign tax authority is asking for it

Resources:

Section 6 (F) of the National Internal Revenue Code

Republic Act 1405 – Bank Secrecy Law

People vs. Sps. Ligot (CTA Crim Case O-241)

No part of this article should be taken as an advice and does not form any attorney – client privilege.

After soul searching, listing down pros and cons you have decided and took action to register your business with the Department of Trade and Industry (DTI) – if you are a sole proprietor, or with the Securities and Exchange Commission (SEC) if you established a partnership/corporation, then after registered it the Bureau of Internal Revenues (BIR) and with the City Hall having jurisdiction over your business.

So you happily look at your permits thinking that you are now a responsible entrepreneur. Good for you!

However, soon after you are now informed that you have to be tax compliant. But does what does being tax compliant mean?

Let us help you in figuring out how to be tax compliant so that you could avoid paying hefty penalties thru this blog series.

BIR Compliance

This unfortunately, is one of the biggest source of penalties hurting the pockets of many entrepreneurs especially the start ups. Most of the time the reason for this, is they are not informed that there are obligations after registration from the simplest up to the more complex filings.

Here is a quick list to give you an overview what are the things that needs to be done to avoid those BIR penalties:

1. Posting of BIR Documents.
2. Submission and Payment (if applicable) of Tax Returns
3. Submission of Required Attachments
4. Issuing of BIR accredited Receipts / Invoices
5. Keeping of Books of Accounts

Let us discuss them one by one.

Posting of BIR Documents

Once you have registered your business you will need to conspicuously display these documents -all in originals (Ito yung madalas na naka frame sa mga business establishments):

1. Certificate of Registration (BIR Form 2303)

Persons whose business and/or profession has been registered with the BIR will be issued a BIR Form 2303 or commonly called a Certificate of Registration -COR (which can be it orange or blue in color) . This is a proof that your business/profession is registered with the BIR (so kapag may humingi ng proof of registration mo with BIR eto yung papakita nyo tulad ng banks, clients/customers, suppliers, etc.)

2. Payment form BIR Form 0605 and Proof of Payment of Annual Registration Fee

This is the form (BIR Form 0605) you use to pay the Annual Registration Fee with the BIR which is Php 500.00. Reminder, this will be filed and paid on or before January 31 of every year. This should be posted together with the proof of payment. So every year you have to take out the old payment form and replace with the new.

3. Notice to the Public to Issue Receipt/Invoice

So you might of have heard or seen the ASK FOR RECEIPT cardboard usually displayed in establishment. Well by virtue of Revenue Regulation (RR) 10 -2019, it had a make over instead of obligating the buyers to Ask For Receipt it is now a NOTICE TO THE PUBLIC” that it is the OBLIGATION of every seller to issue out a BIR Accredited Receipt for every transaction whose amount is Php 100 and above(as per TRAIN LAW).

How will the BIR check your compliance?

Every now and then the BIR officers steps out of their offices and into the field armed with Mission Orders given by their respective Regional Director(RD) and conducts Tax Compliance Verification Drives aka Tax Mapping by virtue of Revenue Memorandum Order (RMO) 9-2006 as amended.

In this activity the BIR officers shall check the compliance of each establishment within their respective jurisdiction. This includes checking if the establishment is registered with the BIR and will also check its compliance one of which is posting the above mentioned BIR documents.

What will be the consequence/s for failure to display these documents?

First, the requirement is to conspicuously DISPLAY… by definition conspicuous means OBVIOUS to the eye (according to https://www.merriam-webster.com). This has to be given emphasis since most (if not all) BIR officers will not consider just mere presentation of these documents . There are too many times that the BIR did not consider just showing the documents which were kept in a drawer or clear book or was displayed however not in a conspicuous manner.

Also be reminded that what needs to be displayed is the ORIGINAL of all the above mentioned documents.

Now let us go to the consequence. Annex A of RMO 7-2015 has provided the list of penalties for each non compliance which is shown below:

Three thousand may not sound much to someone six digits , but it is pretty hefty price to pay if you are just starting up.

Filing and Payment of Tax Returns

So registration is just one part, filing and payment of taxes is another thing.

Once you are registered with the BIR you are now mandated to file and pay (if applicable) corresponding taxes which are reflected in your Certificate of Registration (COR) or any other transaction that has a corresponding tax.

Failure to file and pay can mean, but of course penalties which may include:

• 25% /50% surcharge on Basic Tax Due
• Interest on late Payments (today @ 12% p.a.)
• Compromise Penalties as per RMO 7-2015

For guidance on how to file and pay your taxes you can read our previous article : Taxes, How Do I File (and Pay) Thee? -RMC 4-2021

These are the two basic obligations that every BIR registered business needs to know and comply. Watch out for Part 2 of this blog for the rest of the compliance requirements.

Wania and Partners, CPA provides tax compliance services where we assist business owners in their tax filing and other compliance requirements. Contact us to know more.

Congratulations! You registered your business with the BIR ! But then moments after you get your Certificate of Registration (BIR Form 2303) , you are then filed with confusion as you are now informed that you are now REQUIRED (yes, IT IS A MUST) to file and if applicable pay your taxes.

So how? Well, let us help you on what, how and when to pay taxes.

First, what taxes do you need to file and pay?

So before you get sleepless nights on figuring out on how to file, it is first important to know what kind of taxes do you need file (and pay, if applicable).

To know that, you just have to check your Certificate of Registration/COR (BIR Form 2303, the orange-y or sometimes bluish cardboard paper ) issued to you as proof you are indeed a registered business/entity with the BIR.

So once you have the COR in your hand look for the tax types indicated in your COR (as seen in the photos below)

So in our case we are required to file (and pay if applicable) the following taxes:

• Income Tax
• Value Added Tax
• Withholding Tax
• Registration Fee
• Withholding Tax -Expanded
• Withholding Tax – Compensation

(Will go through the details of each tax type in a separate blog)

FAQ:

Q: Do I still need to file the tax returns stated in the COR even if it will end up to zero (or sometimes negative) amount ?

A: YES!!!

Q: What happens if I forget to file the tax returns?

A: PENALTIES and INTEREST!

Now that you know what taxes to file and how important to file them, we now go to the second question.

When do you need to file your tax returns?

So you may check the lower part of your COR (if its the orange COR was issued to you) or the first page if it is the blue COR (see photos below):

Aside from the deadline the COR will also guide you on what form to use for each tax type.

Now the ultimate question.

How can you file and pay your tax returns?

The BIR has recently issued Revenue Memorandum Circular (RMC 4-2021) giving guidance to all taxpayers and concerned individuals on how to file and pay taxes.

The BIR enumerated two methods in filing you returns which are:

1. Manually
2. Electronically

1. Manually

You have to manually fill up and sign the return and pay either thru an Authorized Agent Bank (AAB) or the Revenue Collections Officer (RCO)

Who may file manually?

Taxpayers who are not required or did not opt to file electronically.

How to pay your taxes?

The payment if manually filed will be thru

1.An Authorized Agent Bank (AAB)under the jurisdiction of the concerned Revenue District Office (RDO) where the taxpayer is registered.

Reminder you can’t just pay in any bank that is nearest to you. It must be one a bank duly authorized by the RDO where your business is located. For the list of AAB’s per RDO check it here (https://www.bir.gov.ph/index.php/list-of-authorized-agent-banks.html)

2. Thru the Revenue Collection Officer (RCO) under the RDO where the taxpayer is registered through the Mobile Revenue Collection Officer System (MRCOS) in areas where there are no AABs. However, you may only pay a maximum amount of Php 20,000 per tax type if paid thru cash. If payment is thru check there is no limit as to payment.

However, in the same RMC , the BIR encourages the taxpayers to file their tax returns electronically.

2. Electronically

Electronical filing is done by submitting the tax returns online thru either:

1. eBIR Forms
   • You just need to download and install the latest version of the eBIRforms (version 7.7 -as of writing) in the BIR website (https://www.bir.gov.ph/) -see photo below

Who may file thru eBIRForms?

Any taxpayer can VOLUNTARILY choose to file thru eBIRForms. There are however certain taxpayers who are REQUIRED to file using eBIRForms these are:

• Top Withholding Agents
• Accredited Tax Agents/Practitioners and all its client-taxpayers
• Accredited Printers of Principal and Supplemental Receipts/Invoices
• One-Time Transaction (ONETT) taxpayers who are classified as real estate dealers/developers; those who are considered as habitually engaged in the sale of real property who are using/filing BIR Form No. 1606 together with the BIR Form No. 2000OT and regular taxpayers already covered by eBIRForms.
• Those who shall file a “No Payment Return” –
• Government-Owned-or-Controlled Corporations (GOCCs)
• Local Government Units (LGUs), except barangays
• Cooperatives registered with National Electrification Administration (NEA) and Local Water Utilities Administration (LWUA)

How do you pay your taxes if filed thru eBIRForms?

1. Authorized Agents Banks (AABs) under the jurisdiction of the concerned Revenue District Office (RDO) where the taxpayer is registered.
2. Revenue Collection Officers (RCOs) under the RDO where the taxpayer is registered through the Mobile Revenue Collection Officer System (MRCOS) in areas where there are no AABs.
3. Electronic Paynent:

• Development Bank of the Philippines’ (DBp) pay Tax online (for holders of Visa/Mastercard Credit Card and/or BancNet ATM/Debit Card)
• Land Bank of the Philippines’ (LBp) Link.Biz portal (for taxpayers who have ATM account with LBp and./or horders of BancNet ATM/Debit/prepaid card or taxpayer utilizing PESoNet facility for depositors of RCBC, Robinsons Bank and Union Bank)
• Union Bank online web and Mobile Payment Facility (for taxpayer who has an account with Union Bank of the Philippines)
• Mobile Payment (GCash/payMaya)

For instructions on how to pay your taxes ONLINE. You may download it here:

Taxpayer who has an account with the following BancNet participating banks can use their ATM Card in paying taxes online with LBP’s Link.Biz Portal and DBP’s Pay Tax Online:

1.Asia United Bank	7.  Entrepreneur Bank	13.  Philtrust Bank
2.BPI Direct BanKo	8.  Equicom Savings Bank	14.  Sterling Bank of Asia
3.CTBC Bank	9.  MASS SPECC	15.  Sun Savings Bank
4. Citystate Savings Bank	10.  Philippine Band of Communications	16.  Tiaong Bank
5.Development Bank of Philippines	11.  Phil. Postal Savings Bank
6. Enterprise Bank	12.  Philippine Veterans Bank

_{We will be having a seminar on the step by step procedure on how to file each tax type in the following months beginning February 🙂}

2. Electronic Filing and Payment System (eFPS)

A taxpayer can also file via eFPS via this website (https://efps.bir.gov.ph/)

Who may file thru eFPS?

Any taxpayer can VOLUNTARILY choose to file thru eFPS. There are however certain taxpayers who are REQUIRED to file using eFPS these are:

Taxpayer under Taxpayer Account Management Program (TAMP)	Government Offices, in so far as remittance of withheld VAT and business tax is concerned
Accredited Importer and Prospective Importer	Government Bidders
National Government Agencies (NGAs)	Insurance Companies and Stockbrokers
All Licensed Local Contractors	Large Taxpayers
Enterprises enjoying Fiscal Incentives (PEZA, BOI, Various Zone Authorities, Etc.)	Top 20,000 Private Corporations
Top 5,000 Individual Taxpayers
Corporations with Paid-Up Capital Stock of P l0 Million and above
Corporations with Complete Computerized Accounting System (CAS)

However to be able to use the eFPS platform the taxpayer must first apply with their respective RDO.

How do you pay your taxes if filed thru eFPS?

For taxpayers using eFPS to file the return electronically and pay the corresponding taxes due thereon through the eFPS-AABs where they are enrolled. Taxpayers enrolled in the eFPS may enroll and maintain their account with any of the following eFPS-AABs:

1. Bank of Commerce	12. MUFG Bank (Formerly Bank of Tokyo-Mitsubishi UFJ. Ltd.)
2. Bank of the Philippine Islands (BPI)	13. Philippine Bank of Communications (PBCom)
3. China Banking Corporation (CBC)	14. Philippine National Bank (PNB)
4. Citibank, N.A.	15. Philippine Veterans Bank
5. CTBC Bank (Formerly Chinatrust Bank)	16. Philippine Trust Company (Philtrust Bank)
6. Deutsche Bank	17. Rizal Commercial Banking Corporation (RCBC)
7. Development Bank of the Philippines (DBP)	18. Security Bank Corporation
8. Eastwest Banking Corporation	19. Standard Chartered Bank
9. Hongkong and Shanghai Banking Corporation (HSBC)	20. Union Bank of the Philippines
10. Land Bank of the Philippines (LBP)	21. United Coconut Planters Bank (UCPB)
11. Metropolitan Bank and Trust Company (Metrobank)

Hope this helps you in your tax compliance. Do file regularly to avoid penalties.

You may download the full text of RMC 4-2021 here:

Should you need assistance in filing and paying your taxes, Wania and Partners can help you may reach us thru our :email (waniaandpartners@gmail.com) , Facebook Page , or contact us page. Experience growth in your company when you outsource your tax compliance with Wania and Partners.

By: John Paul Wania, CPA/Keith Aquino

As the great William Shakespeare once asked “what is in a name” in his play Romeo and Juliet. For Juliet it does not mean a thing to her as long as he loves Romeo. However, in business it really means a lot!

When your register your business name with the Department of Trade and Industry (DTI) there are certain rules you need to follow.

The Don’ts in Business Names:

It is the applicant’s responsibility to ensure that the proposed business name is:

1. not and will not be used for a business that is illegal, offensive, scandalous, or contrary to propriety (Pop’s Jueteng Betting Station, Boobs Massage and Spa);
2. not the same or nearly the same as an existing registered business, company, partnership, corporation, cooperative; nor infringing on any trademark, service mark and trade name (Anne Dok’s Lechon, Jolibee, Starbax Cafe);
3. not composed of generic or geographic words (The Drugstore, Mindanao);
4. not a name which by law or regulation cannot be appropriated (OTOP, Intelligence, State College);
5. not used to designate or distinguish, or to suggest a quality of any class of goods, articles, merchandise, or service (Best Taho Factory, A-1 Auto Repair Shop);
6. not used by the government in its non-proprietary functions (NBI Private Investigation Services, DTI Trading);
7. not a name or abbreviation of any nation, inter-governmental or international organization (Philippine Manpower Pooling Agency, UNESCO Marketing, WHO Health Services); and
8. not deceptive, misleading or one that misrepresents the nature of the business (“GOLD Construction Services” where nature of business is recruitment).

Now let say you now have a business that does not contain the above restriction.

Let’s say : SUI GENERIS!

You need to also consider the territorial scope of the BUSINESS NAME.

Territorial Scope

So madami na ang nasabi tungkol dito sa territorial scope na ito tulad ng:

“Pag gusto mo makamura i- barangay level mo na lang, kesa national.” or

“Dahil online selling ka i-national mo kasi ibebenta mo sya nationwide”

So let us clarify,

Para saan nga ba tong TERRITORIAL SCOPE and why would it matter?

Basically the TERRITORIAL SCOPE is your authority to exclusively use the BUSINESS NAME within a jurisdiction.

For example : I want to register the business name “SUI GENERIS MERCHANDISE” but only register it as barangay since I am on a budget. To be exact my address is 3A Saint Paul Street BARANGAY BAGO BANTAY Project 8, Quezon City.

In our example, the DTI will only allow me to make use of SUI GENERIS provided I do not have any SIMILAR or CONFUSINGLY SIMILAR REGISTERED name (before me) within the SAME barangay (BAGO BANTAY), the SAME city where my barangay is located (QUEZON CITY), the SAME region (NCR) , or no other person has registered the name BEFORE me using NATIONAL in scope. Let say it it gets approved. So what will be the implications, if any?

Will I only be allowed to transact (sell) only within my barangay? No. Basis is this:

The last sentence of the above photo states that no matter what territorial scope you chose you may still transact with anyone in and out of the country.

So what does the territorial scope limit? It limits the place where you can establish a stores, shops, branches, manufacturing or processing plants. So going back to my example I am only allowed to put up shop within my barangay and no where else (if you will be technical about it).So if you plan to put up many branches/stores all over the Philippines the BARANGAY scope is NOT for you.

Also it only limits the exclusivity of the use of the name. In our example, it means, anyone outside my barangay that is not part of QUEZON CITY or NCR can still use SUI GE0NERIS since I only registered it under barangay level. So any one from REGION 8 can make use of SUI GENERIS name (either barangay, city, region or national in scope).

So I have someone with the same name , who cares?

Well, your goodwill and business reputation cares. Let say the other person using SUI GENERIS was defrauding its customers either by providing the same product but below standard quality or not providing at all. People might now confuse this bad person’s business with yours and that will take a toll on your business and later on your TRUE NAME since you are a sole proprietor and of you wouldn’t like that.

Would this happen if you have chosen NATIONAL? NO! Because your name is exclusively yours no one in any part of the country can use it because you already registered as NATIONAL.

Our friendly advice.

Always choose NATIONAL because:

• It does not limit you as to where you can place your store (should you decide to have a brick and mortar store).
• It protect you and your business for any untoward incidents.

Php 2,000 (+30 documentary stamp tax) can be costly to you (pero nakakabili ng kung ano ano sa online shopping) but you could reap the rewards of PEACE OF MIND and EXCLUSIVITY later on.

Want a copy of the Implementing Rules and Regulation on Business Name Law. Get it here:

Do you know what is the difference between establishing a SOLE PROPRIETORSHIP (DTI registered) and a CORPORATION (SEC registered)? Read it here : FAQs in Business Registration- Part 1-Sole Prop vs. Corporation?.

Need assistance in business registration? We can help you avoid all the hassle and stress of business registration. Wania and Partners has already helped many start ups in establishing their business and sustaining it. Contact us for more details.

Feel free to like and follow our Facebook page (https://www.facebook.com/waniaandpartners) and this website to keep you updated on our new articles.

If you want to rest but can’t get that hustle mentality out of your system why not try watching The Founder (just cancel out the greedy stuff Ray Kroc did) and you might find these few business lessons in between just like we did. (Warning: Spoilers ahead)

Be a GAME CHANGER!

In the movie, it showed how most of the drive ins restaurants fell short of standards and customer satisfaction because of the long wait and below average customer service. Dic and Mac acknowledged this and went ahead with a differentiated themselves by knowing what the competition lacked and what can they do about it so they formulated the speedee system which was revolutionary game changer.

Application: Always try to think of ways how your business could standout, be unique and different. Because there could be many milk tea businesses how can yours stand out, in eCOM where many sellers actually sell the same products how who can yours be different. It can be your customer service, operational efficiency, ambiance of the restaurant or whatever that can set you apart from .

Planning and Operational Efficiency is KEY!

Dick and Mac managed to stand out by carefully planning how they will execute their speedee system to perfection, even going through the lengths of going out in a tennis court drawing out layouts of the restaurant and doing walkthroughs just to see if there are any flaws to the process and the layout.

Application: Many of the business owners of today unfortunately dismiss the planning phase saying everything will be ironed out in time. However what many don’t see that although learning from your mistakes is a good thing it is quite costly! It will cost you time, effort and most of all money. For eCOM sellers pick and pack system isn’t as simple as it looks (na kunin mo lang ang item tapos pack mo na) this should be a science there should be a good layout of products even a map where the products is placed this way di na maliligaw yung picker saan kukunin yung item mapa baguhan man yan o beterano na, a fool and dumb proofing system where there would be catalogs with pictures available for the pickers so that they would not pick the wrong item , a standardize packaging system laying out per product how much bubble wrap will be used or what size of pouch all of this will result to savings in time effort and cost. This may be time consuming but trust us when we say it will all be worth it.

Get a FINANCE PERSON involved!

One thing that shocked Ray in the movie was that despite already having launched numerous franchise he still did not have any capital to expand this was because of a bad deal in the contract (we’ll touch on this also). He was already down and out and debtors was already on his tails. Good thing he came across Harry Sonneborn, a Vice President of Finance in his company, who just took a peek of his books and listened how he operates and then voila the advice that will change Ray’s life and the world of franchising forever!

Application: A million or ten million pesos worth of sales won’t mean anything if you don’t take time or even know how to read your finances. But what if you are too busy with operations and don’t have time to read the numbers? Easy, outsource! You don’t have to do everything and it is better to have a trained eye to read, understand and interpret the financials for you. Because like it or not, business is not always having about guts (or kutob), decisions should be made objectively and this done by understanding the numbers.

There are still more lessons in this movie but we will leave it up to you to find out and when you do pleas share it by leaving it in our comment box below or in our Facebook page.

Wania and Partners offers business consultancy services which we give full accounting and managerial reports and advice to help your business grow a notch higher. Contact us for more details on how to avail our services.

So this is part 2 of our CREATE BILL mini series. If you are reading this let me congratulate you for being interested on the fate of your business (or study if you are a student).

(Missed the part 1 read it here: Ano bang bago dito part 1)

For part two let us discuss another major amendment : the reduction of the Minimum Corporate Income Tax (MCIT).

But what is Minimum Corporate Income Tax (MCIT) in the first place?

Minimum Corporate Tax is a tax on the corporation’s TOTAL GROSS INCOME which is currently at 2%.

Ano! You mean pag corporation dalawang ang tax on income na babayaran?

Hindi naman.

In the first place you are only to compute MCIT beginning in the fourth taxable year following the year of commencement of business operations. So meaning di naman agad agad ay may MCIT ka babayaran.

Second is you are only to pay MCIT WHENEVER the computed tax due using the Regular Corporate Income Tax (RCIT) which is 30% of taxable income is ZERO or less than the MCIT. In short pag MCIT> RCIT dun ka lang liable or need bayaran yung computed MCIT>

Waaaah may math! Malamang TAX to e so may math pero para madali gawa tayo ng example:

Illustration:

X Company, Domestic Corporation, incorporated and registered with the BIR in 2016. When would X Company be liable to MCIT?

In 2020 or 4 years after it commence its operation which was on 2016 (registered with the BIR).

X Company had the following gross income and net income for from 2020-2023:

Year	Gross Income (GI)	Net Income (NI)
2020	2,000,000	140,000
2021	2,500,000	180,000
2022	3,500,000	200,000
2023	4,000,000	350,000

Oops! Ano pla muna ang pinagkaiba ng GROSS INCOME sa NET INCOME?

Gross income is the result when you deduct the cost of sales/cost of services from the total sales/collection plus any other income not subject to final taxes.

Teka ulit ano naman po yung COST OF SALES/COST OF SERVICES?

Cost of sales or cost of service are the necessary and ordinary expenses directly incurred related to the product or service. Meaning if di ka gagastos nito e wala ka mabebenta or magagawang serbisyo.

Example:

Nag bebenta ka ng t-shirt for law school students. Para makabenta ka nun ano need mong gastusin? Syempre yung plain tshirt (either bayad mo sa pagpapatahi o binili mo na gawa na sya) , yung pag papa imprenta ng tshirt yan ang cost of sales mo.

May parlor ka ano ang cost of service? Yung mga gamit mong pang gupit, pang kulot and so on.

E ano naman po yung NET INCOME?

Net Income is the result when you deduct from the TOTAL NET SALES (net of sales returns and cancellations) or TOTAL COLLECTIONS the cost of sales/service add other income not subject to final tax less allowable deductions may it be itemized or optional standard deductions.

Dito sa pag compute NET INCOME ito naman yung ibinawas mo pa yung all other allowable deductions be it itemized deduction (e.g. operating expenses mo tulad ng renta, kuryente , tubig, pasahod etc.) or optional standard deduction(OSD)

(Will have a separate discussion on ITEMIZED vs. OPTIONAL next week siguro)

So para madali ito sya

GROSS INCOME	NET INCOME
NET SALES/COLLECTION	NET SALES/COLLECTION
LESS: COST OF SALES	LESS :COST OF SALES
ADD : OTHER INCOME NOT SUBJECT TO FINAL TAX	ADD : OTHER INCOME NOT SUBJECT TO FINAL TAX
GROSS INCOME	GROSS INCOME
	LESS ALLOWABLE DEDUCTIONS (ITEMIZED OR OSD)

Ngayon malinaw na (sana) mabalik tayo.

Compute the MCIT and RCIT.

A:

Year	MCIT (2% of GI)	NCIT (30% of NI)
2016	40,000.00	42,000.00
2017	50,000.00	48,000.00
2018	70,000.00	60,000.00
2019	80,000.00	105,000.00

How much is tax due?

A: Whichever is higher.

Year	Tax Due	MCIT/RCIT
2020	42,000.00	RCIT
2021	50,000.00	MCIT
2022	70,000.00	MCIT
2023	105,000.00	RCIT

So remember this about MCIT:

1. It only starts beginning on the 4th taxable year of operation of the business (actually reckoned on the date of BIR registration)
2. You are only liable for MCIT when MCIT is GREATER THAN RCIT (MCIT >RCIT)

Now hopefully you understand now MCIT and how it works! Madami pa kailangan idiscuss sa MCIT and will do it in a separate post 🙂

On to the proposed amendment…

Reduction of MCIT Rate

Under SBN 1357, they proposed to reduce the MCIT rate from 2% to 1%. However it is only for a limited time offer beginning July 1, 2020 (yes retro ulit) until June 30,2023.

Although this is just for a limited time this will be a relief to many of the MSMEs because this will somehow cushion the effects of the recent pandemic hopefully this pushes through.

More of the amendments next week.

Want the full version of the SB 1357? Dowload here:

For questions, comments and or clarifications just drop it on the comments section.

So you are decided, you will go legit and to save on cost you decide to do it on your own (hmm sure ka baka magsisi ka pero sige). Naturally your first question would be:

You yourself must first ask this very important question.

Sole proprietorship or Corporation which will you choose?

We say that this is the most important question in business registration because your answer to this will greatly affect how you will go through the next steps of registration and of course the tax implications.-

To help you with this question we lay out differences between the two in the following aspects:

As to registration or regulatory body?

If you choose to register as a sole proprietor you just need to register with Department of Trade and Industry (DTI) through BNRS. Just answer the fields and in a matter of minutes you will have your e-certificate as proof of your registration. So it is fast and easy!

If you choose to establish a Corporation, this is a bit complex process and not as fast compared to sole. You need to draft the Articles of Incorporation, By Laws and Treasurer’s Certificate. Know how much would be your Authorized, Subscribed and Paid up Capital will be send it to the Securities and Exchange Commission for review and wait til gets its releaseed about 2-3 weeks sometimes a month or two pa nga.(so if you have zero knowledge best you outsource this to a lawyer or an accountant) .

(Will be coming out with a step by step process of registration with DTI and SEC sooooooon!)

As to the liability against debtors

When you register as a SOLE PROPRIETOR you have a GENERAL LIABILITY.

What does GENERAL LIABILITY mean?

This means when your business go under (pag nalugi) and you have outstanding debts(may utang ka pa sa business) your creditors (pinag kaka utangan mo) may get all of your assets as in all assets EVEN YOUR PERSONAL ASSETS in order to settle your debts even if that debt is because of your BUSINESS.

In short gang sa SOFA at PLASMA TV mo kung kina-kailangan ay pwedeng hatakin ng pinagkakautanagan mo be it suppliers, banks, employees and taxes.

How bout when you choose to register as a CORPORATION?

When you register as a CORPORATION your liability is LIMITED!

What does LIMITED LIABILITY mean?

It means when your business goes under and you decide to close your corporation and you still have outstanding debts. Unlike the sole props, the debtors can only run after the ASSETS OF THE BUSINESS only! (oo safe yung sofa at plasma tv mo).

Why is this so?

Because a corporation is treated a separate and distinct entity from the owners in the eyes of the law. This called corporate fiction and their only limited times that the corporation fiction can be pierced but generally it can’t be (will discuss this in a separate blog)

As to taxes (income taxes to be exact).

If you decide to be register as sole proprietor what will be your tax implication?

Well for income tax purposes. Individuals maybe at a maximum of 35%!

How bout for corporations?

Corporations are taxed on its taxable income at 30% for now(hopeful for the tax reform to be signed where the tax rate may go down as 20%!… read : Ano bang bago dito? CREATE BILL?)

As to the number of owners (of course)

Ordinarily, if you are the only ONE the sole who will own and manage the business sole proprietorship is for you. The business papers will be under your name that includes your DTI, BIR and Business Permit will be named under the sole owner.

If you have two to five (or even as high as fifteen) who will own and/or manage the business then it is best to put up CORPORATION. The business papers especially the Articles of Incorporation will clearly lay out the names of the stockholders of the incorporators (the first company stockholders) and the amount of shares they bought which will determine their percentage of owners of the company and the amount of dividends (share on/ the net profit).

Recap

Registration : Mas madali at mabilis pag sole prop

Liability:Mas protektado ang personal assets mo pag CORPO

Tax (Income Tax) : Mas mababa ang tax pag CORPO at maaring mas bumaba pa

So after reading this difference you might think na mas ok pala mag corporation. However pano pag mag isa lang talaga ako?

But did you know you can register as a corporation even if you are just only one? How?

This is through establishing a ONE PERSON CORPORATION which is now allowed by virtue of the REVISED CORPORATION CODE.

Want to know how to establish your own ONE PERSON CORPORATION. Sign up in our seminar in partnership with Attorney Nico B. Valderama, CPA, MPM

Sign up here: Join the seminar!

We would love to hear from you feel free to comment what you have learned or what topics would you like us to feature. Will be coming out with the part 2 of this article next week!