This May, there has been a wide fiasco between the Bureau of Internal Revenue (BIR) and real estate company Megaworld Corporation. On May 17, The BIR released a closure order against Megaworld after receiving reports from condo owners saying that there were discrepancies with the taxes they paid.
On the other hand, Finance Secretary Carlos Dominguez III stated on May 25 that there is no basis for BIR to issue a closure order against Megaworld because it did not deny the BIR access to its books and comply with an audit. Whether true or not, there has been damage because of the news about Megaworld’s potential closure.
According to Dominguez, Megaworld lost PHP 111 million in share value between May 17 to 23. If this financial damage can be done to a real estate conglomerate like Megaworld, tax disputes can cause hassle to individuals.
Having even surface knowledge about the different taxes in the Philippines can go a long way. Here are the other taxes in the Philippines.
Types of taxes in the Philippines
There are two types of taxes in the Philippines, national and local taxes. National taxes refer to mandatory contributions under the National Internal Revenue Code of 1997. On the other hand, local taxes are imposed by the local government of an area under the Local Government Code of 1991.
Taxes under Philippine national taxes
Estate tax
An estate tax is charged when a real estate owner passes away, and their lawful beneficiaries decide to transfer land titles to their name at the owner’s time of death. Real estate titles would not be transferred to the heirs unless estate tax is paid.
For example, if your father decided to transfer his Greta house and lot from Camella once he passes away, you would need to pay estate tax before transferring the title.
Documentary stamp tax
Documentary tax is a tax imposed on contracts, agreements, certificates, acceptance, sale, assignment, and other legal documents to prove that a transaction between two parties occurred.
Percentage tax
Percentage tax is a business tax imposed on business owners who sell or lease goods, services, properties, or services that are not VAT-registered and has a minimum yearly gross sale of PHP 550,000.
Capital gains tax
Capital gains tax is imposed on a seller or a business when they sell a valuable asset like jewelry, stocks, properties, and other goods considered capital assets or items of high value.
Income tax
Income tax is imposed on individuals from their source of living, whether it’s a profession, business, trade, or property. A person’s income tax is different depending on their income bracket.
Withholding tax
The amount withheld from an employee’s wage and paid directly to the government for the employee’s partial income tax is referred to as withholding tax.
Value Added Tax (VAT)
VAT is a business tax imposed on sellers and vendors upon sale of goods, importation, sale of properties, or lease of goods. VAT is considered an indirect tax, and everyone indirectly pays for VAT every time they purchase anything in a retail store.
Excise tax
Just like VAT, an excise tax is an indirect tax. Excise tax is imposed on goods and products under the Tax Reform for Acceleration and Inclusion Law. These products include tobacco, liquor, or any drink with added sugars.
Donor’s tax
Donor’s tax is imposed on a gift, donation, or any free-of-charge transfer from benefactor to recipients. There are times when the BIR does not charge a donor’s tax on a donation, especially when these are donations for victims of calamities.
Taxes under Philippine local taxes
Franchise tax
The franchise tax is a tax imposed on franchise businesses. Franchise taxes have a minimum of 50% rate of the 1% of the total annual gross for the current year of a franchise-operated.
Basic real property tax
Real property tax is a tax imposed on agricultural, commercial, industrial, mineral, and residential properties. The primary real property tax prescribed in the Philippines is 2% for cities and municipalities within Metro Manila and 1% outside Metro Manila.
Sand, gravel, and other quarry resources tax
LGUs can only charge up to 10% of the fair market value per cubic meter of quarry resources like gravel, sand, common stones, earth, and sand taken from public lands or waters.
Business of printing and publication tax
When they are published or printed, these taxes are also taken out of books, posters, pamphlets, cards, tarps, and other printed items.
Annual fixed tax for delivery trucks and vans
This tax is imposed on every vehicle that delivers distilled spirits, fermented liquor, food, cosmetics, tobacco, and other products from manufacturers directly or indirectly from the province. Under the law, the annual fixed tax is PHP 550.
Professional tax
This tax is imposed on lawyers, doctors, architects, or any other profession that requires a board exam or licensure from the government.
Amusem*nt tax
This tax is imposed on films, theatrical plays, concerts, or any entertainment show. This tax is added to the price of admission and ticket price.
Community tax
Community tax is known as cedula. Any person at least 18 years of age can get a Community Tax Certificate to prove that they are a municipality resident.
Barangay tax
Small businesses like sari-sari stores with a gross sale of PHP 50,000 annually have to pay barangay tax.
Barangay clearance
This document from the barangay is legal proof that you are allowed to do something or start a business in a certain barangay. Generally, it is also used as proof of identity when dealing with the government or getting a job.
Why are Taxes Needed?
Taxes are the primary source of revenue for the Philippine government. Taxes are spent on infrastructure projects, public services, welfare programs, services, and as budget of different departments of government. As citizens, we have to pay our taxes to help our nation and its development.
Check out our Properties in the Philippines
Check out our catalog of house and lot and condo for sale in the Philipines!
Explore Homes
As a seasoned expert in tax matters, particularly those related to the Philippines, I find the recent fiasco between the Bureau of Internal Revenue (BIR) and Megaworld Corporation to be an intriguing case highlighting the intricacies of tax disputes. My extensive knowledge in this field allows me to dissect the complexities involved and shed light on the different tax concepts mentioned in the article.
Firstly, the dispute revolves around discrepancies in taxes paid by condo owners, leading to a closure order from the BIR against Megaworld. However, Finance Secretary Carlos Dominguez III contested this, stating that there was no basis for the closure order since Megaworld had not denied BIR access to its books and had complied with an audit.
The financial repercussions for Megaworld were substantial, with a reported loss of PHP 111 million in share value between May 17 to 23. This incident underscores the broader impact tax disputes can have, not only on large corporations like Megaworld but also on individuals.
The article then wisely transitions to educate readers on the different types of taxes in the Philippines, encompassing both national and local taxes.
-
National Taxes:
- Estate Tax: Levied when a real estate owner passes away, and beneficiaries transfer land titles.
- Documentary Stamp Tax: Imposed on various legal documents to validate transactions.
- Percentage Tax: Applied to business owners with significant yearly gross sales who are not VAT-registered.
- Capital Gains Tax: Imposed on the sale of valuable assets like jewelry, stocks, and properties.
- Income Tax: Levied on individuals based on their income brackets.
- Withholding Tax: Amount withheld from an employee's wage and paid directly to the government for partial income tax.
- Value Added Tax (VAT): An indirect tax on goods, services, and properties at the point of sale.
- Excise Tax: Indirect tax on specific goods like tobacco, liquor, and sugary drinks.
- Donor's Tax: Imposed on gifts, donations, or free-of-charge transfers.
-
Local Taxes:
- Franchise Tax: Applied to franchise businesses based on a percentage of the total annual gross.
- Basic Real Property Tax: Imposed on various types of properties, with different rates for Metro Manila and outside.
- Sand, Gravel, and Other Quarry Resources Tax: Charged by LGUs based on the fair market value of quarry resources.
- Business of Printing and Publication Tax: Applied when books, posters, and other printed items are published or printed.
- Annual Fixed Tax for Delivery Trucks and Vans: Imposed on vehicles delivering specific products.
- Professional Tax: Imposed on professionals like lawyers, doctors, and architects.
- Amusem*nt Tax: Applied to films, theatrical plays, concerts, and entertainment shows.
- Community Tax: Known as cedula, this tax certificate proves municipality residency for individuals aged 18 and above.
- Barangay Tax and Clearance: Small businesses and individuals in specific barangays may be subject to taxes and clearances.
Understanding these tax categories is crucial not only for businesses but also for individuals, as taxes serve as the primary source of revenue for the Philippine government, funding various projects and services that contribute to the nation's development. The article aptly concludes with a reminder of the importance of paying taxes as responsible citizens.
