Tax Update Seminar/Dialogue with Medical and Dental Practitioners Revenue Region 19-Davao City

1. Tax Update Seminar/Dialogue with Medical and Dental Practitioners Revenue Region 19-Davao City April 5, 2014 1:00 – 5:00 pm Presented by: SUSAN D. TUSOY, CPA, MPS Asst. Chief, Assessment Division

2. Topic Outline • Registration, Invoicing and Bookkeeping Regulations • Applicable Tax Type • Registration Fee • Income Tax • Business Tax (VAT and Percentage) • Withholding Tax • As Payor • As Payee

3. REGISTRATION FEES

4. When to register • On or before the commencement of business • Before payment of any tax due • Upon filing of a return, statement or declaration as required by the NIRC. • Employee: within 10 days from date of employment

5. BIR Registration Procedures PRIMARY REGISTRATION SECONDARY REGISTRATION STAGE 1 STAGE 2 Application & Issuance of TIN Registration of Business/Practice of Profession/Employment Registration of books, Issuance of ATP, CAS and Loose-leaf

6. On Registration • Pay Annual Registration Fee of P500.00 upon registration and every year thereafter on or before Jan. 31

7. REGISTRATION OF BRANCH Medical practitioners are also required to register and pay the corresponding Registration Fee for each separateor distinct establishment.

8. On Registration RR 4-2014 • All self-employed professionals shall submit an affidavit indicating the rates, manner of billings and the factors they may consider in determining their fees • Due date • Upon registration and every year thereafter on or before Jan. 31 • Transitory provision • Affidavit to be submitted within 30 days from effectivity of this Regulation

9. INVOICING REQUIREMENTS

10. Invoicing Requirements • Issue sequentially Official Receipt (OR) for fees received • Sales Invoice for sale of goods (medicines). • Each OR issued shall indicate the name and address of the client, date of transaction, nature of service rendered and the amount.

11. Invoicing Requirements • The OR shall be accomplished at least in duplicate • The duplicate retained & preserved in place of business for 10 years from close of taxable year (RR 17-2013).

12. Sample of Commercial Invoice – A Non-VAT Official Receipt

13. Proper Invoicing and Receipting of Output Tax • Revenue Regulations 18-2011 • Reiterates Sec. 237 of the Tax Code that VAT-registered taxpayers should separately bill the VAT. • The amount shall be shown as a separate item in the invoice or receipt 13

14. Proper Invoicing and Receipting of Output Tax Ex: If the amount charged is P560.00, it shall be presented in the following manner: Professional Fee (P560.00/112%) P 500.00 Add12% VAT (12% of P500.00) 60.00 Total Amount charged P 560.00 14

15. Sample of VAT Official Receipt 15

16. Proper Invoicing • Revenue Regulations 4-2014 • In cases when no professional fees are charged by the professional and paid by client, a BIR registered receipt, duly acknowledged by the latter, shall be issued showing a discount of 100% as substantiation of the “pro-bono” service. 16

17. Principal Receiptsvs. supplementary Invoices (RR 18-2012) • Principal • A written account evidencing the sale of goods and/or services issued to customers in an ordinary course of business • Official Receipt • Sales Invoice

18. Principal Receiptsvs. supplementary Invoices (RR 18-2012) • Supplementary • Also a commercial invoice • Also to be registered in the BIR • Ex: Delivery Receipt, Collection Receipt, Billing Statement, Statement of Accounts, Acknowledgement Receipt, etc.

19. VAT Sales Invoice • A written account evidencing the sale of goods and/or properties • issued whether cash sales or on account • Basis of the output tax liability of the seller and the input tax claim of the buyer • Includes Cash Sales Invoices & Charge Sales Invoices

20. VAT Official Receipt • A proof of sale of service and/or leasing of properties • Basis of the output tax liability of the seller and the input tax claim of the buyer

21. Non-VAT Receipts/Invoices • Non-Vat Sales Invoices • A written account evidencing the sale of goods and/or properties, whether cash sales or on account • Basis of the Percentage Tax liability of the seller • Non-Vat Official Receipts • A proof of sale of service and/or leasing of properties • Basis of the Percentage Tax liability of the seller

22. Salient Features • The approved ATP shall be valid only • upon full usage of the inclusive serial numbers or • five (5) years from issuance of the same, whichever comes first.

23. Salient Features • ONLY BIR ACCREDITED PRINTERS shall have the exclusive authority to print principal and supplementary receipts/invoices.

24. Transitory Provision • Expiring Authority to Print (ATP) for invoices/receipts (principal and supplementary) shall apply for a new ATP not later than 60 days prior to actual expiry date

25. Expired Receipts/Invoices • Those with ATP prior to Jan. 1, 2011 were valid only until Aug. 30, 2013 while those with ATP dated Jan. 1, 2011 to Jan. 17, 2013 were valid only until Oct. 31, 2013. • Issuance of receipts/invoices after its validity constitute a violation of Sec. 264 of the NIRC of 1997 • It is considered as if no receipt/invoice was issued

26. Expired Receipts/Invoices • No deduction from gross income shall be allowed using these invoices/receipts as there are not valid proof of substantiation • In case of VAT-registered persons, no input tax may be claimed using these receipts/invoices

27. BOOKKEEPING REQUIREMENTS

28. BOOKKEEPING REQUIREMENTS • Preserve within the prescriptive period of 10 yrs. • Gross receipts exceeding P150,000 in any given quarter must be audited by a CPA

29. BOOKKEEPING REQUIREMENTS • It’s not required to register new set of books every year; only before the pages of current book is almost used up. • Ledger • Journal

30. PATIENTS’ LOG BOOK (A subsidiary book) • Daily list of clients w/ the corresponding fees including those free of charge, per branch • Name and address • Date • Official receipt no. • Amount charge • Must be registered with the BIR

31. Official appointment books (RR 4-2014) • Shall contain only the names of the client and the date/time of the meeting • Due date • Within 30 days from effectivity of this regulation • Published on March 21, 2014 • !5 days effectivity : April 5, 2014 • Due date: May 5, 2014

32. Original Certificate of Registration, Registration Fee and the Ask for Receipt Notice must be conspicuously displayed in the physician’s place of business and/or clinic Tax Compliance Verification Drive (Tax mapping)

33. Income Tax

34. Sample Computation – Itemized Deduction Gross Receipts P2,000,000 Less: Allowable Deductions (itemized) Rent P 500,000 Fuel and Oil 50,000 Communication 20,000 Supplies 280,000 Professional Fees 100,000 950,000 Net Income P1,050,000 Less: Personal Exemption 50,000 Additional Exemption (2 dep.) 50,000 100,000 Net Taxable Compensation P 950,000 Tax Due P 269,000 Tax Withheld (1st to 4thQtr) Form 2307 212,500 Quarterly Income Tax Payment 50,000 262,500 Payable P 6,500

35. INCOME TAX TABLE OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER Not over 10,0000 5% 10,000 30,000 500 + 10% 10,000 30,000 70,000 2,500 + 15% 30,000 70,000 140,000 8,500 + 20% 70,000 140,000 250,000 22,500 + 25% 140,000 250,000 500,000 50,000 + 30% 250,000 500,000 over 125,000 + 32% 500,000

36. Business Expenses: • To be deductible, business expense must: • constitute ordinary and necessary expense; • to be paid or incurred during the taxable year in carrying on or directly attributable to operation and/or conduct of trade, business, or profession; • be reasonable in amount; • be sustained by adequate proof; • not be against law or public policy

37. RR 12-2013 – Requirements for Deductibility • Any income payment allowable as deduction shall only be allowed to be deducted if: • The income tax required to be withheld has been paid to the BIR • No deduction shall be allowed notwithstanding payments of WTAX at the time of investigation

38. Sample Computation – Itemized Deduction Gross Receipts P2,000,000 Less: Allowable Deductions (itemized) Rent P 500,000 Fuel and Oil 50,000 Communication 20,000 Supplies 280,000 Professional Fees 100,000 950,000 Net Income P1,050,000 Less: Personal Exemption 50,000 Additional Exemption (2 dep.) 50,000 100,000 Net Taxable Compensation P 950,000 Tax Due P 269,000 Tax Withheld (1st to 4thQtr) Form 2307 212,500 Quarterly Income Tax Payment 50,000 262,500 Payable P 6,500

39. Sample Computation –Optional Standard Deduction Gross Receipts P2,000,000 Less: Optional Standard Deduction (40%) 800,000 Net Income P 1,200,000 Less: Personal Exemption 50,000 Additional Exemption (2 dep.) 50,000 100,000 Net Taxable Compensation P 1,100,000 Tax Due P 317,000 Tax Withheld (1st to 4thQtr) 212,500 Quarterly Income Tax Payment 50,000 262,500 Payable P 54,500

40. Advantages of using optional standard deduction (for individual taxpayers) • shall not be required to submit with his tax return such financial statements otherwise required under the Code • shall keep such records pertaining only to his gross sales or gross receipts,

41. Income Tax Due Dates

42. Value Added Tax/ Percentage Tax

43. VAT vs. NON-VAT Value Added Tax (12%) • Medical/dental services rendered by professionals whose gross receipts exceed the threshold of P1,919,500 Non-VAT • If gross receipts do not exceed the threshold • Subject to 3% percentage tax

44. VAT defined • It is a tax on the value added to the purchase price or cost in the sale or lease of goods, properties, or services in the course of trade or business. • Due Date

45. VATPayable Output Tax ( P100,000* x 12%) - P12,000.00 Less Input Tax (60,000 **x 12%) - 7,200.00 VAT payable - P 4,800.00 • P112,000/112% = P100,000 ** P67,200/112% = P 60,000

46. HOW TO COMPUTE VAT-gov’t transaction (PHIC) 46 Formula: Output Tax (12% of Gross receipts ) P xxx Less Standard Input Tax (7% of gross receipts) xxx VAT Payable P xxx Less 5% withholding tax xxx VAT Payable P xxx 46

47. Sources of Input Tax • Purchase of goods/services for which the VAT was actually paid, like: • Rentals on clinic • Purchase of medical supplies • Communication expenses • Fuel • Professional services • etc

48. Submission of Summary List of Sales and Purchases • RR 1-2012 • Mandatory submission of Quarterly Summary List of Sales and Purchases by all VAT registered taxpayers effective Jan. 1, 2012 • Due Date: On or before the 25th day of the month following the close of the taxable quarter.

49. Submission of SLS / SLP • SLS/SLP shall be submitted in softcopy to the RDO having jurisdiction of the taxpayer on or before the 25th day of the month following the close of the taxable quarter

50. Percentage Tax