Tax Services

Correct planning for correct payment

All businesses and professionals must engage in accounting for their taxes, even tax-exempt ones because tax-related accounting traces sources of income as well as payments and expenses. Taxation regulations vary between countries; in the Philippines, the National Internal Revenue Code as enforced by the Bureau of Internal Revenue (BIR) is the standard to be complied with.

Our tax services team provides solutions that help businesses make sure that their tax payment adheres to official Philippine standards, and pinpoints opportunities and potential problems that can make or break a business’s profitability.

Up to date, correct filing and payment

Filing and paying taxes can be a complicated process during the entire lifecycle of a business because of the multiple forms to be filled out and the year-round deadlines to be met. Tax regulations are also constantly changing, and it can be challenging for a business—new or smaller ones, in particular—to keep track of these changes alongside its day-to-day operations. Failure to keep up or paying according to outdated regulations may result in costly fines.

As accountants, it is our tax services team’s mandate to keep abreast of all the latest developments in tax regulations to help businesses file and pay correctly and on time, every time.

Paying efficiently with planning

Businesses and professionals may be unaware of tax breaks and other deductions that may be able to ease their tax burden. Our tax services team helps businesses find these tax breaks and other legal ways to reduce their taxes, as well as to make sure that adequate funds are set aside for each taxation period throughout the year.

Tax planning may also include assistance in the management of a business’s finances in such a way as to include tax payment vis-a-vis expenses and profit, to make sure that the tax burden does not become too great.

Our Tax Services include

Fulfilling tax reporting obligations can be a real challenge for businesses, from knowing how to fill out standardized forms with the correct amounts to providing additional information upon the request of the tax authorities. There are times when the authorities may also require explanations and analyses of how the tax reports were prepared.

This is why assistance and advice on Compliance and Reporting are much sought after by busy business owners whose time is taken up by the daily management and operations of their enterprise. Advisory services include providing insight into the way tax returns were filed for past transactions.

When preparing tax returns, our team analyses the business’ historical information against the country’s tax laws, accepted tax filing practices, and industry precedents. Note that should tax authorities require it, any tax returns that are prepared will also be reviewed and approved.

Our Compliance and Reporting services include assistance in preparing and filing:

  • Personal Taxes
  • Corporate Taxes
  • Employment Taxes

Concerning Compliance and Reporting, our team also assists businesses with bookkeeping and maintenance of their financial records. Note that larger companies will also need to have these records audited yearly by an independent Certified Public Accountant.

Personal taxes.

Anyone whose source of income is in the Philippines is required to pay taxes and file a tax report. This includes Filipinos living overseas and foreign nationals residing in the Philippines who derive income from the Philippines. Foreigners who don’t live in the Philippines but work or own a business in the country are likewise required to submit an income tax report.

The amount to be paid varies according to a person’s annual taxable income as defined by the country’s progressive personal income tax system. This system is currently covered by the Tax Reform for Acceleration and Inclusion or TRAIN law, which has lowered personal tax rates since its implementation in 2018.

Our team is also able to assist professionals, entrepreneurs, and freelancers who may not have sufficient or updated knowledge of tax filing requirements and processes which include registration, filing, and payment.

Corporate taxes.

All Filipino- or foreign-owned companies doing business in the Philippines are required to pay and file corporate taxes. Filipino-owned companies must pay taxes on all income generated within or outside the Philippines, while foreign-owned companies are only required to pay taxes on income generated within the country.

On top of the standard 30% corporate income tax, most companies that provide products or services in the Philippines are also required to pay the 12% value-added tax or VAT. Companies that provide healthcare, education, and agricultural food products remain VAT-exempt.

Companies that hire staff in the Philippines will likewise have to pay various employment taxes which include payroll tax, social security, and employees compensation which varies according to an employee’s monthly salary credit.

Paying taxes as efficiently as possible requires the kind of in-depth knowledge of tax regulations that experienced taxation specialists have.

In compliance with the 2013 International Ethics Standards Board for Accountants (IESBA) CPA Code of Ethics, such specialists would be able to advise both businesses and individual taxpayers on structuring their affairs in a tax-efficient manner. They would also be able to advise business owners on the application of new tax laws or regulations.

Tax Planning and Advisory encompass a broad range of services which include:

  • Analysing a business’ finances from a taxation viewpoint
  • Formulating tax payment strategies with room for retirement savings
  • Representing clients before tax authorities to resolve taxation issues

Our Tax Planning and Advisory team comprise financial professionals and advisors as well as CPAs who are up to date with the latest tax regulations issued by the BIR. Their experience with businesses and professionals in various industries allows them to advise clients according to their specific circumstances which will vary in terms of income and expenditures.

Minimizing the amount of taxes to be paid as far as the law permits are our team’s primary goal, particularly when it comes to business, estate, and retirement planning as well as investment management.

Long-term flexibility.

In assisting clients with their tax planning, our team makes sure that it has a thorough understanding of their finances, and that it’s aligned with their overall financial objectives. It also makes sure that clients are apprised of their true financial position vis-à-vis their tax obligations.

Planning is done for the long-term, with strategies constantly being reviewed and adjusted as needed, particularly as tax regulations are continually being updated. Special consideration must be made for businesses with overseas operations or individuals residing or conducting business abroad.

Life-changing advice.

Also known as tax consulting, our tax advisory services often involve major events in the life of a business or individual, when clients may end up paying more than they have to without the benefit of a tax advisor’s insight. Examples of such events include:

  • Starting a business
  • Merger or acquisition
  • Overseas expansion
  • Marriage or the birth of a child
  • Buying a home
  • Retirement

Because of the far-reaching effects of tax advisory, businesses need to find advisors with the right credentials, sufficient and relevant industry experience, as well as experience in engaging in direct dialogue with the BIR.

Because the amount of taxes to be paid is entirely dependent on the taxable income of a business or professional, it makes sense to make sure that the tax base itself is calculated correctly. This, along with identifying errors and recommending the means for their correction, is the objective of the Tax Audit.

During a Tax Audit, our team of taxation specialists conducts an independent review of a business’ or professionals’ accounting and tax calculation processes within the required timeframe. The audit services they provide also include:

  • Calculating the taxes and duties to be paid
  • Checking the payment status of budget and extra-budgetary funds
  • Ensuring compliance with tax regulations

In the Philippines, Tax Audits are required for larger businesses or corporations about to engage in a merger, spin-off, or similar form of organizational restructuring, as well as taxpayers claiming tax credits or refunds.

Both individuals and businesses should seek professional assistance in the event of a Tax Audit, as it may result in the payment of back taxes and/or hefty penalties.

What happens during a Tax Audit

In the Philippines, the Tax Audit process generally starts with a letter from the BIR informing a taxpayer of its selection for an audit. The audit then has to be carried out within 120 days. Unless any mistakes or fraud were found during the audit, an individual or business can’t be audited twice within a year.

It’s the responsibility of the individual or business to provide the auditor with the required documents that prove that no errors were made during tax filing and payment. Note that taxpayers who are unable to provide these documents will have to submit other documents explaining the lack thereof. The required documents may include:

  • Books of accounts
  • Tax returns or reports
  • Transfer pricing documentation

Why professional help is advisable

Taken by surprise upon a request for a Tax Audit, the conscientious taxpayer may be inclined to get in touch with the BIR or a country’s taxation authority directly. Taxation experts, however, generally advise getting in touch with a reputable tax services provider immediately upon receipt of the letter.

Such a provider is better equipped for processing the audit request and carrying out the required formalities, which includes interacting with tax authorities. Note, however, that the best way to handle a Tax Audit, should the need arise, is to file and pay the correct taxes consistently and to keep all financial records in order.

When a business sells products or services internally or to a subsidiary, the act of charging a usually lower price for this “controlled” transaction is known as transfer pricing. This is a common taxation and accounting practice among larger businesses such as multinational corporations or holding companies that use transfer pricing as a way to distribute its revenue before calculating its taxes or interest.

Because of the impact, it has on how much in taxes a business has to pay, transfer pricing is monitored closely by taxation authorities. Some businesses may be tempted to use transfer pricing as a way to evade taxes or reduce their tax burdens illegally, because of how it may be used to move funds to countries or jurisdictions with lower tax rates.

Business owners who are therefore looking to use transfer pricing must be aware of the relevant regulations as well as the risks involved to make sure that their transfer pricing methods are ethical and compliant.

Examples of cases where transfer pricing may be used include:

  • Research projects carried out by a department for another department of the same company
  • Transferring patents, royalties and other forms of intellectual property to subsidiaries
  • A producer in one country selling its goods to a related party distributor in another country

Naming a transfer price.

Transfer pricing may be carried out in several ways under guidelines set by the Organisation for Economic Co-operation and Development (OECD), which are almost universally accepted by taxation authorities.

Many businesses often use transactional profit methods because these methods require less information but are less accurate, a result. These methods work by comparing the net operating profits from the controlled transaction to the profits of other businesses engaged in similar transactions. The two OECD-authorised transactional profit methods are:

  • Transactional profit split
  • Transaction net margin

Traditional transaction methods, on the other hand, are based on the terms and conditions of existing transactions between external or independent businesses. These methods work by comparing those terms and conditions with those of an internally controlled transaction. The three OECD-authorised traditional methods are:

  • Cost plus
  • Cup
  • Resale price

Transfer pricing in the Philippines.

Economic trends that are specific to the Philippines such as inbound remittances from overseas workers and the establishment of special economic zones have necessitated the development of transfer pricing regulations. These regulations took effect less than ten years ago, and have been updated recently by the BIR to include guidelines for conducting transfer pricing audits.

Note that Philippine authorities require businesses that use transfer pricing to validate their prices by submitting documents that include the details of the controlled transaction, cost contribution arrangements, and risk analyses. This validation process is not conducted annually but must take place whenever a transfer pricing transaction is carried out.