STRATEGIC TAX MANAGEMENT

Commissioner of Internal Revenue

“Mr. Caesar R. Dulay”

RDO – Revenue District Office No. 25A (RDO West)

Office Address: Along bypass road, Tiaong, Guiguinto, Bulacan

AREA OF JURISDICTION: Malolos City, Paombong, Bocaue, Guguinto. Bustos, Balagtas, Baliwag, Bulacan,
Plaridel, Calumpit, Hogonoy, Pandi and Pulilan.

Three General Classification of Tax in the Philippines

National Tax – refer to national internal revenue taxes imposed and collected by the national
government through the Bureau of Internal Revenue (BIR) and local taxes refer to those imposed and
collected by the local government.

Capital gains tax – Tax on profits from selling an asset (property, jewelry, stocks, etc.) in the Phil.

Documentary stamp tax (DST) – Tax on documents, loan contracts, and papers that serve as
proof of sale or transfer of ownership of a property

Donor’s tax – Tax on a gift or donation, in which both the sender and recipient are living when
the gift is given

Estate tax – Tax paid by the legal heir before the estate [3] from a deceased person is transferred
to their name

Excise tax – Tax on the production, sale, or consumption of goods in the Philippines

Income tax – Tax on a person’s or business’ income or profit

Percentage tax – A business tax imposed on non-VAT-registered individuals or corporations that

sell or lease goods and services with gross annual sales or receipts not exceeding PHP 3 million

Value-added tax (VAT) – A sales tax on consumption imposed on the sale, lease, or importation
of goods, properties, and services in the Philippines, which may be passed on to the consumer

Withholding tax – Tax withheld from an individual’s income to promote tax compliance and
prevent tax evasion

Local Tax - refer to those imposed and collected by the local government.

Basic real property tax – Tax on the value of real properties such as houses, lands, buildings, etc.
 Business of printing and publication tax – Tax imposed on businesses that involve printing and
publication

Franchise tax – Tax imposed on a franchise business

Sand, gravel and other quarry resources tax – Tax on the fair market value of ordinary stones,
sand, gravel, earth, and other quarry resources extracted from public lands or public waters
within the province

Professional tax – Tax imposed on professionals such as lawyers, doctors, and engineers

Amusement tax – Tax imposed on cinemas, theaters, concert halls, circuses, and other
amusement venues

Annual fixed tax for delivery trucks and vans – PHP 500 fee for every truck or van used to
deliver soft drinks, liquors, or cigarettes within the province

Local business tax – Tax imposed by municipalities on different types of businesses within their
jurisdiction

Barangay tax – Tax imposed on stores or retailers with annual gross sales of up to PHP 50,000 in
cities or up to PHP 30,000 in municipalities

Community tax – Tax imposed on individuals and corporations within a city’s or municipality’s
jurisdiction

Special Tax –

Motor Vehicle User’s Charge (MVUC) – An annual fee charged on every application for vehicle
registration

Travel tax – An airport fee imposed on Filipino citizens, foreign residents, and non-resident
foreigners (who have stayed in the country for more than a year) who are leaving the Philippines

Head tax – Tax imposed on foreigners staying in the Philippines for at least 60 days, with
permanent residency status in the country, and applying for Re-entry Permit and paid to the
immigration officer when entering the country

Charges on forest products – Tax on the privilege of exploiting the forest resources in the
Philippines

Energy consumption tax – Tax on electric power consumption over 650 kWh of each residential
customer

TAX AVOIDANCE TAX EVASION

 Legal  illegal
 utilized to minimize (if not erase) tax  utilized to minimize (if not erase) tax
liabilities of a certain taxpayer liabilities of a certain taxpayer
  Examples:  Examples:
Using legitimate tax deductions Not reporting income
Setting up tax deferrals plan Reporting more expenses than you can
Taking tax credit Not paying taxes owed
Understating your tax owed
 Other name: Tax planning  Other name: Tax dodging

Company: ABS-CBN
Transfer Pricing

Ex: Product cost 100

Product mark-up 50
Product sale 150

Taxable Income P50 x 30% = P15

Special Economic Zone - Exempt

Voluntary Assessment and Payment Program (VAPP)

To encourage tax payments, boost revenue collection and sustain government programs during the
COVID-19 pandemic, the Bureau of Internal Revenue provided an avenue by which taxpayers may pay
additional taxes in exchange for exemption from audit of internal revenue taxes for the calendar year
ending December 31, 2018 and fiscal year 2018 ending on the last day of the months of July 2018 to
June 2019. This new program is called the Voluntary Assessment and Payment Program (VAPP) under
Revenue Regulations (RR) No. 21-2020. (Ended December 31, 2020)

PENALTIES
MODULE 1: TAX REMEDIES
Remedies of the Government in the Collection of Taxes
1. ADMINISTRATIVE 2. JUDICIAL
a. Distraint of personal property; a. Ordinary civil action
b. Levy of real property b. Criminal action
c. Enforcement of forfeiture of property
d. Enforcement of tax lien
e. Requiring the filing of bonds
f. Requiring proof of filing income tax returns
g. Deportation of aliens
h. Inspection of books of accounts.

Administrative

a. DISTRAINT- seizure by the government of personal property, tangible or intangible, to enforce

the payment of taxes to be followed by its public sale of such property, if the taxpayer fails to
pay voluntarily.

Kinds of Distraint
a. Actual - there is taking of possession of the personal property out of the taxpayer into that
of the government;
b. Constructive - the owner is merely prohibited from disposing of his property.

b. LEVY - same act of seizure but in this case, it is seizure of real property, interest in or rights to
such property in order to enforce payment of taxes. As in the distraint of personal property, the
real property under levy shall be sold in a public sale, if the taxes involved are not voluntarily
paid following such levy.
 c. FORFEITURE- a divestiture of property without compensation, in consequence of a default or
offense. In case of chattels and removal of fixtures of any sort, forfeiture is enforced by seizure
and sale or destruction of the specific forfeited property. The forfeiture of real property is
enforced by a judgment of condemnation and sale in a legal action or proceeding, civil or
criminal, as the case may require.

d. TAX LIEN- a legal claim or charge on property either real or personal established by law as a
security in default of the payment of taxes. The tax, together with interest, penalties and cost
that may accrue in addition thereto is a lien upon all property and rights to property belonging
to the taxpayer.

e. REQUIRING THE FILING OF BONDS- Filing of performance bond to secure the payment of taxes
or compliance with certain provisions of tax laws and regulations. This may be required by the
BIR for the issuance of a tax clearance.

f. REQUIRING PROOF OF FILING INCOME TAX RETURNS. – Before a license to engage in trade or
business or occupation or to practice a profession can be issued to a person, partnership,
association or corporation, he must submit to the officer issuing such license or permit, proof
that he has filed his income tax return during the preceding year and that income taxes due
have been paid thereon.

g. DEPORTATION OF ALIENS- any alien who

1. knowingly and fraudulently evades the payment of any internal revenue tax or
2. willfully refuses to pay such tax and its accessory penalties after the decision on the tax
liability rendered by the Commissioner of Internal Revenue, or the CTA or any competent
judicial tribunal shall have become final and executor, is subject to deportation. The penalty of
deportation is not a bar to any proceeding taken by the government to enforce collection of tax
delinquency.

h. INSPECTION OF BOOKS OF ACCOUNTS

Judicial Action

a. Civil Action- After the assessment made by the Commissioner of Internal Revenue has become final
and executory for failure of the taxpayer to dispute the same and appeal the disputed assessment to the
Court of Tax Appeals, the government may institute civil actions to collect internal revenue taxes in the
Regional Trial Court and the Metropolitan Trial Court, City and municipal courts.

b. Criminal Action- maybe pursued by the authorities for the collection of delinquent taxes. An
assessment of a tax deficiency is not necessary to a criminal prosecution for tax evasion. The crime is
complete when the violator has knowingly and willfully filed a fraudulent return or neglected to file a
return with intent to evade the tax. If the taxpayer is acquitted, the government may still collect the tax
in a civil action, because the payment of a tax is an obligation imposed by statute and does not arise
from a criminal act.
MODULE 2: PROTESTING AN ASSESSMENT
SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative
finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided,
however, That a pre-assessment notice shall not be required in the following cases:

(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the
tax as appearing on the face of the return; or

(b) When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or

(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a
taxable period was determined to have carried over and automatically applied the same amount
claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable
year; or

(d) When the excise tax due on excisable articles has not been paid; or

(e) When the article locally purchased or imported by an exempt person, such as, but not limited to,
vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-
exempt persons.

The taxpayers shall be informed in writing of the law and the facts on which the assessment is made;
otherwise, the assessment shall be void.

An assessment refers to the determination of amounts due from a person obligated to make
payments. In the context of national internal revenue collection, it refers to the determination of the
taxes due from a taxpayer under the National Internal Revenue Code of 1997.

Generally, however, the BIR assesses taxes when it appears, after a return had been filed, that the taxes
paid were:

Incorrect Fraudulent
False When taxes are due but no return is filed.
MODULE 3: TRAIN LAW

TRAIN aims to make the current tax system simpler, fairer, and more efficient.
By 2020
Reduce the poverty rate from 26% to 17% uplifting about 10 million Filipinos from poverty
Achieve middle – income status
By 2040
Eradicate extreme poverty, provide equal opportunities through inclusive economic and political
institutions and achieve high income status.
HIGHLIGHTS OF TRAIN
A. Income Taxes
Current Annual income P10,000 and below – 5%
Annual income P500,000 and above – 32%
13th month pay and other benefits P82,000 and
below – 0%
Train Law Annual income P250,000 and below – 0%
Annual income P8M and above – 35%
13th month pay and other bonuses P90,000 and
below – 0%

New Tax Obligation Rate under TRAIN Law for 2018 Onwards
The 13th month pay is generally exempt from taxation. However, there is a prescribed limit to this
exemption provided under Section 32 (B)(7)(e) of the National Internal Revenue Code (NIRC) – which
was amended by Republic Act No. 10963 or the TRAIN law on January 2018. The amendment stipulates
that the 13th month pay and other equivalent benefits shall not be subject to tax for a maximum of
P90,000. This new amount is a relative increase from the previous tax exclusion rate of P82,000.
Anything beyond the maximum exclusion rate of P90,000 must be included in the computation of the
employee’s gross income for the applicable taxable year.

TRAIN repeals Section 35 of the National Internal Revenue Code on personal exemptions of
individual taxpayers. Whether the taxpayer is single, married, head of the family, with or without
dependents, the taxpayer is exempted from paying personal income tax (PIT) as long as he /she is
earning less than P21,000 a month.

Starting 1 January 2018, compensation earners, self-employed and professional taxpayers (SEP) whose
annual taxable incomes are P250, 000 and below or less than P21,000 a month is exempted from the
personal income tax (PIT).

SEPs whose gross receipts or sales are below P3 million have the option to choose from the 8% flat tax
rate or the TRAIN’s new personal income tax table.

SEPs whose annual salaries are P500,000 and below are exempt from 3% percentage tax.

The 13th month pay and other bonuses amounting to P90,000 are likewise tax-exempt.

B. Value-Added Tax

Current: Vat Threshold P1.9M

Train Law: Vat Threshold P3M

Output Vat (sales) – Input Vat (purchases) = VAT Payable

Sectors and items exempted:

 Small business with total annual sales of  VAT zero-rating of renewable energy
P3M and below  Health and education
 Persons with disability  Tourism enterprises
 Drugs and medicines for diabetes, high  Business process outsourcing companies
cholesterol and hypertension (VAT-free in special economic zones
starting 2019)  Senior citizens
 Raw food/agricultural products  Cooperative

The following are also exempted from VAT:

•Raw food •Agricultural products •Health and education •Senior citizens

•PWDs •Cooperatives •Renewable energy •Tourism enterprises
•BPOs in special •Socialized housing • Low-cost housing •Leases below
economic zones (P450,000 and below) (amounting to P3 P15,000/month
million)
•Condominium
association dues

VAT- free starting 2019: Sale of drugs for diabetes, high cholesterol, and hypertension

VAT- free starting 2021: Socialized and mass housing projects P2 million and below

C. Sugar-Sweetened Beverages

Current None
Train Law P6/ liter: Beverages using caloric and non-caloric
sweeteners
P12/ liter: Beverages using high fructose corn
syrup

To promote a healthier Philippines, sugar-sweetened beverages will be taxed.

 P6 per liter for drinks using sugar and artificial sweeteners

 P12 per liter for drinks using high fructose corn syrup.

All kinds of milk, 3-in-1 coffee, natural fruit and vegetable juices, and medically indicated beverages are
exempted.

KEY EXEMPTIONS: 3-1 Coffee, Milk and 100% Juices

 D. Petroleum Excise Tax

Current Liquefied petroleum gas – None

Diesel fuel – None
Regular and unleaded premium gasoline – P4.53
per liter
Train Law Liquefied petroleum gas
2018: P1 per kg
2019: P2 per kg
2020 and onwards: P3 per kg

Diesel fuel
2018: P2.50 per liter
2019: P4.50 per liter
2020 and onwards: P6 per liter

Regular and unleaded premium gasoline

2018: P7 per liter
2019: P9 per liter
2020 and onwards: P10 per liter

* TRAIN has safeguard provision that would

suspend the increases if Dubai $80 per barrel
* Law grants the Department of Finance the
power to require fuel making in order to combat
oil smuggling

Through appropriately taxing dirty fuel, environmental and health concerns can be addressed.
TRAIN increases the excise tax on fuel which has not been adjusted since 1997.

E. Automobile Excise Tax

Current Vehicles: P600,000 and below – 2%

Vehicles: P600,00- up to P1.1M – P12,000 + 20%
of excess over P600,000
Vehicles: Above P1.1M up to P2.1M – P112,000 +
40% of exc4ess over P2.1M
Train Law Vehicles: P600,000 and below – 4%
Vehicles: Above P600,000 up to P1M – 10%
Vehicles: Above P1M up to 4M – 20%
Vehicles: Above P4M – 50%
 Pick-up trucks and electric vehicles are exempted from excise taxes.

F. Tobacco Excise Tax

Current 2017: P30 per pack

2018: P31.20 per pack
Train Law January to June 2018: P32.50 per pack
July to December 2018 up to 2019: P35 per pack
2020 to 2021: P37.50 per pack
2022 to 2023: P40 per pack
2023 and onwards: 4% annual increase

G. Cosmetics Tax

Current None
Train Law Cosmetic procedures and procedures solely for
enhancing patient’s appearance: 5%

A 5% tax will be imposed on cosmetic surgery or medical procedures for purely aesthetic
purposes.
 H. Donor’s Tax

Current Gifts net donations: Up to 15%

Train Law Gifts net donations: P250,000 and above – 6%
(regardless of relationship between donor and
recipient)

A single tax rate of 6% of net donations will be imposed for gifts above P250,000 yearly
regardless of relationship to the donor.

I. Estate Tax

Current Family home net estate value: Up to 20%

Train Law Family home net estate value: 6%

A single tax rate of 6% based on the net value of the estate with a standard deduction of P5
million will be imposed.

J. Coal (Mineral Products)

Current P10 per metric ton

Train Law First year: P50 per metric ton
Second year: P100 per metric ton
Third and succeeding years: P150 per metric ton

K. Nonmetallic Minerals and Quarry Resources

Current Non-metallic and metallic minerals: 2%

(including copper, gold and chromite)
Train Law Non-metallic and metallic minerals: 4%
(including copper, gold and chromite)
VETO MESSAGE OF THE PRESIDENT ON TRAIN

President Rodrigo Duterte, by the power vested in him by Article VI, Section 72 of the Constitution,
vetoed five-line items under the Tax Reform for Acceleration and Inclusion (TRAIN) Act in an effort to
"ease the burden of the common taxpayers."

The vetoed five-line items included the following provisions:

1. Reduced income tax rate of employees of Regional Headquarters (RHQs), Regional Operating
Headquarters (ROHQs), Offshore Banking Units (OBUs), and Petroleum Service Contractors and
Subcontractors.

2. Zero-rating of sales of goods and services to separate customs territory and tourism enterprise zones

3. Exemption from percentage tax of gross sales/receipts not exceeding five hundred thousand pesos
(P500,000.00)

4. Exemption of various petroleum products from excise tax when used as input, feedstock, or as raw
material in the manufacturing of petrochemical products, or in the refining of petroleum products, or as
replacement fuel for natural gas fired combined cycle power plants

5. Earmarking of incremental tobacco taxes

TRAIN’S IMPLEMENTING RULES AND REGULATIONS

The Department of Finance (DOF) is now fast-tracking the Implementing Rules and Regulations (IRR) of
TRAIN. Even if there is no IRR yet, the law already took effect on January 1, 2018, as what is required for
its effectivity is publication.

BENEFITS OF TRAINS

 EDUCATION: Create a more conducive learning environment with the ideal teacher-to-student
ratio. In the next 5 years, the tax reform can fund 629,120public school classrooms, or 2,685,101
public school teachers.
 HEALTHCARE SERVICES: In the next 5 years, the tax reform can fund 60,483 rural health units, or
484,326 barangay health stations, or 1,324provincial hospitals.
 INFRASTRUCTURE PROGRAMS: Additional funds from the tax reform will be used for the
projects of the Department of Public Works and Highways which consists of major highways,
expressways, and flood control projects. In the next 5 years, the tax reform can fund: 35,745 km
of paved roads, or 786,400 km of temporary bridge upgrades, or 2.6 million hectares of
irrigated land.
 THE POSIDENT’S MESSAGE

1. Philippine Economic Zone Authority (PEZA)

2. The Omnibus Investment Code (E.O. 226)

3. Barangay Micro Business Enterprises (BMBE) Act

4. Double Taxation Agreement (DTA)

5. Senior Citizen Law

REPUBLIC ACT NO. 7916 (The Special Economic Zone Act) -An act of providing for the legal framework and
mechanism for the creation, operation, administration, and coordination of Special Economic Zones in the
Philippines, creating for this purpose, the Philippine Economic Zone Authority (PEZA), and for other purposes.

Purposes, Intents and Objectives (The Special Economic Zone Act)

a. To establish the legal framework and mechanisms for the integration, coordination, planning and monitoring
of special economic zones, industrial estates/parks, export processing zones and other economic zones;
b. To transform selected areas in the country into highly developed agro-industrial, industrial, commercial,
tourist, banking, investment, and financial centers, where highly trained workers and efficient services will be
available to commercial enterprises;
c. To promote the flow of investors, both foreign and local, into special economic zones which would generate
employment opportunities and establish backward and forward linkages among industries in and around the
economic zones;
d. To stimulate the repatriation of Filipino capital by providing attractive climate and incentives for business
activity;
e. To promote financial and industrial cooperation between the Philippines and industrialized countries
through technology-intensive industries that will modernize the country’s industrial sector and improve
productivity levels by utilizing new technological and managerial know-how; and
f. To vest the special economic zones on certain areas thereof with the status of a separate customs territory
within the framework of the Constitution and the national sovereignty and territorial integrity of the
Philippines

Philippine Economic Zone Authority (PEZA)

Philippine Economic Zone Authority is a government agency in the Philippines attached to the Department of
Trade and Industry created to help promote investments in the export-oriented manufacturing industry into
the country by assisting investors in registering and facilitating their business operations and providing tax
incentives. PEZA also assists investors who locate in service facilities inside selected areas in the country which
are usually business process outsourcing and knowledge process outsourcing firms. Other activities also eligible
for PEZA registration and incentives include establishment and operation within special economic zones for
tourism, medical tourism, logistics and warehousing services, economic zone development and operation and
facilities providers.

Fiscal Incentives to PEZA-Registered Economic Zone Enterprise

• Income Tax Holiday (ITH) – 100% exemption from corporate income tax 

 4 years ITH for Non-pioneer Project

 6 years ITH for Pioneer Project

ITH Extension years may be granted if Project complies with the following criteria, (one criterion is equivalent
to one ITH extension year), provided that the total ITH entitlement period shall not exceed eight (8) years:
 The average net foreign exchange earnings of the project for the first three (3) years of operations is at
least US$500,000.00 and,

 The capital equipment to labor ratio of the project does not exceed US$10,000.00 to 1 for the year
immediately preceding the ITH extension Year being applied for.

> The average cost of indigenous raw materials used in the manufacture of the registered product is at least
fifty per cent (50%) of the total cost of raw Materials for the preceding years prior to the ITH extension year. 
   Exemption from expanded withholding tax

Fiscal Incentives to PEZA-Registered Economic Zone Enterprise (continued)

 Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and exemption

from all national and local taxes (“Gross Income” refers to gross sales or gross revenues
derived from the registered activity, net of sales discounts, sales returns and allowances
and minus cost of sales or direct costs but before any deduction is made for administrative
expenses or incidental losses during a given taxable period)
 Tax and duty free importation of raw materials, capital equipment, machineries and spare

parts.
 Exemption from wharfage dues and export tax, impost or fees

 VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements

 Exemption from payment of any and all local government imposts, fees, licenses or taxes.

 Exemption from expanded withholding tax

Non-Fiscal Incentives to PEZA-Registered Economic Zone Enterprises 



 Simplified Import – Export Procedures (Electronic Import Permit System and Automated Export
Documentation System).
  Non-resident Foreign Nationals may be employed by PEZA-registered Economic Zone Enterprises in
supervisory, technical or advisory positions.

 Special Non-Immigrant Visa with Multiple Entry Privileges for the following non-resident Foreign
Nationals in a PEZA-registered Economic Zone Enterprise: Investor/s, officers, and employees in
supervisory, technical or advisory position, and their spouses and unmarried children under twenty-
one years of age.   PEZA extends Visa Facilitation Assistance to foreign nationals their spouses and
dependents. 

2. The Omnibus Investment Code

The Omnibus Investments Code of 1987 (Executive Order No. 226, as amended), which is implemented by the
Philippine Board of Investments (the "BOI"), provides a comprehensive set of incentives for local and foreign
enterprises engaged in activities considered by the Philippine government as high priority for national
development.

The following incentives are available to a BOI-registered enterprise:

1. Tax Exemptions
a. Income Tax Holiday (ITH)
 New projects with a pioneer status for six (6) years;

 New projects with a non-pioneer status for (4) years;

 Expansion projects for three (3) years, limited to incremental sales revenue/

volume as a general rule;

 New or expansion projects in less developed areas ("LDAs") 3 for six (6) years,

regardless of status; and,

 Modernization projects for three (3) years, limited to incremental sales

revenue/volume, as a general rule.

 The ITH is restricted with respect to certain Export Traders and Mining

Activities
 New registered pioneer and non-pioneer enterprises and those located in

 LDAs may avail themselves of a bonus year subject to certain conditions

b. A registered enterprise with a bonded manufacturing warehouse shall be exempt from customs duties and
national internal revenue taxes on its importation of required supplies/spare parts for consigned equipment or
those imported with incentives. The privilege to operate a bonded manufacturing/trading warehouse subject
to Customs rules and regulations.
c. 10-years exemption from wharfage dues and export tax, duty, impost and fees for exports of non-traditional
export products.
d. For agricultural producers, 10-years exemption from the payment of all taxes and duties on their
importation of breeding stocks and genetic materials.

3. Barangay Micro Business Enterprise (BMBE)

A micro business or enterprise is defined as any business activity or enterprise engaged in industry,
agribusiness and or services, whether single proprietorship, cooperative, partnership or corporation whose
total assets, inclusive of those arising from loans but exclusive of the land on which the particular business
entity’s office, plant and equipment are situated, must have value of not more than 3 million Pesos (Sec. 3. of
R.A. 9501 otherwise known as the Magna Carta for Micro, Small and Medium Enterprises (MSMEs).
If your business or activity falls under the micro enterprise category, you might also be eligible to be registered
as a BMBE (Barangay Micro Business Enterprise) which may avail of the following incentives provided by the
government through R.A. 9178, otherwise known as the “Barangay Micro Business Enterprises Act of 2002:

WHAT ARE THE BENEFITS AND INCENTIVES OF REGISTERED BMBE’S? 

1. Income tax exemption from income arising from the operations of the
enterprise.
2. Exemption from coverage of the Minimum Wage Law but BMBE employees
will still receive the same social security and health care benefits like other
employees.
3. Priority to a special credit window set up specifically for financing
requirements of BMBE’s
4. Technological transfer, production and management training, and marketing
assistance programs for BMBE’s beneficiaries.

4. Double Taxation Agreements

A Double Taxation Agreements (DTA) is a tax treaty between two countries or territories. Relief from paying
tax twice DTAs give more relief from double taxation than is available under domestic law. One way DTAs
prevent double taxation is by giving one country or territory the right to tax certain income and exempting it in
the other state.
Example: You are a resident of Country A and have earned income in Country B. Country A subjects its
residents’ worldwide income to tax, and obligates you to pay taxes on the income you earned in Country B.
Meanwhile, Country B taxes all income earned in its jurisdiction, and obligates you to pay taxes on that same
income. This is a classic example of double taxation, and it is a situation that many countries try to avoid as
much as possible, recognizing that it disincentivizes foreign investment.

The benefits granted under the Philippines’ double tax treaties

 
The Philippines has signed various treaties through which the taxation of certain incomes twice is avoided.
These incomes must be obtained by non-residents carrying out activities in the Philippines, branch offices of
foreign companies included. This is the most important provision contained by all the Philippines’ double tax
treaties.
Following this, each agreement contains specific provisions related to the tax deductions, exemptions and tax
reliefs which will be provided under certain circumstances. Most of the double taxation treaties signed by the
Philippines include special provisions related to the taxation of:
-          dividend payments;
-          interest payments;
-          royalties payments;
-          international air transportation and shipping services.

5. Value Added Tax

Value-Added Tax (VAT) exemptions under CREATE Act shall include:

• Sale or distribution, importation, printing, or publication of any educational material covered by the
UNESCO agreement including digital and electronic format

• All drugs, vaccines, and medical devices prescribed and used for the treatment of COVID-19

• Capital equipment, its spare parts, and raw materials for the production of personal protective
equipment for COVID-19 prevention
 • Drugs for the treatment of COVID-19 approved by the FDA for use in clinical trials, including raw
materials directly necessary for the production of such drugs

• Sale of prescription drugs and medicines for cancer, mental illness, tuberculosis, diabetes, high
cholesterol, hypertension, and kidney disease (beginning January 1, 2021 instead of January 1, 2023)

Amendments to indirect tax and incentives related to COVID-19 prevention, control and treatment
• Value-added tax (VAT) exemption on the sale or importation of the following goods:

• Drugs, vaccines, medical devices, capital equipment, spare parts and raw materials for the
prevention, control and treatment of COVID-19, subject to conditions, beginning 1 January
2021 to 31 December 2023; and

• Prescription drugs and medicines for cancer, mental illness, tuberculosis and kidney
diseases, beginning 1 January 2021 (previously 1 January 2023).

• The importation of COVID-19 vaccines will be exempt from import duties, taxes and other fees, subject
to the approval or licenses issued by the Department of Health or the Food and Drug Administration.

b. Value Added Tax (Senior Citizen/PWD’s)

3 Steps in Computing Amount Billable to Senior Citizen/PWD’s
1. Determine the amount of VAT exempt sale
A senior citizen is exempted from paying Value-Added Tax (VAT). As such, you need to deduct the amount of
VAT from the selling price. Here’s how to compute the VAT Exempt

Sales to Senior Citizen/PWDs:

Formula:
VAT Exempt Sales =  Selling Price ÷ 1.12
Computation:
P1,000.00 ÷ 1.12 = P892.86

2. Deduct the 20% discount

Formula:
Senior Citizen/PWDs Discount = VAT Exempt Sale x 20%
Computation:
P892.86 x 0.20 = P178.57

3. Compute the billable amount

Formula:
Amount Collectible = VAT Exempt Sale – Senior Citizen/PWDs Discount
Computation:
P892.86 – P178.57 = P714.29