I recently joined a forum for entrepreneurs and I found out that many still have a lot of questions about taxation in the Philippines. As an overview, Bureau of Internal Revenue (BIR) is the government agency tasked to collect all taxes from income generating companies and individuals within its territories. To categorize each kind of tax, different forms/returns were formulated according to information necessary to accurately report income and compute taxes as well.
Here is a list of commonly reported tax and BIR returns used for each. For registered businesses, please refer to your Certificate of Registration (BIR Form 2303) for taxes required for government reporting.
- Income Tax – For self-employed individuals, estate and trusts, use Form 1701 for your annual income tax and 1701Q for quarterly reporting. For partnerships and corporations, use Form 1702 for annual and 1702Q for the first three quarters of your taxable year. It is now required that succeeding quarters include summary of your income from the start of your taxable year.
- Value-Added Tax – For VAT registered businesses only, use Form 2550M for the first two months of each taxable quarter and 2550Q for each quarter. Take note that the quarterly return is a summary of the three months of the taxable quarter reported.
- Percentage Tax – For Non-VAT registered companies only, use Form 2551M to report your monthly income. There is a 2551Q but this is applicable to specific industries only.
- Compensation Withholding Tax – All businesses with taxable salaries are required to remit using Form 1601C for each taxable month and report its annual alpha list with Form 1604CF (including Final Withholding Tax).
- Expanded Withholding Tax – Also known as Creditable Income Tax Withheld for various transactions, use Form 1601E monthly and report its annual alpha list with Form 1604E
- Final Tax Withheld – This is the tax on passive (not the main) income earned by taxpayers, use Form 1601F monthly and 1604CF for its alpha list.
There are other forms required but is specific only to transactions or industries they are in. Some forms are used for requesting authorization to transact a particular matter, whether with them or with third-parties. Whatever your business is, the government wants to know it. So, what BIR return do you need?