After successfully registering your business with the Bureau of Internal Revenue (BIR), you will be subject to quarterly and annual payment of taxes, aside from the renewal of the BIR Certificate of Registration Renewal (Form 2303) yearly.
“Tax is an enforced proportional contribution levied by the lawmaking body of the State to raise revenue for public purpose.”
Taxes are imposed after the commencement of a business or profession. Since taxation is generally wide in scope, this post specifically covers income taxes for individuals purely earning income from a business (sole proprietors), non-VAT taxpayers, and start-up businesses without employees hired.
Registered businesses must take note that non-filing and non-payment of income tax returns is subject to penalties, fines, compromises, and/or imprisonment.
Mode of Filing Income Tax Returns
Manual Filing System
The traditional manual system of filing income tax return is by paper documents where taxpayers fill up BIR Forms to report income, expenses, or any declaration required to be filed with the BIR.
Under the NIRC, the income tax return shall be filed to the following, in descending order of priority, within the Revenue District Office (RDO) where the taxpayer is registered or required to register:
An authorized agent bank (AAB)
Revenue Collection Officer
Duly authorized city or municipal treasurer, if there is no BIR office in the locality
e-BIR Forms
The BIR introduced the e-BIR Forms with an offline or online version. Taxpayers fill up their income tax returns in electronic spreadsheets without the need of writing on paper returns. The system ensures completeness of data on the return and is capable of online submission. If there are no penalties that require BIR assessments, taxpayers would have to print a hard copy of the filled tax returns and proceed directly to the bank for payment.
Electronic Filing and Payment System (eFPS)
The eFPS is a paperless tax filing system developed and maintained by the BIR. Taxpayers file tax returns, including attachments in electronic format and pay the tax through the Internet.
Taxpayers mandated to use the eFPS:
Large taxpayers duly notified by the BIR
Top 20,000 private corporations duly notified by the BIR
Top 5,000 individual taxpayers duly notified by the BIR
Taxpayers who wish to enter into contract with government offices
Corporations with paid-up capital of P10,000,000
PEZA-registered entities and those located within Special Economic Zones
Government offices, in so far as remittance of withheld VAT and business tax are concerned
Taxpayers included in the Taxpayer Account Management Program (TAMP)
Accredited importers, including prospective importers required to secure the Importers Clearance Certificate (ICC) and Custom brokers Clearance Certificate (BCC)
Income Tax Returns for Individuals
Form 1700 - Purely employed taxpayer
Form 1701A - Purely in business or profession, using itemized, OSD or opting to the 8% optional income tax (Annual)
Form 1701Q - Purely in business or profession, using itemized, OSD or opting to the 8% optional income tax (Quarterly)
Form 1701 - Mixed income earners, Estates and Trusts
Deadline of Filing the Annual Income Tax Return
The annual income tax return is due for filing on the 15th day of the fourth month following the taxable year of the taxpayer. The income tax due shall be paid upon filing. The BIR Form for the annual ITR is BIR Form 1701A.
Required Attachment in the Annual Income Tax Return
1. Certificate of Independent CPA - if annual sales, earnings, receipts or output exceeds P3,000,000
2. Supplemental form for taxpayers with multiple activities per tax regime
3. Account information form and financial statements (FS) showing:
a. Sales/receipts/fees
b. Cost of sales/services
c. Non-operating and other taxable income
d. Itemized deductions (if taxpayer did not avail of OSD)
e. Taxes and licenses
f. Other information prescribed to be disclosed in the FS
4. Statement of management responsibility (SMR)
5. Certificate of income payments not subjected to Withholding Tax (BIR Form 2304)
6. Certificate of creditable withheld at source (BIR Form 2307)
7. Duly approved Tax debit memo, if applicable
8. Proof of prior year's excess credits, if applicable
9. Proof of foreign tax credits, if applicable
10. For amended return, proof of tax payment and the return previously filed
11. Certificate of tax treaty relief/entitlement issued by the concerned Investment Promotion Agency (IPA)
Deadline of Filing the Quarterly Income Tax Returns
Individuals engaged in business are required to file three quarterly returns aside from the annual consolidated income tax return. Individual taxpayers engaged in business shall file their quarterly income tax returns using BIR Form 1701Q. Quarterly income tax returns of individuals engaged in business are due 45 days from the end of the first three quarters.
The deadline of quarterly income tax returns for individuals is as follows:
1st Quarter ITR (1701Q) - May 15, same year
2nd Quarter ITR (1701Q) - August 15, same year
3rd Quarter ITR (1701Q) - November 15, same year
Frequency of Reporting
Individuals who are purely engaged in business or profession should file their income tax returns quarterly and annually.
When and Where to File and Pay Tax
The annual income tax return shall be filed and the tax paid on or before the 15th day of April of each year covering the income for the preceding year with:
Any authorized agent banks (AAB) located within the jurisdiction of the Revenue District Officer (RDO) where the taxpayer is registered
Revenue Collection Officer (RCO) under the jurisdiction of the RDO where the taxpayer is registered, if there is no AAB
In case of "no payment returns," the same shall be filed with the RDO where the taxpayer is registered or has his legal residence or place of business in the Philippines or with the concerned RCO under the same RDO.
A "no payment return" pertains to tax returns without tax payable such as those with negative or zero taxable income, those with exempt or no operation during the period, those with tax creditable or refundable, or those with balance payable only on the second installment.
Payment of Income Taxes
The general rule is "pay as you file". The regular income tax is paid as the taxpayer files his return. Installment payment of income tax is allowed on certain conditions.
Installment Payment of Income Taxes
When the tax due is in excess of PHP2,000, the individual taxpayer may elect to pay the tax in two equal installments. The first installment shall be paid at the time the return is filed (on or before 15 April) and the second installment is paid on or before 15 October following the close of the calendar year.
If any installment is not paid on or before the date fixed for its payment, the whole amount of the tax unpaid becomes due and payable together with the delinquency penalties.
Disclaimer: The contents of the website have been validated by an external tax resource person, and is for general information only; all of which do not substitute for professional advice. For actual filling up of various BIR Forms, consulting with a tax professional is best advised.
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