What will be discussed:
The tax collected on the average gross annual income on a rental apartment/property in the country. Rental tax is charged instead of a sales tax when equipment or properties are leased. So instead of paying a sales tax for purchase of the leased equipment, taxes are collected by the Lessor in addition to the rentals over the lease term.
Gross income means all income derived from whatever source.
- Compensation for services, in whatever form paid, including but not limited to fees, salaries, wages, commissions and similar item
- Gross income derived from the conduct of trade or business or the exercise of profession
- Gains derived from dealings in property
- Prizes and winnings
- Partner's distributive share from the net income of the general professional partnerships
o Gross rental income is US$1,500 or more or less P64,000/month
o The property is personally directly owned jointly by husband and wife
o They have no other local income
o There is no mortgage, i.e., no loan is taken for the purchase
In arriving at the pre-tax profit figure, we calculate, and deduct:
o Depreciation / capital allowances if available. We assume a value for the apartment based on our valuation research, and depreciate on this basis.
Deductions are also made from any other costs which a landlord normally pays - management charges, buildings insurance, and realtor agency fees. There is a choice between standard percentage deductions (if available) or typical actually incurred costs. Real estate tax is normally payable by the landlord.
Under existing VAT regulations, rental payments exceeding PHP10,000 (US$216) per unit received by landlords whose gross annual rental income exceed PHP1,500,000 (US$32,427) are subject to 12% VAT. If the gross annual rental income is less than PHP1,500,000 (US$32,427), the applicable tax rate is 3%. The VAT burden is generally shouldered by the tenants but for calculation purposes, the VAT was added to the landlord’s tax liability.
Annual Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those With Mixed Income, i.e., Compensation Income and Income from Business and/or Practice of Profession)
BIR Form 1701 - Annual Income Tax Return (For Self-Employed Individuals, Estates and Trusts Including Those With Both Business and Compensation Income)
1. Certificate of Income Tax Withheld on Compensation (BIR Form 2316), if applicable
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable
3. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable
4. Waiver of the Husband’s right to claim additional exemption, if applicable
5. Duly approved Tax Debit Memo, if applicable
6. Proof of Foreign Tax Credits, if applicable
7. Income Tax Return previously filed and proof of payment, if filing an amended return for the same year
8. Account Information Form (AIF) or the Certificate of the independent CPA with Audited Financial Statements if the gross quarterly sales, earnings, receipts or output exceed P 150,000.00
9. Proof of prior year’s excess tax credits, if applicable
1. Fill-up BIR Form 1701 in triplicate copies.
2. If there is payment:
- Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered and present the duly accomplished BIR Form 1701, together with the required attachments and your payment.
- In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered and present the duly accomplished BIR Form 1701, together with the required attachments and your payment.
- Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer
3. For "No Payment" including refundable/ creditable returns, returns with excess tax credit carry over, and returns qualified for second installment:
- Proceed to the Revenue District Office where you are registered or to any established Tax Filing Centers established by the BIR and present the duly accomplished BIR Form 1701, together with the required attachments.
- Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative.
Final Adjustment Return or Annual Income Tax Return – On or before the 15th day of April of each year covering income for the preceding year.
25% surcharge on basic tax due
50% surcharge in case of fraud or intent to evade tax
20% per annum based on basic tax due
· COMPROMISE PENALTY
Subject to type and amount of tax due
Is there anything we missed?