Tax planning and paying your taxes on time are part of adulting.
Taxes are the lifeblood of the nation needed to finance the government and its services to the citizens. Hence, regardless of any reluctance you might feel in parting with your hard-earned money, it’s your duty as a citizen to give your fair share to the government. You must pay the right amount of tax at the right time.
If you own a real estate property such as a condo unit, you are obliged to settle your real property tax (RPT) on or before January 31, if you are paying in full. If you decide to pay in installment, you may settle on or before the last day of each quarter: March 31, June 30, September 20, and December 31.
Keep in mind that failure to meet the deadlines for tax filing and payments may result in penalties. Make sure you have everything in order ahead of the tax deadlines.
Below are some helpful tax preparation tips to help you stay stress-free for the tax season:
1. Know your tax obligations.
Under the National Internal Revenue Code (NIRC), as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law, resident and non-resident Filipino citizens are obliged to pay taxes on income based on the following rules:
For Resident Filipino Citizens
1. If you are a compensation income earner (i.e. a salaried employee), you must pay the net income tax on your compensation income.
2. If you are self-employed with gross sales or gross receipts amounting to NOT more than PhP3 million, you may choose between paying:
A) the net income tax; or
B) 8% of the gross sales or gross receipts in excess of PhP250,000.00
Note: You should signify your option in the first quarter of each year. Otherwise, the default tax rate will be your net income tax.
3. If you are self-employed with gross sales or gross receipts amounting to more than PhP3 million, you must pay the net income tax.
4. If you are a mixed-income earner (e.g. you are a salaried employee with a part-time job or a business), you must pay:
A) the net income tax on your compensation income; and
B) the net income tax or 8% of the gross sales or gross receipts (not more than PhP3 million); or
C) the net income tax on the gross sales or gross receipts exceeding PhP3 million.
The rules apply to non-resident Filipino citizens, but only income earned within the Philippines shall be taxable.
The rules shall apply to all income except (1) passive income such as interest earnings from bank deposits and royalties; (2) capital gains from the sale of shares of stocks; and (3) capital gains from the sale of real property. For these items, the final withholding tax shall apply.
Real property tax (RPT)
This tax is the obligation of the property owner or administrator. The rate is computed as follows:
RPT = RPT rate x assessed value
The RPT rate for real properties in Metro Manila is 2%, while the rate for real properties in the province is 1%. The assessed value is the market value of the property multiplied by the assessment level or the percentage applied to the fair market value. Condos and other residential properties are imposed a maximum RPT of 20%.
Aside from the RPT, you should also take note of common condo fees, like association dues and other fees, related to your property ownership.
2. Mark your calendar for the deadlines.
Another important tip on tax planning is to meet the deadline. As discussed, annual income tax returns should be filed on or before April 15 of each year. Filing your tax may be accomplished online, and payments may be coursed through selected banks.
For real property taxes, take note of January 31 (full payment) or the last days of each quarter (installment payments). It is important to stay in the loop re: local ordinances for RPT updates and possible extension of tax filing and payments.
The set dates are the deadlines. Aspire to meet your obligations ahead of time to avoid incurring penalties.
3. Get the services of a bookkeeper or an accountant.
You have nothing to worry about if you’re purely a compensation income earner. This is because your employer acts as the withholding agent who will prepare your income tax return (ITR), file it on time, and pay your taxes on your behalf.
It gets somewhat tricky when you have other sources of income such as when you’re earning as a part-time writer or own an online shop. You will then fall under the mixed-income earner category in which you may need the assistance of a bookkeeper or an accountant.
One important tip is to double-check your tax returns before letting your bookkeeper or accountant file them for you. Your signature on these returns signifies your knowledge of the correctness of the information disclosed.
4. Keep your records in order.
Record-keeping is important for every adult to master. Keep a complete record of your tax transactions.
If you’re using BIR’s e-filing system, create a folder for your own copies of the returns and confirmation receipts.
You may keep hardcopies for a period of at least two years unless you need to hold on to your files longer. When you no longer need them, know how to properly dispose of your files containing your personal and other confidential information.
Taxes serve as the fuel that keeps the government running. These mandatory contributions from income-earning individuals and corporate entities fund our public hospitals, schools, infrastructure projects, national defense, and other public services
So be a responsible Filipino. Pay your taxes regularly and on time.