Have you read the latest issued revenue regulations and memorandum this year, 2019? If you haven’t, here are five (5) tax updates this year 2019 that you should read. What are these updates in 2019? First, these updates include new tax rates for life insurance and insurance in a foreign insurance company. Second, the creditable withholding tax for top withholding agents for their purchases of goods and services on their suppliers. Third, it also defines who is the top withholding agent.
What else this article includes? It also consists of the vat train law updates on imposing exemptions on prescribed drugs or medicines for diabetes, high cholesterol, and hypertension. These vat updates will also discuss the treatment of input tax for the unsold drugs or drugs before the effectivity as a vat exempt. Lastly is the update about the filing and payment of estate tax due in the Philippines. Let’s start with life insurance.
Latest Tax Update on Train Law 2019
1. New Tax Rates for Life Insurance
On June 14, 2019, the Bureau of Internal Revenue issued the modification of the Alphanumeric Tax Code for percentage taxes under Republic Act No. 10001. It is an act reducing taxes, particularly on life insurance policies.
Any amounts collected by life insurance companies, agent or corporations is subject to other percentage taxes. These companies do not include those who are purely cooperatives or associations. Previously, the amount collected by the companies was subject to 5% on the total premiums collected. On the other hand, any insurance agents of Foreign Insurance companies were subject to 10% on the total premiums collected.
What is the effect of this memorandum? It reduces the taxes on life insurance from 5% to 2% on total premiums collected by the insurance company or agent. The tax rate on total dividends collected by the insurance agent in any foreign insurance company is 10% to 4% as the new tax rate.
The implementation of this issuance shall take effect immediately.
(Read more article: 13 Approved Train Law Philippines 2019 )
2. Creditable Withholding Tax on Top Withholding Agents
Do you know what withholding tax is in the Philippines? If you want to know more about withholding tax, you may read this article about withholding tax under train tax law. You might be asking about the requirement of a top withholding agent. It refers to the taxpayer whose gross sales or receipts maybe amounted to twelve million pesos only (12,000,000). These requirements include the total claimed deductible itemized deductions and gross purchases.
Revenue Regulations 7-2019 releases to clarify the income payment subject to creditable withholding tax rates. This regulation monitors the income payment made by any top withholding agents, including non-resident aliens engaged in trade in the Philippines. They are subject to one (1%) percent for the supplier of goods while the supplier of services is subject to two (2%).
However, any taxpayers classified before the effectiveness of this regulation as top withholding agents will not qualify these creditable withholding taxes. Take note also that the term goods are pertaining only to tangible personal property. It will not include any intangible as well as agricultural products.
To be a resident supplier of goods or services, there is a regular transaction to any top withholding agent, not only for a single purchase. However, if the top withholding agent purchases any goods or services at 10 000 or more are subject to creditable withholding tax. Lastly, to be a regular supplier, they must have at least six months’ transactions regardless of the amount of purchase.
3. Value Added Tax 2019 Updates
VAT Exempt for Sale of Drugs for Diabetes, High-Cholesterol, and Hypertension
On January 10, 2019, the government issued the revenue memorandum circular no. 4-2019. This memorandum is implementing guidelines on the value-added tax exemptions of the sale of drugs prescribed. These drugs prescribed include diabetes, high cholesterol, and hypertension. This memorandum is under the Republic Act no. 8424 as the National Internal Revenue Code of 1997. The effectivity of this regulation will be on January 1, 2019.
Other relevant stories:
Value Added Tax (VAT) under Train Tax Law
VAT Invoices Update under Train Law 2018
4. Input Tax for VAT Exempt Drugs
The government issued a memorandum to clarify how the input tax claims for the prescribed medicines or drugs were still unsold before giving this regulation. Therefore, any unsold medicines or drugs from all manufacturers, wholesalers, distributors, and retailers will claim the excess input tax.
The total amount to claim the input tax will include those still in the company’s hands and imported. If the sale of VAT-exempt drugs has been made, the input tax is a charge to the cost of purchase or other expense accounts.
5. Estate Tax Filing and Payment of Tax Due 2019 Updates
This update is about the filing and paying tax dues of the estate tax in the Philippines, including compensation of the estate tax by installment and partial sale of the estate.
Under the cash installment, the payment is made within two years from the date of filing. This payment will be using the form 0605 or a payment form for this transaction. The next installment is after the first (1st) payment.
If the bank deposit of the decedent is withdrawn within one year at the time of death, the bank will remit the 6% final withholding tax. The bank will file using the monthly remittance for taxes withheld on the amount withdrawn. This amount shall send on or before the 10th day following the month when the withholding was made.
However, if you withheld the amount in the 3rd month of the quarter, the bank will use a quarterly remittance return. This tax shall remit on or before the last day of the month following the close of the quarter.
After filing, the bank shall issue the original and duplicate copies of the tax withholding form to the interested parties. On the other hand, the third copies are kept by the bank. Finally, on the legal heirs, the duplicate copies are submitted to the RDO where the decedent died.
(Other updates of estate tax train law: Estate Tax Train Law in the Philippines)
Conclusions
You’ve learned the five (5) latest updates of train law. First, life insurance is subject to 2% – 4% based on the total premium collected. The second thing you’ve learned is the creditable withholding tax of 1% and 2% for the top withholding agents.VAT Exempt for Sale of Drugs for Diabetes, High-Cholesterol, and Hypertension and how to claim the input tax for those items that are subject to vat exemption this year. Lastly, is the procedures in filing the estate tax return.
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