Paying taxes to the Bureau of Internal Revenue (BIR) is a legal responsibility that every citizen should adhere to. It is a civic duty we should embrace; but doing so, especially for first timers, can be an overwhelming and frustrating task.
Worry no more! We’re here to help you have a basic understanding of the common monthly and quarterly tax deadlines applicable to most Micro, Small and Medium Enterprises (MSMEs). This guide will help you achieve peace of mind by staying compliant.
1. BIR Form 1601C
Withholding Tax on Compensation (WTC) is income tax of individuals that you, as the employer, deduct from the salaries and wages of your employees during payroll. WTC is based on a graduated tax (i.e., higher tax for higher income) table provided by the BIR.
The BIR Form 1601C is the specific tax form that you will use to report the monthly WTC you collected from your employees. You are responsible for submitting the return and remitting the WTC to the BIR on or before the 10th day of the following month e.g., WTC deducted from your employees in June should be filed and remitted on or before July 10. For the December year-end, the BIR allows submission of the BIR Form 1601C (and payment of corresponding amount) on or before January 15.
2. BIR Forms 0619E and 1601EQ
Expanded Withholding Tax (EWT) is the amount you deduct (withhold) on certain payments you make to your suppliers, such as professional fees, rent, contractor fees, etc. EWT is considered your supplier’s advanced payment of income tax. You then act as a withholding agent of the BIR and collect the EWT amount. The purpose of this scheme is for the BIR to collect taxes from income payments at an earlier stage i.e., income taxes are collected upon income payment rather than quarterly.
Note that you don’t have to deduct EWT from all supplier payments. You collect EWTs only on certain types of income payments using the rates provided by the BIR (normally ranging from 1% to 15%). For MSMEs, most of the time you only have to withhold from professional fees (5% to 15%), rent (5%) and contractor fees (2%). In some cases, you will receive a notification from the BIR that you are required to withhold from all suppliers (e.g., if you are identified as a Taxpayer Account Management Program or TAMP taxpayer); in that case, then you must withhold from all supplier payments.
EWTs are advanced payment of income taxes; thus, your suppliers can declare the amount in their Income Tax Returns as tax credit i.e., deduction from the tax due to reduce the amount of tax to be paid. Ensure that you issue them a BIR Form 2307 to document the amount of EWT that you’ve collected. Your supplier will use this as support that a certain amount of income tax has already been paid in advance.
EWTs are reported through the following forms:
BIR Form 0619-E
The BIR Form 0619-E is the form used for the monthly reporting of EWTs. You must file your BIR Form 0619-E and remit the corresponding amount of EWT collected on or before the 10th day of the following month e.g., EWT collected from your suppliers in May should be filed and remitted on or before June 10.
BIR Form 1601-EQ
The BIR Form 1601-EQ is basically similar to the BIR Form 0619-E except that Form 1601-EQ requires more information. In preparing this form, you will need to summarize and report the total income payments made and taxes withheld from your suppliers for the quarter.
This form also requires an attachment called the Quarterly Alphalist of Payees or QAP. QAP is a document that contains the detailed list of suppliers (payees) from whom income payments were withheld. The QAP should contain the following information:
The registered name of the payees;
The Tax Identification Number (TIN) of the payees;
The registered address of the payees;
The total income payments made to the payees for the quarter and;
The amount of taxes withheld from the payees.
The BIR 1601-EQ along with the QAP should be filed and paid not later than the last day of the month following the close of the quarter e.g., EWT collected from your suppliers for the quarter April to June should be filed and the balance (net of April and May remittances) remitted on or before July 31.
3. BIR Form 2550Q or BIR Form 2551Q
Depending on your registration, you will have to file either a BIR Form 2550Q (if you are VAT-registered) or a BIR Form 2551Q (if you are not VAT-registered). Taxpayers with annual gross sales or receipts exceeding the threshold of Php 3,000,000 are required to register as VAT taxpayers.
BIR Form 2550Q
Value-Added Tax or VAT is a consumption tax imposed on the sale of goods and services. VAT is considered an indirect tax because you can transfer it to your customers as part of the selling price of your product or service.
If you are VAT-registered, you are required to charge and collect a 12% VAT on your sales (Output VAT) and report it to the BIR. On the other hand, you can also claim VAT credits for the VAT you paid on purchases and other operating expenses (Input VAT). The net amount you will pay to the BIR, i.e., your VAT Payable, is the balance when you deduct your Output VAT (from sales) less your Input VAT (from expenses).
The BIR Form 2550Q is the form you will use to file your VAT Payable. In this form, you will report your total Output VAT and total Input VAT for the quarter (Prior to January 1, 2023, VAT reporting is also done monthly aside from quarterly).
Along with the return, you are also required to submit a Summary List of Sales and Purchases or SLSP containing details to support the Output and Input VAT that you’ve reported in the BIR Form 2550Q.
The BIR Form 2550Q along with the SLSP should be filed, submitted and paid not later than the 25th day following the close of each taxable quarter e.g., VAT Payable for the quarter April to June should be filed and remitted on or before July 25.
BIR Form 2551Q
Percentage Tax is simply the sales tax that you will pay if you are not VAT-registered.
The percentage tax is generally computed based on gross sales or receipts and is remitted on a quarterly basis. The current standard rate for percentage tax is 3% (for a time, percentage tax was lowered to 1% but it has gone back to 3% starting July 1, 2023).
The form used to file and remit Percentage Tax is the BIR Form 2551Q.
Similarly with VAT, the return shall be filed and the tax paid within 25 days after the end of each taxable quarter e.g., Percentage Tax Payable for the quarter April to June should be filed and remitted on or before July 25.
4. BIR Form 1701Q/1702Q
Finally, you are also required to file and pay Quarterly Income Tax. Your Quarterly Income Tax is based on your taxable income for the quarter; whereby, taxable income means your taxable revenues less your expenses allowable for deduction.
The form will vary depending on the type of taxpayer.
BIR Form 1701Q
Use the BIR Form 1701Q if you are a self-employed individual (sole proprietor registered with the Department of Trade and Industry), a professional (you practice your profession e.g., doctor, accountant, lawyer) or a mixed income earner ( a sole proprietor and at the same time employed or a professional and at the same time employed).
The amount of Quarterly Income Tax that you will pay depends on your taxable income and is based on the graduated tax table provided by the BIR.
If your gross annual revenue is less than Php 3,000,000, you have the option to either:
File BIR Form 2551Q plus BIR Form 1701Q and pay the corresponding Percentage Tax and Quarterly Income Tax; OR
File BIR Form 1701Q only and pay a flat rate of 8% Gross Receipts Tax (8% of your total quarterly sales or receipts) in lieu of the Percentage Tax and Quarterly Income Tax.
Note that, in most cases, you need to notify your BIR Revenue District Office (RDO) of your option on how you will pay your Quarterly Income Tax. Normally, your RDO will reflect in your BIR Certificate of Registration (COR or BIR Form 2303) if you chose to pay the 8% Gross Receipts Tax, i.e., there will be no BIR Form 2551Q in your list of Tax Types.
File your BIR Form 1701Q on or before the 45th day following the close of the quarter e.g., Quarterly Income Tax for the quarter April to June should be filed and paid on or before August 15.
BIR Form 1702Q
Use the BIR Form 1702Q if you are a corporation or partnership registered with the Securities and Exchange Commission.
To compute your Quarterly Income Tax, you need to have your quarterly financial statements ready or, at least, your Statement of Profit or Loss (also called Income Statement). You need to ensure that all the revenues and expenses declared in your financial statements are properly supported with corroborating evidence.
You can then compute your Quarterly Income Tax by multiplying your taxable income to the applicable rate depending on your classification below. The tax amount that you will come up with is called your Regular Corporate Income Tax (RCIT).
Types of Domestic Corporation | Rate |
Domestic corporation, in general | 25% |
Domestic corporations with total assets not exceeding 100 million Philippine pesos (PHP) and total net taxable income not exceeding PHP 5 million | 20% |
Proprietary educational institutions and non-profit hospitals, on net income if gross income from unrelated trade, business, and other activities does not exceed 50% of the total gross income from all sources. | 10% |
Non-stock, non-profit educational institutions (all assets and revenues used actually, directly, and exclusively for educational purposes) and other non-profit organizations | Exempt |
If you are in your 5th year of operations, your Quarterly Income Tax computation will get a bit complicated. You need to pay the higher of:
RCIT - as per computation above; OR
Minimum Corporate Income Tax (MCIT) - 2% of your gross income.
File your BIR Form 1702Q on or before the 60th day following the close of the quarter e.g., Quarterly Income Tax for the quarter April to June should be filed and paid on or before August 30.
That's about it. Take note though that these are monthly and quarterly tax deadlines only; there are annual deadlines as well (which needs a whole separate article).
Late filing of tax returns can be a huge burden especially to MSME taxpayers with limited resources. Several potential consequences can be associated with filing taxes past the deadlines, like surcharges and interest. These penalties can accumulate over time and may cause a big impact to your financial standing.
Thus, we urge you to prioritize timely and accurate filing of the returns to the BIR to avoid these unnecessary costs. To help you out further, we prepared a printable Tax Filing Deadlines Cheat Sheet to guide you when to file your tax returns. You may click this link to download.
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Disclaimer: Numbers that Matter Inc. aims to curate topics that are simplified and easily digestible for micro, small and medium enterprises, by balancing our technical know-hows as accounting professionals and the practical experiences of our team working on ground with our clients. There may be technicalities intentionally omitted from our content to preserve its simplicity. Any practical tip is purely the opinion of the team and is merely informal advice, and thus, should not be taken as a definitive rule. Should you have any specific questions, feel free to message the team at consult@numbersthatmatterph.com and we’d be happy to discuss with you further.