Taxpayers are reminded that the first few months of the new year are their last chance to complete their remaining tax obligations.
Lawyer Mabel Buted, a junior partner of Du-Baladad and Associates Law Offices, which is a member firm of WTS Global, in a recent newspaper column reminded taxpayers to settle their obligations for the previous year to carve a fresh start in the new year, free from the encumbrances of the past.
In January, taxpayers should pay their withholding tax obligations on income payments made in the previous year. These include the income tax still payable on the compensation income of employees which are due to be remitted on January 15 (for non-eFPS registered taxpayers) and January 20 (for the eFPS registered), said Buted.
The income tax on compensation must be computed based on the total income earned for the year by the employee. Upon annualization of the total taxable compensation income and computing the total taxes due, the remaining withholding taxes due shall form part of the withholding tax obligation to be remitted by the employer to the tax authority in January.
Buted added that the employer should furnish the employees their Certificate of Income Taxes Withheld on Compensation on or before January 31, which must also be submitted to the BIR on or before February 28.
The other types of withholding taxes—fringe benefits tax (FBT), expanded withholding tax (EWT), and final tax—must be paid to the BIR not later than January 31, Buted said.
In case of over-withholding of tax on compensation, the excess must be refunded to the employee not later than January 25. For the other types of withholding taxes, the taxpayer can claim for a refund with the BIR within two years from payment.
Taxpayers are also reminded to renew their business permits and pay their local business taxes based on the preceding year’s gross receipts not later than January 20.
The filing of the Value Added Tax (VAT) Return for the last taxable quarter must be made on or before January 25, Buted said.
In related news, taxpayers are reminded that by January 1, 2023, the filing of the monthly VAT Return is no longer required. This means VAT-registered companies will only be filing four VAT returns for the year instead of the usual 12 returns. The VAT return will still be due within 25 days following the close of each taxable quarter, or on a quarterly basis, using BIR Form No. 2550-Q (Quarterly Value-Added Tax Return).
Taxpayers should also know by now about the reduction of income tax for individual taxpayers starting January 1.
For the income bracket of over P250,000 to not over P400,000 per year, the tax is to be reduced to 15% starting January 1. This is lower than the tax rate of 20% imposed from January 1, 2018 to December 31, 2022.
For taxable incomes of over 400,000 to not over 800,000, the new tax rate is 20% from the previous 25%, while incomes of over P800,000 to not over P2 million will carry a 25% tax rate from 30% previously. People earning over P2 million to not over P8 million will see their tax rate slashed to 30% from 32%.
On the other hand, incomes above P8 million will still retain the 35% tax rate, unchanged from the current, while taxable incomes of P250,000 or less annually will remain exempted from tax payment in the new year.