April 15 of each year is probably one of the most stressful time of the year for businesses. It is a time where you have to pay your individual and business income tax. Are there ways to lessen your taxes or even make it easier for you? Here are some tips to beat your Philippine tax problems.
1. Ensure that you pay the right taxes. Ensuring that you pay your taxes properly based on your actual receipts is the number one rule in avoiding tax problems in the future. Yes, it might be a bit costly and some would say you can lessen it by not issuing official receipts but mind you if the BIR discovers this then that will be more costly when it comes to fines and penalties.
2. Organize your accounting records. Make sure that your records are properly organized. Put all your income tax payments (monthly, quarterly and annual) in a separate folder. Cross check them while you are preparing your annual return. A small mistake in filling your return might cost you as well.
3. Automate your accounting system. Using a manual system might be affordable but it is also prone to human error. Try to upgrade your accounting system by using computerized systems like Quickbooks and MYOB. Using these systems will save you a lot of money and headaches as well.
4. Computerize your payroll system. If you have more than 5 employees, it is time to upgrade your payroll system. Since payroll and employee deductions are part of your income tax filling, it would be best if they are computed properly and on time. (Check out Philippine Payroll Pro Packages)
5. Reduce your tax legally. Do you know that you can actually reduce your tax payments legally? If you know of the proper ways to charge various expenses and business activities then you might actually save a lot. Some of the expenses that can be charges are:
- Representation expenses – you can charge from 0.5% to 1% of net sales to this account. This involves meeting of your clients and other customers in restaurants and other establishments. You can also charge travel expenses going to customers who are far from your office. Make sure to collect receipts always.
- If your business involves research and development. You can actually charge travel expenses and even leisure stays locally and internationally just make sure that these includes visits to your suppliers.
- You can actually save if you hire family members simply because their salaries may be deducted from taxable income.
- Do you have bad paying clients for more than a year? If you have consider writing them off and charge them to bad debts expense.
- Donate to charities and institution. Make a habit of sharing your blessings. These donations are 100% deductible if they are to accredited non-government organizations. If they are not registered you can still deduct up to 5% of your taxable income as a corporation and up to 10% if you are a single proprietor.
- Deduct tax withheld. Be sure to have BIR Form 2307 from customers who deducted tax in advance from you so that you can claim them against your taxable income.
- Enjoy 100% tax savings for new businesses. If you have just started your business and your total assets is below P3 million then apply as a Barangay Micro Business Enterprise. Once approved you will avail 100% income taxt exemption plus exemption from minimum wage and lower local taxes.
Taxes are used to make our country better and paying them correctly and on time will be your contribution to the country’s economy. Remember to always be updated and be on time.