#AskTheTaxWhiz: Are small businesses required to withhold taxes?

Mon Abrea

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#AskTheTaxWhiz: Are small businesses required to withhold taxes?
You just registered a small business. Should you withhold taxes?

I just registered a small business. Am I required to withhold taxes? When and where do I file and pay? How much is the penalty if I fail to file a “no payment” return?

Small businesses are not required to withhold taxes provided they did not and will not do any of the following:

  1. Register for expanded withholding tax (EWT) and withholding tax on compensation (WC) as reflected in their certificate of registration (COR or BIR Form 2303). You register for EWT when you pay for expenses subject to EWT, and WC when you hire employees.
  2. Claim expenses subject to EWT like rent expense, professional fees paid to lawyers, accountants, among others.
  3. Claim salary expense, which is subject to WC.

In case you are registered for both EWT and WC, you have to file the returns every 10th of the month. You may opt to file and pay at accredited agent banks near your office before the deadline to avoid long queues. 

However, if you are to file “no payment” return, or tax return with zero or no tax due, you need to file at the Revenue District Office where your business is registered.

If you fail to file the returns on time, you will be charged a minimum of P1,000 ($23.03*) compromise penalty per return per month.

Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at business@rappler.com. – Rappler.com

 

 

 

 

 

 

 

Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon’s tax handbook, “Got a Question About Taxes? Ask the Tax Whiz!” is now available in all bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at consult@acg.ph.

 

 

 

*($1 = P43.42)

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