Tax Deduction Philippines

Tax Deductibility of Foreign Expenses for Philippine Businesses: A Question-and-Answer Guide

Question: As a small local business operating in a Philippine province, can we claim tax deductions for foreign expenses, such as payments to foreign consultants and other foreign companies? What are the requirements and ways to ensure these expenses are tax-deductible?

Answer:

In the Philippines, the general rule is that all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business are deductible from the gross income. This includes foreign expenses, provided they meet certain criteria. Here are the key points regarding the tax deductibility of foreign expenses:

1. Ordinary and Necessary Expenses:

• Under Section 34(A) of the National Internal Revenue Code (NIRC), for an expense to be deductible, it must be both ordinary and necessary in the business trade or profession of the taxpayer.

2. Foreign Expenses:

• Payments to foreign consultants and other foreign entities can be considered as deductible expenses if they are directly related to the business and are essential to its operations.

3. Withholding Tax on Foreign Payments:

• One significant requirement for the deductibility of payments made to non-residents (foreign consultants or companies) is the withholding of tax at source. The Bureau of Internal Revenue (BIR) mandates withholding tax rates on certain income payments to non-residents, and remitting this tax is essential for the corresponding expense to be deductible.

• Ensure that you comply with the required withholding tax rates and remit them properly to the BIR.

4. Official Receipts and Supporting Documents:

• Proper documentation is vital. Always secure official receipts or equivalent documents for every transaction, even with foreign entities. These documents are necessary to substantiate the claim for deductions.

• For payments to foreign consultants, it might be beneficial to have contracts or agreements in place that detail the nature of the consultancy, the compensation, and other relevant terms.

5. Arm's Length Transaction:

• Ensure that the transactions are conducted at arm's length, especially if dealing with related foreign entities. This means that the transaction is undertaken under usual market conditions and that the terms are not influenced by any relationship between the parties.

6. Allocation of Expenses:

• If the foreign expense is partly for business and partly for personal purposes, only the business portion can be deducted. Proper allocation and documentation are crucial.

Conclusion:

Foreign expenses incurred by a Philippine business can be tax-deductible, provided they are ordinary, necessary, and supported by proper documentation. It is also vital to comply with the withholding tax requirements set by the BIR for payments to non-residents. To ensure full compliance and to understand the intricacies of claiming such deductions, consulting with a tax expert or accountant familiar with Philippine tax laws is recommended.

Disclaimer: This article is intended for informational purposes only and should not be construed as legal or tax advice. Consult a tax expert or accountant for advice specific to your situation.

Illegal Gambling Philippines

Bail Amount for Illegal Gambling in the Philippines: A Question-and-Answer Guide

Question: How much is the standard bail amount for illegal gambling in the Philippines?

Answer:

In the Philippines, the amount of bail for a particular offense is not fixed and can vary depending on several factors. The determination of bail amounts usually follows the guidelines set by the Supreme Court, and the amounts can be found in the "Bail Bond Guide," which the courts refer to when setting bail.

For the offense of illegal gambling, the specific bail amount would depend on the particular gambling offense charged under the law, especially as described under Presidential Decree No. 1602 (Prescribing Stiffer Penalties on Illegal Gambling).

As of the last available Bail Bond Guide:

• The bail for "illegal gambling" under P.D. 1602, when not covered by any other specific provision, is set at Php 10,000.00.

However, there are different forms of illegal gambling, and the bail may vary according to the gravity of the offense:

1. Less Grave Offenses: For less grave gambling offenses, the bail might be set at a lower amount.
2. Grave Offenses: For more grave offenses, especially those that involve operating large illegal gambling operations or acting as a financier, the bail amount could be significantly higher.

Furthermore, it's important to note:

• Judge's Discretion: While the Bail Bond Guide provides recommended amounts, the actual amount can be determined by the judge based on the circumstances of the case, the evidence presented, the accused's ability to pay, flight risk, and other relevant factors.
• Updates and Revisions: The Bail Bond Guide can be updated and revised. Always refer to the latest version or consult with legal counsel to get the most accurate and current bail amount for a specific offense.

Conclusion:

The bail amount for illegal gambling in the Philippines can vary depending on the specific charges and circumstances. If faced with charges related to illegal gambling, it's essential to consult with a legal expert who can guide you on the applicable bail amount and other legal matters related to the offense.

Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. Consult a legal expert for advice specific to your situation.

Violating the Data Privacy Act Philippines

Consequences of Violating the Data Privacy Act in the Employment Setting: A Question-and-Answer Guide on Philippine Law

Question: What are the consequences if my employer told me that I violated the Data Privacy Act (DPA)?

Answer:

The Data Privacy Act of 2012 (Republic Act No. 10173), commonly referred to as the DPA, provides for the protection of personal information processed by both public and private entities, including employers. Here are the potential consequences if an employee is accused by their employer of violating the DPA:

1. Administrative Sanctions:

• If your employer determines that you have violated the company's data privacy policies or the DPA itself, you might face administrative sanctions according to the internal rules and regulations of the company. This can range from a simple reprimand to suspension or even termination, depending on the gravity of the violation.

2. Criminal Penalties:

• Under Sections 25 to 33 of the DPA, there are specific acts which, if committed, are considered offenses punishable by fines and imprisonment. For instance, unauthorized processing of personal information or sensitive personal information, accessing these without authorization, and improper disposal, among others, carry penalties of imprisonment and fines.

3. Civil Liability:

• If your actions resulted in harm or damage to an individual, you could be held civilly liable and may be required to pay damages.

4. National Privacy Commission (NPC) Involvement:

• The NPC is the government agency mandated to enforce the DPA. If a complaint is lodged with the NPC, they may conduct an investigation. If found liable, the NPC can impose cease and desist orders, orders of temporary or permanent ban on the processing of personal data, and financial penalties on top of criminal charges.

5. Effect on Professional Reputation:

• Being found in violation of the DPA can harm your professional reputation, making it challenging to find similar employment in the future, especially in roles that require handling of personal data.

Conclusion:

Violating the Data Privacy Act within an employment setting can lead to serious consequences. It's crucial for employees to familiarize themselves with the provisions of the DPA and their company's data privacy policies. If you've been accused of such a violation, it would be prudent to consult with a legal expert to understand your rights and potential defenses.

Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. Consult a legal expert for advice specific to your situation.

Employment Without a Contract in the Philippines

Employment Without a Contract in the Philippines: A Question-and-Answer Guide on Legal Provisions

Question: Is it illegal for employers in the Philippines to hire employees without providing any contract?

Answer:

In the Philippines, the practice of hiring employees without providing a written employment contract is not strictly illegal. However, there are important legal implications and safeguards to be aware of:

1. The Labor Code and Employment Contracts:

• While the Labor Code of the Philippines does not explicitly mandate that all employment relationships be established through written contracts, it does provide for certain rights and protections for employees which are often formalized and detailed in such contracts.

2. Proof of Employment:

• A written contract serves as evidence of the terms and conditions of employment. In the absence of a written contract, proving the existence of an employer-employee relationship or the terms agreed upon can be more challenging. However, employment can still be proven through other means such as payslips, company IDs, testimonies, or other company-issued documents.

3. Probationary Employment:

• Article 281 of the Labor Code states that probationary employment shall not exceed six months from the date the employee started working. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he/she fails to qualify as a regular employee based on reasonable standards made known by the employer to the employee at the time of the engagement. A written contract or document detailing these standards is crucial in these situations.

4. Obligation to Provide a Copy of the Contract for Overseas Employment:

• In cases of overseas employment, it is mandatory for the employer to provide a written contract. The absence of a written contract for overseas Filipino workers (OFWs) is strictly prohibited under the Migrant Workers and Overseas Filipinos Act (R.A. 8042, as amended by R.A. 10022).

5. Disputes and Claims:

• In the event of disputes, the absence of a written contract can complicate matters. The Department of Labor and Employment (DOLE) or the National Labor Relations Commission (NLRC) typically resolves such disputes, and the absence of a written agreement may make it difficult to ascertain the terms of employment.

Conclusion:

While it's not outright illegal for employers to hire employees without a written contract in the Philippines, having one is strongly advisable. Written contracts provide clarity, protect the rights of both parties, and serve as crucial evidence in the event of disputes. Employees are encouraged to request a written contract detailing the terms and conditions of their employment to safeguard their rights.

Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. Consult a legal expert for advice specific to your situation.

Employment of Minors in the Philippines

Employment of Minors in the Philippines: A Question-and-Answer Guide on Philippine Labor Laws

Question: I recently discovered that my 15-year-old son is working for a company. Is that against Philippine Labor laws?

Answer:

Yes, the employment of minors, especially those below 15 years old, is regulated under Philippine labor laws. Here's what you need to know:

1. Age Restrictions under the Labor Code:

• Article 139 of the Labor Code of the Philippines prohibits the employment of children below 15 years of age, unless:
  • They are directly under the sole responsibility of their parents or guardians; and
  • The work does not involve hazardous undertakings.

2. Exception under the Child and Youth Welfare Code:

• Article 59 of Presidential Decree No. 603, also known as the Child and Youth Welfare Code, states that a child below 16 years may be employed, but their employment should not be harmful to their safety, health, or morals, and should not impair their normal development. It should also not prejudice their attendance in school.

3. Special Protection of Children Against Child Abuse Act (R.A. 7610):

• Section 12 of R.A. 7610 further defines "child labor" and provides that children below 15 years old may not be employed except when they work directly for their parents. Even so, the work should not be hazardous or detrimental to their health, safety, morals, or development.

• Children between 15 to 18 years old are prohibited from undertaking hazardous work, which includes being exposed to harmful chemicals, dangerous machinery, and the like.

4. Department of Labor and Employment (DOLE) Guidelines:

• DOLE has set specific guidelines and requirements for the lawful employment of children under 18 years of age. These regulations ensure that their health, safety, and well-being are not compromised.

5. Penalties for Violation:

• Employers who violate these provisions can face penalties, including fines and imprisonment, as stipulated under R.A. 7610 and the Labor Code.

Conclusion:

While the Philippine labor laws allow for the employment of minors in certain conditions, there are strict regulations to ensure their safety, well-being, and continued access to education. If you believe your son's employment is contrary to these laws, you may wish to consult with the Department of Labor and Employment or seek legal counsel to understand the best course of action.

Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. Consult a legal expert for advice specific to your situation.