On August 22, 2013, the Bureau of Internal Revenue issued Regulation No. 16-2013 which imposes new rules on privilege stores or popular known as "tiangge". The new regulation basically provides a clear-cut definition as to who are the operators, exhibitors and tenants who are not tiangge operators.
The tiangge phenomenon is very popular especially to those who would like to try their entrepreneurial skills by joining bazaars which are seasonal in nature or by establishing small stores on limited occasions. So, if you are one of those who would like to engage in the tiangge business, be guided by the new guidelines.
Here is an overview of the new regulation:
What determines whether your business falls under the "tiangge" category is actually the duration of the operations in a taxable period. Pursuant to the regulation:
"... should the store engage in any business activity for a cumulative period of more than fifteen (15) days, it shall not be considered a “privilege-store” under these Regulations." (Sec. 2a)
In case that a privilege store operator engages in business for more than fifteen (15) days, then the operator shall be treated as a regular taxpayer. They are required to have their own sets of invoices and/or official receipts, pay income tax, business tax and must remit withholding tax especially on rental. (Section 2c)
So how do you determine if you are operating for fifteen (15) days?
If the privilege store is operating more than one (1) business activity in a separate venue or simultaneously operating several or multiple business activities in one (1) venue, it shall be considered one (1) day per business activity in the computation of cumulative number of days in a given taxable year." (Sec. 2a)
In addition, privilege store operators are obligated to do the following:
1. Obligation to deduct and withhold the expanded withholding tax on rental payments to exhibitor/organizer for subleased spaces or lessor/owner of leased property. Take note that the rate of withholding tax is five percent (5%) of the gross rental payments which shall be remitted on or before the 10th day of the succeeding month.
2. Obligation to file annual income tax return or BIR Form 1700 on or before April 15 of every year.
3. Obligation to submit information statement on privilege store activities
4. Obligation to keep books of accounts and issue receipts/sales invoices
5. Obligation to submit list of sales on privilege store activities to the exhibitor/organizer
Read the entire text of BIR Regulation 16-2013 here.
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