I presume that you are an owner of the building whose actual use might be:
A) R4sidential use- EVAT will not apply here because it is the owner of the building who is occupying.
B) Commercial Use-EVAT applies here. Take case case of the following scenario.
Mr. A owns CPG 4 door apartment Building in Tagbilaran City and have it rented to the following
Lessees: B, C, D and E for Php 10,000 Each per month
However, for reason only known to the building owner, he did not allow Lessee E to deduct the withholding tax of 5% per month
Here how it works:
For Withholding tax-Rent 5% against the gross rental
For Lessee BC and D they give only to Building owner say every 21st pay of the following mont the following:
Lessee B- Php 9500 Cash and Php 500.00 BIR receipt for the 5% (OF pHP 10,000) deducted from the 10,000
LESSEE C-pHP 9,500 cASH PLUS pHP 500.00 bir rECEIPT FOR THE 5% (OF 10,000) WITHHOLDING TAX
LESSEE D-Php 9,500 Cash plus php 500.00 BIR receipt for 5% (of Php 10,000) witholding tax
As rental expenses Lessee BC and D are entitled for a total deduction of Php 120,000 (10,000 x 12 mos) EACH FROM THEIR INCOME FOR THE YEAR APPLICABLE. This will reduce the amount of
income tax that they will pay in the pursuit of engaging in business.
On the part of the building Owner A, he has paid in advance the following:
B= 500 x 12 = 6000
C= 500 x 12 =6,000
D= 500 x 12 =6000
Total advance payment= Php 18,000
Ynder this set up, the BIR has made the renter as its agents to collect taxes from the Building owner. Ssurely the law will be complied with because, if you will not pay the 5% withholdng tax, the equivalent rental expense will be disallowed by the BIR, from being deducted from the Gross Income.
Assuming that the computed interest from rental of Mr. A is Php 40,000
then he has only to pay additional Php 22,000 to complete his income tax
On the other hand, LESEE E can not claim a deduction of 120,000 as rental expense for the current year , because to be allowed a deduction, he must have convinced the Building owner A, that a Php 500.00 d eduction against his rental payment be set aside as withholding tax every month.
IN The event that the BIR will discover that the amount of Php 6,000 as withholding tax, was not deducted from LESSEE E, the BIR can run after the building owner. Penalties will be imposed and interest compromise are even added to the charges it appears that there was a deliberate attempt on the part of the building owner to hide his income from Rent.
How Evat Works:
For Goods we usually bought:
Sira Sira Store goes to SM and bought Php 10,000 worth of shoes. the 12% tax was Php 1,200. So the SIRA-SIRA store paid a total of Php Php 11,200
While arriving home, SIRA SIRA Store sold this one pair of shoes to Customer B for Php 13,000
The EVAT tax was Php 1,560 or a total of Php 14,560.00
Computation of how much Sira Sira Store will pay to the BIR.
From the tax he collected from Customer B Php 1,560.00
Less-Sira-Sira Stores payment to sM 1,200.00
Balance to be paid by SIRA Sira Store. Php 360.00
From the illustration, EVAT is ANTI Consuer, anti poor. Do you know of one Senator who did not make it to the Magic 12. Why, because of EVAT issue. Whoever is associated with it come election time run the risk of losing his position.
For Rental:
If a building is rented for 20,000 per month, the 12% computation of EVAT is as follows
20,000 divided by 1.12 or Php 17,857.14
Tax due is Php 20,000 minus Php 17,857.14=2,142.86 (Payable tothe BIR monthly)
If you have time, please feel free to go to your BIR who will be more than willing to assist you.
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