Tax – the life-blood of the nation. Without tax, government won’t be able to build roads and infrastructures, and provide services to its people, at least in the ideal world. It is something you cannot escape from the time you were born until you die. When you get into franchising, you need to pay taxes as well. Because of the passage of Tax Reform for Acceleration and Inclusion or TRAIN Law, there are certain conditions included that could either increase or decrease the taxes you have to pay.<\/p>\n
“How much?”\u00a0<\/em>you might ask.<\/p>\n Let’s look into the taxes you need to pay as a franchisee under the Tax Reform Law.\u00a0<\/strong><\/p>\n Franchises are still subject to the usual business and income tax just like any other business. Nonetheless, check below for specific amount of taxes to be imposed:<\/p>\n There is also a difference between taxes filed by a corporation and sole proprietor. If you register as a corporation,<\/strong> then your income is subject to 30 percent<\/span> corporate income tax. This may be reduced to 20 or 25 percent upon the passage of TRAIN 2.<\/p>\n If you are a sole proprietor<\/strong>, your income will be subject to personal income tax of up to\u00a035 percent.<\/span><\/p>\n Can I get away with the 20 percent tax on royalty?\u00a0<\/strong><\/p>\n Believe it or not, yes. The rule is that IF the royalties are not considered as passive income rather for the active pursuit and performance of the company’s primary purpose, then there is no need to pay the 20 percent tax for royalty.<\/p>\n Keep in mind that passive income means you are earning something without exerting effort. A perfect example of this is rental. Clearly, running a business is not passive income because you need to do something to perform the business’ main purpose.<\/p>\n But 20 percent tax on royalty is LOWER than the 30 percent corporate income tax.\u00a0<\/strong><\/p>\n That’s true. Still, keep in mind that the 20 percent tax is based on\u00a0gross revenue<\/span> as opposed to 30 percent corporate income tax, which will be imposed only on the taxable income<\/span>. You also have to remember that corporate income tax is subject to optional standard deductions or itemized deductions, which means you could pay lower amount even if the rate imposed is higher.<\/p>\n Still, don’t worry. Taxes will always be part of your expenses as a business owner. Don’t be discouraged in getting into franchising or starting your business just because of the taxes you have to pay. Strategic tax planning plays a crucial role in ensuring that you pay whatever is due – and correctly – and at the same time, make the most out of your profits.<\/p>\n The good news is there are seminars available that you can attend to so you can better understand how Philippine tax system works. There are also groups and dedicated tax professionals who are willing to answer your questions about tax, so make sure to reach out to them.<\/p>\n","protected":false},"excerpt":{"rendered":" Tax – the life-blood of the nation. Without tax, government won’t be able to build roads and infrastructures, and provide services to its people, at least in the ideal world. It is something you cannot escape from the time you were born until you die. When you get into franchising, you need to pay taxes … <\/p>\n\n