technoPreneurship
Technopreneurship
MWF 11:45-1:10
PHILIPPINE FRANCHISE LAW
By : Entrepreneur PHILIPPINES (2009)
I. The franchisee should withhold a 20 percent final tax on all payments made to the franchisor, including the initial franchise fee. The franchise fee and the monthly royalty payments paid by the franchisee to the franchisor are subject to a 20 percent final tax, based on section 24(B) of Republic Act No. 8424, otherwise known as the 1997 National Internal Revenue Code (NIRC).
The imposition of this 20 percent final tax is not limited to the monthly royalties on gross sales but is also imposed on the initial franchise fee. The Bureau of Internal Revenue (BIR), through BIR Ruling No. 002 dated January 4, 1990, has defined “royalties” to mean the following: (a) “payment of any kind received as a consideration for the use of or the right to use any copyright of literary, artistic or scientific work, including cinematographic films or tapes used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula, or process or other like right or property”; and (b) “gains derived from the sale, exchange, or other disposition of any such right or property which are contingent on the productivity, use, or disposition.” Under Section 57 (A) of the NIRC, the franchisee is the “payor” and is thus constituted as the withholding agent. As the withholding agent, the franchisee is responsible for withholding the equivalent of 20 percent from amounts paid as franchise fees or royalties. Failure on the part of the franchisee to withhold and remit this tax may subject the franchisee to criminal and civil penalties under the NIRC in addition to the payment of the tax.
II. The franchisee may choose between registering as a VAT taxpayer or as a percentage taxpayer. The general rule is that any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, or imports goods shall be
MWF 11:45-1:10
PHILIPPINE FRANCHISE LAW
By : Entrepreneur PHILIPPINES (2009)
I. The franchisee should withhold a 20 percent final tax on all payments made to the franchisor, including the initial franchise fee. The franchise fee and the monthly royalty payments paid by the franchisee to the franchisor are subject to a 20 percent final tax, based on section 24(B) of Republic Act No. 8424, otherwise known as the 1997 National Internal Revenue Code (NIRC).
The imposition of this 20 percent final tax is not limited to the monthly royalties on gross sales but is also imposed on the initial franchise fee. The Bureau of Internal Revenue (BIR), through BIR Ruling No. 002 dated January 4, 1990, has defined “royalties” to mean the following: (a) “payment of any kind received as a consideration for the use of or the right to use any copyright of literary, artistic or scientific work, including cinematographic films or tapes used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula, or process or other like right or property”; and (b) “gains derived from the sale, exchange, or other disposition of any such right or property which are contingent on the productivity, use, or disposition.” Under Section 57 (A) of the NIRC, the franchisee is the “payor” and is thus constituted as the withholding agent. As the withholding agent, the franchisee is responsible for withholding the equivalent of 20 percent from amounts paid as franchise fees or royalties. Failure on the part of the franchisee to withhold and remit this tax may subject the franchisee to criminal and civil penalties under the NIRC in addition to the payment of the tax.
II. The franchisee may choose between registering as a VAT taxpayer or as a percentage taxpayer. The general rule is that any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, or imports goods shall be