Author Topic: TAX ON SALE OR PURCHASE OF GOLD  (Read 4106 times)

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Offline renantiur

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TAX ON SALE OR PURCHASE OF GOLD
« on: April 26, 2012, 09:51:15 PM »
I once thought that selling gold to BSP and to any other buyers would not give you much headache. I have this previous impression that the sale or buying of gold, being a vital commodity to our economy, is exempt from any form of taxes. I just found out recently that i was erroneous.


IN SALE OF GOLD BY A SMALL- SCALE MINER AND LARGE SCALE MINER.

                  If you sell gold to BSP, here are the taxes that the BSP will withhold from you:

                      1. 2% excise tax - BIR Revenue Regulation 7-2008, and now BIR Revenue REgulation 6-2012 (amending RR
                          7-2008).  this 2% excise tax shall be based on either:
                                               a. actual market value of the gross output at time of removal, if locally extracted (mined) or produced
                                                   or

                                               b. the value used by the Bureau of Customs in computing tariffs and duties, in case of importation
                                                   (obviously this value ( letter b) will not apply if you sell gold (mined or treasure) to BSP because
                                                   you are not importing gold but you are selling gold to BSP.

                                      Thus, the excise tax shall be based on the actual market value of the gross output at the time of removal.
                                     (valuation a)

                  This 2% tax on gross value shall be withheld or deducted by the BSP/other buyers from what you will receive from them.
                
                   Hence, upon withholding and deducting the 2% excise tax,   The buyers (BSP/other buyers) would then remit it to the government  by filing the corresponding excise tax return (BIR form 2200M) and paying the amount of taxes withheld to the Accredited Agent Bank (AAB) having jurisdiction over its principal place of business on or before the 10th day of the following month (for illustration, see section 5 of RR 6-2012).  

                  it must be noted that under Section 151 A (3) (a) (b) of the 1997 tax code, there shall be levied , assessed and collection on minerals, mineral products, and quarry resources, a 2% excise tax on all metallic minerals, based on the actual market value of the gross output thereof at the time of removal.  

         Furthermore, Possessors of metallic minerals (holder of the gold item), whether imported or local, must therefore be able to show proof that the excise tax has been paid (proof like the copy of Excise tax returns  BIR form 2200 M and bank receipts)  .   Absent such proof, possessors of metallic minerals shall be held liable for the excise taxes due thereon.    conversely, if at the time of extracting the gold from the mine site, excise taxes have already been paid upon filing and paying the excise tax using BIR form 2200 and you can show proof of such payments to the BSP, the BSP will no longer deduct the 2% excise tax from the seller.



                   2. Income Tax-  Aside from the 2% excise tax, the law also imposes an income tax on the seller ( as in all cases, when you earn, you pay income tax on your privilege to earn).    The rate of income tax shall be based on the schedular table of  income tax rate as provided under our National Internal Revenue Code (usually 32% if you are an individual and you have a net taxable income of more than 500,000).  

                    However, it is the responsibility of the seller of the gold to file his quarterly income tax return on specified dates and his annual income tax returns on or before April 15, 2012.   The amount of income tax will depend on the gross income that he earned less any allowed deductions (those supported with receipts and other deductions and personal /additional exemptions).   The difference of the gross income less any allowed deductions is called net income.   This net income is now taxed based on the schedule income tax rates. if you have more than 500,000 in annual net taxable income of 600,000.00, expect that you will be taxed at the full and harsh rate of 32% income tax for individuals.    For corporations, the tax will not be based on the schedular tax rates but it is fixed at 30% on the NET taxable income.

                   Since you are not required to file your income tax return immediately upon sale of your gold to BSP or your other buyers (since you will only be required to file on a voluntary disclosure basis on various specified dates for your quarterly income tax return and on April 15 of the next calendar year for your annual income tax return) , you will not be withheld /or deducted by the BSP/Other Buyers of this 30% on the NET taxable Income at the time you will be selling your gold to them.  

                   Instead, the law only requires the BSP or any other buyers to withhold 5% (before RR 6-2012, it was 10% under RR 7-2008. But it was reduced to 5% under RR 6-2012).   This 5% withholding tax is creditable, which means that although the 5% based on the gross proceeds will be deducted from the seller (owner of gold), the said 5% withholding tax may be credited  by the seller against his income tax liability when he files his annual income tax ( or quarterly income tax if he opts to claim it during the filing of quarterly income tax).  

                  Hence, the 5% creditable income tax withheld , which was deducted by the BSP/other buyers upon selling the item, becomes a sort of an advance income tax payment by the seller of the gold.   Instead of the seller voluntarily declaring the gold selling transaction and paying the income tax, the government constitutes the BSP/other buyer as its agent/s (withholding agent) and require them to withholdng the 5% amount and directly deduct the said amount from the eventual proceeds that the seller may receive.  The buyers (BSP/other buyers) would then remit it to the government  by filing the corresponding creditable withholding tax return  (BIR form 1601-e) and paying the amount of taxes withheld to the Accredited Agent Bank (AAB) having jurisdiction over its principal place of business on or before the 10th day of the following month (for illustration, see section 5 of RR 6-2012).  
                  

           3. value added tax-

                        In this instance, if the buyer of the gold is the BSP, the sale by the seller of gold is subject to VAT but the applicable rate is 0%, if he is a VAT registered taxpayer. It is erroneous to say that the sale of gold to BSP is VAT exempt.   Although the seller will not be required to pay an amount because his sale of gold to BSP is VAT zero rated (sales x zero is equals to zero payment) , he will still file a VAT return with the BIR showing the amount of sales but without payment.   The only difference between VAT zero-rated and VAT exempt is that in the former situation, VAT zer0-rated  transaction can claim refunds/TCC from the government based on the inputs (VAT from their purchase), while in the latter, the sale is totally exempted from paying VAT but he cannot claim refund for VAT on his purchases/expenses (input tax).  

                       This VAt zero-rated and VAt exempt issue is a complicated issue. To those who cannot understand, please ask your friends who are accountancy graduates or who are practicing CPAs.

                      please take note that if you sell your gold to buyers , other than the Bangko Sentral ng Pilipinas, the BIR will assess you an additional 12% value added tax. (Section 3 (b) of RR 6-2012). (this 12% VAT if sold to Buyers, other than BSP, just reteirates the applicability of the 12% VAt on the sale of metallic metals to persons and entities in general). This VAT amount will not be withheld by the BUYER OTHER THAN THE BSP the time of the transaction because this is not a creditable VAT withheld.  Instead, you, as the seller of the gold, will have to voluntarily declare , under the pain of criminal prosecution if you fail to file and pay the said tax, and pay the VAT (less input taxes ) by using BIR form 2550M/Q. You may file and pay the VAT with the authorized AAB on or before the 20th day (25th day if quarterly) of the following month of the date when the sales transaction took place. This 12% VAT that you are required to pay will, of course, be deducted of the applicable input taxes (VAT from your purchases and expenses). Hence, this is not really 12% but the said VAt may be reduced by the amount of input taxes (with VAT receipts and if you have already registered as a VAT taxpayer yourself).


            in sum, if you sell gold to BSP:

                        1. excise tax
                        2. income tax (5% withholding-directly deducted by BSP upon selling)
                                 and you still have to file and pay 32% or 30% based on your net taxable income for the year upon filing of your
                                 annual income tax return (of course, you deduct the 5% creditable withholding tax against your eventual
                                 (income tax liability).

                        3. VAT- the seller is not liable to pay VAT because sale of gold to BSP is zero-rated.  the vat-registered seller may
                                 even ask for a Tax credit certificate/tax refund for the VAT that he paid on his purchases (input taxes ).


            in sum, if you sell gold to other buyers other than BSP:

                        1. excise tax
                        2. income tax (5% withholding-directly deducted by BSP upon selling)
                                 and you still have to file and pay 32% or 30% based on your net taxable income for the year upon filing of your
                                 annual income tax return (of course, you deduct the 5% creditable withholding tax against your eventual
                                 income tax liability).

                        3. VAT- the seller is liable to pay 12% VAT because sale of gold to other buyers is not VAT zero-rated. the
                                 vat-registered seller may, however, lessen his VAT liability by claiming input taxes (with supporting VAT
                                 receipts).

for legal basis, please read BIR Revenue Regulation 6-2012 (amending BIR RR 7-2008) and the related legal provisions found in our TAX Code (NIRC) , as cited in the said revenue regulation.

                so the next time you sell your gold to BSP or other buyers , please read this article again. Once you have read this post, you may no longer be surprised why there are so many deductions from the gross proceeds. I hope this post will help my brothers here in TSEATC forum.





« Last Edit: April 29, 2012, 12:16:03 AM by DINDO BAYAUA »

Offline renantiur

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Re: TAX ON SALE OR PURCHASE OF GOLD
« Reply #1 on: April 26, 2012, 10:04:18 PM »
This is just a clarification on the VAT issue.

     If the seller of the gold item is not a VAT-registered taxpayer, but instead a non-vat taxpayer , he cannot avail of the zero-rating of VAT.  his sale of gold to BSP will be VAT exempt  (which means he cannot avail of the refund/TCC of the VAT amounts that he paid on his purchases or expenses- or input)

     If the seller is not registered with the BIR, the same treatment (as in the case of non-vat taxpayer) shall be followed.   his sale of gold to BSP is exempt but he is not entitled to any refund/TCC.

     If the seller is VAT registered ( registered with the BIR as VAT), his sale of gold to BSP is vat zero rated.

     If the seller is vAT registered , and he sells his gold to other buyers (other than BSP), he is liable to pay 12% VAT less input taxes.

     If the seller is non-vat registered (registered with the BIR as non-vat)  or not registered at all with the BIR, and he sells his gold to other buyers (other than BSP) , there are two situations:

          1. If the GROSS sale does not exceed 1,500,000 pesos for each transaction - 3% only.
          2. If the GROSS sale of gold exceeds 1,500,000 pesos for each transaction = 12% less input (THIS IS ERRONEOUS - BECAUSE  
                 NO INPUT TAXES MAY BE DEDUCTED FROM THE 12% OUTPUT TAX IF HE IS NON-VAT TAXPAYER OR HE IS AN
                 UNREGISTERED TAXPAYER
)                              
          3. If the said non-vat registered or unregistered seller's cumulative income will reach 1,500,000 pesos on any given month of the
              year, he shall be mandated to register as VAT taxpayer within 30 days on the month that he breached the 1,500,000 pesos
              benchmark. he shall then be liable to pay 12% VAt on the month following his registration as VAT taxpayer.

 
« Last Edit: April 28, 2012, 11:57:13 PM by DINDO BAYAUA »

Offline renantiur

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Re: TAX ON SALE OR PURCHASE OF GOLD
« Reply #2 on: April 26, 2012, 10:16:44 PM »


WITH ALL THOSE TAXES (2% EXCISE, 30%-32% INCOME TAX ON NET TAXABLE INCOME , AND 12% vaT IF NOT SOLD TO BSP), NO WONDER OTHER SELLERS OF GOLD ARE SELLING THEIR GOLD ITEMS (MINED OR TREASURES) IN THE BLACK MARKET AND NO LONGER TO THE BSP.



Offline admin

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Re: TAX ON SALE OR PURCHASE OF GOLD
« Reply #3 on: April 27, 2012, 12:24:55 AM »
Wow.. that's a lot of great info there! Thanks!
TW

t_hunter44

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Re: TAX ON SALE OR PURCHASE OF GOLD
« Reply #4 on: April 28, 2012, 01:49:31 PM »
Renantiur. now we are educated on that dilemma.  Many thanks for that great information.