Are all sari-sari store in the Philippine subject to tax? Let’s find out. In the Philippines, many entrepreneurs engaged in small business enterprises or small-medium businesses (SMB). Many of these entrepreneurs engaged for survival or day-to-day consumption. In the Philippines many small businesses everywhere, you can see either in the streets or the islands there are a lot of sari-sari stores.
If you have a sari-sari store, are you wondering if what tax should you pay? In the Philippines, there are different taxes and it might confuse the taxpayer as to what tax they are required to pay. This article will help many entrepreneurs who are engaging in a sari-sari store to know what tax should you pay.
Is Sari-sari Store Considered as Small Medium-size Business?
What is the small and medium-sized business? Any business with 100 or fewer employees while with 100-999 employees are considered medium size. Does it mean that sari-sari store owner belongs to small business since less than 100 employees? The answer is No.
A small sari-sari store is not for gaining profits but only for subsistence or livelihood. Therefore, a sari-sari store is not considered a small business in the Philippines.
Is Sari-sari Store Subject to Business Tax?
Income generated from a sari-sari store is considered as Marginal Income Earner or Compensation (MIC). Marginal Income Compensation is an individual whose gross sales from their business does not exceed 100, 000 annual income. (RMC No. 7-2014)
In addition, the activities of Marginal Income Earner should principally for subsistence or livelihood. These earners shall include but not limited to the following:
- Agricultural growers or producers
- Direct seller to the ultimate consumers
- Small sari-sari store
- Small carinderias or turo-turo
- Drivers or operators of a single unit tricycle
MIC is also exempted from VAT (value added tax) and other percentage tax in the Philippines.
Person Engaged in Sari-sari Subject to Individual Tax?
All persons who earn income is subject to tax. How about a person engaged in a small sari-sari store is still exempted from individual income tax? Yes, if the total income does not exceed the 250, 000 as the thresholds. To learn more, you can read things you should know more about de minimis benefits under TRAIN law 2018. It has illustration on how to compute tax after the individual thresholds.
How about those who are employed at the same time with a sari-sari store? Do I need to file a mixed income? The answer is NO. An employed person should file individual tax if the other income is taxable. Since income from small sari-sari is exempted from any tax, therefore, income from your sari-sari store is not included in your personal tax.
Therefore, any person who has a small sari-sari store in the Philippines is not subject to any business tax or individual tax provided it is for subsistence or livelihood only. The person who is employed with additional income from the small sari-sari store is not required filing an individual income tax in the Philippines.
If you’re planning to establish a small sari-sari store, you can read on how to register your business in the Burea of Internal Revenue (BIR) to your nearest Regional District Officer (RDO).