Who are required to file Annual Income Tax Returns?

I received a message from a finance officer of a multinational company regarding a question as to what companies are required to file Annual Income Tax Returns.  Let me share below the basic answer to that question. I think this is timely given that we are about to close our books for 2010 and file our taxes on or before April 15.

In accordance with Sec. 232-A of the Tax Code, "All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep a journal and a ledger or their equivalents: Provided, however, That those whose quarterly sales, earnings, receipts, or output do not exceed Fifty thousand pesos (P50,000) shall keep and use simplified set of bookkeeping records duly authorized by the Secretary of Finance where in all transactions and results of operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the year: Provided, further, That corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed One hundred fifty thousand pesos (P150,000) shall have their books of accounts audited and examined yearly by independent Certified Public Accountants and their income tax returns accompanied with a duly accomplished Account Information Form (AIF) which shall contain, among others, information lifted from certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding income therefrom and other relevant statements. "

The above provision pertains to the necessity of audit by an independent CPA on the financial statements of the company that will accompany the Annual Income Tax Return to be filed. The independent CPA will sign on the opinion on the audit report and not on the Annual Income Tax as this is management's responsibility. Normally, the ITR is signed by the Company's President/CEO/CFO and the Finance Manager/Treasurer.

However, in the Philippine setting, the auditor, in addition to the audit of the FS assists the client in the computation of tax payable and proposes adjustments.  He will just attach an "Auditor's Report on the Financial Statements for Filing with the Bureau of Internal Revenue" which attests that there is no relationship by consanguinity or affinity of the auditor to any stockholder of the Company and that the amounts on the schedule of taxes and licenses and valid.