Taxes on Stocks Investment

Manny Pacquiao's tax case with the BIR was all over the news the last two weeks where the famous boxer is being accused of not paying over P2.2 billion pesos to the government. Don't worry, we will not dwell on each side's arguments on the matter. But I think this is the best opportunity to discuss the related taxes associated in being a stocks investor. This is an important lesson to understand for new investors, and what long-time investors should already know. We will focus our discussion to transactions involving individual investors.Let's dive in to answer some of the common questions asked by fellow investors:

1. What are the taxes applicable for stocks investing?

For BIR purposes, there is a distinction whether a stock is traded in a public exchange or not.

For stocks listed in PSE, our tax authority requires us to pay 1/2 of 1% of the gross selling price of every stock transaction sold. Here is an example to show you how to compute your tax.

It is important to note that the BIR also requires stock brokers to withhold the amount and directly remit it to them. If you are familiar with how the tax system works, corporations and businesses act as collecting agents
and they would automatically deduct any tax collectible and they would be the ones to remit it to BIR. If what I'm trying to say is still not clear, just think about why you have never received the full amount of your salaries from employment. That's right, your employer automatically deducts the taxes you owe to the government not because they want to, but because they were told to do so.

Security Analysis: Preface Part II

Security Analysis is arguably of one the best investment books transcending generations ever since it as first published in 1935. To date, it is still widely used by aspiring investors and professionals as a guide to help them in their journey to wealth. Written by Benjamin Graham and David Dodd, two of the people instrumental to launching the highly successfully career of the Oracle of Omaha. Warren Buffett only has high praise for the book and the authors, "They laid a roadmap for investing that I have now been following for 57 years. There's been no reason to look for another."  

We will break down the principles ideas, and insights shared from the book and see how it would help us make investing decisions and guide us through from being part of the herd to becoming an Intelligent Investor.

For part I of the preface analysis, click here.

We continue the discussion with more insights on investing.

Questions that need answered before Investing:
1. How stable is the enterprise, and what are its future prospects?
2. What are its earnings and cash flow?
3. What is the downside risk of owning it?
4. What is its liquidation value?
5. How capable and honest is its management?
6. What factors might cause the owner of this business to sell control at a bargain price?