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ANGELES UNIVERSITY FOUNDATION

SCHOOL OF LAW
Taxation 1
A.Y. 2016-2017
Course Outline
Reference Materials:
The National Internal Revenue Code (1997 Tax Code), as amended
Tax Law and Jurisprudence (Justices Vitug and Acosta, 2014 Edition)
The National Internal Revenue Code Annotated (De Leon and De Leon, Jr.)
Part Two: Income Taxation
I.

Organization and Structure of the Bureau of Internal Revenue (BIR):


Secs. 2-21, Tax Code

II.

Features of Income Taxation

III.

General Definitions for Income Tax Purposes Revenue Regulations


No. 10-2012, BIR Ruling No. 108-10 dated October 19, 2010, BIR
Ruling No. BIR Ruling [DA-(JV-017) 077-10] dated May 28, 2010

IV.

General Principles of Income Taxation in the Philippines: Sec. 23


- Kinds of income taxpayers: Sec. 22 (B), (C), (D), (E), (F), (G), (H),
(I)
Collector vs. Batangas Transportation Co., 102 Phil 882
Evangelista vs. Collector 102 Phil 140
- Income Sources from Within and Without the Philippines: Sec. 42
British Overseas Airways Corporation vs. CIR 149 SCRA 395

V.

Computation of Taxable Income


a. Definition of Taxable Income Sec. 31
Madrigal vs. Rafferty
b. Computation of Gross Income
c. Gross Income items subject to Tax Sec. 32(A)
Henderson vs. Collector 1 SCRA 649
In relation to Dividends: Section 73(A) (C)
CIR vs. CA and Andres Soriano Corporation, G.R. No.
108576, January 20, 1999
d. Exclusions from Gross Income
e. Exempt Corporations Sec. 30
CIR vs. PAGCOR, CTA No. 7976, September 5, 2011

VI.

Special Treatment of Fringe Benefits/Fringe Benefits Tax Section 33


Revenue Regulations No. 3-98 as amended

VII.

Deductions from Gross Income Sec. 34


- Atlas Consolidated Mining vs. CIR, G.R. No. L-26911, Nov. 27, 1981
- H. Tambunting Pawnshop Inc. v. CIR, G.R. No. L-173373, July 29,
2013

Ordinary and Necessary Expenses


o CIR v. General Foods, G.R. No. 143672, April 24, 2003
o Secs. 120, 68, Revenue Regulations No. 2-40
o Sec. 5, RR No. 10-2002
Interests RR No. 13-2000
Taxes
Losses RR No. 14-2001, as amended
Bad Debts
o Phil. Refining Co. vs. CA, CTA, CIR, G.R. No. 118794, May 8,
1996
Depreciation
Depletion
Charitable and other contributions
Research and development
Pension trusts
Additional requisites for deductibility of certain payments
Optional Standard Deduction
Additional deductions available to individual taxpayers
o Premium payments on health or hospitalization insurance
[Sec. 34(M)]

VIII. Non-deductible items Sec. 36


IX.

Personal and additional exemptions Section 5

X.

Income and Deduction of Insurance Companies Sec. 37

XI.

Tax Base and Tax Rates


a. Individual Income Taxpayers
i. Citizen and resident aliens
Global Rates Sec. 24 (A) [taxable income other than
income under Sec. 24 (B), (C), (D)]
Schedular Rates
Interests, royalties, prizes, and other winnings
Sec. 24(B)(1)
Cash and/or property dividends Sec. 24(B)(2)
Capital gains from sale of shares of stock not
traded in the stock exchange
Capital gains from the sale of real property
treated as capital asset
o Definition of a capital asset- Sec.
39(A)(1)
ii. Non-resident alien engaged in trade or business within the
Philippines Section 25(A)
iii. Non-resident alien not engaged in trade or business in the
Philippines Section 25(B)
iv. Alien individual employed by regional or area headquarters
(RHQ) and regional operating headquarters of multinational
companies (ROHQ) Section 25(C)
cf: Articles 58 59, The Omnibus Investments Code of 1987
(Executive Order No. 226), as amended by R.A. No. 8756.
2

v. Alien Individual Employed by Offshore Banking Units Section


25(D)
vi. Alien Individual Employed by Petroleum Service Contractor and
Subcontractor Section 25(E)
Cf: Presidential Decree No.
vii. Tax Liability of Members of General Professional Partnerships
Section 26, 73(D), Revenue Memorandum Circular No. 3-2012
Revenue Regulations/Revenue Memorandum Circular
b. Corporate Taxpayers
i.
Domestic Corporations
Global Rates - Section 27(A), (B), (C)
Domestic Corporations, in general
Proprietary Educational Institutions and Hospitals
o CIR v. St. Lukes Medical Center, G.R. No.
195909, September 26, 2012
Government-owned or controlled corporations,
agencies or instrumentalities

ii.

Schedular Rates (Tax rates on certain passive incomes)


Section 27(D)
Minimum Corporate Income Tax (MCIT) Section 27(3), RR
No. 09-1998, as amended by RR No. 12-2007

Resident Foreign Corporations


Global Rate Section 28(A)(1)
MCIT Section 28(A)(2), RR No. 09-1998
International Carriers Section 28(A)(3), R.A. No. 10378, RR
No. 15-2013
Offshore Banking Units Section 28(A)(4)
Tax on Branch Profit Remittances/Branch Profits Remittance
Tax (BPRT) Section 28(A)(5)
RHQ/ROHQ Section 28(A)6)
Schedular Rates (Tax on Certain Incomes received by a
Resident Foreign Corporation) Section 28(A)(7)
iii. Non-resident Foreign Corporations
Global rate Section 28(B)(1)
Schedular rates Section 28(B)(5)
o Interest on foreign loans
o Intercorporate dividends (tax sparing rule)
CIR v. Procter & Gamble Philippines
Manufacturing Corp., G.R. No. 66838, December
2, 1991
o Capital Gains from sale of shares of stock not traded in
the stock exchange
Nonresident cinematographic film owner, lessor or distributor
Section 28(B)(2)
Nonresident owner or lessor of vessels chartered by
Philippine nationals Section 28(B)(3)
3

XII.

Nonresident owner or lessor of aircraft, machineries, and


other equipment Section 28(B)(4)
BIR Ruling No. 337-11, September 7, 2011

Improperly Accumulated Earnings Tax (IAET) Section 29


Revenue Regulations No. 2-2001
CIR v. Antonio Tuason, Inc., G.R. No. 85749, May 15, 1989
BIR Ruling No. 094-13, March 18, 2013

XIII. Tax-Free Exchanges Section 40(C)


Revenue Memorandum Ruling No. 01-2001
BIR Ruling No. 214-12 March 28, 2012
BIR Ruling [DA-(S40M-003) 094-09] February 18, 2009
XIV.

Accounting Periods and Methods Sections 43 49


Accounting Methods in general
Accounting Methods authorized under the Tax Code
- Cash
- Accrual
- Installment
- Percentage of Completion (Long-term construction
contracts)
- Crop year basis

Accounting Periods

XV.

Withholding Taxes Section 57 and 58


Revenue Regulations No. 2-98 (Secs. 2.57; 2.57.3, 2.57.4,
2.57.5)
Returns and Payments of Taxes withheld at source Section 58
Withholding tax on wages Sections 78 to 83
o CIR v. Malayan Insurance Company, G.R. No. L-21913,
November 18, 1967
o CIR v. Procter & Gamble G.R. No. 66838

XVI.

Filing

of Income Tax Returns


Individual Return Section 51
Corporation Returns Sections 52 and 53
Returns of receivers, trustees in bankruptcy, assignees Section
54
Returns of GPPs Section 55
Fiduciary Returns
Payment and Assessment of Income Tax Section 56
Declaration of income tax for individuals
Declaration of Quarterly Corporate Income Tax
Place and time of filing of quarterly corporate income tax

XVII. Final Adjustment Return Section 76


Remedies for Recover of Excess Creditable Withholding Tax
Irrevocability Principle
o CIR v. BPI G.R. No. 178490, July 7, 2009
4

o
o
o
o

PBCom vs. CIR G.R. No. 112024, January 28, 1999


Philam Asset Management G.R. No. 156637, December
14, 2005
CIR vs. TeaM Philippines (Operations) Corporation G.R.
No. 179260, April 2, 2014
ACCRA Investments vs. CIR G.R. No. 96322, February
20, 1991

XVIII. Estates and Trusts Sections 60 66


Tax Treatment
Allowable Deductions
Revocable Trusts
Income for the benefit of the grantor
Fiduciary returns
Fiduciaries indemnified against claims for taxes paid
XIX.

Distribution of Assets by a Corporation Section 73 (A) (C)