General Principles

I.

II.
III.

Features of Philippine Income Taxation

A. Tax Situs
B. Progressive vs. Regressive System of Taxation
C. Global vs. Schedular System of Taxation
General Principles of Income Taxation (S23)
Scope of income taxation
A. Definition of Terms (s22)
B. Taxpayer (S22 N)
C. Persons (S22 A)

Income
I.

Income
a. Definition
b. Difference between CAPITAL and INCOME
i. Marigal vs. Rafferty 38 Phil 14
c. Difference between RECEIPTS and INCOME
d. Requisites for income to be taxable
e. Test in determining income / Doctrines on Determination of Taxable
Income
i. Realization Test / Severance Theory
1. Eisner v. Macomber 252 US 89
2. Raytheon Production Corp vs. CIR 144 F2d 110
3. BIR Ruling 091-99 dated July 8,1999
ii. Claim of Right Doctrine
1. Commissioner v Tours Specialist 183 SCRA 402
2. Commissioner v. Javier 199 SCRA 824
iii. Income from whatever source
1. Guttierez c. Collector 101 Phil 713
2. James v. US 366 US 213
3. Commissioner v. Glenshaw Glass 348 US 426
4. Farmers &Merchants Bank v. CIR 59 F2nd 912
iv. Economic Benefit Test
1. BIR Ruling No. 123-97 dated Nov. 10,1997
2. BIR Ruling No. 029-98 dtaed March 19, 1998
3. Perry v. US 160 F SUpp 270
4. Bradford v. CIR 233 F2nd 935

Classification of Income Taxpayers

I.

II.
III.

Individuals
a. Citizens S1 S2, Art IV 1987 Constitution
i. Resident Citizens
ii. Non Resident Citizens S22
b. Alien
i. Resident Alien S22(f)
ii. Non-resident Alien s22(g)
1. Engaged in trade and business
2. Not engaged in trade and business
c. General Professional Partnership s22 (b)
i. Tan v CIR GR L- 109289 October 3, 1994
Estates and Trusts
a. CIR v. Visayas Electric 23 SCRA 715
b. CIR v CA, CTS, GCL Retirement Plan 207 SCRA 487
Corporations S22 (B)
a. Domestic Corporations S22 (c)
i. Co-ownersip Art 484 Civil Code
b. Foreign Corporation s22 (d)
i. Resident Foreign Corporation s22 (h)
ii. Non-resident Corporation s22 (i)
c. Cases

i.
ii.
iii.
iv.

Lorenzo Oa v Cir 45 SCRA 74

Evangeline v. Coll 102 Phil 140
Pascual v CIR 166 SCRA 560
Afisco Insurance Corp v CIR GR 112675 Jan 25,1999 302 SCRA 1

Tax Base and Tax Rates

A. Individuals
I.
Resident Citizens & Resident Aliens (s24
a. Taxable Income s24 (a) (1) (a), (b), & (c)
b. Passive Income
i. Interest, Royalties, Prizes & Other Winnings
1. S24 (B) (1)
2. S22 (FF)
3. RR 10-98
ii. Dividends S24(D)
iii. Capital Gains on shares of stocks
1. S24 (c)
2. RR 06-2008
iv. Capital Gains on Real Property
1. S24 D
2. Civil Code Definition of Real Property (Art 415)
3. RR 8-98
4. RR 13-99
5. RR 14-2000
II.
Non Resident Aliens S25
a. Engaged in trade or business
i. Taxable income s25 (A)(1)
ii. Passive Income s25 (A) (2)
iii. Capital gains s25(3)
b. Not engaged in trade or business s25(b)
c. Special aliens S25(c), D & E
i. RMC 41-2009
III.
Members of General Professional Partnership S26

B. Corporations
i.
Domestic Corporations S27
a. In general s27 a
b. Special Corporations s27 b &c
c. Passive Income
i. Interest , Royalties s27 d1 & 3
ii. Dividends s27 4
iii. Capital gains s27 d2 & 5
ii.
Resident Foreign Corporations s28
a. In general s28A
i. N.V. Reederit Amsterdam v. Commissioner GR 460029
June 23, 1998 162 SCRA 487
b. Special Foreign Corporations
i. International Carriers
1. S28 3
2. RR 15-2002
ii. Offshore banking units
1. S28 4 as amended
2. RR 10-98
3. RR 10-76
4. RR 14-77
iii. Regional or Area headquarters and regional operating
headquarters
1. S22 DD
2. S22 EE

iii.

3. S28 A6
c. Branch Profit Remittance Tax S28 A5
i. Marubeni Corp v. Commissioner
ii. Bank of America NT & SA v. CA & CIR
iii. Compania General trade de Tabacos CTA
iv. RMC 55-80
d. Passive Income
i. Interest S28 A7a & b
ii. Dividends S28 A7d
iii. Capital Gains S28 A7c
e. Subsidiary v. Branch of Foreign Corp
Non-resident Foreign Corporation
a. In general S28 B1
b. Special Non-resident foreign corporations S28 B2 3 & 4
c. Passive Income
i. Interest S28 B5a
ii. Dividends S28 B5b
1. Commissioner v. Procter & Gamble
2. Commissioner v. Wander Phils
3. Marubeni Corp v. Commissioner
iii. Capital Gains S28 B5c