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Assessment- should be made within 3 years from the due date of filing of the
return or from the actual filing whichever is later
Collection- should be made within 5 years from the date of the assessment
Appropriation, Revenue or Tariff Bills- shall originate exclusively in the House
of Representative, but the Senate may propose or concur with amendments
Direct Double Taxation is Discouraged
Chapter 2
Tax- is an enforced proportional contribution levied by the lawmaking body of the
state to raise
revenue for public purpose
Tax Laws- will prevail against GAAP
Tax Administration (BIR)- refers to the management of the tax system
BIR= 1 Commissioners and 4 Deputy Commissioners
BOC= 1 Commissioner and 5 Deputy Commissioners and 14 District
Collectors
BOI= 5 full-time governors and DTI secretary
PEZA= 1 Director General and 3 Deputy Directors
Statutory Taxpayer- is the person named by law to pay the tax
Economic Taxpayer- the one who actually pays the tax
Principle of a Sound Tax System (Adam Smith)
1. Fiscal Adequacy- the sources of the government funds must be sufficient to
cover cost
2. Theoretical Justice or Equity- “Ability to Pay Theory”
3. Administrative Feasibility- tax laws should be capable of efficient and
effective
administration to encourage compliance
Large Taxpayers- (LTS) Large Taxpayer Service
Non-Large Taxpayers- (RDOs) Revenue District Offices
Large Taxpayers: Vat & Percentage Tax = at least
200k/Quarter
Withholding, Income, Documentary Stamp, Excise = at least 1M
tax paid
Gross Receipts or Sales = 1 Billion
total annual
Net Worth = 300M
Gross Purchases = 800M
Chapter 3
Return on Capital- increases net worth and subject to income tax (Recovery of
lost Profit)
- Proceeds of crop or livestock insurance, Guarantee Payments,
Indemnity received from patent infringement suits
Return of Capital- maintains net worth, not taxable (Recovery of lost Capital)
Infinite Value- Life, Health, Human Reputation = Return of Capital
FV-SP = Subject to Transfer Tax
SP-Cost= Income Tax
Non-Resident- Citizens staying abroad for a period of at least 183 days
Resident- Aliens who stayed in the Philippines for more than 1 year
NRA-ETB- Aliens who are staying in the Philippines 181days-1year
NRA-NETB- Aliens who are staying in the Philippines not more than 180 days
Penalties for Late Filing or Payment of Tax
1. Surcharge
a. 25% of the basic tax for failure to file or pay deficiency tax on time
b. 50% for willful neglect to file and pay taxes
2. Interest- 20% per annum
3. Compromise Penalty- is an amount paid in lieu of criminal prosecution over
a tax violation
Chapter 4
Mutually Exclusive- tax schemes in income taxation
Passive Income- earned with very minimal or even without active involvement of
the taxpayer
Ex. Interest Income from banks, Dividend from domestic corporation,
Royalties
Active Income- earned with considerable degree of effort from the taxpayer
Ex. Compensation, Business, Professional Income
Ordinary Assets- assets used directly in the business, trade or profession
Fiscal Accounting Period- available only to corporate income taxpayer
Deadline of Filing ITR- 15th day of the month following the close of taxable year
of the taxpayer
April 15 next year- Deadline of ITR who are using calendar year
Dissolution of business(Deadline):For Individual - April 15 next year
For Corporation – 30d from the cessation of
activities or 30d from the approval of merger by SEC
Change of Accounting Period (Corporate Taxpayer)- + 3.5months kung kailan
mag eend yung new accounting period
Termination of the Accounting Period of the taxpayer by CIR- Payable
IMMEDIATELY
Hybrid Basis- combination of accrual basis, cash basis or other methods of
accounting
Installment Method- Gross Income is recognized in proportion to the collection.
1. Dealer of Personal property on the sale of properties they regularly sell
2. Dealer of Real properties, only if their initial payment does not exceed 25%
of the SP
3. Casual sale of Non-Dealers in property, real or personal when their price
exceeds 1,000
and their Initial Payment does not exceed 25% of the SP
Initial Payment- total payments by the buyer in cash or property in the year the
sale was made
Selling Price= Cash received/receivable + FMV of property received/receivable +
Mortgaged
assumed by the buyer
Contract Price- amount receivable in cash or other property from the buyer.
- Usually the Selling Price if there is no mortgage
- SP – Mortgage assumed by the buyer
Gross Income = (Collection/Contract Price) x Gross Profit
Cooperatives- if it transacts purely with its members are exempt from ALL taxes
and fees
- Accumulate reserve and Undivided savings should not exceed
10,000,000
Non-Stock and Non-Profit Entities- Exempt. Unrelated=Taxable
Qualified Employees’ Trust Fund- Exempt
Chapter 9- Inclusions in Gross Income
1. Compensation Income
2. Gross Income from the conduct of trade, business or exercise of a
profession
3. Gains from Dealings in Properties
- Ordinary losses are deductions against Gross Income
- Net Capital gains are included in the Gross Income
- Net Capital loss is not an item of deduction against gross income
4. Interest Income: From lending activities, from bonds and promissory notes and
bank deposits abroad
5. Rents- it should be unrestricted or restricted to be applied in future years or
upon termination of lease
- Excluded if it constitutes a loan or is a security deposit
6. Royalties- active royalties earned within or outside the Philippines
6. Dividends- declared by Foreign Corporation
7. Prizes and Winnings- earned abroad or the amount is 10,000 and below
8. Pensions- if they fail to meet the requirement
9. Partner’s share from NI of GPP/Exempt Joint Ventures and Exempt Co-
ownership
10. Income distribution from taxable estate or trusts
11. Farming Income
12. Recovery of past deductions (NOLCO-3years)
13. Reimbursement of Expenses
14. Cancellation of indebtedness for a consideration
De Minimis Benefits
Hybrid Expenses- expenses partly for business and partly for employee’s
incentive
- 50% of the expense is subject to Fringe Benefit Tax
Ex. Housing benefits in the form of rental accomodation
Allowing an employee free use of business property (Depreciation)
Example of FBT the employee in social and Atletic
1. Housing Benefits clubs
2. Expense Account
3. Vehicles of any kind 7. Expense for foreign travel
4. Household personnel, such as maid 8. Holiday and vacation expenses
or drivers 9. Educational assistance to the
5. Interest, for the difference between employee or his dependents
market rate (12%) and the actual 10. Life or health and other non-life
intereset granted insurance premiums or similar
6. Membership fees, dues and other accounts in excess of what law allows
expenses borne by the employer for
Characteristics of FBT
1. Final Tax
2. Tax upon Managerial and Supervisory
employees
3. Paid by the employer
4. Grossed-up tax
5. Due Quarterly: Manual- OoB the 10th day of the month following the quarter
- OoB the 15th day of the month following the quarter
Rules on Valuation of Fringe Benefits
1. Given in cash ir paid for in cash – monetary value is the amount paid for in cash
(50% rental payment)
2. Given in kind – book value or fair value whichever is higher
- Transfer of ownership = 100%
3. Free use – 50% of the rental value or if none the depreciation value is used
- 20 years for Real Properties
- 5 years for Moveable Properties
4. Owned by the employer and assigns the same for use of his employee as his
usual place of residence
- 5% of whichever is higher of the zonal or assessed value of the land
improvement
- Monetary Value=50% of the annual value of the benefit
5. The Employer purhases residential property on installment basis and allows his
employee to use the
same as his usual place of residence
- 5% of the Acquisition cost, exlusive of interest
- Monetary Value=50% of the annual value of the benefit
6. Purchase car on installment basis- 20% of the acquisition cost then divide by 4
7. Aircrafts including helicopters – use in the business- not subject to FBT
8. Yachts- considered as immovable by virtue= 20 years= Automatic 100%
9. Expenses for Foreign Travel
- In land travel expenses- Food, beverages and local transportation except
lodging=300$/day=Exempt
- Economy and business class airplane are exempt
- For first class ticket, 30% of ticket is presumed a fringe benefit