TAXATION LAWS

BACC 105-2
 TAXATION LAWS

Tax Laws- provide for the assessment and collection of taxes.

- National Internal Revenue Code (NIRC), Tariff and Customs
Code, Local Tax Code, Real Property Tax Code

Tax Exemption Laws- grant certain immunity from taxation

- Minimum Wage Law, Omnibus Investment Code of 1987,
Barangay Micro-Business Enterprise (BMBE) Law, Cooperative
Development Act
 SOURCES OF TAX LAWS

1. Constitution
2. Statutes and Presidential Decrees
3. Judicial Decisions or case Laws
4. Executive Orders and Batas Pambansa
5. Administrative Issuances
6. Local Ordinances
7. Tax Treaties and conventions with foreign countries
8. Revenue Regulations
 TYPES OF ADMINISTRATIVE ISSUANCES

1. Revenue Regulations
2. Revenue Memorandum Orders
3. Revenue Memorandum Rulings
4. Revenue Memorandum Circulars
5. Revenue Bulletins
6. BIR Rulings
 REVENUE REGULATIONS

•Formal pronouncements signed by the Secretary

of Finance upon recommendation of the
Commissioner of Internal Revenue (CIR)
intended to clarify or explain the tax law and
carry into effect its general provisions by
providing details of administration and
procedure.
 REVENUE REGULATIONS

•Has the force and effect of a law, but is not

intended to expand or limit the application of the
law; otherwise, it is void.
 REVENUE MEMORANDUM ORDERS (RMO)

•Issuances that provide directives or instructions;

prescribe guidelines; and outline processes,
operations, activities, workflows, methods and
procedures necessary for implementation of
policies.
 REVENUE MEMORANDUM RULINGS (RMR)

•Rulings, opinions and interpretations of the CIR

with respect to the provisions of the Tax Code
and other tax laws as applied to a specific set of
facts, with or without established precents, and
which the CIR may issue to guide taxpayers on
tax consequences.
 REVENUE MEMORANDUM RULINGS (RMR)

•Rulings, opinions and interpretations of the CIR

with respect to the provisions of the Tax Code
and other tax laws as applied to a specific set of
facts, with or without established precents, and
which the CIR may issue to guide taxpayers on
tax consequences.
 REVENUE MEMORANDUM CIRCULARS

•Issuances that publish pertinent and applicable

portions as well as applications of laws, rules,
regulations and precedents issued by the BIR
and other agencies/offices.
 REVENUE BULLETINS (RB)

•Refer to periodic issuances, notices, and official

announcements of the Commissioner of Internal
Revenue that consolidate the Bureau of Internal
Revenue’s position on certain specific issues of
law or administration
 BIR RULINGS

•Official positions of the Bureau to queries raised

by taxpayers and other stakeholders relative to
clarification and interpretation of tax laws.
 TYPES OF RULINGS

1. Value Added Tax (VAT) Rulings

2. International Tax Affairs Division (ITAD)
rulings
3. BIR Rulings
4. Delegated Authority (DA) rulings
 NATURE OF PHILIPPINE LAWS

Philippine tax laws are civil and not political in

nature. They are laws of the occupied territory
and not by the occupying enemy. Tax payments
made during occupations of foreign enemies are
valid.
 ELEMENTS OF A VALID TAX

1. Tax must be levied by the taxing power

having jurisdiction over the object of taxation.
2. Tax must not violate constitutional and
inherent limitations.
3. Tax must be uniform and equitable.
 ELEMENTS OF A VALID TAX

4. Tax must be for public purpose.

5. Tax must be proportional in character.
6. Tax is generally payable in money.
 ELEMENTS OF A VALID TAX

4. Tax must be for public purpose.

5. Tax must be proportional in character.
6. Tax is generally payable in money.
 CLASSIFICATION OF TAXES

A. As to purpose
1. Fiscal or revenue tax- a tax imposed for general
purpose
2. Regulatory- a tax imposed to regulate business,
conduct, acts or transactions
3. Sumptuary- a tax levied to achieve some social or
economic objectives
 CLASSIFICATION OF TAXES

B. As to subject matter
1. Personal, poll, or capitation- a tax on persons who are
residents of a particular territory
2. Property tax- a tax on properties, real or personal
3. Excise or privilege tax- a tax imposed upon the
performance of an act, enjoyment of a privilege or
engagement in an occupation
 CLASSIFICATION OF TAXES

C. As to incidence
1. Direct Tax- When both the impact and incidence of
taxation rest upon the same taxpayer, the tax is said to
be direct. The tax is collected from the person who is
intended to pay the same. The statutory taxpayer is the
economic tax payer.
 CLASSIFICATION OF TAXES

C. As to incidence
2. Indirect tax- When the tax is paid by any person
other than the one who is intended to pay the same,
the tax is said to be indirect. The statutory taxpayer is
not the economic taxpayer.
 CLASSIFICATION OF TAXES

D. As to amount
1. Specific tax- a tax of a fixed amount imposed on a
per unit basis such as per kilo, liter, or meter, etc.
2. Ad valorem- a tax of a fixed proportion imposed
upon the value of the object
 CLASSIFICATION OF TAXES

E. As to rate
1. Proportional tax- Flat or fixed rate tax. The use of
proportional tax emphasizes equality as it subjects all
taxpayers with the same rate without regard to their
ability to pay.
 CLASSIFICATION OF TAXES

E. As to rate
2. Progressive tax- This is a tax which imposes
increasing rates as the tax base increase. The use of
tax rates results in equitable taxation.
3. Regressive tax- Decreasing tax rates.
 CLASSIFICATION OF TAXES

E. As to rate
2. Progressive tax- This is a tax which imposes increasing
rates as the tax base increase. The use of tax rates results in
equitable taxation.
3. Regressive tax- Decreasing tax rates.
4. Mixed tax- tax rates which is a combination of any of
the previous types of tax
 CLASSIFICATION OF TAXES

F. As to imposing authority
1. National tax –tax imposed by the national
government
2. Local tax- tax imposed by the municipal or local
government
 NATIONAL TAX

a. Income Tax- tax on annual income, gains or

profits
b. Estate Tax- tax on gratuitous transfer of properties
by a decedent upon death
c. Donor’s Tax- tax on gratuitous transfer of
properties by a living donor
 NATIONAL TAX

d. Value Added Tax- Consumption tax collected

by VAT business taxpayers
e. Other percentage tax- consumption tax
collected by non-Vat business taxpayers
 NATIONAL TAX

f. Excise tax- tax on sin products and

non-essential commodities
g. Documentary stamp tax- a tax on documents,
instruments, loan agreements and papers
 LOCAL TAX

a. Real property tax

b. Professional tax
c. Business taxes, fees and charges
d. Community tax
e. Tax on banks and other financial institutions
 TAX VS. REVENUE

Tax refers to the amount imposed by the

government for public purpose. Revenue
refers to all income collections of the
government which includes taxes, tariff,
licences, toll, penalties and others.
 TAX VS. LICENSE FEE

Tax emanates from taxation power and is

imposed upon any object.
License fee emanates from police power and
is imposed to regulate the exercise of a
privilege.
 TAX VS. TOLL

Tax is a levy of government; hence, it is a

demand of sovereignty. Toll is a charge for
the use of others’ property; hence, it is a
demand of ownership.
 TAX VS. DEBT

Tax arises from law while debt arises from

private contracts. Debt can be subject to set
off but tax can’t. Debt can’t be paid in kind,
dacion en pago, but tax is generally payable
in money.
 TAX VS. DEBT

Tax draws interest only when the taxpayer is

delinquent. Debt draws interest when it is
stipulated on the contract.
 TAX VS. SPECIAL ASSESSMENT

Tax is an amount imposed upon persons

properties, or privileges. Special assessment is
levied by the government on lands adjacent to a
public improvement and is intended to
compensate the government for a part of the cost
of the improvement.
 TAX VS. TARIFF

Tax is an amount imposed upon persons

properties, or privileges. Tariff is the amount
imposed on imported or exported
commodities.
 TAX VS. PENALTY

Tax is an amount imposed for the support of

the government. Penalty is an amount
imposed to discourage an act. Penalty may be
imposed by both the government and private
individuals.
 TAX SYSTEM

Tax system refers to the methods or schemes

of imposing, assessing, and collecting taxes.
 TAX SYSTEM

1. Progressive- employed in the taxation of

income of individuals, and transfers of
properties by individuals
2. Proportional- employed in taxation of
corporate income and business
3. Regressive- not employed
 TAX COLLECTION SYSTEMS

A. Withholding system on income tax- the

payor of the income withholds or deducts the
tax on the income before releasing the same
to the payee and remits the same to the
government.
 WITHHOLDING TAX SYSTEM

1. Creditable withholding tax

a. Withholding tax on compensation- estimated
tax required by the government to be withheld by
employers against the compensation income to
their employees
 WITHHOLDING TAX SYSTEM

1. Creditable withholding tax

b. Expanded withholding tax- an estimated tax
required by the government to be deducted on
certain income payments made by taxpayers
engaged in business.
 WITHHOLDING TAX SYSTEM

1. Creditable withholding tax

The creditable withholding tax is intended to
support the self-assessment method to lessen the
burden of lump sum tax payment of taxpayer and
also provides for a possible third-party check for
the BIR of non-compliant taxpayers.
 WITHHOLDING TAX SYSTEM

2. Final withholding tax- a system of tax

collection wherein payors are required to
deduct the full tax on certain income
payments
 DIFFERENCES BETWEEN FWT AND CWT

Income tax withheld- Full; Partial

Coverage- Certain passive income; passive and active
income
Who remits the actual tax- Income payor; income payor
for cwt and taxpayer for the balance
Necessity of income tax return- required; not required
 WITHHOLDING SYSTEM ON BUSINESS TAX

When the national government agencies and

instrumentalities including
government-owned and controlled
corporations (GOCCs) purchase goods or
services from private suppliers.
 VOLUNTARY COMPLIANCE SYSTEM

The taxpayer himself determines his income,

reports the same through income tax returns
and pays the tax to the government.
 ASSESSMENT/ENFORCEMENT SYSTEM

The government identifies non-compliant

taxpayers, assesses their tax dues including
penalties, demands for taxpayer’s voluntary
compliance or enforces collections by
coercive means
 PRINCIPLES OF A SOUND TAX SYSTEM

1. Fiscal adequacy
2. Theoretical justice
3. Administrative feasibility
 FISCAL ADEQUACY

Sources of government funds must be

sufficient to cover government costs. The
government must not incur a deficit.
 THEORETICAL JUSTICE OR EQUITY

Taxation should consider the taxpayer’s

ability to pay, and exercise of taxation should
not be oppressive, unjust or confiscatory.
 ADMINISTRATIVE FEASIBILITY

Tax laws should be capable of efficient and

effective administration to encourage
compliance. Government should make it easy
for the taxpayer to comply by avoiding
administrative bottlenecks.
 ADMINISTRATIVE FEASIBILITY

Examples of its application:

1. E-filing and e-payment of taxes
2. Substituted filing system for employees
3. Final withholding tax on non-resident aliens or
corporations
4. Accreditation of authorized agent banks in the
filing and payment of taxes
 TAX ADMINISTRATION

Refers to the management of the tax system,

entrusted to the Bureau of Internal Revenue
under the supervision and administration of
Department of Finance.
 CHIEF OFFICIALS OF THE BIR

1 Commissioner
4 Deputy Commissioners:
Operations Group
Legal Enforcement Group
Information Systems Group
Resource Management Group
 POWERS OF THE BIR

1. Assessment and collection of taxes

2. Enforcement of all forfeitures, penalties
and fines, and judgments in all cases
decided in its favor by the courts
 POWERS OF THE BIR

3. Giving effect to, and administering the

supervisory and police powers conferred to it by
the NIRC and other laws
4. Assignment of internal revenue officers and
other employees to other duties
 POWERS OF THE BIR

5. Provision and distribution of forms, receipts,

certificates, stamps, etc. to proper officiials
6. Issuance of receipts and clearances
7. Submission of annual report, pertinent information
to Congress and reports to the Congressional
Oversight Committee in matters of taxation
 OTHER AGENCIES TASKED WITH TAX
COLLECTIONS OR INCENTIVES
1. Bureau of Customs
2. Board of Investments
3. Philippine Economic Zone Authority
4. Local Government Tax Collecting Unit
 BUREAU OF CUSTOMS

Tasked to administer collection of tariffs on

imported articles and collection of the Value
Added Tax on importation. Together with the
BIR, the BOC is under the supervision of
DF.
 BUREAU OF INVESTMENTS

BOI is tasked to lead the promotion of

investments in the Philippines by assisting
Filipinos and foreign investors to venture and
prosper in desirable areas of economic
activities.
 PHILIPPINE ECONOMIC ZONE AUTHORITY

PEZA is created to promote investments in

export-oriented manufacturing industries in
the Philippines. It gives out tax holidays,
exemption from import and export taxes
 LOCAL GOVERNMENT TAX COLLECTING UNITS

Provinces, municipalities, cities and

barangays also imposed and collect various
taxes their fiscal autonomy.
 TAXPAYER CLASSIFICATION FOR PURPOSES OF
TAX ADMINISTRATION: LARGE TAXPAYERS
A. As to payment
1. Value added tax- At least 200,000 per
quarter for the preceding year
2. Excise Tax- At least 1,000,000 tax paid
for the preceding year
 TAXPAYER CLASSIFICATION FOR PURPOSES OF
TAX ADMINISTRATION: LARGE TAXPAYERS
A. As to payment
3. Income Tax- At least 1,000,000 annual
income tax paid for the preceding year
4. Withholding Tax- At least P1,000,000 annual
withholding tax payments or remittances
 TAXPAYER CLASSIFICATION FOR PURPOSES OF
TAX ADMINISTRATION: LARGE TAXPAYERS
A. As to payment
5. Percentage Tax- At least 200,000 percentage
tax paid or payable per quarter for the preceding
year
6. Documentary stamp tax- At least P1,000,000
aggregate amount per year
 TAXPAYER CLASSIFICATION FOR PURPOSES OF
TAX ADMINISTRATION: LARGE TAXPAYERS
B. As to financial conditions/operations
1. Gross Receipts or sales- 1M total annual
gross sales or receipts
2. Net Worth- 300M total net worth at the close
of each calendar fiscal year
 TAXPAYER CLASSIFICATION FOR PURPOSES OF
TAX ADMINISTRATION: LARGE TAXPAYERS
B. As to financial conditions/operations
1. Gross Receipts or sales- 1M total annual
gross sales or receipts
2. Net Worth- 300M total net worth at the close
of each calendar fiscal year
 TAXPAYER CLASSIFICATION FOR PURPOSES OF
TAX ADMINISTRATION: LARGE TAXPAYERS
B. As to financial conditions/operations
3. Gross Purchases- 800M total annual purchases
for the preceding year
4. Top corporate taxpayer listed and published
by Securities and Exchange Commission