Professional Documents
Culture Documents
I.
GENERAL PRINCIPLES:
2. FOR INDIVIDUALS:
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TAXABLE PERIOD
INSTANCES
ARISES
1.
2.
3.
4.
WHEREBY
When
When
When
When
SHORT
ACCOUNTING
PERIOD
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KINDS OF TAXPAYERS
(1) Individuals
(2) Corporations;
(3) Partnerships; and
(4) Estates and Trusts.
INDIVIDUAL TAXPAYER
Citizens
1.
2.
Corporations
Includes all types of corporations, partnerships (no matter
how created or organized), joint stock companies, joint
accounts, associations, or insurance companies, whether or
not registered with the SEC.
Excludes general professional partnerships (GPP), joint
venture or consortium formed for the purpose of undertaking
construction projects, joint venture or consortium engaging in
petroleum, coal, geothermal and other energy operations
pursuant to an operating or consortium agreement under a
service contract with the government.
(1) Domestic corporations A corporation created and
organized under its laws (the law of incorporation
test).
(2) Foreign corporations A corporation which is not
domestic.
a. (a) Resident foreign corporations Foreign
corporation engaged in trade or business
within the Philippines.
Doing business The term implies a
continuity of commercial dealings and
arrangements, and contemplates, to that
extent, the performance of acts or works or
the exercise of some of the functions
normally incident to, and in progressive
prosecution of commercial gain or for the
purpose and object of the business
organization. [RA 7042, Foreign Investments
Act]
In order that a foreign corporation
may be regarded as doing business within a
State, there must be continuity of conduct
and intention to establish a continuous
business, such as the appointment of a local
agent, and not one of a temporary character
[CIR v. BOAC]
b.
Aliens
(1) Resident Alien
An alien actually present in the Philippines who is not a mere
transient or sojourner is a resident for income tax purposes.
No/Indefinite Intention = RESIDENT: If he lives in the
Philippines and has no definite intention as to his stay, he is a
resident. A mere floating intention indefinite as to time, to
return to another country is not sufficient to constitute him a
transient.
Definite Intention = TRANSIENT: One who comes to the
Philippines for a definite purpose, which in its nature may be
promptly accomplished, is a transient.
Partnership
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NATURE
1.
2.
GENERAL PRINCIPLES
o
o
o
INCOME DEFINITION
(a) income means all wealth which flows to the taxpayer other
than a mere return of capital. It includes gain derived from the
sale or other disposition of capital assets. Income is a gain
derived from labor or capital, or both labor and capital; and
includes the gain derived from the sale or exchange of capital
assets.
(b) It is an amount of money coming to a person within a
specified time, whether as payment for services, interest or
profit from investment. Unless otherwise specified. It means
cash or its equivalent. Income can also be thought of as a flow
of the fruits of one's labor. [Conwi v. CTA, G.R. No. 48532
August 31, 1992]
(c) Income may be received in the form of cash, property,
service, or a combination of the three. NATURE Income
includes earnings, lawfully or unlawfully acquired, without
consensual recognition, express or implied, of an obligation to
repay and without restriction as their disposition. [James v.
US, 366 US 213]
Realization
Actual
vis--vis
Constructive
accounting
in
reporting
income
and
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Examples:
1.
2.
3.
2.
Installment
method;
Provided, initial payments
do not exceed 25% of
selling price
If exceeds 25%-- Deferred
payment method
*held as inventory
If
either of 2 or both
conditions
not
met
Deferred payment method
*personal
property
considered inventory
Sale by individual
not
Installment
method;
Provided, initial payments
do not exceed 25% of
selling price
Real property
OF
COMPLETION
(IN
LONG-TERM
ii.
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CONCEPT
DERIVED
OF
INCOME
FROM
WHATEVER
SOURCE
NET
INCOME
VIS- -VIS
statutory
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b)
c)
d)
e)
5.
6.
2.
3.
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1.
2.
3.
4.
Housing
Expense Account
Vehicle of any kind
Household personnel, such as maid, driver and
others
5. Interest on loan at less than market rate to the
extent of the difference between the market rate and
actual rate granted.
6. Membership fees, dues and other expenses borne by
the employer for the employee in social and athletic
clubs and similar organizations
7. Expenses for foreign travel
8. Holiday and vacation expenses
9. Educational assistance to the employee or his
dependents; and
10. Life or health insurance and other non-life insurance
premiums or similar amounts on excess of what the
law allows.[Sec. 33(B)]
1.
2.
3.
Definition
Fringe benefit means any good, service, or other benefit
furnished or granted by an employer, in cash or in kind, in
addition to basic salaries, to an individual employee (except
rank and file employees) such as, but not limited to the
following:
2.
3.
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i.
ii.
iii.
iv.
v.
Net
Capital Asset
Capital Gain
Capital loss
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gains
Part Allowable Deduction
from gross income
6.
Net Capital Loss
7.
Types of Properties
Capital assets
Property
held
by
the
taxpayer, whether or not
connected with his trade or
business which is not an
ordinary asset. Generally,
they include:
(1) stocks and securities
held by taxpayers other
than dealers in securities
ii.
The tax rules for the gains or losses from sales or exchanges
of capital assets over ordinary assets are as follows:
1.
2.
3.
4.
5.
1.
2.
3.
4.
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2.
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iii.
2.
b)
c)
d)
e)
carry-over
rule
(applicable
only
(7) Dealings
corporations
in
shares
of
stock
of
Philippine
Dealers in securities
Investor in shares of stock in a mutual fund company
All other persons who are specifically exempt from
national internal revenue taxes under existing investment
incentives and other special laws.
Shares not
exchange ---
listed
and
traded
through
the
stock
Net capital gains derived during the taxable year from sale,
exchange, or transfer shall be taxed as follows (on a per
transaction basis):
Amount of capital Gain
Not over 100,000
On any amout in excess of
100,000
Tax Rate
5%
10%
to
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iii.
iv.
v.
vi.
vii.
viii.
2.
3.
4.
1.
2.
3.
4.
professional
Vessel
Aircraft,
machineries and
other equipment
Other assets
NON
resident
corporation
4.5%
7.5%
Non
Alien
25%
25%
30%
25%
resident
Tax exempt if :
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Lessor
Citizen Resident Alien Nonresident alien engaged in
trade or business in the
Philippines
Non-resident
alien
not
engaged
in
trade
or
business in the Philippines
Domestic
Resident
Corporation
Non-resident
Corporation
Corporation
Foreign
Foreign
Tax Rate
Net taxable income shall be
subject to the graduated
income tax rates
II.
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3.
4.
5.
6.
3.
4.
5.
6.
7.
7.
8.
Place of sale
Abroad
Treatment
Income
from
without
Pilipinas
kong Income
from
minumutya
abroad
Note: in other words, the situs of the income from the sale of
personal property is the place of sale
Exceptions:
(1) Gain from the sale of shares of stock in a domestic
corporation Treated as derived entirely from sources within
the Philippines regardless of where the said shares are sold.
(2) Gains from the sale of (manufactured) personal property:
(a) produced (in whole or in part) by the taxpayer within and
sold without the Philippines, or
(b) produced (in whole or in part) by the taxpayer without
and sold within the Philippines Treated as derived partly from
sources within and partly from sources without the Philippines.
Place
Production
Pilipinas
of
Place of Sale
Treatment
Abroad
Partly
within,
partly without
Partly
within,
partly without
Abroad
2.
Pilipinas
situs
Residence of the debtor
Residence of corporation
Place of performance
Location of the property
Place of exercise
Location of realty
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Sale of personal
Shares
of
stocks
domestic corporation
of
(a) Tangible
revenue tax
Express exclusion
(b) Intangible
General rule: Place of Sale
Exception: Shares of stock
of domestic corporations:
Place of incorporation
Place of incorporation
Taxpayer
All taxpayer since there is
no income
All taxpayer unless provided
Exclusions
credit
distinguished
that income is to
included
As expressly provided
from
deductions
and
be
tax
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Nontaxable compensation
for damages on account of
(1)
Personal
(physical)
injuries or sickness
(2)
Any other damages
recovered on account of
personal injuries or sickness
(3) Exemplary and moral
damages for out-of-court
settlement,
including
attorneys fee
(4) Alienation of affection,
or breach of promise to
marry
(5)
Any amount received
as a return of capital or
reimbursement of expenses
Notes:
RA 7641
Retiring employee must be
in the service of same
employer
CONTINUOUSLY
for at least five (5) years
Retiring employee must be
at least sixty (60) years
oldbut not more than 65
years of age at the time of
retirement
Availed of only once, and
only when there is no RPBP
RPBP
Retiring official or employee
must have been in the
service
of
the
same
employer forat least ten
(10) years.
Retiring official or employee
must be at least fifty (50)
years old at the time of
retirement
Retiring employee shall not
have previously availed of
the
privilege
under
a
retirement benefit plan of
the
same
or
another
employer
Plan must be reasonable.
Its implementation must be
fair and equitable for the
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