TAXATION INCOME

TAXATION

NOTES IN PERIODS AND METHODS OF

ACCOUNTING RETURNS AND PAYMENT OF TAX

1. Accounting periods

Fiscal Year

An accounting period of 12 months ending on the day of any month other than December.

Calendar Year

An accounting period of 12 months which starts on the first day of January and ends on
the last day of December.

Calendar year should be allowed if:

a. The taxpayers annual accounting period is other than a fiscal year.

b. The taxpayer has no annual accounting period, or does not keep books.
c. The taxpayer is an individual.

2. Accounting methods

Under accrual basis, income is recognized when earned regardless of when received, and
expenses are recognized when incurred regardless of when paid.

Under cash basis, income is recognized when received regardless of when earned, and
expenses are recognized when paid regardless of when incurred.

Accounting for Long-term Contracts

Long-term contracts means building, installation or construction contracts covering a

period in excess of one (1) year. Persons whose gross income is derived in whole or in part
from such contracts shall report such income upon the basis of percentage of completion.

3. The following individuals are required to file an income tax return:

a. Every Filipino citizen residing in the Philippines.

b. Every Filipino citizen residing outside the Philippines, on his income from sources within
the Philippines.
c. Every alien residing in the Philippines, on income derived from sources within the
Philippines.
d. Every non-resident alien engaged in trade and business or in the exercise of profession
in the Philippines.

4. The following individuals shall not be required to file an income tax return:
 a. An Individual whose gross income does not exceed his total personal and additional
exemptions for dependents.

A citizen of the Philippines and any alien individual engaged in business or practice of
profession within the Philippines shall file an income tax return regardless of the
amount of gross income.

b. An individual with respect to pure compensation income derived from sources within
the Philippines, the income tax on which has been correctly withheld.

An individual deriving compensation concurrently from two or more employers at any

time during the taxable year shall file an income tax return.
An individual whose compensation income derived from sources within the Philippines
exceeds P 60,000 shall file an income tax return.

c. An individual whose sole income has been subjected to final withholding tax.
d. An individual who is exempt from income tax pursuant to the provisions of the Tax Code
and other laws, general or special.

5. Where to File

The return shall be filed with an authorized agent bank, Revenue District Officer, Collection
Agent or duly authorized Treasurer of the city or municipality in which such person has his
legal residence or principal place of business in the Philippines, or if there are no legal
residence or place of business in the Philippines, with the Office of the Commissioner.

6. When to File

Individual taxpayer

The income tax return of individual taxpayers must be filed on or before April 15 of the
year following the taxable year.

Corporate taxpayer

Corporations must file a quarterly return on a cumulative basis for the first, second and
third quarter of the taxable year within 60 days from the end of each quarter, and an
annual return for the taxable period on or before the 15 th day of the 4th month following
the end of the taxable year.

Capital Gain tax return

A capital gain tax return for individual and corporate taxpayers must be filed within 30
days from the date of each transaction.
7. Husband and Wife

Married individuals are required to file one return only, but where it is impracticable for the
spouses to file one return, each spouse may file a separate return on income but the
 returns so filed shall be consolidated by the Bureau for purposes of verification for the
taxable year.

8. Return of Parent to include Income of Children

The income of the unmarried minors derived from property received from a living parent
shall be included in the return of the parent, except when:

a. The donors tax has been paid on such property.

b. The transfer of such property is exempt from donors tax.

9. Persons under Disability

If the taxpayer is unable to make his own return, the return may be made by his duly
authorized agent or representative or by the guardian or other person charged with the
care of his person or property.

The principal and his representatives are liable for erroneous, false, or infradulent returns.

10. Returns of General-Professional Partnerships

Every general-professional partnership shall file, in duplicate, a return of its income,

except income included from gross income, setting forth the items of gross income and of
deductions allowed by the NIRC, and the names, Taxpayer Identification Number (TIN),
addresses and shares of each of the partners.

Nothing Follows