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National Internal Revenue Code of 1997, as amended (NIRC) (Revenue Regulations 02-98) Income Taxation 1.

Income tax systems a) Global tax system b) Schedular tax system c) Semi-schedular or semi-global tax system 2. Features of the Philippine income tax law 3. Criteria in imposing Philippine income tax 4. Taxable period

5. Kinds of Income taxpayers

a) Individual taxpayers (i) Citizens (a) Resident citizens (b) Non-resident citizens- Sec.22 (E); Sec. 23 C (ii) Aliens (a) Resident aliens- Sec. 22 (F) (b) Non-resident aliens Sec. 22 (G) (1) Engaged in trade or business(2) Not engaged in trade or business (iii) Special class of individual employees (a) minimum wage earners- RA 9504 (iv) Members of general professional partnership (GPP)- Sec. 26 b) Corporations - Sec. 22 (B) (i) Domestic corporations Sec. 22 (C) (ii) Foreign corporations- Sec. 22 (D) (a) Resident foreign corporations Sec. 22 (H) (b) Non-resident foreign corporations- Sec. 22 (I) c) Partnerships d) Estates and trusts Section 60-66

6. Income taxation/ Tax a) Definition b) Basis, Nature, function c) General principles/ Situs- Sec. 23 d) Kinds of Income Taxes under RA 8424 Net Income Tax Secs. 24(A), 26, 27 (A-C), 28(A), 31 and 32(A)
Gross Income Tax-Secs. 25(B) and 28(B)(1) Final Income Tax- Sec. 57(A) Minimum Corporate Income Tax- Secs. 27(E), 28(A)(2)

Improperly Accumulated Earnings Tax- Sec. 29; Rev.Reg. 2-2001 Optional Corporate Income Tax- Sec. 27 (A) 4th to 10th par. And 28 (A)(1) 4th par. Fringe Benefits Tax Sec. 33 and RR 3-98, RR 5-2011; RR 8-2012

7. Income a) Definition/Concept/ Nature Capital vs. Income Cases: Madrigal vs. Rafferty 38 Phil 414 Fisher vs. Trinidad 43 Phil 973 b) Sources of Income c) Tests in determining income Realization test Claim of Right Doctrine Economic Benefit Test Severance Test All events test

Cases: NDC vs. CIR 151 SCRA 472 Comm. vs. IAC 127 SCRA 9 Filipinas Synthetic Fiber Corporation vs. CA , G.R. No. 17667 , November 22, 2007 CIR vs. Isabela Cultural Corporation GR No. 172231 February 12, 2007 8. Taxable Income Defined -Sec. 31 When income is taxable Case: CIR vs. PAL G.R. No 160538 October 9, 2006 9.) Gross income 1.) Definition - Sec. 32 (A) 2.) Concept of income from whatever source derived (Other sources of Income) 3.) Gross income vis--vis net income vis--vis taxable income 4.) Classification of Income as to source-Sec.42 5) Sources of Income subject to tax 10.) Exclusions from gross income Sec. 32 B RA 7641 RA 4917 Tax exempt under special laws RA 1169 Prizes from PCSO

PD 81 income from bonds for sale in international market PD 66 Income from bonds issued by PEZA PD 745 and 1217, income from installment sales of houses to their employees and workers or to low-income groups in housing projects or income derived from rentals thereof.

Case: Intercontinental Broadcasting Corp. vs. Amarilla GR. No 162775 October 27, 2006

11). Deductions from Gross Income


a. Allowable Deductions Sec 34 i. Expenses Sec. 34A1a and RR 10-2002 ii. Interests Sec. 34 B; RR 13-2000 iii. Taxes Sec. 34C; RA 7432 CIR vs. Central Drug Luzon Corporation GR No. 159647 April 15, 2005 iv. Losses Sec. 34 D RR 14-2001 Losses from wash sales sec. 38 v. Bad Debts Sec. 34-E Philex Mining vs. CIR GR No. 148187 April 16, 2008 CIR vs. Isabela Cultural Corporation GR No. 172231 February 12, 2007 vi. Depreciation Sec. 34 F RR 12-2012 vii. Sec. 34 G- Sec.34 M viii. Items not deductible Sec. 36 ix. Special provisions on deductions Sec. 37

b. Personal and Additional Exemptions Sec. 35; RA 9504 Case: Pansacola vs .CIR G.R. No. 159991, November 26, 2006

12). Individual Income Taxation


Taxation of resident citizens, non-resident citizens, and resident aliens
Secs. 23 (A-D), 24, and 25;

Tax on Passive Income Interests, Royalties, Prizes and other Winnings Sec. 24 (B)(1), 25(A)(2), 25(B), (C), (D), (E) Dividends Sec. 24 (B)(2), Sec 73B, 25 (A)(2), 25(B), (C), (D), (E), Cases: Commissioner vs. Manning 66 SCRA 14 Anscor vs. CIR 301 SCRA 152 Procter & Gamble vs. Commissioner 160 SCRA 560 Procter & Gamble vs. Commissioner (MR) 201 SCRA 377 Wander vs. Commissioner 160 SCRA 573 Sale of Shares of Stock Sec. 24C, 25(A)(3), 25(B), (C), (D), (E) Sale of Real Property Sec. 24(D)(1), 25(A)(3), 25(B) last part, Sec. 24(D)(2), RR 13-99 Fringe Benefits Sec.33; RR 3-98 RR 5-2001; RR 8-2012 13). Corporate Income Taxation
Secs. 23 (E), 22(H-l), 27 and 28 Sec. 27(A), Sec. 22B

Cases: Batangas vs. Collector 102 Phil. 822 Evangelista vs. Collector 102 Phil. 140 Reyes vs. commissioner 139 SCRA 436 Ona vs. Bautista 45 SCRA 74 Obillos vs. Commisioner 139 SCRA 436 Pascual vs. Commissioner 166 SCRA 560 Alisco vs. Commissioner 302 SCRA l

Taxation of domestic corporations, resident foreign corporations and non-resident foreign corporations Tax on Educational Institutions Sec. 27B, Article XIV Sec. 4 par. 3 and Article VI Sec. 28 par 3 of the 1987 Constitution, Sec. 234(B) of the LGC, Sec. 30 (H) and (I) of the NIRC, Sec. 109(H) of LGC, Sec. 133 of LGC. Tax on GOCCs Sec. 27 (c), 32(B)(7)(b), Sec. 133(o) and 154 LGC R.A. 10026 Cases: Pagcor vs. Basco 197 SCRA 52 Mactan Cebu vs. Marcos 261 SCRA 667 LRT vs. City of Manila 342 SCRA 692 Tax on Passive Income of Domestic Corporations Interest and Royalties
27 (D)(1),28 (A)(7)(a)

Gains from Sale of Shares of Stock


27(D)(2), 28(A)(7)(c), 28(B)(5)(c), RA 7717 Sec. 127 NIRC

Income derived under the Expanded Foreign Currency Deposit System (27D3), ref. to 28A7b and 28B5c

Intercorporate Dividends (27D4) in relation to 28A7d and 28B5b Cases: Procter & Gamble vs. Commissioner 160 SCRA 560 Procter & Gamble vs. Commissioner (MR) 201 SCRA 377 Wander vs. Commissioner 160 SCRA 573 Gains from Sale of Lands and/or Buildings
27(D)(5), RR 4-99

Minimum Corporate Income Tax (MCIT) Sec. 27E and 28A2 Cases: The Manila Banking Corporation vs. CIR GR No. 168118 Aug. 28, 2006

CIR vs. PAL GR. No.180066, July 7, 2009 Tax on Resident Foreign Corporations (Sec. 28A1) Tax on Gross Philippine Billings Sec. 28A3 and RR 15-2002 RA 10378 Offshore Banking Units (Sec. 28A4) Branch Profit Remittances (Sec. 28A5) Case: Marubeni vs.CIR 177 SCRA 500

Tax on Non-Resident Foreign Corporations


Sec. 28B2, 28B3, 28B4, 28B5a and Sec. 32B7a Case: Mitsubishi vs. CIR 181 SCRA 214 Improperly Accumulated Earnings Tax (IAET) Sec. 29, RR 2-2001, RMC 035-11

Case: CIR vs . Ayala Securities Corp. et al Exempt Corporations Sec. 30, Sec 27C and 22B Case: CIR vs. CA and YMCA G.R. No. 124043 October 14, 1998 CIR vs. St. Lukes Medical Center GR Nos. 195909 & 195960 September 26, 2012 14. Capital Gains and Losses Sec .39; RR 7-2003; RR 6-2008 Calasanz vs. CIR 144 SCRA 664 Determination of Gain and Loss Secs. 40-41 15. Taxation on estates and trusts Estates and Trust Secs. 60 to 66 16. Accounting Periods and Method of Accounting Secs. 43 to 50, Case: Banas vs. CIR325 SCRA 259 Section 49 Improvements by lessees RR 2-1940 Returns and Payment of Tax Sec. 51 to 59

17.

Pay as you file System vs. Pay as you earn System Final Withholding Tax System vs. Creditable Withholding Tax System Corporate Income Tax Sec. 74 to 77 Case: Chamber of Real Estate and Builders Association, Inc. vs. The Executive Secretary, G.R. No. 160756 March 9, 2010