Académique Documents
Professionnel Documents
Culture Documents
EXPLANATORY NOTES
By: Judge Gil Bollozos
NIRC being a special law prevails over a general law like Civil Code.
Revenue law, is a law passed for the purpose of authorizing the levy and
collection of taxes.
Revenue derived from taxes are exempt from execution.
Revenue refers to all funds or income derived by the government whether
from tax or other source.
Enforcement and collection of tax is executive in character.
La Suerte Cigar vs. CA, 134 SCRA 29 when an administrative agency
renders an opinion by means of circular or memo, it merely interprets a preexisting law, and no publication is necessary for its validity. Construction by
an executive branch of government of a particular law although not binding
upon the courts must be given weight. These agencies are the one called to
implement the law.
Rulings or interpretation while entitled to great weight, are not judicially
binding.
BIR RULINGS and DOJ Opinions are less general interpretation of tax laws of
the administrative level issued by the BIR and the DOJ. These two will take a
character of substantive rules and are generally binding and effective, if not
otherwise contrary to law or constitution.
It is the BIR who will seek DOJ opinion on tax laws not the taxpayer.
Ruling of first impression means rulings, opinions & interpretations without
established precedents. Only the CIR can issue this ruling. Those with
precedents are called Ruling with established precedents.
CIR vs. Hantex, G.R. No. L-136075, March 31, 2005
Mere photocopies not admissible. Exert effort to get the original
Hearsay evidence is admissible by the technical rules of evidence. BIR not
bound. It depends on trustworthiness for evidence to be admissible.
The corresponding income tax, as computed, shall be paid at the same time that
the returns are filed based on declarations of actual income and deductions for the
particular quarter. The filing of the returns and payment of taxes shall be in lieu of the
filing of a declaration of estimated income for the current taxable year and the payment
of the estimated tax as provided for in Section 67(a) and (b) (now 60) of the NIRC
primarily for the reason that the procedure prescribed in Section 67 (now 60) of the
NIRC of estimating the amount of income and tax to be paid by the individual.
Such being the case, your opinion that professional partnerships are not required
to file quarterly returns of their income is hereby confirmed. However, individual partners
of a professional partnership are required to file a return of summary declaration of
gross income and deduction for each of the first three quarters of the calendar year and
a final or adjustment return. The corresponding tax, as computed, shall be paid at the
same time that the returns are filed based on declarations of actual income and
deductions for the particular quarter. (BIR Ruling No. 94-60)
Joint venture. A joint venture was created when two corporations while
registered and operating separately were placed under one sole management which
operated the business affairs of said companies as though they constituted a single
entity thereby obtaining substantial economy and profits in the operation. (Collector vs.
Bantangas Transportation, et al, 102 Phil. 822; See also BIR Ruling Nos. 020(b)-02080-187-82 dated June 3, 1982; 24-000-00-115-86 dated July 17, 1986; 069-90 dated
May 9, 1990)
Thus, Empire Venture which has been constituted as a single entity whereby
Empire and Uniphil agreed to pool their resources for the development of a parcel of
land and the construction of condominium units thereon as well as the eventual sale of
said units is a joint venture which is subject to the 35% Section 27 of the Tax code, as
amended. However, the respective 70% and 30% shares of Uniphil and Empire from
the profits of the joint venture are not subject to income tax Section 27 of the Tax Code,
as amended. (BIR Ruling No. 91-254)
Note: The term corporation mentioned in joint venture refers to a corporation as
defined by the corporation law.
Unregistered partnerships. They, in order to be subject to corporate income
tax, must be engaged in joint venture for profit. To constitute said unregistered
partnership, the character of habituality peculiar to business transactions for the
purpose of gain must be present. (BIR Ruling No. 89-124)
STOCK DIVIDEND
- The payment by a corporation of a dividend in the form of shares usually of its
own stocks without change in per value.
- The stock distributed is a stock dividend. It is not subject to a dividend tax or
passive income. However, if the stockholder owns a common stock and the
stock dividend is preferred stock or vice versa, then the stock dividend is
subject to tax because there is already change of interest. Dividends out of quarterly profits. This refers to your letter requesting opinion
as to whether your company can declare cash and/or stock dividends out of quarterly
profits and/or surplus.
It is represented that your company has been issuing cash and stock dividends
for the last five (5) years; that during the early part of this year, you have issued 50%
dividend out of accumulated retained earnings; and that since your company has been
making profits as early as the first quarter of this year, you intend to declare cash and/or
stock dividend out of quarterly profit.
Ruling: An ordinary dividend is the most common type of corporate distribution,
and is defined as (1) a distribution of property by a corporation to its stockholder (2)
made in the ordinary course of its business (3) out of its earnings and profits. (par.
2251, 2d Am. Jur. 33) Thus, a dividend is a corporate profit set aside, declared and
ordered by the directors to be paid to the stockholders on demand or at a fixed time.
(Fisher vs. Trinidad, 43 Phil. 973)
It is distinguished from profits for the profits in thousands of a corporation do not
become dividends until they have been set apart, or at least declared, as dividends and
transferred to the separate property of the individual stockholders. Such being the case,
your company can declare cash and/or stock dividends out of its quarterly profit. (BIR
Ruling No. 87-172)
Domestic Corporations and Foreign Corporations
The term domestic, when applied to a corporation means created or organized
in the Philippines or under its laws (Se. 22[C], NIRC), while the term foreign, when
applied to a corporation, means a corporation which is not domestic (Sec. 22[D], NIRC).
The branches of a domestic corporation, whether located in the Philippines or abroad,
are merely extensions of the local head office. Accordingly, their incomes in the
Philippines and abroad of the head office and foreign branches are to be reported by
the Philippine head office in its corporate income tax return, and the branch profits
remitted by its foreign branches to the Philippine head office shall no longer be subject
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to the branch profit remittance tax because (a) the income of the foreign branch had
already been subjected to Philippine income tax, and (b) the branch profit remittance tax
applies only to Philippine branches of foreign corporations operating in the Philippines
operating in the customs territory and exempts from the tax profits remitted by the
Philippine branch operating in special economic zones to their head offices abroad.
A resident foreign corporation is a foreign corporation engaged in trade or
business within the Philippines (Sec. 22[H], NIRC), and a nonresident foreign
corporation is a foreign corporation not engaged in trade or business within the
Philippines (Sec. 22[I], NIRC).
Test in determining Status of Corporations
Following the above provisions, it can be said that the Philippines adopted the
law of incorporation test under which a corporation is considered (a) as a domestic
corporation,, if it is organized or created in accordance with or under the laws of the
Philippines, or (b) as a foreign corporation, if it is organized or created in accordance
with or under the laws of a foreign country. Corollarily, a domestic corporation may be
formed or organized by foreigners under the Philippine Corporation Code, provided that
it is organized under the laws of the Philippines. On the other hand, a corporation
established by Filipino citizens under the laws of a foreign country will be treated as a
foreign corporation, and the branch that such foreign corporation sets up in the
Philippines is a resident foreign corporation. In other words, the nationality of the
owners of the corporation has no bearing in ascertaining the status or residence of
corporations, for income tax purposes.
Doing Business
The term doing business 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 of business organization. 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 (BOAC v.
Commissioner, 149 SCRA 395).
Partnerships
Except for a general professional partnership and an unincorporated joint venture
or consortium in construction or energy-related projects, which in reality are also
partnerships, Section 22(B) of the 1997 Tax Code considers any other type of
partnership (described here as business partnership) as a corporation subject to
income tax. Indeed, Section 24(B) of the 1997 Tax Code places a business partnership
and an ordinary corporation on a similar footing, by imposing the 10% dividend tax on
the cash and/or property dividends actually or constructively received by an individual
stockholder of a corporation, or in the distributable net income after tax of a partnership
of which he is a partner, except a general professional partnership, received by a
partner. The term after-tax net profit means the net profit of the partnership
computed in accordance with generally accepted principles of accounting, less the
corporate income tax imposed in Section 27 of the Tax Code (Sec. 2 Rev. Regs. No. 284, January 16, 1984). Sec 73(D) of the 1997 Tax Code, however, provides that the
taxable income declared by a partnership for a taxable year which is subject to tax
under Section 27(A) of this Code, after deducting the corporate income tax imposed
therein, shall be deemed to have been actually or constructively received by the
partners in the same taxable year and shall be taxed to them in their individual capacity,
whether actually distributed or not.
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Joint Ventures
Elements of joint venture. To constitute a joint venture, certain factors are
essential. Thus, each party to the venture must make a contribution, not necessarily of
capital, but by way of services, skill, knowledge, material or money; profits must be
shared among the parties; there must be a joint proprietary interest and right of mutual
control over the subject matter of the enterprise; and usually, there is single business
transaction (BIR Ruling No. 317-92).
Exempt joint venture or consortium is an unincorporated joint venture or
consortium engaged in construction activity or energy-related project. The term
joint venture or consortium, referred to in Section 22(B) of the 1997 Tax Code that
is not considered as a separate taxable entity, means an unincorporated entity formed
by two (2) or more persons (individuals, partnerships or corporations) for the purpose of
undertaking construction project (P.D. 929, May 4, 1976), or engaging in petroleum and
other energy operations with operating contract with the government. The term joint
venture was clarified by the Secretary of Finance when he issued Revenue
Regulations No. 10-2012 on June 1, 2012. In said Regulation, the joint venture that is
not taxable as a corporation must comply with the following requisites: (a) the joint
venture or consortium is formed for the purpose of undertaking construction activity; (b)
It involves jointing or pooling of resources by licensed local contractors; i.t., licensed as
a general contractor by the Philippine Contractors Accreditation Board (PCAB) of the
Department of Trade and Industry; (c) the local contractors are engaged in construction
business; and (d) the joint venture itself is licensed as such by PCAB. If all the above
requisites are not met, the joint venture becomes liable to the corporate income tax.
Each member of the joint venture not taxable as a corporation shall report and pay
taxes on their respective shares to the joint venture profit. Since it is not considered as a
separate taxable entity, the net income or loss of the joint venture or consortium is taken
up and reported by the co-venturers or consortium members in accordance with their
participation in the project as set forth in their agreement. The participation in the project
as set forth in their agreement. The two (2) elements unincorporated entity (or entity
not registered with the Securities and Exchange Commission) and for the purpose of
undertaking construction or energy-related project must be present in order that the
joint venture or consortium may not be considered as a separate taxable entity.
Tax-exempt joint venture shall not include those who are mere suppliers of
goods, services or capital to a construction project.
Joint Venture (JV) involving foreign contractors may be treated as non-taxable
corporation only if:
1. Member foreign contractor is covered by a special license as contractor by
PCAB; and
2. Construction project is certified by the appropriate Tendering Agency
(government office) that the project is a foreign-financed/internationallyfunded project and that international bidding is allowed under the Bilateral
Agreement entered into by and between the Philippine government and the
foreign/international financing institution, pursuant to the rules and regulations
of R.A. 4566 (Contractors License Law)
Each member of the joint venture not taxable as corporation shall report and pay
taxes on their respective shares on the joint venture profit, received by a joining
corporation.
All licensed local contractors must enroll to BIRs eFPS at the RDO where local
contractors are registered as taxpayers.
Foreign joint venture or consortium that does not sell goods nor perform
services in the Philippines. A joint venture or consortium formed among nonresident foreign corporations in connection with a local project in the Philippines is not
subject to Philippine income tax, where said foreign joint venture or consortium does not
sell goods nor perform any service in the Philippines. This rule is anchored on the fact
that a foreign corporation is taxable only on income from sources within the Philippines
(BIR Ruling No. 23-95). Accordingly, no withholding tax is required to be deducted and
withheld by the Philippine payor from income payments from foreign sources made to
the foreign joint venture or consortium.
Exempt joint venture or consortium may become taxable partnership. An
exempt joint venture or consortium undertaking a construction of office tower project
may subsequently become subject to income tax as a separate joint venture or
consortium, where after the construction period, the joint venture partners engaged in
the business of leasing the building floors or portions thereof separately owned by them
(BIR Ruling No. 317-92, October 28, 1992). The tax exemption of the joint venture
granted under the law is valid only up to the completion of the construction project and
does not extend to the subsequent sale or lease of the developed condominium floors
or units to customers.
BIR Rulings prior to Revenue Regulations No. 10-2012:
Corporations does not include joint venture undertaking construction
activity; allocation of floors, units, or lots is a mere return of capital. The joint
ventures described above are not subject to corporate income tax under Section 27 of
the 1997 Tax Code, since the term corporation does not include a joint venture or
consortium formed for the purpose of undertaking construction projects pursuant to
Section 22(B) of the 1997 Tax Code. Accordingly, the memorandum of agreement, joint
venture agreement, or exclusive development and marketing agreement between or
among the contracting parties, as the case may be, will not give rise to a taxable joint
venture, and the allocation of specific floors or units or subdivision lots in the project is
not a taxable event and is not subject to income tax and expanded withholding tax,
because the allocation is a mere return of the capital that each party has contributed to
the project.
Transfer of land to joint venture is similar to capital contribution;
distribution of developed lots/units is merely an act of partitioning commonly
owned property. Joint venture agreements for the construction and development of
real property may or may not be treated as a separate taxable unit, depending on
whether or not a separate taxable unit, depending on whether or not a separate taxable
entity is established by the joint venture partners. If the parties did not form nor register
a separate entity and merely agreed to pool their resources to a common fund, no
separate taxable unit is created. In this case, each joint venture partner has to account
for his respective share in the net revenue earned from the joint venture project
separate income tax returns partners. Hence, the partners may file separate income tax
returns for its net revenue for the project less its respective proportionate share in the
joint venture expenses. The contribution of land to the joint venture is not a taxable
event that will give rise to capital gains tax on sale or transfer of land. Such transfer is
similar to a capital contribution that does not give rise to income tax. The distribution of
developed lots/units is merely an act of partitioning the commonly owned property. It is
nothing more than an act of terminating the co-ownership by making each partner
specific owner of the identifiable lot or unit. At this stage, no taxable sum has yet been
realized by the joint venture partners. That act of allocation or assigning portions of the
developed lots to each member of the joint venture cannot be treated as a taxable
event. The same is true despite the fact that the shares allocated to or received by the
partners may not necessarily correspond to the lot area originally contributed by them to
the joint venture. Hence, the titling of the land back to the joint venture partners is not
subject to income tax, expanded withholding tax, and value added tax (BIR Ruling DA165-03-18-99).
Sale of developed floor, unit or lot is subject to income tax. Should the
corporate landowner or developer sell any of the floors or portions of the floors allocated
to them to third parties, the gain that may be realized by them from such sale will be
subject to the regular corporate income tax and to the expanded withholding tax under
Revenue Regulations No. 6-85 (now Rev. Regs. No. 2-98), as amended (BIR Ruling
No. 274-92, September 30, 1992). This rule applies even if the sale takes place before
or during the construction period.
Taxable Joint Ventures
There are two (2) instances when a joint venture becomes a taxable entity. First,
a domestic corporation jointly owned by individuals and by two or more existing
domestic corporations and/or foreign corporations that is incorporated under the laws of
the Philippines (e.g., D.M. Consunji, Inc.), or duly registered with or licensed by the
Securities and Exchange Commission [e.g., Marubeni Corporation Philippine Branch]
is a taxable corporation, even if it is engaged in the business of construction or energyrelated activity. Second, if the unincorporated joint venture or consortium (or
unregistered partnership) is engaged in any other line of business than construction or
energy-related activity with operating contract with the government, the same will also
be treated as a taxable corporation. The income and expenses of the taxable joint
venture must be reported by it during the taxable year.
Immediacy Test Improperly Accumulated Earnings Tax (Cyanamid vs. CA,
G.R. No. 108067, January 20, 2000)
Taxation of Co-ownership (Read)
1. Ona vs. Commissioner, 45 SCRA 74
2. Pascual vs. Commissioner, 166 SCRA 560
3. Obillos vs. Commissioner, 139 SCRA 436
Section 30 - Exemption from Tax on Corporations. The corporations covered by this
section are exempted from income tax because it is generally organized not for profit
but exclusively for the benefit of their respective members. So that no income inuring to
the benefit of the individual members but for the benefit of the organization as a whole.
However, a corporation is not simply exempted from tax because it is not organized
and operated for profit, it is still subjected to income tax no matter how these
corporation are created. Hence, if they will have income of whatever kind and character
from any of their properties real or personal or from any of their activities conducted for
profit regardless of the disposition made of such income, they will be liable for income
tax.
For instance a non-profit corporation will sell their property and derive income
therein, that income would be subjected to income tax.
The rule that regardless of their disposition made of such income do not apply to
non-profit educational institution, because under the constitution all revenues and
assets of these institutions it actually, directly and exclusively used for educational
purposes will make these institution exempted from all taxes. Thus, if Xavier University,
for example, who is a non-stock, non-profit educational institution will use their rental
income from the gym for education purposes, the same is not subject to income tax.
However, if the gym rental is used for charitable purposes it would already be subjected
to income tax because what the constitution provides is only to educational purposes.
READ : 1) CIR vs. Court of Appeals, 298 SCRA 83
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Exercise of profession;
Services rendered;
Rentals;
Profits from sale or exchange of asset;
Business or trade;
And from other sources such as interest in bank deposits, dividends, and
royalties.
Definition of Income
Income means an amount of money coming to a person or corporation within a
specified time, whether as payment for services, interest or profit from investment.
Unless otherwise specified, income means cash or its equivalent (Conwi v. CTA and
Commissioner, 213 SCRA 83). Income is a flow of service rendered by capital by the
payment of money from it or any other benefit rendered by a fund of capital in relation to
such fund through a period of time (Madrigal v. Rafferty, 38 Phil. 414). Income covers
gain derived from capital, from labor, or from both combined, provided it be understood
to include profit gained through a sale or conversion of capital assets (Fisher v.
Trinidad, supra). Income includes earnings, lawfully or unlawfully acquired, without
consensual recognition, express or implied, of an obligation to repay and without
restriction as to their disposition (James v. U.S., 366 U.S. 213). Thus, income from
illegal drug and gambling activities is taxable as well.
Income may include: (a) increase in inventory at the end of the taxable year;
however, mere increase in the value of property is not income but increase in capital;
(b) transfer of appreciated property to employee for services rendered; and (c) just
compensation paid by government for property acquired by expropriation.
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c.
d.
e.
f.
g.
declare it as income. The court ruled that the amount received is income
subject to tax, but the tax return filed cannot be considered as fraudulent
because petitioner literally laid his cards on the table for respondent to
examine. Error or mistake of fact or law is not fraud (Commissioner v.
Javier, 199 SCRA 824).
Income from whatever source. All income not expressly excluded or
exempted from the class of taxable income, irrespective of the voluntary or
involuntary action of the taxpayer in producing the income, and regardless of
the source of income, is taxable (Blas Gutierrez v. Collector, 101 Phil. 713).
Economic benefit test. Any economic benefit to the employee that
increases his networth (i.e., total assets less total liabilities), whatever may
have been the mode by which it is effected, is taxable. Thus, in stock options,
the difference between the fair market value of the shares at the time the
option is exercised and the option price constitutes additional compensation
income to the employee at the time of exercise (not upon the grant or vesting
of the right) (Commissioner v. Smith, 324 US 177).
Severance test as capital or investment is not income subject to tax, the
gain or profit derived from the exchange or transaction of said capital by the
taxpayer for his separate use benefit or disposed income subject to tax.
Substantial alteration of interest lost income to be returnable for taxation
must be fully and completely realized. When there is no separation of gain or
profit, or separation of the increase in value from capital, there is no income
subject to tax.
Flow of wealth test anything/implying existence of capital
a) Capital is fund income is the flow;
b) Capital is wealth income service of wealth;
c) Property is tree income is fruit;
d) Labor is tree income is fruit.
All of the following tests are followed in the Philippines for purposes of
determining whether income is received by the taxpayer of not during the year.
Significance of knowing the Type of Character of Income
In general, it is important to know the types of income realized by the taxpayer,
since the Philippines has adopted the semi-global or semi-schedular tax system. Under
this tax system, compensation income, and other income not subject to final income tax,
are added together to arrive at the amount of gross income of an individual, and after
deducting the allowable deductions from business and professional income, capital
gains, passive income, and other income not subject to final income tax as well as
personal and additional exemptions, if qualified, the graduated income tax rates ranging
from five percent (5%) to 32% are applied in the resulting net taxable income to arrive at
the income tax due and payable.
The passive investment income are generally subject to the final withholding tax;
hence, the income recipient does not file a tax return covering such passive investment
incomes, although the withholding agent-payor of income is held responsible under the
law to deduct, withhold and remit the final income tax thereon to the BIR.
Capital assets subject to the final capital gains tax such as shares of stock of a
domestic corporation and real property located in the Philippines, except when sold or
transferred by a dealer in securities or real estate dealer, are covered by the capital
gains tax return; hence, not included in the taxable income of the individual taxpayer
subject to the global tax system and the graduated income tax rates.
The rules for individuals discussed above apply also to a corporation, except that
the corporation does not receive compensation income and are not entitled to deduct
personal and additional exemptions from their gross income during the year.
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Compensation Income
In general, the term compensation means all remuneration for services
performed by an employee for his employer under an employer-employee relationship
(See Sec. 2.78.3, Rev. Regs. No. 2-98, as amended), unless specifically excluded by
the Tax Code. In determining the existence of an employer-employee relationship, the
elements that are generally considered are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employee with respect to the means and methods by which the
work is to be accomplished. It is the so-called control test that is the most important
element (Brotherhood Labor Unity Movement of the Philippines v. Zamora, L-48645,
January 7, 1987).
Who is an employee?
For taxation purposes, a director is considered an employee under Section 5 of
Revenue Regulations No. 12-86, to wit: An individual, performing services for a
corporation, whether as an officer and director or merely as a director whose duties are
confined to attendance at and participation in the meetings of the Board of Directors, is
an employee. The non-inclusion of the names of some of petitioners directors in the
companys Alpha List for 1997 does not ipso facto create a presumption that they are
not employees of the corporation, because the imposition of withholding tax on
compensation hinges upon the nature of work performed by such individuals in the
company. Moreover, Section 2.57.2.A(A) of Revenue Regulations No. 2-98 cannot be
applied to this case as the latter is a later regulation, while the accounting books
examined were for the year 1997 (First Lepanto Taisho Insurance Corporation v. CIR,
G.R. No. 197117, April 10, 2013). [NOTE: Beginning 1998, a director who is not an
officer or employee of a corporation is NOT an employee of said corporation; hence, the
applicable withholding tax to be deducted from such income shall be 10% EWT, which
is creditable against his ordinary income tax liability for the year, provided it is
evidenced by BIR Form 2307. However, said directors fee is taxed also under the
global tax system].
The term employee refers to any individual who is the recipient of wages and
includes an officer, employee or elected official of the government or any political
subdivision, agency or instrumentality thereof. It includes also an officer of a
corporation. Thus, a juridical entity that performs services to another person is not an
employee of the latter. Accordingly, the proper withholding tax on such income payment
is the expanded withholding tax (not withholding tax on compensation income). To
create an employer-employee relationship, the person that performs the service to
another must be an individual.
The term compensation income means all remuneration for services
performed by an individual employee for his employer, including the cash value of all
remuneration paid in any medium other than cash. There are various types of taxable
compensation income, such as salaries, wages, bonus, remuneration, honorarium,
benefits and allowances (including representation and transportation allowance (RATA),
personal emergency relief allowance (PERA), longevity pay, subsistence allowance,
hazard pay, annuities, pensions, etc. Additional compensation allowance (ACA) given to
government employees pursuant to E.O. 219 shall not be subject to withholding tax
pending its formal integration into the basic pay. While its nature shall continue to be
that of compensation, it shall be treated as part of the other benefits which are
excluded from compensation income, provided that the total amount does not exceed
30,000 (BIR ruling No. 034-2002, August 16, 2002 modified BIR ruling No. 179-99,
November 22, 1999). BIR Ruling Nos. 120-96, November 8, 1996 and 062-2000,
November 20, 2000 exempt benefits and allowances such as longevity pay, subsistence
allowance, and hazard pay granted to uniformed policemen and jail guards under
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R.A. 6975 (DILG Act of 1990). However, if the recipient is an AFP personnel, all
remunerations (monetary and non-monetary) are taxable, except allowances for
quarters, clothing and subsistence which are exempt from income tax pursuant to RMC
15-87 (BIR Ruling No. 143-96, December 24, 1996).
Compensation Income of Philippine Nationals and Aliens Employed by Foreign
Governments and International Organizations in the Philippines
Section 23 of the Tax Code lays down the general principles in taxing citizens
and alien individuals. Resident citizens are taxed on worldwide income, while resident
aliens are taxed only on their Philippine-source income. As an exception to the general
rule, most international agreements which grant withholding tax immunity to foreign
governments/embassies/diplomatic missions and international organizations also
provide exemption to their officials and employees who are foreign nationals and/or
non-Philippines residents from paying income taxes on their salaries and other
emoluments.
Since the withholding tax is merely a method of collection of income tax, the
exemption from withholding taxes on compensation income of foreign
governments/embassies/diplomatic missions and international organizations does not
equate to the exemption from paying the income tax itself by the recipients of said
income.
Foreign Embassies and Diplomatic Missions
Articles 34 and 37, Vienna Convention on Diplomatic Relations, exempts: (a)
diplomatic agents who are not nationals or permanent residents of the Philippines; (b)
members of family of diplomatic agent forming part of his/her household who are not
Philippine nationals; (c) members of administrative and technical staff of the mission
plus members of their families who are not Philippine nationals or permanent residents
of the Philippines; (d) members of service staff of the mission who are not Philippine
nationals or permanent residents of the Philippines; and (e) private servants of
members of the mission who are not Philippine nationals or permanent residents of the
Philippines. The applicable rules are as follows:
Aid Agencies of Foreign Governments
JICA: Only JICA resident representatives and his/her staff who were dispatched
from japan shall not be subject to Philippine income tax.
GIZ: (Germany): Only German specialist of German construction and consulting
firms shall be exempt.
AUSAID: Salaries and other remuneration paid by the Government of Australia
or by Australian personnel, firms, institutions or organizations to any person
performing work under the Memorandum shall be exempt.
CIDA: Only Canadian personnel who derive income from Canadian aid funds as
provided under the subsidiary agreement shall be exempt.
Advisory Committee on Voluntary Foreign Aid-USA
CARE: Only Care employees who are not Philippine nationals are exempt.
FPPI or PLAN: Only non-Filipino staff members of the PLAN who receive
salaries and stipends in US dollars shall be exempt.
Aid Agencies
Ford Foundation, Rockefeller Foundation, Agricultural dev Council, and Asia
Foundation: only non-Filipino staff members thereof who receive salaries
and stipends in US dollars shall be exempt.
IRRI (PD 728 and RA 3538)
Catholic Relief Services NCWC and Tools for Freedom Foundation (R.A. 4481)
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Asian Development Bank (ADB) Section 45(b), Article XII of the Agreement
between ADB and RP: Only officers and staff of ADB who are not Philippine nationals
shall be exempt from Philippine income tax (because exemption is subject to the
power of the Government to tax its nationals. Any exemption from Philippine
income tax must be granted under duly recognized international agreements or
particular provisions of existing law. Affected individuals (of foreign embassies and
international organizations) who were not granted such exemption must file their income
tax returns and pay the tax due thereon on or before the 15 th day of April following the
close of the taxable year (RMC 31-2013, April 12, 2013).
Statutory Minimum Wage
Compensation income falling within the meaning of statutory minimum wage
(SMW) under R.A. 9504, effective July 6, 2008, as implemented by Revenue
Regulations No. 10-2008 dated July 8, 2008, shall be exempt from income tax and
withholding tax. Holiday pay, overtime pay, night shift differential pay, and hazard pay
earned by Minimum Wage Earner (MWE) shall likewise be covered by the above
compensation such as commissions, honoraria, fringe benefits. Benefits in excess of
the allowable statutory amount of 30,000, taxable allowances and other taxable
income other than the SMW, holiday pay, overtime pay, hazard pay and night shift
differential pay, shall not enjoy the privilege of being a MWE and, therefore, his/her
entire earnings are not exempt from income tax and withholding tax.
Hazard pay shall mean the amount paid by the employer to MWEs who were
actually assigned to danger or strife-torn areas, disease-infested places, or in distressed
or isolated stations and camps, which expose them to great danger of contagion or peril
to life. Any hazard pay paid to MWEs which does not satisfy the above criteria is
deemed subject to income tax and withholding tax.
When an award of backwages is made, there is an acceptance that the
employee was illegally or unjustly dismissed, and the backwages are the salaries he
was supposed to have earned had he not been dismissed. It is as though he was not
separated from employment, and as though he actually rendered service (Escareal v.
Court of Tax Appeals, et al., CA-GR SP No. 41989, September 30, 1998). In this
connection, RMC 39-2012 dated August 3, 2012 provides that the employee should
report as income and pay the corresponding income taxes by allocating or spreading his
back wages, allowances and benefits through the years from his separation up to the
final decision of the court awarding the backwages. The said backwages, allowances
and benefits are subject to withholding tax on wages. However, when the judgment
awarded in a labor dispute is enforced through garnishment of debts due to the
employer or other credits to which the employer is entitled, the person owning such
debts or having in possession or control of such credits (e.g.., banks or other financial
institutions) would normally release and pay the entire garnished amount to the
employee. As a result, employers who are mandated to withholding taxes on wages
pursuant to Section 79 of the Tax Code, as implemented by Revenue Regulations No.
2-98, cannot withhold the appropriate tax due thereon. In this regard, the employer
also refers to the person having control of the payment of the compensation in cases
where the services are or were performed for a person who does not exercise such
control. Thus, the person owning or having possession or control of the credit shall
withhold the required tax.
Backwages, Allowances, and Benefits Awarded in Labor Dispute
Backwages, allowances, and benefits awarded in a labor dispute constitute
remuneration for services that would have been performed by the employee in the year
when actually received, or during the period of his dismissal from the service which was
subsequently ruled to be illegal.
15
The employee should report as income and pay the corresponding income taxes
by allocating or spreading his backwages, allowances and benefits thru the years from
his separation up to the final decision of the court awarding the backwages.
The backwages, allowances, and benefits are subject to withholding tax on
wages.
However, when the judgment awarded in a labor dispute is enforced thru
garnishment of debts or having in possession or control of such credits (e.g., banks or
other financial institutions) would normally release and pay the entire garnished amount
to the employee. As a result, employers who are mandated to withhold taxes on wages
cannot withhold the appropriate tax due thereon.
In order to ensure the collection of the appropriate withholding tax on wages,
garnishees of a judgment award in a labor dispute are constituted as withholding agents
with the duty to withhold tax on wages equivalent to five percent (5%) of the portion of
the judgment award, representing the taxable backwages, allowances and benefits
(RMC 39-2012, August 3, 2012).
Items Not Included as Compensation Income
Compensation shall not include remuneration paid: (a) for agricultural labor paid
entirely in products of the farm where the labor is performed; or (b) for domestic service
in a private home; or (c) for causal labor not in the course of the employers trade or
business; or (d) for services by a citizen or resident of the Philippines for a foreign
government or an international organization (Sec. 78[A], NIRC).
As a general rule, the income recipient is the person liable to pay the income tax.
In order to improve the collection of income on the compensation income of employees,
the State requires the employer to withhold the tax upon payment of the compensation
income, such that at the end of the calendar year, the employee needs only to file a tax
return and no tax is paid, because his total withholding tax during the year is equal to
his income tax liability. [Beginning 2002, qualified employees need not file their income
tax returns and the employer may file a substituted return for its employees.]
Other Income
Income from any source whatever
The phrase income from any source whatever is broad enough to cover
gains contemplated here. These words disclose a legislative policy to include all income
not expressly exempted within the class of taxable income under our laws, irrespective
of the voluntary or involuntary action of the taxpayer in producing the gains (Blas
Gutierrez v. Collector, supra).
Any economic benefit to the employee, whatever may have been the mode
by which it is implemented, is income subject to tax. Thus, in stock options, the
difference between the fair market value of the shares at the time the option is
exercised and the option price constitutes additional compensation income to the
employee (Commissioner v. Smith, supra). A stock option is a right, but not an
obligation, to purchase (call option) or sell (put option) a specified number of shares at a
fixed price before or at a certain date in the future
The principle underlying the taxability of an increase in the net worth of a taxpayer
rests on the theory that such an increase in net worth, if unreported and not
explained by the taxpayer, comes from income derived from a taxable source. In
this case, the increase in net worth was not the result of the receipt by it of taxable
16
income. It was merely the outcome of the correction of an error in the entry in its books
relating to its indebtedness to the insurance company. The income tax law imposes a
tax on income; it does not tax any or every increase in networth whether or not derived
from income (Fernandez Hermanos, Inc. v. Commissioner, CTA Case 787, June 10,
1963)
READ : Madrigal vs. Rafferty , 38 Phil. 414
The tax code did not indicate the source of income (Blinds Sources). What it
enumerates are specific items of income.
Are the following items considered income?
1. Found treasure other forms of gain;
2. Punitive damages/damages for breach of promise or alienation of affection;
3. Recovery of bad debts;
4. Tax refund;
5. Non-cash benefits;
6. Income from illegal sources;
7. Prizes, scholarship, fellowship;
8. Forgiveness of debt.
In the case of Commissioner vs. Tours Specialist, 183 SCRA 402, the Supreme
Court stated that taxable income, however, does not include items received which do
not add to the taxpayers net worth or redound to his benefit such as amounts merely
deposited or entrusted to him.
The following are not income: (a) deposit of property that does not increase
networth of taxpayer (e.g., the increase in asset has a corresponding increase in
liability); (b) increase in networth is due to correction of errors in book entries; (c)
voluntary assessments by a corporation paid by its shareholders under Revenue
Regulations No. 2; (d) security deposit paid to a lessor until it is applied in payment of
accrued rent; (e) contributions by lot owners for the memorial park care fund; and (f)
loan proceeds received by the borrower.
(B) Exclusion from Gross Income an income can be exempted from taxes based
on the following reasons:
1. Exemption by the fundamental law of the land;
2. Exempted by the statute;
3. It does not come within the definition of income such as stock dividend or
increase in the appraisal of the FMV of the property.
Some Principles:
A tax free income is different from a tax free organization.
Doctrine of Constructive Receipt of Income means that it was already set aside,
without limitations, restrictions or conditions for its withdrawal. Example share of the
partner in a general partnership.
Doctrine of Cash Equivalent in Transaction means that if a property is exchanged
with another property the difference of a Fair Market Value (FMV) would be considered
income.
The Material Benefit rule (CIR vs. Javier, 199 SCRA 824), means that under the
solutio indebiti rule, if the holder of the property has the obligation to return it and
17
instead use it for his own benefit, the amount to be returned would be considered an
income.
Exclusions from Gross Income simply means that these incomes are not subject to
income tax:
There are only instances an item of income would not be subjected to income
tax:
1. If it is exempted by the Constitution.
2. If it is exempted by the statute or law.
3. When it does not come within the definition of income.
Example: increase of appraisal value of the property
1. Life Insurance proceeds of life insurance being only an indemnity of life lost is
not subject to income tax. However, it can be subjected to estate tax if the rules
of the estate taxes will apply. If it is an accident insurance and it includes
coverage of life insurance the proceeds would not be subjected to income tax.
2. Return of Premium not subject to income tax because it is just a mere return of
capital.
3. Gifts, Bequests, and Devises not subject to income tax but subject to estate tax
or donors tax.
4. Compensation for Injuries or Sickness includes physical, moral and psychological
injuries.
Lost profits recovered are subject to income tax.
5. Income Exempt under Treaty would not be subject to tax because of the treaty
(International Comity) entered into by the government with other countries.
6. Retirement Benefits covered by a private benefit plan maintained by the
employer would be exempted from income tax if the following conditions will be
present:
(1)
(2)
(3)
The retiring employee is in the service of the same employer for at least ten
(10) years;
He is not less than fifty (50) years of age at the time of retirement.
You retired under the private benefit plan of the employer.
At least sixty (60) years old but not more than sixty-five (65) years old.
Has served at least five (5) years of service with the same employer.
Entitled retirement salary for every year of service but not less than one
month salary.
Involuntary retirement is present if the employee did not ask, did not initiate, and it is
not of his own choice that he is retired. The reasons may be because of the death,
sickness or other physical disability, or for any cause beyond the control of the said
official or employee. Some other grounds like retrenchment, redundancy, closure of
18
business, are also other forms of involuntary retirement. The retirement benefits
received from involuntary retirement not subject to income tax.
BIR Ruling No. 071-95, April 11, 1995 retirement under CBA is taxable for being
voluntary. If the company has no BIR approved retirement plan an employee who is
separated against his will but who signed a CBA, the retirement benefits under the CBA
is taxable because by signing the CBA it will make his separation voluntary.
C. Foreign retirement benefits gratuitously received by a resident or non-resident
citizen of the Philippines or alien who come to reside permanently in the Philippines are
exempted from income tax.
D. Benefits given to persons residing in the Philippines whether alien or citizen by
the USVA exempted from income tax.
SSS and GSIS benefits are exempted from income tax.
7. Miscellaneous Items (READ: CIR vs. Mitsubishi, G.R. No. 54908, Jan. 22, 1990).
a)
b)
c)
19
Nota Bene take note of the tax provisions for minimum wage earners which
exempt compensation and other benefits.
F. GSIS, SSS, Medicare, Pag-IBIG contributions (which are employers share) are
exempted from income tax including union dues but not including contributions made by
employers which are not enumerated in par. F to be exempt.
G.
Self-explanatory.
H.
Self-explanatory.
Section 33 - Fringe Benefit this tax is imposed to the employee but payable by the
employer under the withholding tax system.
Rank and file employees are exempt from Fringe Benefit Tax (FBT)
Only supervisory or managerial employee are liable to pay FBT, except if:
1) The FB is required by the nature of the employment;
2) Necessary to the trade, business or profession of the employer;
3) FB is for the convenience and advantage of the employer.
The tax base is grossed up monetary value of the FB.
FB given to employees which are non-residents alien individual not engaged in trade
or business within the Philippines including the special alien individuals under Section
25 shall not be subject to FBT but the regular rates imposed under Section 25.
Memorize definition of FB under Sec. 33.
FB means employees benefits supplementary to a money wage or salary.
Example of FB - see par. B, Section 33, no. 1-10
FB that are not taxable refer to par. C, Section 33. (memorize)
If the FB is already subjected to FBT it is no longer subject to tax as compensation
income. So that if the FB is exempted from FBT it would still be subject to compensation
income tax unless if the employee is also exempted from the income tax.
De minimis benefits (benefits of small value) is exempted both from FBT and
compensation income tax.
Examples of De minimis benefits:
1) monetized unused vacation leave not exceeding ten (10) days for private
employees; for public employees no limit.
2) Medical cash allowance to dependents not exceeding 700.00/semester or
125.00/month;
3) Rice subsidy 1,000.00/month or less;
4) Uniform allowance 3,000.00/annum;
5) Medical benefits 1,000.00/annum;
6) Laundry allowance 300.00/month.
READ: Revenue Regulation No. 1-2015
CHAPTER VII. Allowable Deductions.
20
Ordinary and
Requisites:
1.
2.
3.
4.
5.
6.
7.
Necessary
Trade,
business
or
Professional
Expenses.
II.
Itemized Deductions (the same requisites with the ordinary but with additional
conditions):
1.
Example:
Interest Expense
Less : Bank deposit interest income
50,000 x 38% (effective Jan. 1, 2000)
Deductible interest expense
60,000
19,000
41,000
2.
2.
Taxes
The following cannot be deducted:
1. Income Tax
2. Foreign Income Tax (if Foreign Tax credit is not utilized)
3. Estate and Donors Taxes
4. Transfer Tax on sale of shares of stocks (Sec. 127d)
5. Special Assessments
Taxes that are not enumerated above are deductible from business income provided
it is connected.
Foreign Tax Credit is a portion of foreign income tax which can be used as a
deduction from the Philippine Income Tax due.
Two approaches:
1. Gross Income (within and without)
Less : Deductions (including Foreign Income Tax)
Taxable income
OR
2. Gross Income (within and without)
Less : Deductions (not including Foreign Income Tax)
Taxable income
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
FTC will only arise if the taxpayer is taxable in the Philippines of income derived
within and without the Philippines
C to determine FTC there is a Formula. The entire foreign tax paid cannot be used
as FTC.
3.
Losses
Kinds of Losses
A. Ordinary losses operation of the business
- NOLCO will apply
- connected with business
B. Casualty losses - properties used in business
- loss arises from fires, storms, shipwreck, or other
casualties, robbery, theft or embezzlement.
- to be reported to the BIR not less than 30 days and
not more than 90 days.
- not used as a losses deduction for estate tax
purposes
- proof of loss (par. 2 of par. D). study carefully.
- should not be compensated by insurance to be
deductible.
C. Capital losses - (to be discussed with Capital Gains)
22
5.
Depreciation
- property, plant and equipment are normally usable for a number of
years. A point will be reached when such property may not be
useful anymore in the business die to exhaustion, wear and tear.
- the owner will be able to recover the cost of the property because
it will gradually or periodically deducted from his gross income as
deduction called depreciation.
- depreciation will only apply to extraordinary expenditures or capital
expenditures.
Depreciation for income tax purposes, depreciation means the reduction in service
value or property used in business or trade arising from exhaustion, wear and tear, and
obsolescence. (Sec. 195, Rev. Reg. No. 2)
Depreciation commences with the acquisition of the property or with its erection.
Depreciation of properties used in petroleum operations is allowable.
Requisites for claiming depreciation deductible are as follows:
(a)
(b)
(c)
(d)
The proper allowance for depreciation of any property used in trade or business, or
out of its not being used, is that sum which should be set aside for the taxable year in
accordance with a reasonable consistent plan whereby the aggregate of the sums so
set aside, plus salvage value, will, at the end of the useful life of the property, suffice to
provide an amount equal to the original cost. (Sec. 195, Rev. Regs. No. 2)
Depreciation a deduction from gross income for depreciation is allowed but limits
the recovery to the capital invested in the asset being depreciated. The law does not
authorize the depreciation of an asset beyond its acquisition cost. Hence, a deduction
over and above such cost cannot be claimed and allowed. The reason is that
deductions from gross income are privileges not matters of right. They are not created
by implication but upon clear expression of the law. (Basilan Estates, Inc. vs.
Commissioner, G.R. No. L-22492, Sept. 5, 1967)
Goodwill, trademarks, formulas.
23
(1) Business and income producing property other than land, generally depreciates
or loses its usefulness and value with the passage of time. A deduction for such
depreciation is allowed in computing taxable income. As such, your opinion that the
assigned cost on the plant as determined at the time of purchase can be depreciated for
tax purposes is hereby confirmed.
(2) Goodwill, including trademarks, trade names, and trade brands, are not such
property as are subject to exhaustion. Accordingly, the value assigned on the
trademarks which is computed on the basis of future sales cannot be discounted to its
present value at the time of acquisition and cannot be amortized for tax purposes over
the average remaining lives of the different trademarks purchased.
(3) Right to receive royalties over a given term is depreciable. Accordingly, your
opinion that discounted or present value at the time of acquisition and that it is
acceptable for tax purposes to amortize the said present values and royalties to be paid
on the basis of future sales may be discounted, to determine the present values and
may be paid at said price (i.e., the cash price as discounted) over the agreed period
(say 5 to 8 years) when royalties will have to be paid is hereby confirmed. Moreover,
said royalty payment is subject to the 20% final withholding tax.
(4) Formulas are not subject to annual depreciation. If, however, after acquisition, a
formula is found to be worthless, its cost may be deducted in full as a loss for the year in
which the formula is abandoned as being worthless. Accordingly, the cost of the
different formulas cannot be amortized over the (a) remaining life of the trademarks
purchased or (b) the expected period within which your client proposes to continue
manufacturing said products using the said formulas.
(5) Amounts paid for an agreement not to compete in a trade or business, where
the taxpayer can prove the existence of such an agreement, are capital expenditures
and subject to allowances for depreciation ratably spread over the period mentioned in
the agreement but only where the elimination of competition is for a definite and limited
term may the cost be exhausted over such a term. Accordingly, your opinion that the
value agreed between your client and seller may not compete in the same line of
business that was sold to your client is hereby confirmed.
(6) Goodwill is not such property as is subject to exhaustion. Accordingly, your
opinion that any amount of goodwill paid for by your client may not be deducted for tax
purposes unless the same business or the assets related to the said goodwill is sold by
your clo9ent is hereby confirmed. (BIR Ruling No. 88-206)
Patents, copyrights, etc. Intangibles, the use of which in the trade or business is
definitely limited in duration, may be the subject of a depreciation allowance. Examples
are patents, copyrights and franchises. Intangibles, the use of which in the business or
trade is not so limited, will not usually be a proper subject of such an allowance. If,
however, an intangible asset acquired through capital outlay is known from experience
to be of value in the business for only a limited period, the length of which can be
estimated from experience with reasonable certainty, such intangible asset may be the
subject of a depreciation allowance provided the facts are fully shown in the return or
prior thereto the satisfaction of the Commissioner of Internal Revenue. (Sec. 107,
Income Tax Regulations)
Such being the case, the value assigned on the trademarks which is computed on
the basis of future sales can be discounted to its present value at the time of acquisition
and can be amortized for tax purposes over the average remaining lives of the different
trademarks purchased. Moreover, the cost of the different formulae can be amortized
over the (a) remaining life of the trademarks purchased or (b) the expected period within
24
which your client proposes to continue manufacturing said products using the said
formulae.
-
Methods
Cost Salvage Value
Life (years)
1.
Straightline method -
2.
3.
6.
Depletion
- it is the cost or value of the exhaustion of natural resources, such
as mines and oil and gas wells, as a result of severance of
production. Only persons having an economic interest in a mineral
land or oil gas wells are entitled to a depletion allowance (which
should not be more than the capital invested). To acquire an
economic interest, the taxpayer must have a capital investment in
the property and not a mere economic advantage.
7.
9.
Pension Trust
Requisites:
1. Employer contributes for the pension trust for the payment of
reasonable pension for employees. The contribution is a deductible
business expense.
26
Note: The change of status rule as single, HF or married is already irrelevant because
the BASIS is now 50,000.00 regardless of STATUS.
If the taxpayer dies during the taxable year, his estate may still claim the personal
and additional exemptions for himself and his dependent(s) as if he died at the close of
such year.
If the spouse or any of the dependents dies or if any of such dependents marries,
becomes 21 years old or becomes gainfully employed during the taxable year, the
taxpayer may still claim the same exemptions as if the spouse or any of the dependents
died, or as if such dependents married, became 21 years old or became gainfully
employed at the close of such year.
Example: Jan. 1, 2010 X is single; June 2, 2010 X got married; December 1, 2010 X
became a widower when the wife died after she delivered twin babies. On
December 10, one of the twins died. How much basic exemption for the
2010?
Personal Exemption Allowable to Nonresident Alien Individual a nonresident
alien individual engaged in trade, business or in the exercise of a profession in the
Philippines shall be entitled to a personal exemption in the amount equal to the
exemptions allowed in the income tax law in the country of which he is a subject or
citizen, to citizens of the Philippines not residing in such country not to exceed the
amount fixed in this Section as exemption for citizens or residents of the Philippines.
Provided, that said nonresident alien should file a true and accurate return of the total
income received by him from all sources in the Philippines, as required by this Title.
Rules to observe
1. Reciprocity Rule
2. Whichever is lower rule
3. Can avail only basic personal exemption
Senior Citizen
- those 60 years old and above
- Exemption from the payment of individual income tax provided that their
annual taxable income does not exceed the poverty level of P60,000.00 or
such amount as may be determined by the NEDA for a certain taxable year.
Taxability of senior citizen to other internal revenue taxes.
a.
b.
c.
A senior citizen whose annual taxable income exceeds the poverty level of
60,000 or such amount as may thereafter be determined by the NEDA for a
certain taxable year shall be liable to the individual income tax in the full amount
thereof on his taxable income net of allowable deductions.
Regardless of the amount of taxable income, a senior citizen who derives
income from self-employment, business and practice of profession shall be
subject to other internal revenue taxes which include but are not limited to the
value-added tax, caterers tax, documentary stamp tax, overseas
communications tax, excise taxes, and other percentage taxes. He shall,
therefore, file the corresponding business tax returns in accordance with existing
laws, rules and regulations.
He shall be subject to the 20% final withholding tax on interest income from
Philippine Currency bank deposit, yield and other monetary benefit from deposit
substitutes, trust fund and similar arrangements; royalties, prizes (except prizes
amounting to 3,000 or less which shall be subject to income tax at the rates
prescribed under Section 21, par. (a) or (f), NIRC) as the case may be, and
winnings (except Philippine Charity Sweepstakes winnings).
27
d.
e.
Capital gains from sales of shares of stock (Sec. 21(d), [now Sec. 24], NIRC)
Capital gains from sales of real property (Sec. 21(e), [now Sec. 24], NIRC)
Basic personal exemption only for benefactor a qualified senior citizen living
with and taken cared of by a benefactor whether related to him or not, shall be treated
as a dependent and his benefactor shall be entitled to the basic personal exemption of
20,000 as head of the family, as defined in Section 2(e) of these regulations. (This rule
no longer applicable because of the 50,000.00 exemptions regardless of status.)
For purposes of claiming personal exemption as head of the family with dependent
senior citizen, the identification card number issued by the OSCA shall be indicated in
the ITR to be filed by the benefactor. The senior citizen shall indicate in a certification to
be submitted to the RDO and the OSCA his benefactor who will be granted the
exclusive right to claim him as dependent for income tax purposes.
Caring for a dependent senior citizen shall not, however, entitle the benefactor to
claim the additional exemption allowable to a married individual or head of family with
qualified dependent children under Sec. 29(1) (2) (now 34) of the NIRC, as amended.
Section 36. - Items not deductible
1.
2.
3.
4.
Query: A lawyer, exercising his profession, paid premium for his own life insurance. If
he dies the proceeds will go to his estate. Premium is deductible? How about if
the beneficiary is his GF and he is married?
5.
Not allowed in order to avoid evasion and collusion. The prohibition is on losses.
It includes also interests on loans. See notes on interest expenses.
28
- this rule of nondeduction does not apply if the dealers transaction of stocks
and securities is made in the ordinary course of business.
- loss of WS is disallowed to prevent the taxpayer from manipulating a
pretended or engineered loss purely to establish a tax deduction
- WS gains are taxable under schedular rates (individual) and regular corporate
tax (corporation).
READ: Calasanz vs. CIR, 144 SCRA 664
Section 39 Taxation of Capital Gains and Losses on Capital Assets
- the rules do not apply to sale of capital assets (real property) of an individual
and sale of capital assets (land or buildings) of corporations, which are
subject to Final Taxes. This rule will not also apply to capital gains on sale of
shares of stocks, because subject also to final taxes (5% or 10% rates).
- if the capital gain/net capital gain arise the applicable tax rates would be
schedular rates (individual) and the regular corporate tax (corporation)
- memorize the following:
1. Ordinary Assets (four groups)
a. Stock in Trade and Inventories for sale in the regular conduct of
business.
b. Properties primarily held for sale in trade or business.
c. Property used in trade or business subject to depreciation.
d. Real property used in business.
2. Net Capital Gain (NCG)
3. Net Capital Loss (NCL)
4. Net Capital Loss Carry Over (NCLCO)
- Rules
1. A capital loss is only deductible
from a capital gain
Individual
Applicable
Corporation
Applicable
-do-
Not Applicable
-do-
-do-
- Difference
NOLCO
- losses from business operation
NCLCO
arise from capital assets
transaction [Sec. 39(D)]
to be carried over only once,
following the year the NCLCO
was sustained.
Ex. Net capital loss in 2010
can be deducted from the net
capital gain in 2011. If after
Any loss from SS is deductible from the gain of SS except it is a WS. (Not
applicable under the present tax laws)
Short Sale For income tax purposes, a short sale is not deemed to be
consummated until the delivery of property to cover the short sale. If the short
sale is made through a broker and the broker borrows property to make
delivery, the short sale is not deemed to be consummated until the obligation
of the seller created by the short sale is finally discharged by delivery of the
property to the broker to replace the property borrowed by such broker.
Section 40.
(A)
(B)
(C)
Consolidation -
agent, who will receive 10% sales commission on all sales actually concluded and
collected through her efforts. In 1995, Baier-Nickel received commission income, which
Jubanitex withheld 10% and remitted to the BIR. Baier-Nickel filed her income tax return
on October 17, 1997 and on April 14, 1998, she filed a claim for refund, contending that
her commission income is not taxable in the Philippines because it was compensation
for her services rendered in Germany.
Non-resident aliens, whether or not engaged in trade or business, are subject to
Philippine income tax on their income received from all sources with the Philippines.
The underlying theory is that the consideration for taxation is protection of life and
property and that the income rightly to be levied upon to defray the burdens of the
Government is that income which is created by activities and property protected by the
Government or obtained by persons enjoying that protection. The important factor,
therefore, which determines the source of income of personal services is not the
residence of the payor, or the place where the contract for service is entered into, of the
place of payment, but the place where the services were actually rendered (Baier-Nickel
v. Commissioner, G.R. No. 156305, February 17, 2003).
In this case, however, the appointment letter of Baier-Nickel, as agent of
Jubanitex, stipulated that the activity or the service which would entitle her to 10%
commission income, are sales actually concluded and collected through her efforts.
What she presented as evidence to prove that she performed income-producing
activities abroad were copies of documents she allegedly faxed to Jubanitex and
bearing instructions as to the sizes of, or designs and fabrics to be used in the finished
products as well as samples of sales orders purportedly relayed to her by clients.
However, these documents do not show whether the instructions or orders faxed
ripened into concluded or collected sales in Germany. At the very least, these pieces of
evidence show that while Baier-Nickel was in Germany, she sent instructions/orders to
Jubanitex. Thus, claim for refund was denied (Commissioner v. Baier-Nickel, G.R. No.
153793, August 29, 2006).
Income from turnkey contract with onshore and offshore portions. While
the construction and installation work were completed within the Philippines, the
evidence is clear that some pieces of equipment and suppliers were completely
designed and engineered in Japan. The two (2) sets of ship unloader and loader, the
boats and the mobile equipment for the NDC project and the ammonia storage tanks
and refrigeration units were made and completed in Japan. They were already finished
products when shipped to the Philippines. The other construction supplies listed under
the Offshore Portion such as steel sheets, pipes and structures, electrical and
instrument apparatus, were not finished products when shipped to the Philippines.
They, however, were likewise fabricated and manufactured by the sub-contractors in
Japan. All services for the design, fabrication, engineering and manufacture of the
materials and equipment under Japanese Portion Yen I were made and completed in
Japan. These services were rendered outside the taxing jurisdiction of the Philippines
and are therefore not subject to tax on the part of a foreign corporation (Commissioner
v. Marubeni Corporation, G.R. No. 137377, December 18, 2011).
A tax sparing credit is a credit granted by the residence country for foreign taxes
that for some reasons were not actually paid to the source country but that would have
been paid under the countrys normal tax rules. The usual reason for the tax not being
paid is that the source country has provided a tax holiday or other tax incentive to
foreign investors as an encouragement to invest or conduct business in the country. In
the absence of tax sparing, the actual beneficiary of a tax incentive provided by a
source country rather than the foreign investment may be the residence country rather
than the foreign investor. This result occur whenever the reduction in source-country tax
is replaced by an increase in residence-country tax.
32
In the leading case of Commissioner v. Procter & Gamble PMC (160 SCRA 560),
the court ruled that the preferential 15% tax on dividend paid to a non-resident foreign
corporation is inapplicable because of the failure of the claimant to show the actual
amount credited by the U.S. government, to present the U.S. income tax returns of
PGMC-USA, and to submit a duly authenticated document evidencing the tax credit of
the 20% differential. Upon motion for reconsideration, the Supreme Court in an en banc
resolution reversed the earlier decision of the court. It pronounced that the 15%
preferential tax rate was applicable to the case at bar, because it was established that
the Philippine Tax Code only requires that the U.S. shall allow Procter & Gamble USA
deemed paid the tax credit equivalent to 20%. Clearly, the deemed paid which must
be allowed by U.S. law to P&G USA is the same deemed paid tax credit that Philippine
law allows to a Philippine corporation with a wholly-or-majority-owned subsidiary in the
U.S. The deemed paid tax credit allowed in Section 902, U.S. Tax Code, is no more a
credit for phantom taxes than is the deemed paid tax credit granted in Section
30(C)(8) (now Sec. 28[B][5][b], NIRC). The legal question should be distinguished from
questions of administrative implementation arising after the legal question has been
answered. (Commissioner v. Procter & Gamble PMC, 204 SCRA 377)
The fact that Switzerland does not impose any tax on the dividends received
from a domestic corporation should be considered as full satisfaction of the condition
that the 20% differential is deemed credited by the Swiss government (as against the
Commissioners contention that the tax-sparing credit should apply only if the foreign
country allows a foreign tax credit). The court observed that to deny private respondent
the privilege to withhold only 15% provided for under P.D. 369 would run counter to the
very spirit and intent of said law and definitely will adversely affect foreign corporations
interest and discourage them from investing capital in our country (Commissioner v.
Wander Philippines, 160 SCRA 573).
What are disguised dividends in income taxation? Give an example.
Disguised dividends are those income payments made by a domestic
corporation, which is a subsidiary of a non-resident foreign corporation, to the latter
ostensibly for services rendered by the latter to the former, but which payments are
disproportionately larger than the actual value of the services rendered. In such case,
the amount over and above the true value of the service rendered shall be treated as a
dividend, and shall be subjected to the corresponding tax of 35% on the Philippine
sourced gross income, or such other preferential rate as may be provided under a
corresponding Tax Treaty.
Example: Royalty payments under a corresponding licensing agreement.
(A)
c.
d.
e.
Hence, Gross Income within the Philippines (trade, business or profession) shall
only be deducted by expenses incurred within the Philippines. Application of the
connected/related rule on expenses.
Except : Interest paid on loans abroad, the proceeds of the loans is actually used
in connection with the conduct or operation of the business in the Philippines.
(B)
(C)
34
TAXABLE PERIOD the rule is that the taxable period of a taxpayer covers a
period of 12 months. The exceptions are as follows:
(a)
(b)
(c)
(d)
(e)
(f)
such deductions must be taken in the year in which the gross income from the crop has
been realized.
(d) Installment plan or method is a method which is available to sales by
dealers of personal property on the installment basis, where the returnable income in
the taxable year which the gross profit realized or to be realized when payment is
completed bears to the total contract price expressed in the following formula:
Gross profit times installments received divided by total contract price equals returnable
income.
The method applies also to sales of realty where the initial payment does not exceed
25% of the selling price; if the initial payment of the selling price exceeds 25% thereof,
then the income shall be reported in full.
This applies further to casual sales of personality (other than property includible in
the taxpayers inventory) for a price exceeding 1,000 and where the initial payment
does not exceed 25% of the selling price.
Methods of determining taxable income.
(a) Percentage method
(b) Net-worth expenditure method
(c) Excess cash expenditure method
(d) Bank deposits
Requirements for use of net-worth method
(a) That the taxpayers books do not clearly reflect the income, or the taxpayer
has no books, or if he has books, he refuses to produce them.
(b)
(c)
That there is a fixed starting point or opening networth, a date beginning with
the taxable year or prior to it at which the taxpayers financial condition can be
affirmatively established, with same definiteness; and
(d)
That the circumstances are such that the method does clearly reflect the
taxpayers income with reasonable accuracy and certainty, and proper and just
additions of personal expenses and other non-deductible expenditures were
made, and correct, fair and equitable credit adjustments were given by way of
eliminating non-taxable items.
- Period for which deductions and credits taken = apply as paid or incurred rule
Section 51-59. Returns and Payment of Taxes
Individuals
A.
Required to file Income Tax Return
1. RC within and without income
2. NRC within income
3. RA within income
4. NRA within income
B.
NOT REQUIRED
36
1.
2.
3.
4.
37
FILING OF DECLARATIONS
AND PAYMENTS
DATES
First
April 15 of the current taxable year
Second
Third
Fourth
38
Rules:
1. A corporation files a quarterly income tax return within 60 days after the end of
each first three quarters of the taxable year.
2. A final income tax return covering the total taxable income of the taxable year
should be filed on or before April 15 of the following year. The amount of total
income tax computed thereof shall be reduced by income taxes paid during the
first three quarters of the taxable year.
3. The amount of tax previously paid for the preceding quarters should reduce the
amount of tax computed on the cumulative taxable income.
4. If the total quarterly tax paid during the taxable year is more than the tax due on
the final return the corporation may claim tax credit carry over or refunded with
the excess amount.
Section 57 to 59. Withholding Taxes
Withholding of taxes is a systematic way of collecting taxes at source. It is an
indispensable method for collecting taxes in order that the government can obtain
adequate revenue. The withholding tax agent who is usually an employer or a person
from whom the income is derived does this process through withholding the appropriate
amount of taxes from taxpayers. It is designed to ensure the collection at source of
income taxes.
If withholding tax is not withheld from income payments, there will be a disallowance
of deductible business expenses claimed by the withholding agent in this income tax
return or a penalty shall be imposed on withholding tax agent for failure to withhold the
tax.
Withholding Tax at Source
A taxation at source is that part of tax system which collects through withholding
agents or employers the appropriate income taxes due as they are earned and before
earnings are paid to the employees.
The income paid to the employees is the net amount after deducting the taxes
withheld which is based on the taxable income after adjustments with respect to
personal, additional exemptions and or other adjustments allowed by the law, if any.
The primary objective of the system is to ensure accurate payment of taxes and to
be able to use taxes collected at an earlier time to finance the operations and projects of
the government.
Classification of Withholding Tax at Source
Withholding tax may be classified into two categories such as
1) Final Withholding Tax, and
2) Creditable Withholding Tax
Final Withholding Tax (FWT)
Under the final withholding tax system the amount of income tax withheld by the
withholding agent is constituted as a full and final payment of the income tax due from
the payee on the said income. The liability for the payment of the tax rests primarily on
the payor as a withholding agent. Thus, in case of failure to withhold or in case of under
withholding, the deficiency tax shall be collected from the payor/withholding agent. The
payee is not required to file an income tax return for the particular income, the final tax
on which has been withheld.
39
The finality of the withholding tax is limited only to the payee or recipients income
tax liability on the particular income. It does not extend to the payees other tax liability
on said income, such as when the said income is further subject to a percentage tax.
Creditable Withholding Tax (CWT)
Under the creditable withholding tax system, taxes withheld on certain payments are
intended to equal or at least approximate the tax due of the payee on said income. The
income recipient is still required to file his income tax return as prescribed in the Section
51 of the NIRC, either to report the income and/or pay the difference between the tax
withheld and the tax due on the income. A tax withheld in income payments covering
the expanded withholding tax from compensation income is creditable in nature.
Diferrence between FWT and CWT
- in FWT no more tax liability if properly withheld. In CWT it may or may not result
to a balance of tax liability.
Taxes withheld on compensation is an example of CWT.
Section 60 to 66. - Estates and Trusts
TAX ON INCOME OF ESTATE
The estate is composed of all properties, rights and obligations including those
properties, earnings or obligations that have accrued thereto since the opening of the
succession. The estate is to be transferred from the decedent to his successors.
During the period when the title to the properties is not yet finally transferred to the
successors, there may be earnings generated from the estate. These earning are
subject to income tax.
Estates or Trusts Taxable Income and Tax
For taxation purposes, the taxable income of the estate/trust shall be determined in
the same manner and basis as in the case of individual taxpayers. The items
composing the taxable income and tax of the income from estates/trusts are as follows:
Treated as Individual Taxpayers
1. Gross Income
The items of gross income of the estate are the same items with the items of
gross income of individual taxpayers.
2. Deduction
Deductions from the gross income of the estates/trusts are the same with the
items of deduction allowed to individual taxpayer.
3. Special Deduction
In addition to the allowable deductions under Section 34 of the Tax Code, the
estate is also allowed to deduct the amount of income of the estate during the
taxable year that is paid or credited to the legatee, heir or beneficiary, subject
to a creditable withholding tax of fifteen percent (15%)
However, the amount so allowed as a deduction shall be a part of the taxable
income of the legatee, heir or beneficiary. It is to be noted that any portion of
40
the gross estate paid to the heir is not deductible from the gross income of the
estate.
4. Exemption
Generally, the income from estate/trusts is allowed for an exemption of
20,000.
5. Tax Rate
The tax rate applicable is the tax rate prescribed for individual taxpayers.
TAX ON INCOME OF TRUSTS
A trust is an obligation imposed or a right to administer over a property given to a
person for a benefit of another.
This is a legal institution used to administer funds in behalf of individuals or
organizations. Trust device is used frequently to transfer property from one generation
to another.
Illustration.
Suppose Juan wants his wife to have the income from his estate as long as she
lives. Juan may place his property in a trust, the income of which would go to his wife
for life; the trust might be dissolved at her death and the property distributed to the
children. The trust is assigned to be administered by Attorney Nilo, a trustee.
Under this arrangement, the trustee is required by law to manage the trust strictly in
accordance with the terms of the trust instrument.
When a trust is created, a new entity comes into being, for which returns must be
filed and taxes paid.
Income accumulated in trust and/or to be distributed to beneficiary are subject to
income tax.
A trust created by a written instrument other than a will is known as a trust intervivos, if created by will is known as a testamentary trust.
Income Derived from Trusts.
Tax imposed upon individual taxpayers shall apply to the income of any property
held in trust, including:
1. Income accumulated in trust for the benefit of unborn or unascertained person/s
with contingent interests, and income accumulated or held for future distribution
under the terms of the will or trust;
2. Income that is to be distributed currently by the fiduciary to the beneficiaries, and
income collected by a guardian of an infant that is to be held or distributed as the
court may direct; and
3. Income that, in the discretion of the fiduciary, may be either distributed to the
beneficiaries or accumulated.
The trust, or the beneficiaries or the grantor may pay the tax on income derived from
trusts.
Computation of Trusts Income Tax
41
The computation of the net taxable income of trust shall be in the same manner with
the net taxable income of estate. The net taxable income shall be taxed by using the
scheduler tax of an individual taxpayer based on Sec. 24 A of the Tax Code.
Two or More Trusts
In the case of two or more trusts created by the same person, for the same
beneficiary, the taxable income of all trusts shall be consolidated and the tax shall be
computed based on the consolidated income.
The proportionate amount of the tax computed based on the consolidated income
shall be assessed and collected from each trustee which should be equal to the
proportion of the taxable income of the trust administered by the trustee to the
consolidated income of the several trusts.
REVOCABLE TRUSTS
Generally, revocable trusts exist when the trustor (grantor) reserves the power to
change at any time any part of the terms of the trust. For tax purposes, the rule is that
the grantor is liable for the income of a revocable trust (because the revocable trust by
itself is not subject to income tax except if the trust is irrevocable (because irrevocable
trust is subject to income tax, so that the grantor is already exempted from income tax
on the income derived from the irrevocable trust).
Illustration:
Mrs. Caduda Duda created a trust naming his eldest son as revocable beneficiary
who will receive the income of the trust. If the eldest son could not abide with the rules
provided in the trust instrument, Mrs. Duda could change outright the terms of the trust.
For the year, the trust earned a total income of 200,000. How much would be the
taxable income of the trust?
There is no taxable income of the trust because it is a revocable trust. The income
should be reported as taxable income of the grantor, Mrs. Caduda Duda.
Trusts, explained. These are taxable entities created by will or trust deeds
where the transfer of property to such trusts is irrevocable and the income of which is to
be accumulated for designated beneficiaries other than the grantor.
Estates and trusts are subject to the rates of income tax applicable to individuals.
Income of estate or trust includes the following:
(a) Income accumulated in trust for the benefit of unborn or unascertained person
or persons with contingent interests, and income accumulated or held for future
distribution under the terms of the will or trust.
(b) Income which is to be distributed currently by the fiduciary to the beneficiaries,
and income collected by a guardian of an infant which is to be held or distributed
as the court may direct.
(c) Income received by estates of deceased persons during the period of
administration or settlement of the estate; and
(d) Income which, in the discretion of the fiduciary, may be either distributed to the
beneficiaries or accumulated.
Trusts not subject to tax.
42
(a) Revocable trusts the income of which is held or distributed for the benefit of the
grantor
(b) Employees pension trusts.
The taxable income of the estate or trust shall be computed in the same manner and
on the same basis as in the case of an individual. However, when it comes to allowable
deductions, the guidelines in Section 61 of the Tax Code, should be followed.
Exemption allowed to estates and trusts.
(a) 20,000.00 is allowed as an exemption.
Revocable trusts. Where at any time the power to revest in the grantor title to any
part of the corpus of the trust is vested (a) in the grantor, either alone or in conjunction
with any person not having a substantial adverse interest in the disposition of such part
of the corpus or the income therefrom, or (b) in any person not having a substantial
adverse interest in the disposition of such part of the trust shall be included in
computing the net income of the grantor.
Income for the benefit of grantor. Where any part of the income of a trust
(a) is, or in the discretion of the grantor or of any person not having a substantial
adverse interest in the disposition of such part of the income may be held or
accumulated for future distribution to the grantor;
(b) may, in the discretion of the grantor or of any person not having a substantial
adverse interest in the disposition of such part of the income, be distributed to
the grantor;
(c) is, or in the discretion of the grantor or of any person not having a substantial
adverse interest in the disposition of such part of the income may be, applied to
the payment of premiums upon policies of insurance on the life of the grantor;
such part of the income of the trust shall be included in computing the net
income of the grantor.
Requisites for exemption of employees pension trust.
(a) The employees trust must be part of a pension, stock bonus or profit-sharing
plan of an employer for the benefit of some or all of his employees;
(b) Contributions are made to the trust by such employer, such employees, or both;
(c) Such contributions are made for the purpose of distributing to such employees
both the earning and principal of the fund accumulated by the trust;
(d) The fund is accumulated by the trust in accordance with the plan of which the
trust is a part;
(e) The trust instrument makes it impossible for any part of the trust corpus or
income to be used for, or diverted to, purposes other than for the exclusive
benefit of such employees.
It may be noted that under Republic Act No. 4917, retirement benefits received by
officials and employees of private firms under a reasonable private benefit plan
maintained by the employer are exempt from all taxes.
Section 78 to 83. Withholding on Wages
43
Where the employee has opted to have his compensation income subjected to
withholding so as to be relieved of the obligation of filing an annual income tax return
and paying his tax due on a lump sum basis, he shall execute a waiver in a prescribed
BIR form of his exemption form withholding which shall constitute the authority for the
employer to apply the withholding tax table provided under these Regulations.
The employee who opts to file the Income Tax Return shall file the same not later
than April 15 of the year immediately following the taxable year.
Cumulative Average Method
This method is used if the compensation of a particular employee is exempt from
withholding because the amount thereof is below the compensation level, but
supplementary compensation is paid during the year; or the supplementary
compensation is equal to or more than the regular compensation to be paid; or the
employee was newly hired and had a previous employer(s) within the calendar year,
other than the present employer doing this cumulative computation, the present
employer shall determine the tax to be deducted and withheld in accordance with the
cumulative average method.
The cumulative average method, once applicable to a particular employee at any
time during the calendar year shall be the same method to be consistently used for the
remaining payroll periods of the same calendar year.
Annualized Withholding Tax Method
44
Where to File
45
Creditable and final withholding taxes deducted and withheld by the withholding
agent shall be paid upon filing a return in duplicate with the authorized agent banks
located within the Revenue District Office (RDO) having jurisdiction over the residence
or principal place of business of the withholding agent. In places where there is no
authorized agent banks, the return shall be filed directed with the Revenue District
Officer, Collection Officer or the duly authorized Treasurer of the city or municipality
where the withholding agents residence or principal place of business is located, or
where the withholding agent is a corporation, where the principal office is located except
in cases where the Commissioner otherwise permits.
When to file
The withholding tax return, whether creditable or final shall be filed and payments
should be made within 10 days after the end of each month except for taxes withheld for
December, which shall be filed on or before January 25 of the following year.
For large taxpayers, the filing of the return and the payment of tax shall be made
within 25 days after the end of each month.
The return for final withholding taxes on interest from any currency bank deposit and
yield, or any other monetary benefit from deposit substitutes and from trust funds and
similar arrangements shall be filed and the payment made within 25 days from the close
of each calendar quarter.
Withholding Tax Statement
Every payer required to deduct and withhold taxes under there regulations shall
furnish each payee, whether individual or corporate, with a withholding tax statement,
using the prescribed form (BIR Form 2307) showing the income payments made and
the amount of taxes withheld there from, for every month of the quarter within 20 days
following the close of the taxable quarter employed by the payee in filing his/its quarterly
income tax return. Upon request of the payee, simultaneously with the income payment.
For final withholding taxes, the statement should be given to the payee on or before
January 31 of the succeeding year.
Annual Information Return for Income Tax Withheld
The payor is required to file to the Commissioner, Revenue Regional Director,
Revenue District Officer, Collection Agent in the city or municipality where the payor has
his legal residence or principal place of business, where the government office is
located in the case of a government agency, on or before January 31 of the following
year in which payments were made, and Annual Information Return of Income Tax
Withheld at Source (Form No. 1604), showing among others the following information:
1.
2.
46
Due dates refer to the last day for filing return and payment of tax. The following are
the due date prescribed by laws for filing of return and payment of taxes.
Events
Due Date
April 15 succeeding
2.
15
same
November 15 same
April 15 succeeding
3.
Estate tax
a. Notice of death ..
death
b. Estate tax return
death
5. Donors tax
donation
Value-added tax:
a. On sale of goods, services or property
(1) Monthly declaration .
months end
(2) Quarterly return
quarters end
b. On importation ..
Customs
months
after
months
after
6.
25th
day
after
25th
day
after
day
after
9.
than
b. Large taxpayers
On or before 25th
day of the month
following the month in which
withholding was made
Nota Bene A withholding agent (WA) is a taxpayer but not a statutory taxpayer.
WA can claim a tax refund if there is overpayment.
Take note of the following:
Meaning of : 1.
2.
3.
4.
48