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Taxation refers to the act of collecting taxes. This power is vested in the government, whether
local or nation. Taxes are compulsory payments associated with income, consumption, or
holding of property that individuals and corporation are required to make each year to
governments.
The government serves to promote the general welfare and protection of its citizens. As such,
various functions related to the following are formed: education, defense, social welfare, food
production, protection of the environment, and others. To maintain activities that are deemed
important, funds need to be provided on a regular basis; in effect, it becomes necessary for the
government to collect taxes.
When people do not pay taxes, the viability of the government is placed in jeopardy. The
provision of services will not be sustained. Even if people decide to remove a government that
imposed taxes, they will not be able to find one that will not need funds to operate.
It is important that people should share in the burden of running the government, and this can be
achieved through the regular payments of taxes.
Although the government has the power to tax its citizens, there are certain requisites that must
be present before taxation is deemed valid.
A tax is said to be for public purpose if the funds is generated through it is used to support the
government, like when it is used to pay for the construction of public buildings. Financing
research in agriculture is also a valid reason for collecting taxes.
Taxation is valid when all taxable articles or kinds of property belonging to the same class or
category are tax at the same rate. Two adjoining lots located in a residential area, for instance,
must be levied with tax with the same percentage over the value of the lots. If uniformity of
application is implemented, taxation is said to be valid.
When the state collects taxes on persons, properties, or transactions where it has jurisdiction,
taxation is valid. A property owned by a person living in another place may be levied a tax by the
Taxation is valid if sufficient notice and opportunity for hearing is provided to individual subject
of taxation.
OBJECTIVE OF TAXATION
Taxation serves to achieve any or all of the following objectives:
1. To raise funds
2. To redistribute wealth
3. To regulate consumption
4. To protect local industries
The chief means for raising funds to support the government is through taxes.
Some individuals amass great wealth during their lifetimes. Taxation is one of way of
redistributing this wealth to the people. Taxes relating to estate and inheritance are examples of
means used.
The consumption of some goods sometimes reaches levels that become harmful to the society. To
limit the sale of these goods, taxes are imposed. If, for instance, foreign travel depletes the
nations dollar reserves, the government may impose taxes at rates enough to discourage the said
activity.
Imported goods sometimes enter our local markets to the detriment of local producers. If
imported goods are sold locally at lower prices, the government may impose taxes that will raise
its selling price. When this happens, imported goods will be less attractive to domestic
consumers.
CLASSES OF TAXES
Taxes may be classified according to the following:
1. Subject
2. Purpose
3. Authority imposing tax
4. Determination of the amount
5. Who bears the burden
6. Graduation rate
According to Subject
Taxes may be classified according to subject as personal, property, or excise.
Property Tax is one levied on property. The amount paid is in proportion to its value, or some
reasonable means of apportionment.
According to Purpose
Taxes may be classified as either revenue or regulatory.
A Revenue Tax is imposed to collect revenues for the general purpose of the government.
Examples are income tax and sales tax.
A Regulatory Tax is imposed for a special purpose like the protection of local industries from
foreign competition.
A National Tax is one imposed by the national government. Examples are income taxes and
custom duties.
A Local Tax is one levied by the municipal, provincial, or barangay governments. An example is
the real property tax.
A Specific Tax is one assessed on the basis of tax per unit. When assessment is based on a
percentage of the value of the item, the tax is regarded as Ad Valorem.
A tax is direct when the person on whom the tax is imposed absorbs the burden. An example is
income tax.
A tax is indirect when the amount is paid by the person other than the one on whom it is legally
imposed. An example is the value added tax VAT paid by the seller but passed on to the buyer as
part of the selling price.
A tax is proportional if it is based on fixed percentage of the amount of the property, income, or
other factors. Examples are sales tax and real property tax.
A tax is progressive when the rate increases at the tax base increases. An example is the income
tax.
LEGISLATIVE- this power can only be exercised by the law making body (Congress) not the
executive or the judicial branch of the government, except when delegated by the national
legislative body to a local legislative body or to the executive branch, subject to limitations as
may be provided by law;
It is also defined as the act of levying a tax, i.e. the process or means by which the sovereign,
through its law-making body, raises income to defray the necessary expenses of government. It is
a method of apportioning the cost of government among those who, in some measure, are
privileged to enjoy its benefits and must therefore bear its burdens.
Taxes are the enforced proportional contributions from persons and property levied by the law-
making body of the State by virtue of its sovereignty for the support of the government and all
public needs.
The basis of taxation is found in the reciprocal duties of protection and support between the State
and its inhabitants. In return for his contribution, the taxpayer received benefits and protection
from the government. This is the so-called benefits received principle.
The Supreme Court said that taxes are the lifeblood of the government and should be collected
without unnecessary hindrance. They are what we pay for a civilized society. Without taxes, the
government would be paralyzed for lack of motive power to activate and operate it. The
government, for its part, is expected to respond in the form of tangible and intangible benefits
intended to improve the lives of the people and enhance their moral and material values.
BENEFIT-RECEIVED PRINCIPLE
This principle serves as the basis of taxation and is founded on the reciprocal duties of protection
and support between the State and its inhabitants. Also called symbiotic relation between the
State and its citizens.
In return for his contribution, the taxpayer receives the general advantages and protection which
the government affords the taxpayer and his property. One is compensation or consideration for
the other; protection for support and support for protection.
However, it does not mean that only those who are able to and do pay taxes can enjoy the
privileges and protection given to a citizen by the government.
In fact, from the contribution received, the government renders no special or commensurate
benefit to any particular property or person. The only benefit to which the taxpayer is entitled is
that derived from the enjoyment of the privileges of living in an organized society established
and safeguarded by the devotion of taxes to public purpose. The government promises nothing
to the person taxed beyond what may be anticipated from an administration of the laws for the
general good.
Taxes are essential to the existence of the government. The obligation to pay taxes rests not upon
the privileges enjoyed by or the protection afforded to the citizen by the government, but upon
the necessity of money for the support of the State. For this reason, no one is allowed to object to
SITUS OF TAXATION
Literally, situs of taxation means place of taxation. It is the State or political unit which has
jurisdiction to impose a particular tax.
The determination of the situs of taxation depends on various factors including the:
1. Nature of the tax;
2. Subject matter thereof (i.e. person, property, act or activity;
3. Possible protection and benefit that may accrue both to the government and the taxpayer;
4. Residence or citizenship of the taxpayer; and
5. Source of the income.
Poll tax may be properly levied upon persons who are inhabitants or residents of the State,
whether or not they are citizens.
This is so because the taxing authority has control over the property which is of a fixed and
stationary character.
The place where the real property is located gives protection to the real property; hence, the
owner must support the government of that place.
Lex rei sitae is a Latin phrase which means the law where the property is situated. This is a
legal doctrine of property law and international private law. The law governing the transfer of
title to property is dependent upon and varies with, the lex rei sitae.
KINDS OF SHIFTING
FORWARD SHIFTING- when burden of tax is transferred from a factor of production
through the factors of distribution until it finally settles on the ultimate purchaser or
consumer.
BACKWARD SHIFTING when the burden is transferred from consumer to the
producer or manufacturer.
ONWARD SHIFTING - when tax is shifted to two or more times either forward or
backward.
CAPITALIZATION- is the reduction in the price of the taxed object equal to the capitalized
value of the future taxes which the purchaser expects to be called upon to pay.
TRANSFORMATION- the manufacturer or producer upon whom the tax has been imposed,
fearing the loss of his market if he should add the tax to the price, pays the tax and endeavors to
recoup himself by improving his process of production thereby turning out his units at a lower
cost.
TAX EVASION- is the practice by the taxpayer through illegal or fraudulent means to defeat or
lessen the amount for tax. This is also known as tax dodging.
CLASSIFICATION OF TAXPAYERS
1. Individual Taxpayers
Resident Citizens
Non-Resident Citizen
Resident Aliens
Non-Resident Aliens
2. Corporate Taxpayer
Domestic Corporation
Foreign Corporation
Resident Corporation
Non-Resident Corporation
3. General Professional Partnership
CPA
Lawyer
4. Estates and Trust
DOUBLE TAXATION
Double taxation means taxing the same property twice when it should have been taxed only
once. This characterizes two taxes that are of the same kind or character, and were imposed on
the same subject matter, for the same purpose, by the same taxing authority, within the same
jurisdiction, during the same taxing. Because of this specific nature of double taxation, it is
otherwise described as a direct duplicate taxation or sometimes referred to as obnoxious
double taxation.
Double taxation is a taxation principle referring to income taxes that are paid twice on the same
source of earned income.
Paying taxes is something inevitable wherever you live. Almost all transactions require the
payment of taxes. In the Philippines, taxes are grouped into two basic types: National and Local.
NATIONAL TAXES are the ones paid to the government through the Bureau of Internal
Revenue (BIR). Our national taxation system is based on the National Internal Revenue Code of
1997 or the Republic Act No. 8424 also known as the Tax Reform Act of 1997, as amended.
Import and export tariffs levied by the Bureau of Customs are also considered national taxes and
duties but will not be discussed in this article.
LOCAL TAXES, on the other hand, are based on Republic Act 7160, otherwise known as the
Local Government Code of 1991, as amended. These taxes and fees are imposed by the local
government units in every province, city, municipality, and barangay, which are given the power
to levy such taxes by the code.
Capital Gains Tax is tax imposed on the proceeds from sale, exchange, or other disposition of
capital assets located in the Philippines. Examples of sold assets that are subject to capital gains
tax include properties, stocks, pieces of jewelry, and other high-value goods.
Documentary Stamp Tax is imposed on documents, instruments, loan agreements, and papers
that are used as evidence of acceptance, assignment, sale or transfer of obligation, rights, or
property. Documentary stamps are usually found on deeds of sale and bank promissory notes,
among others.
Donors Tax is levied on a donation or gift for the gratuitous transfer of property between two or
more persons who are both still living at the time of transfer. Even relief goods sent for donation
are charged this type of tax.
Estate Tax is required to be paid before an estate is transferred to the rightful beneficiary or heir
of a deceased person. This is based on a graduated schedule of tax rate.
Excise tax is tax on goods produced for sale and subsequently sold within the country. It is
considered an indirect tax which means the manufacturer is supposed to recover it by adding the
amount to the selling price. Sin tax on tobacco and alcohol is an example of excise tax.
Income tax is imposed on all compensation and income received or earned from practice of
profession, conduct of trade in business, and from properties.
VALUE ADDED TAX OR VAT is another kind of indirect tax that is passed on to the end
consumer. It is a form of consumption tax making it the most common tax type because all final
sales are almost always charged this tax.
Withholding Tax on Compensation is tax deducted from salaries of employees and it is the
companys responsibility to remit the same to the government. Other kinds of withholding tax
are Expanded Withholding Tax, Final Withholding Tax, and Withholding Tax on Government
Money Payments.
Basic Real Property Tax is tax on real properties classed as follows: agricultural, commercial,
industrial, residential, timberland, and mineral.
Franchise Tax is imposed by LGUs on business franchises at a rate not more than 50% of 1% of
the gross annual receipts of the previous taxable year.
Business of Printing and Publication Tax is collected from any business that does printing or
publication of printed materials such as books, cards, pamphlets, posters, or tarpaulins.
Professional Tax is collected from doctors, lawyers, engineers, and other professionals engaged
in the exercise or practice of professions that require government examination or acquisition of
license to practice.
Amusement Tax is tax on all forms of entertainment such as movies, concerts, and plays. This
tax is usually already included in the ticket price.
Community Tax, more commonly called Cedula, is required from individuals from a base fee of
Php5.00 and additional Php1.00 for every Php1,000 income.
Annual Fixed Tax for Delivery Trucks and Vans amounting to Php500 is collected by the LGU
from trucks and vans which deliver goods such as beer, soda, and/or cigarettes.
Barangay Tax Is subjected on sari-sari stores and retailers whose annual gross sales do not
exceed Php50,000 and is accrued on the first day of January of each year.
Barangay Clearance is paid as a legal permission for particular individuals, hosts, or companies
to conduct an event or start a business in a barangay.
General Rule: The taxing power cannot go beyond the territorial limits of the taxing authority.
Basically, the state where the subject to be taxed has a situs may rightfully levy and collect the
tax; and the situs is necessarily in the state which has jurisdiction or which exercises dominion
over the subject in question.
Resident citizens and domestic corporation are taxable on all income derived from
sources within or without the Philippines.
A non-resident citizen is taxable on all income derived from sources within the
Philippines.
An alien whether a resident or not of the Philippines and a foreign corporation, whether
engaged or not in trade or business in the Philippines are also taxable only from
sources within the Philippines.
The taxable situs will depend upon the nature of income as follows:
Interests- Interest income is treated as income from within the Philippines if the debtor or
lender whether an individual or corporation is a resident of the Philippines.
Dividends
The source of an income is the property, activity or service that produced the income. It is the
physical source where the income came from.
1) What is income?
Income means all wealth, which flows into the taxpayer other than as a mere return of capital.
Differentiated from Capital, capital is a fund while income is a flow from the use of such fund.
Capital is wealth, while income is the service or the return from the use of such wealth. Property
or fund is the tree, while income is the fruit. Labor is a tree and income is the fruit.
TAXABILITY OF INCOME
For income tax purposes, taxability income has the following requisites:
a. there must be an income, gain or profit
b. the income, gain or profit must have been received OR realized during the taxable year
c. the income gain or profit is not exempt from income tax
a) Optional Standard Deduction - an amount not exceeding 40% of the net sales for individuals
and gross income for corporations; or
INCOME TAX is a tax on a person's income, emoluments, profits arising from property,
practice of profession, conduct of trade or business or on the pertinent items of gross income
specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions and/or personal
and additional exemptions, if any, authorized for such types of income, by the Tax Code, as
amended, or other special laws.
TAXABLE INCOME - this is the pertinent item of gross income specified in the tax
code less deduction of personal and/or additional exemptions.
DEFINITION OF TAXPAYER it means any person subject to tax as imposed by the National
Internal Revenue Code.
3. MARRIED it refers to a person who is legally and lawfully married with or without
children, natural or legally adopted child/children solemnized by religious or state
authority
Personal Exemptions:
For single individual or married individual judicially decreed as legally separated with no
qualified dependents .P 50,000.00
For head of family .P 50,000.00
For each married individual *P 50,000.00
Note: In case of married individuals where only one of the spouses is deriving gross income,
only such spouse will be allowed to claim the personal exemption.
Additional Exemptions:
The husband who is deemed the head of the family unless he explicitly waives his
right in favor of his wife
The spouse who has custody of the child or children in case of legally separated
spouses. Provided, that the total amount of additional exemptions that may be
claimed by both shall not exceed the maximum additional exemptions allowed by
the Tax Code.
The individuals considered as Head of the Family supporting a qualified
dependent
How is Income Tax payable of individuals (resident citizens and non-resident citizens)
computed?
Pay the balance as you file the tax return, computed as follows:
Income Tax Due P ___________
Less: Withholding Tax ___________
Net Income Tax Due P ___________
SOLUTION:
Total Gross Income 602,000.00
(Basic pay + Overtime + 13th month pay + Other Benefits)
Less: SSS /Philhealth/Pag-Ibig 11,400.00
Non Taxable Income* 57,000.00 68,400.00
There is a new cap for the exemption of bonuses and other benefits, from the former amount of
P30,000. Under Republic Act (RA) No.10653, signed into law in 2015, gross benefits received
by officials and employees of public and private entities up to a maximum amount of Eighty Two
Thousand Pesos (P82,000) are excluded from the computation of the gross income of the
recipients of such benefits, and thus, such amounts are exempt from income tax. To implement
RA 10653, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) 3-2015.
If you have seen a Monthly Remittance Return of Income Taxes Withheld on Compensation or
BIR Form No. 1601-C, you will only see totals of compensation and tax withheld on
compensation of the taxpayers employees. You will not have an idea on the computation of the
tax withheld on compensation for each of those employees.
REQUIREMENT OF WITHHOLDING
According to Section 79 of the National Internal Revenue Code (Republic Act No. 8424), as
further amended by RA 9504, except in the case of a minimum wage earner as defined in Sec.
22(HH) of this code, every employer making payment of wages shall deduct and withhold upon
such wages a tax determined in accordance with the rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the Commissioner. This means that employees
and workers who earn minimum wages are not subject to withholding tax. The summary of the
current regional minimum wage rates can be viewed at the Department of Labor and
Employment (DOLE) official website.
Use of withholding tax table-In general, every employer making payment of compensation
shall deduct and withhold from such compensation a tax determined in accordance with the
Computation:
By using the monthly withholding tax table, the withholding tax for January 2014 is computed
by referring to Table A line 2 S (single) of column 6 (fix compensation level taking into account
only the regular compensation income of P18,000 which shows a tax of P1,875 on P15,833 plus
25% of the excess of P 2,167 (P18,000-15,833) plus P7,000 supplementary compensation.
Computation:
Excess 2,167
Jose Cruz, married with four (4) qualified dependent children receives P14,000 (net of
SSS/GSIS,PHIC,HDMF employee share only) as regular semi-monthly compensation. His wife
is also employed but he did not waive his right in favor of the wife to claim for the additional
exemptions.
Computation:
Using the semi-monthly withholding tax tables, the withholding tax due is computed by referring
to Table B line 4 ME4 of column 6 which shows a tax of P937.5 on P12,083 plus 25% of the
excess (P 14,000 12,083 = P1,917).
Excess 1,917
TAX COMPUTATION
Example #3
As an artificial being, a corporation has a juridical personality separate and distinct from that of
each shareholder or member. (See Art. 44, Civil Code). It exists only in contemplation of law.
Under the Philippine's National Internal Revenue Code of 1997 (the "Tax Code"), the term
Corporation shall include partnerships, no matter how created or organized, joint-stock
companies, joint accounts, association, or insurance companies, but does not include general
professional partnerships and a joint venture or consortium formed for the purpose of
undertaking construction projects or engaging in petroleum, coal, geothermal and other energy
operations pursuant to an operating consortium agreement under a service contract with the
Government. 'General professional partnerships' are partnerships formed by persons for the sole
purpose of exercising their common profession, no part of the income of which is derived from
engaging in any trade or business.
CLASSIFICATION OF CORPORATION
1. Stock Corporation- is a corporation having a capital stock divided into shares and which
is authorized by law to distribute to the holders thereof dividends or shares of the surplus
profits of the corporation.
2. Non Stock Corporation - is a species of non-profit corporation in which the members
hold no shares of stock.
1. In General except as otherwise provided in Tax Code, the tax is 30% on taxable
income (except certain passive incomes) received during each taxable years from all
sources within and without the Philippines.
2. In the computation of taxable income, there shall be deducted from the Philippine-
sourced gross income, such allowable expenses, losses and other deductions properly
allocated thereto and a ratable part of expenses, interests, losses and other deductions
effectively connected with the business or trade conducted exclusively within the
Philippines which cannot definitely be allocated to some items or class of gross
income.
1. In general, a non-resident foreign corporation shall pay a tax equal to thirty percent
(30%) of the gross income received during each taxable year from all sources within
the Philippines.
Passive Income
1. Interest from currency deposits, trust funds and deposit substitutes 20%
2. Royalties (on books as well as literary & musical composition) 10%
- In general 20%
3. Prizes (P10,000 or less ) 5%
- In excess of P10,000 20%
4. Winnings (except from PCSO and lotto) 20%
5. Interest Income of Foreign Currency Deposit 7.5%
6. Cash and Property Dividends
- To individuals from Domestic Corporations 10 %
- To Domestic Corporations from Another Domestic Corporations 0%
7. On capital gains presumed to have been realized from sale, exchange or other disposition
6%
of real property (capital asset)
8. On capital gains for shares of stock not traded in the stock exchange
- Not over P100,000 5%
ILLUSTRATION
Problem 1: FX Corporation, a domestic corporation, shows the following income and deduction for
taxable year 1999.
Gross Income Deductions
Philippine Sources 200,000 80,000
From Foreign Sources:
Singapore 80,000 30,000
Indonesia 50,000 20,000
Compute the income tax payable of FX Corporation.
Solution
Gross Income
Philippine Sources 200,000
Foreign Sources
Singapore 80,000
Indonesia 50,000 130,000
Total Gross Income 330,000
Less: Deductions:
Philippine Sources 80,000
Foreign Sources
Singapore 30,000
Indonesia 20,000 130,000
=Taxable Income 200,000
Multiply by Tax Rate 30%
=Corporate Income Tax Due/Payable 60,000
Problem 2: The University Of Bulacan (UB) had the following income and deductions for taxable
year 2011 and 2012, respectively:
Compute the income tax of UB for taxable year 2011 and 2012 respectively.
SOLUTION
Gross Income 2011 2012
Educational Income
Tuition Fees 10,000,000.00 5,000,000.00
Sales of Bookstores 200.000.00 100,000.00
Sales of Canteen 300,000.00 100,000.00
10,500,000.00 5,200,000.00
Unrelated Educational
Income
Rental 4,000,000.00 5,800,000.00
Gross Income 14,500,000.00 11,000,000.00
Deductions:
Allowable Expenses 11,000,000.00 6,500,000.00
Purchase of Library Books
1,500,000.00 500,000.00
Purchase of classrooms
tables, chairs others 2,500,000.00 14,000,000.00 1,000,000.00 8,000,000.00
Taxable Income 500,000.00 3,000,000.00
Multiply by Tax Rate 10% 30%
Income Tax Due/Payable 50,000.00 900,000.00
Solution
Gross Income
Philippine Sources 5,000,000
Total Gross Income
Less: Deductions:
Philippine Sources 3,000,000
=Taxable Income 2,000,000
Multiply by Tax Rate 30%
Solution
Gross Income
Philippine Sources 10,000,000
Multiply by Tax Rate 30%
=Corporate Income Tax Due/Payable 90,000
Here in the Philippines, we are required to include VAT to our sales and pass it on to the
customer, generally. We are, therefore, required to remit this VAT (equivalent to 12%) to the
Bureau of Internal Revenue (BIR). That is your Output VAT. However, during the course of
business, we also incur some expenses. That means VAT was passed on to us already. That is
your Input VAT.
So to make things even simpler, Output VAT comes from your revenues, while Input VAT comes
from your expenses.
If you will take a look at any receipt, say, from your nearest coffee shop. You will see a
breakdown at the bottom. It would look something like this photo below.
Who may opt to register as VAT and what will be his liability?
The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the
beginning of the calendar quarter and shall pay the registration fee unless they have already paid
at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for
administrative reason deny any application for registration. Once registered as a VAT person, the
taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the first day
of the month following registration.
What are the BIR forms used in filing VAT Returns?
VAT returns are filed monthly using the Monthly Value Added Tax Declaration Return BIR Form
2550M and quarterly using the Quarterly Value Added Tax Declaration Return BIR Form 2550Q.
Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or
services by any person registered or required to register under Section 236 of the Tax Code.
Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local
purchase of goods, properties or services, including lease or use of property in the course of his
trade or business. It shall also include the transitional input tax determined in accordance with
Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period.
Total Vatable Purchases are your total purchases from VAT registered suppliers. This should be
supported with VAT receipts.
Under the cash basis the following taxpayers must report their income
a. Those who keep records the cash receipts and disbursement method
b. Those who do not keeps books and record
c. Those whose books and record are inadequate to reflect their taxable income
ACCRUAL BASIS
Accrual basis is a method of keeping accounts under which income earned is included in
gross income. Whether received or not, and expenses incurred are allowed as deductions
although not yet paid.
HYBRID METHOD
Hybrid method is the method of accounting under which the taxpayer reports his taxable
income through the combination of cash and accrual method, or he may adopt one or the
other at his option as in his judgment it clearly reflects his true income.
CROP YEAR BASIS
Crop year basis is a method of accounting under which expense in the production of
crops are deducted in the taxable year in which the gross income from crops have been
realized.
INSTALLMENT METHOD / BASIS (SEC. 49, TAX CODE; SEC. 175 176, REVENUE
REGS. NO.2)
Installment basis is a method under which the taxpayer reports as income only a part of
the gross profit to be realized from the sale / disposal of property on the installment plan
equivalent to that proportion of the amount of the installments actually received in a
taxable year, which the gross profit realized when payment is completed, bears to the
total contract price.
Formula:
Gross Profit/Contract Price X Installment Payments Actually Received = Income to be
reported for the year
Illustrative Problem
Mr. X owns a residential lot costing 200,000. He sold said lot for 400,000 on installment to
Mrs. Y payable for a period of eight (8) years at 50,000 a year. Compute the yearly profit of
Mr. X for income tax purposes.
Solution:
Contract Price 400,000,00
Less: Cost 200,000,00
Real Property
Formula:
Installment Payment/Contract Price X Tax Due = Portion of Tax Payable
Problem:
Mr. M owns a piece of land costing 700,000.00. On December 14, 1998, he sold the same to
Ms. L for 900,000.00. The terms of payment are as follows
Down payment in 1998 was 200,000.00
Payment in 1999 350,000.00
Payment in 2000 350,000.00
Compute the capital gains tax to be paid by Mr. M in 1998, 1999 and 2000
Solution:
TAX REMEDIES
For taxation purposes,-a remedy may refer to the enforcement of right, prevention of violation of
such right or a cause of action that a taxpayer or the government may exercise to protect their
respective right.