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TX 1601: BASIC PRITfCIPLESfiilHEREilT FOt{EltS)

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b. Purpocesof a. The principal(pdmary) purposeis to raise revenuefor gcvernmentalneeds.This is also called


TaxaUon neventEqurpe.
b.The wnchrypn6of taxatisr are:
7)@mptwaaryFrW
a. To reduceexc$si\re inequalitiesd weafth
b, To maintainhighlevel_ofetndoymqnt
' c. To conkol inflation
2) Sumfrmy or ruJubWy putrc - To implenrentUte pottce pqwer of ,the State to
prornde ttrc qen€relr*lfare.
c. TheoryandBarls a. The power of taxation proceedsupon tfre theory that the odstene of the gnrerrrnent is a
ol Taxation lrffirV that it cannot contintle wi$tgrrt meansto pay its expen*s and ttrat for this nrearrsit
hasa right to compd all its citizensand propertywithin its fimils to contribgte.
b- T}e basis is the rafiul Ab d prftection and support betrrrreenthe Sffie ard its
inhabitarts. The sat€ cofbcts bxes tuqn the srbjects of taxdion in order that it may be abh to
performthe furrtions of go/emnrert. The ciuzenson the drer lrarid, pfi trs in order tfiil
they may be securedin the eniryrne4tof ttle benefts of organizedsdcty f*tlt ffiA
tlwy)t
d. a. Taxes 'are ttre trlbM of the Golernmer$ ard their prornfi anO cer€in avaitaUitity'are
imperious(expectlnqobedience)need.
b. Upontaxation dependsthe govemmertrsatility to serrrethe peoplefor vr'hce ben€fit taxes are
@ffected.
c. l.lanift#tioa of ltr€bfoodtfnry:.
ll lreFo" gtax cvEnin the absnltcre Gmsttricrat gnrt.

o. Scopcoflfn
'*-*fl*mmTmHA
The povrieroJ taxation is anffi'fir.7,
!

ttt*Sn*AA i* s.tpGrrp. This power is,


ParcrolTrrdol tpwe\r€t grbiect b ir$€rent s$ oon$Griqn{ limhlorn.
t ChrcArh|rel (or
illbrr) of tlrc
strtGtlowb
Tax

9. a. *tiltg;llFr or EF Y.r(n rer GgrsE rr.


a. **lrilE rdEo rrEr EErrttsililtrau\re rn cn:ilifttEr.

h. ilt'Ettrtffihrha
6nSd.ri6Got$.
Lc$r|rtnub
Detsnnhl
i. &rittffrl$bof
a Soord?a,
ffi(€*tffor
Tax5don)

2. Inffi hnct ol
a. Inhercntpor€fs

use up(rl

b. llir$qitieAmong
thf||f* Inturl|lt
Fowclr the SbE tnei{sd with private rights'aM
RsSA:The Revlew Schod of

which exercises t{te

or classof individuals
or classof
I&ryrdq-e"t.tsgryner_01_9-_pqrtisshtpr9pe$r___.*

ql_EI_iD. - ----l
lbe f9[!Lolgr_9t9qonandbenefit
Egsye!9q!_qlEl-iD*lbefgmolp.r_9te_cgote!.1j_krcfit
Itooirectandrffi.edidte ben#'tcinryiuiiiaJffit arise-ffil
9qq!qn'-c_$!f'qeq{!99!e!yldaCI!im_qglque injuriaor damage_-!4!ho_{
Jljy11rl_ l
Madglyillry_of!E p-r.9pqry*tgke!_tgrn_h!rn___ i

Taxesb€comep?ft of publicfunds
gllrtlq-tb9!=eji9,I9$!:ala!-qt"-tlrrejnjurioqsVtg_cjt-pppg-rL
rhs!-qj:!r-qn{ef EiqejreE
-o_r_te!9t[lspepqrq.esgt_sryniithafi

Limitedto thb costof the licenseandthe necessary


expensesof pOicesurvettance.ind

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=El{D=-

TI|OT: Mwqtitl frtG *ttr- rnm to bvk; otf,r''lr lo Uak twrd. -.tUthm Afthur Watd

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" -'=.h
ReSA '-l*: i'1'

TheRedewfthoof of Accountancy-
8Tel. No.Zg5-9Boz& rc4:gg$g
TAXATIOT{ TATTIAYO/GARCIA

2. Inhercntlimitations
a. Publicpurpose This is the purposeaffectingthe inhabibnts of the State as a mmmunity anOnd mercfyas
individuals,
ttre pfope{tvof a forebnstateoroorcm@

d. Doubhtaxaton This meanshxing a person,propertyor rpht twir- within the samercar bf tlrc sametaxing
?@edtv,
e. Govsnmentagerdes perfiormirggsr€rftrnrtal fundbns are etemlt front tax unhss
expresslytaxed while those performingprodetrry functionsare su$ect to tax unless
expressly
exemded.
t t{qn -dchgrtion of thG
porvet to taf

3. Inhc_rrntfffim (gnilileO and lilurtratcU)

l) TGft of rhhfful
t lltbn

l) Trx ffi lorpdne A tax levted for a privaE, nti_d*; i tadlout dr:
pulDosa prcess of law as t is,W fE-pof,lr d thti oorsnnrent to imDose.
3) Inctrnud@ffc
purpoN.
bridgesard pirs;

1) Ter tarfs qpGlttG Thetil laws(andthisis trm of rfl larvs)oo nc ofrii*e q a ffiterritorial limits.
'wilfrin
bdlbrlrl lftnlt
2) Pppertywfro$yor Rtperty ud#r is whoflyor exdusirrclyrvlsrin ttn jurisdLtion of anffi
erclucively In otlnr Ureft*ecfion fur yyhid a tax is supposedto be cqnpensation.

3) TarC A per$n may be taxed u,fr€lettrere is blh,recn nim aCIffi


r€tilfinshipit&sufying
th€ Wy
.}f JtEusot taleEon
a) Sfrusof Aiation

D
Sttbil*t Sitts
! Polltax on persons Residenceofthe person
State where the property is tocateU*trdtrer *re ownei is
residert or not
3) Tax on tangiblepersonal Sbte where it is phy$cally lqoted although Sre owner
properties residesin anotherjurisdiction(bxi rei sitae)
4) Taxon intangible Domicileof the owner(mobiliasequnturpersonam)
persolmlproperty
5) Incometax, State wherethe taxpayeris'a residentor citizen
6) Business,occupaUon and Place where the business is done, or the occupation ii
transactiontax l0gq9!4_!! !flb9_!!e!!qqion took ptace
7) Tax on gratuitous Statewherethe transferoris,/wasa ciUzenor resident, or
in several taxing

1) Provisionof exemptions;
2) Allowanceof deductionor tax creditfor foreigntaxes;
ll,Il-ei,t]p_s--W(h ._-_ _ ,.
-o,!h9l_stq!e9:..-:_ .l

c. International
fnhrnational comity means friendly agreementand interactionbetween

Internationalcomityis basedon any of the follori'ringgrounds;


a) fuvereign quality among s&afesunderinternationallaw by virtueof whichone state
.cannotexerciseits sovereignpowerover anothei.
b) The ufige dmong dates that yvhenone entersthe territoryof another,there is an
impliedunderstanding that the formerdoes not intendto degradeits dignityby placing
itselfunderjuridiction of the latter.
c) The rule of internationallaw tkat a lorEign governmeflt,maf not be sud wittout
so that it is uselessto assesstax since it cannotbe collected.
3) International law is Our Constitutionhas adoptedthe generaliyacceptedprinciplesof intemationallaw as part of
part of the law of the the law of our country

of the Power to Tax


The powerof taxatronbeingpurelylegislative,Congress cannotdelegatethe powerto others.
The limitationarisesfrom the doctrineof separationof powersarnongthe three branchesof

The followfngare exceptionsto the rulesagainstthe detegationof.thetaxingpower.


a) Delegationto the Presidentto fix within spetifiedlimits tariff rates, impbrt or export
quotas,tonnagesandwharfageduesand otherdutiesor imposts.
b) Delegationto localgovernments the powerto createits own sourccsof revenuesand to
levytaxes,subjectto suchlimitationsas may be provdedby law.
c) Delegationto administrativ€ agencies.certainaspectsof the taxing processthat are not
legishtivesuchas:
1) The powerto fix valueof properfyfor purposesof taxationpursuantto fixedrules.
2) The powerto assessand colled taxes.
. 3) The power to perform any of the innumerable details of cornputation, appralsement,
and adjustments, and the deleqation of such duties.

&,---
Gs\rennnfnt agqrcies qitvttn lentat
expresslytaxed.

proprietaryfunctionsare

Thereis no dirrt doubletaxationin the following:


a) A tax on a mortgageas personalpropertywhenthe mortgagedpropertyis alsotaxedat
rtsfull valueas realestate.
eriqssgleL
"_!L4lalyro!t!9_q?me_prgEtlyimpglgq_bJ_@dlff
4. Constitu$onalLltr$tetlons
a) OueProcessof Law(Art. III, Sec.1);
b) EqualProtectionof the Laws(Art. III, Sec.
.inTaxation Sec.28(1

a) Exemptionfrom taxationof charitableinstitutions,churchesand parsonagesor convents


appurtenantthereto, mosques,non-profitcemeteries,and all lands, buildings,and
improvements,actually,directly,and exclusiVely
usedfor religious,charitableor educational
purposes
[Art.VI, Sec.28 (3)];
b) Exemptionof Revenuesand Assetsof Non-Stock,Non-ProfitEducationalInstitutionsand
Donations
for Educational Purposes fromtaxesand DutiesfAft. XIV,Sec.4 (3)];
c) Exemptionfrom Tax of All Grants,Endowments, Donationsor ContributionsUsedActually,
and Exclusivelvfor Educational Pu Art. XIV.Sec.4 (4
4) Congress Corlgrc$Jor tfie Passageof a Law
All Appropnanon,Revenue,orTariff Eills Shall OriginateExclusivelyfrom the Houseo1
Representatives,but the Senatemay Proposeor concur with Amendrnents(Art. VI, Sec.24);
c) The Congressmay Authorizethe Presidentto Fix Tariff Rates,Import and Export euo6C,
Tonnageand WharfageDuesandother Dutiesor Imposts[A]t. U, Sec.2S(2)l;
d) Congress May Provitle for Incentives Inclrrding Tax Deductionsto EncouragePrivate
Participation
in Programs of EasicandApdiedscienuficResearch (Art. xry. sec. l1).
5) President a) Fowerof the Presidentto Veto Any Partkular Item or Items in j
VI Sec.27 (2)l
6) Spccial Fund a) All MoneyCollectedon Any Tax Leviedfor SpecialPurposeShall Be fieateO as a Specia
Fund[Art. VI, 59c 29 (3)].
7) LocalGovernrnents

5. @nstitutional Umitations (AnSified)


a. Due Process of law
1) Constihrtional pmvlsion "No personshallbe deprivedof life, liberty or foperty withort due proes of larrr...."( rt III

2) Deprivatlon with due Any deprivationof life, litlerty, or propertyis with due procesi n it is Oone:
pnooesi of law a) Underthe authorityof law that is valid or of the ConstituUonitself, anO
b) After ompliane wtth fair and rcasonaHemefrods or proceduresprescribedbv law.
3) Procedural duc proes due prccessin judiciatprdings
Procedural raquires"m
judgmentis rendereda@ing one'spersn or prop€rty."
4) Requirercnt of duc Due processin taxationrequires:
prooes a) Tax nnrst be for public purpose;
b) tmposedwithin the tenitorial jurisdiction;
c) No arbibarinessor odpressionin assdrEnenta!!d cdlection.

b. Equal Pnotcction of the l"ewc


1) Constitudonalprovfrlon l,lo person shall be deFveO of fife, liberty or property wittrout ?@
anv rrsnt, tE (biled eaualprpffiln dilE latt" (Art- fi Sac. f l
Al preons srffi b lcgigdon +at bc
in the prlvifqEs eqnthrred and ffiitities irnpced.
tt tbiolutr equalfi not The Constihttiondoes not require U{tgts whidr are Oferent in faA to Ue treated in law as
rcquired thoughthei were the same.
a) Ctrdficetion lr e$orrd Classiftationis albrred. It is rnf,d ritan:
a) ltrere is crffintial distifictkn;
b) The das;ification is g€nn ne (rebnnt) to the issue;
q) I* d"s.ilqttkrn appliesnot only to existingconditbns h"t firture mnditions as well;
d) The dasiift@l is apflicaHe to all membersof tfie samedms.
5) ExampletddGtlof Ttere is denid of equalprotedon in tfrc fotorifrg cases:
G$,tlpruHoNl a) vllfiere an ordinance impSes a property tax on moor vetricki':usng the streeE or
Fry, such bcing payabh-mV by mners of vehiclesresidingin Manllalut ttroseou[$de
ifar|ih vehodso r.sethe streeE are nd rnadeto snarettre onesponoing burden.
b) Wttere a tax prwisions is enfbred again$ runufactr.rrersof fifi€d irllk only, but not
ag5instpertonssimitar|ysnuscd slch as nsanufiactw€rs of cqldqnsd skimmedhilk.
c. Rulc h
!) Constihrtier| frouidoo 'ttre rute oftaxatin straltUeunifqml
2) Prcpeilhcof ticrrrnl All tax*le aftldes or prop€rtk of Ure
dacs
A tax bconsilered uniformwhenlt operes yvi0rtE ffi
wher€$e subiectmavbe fourd.
4) Concept dequity in
taxafion bss-ffi in-ttrc $ht of the taxpaye/s abilrty to droulder the tax htrden and, if warranted,on
tfie basisoJthe benefiE he reeirres ftorn Ute oovernmerr.
5) Congr$s b erclve a To ensure and enhane ttrc equty obir$ve; ttte Co
prcgrcscivesyctemof progressi\resystemof taxatir:n.
taxation
6) Progr€$tverytemof
taxation
7) Diffarence betrveen Equalprotectionrefersmoreto liketreatmentof personsin ti@
equal plo,tecti,on and Euity refer to the proper relative treatment for tax purposesof personsin unlike
uni$ormlty and equity circumstances.

-=EllD=-
THor: rt is ttot the man who has tw h-tae who b pur, Dut the one,who crave mora.
-*twa
ie
,.

ReSA
The ReviewSchoolof Accqrntancy
8Tel. No. 7gS-98o2& :34-g989
TAXATION TAT'TAYO/GARCIA

TX 16O3:-FASIC PRIITCIPTES(TAX AlrD OTHFRGHABGES)

1. Tax defined and cesenUal cfpracGristics of tar


a. Tax deftned friis an enforcedqorrtributionleviedUytne State by virtue of th€ sovereigrfi on perso{lsand property
within its iurisdictionfor the supportof the go\rernrnentand all nrblic needs.
b. Essential 1) Itisan sffiontibatfqn
Characterisfics 2) It is bviecfpursuantto lqislatire duthority;
ofTax 3) It is pop'&neb in character;
4) It is ptfeHc ln nwpy;
5) Ii is levredon persolfsand propefi r{lhin dnjwi,#ctba of dn &,
6) It is leviedand collectedfor the purposeof n@ trnlctttrcto be usedfor puUlc purpose;
D It is comtnonfvreouiredto E n6.t nnfir laffi fur&N |rxc.r.

2.
a. As b Sopc 1) t{aton l - imped by the NationalGotemrert (e.9. incometax, estate tax, donor's tax, value
addedtax, other percentageta)€s, docurnenbrystamptax.)
2) f.odldr l|rf,rldp.l * impced by munkftul ccrFratirns (e.s. r€ol e6teb tax, ornnuanfrvtax.)
b. As to wlto beart 1) Dtucct - Tax whlch is'dbmandedftom the pensr wtro also *rotibars tte burd.n d tax or tax wtrich
the burden the taxpayercannd shlft to anofier (e.9. incofli€tdx, estaE tax, donot'stax).
2) Indirct - Tax wtildt is demandedftom one personin the ocpectationand intenticn that he stnll
indemniff himself at"the expenseof another or tax $,hadl'can be strtfted to andrer
perrcn (e.9. value'addedtax, other percentaqetaxes)
c. Asto t|te f) Spcemc - Tax of fixed arnount imposedbl, fte ttead or riumtler, or by somestafidardd rveightor
detenr{nedon d measurernent. It requil€s no assessnmt off|er than a li*ing or cbsdficatlon of the
tfrc rmpt 'gaects to be taxed (c.g: aGe t* oe cigsr, dgartites aftd Hqirofs).
2) Ad valorcm - Tax of fixed prcpoftion of the vafueof the ptoperty wtth respectto whicfi the tax is
assessed.It requiresthe ht:rnfrtlr d assessorsor appraisersto estirnatethe valueof
sucfi propetty be6o|eUE aflsrtt d. *trn eact taxpayercan be determfned(e.9. VAT,
l1qprng@\, dono/s trx md estrEUr().
d. As to purpocC f) Gcoard/fredr*rroue - Taxirnposedsolelybr the generalpupoe of the gBrr€rnmd,i.e.,to
rai* rwenuefor gcnrcmment expendlbres (e.g.itpme trx, dono/stax and€statetax).
D !$rga/tfffrOry - Taximposedbr a speciicpirrpose,i.e.,b acfiierrsomesochlor economic
erub irrespectiveof drfier rE\renueis achnily raisedor nd ($€. tariff and certain
__ _4det on imports).
e. As b OUGct ar
snblcct nsthr

f. As tO rat€s or f) ffirl - Taxbasedon a llxedpercentage of arnountof the propgrty,reeipts, or ottrerUaSs


gradafion to betaxed(e.9.VAT,ffier percentagetaxes).
U! ffttrur|rc *'Tax the rate of whkh inmasesas ttre tax baseor brackeincreas€s (e.g. income
tax,estatetax andtbno/s tax).
3) Rcgr,;tilt - Taxihe nte of whi*r @lCsas Uretax bde or hacketincreases.
RgSA: Page2 of 3
Distinction of Tax from Otlrer Charges .tI"
a, Fromtoll
1) Toll defined Toll is a sum of moneycollectedfor the use of sornething,generailyappliedto-thiiCInsideratton
whichis paidfor the useof road,bridgeor tl"relike,of a publicnature.
2) Distirrction Toll Tax
betureen toll and a) Whooe demand Demandof proprietorship Demandof soverciqnty
tax b) Peid for what Paid for use of anather persont Pald for the support of the
property Gov€rnment
Amountis basedon the cost of Amount is based on the
construction
or maintenance of the necessitiesof the State
prlUlicJllevements used
d) Authority ttat May be imposed by the Irflposed by Governmentonly
lmpoaes @vernmentor by private entities

b. From specia|raseesmart
qehlawrpt tisa
hineflts resultingfrom pul
2) Distinction Tar
betvreen special a) Leuied on'what Leviedon landonly Levied on persons, property or
assessmcnt and the exerciseof privilege
tax Not a personal liability of the PersonalRability of the person
IqtrC! assessed taxed
c) Basis Based wholly on the special Easedon the necessitieSof the
benefitsto the propertyassessed govemmefltwithout any special
( benefit directly accruing to th€
taxoaver
d) Apdicafioo Exceptionalbottr as to time and Hasgeneralapplication
place

c. From licence fee


1) ticemctce Dcfincd
2) Dietinction Tax
betnreen licnsc a) Impc€dforwfi* lq1ps$edfor reguletirxr Impsbd for revetrr.re
fee and tar b) Ererbcof whet Irwohres an €rcrcise of 'polhe Invohres exercise of taxing
power _p9rt9r-_ power
, ' ;.e;, *r:::t

! .,a'f .:a:,,r Ie. '.


Arnottrttis gen€rallynot limit€d

O slubjatt d Irnposedon the right to exetcisea Imposed on pefsons, prope|ty


impciUon pfivilege and the right to exercise a
flivilege
iegul-.or-p."s"ti* or-iewjiboi Enforcedbntnbr.rtion assessed
an officer for specificservices by sovereignaUthorityto defray
publicetpenses
D CoirrrFaric lor Failure to pay makes the act or Faifdre to pay does not
feiftiuto prf businessilbgal necessarilymake the business
illegal
d. Fromdel*
DGTI Ter
a) Brc}r _Ba:iedon contrad
bl |rrbr$ilhr Assiqnablq Generallynot assionable
cl .Ptii.nt rrode Maybe pqidin kiM Generallypayablein money
Q May be sublect to set-o,ff or Generallynot subjectto set-off
'rt:ctror
oill|r!{i.m cornpensation gr compensation
c) Gonmgrcnefor Imprisonmentfor non-payment
faihr€b pav excqlt poll tax
Gqvernedby ordinary prescrifiive Garernedby specialprescriptive
period period
-_
9) Intereat Dralrs interest when stipufatedor Does not draw interest except
whenthere is default when@linquent
e. From penatty
Distinction between Penalty Tax
penalty and tax a) Purpose _qelg!_e!& regulate conduct {med at raising
revenue
'Imposedby Gor/ernrnent
only
RgSA: Th€ Review School of Accountancy Page 3 of 3
f. Other chargec/related terms
a. Subsidy A subldyis pecuniaryaid directlygrantedby the govemmentto an individualor privatecommercial
entemrisedeemedbeneficialto the public.
b. Revenue Reyenue refersto all the funds or incomederivedby the govemment whethe from tax or any other

c, fntemal nevehue Inbntal nenmtte refers to taxes imposed by the legislatureotter than dutrcs on imports and
exports.
d. Customs duties Custutrc duti6 (or simply dulb) are taxes impoeedon goods exportedto or impofted from a
(or simply country. Customsduties are reallybxes but the latter is broader.
duties)
e. Tariff Tarifrnray be usedin one of the fdlo'ving thrce senses:
t) A ffi d rafw drawn usualfyin alphabeticalorder corltainmgthe namesof several kinds of
merdnMise with the correspondirqdutiesto be paid fry the same.
!"flne da,b pyabbon goodsimportedor exported.
3)The g rr orodnfuditdnffiaon the imoortationorexoortationof qoods.

5. t{aUonal Taxco Undcr Sourcs of Ter laws, hdc


lric Ter lrrr in llrr
a. l{ational Tareg a) Custornsduties; f) Energytaxeson aircrafrrrndorized watercraft
Imposed Under b) Sugnradjustrnenttax; and decbb powerconnmption;
Special Laws c) Tax on narcoticdrurEs; g) Trarel tax;
d) SpecificeOucationalfund tax; h) Privaterndor vrhick tax.
e) Scie'ncefund tax;
b. Souresof Tax a) Constitution; O Judicialdecisiom;
l:ws b) Statutesor laws; 9) Prrovincial,
cit|, municipaland barangayordinarrces;
c) Presidentialdecrees; h) Treatlesand intematfttnalagr€em€rts
d) Revenueregulations;
e) Mmidstntive rulinqsand opinions;
c. BaskTar l,rwe of a) NatlonalInternal RanenueCode;
dri PhiHppinec b) Tariff and Cu*oms Code;
c) The LocalTax Code;
d) The RealPropertyTax Code.

tlom
e. Emilon llom Wffi llotn bffi is I grd*d hnmfi, dlgrtss or impfied,to partodin p€r$rit d
taradon deflned corpoGtions,or to personsor corporationsof a particularclass. from a tax upon property, or an
excisetax wfrirft persom and corporabm gclt telly nithin the sarnetaxing diffi, are obligedb
Day. '
b. G|adllcrdor of 7) frqgrw or alfuffivc - These are eleress prwi$ons in the Const'rMion,stahJes, Serti€s,
cxcmpdorr ordinanm, francti$esor gtracb.
2) Iffi r wrr&, by oatWn - Thls occirrs nfien a ter is ks\dedon certain classesof
persorq pr€pertbs a Uansedixrs withorrt rertioning
other cttsss. Those nd mentioned arc deemed
' o(€mDtedbv ornission.
c.Inttrp]rtttor| ot Exempdongfiantsarc strictfy construedagdft* ttrc person,entity or prop€rty dalming exemfion.
crctrpdon irilrt orp d.amim nust lusbfv $l€h ct$m bv dear ard oositire srant

7. Tar ur. Tar


a. Tdi auoH.noc (ter 7tx rffi @x n*Urbltot) is the use by tirc taxpayerof legdly permissiblemethodsin
minimizatloo order b reduc tax L.trtlty.
b. Tar cverion (trr ttxfrt (AxQfr)tsttrc use by tte taxpayer of ilhgal m€ansto defbat or lessenthe
dodolno) patrncntof Fx.

The lm$ of &trr&tt coft?Smds to the lmpodtim of the tax, $nW tefvs to the tranfer of tax and id&trc mnsi*s
of the oaymentof the tax.

9.
a. Shifling defined

b. Xindsof Crifting 7) tutrad shlfiiry - This takes pfacewhen the burdenof the tax is tansfened ftom a factor of
ofdistrib'tion
untilit finafly
settes
onthe
ffiS1r;ffi[ffiffi:
_2) bchnd shirUng - This is effected when the burden of the tax is trarrsfered ftom the
customeror purchaserthrou{h the factors of distributionto tfie factor of
production.
f) Orypd *mtry- This occurswhen tax is striftedtwo or moretime either forwardor bachtard.

-=EilD=-

THOT: Llfe aslrs of every individual a antribution and it is up to ttnt indin:duat to diwver what ft drouV b.
- VictorFnnkl
The Reviewfthool of Accountancy
tTel. No. ZgS-98o2& :g4-3989

TAXATION TAI|AYO/GAR,CIA
A|VDATTTHORXTY
TX 16O4: PQWERS (PGRTAXCOLE)
OFTHEQglrlrrS$IOfrER 9F rlrTERrrAr REyEITUE
rg and to Dedde Tax Carc (Sc.4
A. The powerto interpret the provigqnsof fte Tax Codeandrotftertax laumshall be under the exclusiveand orpinal
jurisdictionof the Comrnissiqrcr,subjectto reviewby the Secretaryof Finance;
B. The power to decirle displted asses\ments,refurirls d internal revenue taxes, fees and otfpr drarges, penatbs
imposed in relation thereto, or other matters arising under the Tax Code or other bws or portrons thereof
adminlsteredby ttc &neau o,f Internal Rerrenueis vested in the C-ommi$ftvler,slbiect to the o<dusiveappellate

III. Powcrb ildcf4iddnqrts and prrarcrtQ;fa.ftladfffi forTrx ffin aill

A Eramlndon of Rdurns and Ddcrmiintbn of Tax Or


1) A@ a retumhasbeenfiled or whenttrercis htrt b h r iltrnn, t?E Commistaoffr cr lt'rsfuly ar$cild
rep;e*rfrativemayadfiorizethe oomlnfrn of.dnytr-nryer andtlle as*ssnent of thc corect arnunt of tax;
2) Thebx or anyd€ficienqy $t be paiduponndce anddemardftorntlte Commlsonerc fiult
tax soassessed
his elry arXfrorizd rEp@tEEi
t-
3)

C.ode,or when there is reasonto believethat the bqoksof acounts ard oher reords do rpt conectly reffectUb
declaratons'made or to be made in a retum requiredto be filed under the prwisions of the Tax Code, the
Commissioner,after taking into acmunt the sahs, receipts; inorne or o&ter taable base of other perpons
engaged in similar buslreseesunder similar situations or cirqtsnstancesor after mn rtering offrer rele*ant
infomiatfrry may pressribea minimumamount of such groesreceipts,salesand taxable base,and sudr amount
so priscribed $tall be prima facie conect for purposesof determiningthe intemal revenue.tax liatrilitiesof suctr
persons.
The Revi€w Scilrool of
lTel. Ho. 735-9EO7& 73/r-3989
TAXATION A. S. TATIAYO
TX SOt; $tcOilt TAX(IilOIVIDt ltS, ESTATES
AiD TRUST]$r
l.
a. Citizens

A citizenof the Philiptriresredding ttretein..


2) f,on-rccHcnt
citieo

Pssl"oo f$4"
hrctutss 180da.y rU(fv

t1 (

b. Allcn3 Flthr{dueh$rhoare rxt Filpinos.


1) Rcsidentelien;
2) ltlon-restlentaltendoiriEb,r.rsinessin the Philippines;
3) l{,on-re*lent allen not &inq.budness ln the Philippines.
f) Reclder* efrcn An individtnl utftoser€dp€ne is ud0th the Phtippinesand who'is not a citizenthcreof.
1) An aliertwho fivesln EE Rtiliptines rvitfi no OefuGe-jntentron
as to his stay;
Z1 one wfi) ctxn6 o me hupgrnes fior mnanre lx)rro
rt6l*e tfr.Affi.jlxrtd,bli* frt malcc bi:-hrrm ieomly ia tln oril|harr
'-.,, UtirF;
f 3) An allen who has quired rc*lnc€ in the Philipplnesretains his sbtus as suci until
be iihndffi tl* rn a.rd ddy @arts frorn $rc Phiti.ppines.
2) llon-rdrlootelicn

{*t'1,,.
' ) tP
t"o{

z. Fcill}dG
a. Anlrd,hwln ts . P )oo(
ruhrln furhrCrlludr , )oo(
eamltp pur*t . )ofi
olrffiql
inomr Glnfoinr
tro.l7OO)

b. Qstrturrly inoome
brcfrridftsrelf-
edrpb}td
inOividnel+ efit€s
'
aild ttuds inctuding
$occwlft hBlnGas
arul colrpencation
'- incomc (BlR Form
No.17O1Q)
no(
bo<r
Taxdue [Sec.24 (A)]
Less:Tax creditslpayments - .
:*
Prioryears'excesscredits XXX
Tax paymenVsfor the previousquarter/s XXX
Creditabletax withheldfor the previousquafter/s XXX
Creditabletax withheldper BIRFormNr:.2307far this quarter xxx
Tix peiidin returnpreviouslyfiled if this is an amendedreturn XXX
Otherpayment/smade XXX XXX
Tax
Grosscompensation income
Less:Non-taxable income/exempt compensation xxx
Grosstaxablecompensation income xxx
Less:Deductions
Premiumpaymentfor heaithand/orhospitalization insurance xxx
Personal exemption/exemption for estateand trust xxx
Additionalexemption XXX XXX.
Totalcompensation income(excessof deductron) XXX
Sales/revenues/receipts/fees (net of salesreturns,allowarices and discounts)xxx
'Add:Othertaxable/exempt incomefrom operations,not'subjectto
finaltax gx
Total safes/revenues/recei*sfees xxi
Less:Cost'ofsales/services , XXX
Net sales/revenues/receipts/fees XXX
Add:Non-operating taxableincome .xxx
Grossincome xxx
Less:D,eductlons (optionalstandarddeduction/regular allowable
itemizeddeductions) xxx
Net income xxx '
Less:Excessof dedudtonsover taxabb compensationincomeor
the tdal decluctions,if there is no compensationincome xxx
Taxable/exemptbusrnessincome/incorneftom profession xxx
Totaltaxableirrcome ixx
Regularrate Vo
lfEome tax due uirder regularrate {xx
Add:Incometax'dueunderspecialrate XXX
;fotal incometax due

Tax paymenBfor tfie first tf*t qur*erc XXX


Credltde tax withh€ldfor tht lirst three quarGrs XXX
Creditable,tax
withield for the fourthouarter XXX
Tax wtthheldper BIRFormNo.23f6 XXX
Forergntax credits xxx
Other payrnenG XXX XXX

3. Tax tescendTrx Rrte


Ter hc
citirai artcl"witftolt
dtizen
c. Rceldent alien
d. in trade or h|dncas
e. Non-rcridcfi ln tnde or bointcs ,
f. Estateand
4. Peronal
enmpltorrt ierioilof exempt-onrarearu,t.,arfamount;kilred rnthe ilffitof a-oeductrdn
from gross
'or 'net incomdfor persond,-liv*q or famrtyarpensesof the taxpayer. These have been
cahulatedto be : to.the minimurnof
b. Kinds of pc]tonil 1) Basrcpersonalexerndign;

5.
a. Tarpayers allowed to 1) Residertcitizens;
c{aim bask pcr$onal 2) Non-resident citizens;
eremption 3) Residentaliens;
4) Non-resident (subjectto reciprocity);
aliensdoingbusinessin the Philippines
5) andtruSs.
Estates
otd l{ew
f) Single(includinqmarriedbut legallyseparated, lrridow
or widower) P20,000 P50.000
2) Head of family P25,000 Ps0.000,
j).Married(for eachviorkingspouse) P32,000 P50,000
4) Estateandtrust P20.000 P20.ffiAt

TAXATION - Individuals, Estates and Trusts (Batch 26) t-rtarr


RR llo. 2-

8- Prg|rdurn P.id ot
ftsurattae taten Uy tfre taxpayer for: himself,
indudinqhisfatnilv.. aM -:gi1tqr^tlw!'nC$e texablevear
namltvper y€tr or P200per month whktrerreris lower
P2.4gOt;ry.
c Gio**''lfiinmcqf
familythat cen daim
oremlum dcduction
d. Total family inoome

c. Eramples of nuclear @ childrenlivingtogetheras one household;


2) Shgle parentwtth children; .
3) Sinqlepersonlivingalone.
f. Claimantof prenrium
doductbn

Tiotl - lndividuals, Estates and Trusts (Batch 26)


9. Head of Family

a. Meaning of head of rhe


Thetedn-%A A'or
term "head of i;iitt "neaniin,ulmairteo,bi -l
family"means ieqjiiy;apu;at"d
an unmarried,or-lggally ffi;;*o;an
separited.;;;6;an
4J:t.'- ;ith
;ith
family anyoneofthefollowrngaidepenoent,F-
^5
5k^ r ^ t l ^ . - - ;- r |F
I
1) oneor both parents;a |
|
2t oneor morebrother$,orsisterg;one.ormorelegitimate,illegitimate,recognizeO
I
3) seniorcitizen; I
4) pes-sgqggth C€$_i!itJ .
b. Reguisites or 1) Dependent parent/s I
qualifications of a) LiVingwiththe taxpayer; I
depindents of head b) Dependentuponthe taxpayerfor chiefsuppolt, . I
I
of family
2) Dependentbrottrer,sisteror child I
I
e) Livingwith the taxpayer; d) Unmarried; i
b) Dependentuponthe taxpayerfor chiefsupport; e) Not gainfullyemployed. i
c) t{ot rnorethan 21 yearsold; I
3) Seniorcitizen II
a) mustbelivingwittyand I
b) dependentuponhisbenefactor
for hischiefsupport. I
5).Person
withdisabilfi I
a) livingwth'and I
.=_!)lqpqnoentupgl.[iilpn=.fictgltqrhEf'ergtetlqppq4l__ _ __ __,]
c. P€rsonwith 1) A personwith disabilrty,wlcther rninoror of leoalaoe, and who a ilttol
disability mav df":t.tay_lglbe__lebted 't and deoendentrupsnI
to his benefactoranrtwhdis liyuqwith
such lgldadgr*falni{beldtSf_st{ppAd slaH quatify }s a aepmOent Aection , 4 I
Revenue Regulations No. t-2009).
]
2) Personwith disabilityshall refer to an individualsufferingfrom restrictionor different I
abilities,as a result ofgg!.a|, gltrgl or lgnlqry-:iopairmentro performactivityin a i
r_nanner
or withintherangeioriileEi nofia-ror-n'ilfiEfi'-Effi(Section
z u, nevenue
." .Rggulations
No. 1-2009). i
I

eiemptionof P25,0i[ per e,*inilii *pendent rouil n the percm


inot exceeding
with disabilttyis his/herhgitimate,illqftimatb or"i'tit.t
legallyadoptedchild,whetherminoror
of legalage. [n other words,for purposesof additi-onal exemption,tfre'bengfactor"wiH
i rut*lgentitlcd to tfn additlonaf
-exerUton.uhsS_tbpl beq!@
€e$iq!"-7-Rey.Cllue No. 1-2009) 'otd
d. $crtier,cilirn 1) Sedor iitizen or elderlyshallrefe,to ,ny resid"ntFifi in4
)e-
-&$,s - -
i liffi;rtir"r, airnr.raitaxaoit
inconeJoesnoteil€ed-the-&\,erly
hveGc
I mtn*neO by $e ";t"* HEDAfor the correapondingtaxab&eyear:
a) muStbe livingwith and
b) dependentuponhis benefactorfor his chbf support.
It shallbe the duty gf the bernfactorof a senio'rcitizen-to registerthe seniorcitizenas
hh dependentand himself/herself as benefactorin the RDOfiavinqjurigiction over the
.DlCcewheje hg/qlfq_q!ts-tll-eseniorcitizen_reslq9.. _ __
l) Berrefactorsfull refer to personrwhetherrelatedto the senior
of him/her as a
4) ItE behefactorof a senbr citizenshalltl-Oli horvever,oe eniitteo totlarm ihe ;ijdftional
exemptionof P25r000per dependent(not exceedingfour) alewable_SdylS3_!0€n!ed
under Sec. 35
.of the Tax Code.
1)If ttriiiturnableincome
of;-Gndr-ffizenG-rn
tre naluieof c.mperi;tffiirtffi;ili
he qualifiesas a{irtimum waggealdgii'nesfranbe exemptfrom incometax on the said
compensatron.He is qlso exempted-fromincometax if his taxableincomed@e not
exceedhrspemnal exenmtions.
Z1r.@narn gooosario servrces tor tnerrfxcrusrveu5eand
enjqyment or availment, snallqi\e a discountof 2\o/o. -
3ilffi;ifiiy utilizathnof rugter.enoel@ty b-senior Citizensuppliedby pubtic
'utilitieswill be subject
subiectto a 5olodrscErit@-n'concurrence
discoTfr'tffi-n"concurrence conditions
of certainconditions.
4) Saleof any goodsand serviEt?tffir Citizensshallbe exemptfrom the value-added
Ja((e.s.medicines,professionalfeesofatrendingphysicffi
workers,medicalanddentalservices,-actual fare for landtransportationtravelas well as
ahtransBortservieesarfdseashipgngvessels,utilizationof servicesin hotelsand similar
lodgingplaces,restaurantsand recreationcenters;admissionfeescharged.by theatres,
cinemahouses,etc. fu4graland burialservicesfor the diath of Senlor.:Cltizen

TAXATION - fndividuals, Estates and Trusts (Batch 26)


g. ltleaning of "chief 'chiaf supporf rneanspdncigalor rrainsuppoGnotjust paruatsuppoltJt meansttlat
support' the taxpayeris givingmorethan50%of the dependenfs
needfor fuod,cloffringand
shelter. . -

** r
,t /'

01r)
orr !
rot?
*)l

ry
Ee)
;-;

TAXATION - Individuals, Estates and Trusts (Batch 26) TTIIZ


A husbandand wrfe,residentcitizens,with one (1) qualifieddependentchitd, ng incomeand expenses
for the year2011. The husbandwaivedthe a{ditionalexemptionin favorof his wife.
Salaryof the husband,net of P50,0fi)withholdingtax P450,000
Salaryof the wife, girossof P60,00withholdingtax 600,000
Grossprofessional income,husband,grossof 15o/owithholdingtax .' 1v500,000
Costof services,husband

100,000
700,000
200,tt00
inc{m€, Singaporg (grosssales,P800,000)
Gross'b"usiness @o,oQq
Buslnessexp€nses,SingaPore 150,000
1 - ilow muchwa6the taxableirrcomed the hushnd and wife usingitemizeddeduction?
![e- bu$gld alld:vlle,usinggpli-q!?!$altEa-r!-99-ductg!]
much1y99-thq-leXgl|e-tlcqge-o,f

10. RulesonCharye dstatus

a. Taxpayer matrhs or ia
iatd
tx! 6lpar ;;marriesoniniir
6lpa!;;marries inaveiOO
iniirinave nron
ir CIpenoenii
i6OnronirCIpenoeniiOurirt tta t, the*l
Ourirt OitiiEaOG-
OitifiaOG-yea'1 the
shall hava:lddition l additionalexemption,as ttre casemaybe, in full I
additionai
taxpayermay claimthe corresponding
depandefsr during for suchyea'r. I
I
tfTffiGffiq;mlffifiA"tlia ta'abGt""'1hisesdi;;ay stillalamth;pe'sfiala"d--l
additionaieiemptionsfor himsetfand his dependentsas if he dies at the closeof such
. 'i l . '*- - " f - - . . - -

If the sp,lsedTni-* tne dependentdiesor if any of sttchdeperdentsma.rries,


becomes21 yars oH or becornesgainfullyemptoyedduring the taxableyear/ the
hxpa'€r may sti$ claimthe sarneexemptionsas if the spouseor any of the dependents
dbs, or if suChdependentmsrries,beconres21 yearsold or trecornesgainfrrltt
em$oyed at the.cJoseof the Year'

tG^L /6,,t' ati'p*ih


Ert&rndTnrt flftucUa'qFu.no;{" I

-rxio
b, Dcflnftlptt of trust ilijst i*;'ght on propetty, rearor-peisonit, bv one pirty for the beneft of
ardher.

12, Importfntlbft6ln on CtE6 ardTrusts

1) A tfrtst is a
incoffie.
2) R trust iS a t$xp€yer if under the terms of the'trust the fiduciary mav accumulateor
.-:_d!Ftrih,te-!!g.j!q9@ids_gtxt$i.gt',,
-._-
or principal
ofthecorpus
'iifr-un'dettfretermd thetru* thetitleto any.part of thetrust
rnaybe revested.tothe grantor,the incomeof the paft of the corpusor pri6ipal shall
lrF taxable
bg LEAqurE to the grantor.
2) tf urder tfre term of thq trust the incomeof the trust shatlbe apphedfor tl
the grantor, the irFofnetEt sflall be'ap{|liedfqr the benefit of the grantor shall be
_.__"!aXC& to tb.€qrantel----- - .j , -*,--*-**---,
Wtrenin istate or a tru* is a taxpayer,a distributionof the year'sincometo an heiror
6gngfi€iary is:
1) A,lpag*tl rtem of dedudion br ttn
itemof to the heir
Grossincome XXX XXX
e. Computatlot of
taxaHcinsnrcof Less: Huctions
tteer' teortftiit Business€xpenses
Di$ributionof year'sincometo the heir or beneficiary LXJ
XXX
Net inconr€ before exemPtion
LesS: Personalexemption xxx
Taxable net income xxx
Taxdue [Sec.24 (A
.. WtorildlflG0rc ffiin anv ffdtriary capacitvsfrallfile the incometax retum for 3n
ruturn? es*aE a trust:
1) Gsdisns; S) Receffttrs;
2)' Trustees; 6) Consefvators;
3i f-:recrnors; 7) All dtrer persor6or corporatitcnsactinglasnduckry.
4) Afifn6trabrs; ,. -

c. In crcc of tilD of, Itlotl! ln caseof two or rnoreitr* fi&rciaries,retumfihd !


frrNitfidl.tiliqt_ ortrolkrncewitr|tha requircmerts of tfteTaxqQ4L

Inomc T* lcdrr Orfrlgf, trflrc ent Trurts)

b. fnonrc,fionr bolm
or Drecllce o[
.*-4
Fir* omrter bil 15
pnottlflorl st@dqtrtcr Arxl{Jst15
- Third quatter t{ocrnber15
Fln l di*d rutu!! Aoril 15 of thc sucerling Year

d, Paymett oftix The tax is paid as the retur4 i! !!e4--=_-*-

ffi Estates and Trssts (Batch 26)


RgSA: The Review School of Accountancy
, ," t a'h

of P16 . Ll_q- i r:q,


600 500
Costof sales 100 2W
Business total itemized i50 100

of bilic
as
Yes
children Yes
Yes
Yes
Yes

Yes

*Onfyquahfred'dependqnt childrenwifl quafirythe taxpayerto additionalexemption.The othersfnon-tfit6ren)qualifyas


dependentsbut do not qualifythe taxpayerto additionalexemption.

EilD

TIfOT: - Wh* we lnye to lqm tv &, re kn bf doitg.- - *rbbtte

{
: - ! t F: -: i : : l
"t
-Tj v 1

?he Review Schoof


8Tel. No. 735-9807 &
TAHTION A. S. TAilAYO

l. Sec. 24 (A) -.lhe tar shatl tre @mpubd ol taxable lilcomc ln eccordance rri$ rrd at tftG rGr lrtrtfidEd
in the follrowing sclicidule (resident citzens, non-tecident ffirr, ruaidcnt elllrr, Ste end trost):

Over But not over The tax dr.ll be Flus (Xercesc over
P 10.000 so,h
P 10.000 30.000 P s00 10% P 10.000
30.000 70.000 2.500 15o/o 30,000
.70.Ofi) 140,000 8.500 2A% 70.000
140.000 250,000 22.s00 25Yo 140;000
250.000.:.., ! s00.000 50,000 il% 250,0m
s00.000 ' 125.000 32olo 500.000

2. Final Tsr Rat6 dn Cert in Paslyc Incorne tlom phiipplrc !Ioss.'

a. Rat6 of Tar,CcftrinPeetlvc lnconc

f ) Sec. 2f (b : For rcddcnte or citizens;


2) SeG 2$tf, (2) - Fo? non-rrd&ntdfrcrgrg4d in tndG er lrdrs.
a. Interest from errycurrencyba* deposit 2Wo
b. ftom depositerb6tihtre(obined ftdn 20 or mtxe individualor
20%
c. Yieldor anyodrernlffiEtarvbeneftfum tsustfundsand!*mihrSrrang|e|nenB 20%'
2096
e. Prieesfexced orizesamognting or lesswtridrshafibe subied'totax underSec.24 (A)
to P10,000 2Wo
'f. Odrcr rir{nninqsiocet and Lotb wtnninqs)
PhillnoineChariWSweepstakes 20%
s. RoydUson boolrs,as$sfl asoffierlfterary$,orksandmusicafaompositbns l$6
3)
23fr
b. Yieldor arrydrer rnon€taryb€neft from depositsuHtute (offilrcd ftonr 20 or moneindivUuafor
@rffiate l€ofui) 25%
c. Yiefdor,au dcr nlmetary-bcncftfrtfii UrrltfunG ard simi$ armsEmenG 25%
2il
e. Rmlties on Uo<rc,asistl asotherlit€raryurorksard muskafoome6dd6 25%
f. hires 25%
o. ouler wlnnifih'{€D(ceDtPhilioDh€ch{fty sweepstalcsNndLotb n#rninqs) 25%'

rEs/ctr n*-Ert mr-rnu-


7lholo Exdngt*

Exempt Exem$. 25o/o

4 Y€EGblessfttrr5veas 5% 5o/o 75o/o


3 vea$'to lessthan4 years L2% t20/6 25o/o
Lessthin 3 rrears 2096 wh 25%
*dso appliesto non-resfientctizens
4 G at
a.

ro% 2OVo 25o/o


b. Shareof an individualin the disfibutaHe net incorneafter tax of a
PARTNERSHIP (OTHERTHANa generalprofessional partnership)of whidh
he is arDartner(beginninglanuary 1, 2000) 109o 20qb 257o
c. thare.of.anindividualin the net irrcorneafter tax of an ASSOCIATION, a
IOINTACCOUNT, or a JOINT VENTURE oTCONSORTIUM taxableas a
corpordionof whictthe is a memberor co-venturer(beginningJanuary1, 10o/o 20o/p 25o/o
2000)
R9SA;TheReview

provided, howeyer, that the tax on dividends shill appty onty on income.r*ba#I'V, afterJanuary t, 7gg8.
tncomeformingpart of retainedearnings as of December31, 1997shallnot, evenif declaredor distributedon or after
January1, 1998,be subjectto thistax

5) Exercises:
a. Identirywhetherthe followingare subjectto flnaltax or not. Taxpayeris.RESIDEI{TCffIZEtl unlessotherwisestated
(Y/N).
Finel tax?

i r''teg$lr9n-!51-op.!er-De
3L jnteiest 4k-dspqsi[ -Qal&New
Erst-ulA -Ye(_
-
?l of depositsubstitute,
incomefrom a debt instrumentnot wrthinthe coverage
Lhilippines _
ql?.dep99,q-s-q$!it-ul9'"ft1!
rrqrne !e!Un$IUng!!w,'!!i!-I!-e"S.9y9!qge
InteiesfirrcomC
ilffi6 on$"etnrent OeOtln-strumint of numberof lendersat tfre
and securities(regardless
timeof the
elg'va q|q.!fl ipi!!t!!,.

00q PhiliPEfleg-
!o P30,
to P10.
000
!o_!!Q000,_PhiliPPrFs
I
4

L6l Phillpgr}gFttq WIUtilCs_


deposrtsystem
ta irtere* ieceivedfrom depositorybankunderexpandedforeignculrenc-y
Wlgiq a f-q-stsgntlflrqlD
in the naqq sf_! no!:feqidenq-Sry9!-q@-bE-flg9,se
cr
tto
co|psrqleljgqefvg{gtalll !5' ?0Q!-*
a domestic
16-
received
in the lp,!_n!91n-q-91-e.9e!eE!-pio.f .ped!9I"qttlp
. --- -.- .*-.

26l tnterestincomefrqn-hng-termdepositor investmentevidencedby cedificatesissuedby $SP


qu.s-l
reeive{uva rsil negIoENI:|gE!-!!91!!94qEp-UJBSpE*9-L NE5-9, -
24 Gterd-ftome ALIENindividualfrom a depositorybankunder
receivedby NONRESIDENT

y6r
dornestic

periodof i0 ye.ars
d--maturity
t An--in;trument-rt-ttt was Mn X (;;esident citizenXoi z yearsand wastransferred
to Mr. Y (a residentalien)who, in tum, hefdit for 8 years. How mwfr is fnat withholdingtax due?
r'rr.xtYa to|,
Mr,vllq Ery
citizen)for 3 yearsandtransferredtt
c. An irrtrurnentwrth maturityperiodof 10 yearswasheld by Mr. X (a non-resident
y
to Mr. (a residentalien). Mr. Y held it for 2 yearsbefore transferring
subsequently it to Jvlr.Z (a residentcitizen),who
held it until the- day of maturity or for 5 years. How much is the final withholding tdx due?
;.'f tYa tyl,- rtr.v
Ntr.vl,YA n'1,
l,Yl,-l,o'1, t'tr.
ur.zz SUr( gtft
ltfit ?l!
W4et

with maturityperiodof 10yearswasheldby Mr.X (a'non-resident albn engagedin tradeor business in


- An instrument
d.
yearsbeforesubsequently
inu pniiiooines)for 3 vearsandtransferredit to Mr. Y (a residentcitizen). Mr. Y heldit for 2
it after4 years. Howmuchis the finalwithholding
irnrf.iriiis it to tqr.'z(a residentalien),who pre-terminated tai
due?
-
r'rr.x St!.lr1rr ttr.Y--AA4:2{n Mr.z "5-L--44u

zii;\
TAXATION - Tax Rates for Individual Taxpayers, Estate rn\r /" \L
/.-n"se'i\
-.!
v 3- Caoital Gains Tar
i. Sec..ZC(C) - Capital Gains from'Sale of
Shares of Stock not Traded in the Stock
Exchange
ijx base:Netcapitalgains
Tax rates: 5olo- not over P100,0O0
107o- excessof P100,00O
ti

-/
Sale, barter, transfer and/or assignment of
sharcc of stock of publldy-listed cornpanies
not compliant with mandatory minlmum
pubtlc owncrCrip (1096 of tfie publkty-
listed companhe- isued and ouBtanding
shanas, exclusire ofany fteafsry shares)
(RR No. 16-2012)
Tax base:Gtrc'selling pte or fair market ')
O. Sec. Zl (D) - Capital Fairri from Sal€ of
Real Propefi Clasetfed as C-aPatalAss€t vaftxi whlctever is higfcr
(Located in tlc Ptrihpoincs) Tax rate: 606frnal tax
c. Dispositon of rcd ptogcrty classllled as tne tax te4fe imposedshallbe d€termineds'ittrerunderSectlwr24
capital aesgt by indMdual b Ule (A) for the normalrate of incosnebx br individral citizens'or
governmcnt.or any of hs PoliUcal ' resklentsor under S€dion 24 (D) (1) fiorthe final tax on the
subdivbions or agenche or to GOGCs presurnedcapftalgins of propertyat 696,at the o$ion of the
taxoaw-seller.
d. Eremgtior ftffi i{tf'c.pmet gElns bx on 1) Ercmpt erccccCs
sale/transfitr of tttltldprl rucidence Caprtalga{msree{nedb haveb€enrotEed frornthe sde or
disoositbnof tneir principalrsiidcr|oe by n*ral pel the
procedsof whichis ftSry
nerfl6|inrbtl t€sketrc from the
&te of sde or dismslti:n $all exer$ from cadEelSair|sgrl
2) bt|orrfnatrr|t
The h&€rltanseree $dl withtd ftont the gellerard sftail
deductftorn the agreedseflingprle/cons*ieratioo t|re 60,6capibal
gshs tax whictrstrallbe depodtedin cashor manage/scheckin
interestbearingaccountwitfi an Au$orizedAgent Bank(AAB)
under an EscrowAgreementbetweentfie concernedRevenue
DisHct Offiaer.the S€tl€rand the TrarHieree,'andfie AA8.
The hidorical co6tq adicted basisof the real propertysold or
disposedstrallbe canhl over to tfre nelv prirrcipdr€i(hnce buik or
acouircd. i-ii,'--

C. Cotttpudott for0n brds HistoricalcddoH FriF# criderrc )m(


' of 0rqrcnP.rlttciPal Add: Affitbnal @st t0 il|tit€ tlw primtpal resittefice m*
rc*lclc Adtirsbd d b.alt of Urc rEry prlilciFl residenc€ )04(

*Coetb icquire ndi prrrcipd ru*tcnc


Less:Grosssellir€ priced old pincinl rcEdettae no(
Addittonalcoct to amtirc nov pdml$"rp#Cr[e tg
s. iloU'|.iloa '|tff

fne texasnptirn canonlyoeavaftOoforG]|bfgru.

Taxrbh pordon lf ilfin 'If there b no frJl utiliz{ion of the proceedsof saleor disposiUonof principal
rrtllir#on otpfiofidi rrsirhc, t'le potton of tfie galn pre*med'tolpve beenrcalizedfrom the saleor
dapoetton $all be suhFtto
Ttrcltrthrodlu is
\ Unt*illredmrtixt x Taxbase
C{osss€f,irqfix
Compr*atimof l*mC o* Frfs of the newprincipalresidence:
UtilEedpotttq| xtltstoricalcofr,,:"
Grrrrss selhrg orice
j, Filingof FinalCtpltrl6.lng 1) Aft€r depositlrg the rrurrt reptresentirythe 6% capitalgins tax, the
Tax R€turn on 3.f€ of Buyerffrafisfu anO'd,b-Sc.tter, shalllrindy fle, witfiin Utirty (3O)daysfrom the
prindpalrocldcne date if'sale or dispositionof the res&lenct,with the RDOhaving
prirrcipal
jurisdictionover the property,in duflicate, the FinalCapitalGajm;TaxReturn
corering ffie propertyboughtwitt no computedbx due statingthat the
supposedtax duefdrnoufit,sowithheld bYthe buyer is malntairredin an escrow
aecount,whkh afnountwill be usedto sati#y futuretax liability,if any' on the
subjecttran'iaction.
2) Forpurposesof capitalgainstax€therwisedue on the sale,exchangeor
disp'osition.ofthe saidPrincipalResidence, the exeotion of the Esctow
Aqreementshallbe consideredsufficient.

fAXAffOn - Tax Rates for Individual Taxpayers' Estate


and Trusts (Batch 26) TX-502
I a. An individualtaxpayerholdssharesof stockas investment.Duringthe currentyear,he soldthe shareshe boughtfor I
i et0O,O00 for P180,000direallllg-O-Eqyer.Hofim-ilffiiithe capitalgainstax on the saleif any? 4g0oa I
I @ ia s W I
I b. An individualtaxpayerholdssharesbf stockaslgEglggnt whichhe boughtfor P500,000.Duringthe currentyear, I
I f'" soldthem directlytoj- buyerfor P750,000.Howmuchis the capitalgainstax on the.sale,if anV? 20@t I
rI $4r W I
I c. An individualtaxpayerjggElgdP300,000in the commonsharesof SMCCorp. Duringthe currentyear,he soldthese I
I sharesdirectlyto a buyerfor P250,000.Hownruchis the cagtal gainstax on the sah, if any? ttrI3 I
l--#'L6 l
I O. Duringthgyear2011,Ms. KatAntoniosold.hervacationhousefor P500,0002 StreacQuiedit for P700,000two (2) |
j yearsago. The fair martet valueof the vacatofiffitEitE time of salewas P800,0@,/Ms.Antoniowas goingto I
I usetheproceedstobuildher newprntcipal residence withineighteen(18) monthsafterinforming8lR withinthirty I
] t:Ol daysof suchintention. How much'is'th€ capital gaintax, if any? ltD
I
ri
I e. Mr. C. Avenidoacquiredhrs.ggslgg!-EgidSlsein 2009at a costof P1,000,000.He soldthe saidpropertyon January|
I 1, 2011,with a fair marketvalueof P5,000,000
for a consideration Withinthe L8-monthreglementaryI
of P4,0O0,000.
OurioOhe purchasedhis newprincipalresidenceat costof P7,000,000. I
II
i I - Howmuchis thecaprtal
Question gainstaxdue? tilt?f tla|t|m ru) i
Ir l 2 - Hownnrchisthe basisof thenewprlncipalresidence?4@OW i
i
I f, Usingthe samedata in letterd, if for example,,Mr.Ayenidoacquiredhis new principalresidencewithinthe l8-month i
I regtementaryperiodbut did not utilizethd entireproceedsof the salein acguiringhis neu pnncipalresidencebecauseI
I he only usedP3,(40,000thereofanacquiringhis newprincipalregdence. I
ti
is the capitalgainstax? ?5@
Question1 - Flowrnr.rch I
I
I ' 2 - How much is the basisof the new Princifalresidence?l!& I
I
ll
I q. Mr. Mendozaassignedand conveyedhis prirrcipalresidence with falr marketvalueof P4,000,000 and in additionpaid i
-
| P2,000,000 to acquireas new principal r6iiiBffidfFisl?o. Ms. Co, on the other hand,conveyedelrrrcroal re$ldence I
Ii# to Mr. Mendqzawith fair marketvalueof P5,000,0(X), with the intentrrnol makirq the propertyreceivedfrom Mr. I
I fr?-ft:-5Ffier newprincipal residence.The historicalcr:st of the old principalresiderrceof t4r. Mendozais I
the hlstoricalcostof the old principalresidenceof Ms.Co is P500,000./
I ,P1,000,000/vhfle i
i Qr"o,on 1- Howmuchfras the capitalgainstar(d{re6r tfr exchangeof propertf by Mr. Mendoza?}QQl ,^' I
I Z- How muchwds the cost basisof the nav pfirtctsolresi<lerree of Mr. Mendoza?WW rl q
I 3- How muchwas the cafitd gainstax dm frwr Ms. C.o? (Mt nj,,rr. t t
i 4- princrpalresidence
, Howmuchwasttre cos basisof the ncw r,,,E,F, d Ms.Co? -'"MWw, "l-- ;
i";"1 S
I L

erd tlpir Filipino -/)-


-l-iln6nr--srtpctAlhnr
4. Tar RScl lbr Scid - Camtsprrts
I to J' W,l4h, 4
I I Tar I l.."rtr,{J I Tern.h I
I Scc. 25 (C) | AlienIndividual I Lso7>af grossirrdne withfi the Philippines I
i I Employedby Regionat | f,Same tax tredment to Filipinc whether gf not there is an alien executive I
I i or Areafteadquarters I occupyirgmartag€ri8l g* tcchnical'positbn. I
i I and Regionat I O. fitipinos empbyed by ROIIQF or RHQ'sin a nenagfrFl qf t3dlEFcal I
I | @erating I oadtion sha$havethe optionto be taxedat efther1570of their gross I
I I Heaatqualt€rs of I incomeor at the regularrate on taxablecompensatonincomeunderSectiol
I
I I ilufihrtional co. t z,+(n). I
| 1 i c. All otherixnployem.areconsidered as regularemployeeswho are subjectto I
| | I the regular ln@me tax rat€ on their taxablecompensatioaincome. I
I " I I A. fitipinos exercising the optjon to be taxed at fifteenpercent(15olo) |
I I I preferential rate fu occupying the same managerial or technicalpositionas.}. I
I I : I that of an afienemployedin an ROHQ5 or RHQsmuJt meetall following i
| requirenenb: .. I
l,'' ,' |
| i | /r1 iosition ald irnctlqnatTest- Theemployeemustoccupy{rurnaoerial I
Il
{ I I managerial or technicalfunctionspertainingto saidposition; I
I I | y')) Comoensation TfueShqU-TC$ - In older to be considereda managerialor I
I , I I technicalemployeefor incometax purposes,the employeemusthave l
I i I received,or is dueto receiveundera contractof ernploymerit, a gross I
' annualtaxablecompensation of at least P975,fi)O (whetheror not this is I
1 I ]
I I I actuallyreceived.) i
I I { 3) E;ctusivitv Test- TheFilipinomanagerial employee
or technical mustbe I
I | | exclusively workinq for the ROHQsor RHQsas a regularenrployeeand I
i I i not just a consultantor contractualpersonnel.Exclusivity meanshaving. I
| ,. I _. * I i!s_o!e-9CIp!ever*s!-a!il]*s,-GBj!_o-11-?_Q!q}______*-__

TAXATIOH - TAX RATES for Individual Taxpayers, Estate


' and Trusts (Batch 25) TX-502
Sec. 25 (D) AlienIndividual 15o/oof grossincomewithinthe Philiopiai tii&ax treatmentto Filipinos
Employedby Offshore emproyeoand occupyingman"g*iul ;ndffitd positionssimilarto ihose
BankingUnits occupiedby aliensempbyed by theseoffshorebankingunib).
Sec.2s (E) AlienIndividual '15% of grossincqmewithinttre Philiffiines(sametax treatmentto Filipinos
Employedby Foreign employedand occupyingthe samepositionas thosealienswho are permanent
PetrofeumService residentsof a foreign coulttry but wlto are emdoyd by petroleumservke
Contractorand contractorand subcontractor in the Philippines).
Subcontractor

5. Exercisea

a. He has the follolvingdata on irrcomeand,expenses

P 60,00q
+r
Salary,Philippines
Grossbusinessihcome,Philipplnes (grosssales,P1,200,fl)0) 500,ft)01
Business expenses,PhilipPines 180,00q
- Grossbusinessin@me,USA(grosssales,P1,500,000) 900,000{
Business expenses,USA . 300,fix
Interest incornefrom bankdeposit,Philipdnes t1 so,ooo
lnterest in@mefrom bankdeposit,USA 70,0001
Iraelest incomeftorn dorne*ia depositorybank under EFCDS t I 80,000'
Interest inconrefrom a detr instrun€nt no[*inin the correrageof deposits,,rbsbtute, Philipirres,
grossof 20% creditaHewithholdirg tax 50,000\
Interest irrcomefrom a debt instrurnentwithin the coverageof a depositSubstitute,Philifftneg fr 60,frx)
Royaty on book publishedin the Phllippines f-I 100,(n0.
Prizein a contesthe ioirEd in the Phitippines
PhillpfrineCharitySupepstakeswinnings
l,ryh
1,00,0('0
Gainfrom saleof $ares of stoc* nd traded throughthe bcal stockexdange g#4 tfi,ffi
Divldendreceivedftom a domesticcprpctraton fl' 40,00fvv
Tax payments,RrstttFee (3) quarters 100,000

Question1 - Hov',mudl is the taxablenet.incomein the Ftlilppines? 16@


2 - Hoyymuchisthe tax payableqfter deductingthe allo*able tax creditsard paptents? Iboa@
3 - }fow mrrchis tte total final tax on certain pasgVeincorne? n@

Grossbugnassincorne,Phi[ppincs(grcs sales,H1,000,(X)0) P 1,0(n,009\


Grossbusinessinome, Japan (Erocssales,P7,000,000) 5,0(n,000'
Busin€sso(penses,Philip$rcs 200,0@1
Businessoeenses, Japan 800,000
PhilippgECharkySutcepsarcsutlrnings g 500,q)0
lapancseSweepstCcswinnnrgs c'\t 4m,UF
Interest ilmrE, Bankof Tdyo, Son {,r( 100,000
Intercst in@rnerecnlcd frurn a &pository bank under
expandedFor€bn crrrency Depositsystem(EFcDs),Philipp{nes FI 3oo,ooo
Int€rest on p€sobant dcposit, Philipflnes 11 100,000
Incoine'taxespaid fur tte first three (3) quarters 50,0(x)

auestion 1 - How mucfrwasthc totabfe nettncorne? &tcUD


2 - lbtrr, rnuci wm tfic tax due after deductirBthe quarterlytax paym€nts?Fil@
3 - How mrrctrrvasthe ltnat tax qt passi\reincone? M,C
4 - Horyv mrchwastheta)€bb net inconeutingoptimalstardarddeduction?0r{'f,|}
' ffrD

TAXATION - Tax Rates for Individual Taxpayers, Estate


Trusts (Batch 26)