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    Tax I Syllabus-B PDF

    Transféré par

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    10% - om interest iram depositary bank ££¥6 to 10% - capital gains on sale of shares of stocks Inter-corporate dividends from domestic corp - exempt ION-RESIDENT FOREIGN CORPORATION 1% effective January 1, 2099 based on gross income 25% on cinema filin owner, lessor or distributor 4% % on rentals tv awners or lessor of chartered vessel 7% % rentals of aircraft, machineries & other equipment 20% on fareign loans contracted on or after Aug 1, 1988 capital gsins on sale of shares of stocks -5%6 to 10% or % of 1% if sold through stock exchange Foyaltysubject:> taxtreaty £4) Most favored nation clause CIR ¥.SC Johnson & Sons 309 SCRA 87 (1999) 15% on cividends from domestic corp provided a tax credit = to 33%6 if granted to non-resident corp for tax de=med paid £5) CIR y. Procter & Gamble, 204 SCRA 378, GR No, 66838, 02 Dec 1991, Persons liable to tax v persons subject co tay rate of tax at 15% v. 35% to Phil residents 110% IMPROPERLY ACCLMULATED EARNINGS TAX (IAET) See Rev Reg No. 2-2001, 12 Feb 2001 renting See 29 of NIRC) ‘Applies ‘9 domestic corporations; Exemptions Publicly held corp Banks & Non-bank Financial Institution Insusanee Core panies General Profess onal Partnerships Non-taxable Joint Venture PEZA,CDA entities Prima facie evidence of purpose to avold payment of tax, f personal holding or investment comsany Evidence determinative if permitted to accumulate beyond the reasonable needs of the purpose to avoid tax upon sharenolders unless contrary is proved Lividens! must be declared and paid within 1 year from close of tax year, otherwise tax shall be paid within 15 days theveafter How computed: ‘Taxable Income during the year + Exempt, exclusions, final tax, NOLCO less dividends & income tax paid, and reasonable needs x 10% easonable needs include anticipated needs 100% of paid sp capital Definite expars'on with board resolution Loan: Agreements LWC requirements, meet competition, anticipated losses or reverses, hazards and emergencies Leg: 1 Prohibition Sub: diaries of foreiga corp earmarked for investments Investments if unrelated business, bonds and long term securities are not deemed reasonable {i6) Bareahl Formula and Immediacy Test (Cyanamid Phils Inc v. CA 332 SCRA 639, 2000) IAET is only imposed once on specific earnings but still subject co dividends tax to individuals EXEMP® CORPORATIONS (Sec 36, NIRC) Labor, agricultural & horticultural not principally for profit, an-sto-k, non-profit mutual and coop banks for mutual purpose & without profit leneficlary sac.ety, order, sssociation, frat benefits of members Pxclusive cemecery for merabers 16 igious, charitable, scientific, cultural no income inures to its members or any son, (Art VI, Sec 28(3), Constitution) grants exemption to religious, non-profit cemeteries, charitable, educational covers property tax) [NGOs engaged in micro financing are subject to income tax regardless of disposition because thes» are not vie registered activities that are exempt [RR 14-2007, 11 Dec 2007] Business league, chamber or trade association Civic leazue, org Non-stock, non-profit educational institutions [Art XIV, Sec 4(3) of Constitution) are exempt from duties and taxes, all revenues and assets; substantial evidence to prove that it falls under classification ane that income is used actually. directly and exclusively for educational purposes, (See Rev Memorandum Circular No. 76-2003, 14 Nov 2003) Governrient Educational Institutipns Fermers or other mutual typhoon or fire insurance co, mutual ditch, telegraph, only fees, assessments are for meeting expenses Farmers uit grovzers association for marketing products Nowwithstanding the foregeing,incomé of whatever kind or nature from properties or activities con¢ ucted for profit regardless of disposition shal be subject to tax Interest Income of religious org subject to tax regardless of disposition; bank deposits are personal property (BIR Ruling 512, 21 Oct 1998, Ruling No 58, 05 Apr 1991); Rental inco™e is taxabie regardless of disposition (CIR v. CA 298 SCRA 83, 14 Oct 1998) Gain from sale of land & bldg of religious org used for same purpose is an isolated transaction, thus exempt from income tax; its vents, dividends, interest, profits from businesses are taxable. (Manila Polo Club, CTA No. 293, 31 August 1959; BIR Rulings No. 569, 29 Nov 1988; No. 115, 2 Apr 1992) Application of Sec 30 (H) - YMCA, CIR v. CA 298 SCRA 83 - YMCA's income is not exempt from income ta. itis not an educational institution referred to in the constitution. gation or coop MEANING OF ‘“AXABLE INCOME (Sec 31) - ITEMS OF GROSS INCOME LESS DEDUCTIONS AND PERSONAL EXEMPTIONS, IF ANY, AUTHORIZED BY NIRC OR SPECIAL LAWS Sec 32 (A) Definitions of Gross Income, includes compensation for services, conduct of trade ‘or business or profit, gains from dealings in property, interest, rents, royalties, dividends, annuities, prizes, winnings, pensions, partners’ distributive share in general professional partnership 1¢ 32 (B) EXCLUSIONS FROM GROSS INCOME ~ Excluded and exempts from taxation Life insurance proceeds payable to heirs or beneficiaries, but if held by insurer to pay Interest, the interest is taxable; Question: If beneficiary is the taxpayer itself, are the sroceeds taxable or not? Justice dimaampao says yes. Return of premiums or eash surrender value under diff types of life insurance Gifts, bequests, devices of property, but income from such property & gifts, ete or income ‘rom any property, in case of transfer of divided interests, are taxable Compensation for injuries or sickness, plus damages whether by suit or agreement Exernpt by tresty Reticoment, pensions, gratuities, ete. under RA 7641 and from reasonable private benefit olan (50 / 10 / once; non-diversion of corpus & profits) ‘Amcunt received as consequence of separation due to sickness / death, other physical isability, a causes beyond contral 17) PLDT v CIR GA No. 157264, 31 Jan 2008 ~ separation pay due to redundancy. Proof of receipt by ‘employees ofthe pay ané the remittance ofthe withholding tax to the BIR are material to the claim for refund of sr-oneously paid withholding tax on separation pay. Also, it must be shown that ‘emp oyees declared the income and the tax pad tothe ill through withholding. "Section 10, Claims for ta creditor refund, ~ Claims for tax eredit or refuns of income tax deducted and yathheld on Incorie payments shall be given due course only when it is shown on the return thatthe income payment receivec was declared as part ofthe gross income and the fact of withholding i established bya copy of the statement duly ised by the payer to the payee (BIR Form NO. 1743.1) showing the amount paid anc! the amount of tax withheld thereon.” CTA Circular 1-95 states in part: 1. The party who desires to introduce as evidence such voluminous documents must, after motion and approval by the Court, present (2) a Summary containing, among others, a chronological listing of the numbers, dates and amounts covered by the invoices or receipts and the amounts of tax paid; and (b) a Certification of an indepenclent Certified Public Accountant attesting to the correctness of the contents, of the summary after making an examiration, evaluation and audit of the voluminous receipts and invoices 1% 2. The method of individual presentation of each and every receipt, invoice or account for making, identification and comparison with the originals thereof need not be done before the Court or Clerk of Court anymore after the introduction of the summaty and CPA certification. Itis enough that the receipts, invoices, vouchers or other documents covering the said accounts or payment to be introduced in evidence must be pre-marked by the party concerned and submitted to the Court in order to be made accessible to the adverse party who desires to check and verify the correctness of the summary and CPA certification. Likewise, the originals of the voluminous receipts, invoices and accounts must be ready for verification and comparison in case of doubt on the authenticity thereof is raised during the hearing (or resolution of the formal offer of evidence. (Emphasis and underscoring supplied) Motion for New Trial & Liberal application of the CTA rules of court discussed. Petition denied. [See new Rules of Court for CTA issued in 2005] Social security, retirement, gratuities, pensions received by Filipinos or aliens who reside permanently in the Philippines from foreign government, other institution, public or orivate Received by any person residing in Phil from US Veterans Admin 5, GSIS benerits and gratuities Income by foreign government, their financing institutions & international finance institution Inceme from public utility and essential functions of Phil government and political uubdivisions Prizes & awards as recognitions for religious, charitable, scientific, educational, art, literary. ‘vie if selection is without action on his part to enter the contest or proceedings and Joes not require substantial future service Prizes and awards to atiletes from local and international competition recognized by local sports association [cross reference to Other Percentage Tax, Title V, NIRC] 113 Month pay & other benefits under this paragraph, not more P30K such as government employees under RA 6686, benefits not covered by PD 851 as amended by MO No. 28, 13 Aug 1986, productivity incentives and Christmas bonus. Ceiling increased to P82K under RA 9504 $85, GSIS, Medicare, Pag-ibig, Union Dues by indivicwals| Gains from sale of bonis, debentures, certificate of indebtedness with maturity of 5 years Cains from redemption of mutual funds company shares defined in Sec 22 (BB) ALLOWABLE DEDUCTIONS Mtemized Deductions (Sec 34, NIRC) 10% Optional Standard Deductions (OSD) (Sec 34 (L), Amended pursuant to RA 9504, 07 [ul 2008, now 40%, includes corporation. Allowed only to citizens and resident aliens engaged in business or profession [No need to support expenses scton irrevocable for the year Uniess indicated, itemized is deemed elect Premiums on medical & hospitalization (Sec 34 M) Personal Exemptions (Sec 35) Personal and additional exemptions Not allowed to claim deductions Individuals receiving compensation income (except premiums on medical / hospitalization subject to limitations and personal and additional exemptions) Non-rasident aliens not enjaged in trade or business Aliens (also Filipinos simigrly situated) employed in ROHQ, AN, OBU, Petroleum contractors Non Incom ident Foreign Corporations subject :o Final Tax. Itemized Deductions (Sec 34) ‘There must be a law allowing them (Atlas Consolidated Mining v. CIR 102 SCRA 248) Requisites: Ordinary, necessary, reasonable, not against law, etc Ordinary and necessary means reasonable It appeared sale of property was effected by a broker hence bonus to company officer disallowed (Aguinaldo v. Clit, 112 SCRA 136, 1982) Fees paid to broker to induce investors are reasonable and deductible (On the substantive issue, SC allowed the deduction as reasonable citing Rev Reg No. 2. It is worth noting at this point that most of the payees were not in the regular employ of Algue, nor were they its controlling stockholders. The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity of claimed deduction, In the present case, however, we find that the onus has been discharged satisfactorily. The private responcient has proved that the payment of the fees was necessary and reasonable In the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed [see Algue case, supra] Must be connected with business, excent: Contributions / donations Premium on health / hospitalization ‘Theseare allowed to corporations, individuals, partnerships Must be incurred during the year, [CIR v. Isabela Cultural Corp, GR No. 172231, 12 Feb 2007] - All events test applied in determining whether expenses booked on accrual basis should be claimed as deductible expense] Must be substantiated (ESSO v. CIR 175 SCRA 149 (1989)], see Cohan Rule ~ there is showing that expenses were incurred but cannot be ascertained due toabsence of documentary evidence (RMC 23-2000) Subject to withholding tax, where applicable FEBTC V. CA, CTA & BIR, 477 SCRA 49 (Dec 2005) - To sulficiently support claims for tax refund of excess creditable withholding tax, BIR Form 1743 must be submitted, Confirmation Receipts and ITRs are not sufficient. Having failed to do so, the claims were correctly denied, : 19 Under withholding tax system, ic is the payor who withholds the tax and riot the payee, The OR/CR did not indicate the nature and amount of the payraent. "The findings of fact of the CTA, a special court exercising particular expertise on the subject of tax, are generally regarded as final, binding and conclusive upon this Court, especially if these are substantially similar to the findings of the CA which is normally the arbiter of questions of fact. The findings shall not be reviewed nor disturbed on appeal, unless a party can show that these are not supported by evidence or when the judgment is premised on a misapprehension of facts, or vihen the lower courts failed to notice certain relevant facts which if considered would only justify a different conclusion. Income payments to registered enterprises availing of the Income Tax Holiday are notigubject to Creditable Withholding Tax [DA 030-2008 23 Jan 2008} £68) Barcelon, Roxes Securities v. CIR, GR No. 157064 07 Aug 2006 ~ Assessed for deficiency income tax for failure to withhold tax, assessment barred by prescription Specific Deductions Salaries, bonuses, emoluments, allowances, incentives, Fringe Benefits Rental (without equity, operating lease) Advertising expenses are period costs deductible in the year incurred or paid, However, they may be considered capital expenditures if so substantial in ‘promoting q single brand (CIR v. General Foods, 401 SCRA 545) Entertainment, amusement, recreation, subject to celling Travel Expense Excess over 1* class not deductible, subject to FBT Excess over fixed allowance $150 / 100 not deductible, taxable to employee or to Fey Home leave not taxable to employee Family expenses taxable to employee to be deductible to employer Meals & Housing ‘Generally taxable to employee, except when for the convenience of the employer or form par: of Fringe Benefits of the employee Cash Advance / Reimbursement system Entertainment, amusement or recreation (FAR) facilities Directly related to business Directly in furtherance of business Ni contrary to law, ete Ceiling, ¥: 99 019 of Net sales or net revenues Substantiatson in the name of taxpayer & subject to w/tax, where applicable Gi Only one athletic cub per officer is other than company officers, ete “Exclusions from EAR Treated as compensation or Fringe Benefit Charitable or fund raising events Bona fide business meetings of directors, ete Business league or professional organization meet Promotion, Ad and marketing Shifting to other accounts to hide -prohibited Separate item in ITR or note to FS 20 Interest ~ Use, forbearance or detention of money [see Rev Reg 13-2000, 20 Nov 2000 Requisites) ‘There is debt, and interest is agreed in writing Paic or incurred in connection with business during the year Leyally due Not between related parties Not incurred for petroleum operations Not capitalized Limitations on interest - interest is reduced by 41% (42% effective 01 Jul 2005); 39% and 38% of interest income subject to final w /tax Interest of business taxes not subject to lirait Although cash basis, interest paid in advance deductible only in the year debt is paid in full or correspondingly to amortized principal ‘Taxes ‘ Comaected with trade or business, except income Tax ~ Local { Not an item of cperating expenses because it does not help generate revenue, nor does it redound to benefit of customers, thus nnot to be considered in fixing rates of public utility (Republic v. Meralco, GR No. 141369, 14 Nov 2002) ‘income tax paid to foreign government (tax credit / deduction) CIR v. Lednicky 11 SCRA 604 - Partnership Theory ~ the right to tax income emanates from partnership in the production of income by providing protection, resources, incentives and climate to produce income. [Was income tax paid to foreign government by resident alien deductible though income exclusively came from the Phils? No Gift & Estate Tax Special Assessment or special levy tnder the Local Govt Code (Real Property Taxation] if allowed, as deductible and subsequently refunded, Tax Benefit rule applies imitations on tax credit CIR v. Central Luzon Drug Corp (Mercury) 456 SCRA 414 (2005) - 20% Senior Citizens discounts a tax credit deductible from tax liability Losses Fires, shipwreck, theft other casualties Connected with trade or business Not compensated by insurance or otherwise Not claimed in the estate tax return Declared within 30 to 90 days with BIR NOLCO ~ See 34(D)(3) (see Rev Reg 14-2001, 27 Aug 2001) Losses from wash sales of stock & securities (Sec 38) What are wash sales and how are they treated for income tax purposes? Cap tal losses (See 39) Bad Debts (See Rev Reg No. 5-99, 10 Mar 1999, as amended by Rev Reg No. 25: ‘2002, 19 Nov 2002 amending Sec. 3 of RR No. 5-99) (Charged off curing the year (see PRC v. CIR 256 SCRA 667) Connected with business Not rulated parties Effort to collect falled Lezal debt 21 Ofage Gainfully employed See Silverio v. Republic of the Phils, GR No. 174689 22 Oct 2007 Iems nox deductible (Sec 36) Personal and living expenses Capital Expenditures Premium on insurance where beneficiary isthe payor ~taxpayer Losses between related parties Special provisions re: income and deductions of insurance companies (Sec 37) LLosees from Wash Sales of Stock or securities (See 38) Capital gainsand losses (S4¢ 38) [See Rev Reg No. 7-2003,27 Dec 2003] INCOME TAX TREATMENT ON ‘THE SALE OR EXCHANGE OF PROPERTY (SEC 40) General rule on recognition of gain or loss in a sale or exchange of property Exceptions Factors relevant to determination of gain or loss How is gain or loss computed? What isthe basis to be used? When are gains recognized, but not losses? What are the two types of merger or consolidation under Sec 40? What ar® the tax implications of merger, consolidation & acquisition of 80% of the assets? What are the requisites for taxable and tax free transfer of property resulting to majority, ‘ownership of she corporation? When stocks or securities are subsequently sold, how are gains or losses computed? Guicelines on Monitoring of Tax - Free exchange of property for shares [Rev Reg No. 1 2001] Imp.ementing suidelines of Sec 40 [RMO 32-2001 & RMO 17-2002] Tax consequences of tax-free exchange of property for shares of stock of controlled corporation per Sec 40 (C)(2) [See Rev Memorandum Ruling No. 1-2001, 29 Nov 2001] ‘Tax consequences of De Pacto Merger re Sec 40 (C)(2) and (6)(B) [See Rev Memo Ruling No, 1-202] Determination of substituted basis of property transferred and shares received [See Rev Memo Ruling No. 2-202 CIR v. Rufino, GR No. L-3366:

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