TAXATION LAW 1

SUBJECT

SOCRATIC
SYLLABUS/METHODOLOGY

ATTY. KENNETH BENERI A. GALVEZ, C.P.A.

PROFESSOR

I. Method of Instruction - The Socratic Method of Instruction will be used, i.e. recitation-
lecture method. Questions asked may provoke other questions thereby leading to a
discussion of the problem. At each meeting, the students will be called to recite within
the assigned topic and the professor shall amplify/supplement what has been recited by
the students.

1. Cases Assigned - All cases assigned must be read in the original and the students
called to recite are expected to explain/recite the same.

2. Grading - The final grades will be computed as follows: 30% for recitation, 30% for
mid-term examination, and 40% for the final examination. All test papers shall be
corrected and distributed in accordance with the policy of the Dean.

II. Prescribed book

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph
 Tax Law and Jurisprudence by Justice Jose C. Vitug and Justice Ernesto D. Acosta –
Latest Edition

III. Syllabus

I. GENERAL PRINCIPLES OF TAXATION

A. Definition, Concept and Purpose of Taxation
B. Nature and Characteristics of Taxation
C. Power of Taxation as distinguished from Police Power and Power of Eminent
Domain
D. Theory and Basis of Taxation
E. Principles of a Sound Tax System
F. Scope and Limitations of Taxation
1. Inherent limitations
2. Constitutional limitations
G. Situs of Taxation
H. Stages or Aspects of Taxation
I. Definition, Nature and Characteristics of Taxes
J. Requisites of a Valid Tax
K. Tax as distinguished from other forms of exactions
L. Kinds of Taxes
M. Sources of Tax Laws
N. Construction and Interpretation of
1. Tax Laws

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph
 2. Tax Exemptions and Exclusions
3. Tax Rules and Regulations
4. Penal provisions of Tax Laws
5. Non-retroactive application to Taxpayers
O. Doctrines in Taxation
1. Prospectivity of Tax Laws
2. Imprescriptibility of Taxes
3. Double Taxation
4. Power to Tax involves Power to Destroy
5. Escape from Taxation
a) Shifting of Tax Burden
b) Tax Avoidance
c) Tax Evasion
6. Exemption from Taxation
7. Doctrine of Equitable Recoupment
8. Compensation and Set-off
9. Compromise and Tax Amnesty
10. Taxpayer’s Suit
a) Nature and Concept
b) As distinguished from a citizen’s suit
c) Requisites of a taxpayer’s suit challenging the constitutionality of a
tax measure or act of a taxing authority; concept of locus standi,
doctrine of transcendental importance and ripeness for judicial
determination

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph
 II. NATIONAL TAXATION (NATIONAL INTERNAL REVENUE CODE OF 1997, as
amended.
A. Organization and Functions of the Bureau of Internal Revenue
1. Rule-making authority of the Secretary of Finance
a) Authority of the Secretary of Finance to promulgate rules and
regulations
b) Specific provisions to be contained in rules and regulations
2. Income Tax
a) Definition, Nature and General principles
b) Income
(1) Definition and nature
(2) When income is taxable
i. Existence of income
ii. Realization of income
iii. Recognition of income
iv. Cash method of accounting versus Accrual method of
accounting
(3) Tests in determining whether income is earned for tax
purposes
i. Realization test
ii. Claim of right doctrine or doctrine of ownership,
command or control
iii. Economic benefit test, doctrine of proprietary interest
iv. Severance test

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph
 v. All events test
c) Classification of income
d) Situs of Income Taxation
3. Gross Income
a) Definition
b) Concept of income from whatever source derived
c) Gross income vis-à-vis net income vis-à-vis taxable income
d) Sources of income subject to tax
e) Classification of income subject to tax
(1) Compensation income
(2) Fringe benefits
(3) Professional income
(4) Income from business
(5) Income from dealings in property
(6) Passive investment income
(7) Annuities, proceeds from life insurance or other types of
insurance
(8) Prizes and awards
(9) Pensions, retirement benefit or separation pay
(10)Income from any source whatever
f) Exclusions from gross income
(1) Rationale for the exclusions
(2) Taxpayers who may avail of the exclusions
(3) Exclusions distinguished from deductions and tax credits

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph
 (4) Exclusions under the Constitution
(5) Exclusions under the Tax Code
(6) Exclusions under special laws
4. Deductions from Gross Income
a) General rules
b) Return of capital
c) Itemized deductions
d) Optional Standard Deduction
e) Personal and Additional Exemptions
f) Items not deductible
5. Income Tax on Individuals
a) Income Tax on Resident Citizens, Non-resident Citizens and
Resident Aliens
(1) Coverage – Income from all sources within and without the
Philippines; exceptions
(2) Taxation on compensation income
(i) Inclusions – monetary and nonmonetary compensation
(ii) Exclusions – Fringe benefits subject to tax; De Minimis
benefits; 13th month pay and other benefits and
payments specifically excluded from taxable
compensation income
(iii) Deductions – Personal and additional exemptions;
Health and hospitalization insurance
(3) Taxation of business income/income from practice of
profession
(4) Taxation of Passive Income

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph
 (5) Taxation of Capital Gains
b) Income Tax on Non-Resident Aliens Engaged in Trade or Business
c) Income Tax on Non-Resident Aliens Not Engaged in Trade or
Business
d) Individual Taxpayers Exempt from Income Tax
(1) Senior citizens
(2) Minimum wage earners
(3) Exemptions granted under international agreements
6. Income Tax on Corporations
a) Income Tax on Domestic Corporations and Resident Foreign
Corporations
(1) Regular tax
(2) Minimum Corporate Income Tax (MCIT)
(3) Branch Profit Remittance Tax
(4) Allowable deductions
(i) Itemized deductions
(ii) Optional Standard Deductions
(5) Taxation of Passive Income
(6) Taxation of Capital Gains
b) Income Tax on Non-Resident Foreign Corporations
c) Income Tax on Special Corporations
(1) Domestic Corporations
(i) Proprietary educational institutions and hospitals
(ii) Non-profit hospitals

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph
 (iii) Government-owned or controlled corporations,
agencies or instrumentalities
(iv) Depository banks (foreign currency deposit units)
(2) Resident Foreign Corporations
(i) International carriers doing business in the Philippines
(ii) Off-shore banking units
(iii) Resident depository banks (foreign currency deposit
units)
(iv) Regional or Area Headquarters and Regional
Operating Headquarters of Multinational Companies
(3) Improperly Accumulated Earnings Tax (IAET)
(4) Exemptions from Tax on Corporations
(5) Tax on other Business Entities: General Partnerships,
General Professional Partnerships, Co-ownerships, Joint
Ventures and Consortia
7. Filing of Returns and Payment of Income Tax
a) Definition of a Tax Return and Information Return
b) Period within which to file Income Tax Return of Individuals and
Corporations
c) Persons liable to file Income Tax Returns
(1) Individual taxpayers
(i) General rule and exceptions
(ii) Substituted filing
(2) Corporate taxpayers
d) Where to file Income Tax Returns
e) Penalties for Non-filing of Returns

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph
 8. Withholding of taxes
a) Concept of withholding taxes
b) Kinds of Withholding Taxes

Campuses: Hilltop | MH del Pilar | Pallocan East | Pallocan West | Lipa

Telephone Numbers: +63 43 723 1446 | 980 0041

Website: www.ub.edu.ph