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taxing authority exercise by the legislature for a public purpose and generally payable in money
-lifeblood of the government without which the government can neither exist nor fuction
TAXATION- a process or act of imposing a charge by government authority on property, individuals or transactions to raise money for public purposes.
POWER OF TAXATION- as one of the inherent powers of the government it is the power to take property for the support of the government and for public purpose.
FUNDAMENTAL PRINCIPLES OF TAXATION A. Ability-to-Pay Principle-each subject of every state ought to contribute to the support of the government as nearly as possible in proportion to the revenue which they respectively enjoy under its protection
B.
Uniform and Equitable-the tax measure ought to be so construed as both to take out and keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury
C.
Just- the taxes which each person has to pay ought, as respect to the time and manner of payment and the sum to be paid, to be certain and not arbitrary
Convenient-the tax measure ought to be levied at the time and in the manner in which it is most likely to be convenient to the taxpayer who pays it.
D.
OBJECTS OF TAXATION
1. 2. 3. 4. 5. 6. 7. 8.
Businesses Interests Transactions Rights Acts Persons(natural or juridical) Properties(real or personal, tangible or intangible) Privileges
or property received by a person or corporation within a specified time whether as payment for services, interests or profits from investment.
1.
Taxable- the amount of the income upon which the tax rate prescribed by law is applied to obtain the amount of income taxable Non-taxable-those excluded by law or treaty from taxation.
2.
COMPENSATION INCOME- all remunerations for services performed by an employee for his employer under an employer-employee relationship, unless specifically excluded by the Tax Code
GROSS INCOME-means Gross Sales less Sales Returns, discounts and allowances and cost of goods sold, plus any income from investment and other incidental or outside operations or sources.
Juan, a single and official of a private corporation, received the following compensation from her employee: Salaries 13th month pay Productivity pay Loyalty Award 240,000.00 20,000.00 10,000.00 5,000.00
To compute the taxable compensation income: Salaries Gross benefits: 13th month pay 20,000.00 Productivity pay 10,000.00 Loyalty Award 5,000.00 Gross Benefits 35,000.00 Add: Gross Benefits (35,000.00-30,000.00) Gross Compensation Income Less: Personal Exemption Taxable Compensation Income 240,000.00
The first year of business operation of Mr. Juan Dela Cruz revealed he summary of its income and expenses in 2011:
Sales Sales returns and alowances Cost of sales Rent income (net of 5% witholding tax) Income on sale of capital asset To compute gross income: Sales Less: Sales Returns and Allowances Net Sales Less: Cost of Sales Gross Profit Add:Other Income Rent (79800*95%) Income on sale of capital asset 84,000.00 20,000.00 104,000.00 850,000.00 35,000.00 815,000.00 350,000.00 465,000.00 850,000.00 35,000.00 350,000.00 79,800.00 20,000.00
Gross Income
569,000.00
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2 Kinds of Exemption:
Personal Exemption-pertains to the taxpayer himself and is based on his status; Additional Exemption-pertains to his qualified dependent children
Personal Exemption
Married individuals Head of the family Single Legally separated individuals
Additional Exemption From children (legitimate, legally adopted, illegitimate): Below 21 years old Unemployed Unmarried Living with the taxpayer Fully dependent upon him for chief support
B.
Juan, a single with two qualified dependent children and an official of a private corporation, received the following compensation from her employee:
Salaries 13th month pay Productivity pay Loyalty Award 240,000.00 20,000.00 10,000.00 5,000.00
To compute the taxable compensation income: Salaries Gross benefits: 13th month pay 20,000.00 Productivity pay 10,000.00 Loyalty Award 5,000.00 Gross Benefits 35,000.00 Add: Gross Benefits (35,000.00-30,000.00) Gross Compensation Income Less: Personal Exemption 50,000.00 Additional Exemption 50,000.00 Taxable Compensation Income 240,000.00
5,000.00 245,000.00
The tax on 140,000.00 Tax on Excess (145k-140k) * 25% Income Tax Due
In the first year of business operation of Mr. Juan Dela Cruz, single, revealed the summary of its income and expenses in 2011: Sales Sales returns and alowances Cost of sales Rent income (net of 5% witholding tax) Income on sale of capital asset Deductible expenses To compute gross income and taxable income Sales Less: Sales Returns and Allowances Net Sales Less: Cost of Sales Gross Profit Add:Other Income Rent (79800*95%) 84,000.00 Income on sale of capital asset 20,000.00 Gross Income Less: Deductible Expenses Income from business Less: Basic personal exemption Taxable Income 850,000.00 35,000.00 815,000.00 350,000.00 465,000.00 104,000.00 569,000.00 230,000.00 339,000.00 50,000.00 289,000.00 ---------850,000.00 35,000.00 350,000.00 79,800.00 20,000.00 230,000.00
The tax on 250,000.00 Tax on Excess (289k-250k) * 30% Income Tax Due