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TAX-is an enforced proportionate contribution imposed upon persons, properties, businesses, rights, interests, privileges, transactions and acts

within the territorial jurisdiction of the

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.

SCOPE OF THE POWER OF TAXATION 1. Supreme 2. Comprehensive 3. Unlimited 4. plenary

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

Income-the amount of money

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

5,000.00 245,000.00 50,000.00 195,000.00 ----------

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
----------

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 Exemptions under RA 9504: (June 17,2008)


A.

Personal Exemption
Married individuals Head of the family Single Legally separated individuals

Provided, no qualified dependents is uniformly pegged at 50,000.00 each per annum

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.

--now pegged at P25,000.00 each maximum of four children

NORMAL TAX RATE ON INDIVIDUAL TAXPAYERS


Not over P10,000 5% Over P10,000 but not over P30,000 P500+10% of the excess over P10,000 Over P30,000 but not over P70,000 P2,500+15% of the excess over P30,000 Over P70,000 but not over P140,000.. P8,500+20% of the excess over P70,000 Over P140,000 but not over P250,000 P22,500+25% of the excess over P140,000 Over P250,000 but not over P500,000 P50,000+30% of the excess over P250,000 Over P500,000 P125,000+32% of the excess over P500,000

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

100,000.00 145,000.00 ----------

And to compute the pertinent tax due would be:


Over P140,000 but not over P250,000 P22,500+25% of the excess over P140,000

The tax on 140,000.00 Tax on Excess (145k-140k) * 25% Income Tax Due

22,500.00 1,250.00 23,750.00 ---------

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 pertinent income tax due would be:


Over P250,000 but not over P500,000 P50,000+30% of the excess over P250,000

The tax on 250,000.00 Tax on Excess (289k-250k) * 30% Income Tax Due

50,000.00 11,700.00 61,700.00 ---------

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