Taxation Review Lecture

8/18/2019 Taxation Review Lecture

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TAXATIONREVIEW

Jisryl H. Raz, CPA


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2

PHILIPPINE TAXATION

SYSTEM Protection

- Assessment - File and Pata!es - "ollection - Protest t#e assessment

- En$orcement o$ Ta!es% Ta!es - "laim $or Ta! Re$&nd'"redit()S&mmar Proceedin*s+) ,&dicial Proceedin*s

OVERNMENT

PEOPLE

"ONFLI"T------------REME.IE

S


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OVERNMENT

POLI"EPOWER

TAXATIONPOWER

EMINENT

.OMAINPOWER


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"om/arisonsPOLI"E TAXATION EMINENT .OMAIN

Power to MAKE andIMPLEMENT laws forte !eneral welfare

Power to EN"#RCE$ontri%&tion to raise!o'ern(ent f&nds

Power to TAKE )ri'ate)ro)erty for )&%li$ &se wit

*&st $o()ensation

+roader in a))li$ation

Plenary, $o()reensi'e,

and s&)re(e +T N#T A+-#LTE

Merely to tae )ri'ate

)ro)erty

Pro)erty is taen ordestroyed to )ro(ote!eneral welfare

Money is taen to s&))ortte !o'ern(ent

Pro)erty is taen for )&%li$&se

Can %e e/)resslydele!ated

Cannot %e dele!ated, ifdele!ated, it so&ld %e tote le!islati'e de)art(entof te L0 1e.!. to (aeordinan$es

Can %e e/)resslydele!ated


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"om/arisonsPOLI"E TAXATION EMINENT .OMAIN

Li(ited to te cost o$re*&lation0 licenseand ot#er necessare!/ense

0enerally, NO limit onamo&nt

No im/osition as toamo&nt, instead, it is te0o'ern(ent wi$ is to$o()ensate te )ro)erty

taen.

Relati1el FREE $rom"onstit&tionallimitations

S&23ect to"onstit&tional andIn#erent limitations

S&/erior to and mao1erride "onstit&tionalim/airment /ro1ision

S&/erior to Non3

I()air(ent Cla&se

In$erior to Non3

I()air(ent Cla&se


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eneral Princi/les

4. Prin$i)les or Canons of a -o&nd Ta/ation -yste( 1FEA

a) Fiscal Ade4&ac 5 s&$$icienc to (eet !o'ern(ente/)endit&res and oter )&%li$ needs 10o'ern(ent +&d!et

+alan$e. Tis is in $onsonan$e of te Life%lood Teory.i. +&d!et 6efi$it 7

0o'ern(ent Re'en&es 8 0o'ern(ent E/)endit&res

ii. +&d!et -&r)l&s 7

0o'ern(ent Re'en&es 9 0o'ern(ent E/)endit&res


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eneral Princi/les

2) E4&alit or T#eoretical ,&stice 5 %ased on teta/)ayer:s a2ilit to /a; (&st %e )ro!ressi'e

c) Administrati1e Feasi2ilit 5 $a)a%ility of %ein!e$$ecti1el en$orced. Ta/ laws so&ld not o%str&$t%&siness !rowt and e$ono(i$ de'elo)(ent.


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eneral Princi/les

2. P&r)ose

a) Primaril0 to raise re1en&e

2) Re*&lator 3 To re!&late 1inflation, e$ono(i$and so$ial sta%ility, so$ial $ontrol, et$.

c) "om/ensator 3 To $o()ensate te %enefits)ro'ided %y te !o'ern(ent to te )eo)le


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eneral Princi/les


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eneral Princi/les

=. Nat&re

a)Plenar 5 f&ll and $o()lete in all res)e$t

2)"om/re#ensi1e 5 it $o'ers )ersons, %&sinesses,a$ti'ities, )rofessions, ri!ts and )ri'ile!es.

c)S&/reme 5 it is s&)re(e #NL> insofar as teselection o$ t#e s&23ect of ta/ation is $on$erned

d)Not A2sol&te 5 it is s&%*e$t to li(itations


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eneral Princi/les

?. Li(itations in Ta/ation Power

a) In#erent Limitations 1PENTI

a.4. P&%li$ )&r)osea.2. E/e()tion of te 0o'ern(ent

a.


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eneral Princi/les%. Constit&tional Li(itations

%.4. 6&e )ro$ess $la&se

%.2. E@&al )rote$tion $la&se

%.


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eneral Princi/les

%.. nifor(ity, e@&ality, and )ro!ressi'ity of ta/ation

%.B. Ta/ e/e()tion of te )ro)erties a$t&ally,

dire$tly and e/$l&si'ely &sed for reli!io&s,$arita%le and ed&$ational )&r)oses.

%.. Dotin! re@&ire(ent 12


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eneral Princi/les

%.4G. E/e()tion fro( ta/es of te re'en&es andassets of ed&$ational instit&tions, in$l&din!

!rants, endow(ents, donations and$ontri%&tions

%.44. Power of te Presidentto 'eto any )arti$&larite( 1ite( 'eto or ite(s in an a))ro)riation,re'en&e or tariff %ill 1)o$et 'eto.


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eneral Princi/les

%.42. Ne$essity of an a))ro)riation %efore(oney (ay %e )aid o&t of te )&%li$treas&ry

%.4


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eneral Princi/les

.o&2le Ta!ation

It is ta/in! te sa(e )ro)erty twi$e wen itso&ld %e ta/ed on$e.

Kinds of 6o&%le Ta/ation

1. Direct Duplicate Taxation 5 do&%le ta/ationin te o%*e$tiona%le or )roi%ited sense; not

allowed in te Pili))ines. Tis $onstit&tes a'iolation of s&%stanti'e d&e )ro$ess.


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eneral Princi/les

Elements of Direct Duplicate Taxation:

4.-a(e )ro)erty or s&%*e$t (atter is

ta/ed twi$e2.-a(e )&r)ose


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eneral Princi/les

2. Indirect Duplicate Taxation 5le!al)er(issi%le. Te a%sen$e of one or

(ore of te a%o'e3(entioned ele(ents.

Tis does not ne$essarily 'iolate te e4&al/rotection

of laws.


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eneral Princi/les

How to a'oid 6o&%le ta/ation

4.Ta/ Credits

2.Ta/ Ref&nd


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eneral Princi/lesT#eories o$ Ta!ation

1.Necessity Theory (Theory of

Taxation) 5 te )ower to ta/ is an

attri%&te of so'erei!nty e(anatin! fro(ne$essity 1national defense, ealt,ed&$ation, )&%li$ fa$ilities, et$..


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eneral Princi/les

2.Lifelood Theory (Importance of

Taxation) 5 wito&t ta/es, te!o'ern(ent wo&ld %e )aralyzed forla$ of te (oti'e )ower to a$ti'ateand o)erate it.


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eneral Princi/les

!. "enefits # $rotection Theory%

&eciprocal Duties ("asis of Taxation)

5 tere is a sy(%ioti$ relationsi)%etween te -tate and te $itizenswere%y in e/$an!e of te )rote$tion

and %enefits tat te $itizens re$ei'edfro( te -tate, ta/es are )aid.


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eneral Princi/les

As/ects o$ Ta!ation 5s#ared 2 2ot#e!ec&ti1e and le*islati1e 2od6

()Le1 5 te i()osition or (ain! of ta/ laws

+)Assessment 5 si(ilar to a&dit

7)"ollection 5 enfor$e(ent of ta/


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eneral Princi/les

Note

4.Le'y is often $alled as ta! le*islation orta! /olic.

2.Assess(ent and $olle$tion are $olle$ti'elyter(ed as ta! administration)


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eneral Princi/les

=. An i()a$t of ta/ation is a )oint onwi$ ta/ is ori!inally i()osed.

?. An in$ident of ta/ation is a )oint onwi$ te ta/ %&rden finally rests orsettles down.


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eneral Princi/les

.octrines o$ Ta!ation

4. May te $o&rt interfere wit ta/ le!islation

'nser: As lon! as te le!islat&re, in i()osin! a ta/,does not 'iolate a))li$a%le $onstit&tional li(itations orrestri$tions, it is not witin te )ro'in$e of te $o&rts toin@&ire into te wisdo( or )oli$y of te e/a$tion, te(oti'es %eind it, te a(o&nt to %e raised or te )ersons,

)ro)erty or oter )ri'ile!es to %e ta/ed. Te $o&rt:s )oweris li(ited only to te a))li$ation and inter)retation of telaw.


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eneral Princi/les

2. Is te do$trine of e@&ita%le re$o&)(ent followed inte Pili))ines

'nser: No. A ta/ )resently %ein! assessed a!ainst ata/)ayer (ay not %e re$o&)ed or set3off a!ainst ano'er)aid ta/, te ref&nd of wi$ is already %arred %y)res$ri)tion.


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eneral Princi/les


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eneral Princi/les

=. at is a ta/)ayer s&it

'nser: It is a $ase fied %y a %ona fideta/)ayer i()&!nin! te 'alidity, le!alityor $onstit&tionality of a ta/ law or its

i()le(entation.


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eneral Princi/les

?. at is te nat&re of o&r ta/ laws

'nser: Internal re'en&e laws are not

)oliti$al in nat&re. In ti(es of war, tey aredee(ed to %e te laws of te o$$&)iedterritory and not of te o$$&)yin! ene(y. Ta/laws are $i'il and not )enal in nat&re, alto&!

tere are )enalties )ro'ided for teir 'iolation.


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eneral Princi/les

. A ta/ stat&te is $onstr&ed a!ainst te !o'ern(ent,li%erally in fa'or of te ta/)ayer; wile ta/e/e()tions are $onstr&ed a!ainst te ta/)ayer andli%erally in fa'or of te !o'ern(ent.

B. Ta/ laws are s)e$ial laws wi$ )re'ail o'er a !enerallaw.

8) Ta/ laws o)erate )ros)e$ti'ely &nless te )&r)ose ofte le!islat&re is to !i'e a retros)e$ti'e effe$t.


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"once/t o$ Ta!4. It is an en$orced /ro/ortional

contri2&tion fro( te )ersons and)ro)erty le'ied %y te law3(ain! %ody ofte -tate.

2. Ta!ation 1s) Ta!

a. Ta/ation is te /rocess or means of i()osin!

and enfor$in! $ontri%&tions.%. Ta/ is te en$orced contri2&tion, itself, wi$

!enerally )aya%le in (oney.


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"once/t o$ Ta!"#aracteristics o$ Ta!es4."or$ed $ar!e2.0enerally )aya%le in (oney


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"once/t o$ Ta!

Classifi$ation of Ta/es4. As to s&%*e$t (atter

a.Personal ta/ 5 i()osed &)on )ersons of $ertain $lasswit fi/ed a(o&nt 1e.!. Co((&nity ta/ or )oll ta/

%.Pro)erty ta/ 5 assessed on )ro)erty of $ertain $lass1e.!. Real Pro)erty ta/

$.E/$ise ta/ 5 i()osed on te e/er$ise of )ri'ile!e 1e.!.in$o(e ta/, donor:s ta/, estate ta/, et$.

d.C&sto( d&ties 5 $ar!ed &)on te $o((odities %ein!i()rted into or e/)orted fro( a $o&ntry 1e.!. tariffs


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"once/t o$ Ta!

2. As to %&rden

a. 6ire$t ta/ 5 %ot in$iden$e or lia%ility for te)ay(ent of ta/ as well as te i()a$t or %&rden of teta/ falls on te sa(e )erson 1e.!. in$o(e ta/

%. Indire$t ta/ 5 te in$iden$e or lia%ility for te)ay(ent of ta/ falls on one )erson %&t te i()a$tor %&rden of te ta/ falls on anoter )erson 1e.!.

DAT


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"once/t o$ Ta!


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"once/t o$ Ta!

=. As to (eas&re of a))li$ation

a. -)e$ifi$ ta/ 5 i()oses a s)e$ifi$ s&( %y te ead

or n&(%er or %y so(e standard of wei!t or(eas&re(ent 1e.!. e/$ise ta/ on $i!arettes

%. Ad Dalore( ta/ 5 ta/ &)on te 'al&e of te arti$le

or tin! s&%*e$t to ta/ation 1e.!. DAT of 42re!ardless of te 'al&e of sales


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"once/t o$ Ta!

?. As to ta/in! a&tority

a. National ta/ 5 le'ied %y te National

0o'ern(ent 1e.!. in$o(e ta/, %&siness ta/es,transfer ta/es

%. Lo$al ta/ 5 i()osed %y te Lo$al0o'ern(ent 1e.!. Poll ta/, real )ro)erty ta/es


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"once/t o$ Ta!

. As to ratea. Pro!ressi'e ta/ 5 rate or a(o&nt of ta/ in$reases as te

a(o&nt of in$o(e in$reases 1e.!.nor(alta%&lars$ed&lar ta/ of ? 3


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Esca/e $rom Ta!ation

4. Ta/ A'oidan$e 1Ta/ Plannin! 5 le!al and)er(issi%le (eans

a. hiftin* 5 te )ro$ess %y wi$ te ta/ %&rden istransferred fro( te stat&tory ta/)ayer to anoter

wito&t 'iolatin! te law.

.Transformation 5 te (an&fa$t&rer or )rod&$er )ayste ta/ i()osed &)on i( and endea'ors to re$o&)

i(self %y i()ro'in! is )ro$ess of )rod&$tion, tere%yt&rnin! o&t is &nits of )rod&$tion at a lower $ost.


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Esca/e $rom Ta!ation

c. +apitali,ation 5 a (ere in$rease in te 'al&e of te)ro)erty is not an in$o(e %&t (erely an &nrealizedin$rease in $a)ital.

d. Tax-exemption 5 a !rant of i((&nity to a )arti$&lar)ersons or $or)orations fro( te o%li!ation to )ayta/es

2. Ta/ E'asion 1Ta/ 6od!in! 5 te &se of ille!al orfra&d&lent (eans to defeat or lessen te )ay(ent ofta/


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Ta! La9s0 :IR R&lin*s and

Re1en&e Re*&lations4) Ta! la9sa. A ta/ law is a set of r&les tat )ro'ide (eans for te -tateto raise re'en&es.

%. All re'en&e %ills (&st ori!inate fro( te Ho&se of

Re)resentati'es 1Con!ress. After )assin! < readin!s%y a ma3orit 1ote in te$ni$al $o((ittee, it sall %eele'ated to te -enate wi$ needs to )ass te sa(e <readin!s. Te President:s si!nat&re is ne$essary so tat te%ill %e$o(es a law.

$. In $ase of do&%t, ta/ stat&tes are $onstr&ed a!ainst te0o'ern(ent in fa'or of te ta/)ayer.

d. In $ase of do&%t, ta/ e/e()tions are $onstr&ed a!ainst teta/)ayer in fa'or of te 0o'ern(ent


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Re1en&e Re*&lations2. Re1en&e Re*&lationsa. Tese are inter)retations of an ad(inistrati'e %ody1+IR intended to $larify or e/)lain te ta/ laws and

$arry into effe$t its !eneral )ro'isions %y )ro'idin!details of ad(inistration and )ro$ed&re.%. It is )ro(&l!ated 1(ade %y te -e$retary of "inan$e,

&)on te re$o((endation of te Co((issionerof Internal Re'en&e 1@&asi3le!islati'e f&n$tion.

$. It (&st %e reasona%le, witin te a&tority $onferred,not $ontrary to laws, (&st %e )&%lised and)ros)e$ti'e in a))li$ation.


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Re1en&e Re*&lations


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IN"OME

TAXATION


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NATIONAL INTERNAL REVEN;E TAXES

:&sinessTa!es

IncomeTa!es

Trans$erTa!es

Ta2&lar

5Indi1id&al6

Passi1e

"or/orate

"T

Onero&srat&ito&s

i$ts

Mortis"a&sa

Percenta*eTa!es

VAT

E!cise

.oc&mentar Stam/ Ta!


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"or IN.IVI.;ALS wose !ross in$o(e solely incl&descom/ensation0 allo9ances and ot#er rem&nerations

arisin! fro( te e()loyer3e()loyee relationsi), )assi'ein$o(e and $a)ital !ains not s&23ected to $inal ta! and"T Co()ensation in$o(e //

Add% Passi'e In$o(e, not s&%*e$ted to "T //Ca)ital 0ains, not s&%*e$ted to C0T //ross Income !!Less% 6ed&$tions for

PHHI 1//

Personal E/e()tions 1//Ta!a2le Income !!


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"or IN.IVI.;ALS wit 2&siness or /ro$essional income

0ross re$ei)tssales //Less% Cost of ser'i$esale 1//ross income $rom 2&siness or /ro$ession //

Less% 6ed&$tions forIte(ized 6ed&$tions or #-6 1//

NCLC#, if tere is any 1//N#LC#, if tere is any 1//Net income $rom 2&siness or /ro$ession !!

LessPHHI 1//

Personal E/e()tions 1//Ta!a2le Income !!

" IN.IVI.;ALS i i l d % t ti 2 i


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"or IN.IVI.;ALS wose in$o(e in$l&des %ot com/ensation0 2&sinessincome and /assi1e incomes not s&23ected to $inal ta!%

0ross re$ei)tssales //

Less Cost of ser'i$esales 1//ross income $rom 2&siness or /ro$ession !! Add Passi'e In$o(e, not s&%*e$ted to "T //

Ca)ital 0ains, not s&%*e$ted to C0T //Total ross Income 2e$ore com/ensation income !!Less 6ed&$tions for

Ite(ized 6ed&$tions or #-6 1//NCLC#, if tere is any 1//N#LC#, if tere is any 1//

Net Income $rom :&siness or Pro$ession !! Add Co()ensation In$o(e //Total Income !!

Less PHHI 1//Personal E/e()tions 1//

Ta!a2le Income !!


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"or "ORPORATIONS0 incl&din* 2&siness /artners#i/s0domestic cor/orations0 resident $orei*n cor/orations0 3oint 1ent&res0 and associations, e/$e)t non3resident

forei!n $or)orations 1wi$ is ta/a%le at !ross in$o(e 0ross re$ei)tssales //Less Cost of ser'i$esales 1//

ross income $rom 2&siness or /ro$ession !!

Add Passi'e In$o(es, not s&%*e$ted to final ta/ //Ca)ital 0ains, not s&%*e$ted to C0T //Total ross Income !!

Less 6ed&$tions forIte(ized 6ed&$tions or #-6 1//

Net #)eratin! Loss Carry3#'er 1N#LC# 1//Ta!a2le Income !!

N+L+/ is not applicale since the holdin* period isalso not applicale.


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Income Ta!ation% ross

Income < Incl&sions

0 "road Types of &eturnale Income:

4.Co()ensation In$o(e2.+&siness or Professional In$o(es


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ross Income%"om/ensation Income

All re(&nerations )aid to te e()loyee arisin! fro(an e()loyer3e()loyee relationsi) wi$in$l&de, %&t not li(ited to

a. -alaries and wa!es e!ce/t 9a*es *i1en to MWE

%. +on&ses and allowan$es e!ce/t (7t# mont# /aand ot#er 2on&ses not e!ceedin* P 8+0===.

$. Holiday )ay, #'erti(e )ay, Ni!t sift differential, and

Hazard Pay re$ei'ed %y )ersons ot#er t#an an MWE.


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ross Income%

"om/ensation Incomed. 6e (ini(is and oter frin!e %enefits nots&23ected to $rin*e 2ene$it ta! 1!i'en to ran3and3file, s&23ect to P8+0=== limit

e. -e)aration Pay, Retire(ent )ay, and si(ilarre(&nerations 9#ic# do not meet t#ere4&irements

f. "ees, onoraria, e(ol&(ents, $o((issions, et$.


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Remem2er

E'ery in$o(e is *enerallta!a2le, &nless, s)e$ifi$ally

e/e()ted %y te law and tere@&ire(ents to %e e/e()ted

are (et.


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??

E!am/le%6, (arried wit = @&alified de)endent $ildren ad tefollowin!

Co()ensation In$o(e, 1net of P4F,GGG

---, PHIC, and H6M" Contri%&tions P


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E!am/le% A, resident $itizen, sin!le ad te followin! d&rin! te year

0ross $o()ensation in$o(e P =GGG,GGG

6ed&$tions fro( $o()ensation in$o(e

--- Contri%&tions


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?B

IMPORTANT

Sit&s o$ "om/ensation Income)la$e 9#ere t#e ser1ices are

rendered re!ardless of teresiden$e of )ayor 1-e$. 4??, RRG23=G


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Income Ta!ation% Indi1id&al <

E!cl&sions $rom ross Income1. oliday )ay, / 'erti(e )ay, N i!t siftdifferential, and azard )ay 1HONsHa earned %yME 1non3ta/a%le.

2. 4


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E!cl&sions $rom ross Income


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E!cl&sions $rom ross Income. 6e Mini(is not e/$eedin! teir stat&tory li(its.

B. Pro$eeds of life ins&ran$e )aid to te eirs &)ondeat of te ins&red or woe'er te %enefi$iary is 1also

not s&23ect to estate ta! if te %enefi$iary is t#e t#ird/erson irre1oca2l desi*nated as #eir ; s&23ect toestate ta! if te %enefi$iary is te estate, ad(inistratoror e/e$&tor or if te desi!nation to tird )ersons isre'o$a%le.


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E!cl&sions $rom ross Income. Retire(ent %enefits &nder RA B=41)ri'ate %enefit )lan, )ro'ided

a. Te e()loyee is at least >= ears old atte ti(e of retire(ent;

%. Te e()loyee as rendered (= ears int#e same com/an

$. Te e()loyee a'ailed it $or t#e $irst time

d. -&$ )ri'ate %enefit )lan is a//ro1ed 2t#e :IR.


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E!cl&sions $rom ross IncomeF. -e)aration )ay )aid to te e()loyee for$a&ses 2eond t#e control of saide()loyee 1in'ol&ntary. I$ t#e ca&se o$

se/aration is 1ol&ntar, s&$ )ay(entsall %e ta/a%le.

4G. Mandated $ontri%&tions s&$ as ---,0-I-, PHIC and H6M" $ontri%&tions and&nion d&es.


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E!cl&sions $rom ross Income44. A(o&nts re$ei'ed as a ret&rn of )re(i&(s )aid.

42. Prizes and awards in re$o!nition of reli!io&s,$arita%le, s$ientifi$, ed&$ational, artisti$, literary or$i'i$ a$ie'e(ent as well as awards in a&torizeds)orts $o()etitions.

4


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E!am/le%

6ino )&r$ased a life ins&ran$e ann&ityfor P 4,GGG,GGG wi$ will )ay i( P4GG,GGG )er year. Te life e/)e$tan$yof 6ino is 42 years. How will tea(o&nt %e ta/ed


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?

ross Income% :&siness or

Pro$essional Income0enerally, arisin! fro( sellin! !oods or ser'i$es.

eter indi'id&al or $or)orate ta/)ayer, (ay in$l&de

-ale of !oods and )ro)erties 1real or )ersonal

-ale of ser'i$es 1)rofessional ser'i$es, lease of)ro)erties, et$.

Note: Withholding taxes from professional incomes and

other sale of services which are subject to CWT must becorrectly withheld.


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E!am/le% A, (arried to M ad te followin! d&rin! te ta/a%le year0ross In$o(e

"ro( te Pra$ti$e of )rofession P BGG,GGGRental In$o(e of teir $on*&!al )ro)erty


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B

ross Income% Passi1e

Incomeeneral R&le% Passi'e in$o(e earned witinte Pili))ines are ta!a2le &nless

s/eci$icall e!em/ted 2 la9)

E!ce/tion% If te )assi'e in$o(e is nots&23ected to $inal ta!, s&c# is added to

t#e *ross income s&23ect to normal ta!.


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Passi1e Income%

Indi1id&al Ta!/aersa) Interest on $&rren$y %an de)osits, yield and oter

(onetary %enefit fro( de)osit s&%stit&te, tr&st andsi(ilar arran!e(ent; Roalt fro( )atents andfran$ises, /ri?es e/$eedin! P4G,GGG and9innin*s re!ardless of te a(o&nt +=@ $inal ta!

2) Roalt fro( %oos, literary wors and (&si$al$o()ositions, and di1idend $rom domestic$or)oration (=@ $inal ta!

a. Interest on "C6 &nder te e/)anded "C6- )>@0e!ce/t non-residents


69/599

E!am/le%

Nina, a resident $itizen, ad te followin! in$idental in$o(ein 2GGF

Interest on Pili))ine $&rren$y %an de)osit P


70/599

BG

Passi1e Income%

"or/orate Ta!/aersa. Interest on "C6 &nder te e/)anded "C6-

)>@0 e!ce/t non-resident $orei*n cor/oration

2) Interest on $&rren$y %an de)osits, yield andoter (onetary %enefit fro( de)osit s&%stit&te,tr&st and si(ilar arran!e(ent; Roalt fro()atents and fran$ises, /ri?es e/$eedin!P4G,GGG and 9innin*s re!ardless of te a(o&nt

+=@ $inal ta!)

%. 6i'idend fro( do(esti$ $or)oration e!em/t


71/599

E!am/le%Ta/)ayer re$ei'ed te followin! in$o(e in

2GGFRent, Pili))ines P4G,GGGRent, Hon!on! 2G,GGGInterest, )eso de)osit, PN+ 4G,GGGInterest, - de)osit, PN+ 14,GGG /P?

?,GGG

Interest, de)osit in Hon!on!1HK4,GGG / PB

B,GGG

Prize 1$as won in a lo$al $ontest ,GGG

Prize 1TD won in a lo$al lottery 'al&ed at 4?,GGGPrize won in $ontest in -


72/599

B2

ross Income% Passi1e

IncomeNot S&23ect to Final Wit##oldin* Ta! 5tose wi$ are not s&%*e$ted to final ta/ lietose wi$ are earned a%road, )rizes note/$eedin! P4G,GGG, and interest fro( loans,trade and a$$o&nts re$ei'a%les and tosein$o(es earned o&tside te Pili))ines sall%e in$l&ded in te $o()&tation of !ross

in$o(e.

E l


73/599

E!am/le%

Ma/i(o re$ei'ed te followin! in$o(e in2GGF:&siness income0 P#ili//ines P7==0===

:&siness income0 ;nited States 2?G,GGGE!/enses0 P#ili//ines 2GG,GGGE!/enses0 ;nited States 42?,GGGInterest on de/osit 9it# Metro2anB


74/599

B=

ross Income% "a/ital

ainsCa)ital !ains arisin! fro( te sale of $a)ital assets 1real or

)ersonal assets are ta/a%le as followsa. If REAL /ro/ert not &sed in 2&siness, s&%*e$t to

ca/ital *ains ta! o$ @ of te sellin! )ri$e, or "MD, or

onal Dal&e, wi$e'er is te i!est.

%. If s#ares o$ stocBs not traded in t#e local stocBe!c#an*e, s&%*e$t to >-(=@ ca/ital *ains ta!.

c) All ot#er ca/ital *ains, wi$ are not s&%*e$t to C0T, ares&%*e$t to normal ta! 5>-7+@60 s&%*e$t to te )ertinentr&les in )ro)erty.


75/599

Ordinar Assets 1s) "a/ital Assets

a "a/ital Assets

a) In1entories0 stocBs in trade #eld 2

dealers0 ot#er /ro/ert or in Bind

incl&ded in in1entor o$ t#e

ta!/aer 5e)*) 9orB in /rocess

in1entor and $inis#ed *oodsin1entor0 stocBs6

2) Pro/ert #eld $or sale to c&stomers

in t#e ordinar co&rse o$ 2&siness

5real estate de1elo/er6

c) Pro/erties &sed in 2&siness 9#ic#

is s&23ect to de/reciation or

amorti?ation 5$actor0 o$$ice

2&ildin*0 /atents6

d) Real /ro/ert &sed in 2&siness

5land 9#ic# t#e $actor stands6

a) Ot#er t#an t#ose en&merated as

ordinar assets

2) All /ro/erties not &sed in 2&siness

c) in1estment 9#et#er or not

connected 9it# ta!/aers trade are

ca/ital assets 5e)*) in1estment in

e4&it sec&rities and in1estment in

s&2sidiar6

d) Residential #o&se and lote) Famil car

$) Recei1a2les arisin* $rom sale o$

in1entor

E l


76/599

E!am/le%4. A$$o&nts Re$ei'a%le2. -e$&rities Held as an in'est(ent


77/599

BB

Ordinar Assets 1s) "a/ital AssetsS&23ect to "T S&23ect to Normal Ta!

a) Sale o$ stocBs not listed andnot traded in local stocB

e!c#an*e 5>@- (=@ o$ ca/ital

*ains6

a) Ot#er t#an t#ose listed asMa3or "a/ital Assets 5stocBs not

traded and listed0 and real

/ro/erties s&23ect to @ "T60

all ot#er ca/ital *ains are s&23ect

to normal ta! 5added in t#e *ross

income6

2) Sale o$ real ca/ital /ro/erties

NOT &sed in 2&siness 5@ "T2ased on FMV or SP0 9#ic#e1er

is #i*#er6)

c) NO HOL.IN PERIO. since

t#e ca/ital *ains ta! is a $inal ta!on t#e date o$ sale)

2) HOL.IN PERIO. is

a//lica2le ONLY to indi1id&al

ta!/aers

c) NO HOL.IN /eriod $or

cor/orations)d) AINS or LOSSES are no

lon*er re/orta2le since t#e sale

9as alread s&23ected to $inal

d) ains are re/orta2le in $&ll

s&23ect to #oldin* /eriod cla&se)

O


78/599

Ordinar ains and

Losses0ains and losses deri'ed fro( sale or e/$an!eof te ordinary assets are OR.INARY AINS and LOSSES wi$ are in$l&ded in deter(inin!

ordinar income s&23ect to ta!)

0ainsLosses sall %e )art of 0R#-- INC#MEof s&$ seller 1as oter in$o(e s&23ect to

Normal Ta! 5>-7+@ or 7=@6)


79/599


80/599

"a/ital ains and Losses

HOL.IN PERIO. is a))li$a%le ONLY to indi'id&alta/)ayers.

Ca)ital assets #eld $or more t#an (+ mont#s, teta/a%le !ain or ded&$ti%le loss is >=@ o$ s&c# *ain

or loss.Ca)ital assets eld for not e!ceedin* (+ mont#s,ca/ital *ains ta!a2le in $&ll, owe'er, in $ase of$a)ital loss ded&cti2le in $&ll, %&t li(ited only to tee!tent o$ ca/ital *ains)

In $ase of net $a)ital loss, s&$ loss sall %e $arriedo'er to te s&$$eedin! year.

E!am/le%


81/599

E!am/le%

A, a resident $itizen ad te followin! data for te year 2G44 to 2G4=

+=(( +=(+ +=(7 +=(#rdinary Ta/a%le In$o(e P 2GG,GGG P 2?G,GGG P


82/599

Net "a/ital Loss "arr-O1er5N"L"O6

Te net $a)ital loss of one year(ay %e $arried o'er to tes&$$eedin! year, %&t note/$eedin! te ta/a%le in$o(eof te year wen s&$ net$a)ital loss was s&stained.

E l


83/599

E!am/le%Mr. N, a $itizen of te Pili))ines, sin!le ad te followin!data

+=(= +=((Net in$o(e fro( %&siness P G,GGG P FG,GGG

Interest fro( notes of $lients =,GGG 2,GGGCa)ital !ain on sares of forei!n$or)oration eld for < years ?G,GGG

Ca)ital !ains on *ewelry eld for4G (onts BG,GGG

Ca)ital loss on %onds, eld for= (onts 42G,GGG

S l ti


84/599

Sol&tion% +=(= +=((

Net In$o(e fro( +&siness P G,GGG P FG,GGGInterest in$o(e =,GGG 2,GGG#rdinary net in$o(e =,GGG F2,GGGCa)ital 0ain 1?G P2?,GGGCa)ital 0ain 14GG PBG,GGGCa)ital Loss 14GG 142G,GGGNet "a/ital Loss 5 G>0===6NCLC# 1


85/599

Note%

Cor)orate ta/)ayers are nots&23ect to #oldin* /eriod,

t&s $annot $arry3o'er its net$a)ital loss.

E l


86/599

E!am/le% A, a do(esti$ $or)., ad te followin! data for te year 2G44 to 2G4=

2G44 2G42 2G4< 2G4=

#rdinary Ta/a%le In$o(e P 2GG,GGG P 2?G,GGG P


87/599

"APITAL AIN TAXEXEMPTION% Re4&irementsTo %e e/e()ted fro( Ca)ital 0ains Ta/, es)e$ially in

te sale of residential dwellin!s 1o&se and lot, tefollowin! sall %e o%ser'ed

4. Te $a)ital asset sold was a )rin$i)al residen$e;

2. Te ta/)ayer is a $itizen of te Pili))ines orresident alien;


88/599

"APITAL AIN TAXEXEMPTION% Re4&irements?. tilization of te )ro$eeds of te sale was (ade9it#in ei*#teen 5(86 mont#s fro( te date of sale;

. A $as de)osit is (ade wit an a$$redited %an foran a(o&nt e@&al to te $a)ital !ain ta/, and answera%le

for te $a)ital !ain ta/ so&ld te $onditions for tee/e()tion %e not satisfied;

B. Te e/e()tion sall %e a'ailed of on$e only e1er ten years.

"APITAL AIN TAX


89/599

"APITAL AIN TAXEXEMPTION% Re4&irements

If te entire )ro$eeds of te sale isin'ested, te entire $a)ital !ain is

e/e()t. Te $ost %asis of te new)rin$i)al residen$e will %e te %asisof te old residen$e.

"APITAL AIN TAX


90/599


If only a )ortion of te )ro$eeds of te sale is in'ested inte new residen$e, te $ost %asis of te new residen$e

sall %e

Pro$eeds of te sale in1ested / wat so&ld a'e %een

Entire )ro$eeds of te sale te ta/ 1C0T

"APITAL AIN TAX


91/599


Ca)ital !ain ta/, if te entire )ro$eeds is not&tilized

Pro$eeds of te sale not in1ested / wat so&ld a'e %eenEntire )ro$eeds of te sale te ta/ 1C0T

"APITAL AIN TAX


92/599

"APITAL AIN TAXEXEMPTION% Re4&irementsIf te a(o&nt in'ested is in e/$ess of te)ro$eeds of te sale, te $a)ital !ain is e/e()tand te %asis for te new )rin$i)al residen$e is

e@&al to te %asis of te old residen$e )l&s teadditional in'est(ent

Ne9 Residence D Old residence additional ca/ital in1estment

E l


93/599

E!am/le%

A sold is )rin$i)al residen$e at a sellin!)ri$e of P?M %&t wit a "MD of (illion.Te )ro)erty sold was a$@&ired forP


94/599

F=

Remem2er

Passi'e in$o(es nots&%*e$ted to final ta/es andCa)ital 0ains not s&%*e$tedto $a)ital !ains ta/es areadded to te 0ross In$o(e,

t&s, s&23ect to normalta!.

E!am/le%


95/599

E!am/le%

#li'er, a resident $itizen, as te followin!transa$tions of not listed and traded saresof sto$s of a do(esti$ $or)oration

.ate o$ Sale .ate o$Ac4&isition "ost Sellin*Price

Fe2r&ar (70+==G

Jan&ary 4, 2GGB P G,GGG P(7>0===

A/ril >0 +==G No'e(%er == (>=0===


96/599

F

.E.;"TIONSFROM FROM

ROSS IN"OME

ENERAL R;LES%


97/599

ENERAL R;LES%

4. A ta/)ayer seein! aded&$tion m&st /oint to so(e

s)e$ifi$ )ro'isions of testat&te a&torizin! teded&$tion.

2. Ta/ e/e()tions as well as

ded&$tions are !enerallydisfa'ored %y te law.1strictissimi juris


98/599

Allo9a2le .ed&ctions%

4. #)tional -tandard 6ed&$tion

2. Ite(ized 6ed&$tions

O/tional Standard .ed&ction


99/599


#)tional standard ded&$tion (ay %e $lai(ed in lie& ofte ite(ized ded&$tions.

Indi'id&al ta/)ayers 1R"0 NR"0 RA0 ta!a2le estatesand tr&sts wo are en!a!ed in %&siness or sellin! of

ser'i$e ma claim OS., e/$e)t NRAET+ andNRANET+.

"or indi'id&al ta/)ayers, te =G #-6 is (&lti)lied atis *ross sales or *ross recei/ts. "or )&r)oses of

$o()&tin! #-6 for indi'id&als, !ross salesre$ei)tssall (ean after ded&$tin! sales dis$o&nts a$t&allytaen, sales ret&rns and sales allowan$es.



100/599


Cor)orate ta/)ayers 1domestic and resident $orei*n,e/$e)t non3resident forei!n $or)oration, (ay $lai( =@OS. of its *ross income 1salesre$ei)ts less $ost ofsalesser'i$e )l&s oter in$o(e not s&%*e$ted to final ta/.

Te sele$tion is not )res&(ed; te ta/)ayer so&ldsi!nify is ele$tion to $lai( #-6 and s&$ wo&ld %eirre1oca2le $or t#e ta!a2le ear in wi$ te ret&rn is(ade.

Te fail&re to indi$ate te ele$tion to a'ail te #-6 sall%e $onsidered as a'in! a'ailed of te ite(izedded&$tions.

E!am/le o$ Erroneo&s


101/599

E!am/le o$ Erroneo&s

"om/&tation(st &arter +nd &arter 7rd &arter Ann&al

OS. Ite(ized6ed&$tion

#-6 Ite(ized6ed&$tion

Itemi?ed.ed&ction

#-6 #-6 Ite(ized6ed&$tion

E!am/le o$ "orrect


102/599

E!am/le o$ "orrect

"om/&tation

(st &arter +nd &arter 7rd &arter Ann&al

OS. #-6 #-6 #-6

Itemi?ed.ed&ction

Ite(ized6ed&$tion

Ite(ized6ed&$tion

Ite(ized6ed&$tion


103/599

Itemi?ed .ed&ctions

0eneral R&le E/)enses to %e ded&$ti%le so&ld %eOR.INARY and NE"ESSARY for te %&siness, and(&st %e S;:STANTIATE..

E/$e)tion #)tional -tandard ded&$tion (ay %e$lai(ed wito&t s&%stantiation. Tae note

()RESI.ENTS 1RC and RA and "ITIJENS 1RC andNRC $an $lai( #-6.

+).OMESTI" and RESI.ENT FOREIN$or)orations $an $lai( #-6.

Itemi?ed .ed&ctions%


104/599

Itemi?ed .ed&ctions%5E! InTaLo:a .e/.e/ "#aR. PeT6

a. 0eneral +&siness E!)enses 1salaries and wa!es,s&))lies and re)airs, o)eratin! e/)enses, rentals,ad'ertisin!, tra'ellin! e/)ense, ins&ran$e )re(i&(sa!ainst fire, EAR

2) Interest

c) Ta/esd) Lossese) :ad 6e%ts$) .e/re$iation*) .e/letion

#) "#arita%le and oter $ontri%&tioni) Resear$ and .e'elo)(ent

3) Pension and Tr&st


105/599

eneral :&siness E!/enses

-alaries all rem&neration, in$l&din! wa!esand oter for(s of $o()ensation for ser'i$esa$t&ally rendered )l&s te *rossed-&/

monetar 1al&e o$ $rin*e 2ene$its *ranted 2t#e em/loer to t#e em/loee. Pro'ided, awitoldin! ta/ so&ld %e i()osed 1"+T orta/ so tat te salaries (ay %e $lai(ed as a

ded&$tion.


106/599

eneral :&siness E!/enses

Materials and -&))lies $ost of tese e/)ensewen a$t&ally $ons&(ed.

Tra'el E/)enses any e/)enses in$&rred for

trans)ortation and allowan$es )ro'ided tey arein$&rred solel $or carrin* on t#e trade02&siness or /ro$ession)

Rent E!/ense


107/599

In $as %asis, ad'an$e )ay(ents are notded&$ti%le &nless in$&rred.

In $as %asis, ad'an$e )ay(ents $onstit&te ata/a%le in$o(e te year re$ei'ed, irres)e$ti'e of te)eriod earned.

LESSEE LESSOR

ACCRAL+A-I-

Rent is ded&$ti%le wenIN";RRE.)

Rent is ta/a%le wenRE"EIVE.)

CA-H +A-I- Rent is ded&$ti%le wenIN";RRE. and PAI.)K

Rent is ta/a%le wenRE"EIVE.)KK

E!am/le%


108/599

E!am/le%#n Jan&ary 4, 2G44, Mar$o leased is 'a$ant lot for a

)eriod of 42 years at P 2=G,GGG )er year to Isa%el, telessee. It was a!reed tat te lessee will )ay te followin!

Rent of P =G,GGG 1for 2G44 and 2G42-e$&rity de)osit of P 2=G,GGGReal )ro)erty ta/ at P 2G,GGG )er year &ntil te end of te lease

)eriodTe lease $ontra$t )ro'ides a(on! oters tat te lesseewill $onstr&$t a tree3storey %&ildin! for )arin! )&r)osesat a $ost of P


109/599

4GF

E!am/le%

Te rent e/)ense of te lessee if eis &sin! a$$r&al %asis for in$o(e

ta/ )&r)oses.

Te rent e/)ense of te lessee if e

is &sin! $as %asis for in$o(e ta/)&r)oses.

R t ti t t i t t d


110/599

Re/resentation% entertain(ent, a(&se(ent andre$reation 1EAR

-&%*e$t to a li(it of Q of net sales if te ta/)ayer isen!a!ed in sellin! of !oods; and 4 of te netre'en&e if te ta/)ayer is en!a!ed in sellin! ser'i$es.

If te ta/)ayer is en!a!ed in 2ot# sellin* o$ *oodsand ser1ices, te total a$t&al EAR sall %e allo$ated&sin! t#e net sales or net re1en&e times t#e total o$net sales and net re1en&e s&%*e$t to te li(its

)ro'ided a%o'e.

E!am/le%


111/599

E!am/le% A Cor)oration ad a net sales of P4M. Te a$t&alentertain(ent, a(&se(ent and re$reatione/)ense a(o&nted to P2G,GGG. Te ded&$ti%leEAR e/)ense is .

C Cor)oration is en!a!ed in te sale of !oods andser'i$es wit net sales and net re'en&e of P2Mand P4M res)e$ti'ely. Te a$t&al, a(&se(ent

and re$reation e/)ense a(o&nted to P4,GGG.Te ded&$ti%le EAR e/)ense is

.

Interest% (&st (eet te re@&isites for


112/599

Interest% (&st (eet te re@&isites forded&$ti%ility %efore $an %e $lai(ed as

ded&$tion4. -&%*e$t to a li(it, tat is total interest less


113/599

T#e $ollo9in* interests are non-ded&cti2le%

a. Interests )aid to )ersons $lassified as relatedta/)ayers

%. If te inde%tedness is in$&rred to finan$e )etrole&(

e/)loration

$. Interest on )referred sto$s.

E!am/le%


114/599

/ A Cor)oration is en!a!ed in tradin! %&siness. Te re)orted in$o(e and

e/)enses for ta/a%le year 2G4= are as follows-ales P 4G,GGG,GGGCost of -ales ,GGG,GGG0eneral +&siness E/)enses 4,GGG,GGGInterest on Ti(e 6e)osit 4GG,GGG

Interest fro( Install(ent Re$ei'a%les 42G,GGGInterest E/)enses Clai(ed#n loans )aya%le 4G,GGG#n 6efi$ien$y Ta/es


115/599

E!am/le%

In te ta/a%le year 2G42, Mrs. 0e((a Clarin3Mendoza ad an interest e/)ense on notes)aya%le of =G,GGG and on delin@&en$y ta/es ofP4GG,GGG. Te ta/)ayer ad an interestin$o(e on %an de)osits of P2G,GGG anddi'idend fro( resident $or)orations of

P


116/599

44

not national Internal re'en&e ta/es s&$ as

In$o(e

transfer ta/es$lai(ed as ta/ $redit

)er$enta!e ta/ oter tan te


117/599

E!am/le%Ta/es )aid %y a $or)oration witin a year were

National In$o(e Ta/esNor(al ta/ P ?GG,GGG

I()ro)erly A$$&(&lated Profit Ta/


118/599

44

Losses

Te followin! losses (ay %e $lai(ed asded&$tion

Cas&alty losses

Net #)eratin! Loss Carry3#'er 1N#LC#

Ca)ital losses and se$&rities %e$o(in!wortless

-)e$ial losses

Losses fro( was sales of sto$ or se$&ritiesa!erin! losses

A%andon(ent losses

Re4&isites%


119/599

4

4.Te loss arises fro( fires, stor(s,

si)wre$, or oter $as&alties, or fro(ro%%ery, teft or e(%ezzle(ent;

2.Te )ro)erty lost is $onne$ted wit te

trade %&siness or )ra$ti$e of )rofession.


120/599

Re4&isites%

?. In$&rred in trade, )rofession or%&siness;

. Re)orted wit te +IR witin forty3fi'e days fro( te ti(e of loss; and

B. Not $lai(ed as ded&$tion for estateta/ )&r)oses.

E!am/le% 5i$ "a/ital


121/599

E!am/le% 5i$ "a/italAsset6

Cost or ad*&sted %asis P 4,GGG

Dal&e of )ro)erty %efore $as&alty 4?,GGG

Dal&e of )ro)erty after $as&alty 4G,GGGIns&ran$e re$o'ered


122/599

422

E!am/le% 5i$ OrdinarAsset < Total.estr&ction6 A$@&isition Cost P 4G,GGG

A$$&(&lated 6e)re$iation =,GGG

Ins&ran$e Re$o'ered 2,?GG

E!am/le% 5i$ Ordinar Asset


123/599

42<

E!am/le% 5i$ Ordinar Asset < Partial .estr&ction6

A$@&isition Cost P 4GG,GGG A$$&(&lated 6e)re$iation FG,GGG

Re)la$e(ent Cost to restore te)ro)erty %a$ to its o)eratin! $ondition 2G,GGGIns&ran$e Re$o'ered ?,GGGEsti(ated re(ainin! &sef&l life ? years

E!am/le%


124/599

42=

/ A ta/)ayer en!a!ed in %&siness in$&rred a )artial loss of )ro)erty as

follows Asset 4 Asset 2

+oo Dal&e of te asset at te ti(e of loss P 2GG,GGG P 2GG,GGG

Cost to restore te )ro)erty %a$

to its nor(al o)eratin! $ondition 42G,GGG


125/599

42?

NOL"O

Net o)eratin! loss (eans te e/$ess of allowa%leded&$tions o'er !ross in$o(e of te %&siness in ata/a%le year.

Te net o)eratin! loss of te %&siness or enter)rise for

any ta/a%le year sall %e $arried o'er as a ded&$tionfro( !ross in$o(e for te ne/t t#ree 576 consec&ti1eears i((ediately followin! te year of s&$ loss.

Pro'ided, tat at te ti(e of in$&rrin! net loss, te

ta/)ayer (&st not %e e/e()ted fro( in$o(e ta/.

NOL"O


126/599

NOL"O

Pro'ided, tat for mines ot#er t#an oil and*as 9ells, any net o)eratin! loss in$&rred inany of te first ten 14G years (ay %e $arriedo'er as ded&$tion fro( ta/a%le in$o(e for tene/t fi'e 1? years i((ediately followin! s&$year wen te loss is in$&rred.


127/599

E!am/le%


128/599

E!am/le% A Cor)oration ta/)ayer ad te followin!

>? > >B > >F

0ross In$o(e FGG,GGG FGG,GGG G,GGG =G,GGG FG,GGG

Allowa%le

6ed&$tions FG,GGG G,GGG FGG,GGG


129/599

In $ase of any loss $lai(ed to a'e %een s&stainedfro( any sale or oter dis)osition of sares of sto$s or

se$&rities s#all not %e ded&$ti%le ifTe seller is not a dealer in se$&rities 1srina!e 5te loss so&ld %e A"T;AL.

itin a )eriod of


130/599

/

A sold, not a dealer in se$&rities, as te followin!transa$tions d&rin! te year

44?2G4 P&r$ased ?,GGG sares at P42 ea$ fro(

A+C Cor).

242G4 P&r$ased 4,GGG sares at P4< ea$ (ont

fro( A+C Cor). 1identi$al sto$s.

222G4 -old 4,GG sares fro( te first )&r$ase at

P4G ea$.


131/599

1not esti(ated and te $orres)ondin! re$ei'a%le

so&ld a'e %een written off witin te ta/a%le year. A(o&nt ded&$ti%le so&ld %e te a$t&al a(o&ntEX"L;SIVE of interest.

If te a(o&nt $lai(ed as %ad de%t e/$eeds te $&rrentin$o(e, te e/$ess loss sall %e carried o1er $or t#ene!t t#ree ears 1as N#LC#.

If te a(o&nt is re$o'ered or re$ei'ed s&%se@&ently, tea(o&nt re$o'ered sall %e ta/a%le in f&ll in te year itwas re$o'ered.


132/599

E!ce/tion%


133/599

Ca)ital E/)enses of a Pri'ate Ed&$ationalInstit&tion (ay%e $a)italized s&%*e$t tode)re$iation or ded&$ted at f&ll.

E!am/le%


134/599

/Te followin! infor(ation are fro( te re$ord of Central Mindanao ni'ersity In$., a)ro)rietary ed&$ational instit&tion, for fis$al year ended Mar$


135/599

4


136/599

If te ta/)ayer $oose te se$ond o)tion, it sall

%e s&%*e$t to te followin! li(its A(o&nt $lai(ed as ded&$tion for te year sall N#Te/$eed 2? of te net in$o(e fro( (inin! o)erationswito&t te %enefit of any ta/ in$enti'es &nder e/istin!laws.

Te total a$t&al a(o&nt of e/)loration andde'elo)(ent $osts less te 2? li(it a%o'e sall %e$arried tro&! s&$$eedin! years &ntil f&lly ded&$ted.


137/599

"ontri2&tions% May%e s&%*e$ted to li(itations or ded&$ted at f&ll

Carita%le $ontri%&tions (ade %y an indi'id&al sall %e s&%*e$tto a li(it of 4G of is ta/a%le in$o(e %efore ded&$tin! te$ontri%&tions.

Carita%le $ontri%&tions (ade %y a $or)oration sall %es&%*e$t to a li(it of ? of its ta/a%le in$o(e %efore ded&$tin!te $ontri%&tions.

Carita%le $ontri%&tions (ade %y eiter of te two ta/)ayersa%o'e to te !o'ern(ent for te &se of its /riorit /ro*ramsall %e ded&$ti%le at f&ll. Priority )ro!ra(s are ed&cation0#ealt#0 o&t# and s/orts de1elo/ment0 #&mansettlements0 science and c&lt&re and economic

de1elo/ment.

E!am/le%


138/599

Pio, (arried, wit fi'e (inor $ildren and Pia, sin!le, wit 2 le!ally ado)ted $ildrenare )artners, sarin! )rofits and losses into =. Te followin! data )ertain to te

)artnersi) a$$o&nt and te a$$o&nts of te indi'id&al )artners in teir own %&siness.Partners#i/ Pio Pia

0ross In$o(e P ?BG,GGG P 2G,GGG P 4FG,GGG

Allowa%le 6ed&$tions 2?G,GGG 4?G,GGG BG,GGG

6rawin! A$$o&nts


139/599

4


140/599

A+C )&t &) a @&alified retire(ent )lan a))ro'ed %y te

+IR. It a))ointed + Cor)oration to ad(inister te )lanwi$ $alled for te )ay(ent of P2GG,GGG to $o'er for teretire(ent of e()loyees for )ast ser'i$es rendered and ayearly $ontri%&tion. Te followin! a(o&nts were )aid for

te first tree years of te )lan:s o)eration Contri%&tion for -er'i$es

Past Years "&rrent Years

"irst >ear P 4GG,GGG P ?G,GGG

-e$ond >ear G,GGG ?G,GGG

Tird >ear =G,GGG ?G,GGG

Te )ension e/)ense ea$ year is .


141/599

4=4

"LASSIFI"ATIONSOF TAXPAYERS

AN. PERSONALEXEMPTIONS

"lassi$ication o$


142/599

Indi1id&al Ta!/aers

4. Resident Citizen

2. Non3Resident Citizen


143/599

Indi1id&al Ta!/aers1. &esident +iti,en (&+) 5 ta/a%le !lo%ally 1witin and

o&tside

2. Non-resident +iti,en (N&+) 5 ta/a%le for in$o(es

deri'ed witin te Pili))ines onlyo esta%lises to te satisfa$tion of te CIR te fa$t of teir)ysi$al )resen$e a%road wit a de$inite intention to residet#erein;

o lea'es te Pili))ines d&rin! te ta/a%le year to residea%road, eiter as an i((i!rant or for e()loy(ent on a)er(anent %asis;o stays o&tside te Pili))ines for (ore tan 4< days

"lassi$ication o$


144/599

Indi1id&al Ta!/aers A $itizen wo as %een )re'io&sly $onsidered as non3resident $itizen and wo arri'es in te Pili))ines sallliewise %e treated as a nonresident $itizen for te ta/a%leyear in wi$ e arri'es in te Pili))ines wit res)e$t tois in$o(e deri'ed fro( so&r$es a%road &ntil te date ofis arri'al in te Pili))ines.#'erseas Contra$t orers 1#Cs. Tey are "ili)ino$itizens e()loyed in forei!n $o&ntries wo are )ysi$ally)resent in a forei!n $o&ntry as a $onse@&en$e of teire()loy(ent tereat. To %e $onsidered as an #C or

#", e or se (&st %e d&l re*istered as s&c# 9it#t#e P#ili//ine O1erseas Em/loment Administration5POEA6 wit a 'alid O1erseas Em/loment "erti$icate5OE"6)

"lassi$ication o$


145/599

Indi1id&al Ta!/aers!. &esident 'lien (&') 5 ta/a%le for in$o(es deri'ed witin tePili))ines only

e !enerally $onsider as residents tose wose len!t of assi!n(entsare indefinite or e/$eedin! two 12 years 1+IR R&lin!s Nos. G?434 andG?234.

0. Non-resident 'lien En*a*ed in Trade or "usiness (N&'ET" 5ta/a%le for in$o(es deri'ed witin te Pili))ines only.

Te ter( trade or %&siness sall not in$l&de )erfor(an$e of ser'i$es%y te ta/)ayer as an e()loyee.

A nonresident alien indi'id&al wo sall $o(e in te Pili))ines and

stay erein for an a!!re!ate )eriod of (ore tan 4G days d&rin! any$alendar year sall %e dee(ed as doin! %&siness in te Pili))ines

"lassi$ication o$


146/599

Indi1id&al Ta!/aers4. Non-resident 'lien Not En*a*ed in Trade or "usiness

(N&'NET") 5 ta/a%le for in$o(es deri'ed witin te Pili))inesonly

5. pecial Taxpayer 5 Ta/ed at teir !ross in$o(e at 4? wen Any Fili/ino or Forei*n indi1id&al e()loyed, eiter oldin! a(ana!erial or s&)er'isory )osition, or a ran3and3file, in any ofte followin!

a. #ffsore +anin! nits 1#+s

%. Re!ional Area Head@&arter or Re!ional #)eratin! Head@&arterof a (&ltinational $o()any

$. Petrole&( $ontra$tor or s&%$ontra$tor

"lassi$ication o$


147/599

Indi1id&al Ta!/aers A s)e$ial ta/)ayer, !enerally, sall %e ta/ed at 4? ofis total ROSS "OMPENSATION IN"OME. T&s, e$annot $lai( )ersonal e/e()tions. Howe'er

If a s)e$ial ta/)ayer is a "ili)ino, e ma o/t to %e ta/edat 4? final ta/ or &sin! te ta%&lar ta/ if is *rosscom/ensation income is at least P G>0===.

Aliens are only ta/ed at 4?.

All ot#er income sall %e ta/ed a$$ordin! to /ertinent/ro1isions o$ NIR".

E!am/le%


148/599

A, (arried, ad te followin! data for te year

0ross In$o(e, Pili))ines P =GG,GGG0ross In$o(e, -A


149/599

E!am/le%

A, (arried, ad te followin! data for te year0ross In$o(e, Pili))ines P =GG,GGG

0ross In$o(e, -A


150/599

E!am/le%

A, (arried, ad te followin! data for te year0ross In$o(e, Pili))ines P =GG,GGG0ross In$o(e, -A


151/599

E!am/le%

A, (arried, ad te followin! data for te year0ross In$o(e, Pili))ines P =GG,GGG

0ross In$o(e, -A


152/599

Indi1id&al <P l E ti


153/599

Personal E!em/tions

Personal e/e()tions are only !i'en to indi1id&als weter RC, NRC, RA and NRAET+ s&%*e$t tore$i)ro$ity r&le.

R"0 NR" and RA (ay $lai( a %asi$ )ersonale/e()tion of PP ?G,GGG re!ardless of te stat&s1sin!le, (arried, le!ally se)arated or ead of tefa(ily.

NRAET: $an only $lai( %asi$ )ersonal e/e()tion i$

t#ere is a reci/rocit %etween Pili))ine laws and telaws of is $o&ntry were e resides. Howe'er, te :PEcannot e!ceed P#/ >=0===, %&t (ay %e lower instead.

Indi1id&al <Personal E!em/tions


154/599

Personal E!em/tionsR"0 NR" and RA (ay $lai( an additional )ersonale/e()tion of P) 2?,GGG for e1er 4&ali$ied de/endent"HIL., %&t not e/$eedin! fo&r $ildren, PR#DI6E6 tatte $ild is

Not (ore tan 24 years old

Li'in! wit te ta/)ayer

6e)endin! &)on te ta/)ayer at least Q )l&s 4 for isli'in!.

Le!iti(ate, ille!iti(ate 1re$o!nized or le!ally ado)ted

n(arried and not !ainf&lly e()loyed

Indi1id&al


155/599

Personal E!em/tions

Pro'ided tat, te ta/)ayer (ay also$lai( an additional e/e()tion e'en if

te $ild rea$es a%o'e 24 years oldwen s&$ $ild is in$a)a%le of self3s&))ort %e$a&se of (ental defe$t.

NRAET+ sall %e entitled to /ersonal e!em/tionin an a(o&nt e@&al to te e/e()tion allowed %y


156/599

@ ) yte in$o(e ta/ law of te $o&ntry of wi$ ese

is a s&%*e$t or $itizen %&t not to e/$eed tea(o&nt fi/ed in te NIRC as te e/e()tion for$itizens or residents of te Pili))ines. 1-e$.


157/599

t#e ta!/aer 9#o claim /ersonal

e!em/tions%eter sin!le, (arried, ead of te fa(ily or le!allyse)arated, te ta/)ayer $an $lai( only to te (a/i(&(a(o&nt of P ?G,GGG %asi$ )ersonal e/e()tion.

If te ta/)ayer so&ld (arry or so&ld a'e additionalde)endents d&rin! te ta/a%le year, e (ay $lai( te$orres)ondin! e/e()tion in f&ll for s&$ year.

R&les on determinin* t#e stat&s o$t#e ta!/aer 9#o claim /ersonal


158/599

t#e ta!/aer 9#o claim /ersonal

e!em/tions%If te ta/)ayer so&ld die d&rin* t#e ta!a2le ear , isestate (ay $lai( is $orres)ondin! e/e()tions 1%ot)ersonal and additional as if e died at te end of s&$ year.

If te s)o&se or any of te @&alified de)endent so&ld (arryor 2ecome t9ent-one ears old d&rin! te year, or so&ld%e$o(e !ainf&lly e()loyed, te ta/)ayer (ay still $lai( tee/e()tion as if te s)o&se or de)endent died or as if s&$de)endent (arried, %e$a(e twenty3one years old or %e$a(e!ainf&lly e()loyed at te $lose of s&$ ta/a%le year.

Income Ta!ation% Indi1id&al <SSS P#ilH lt# P I:I PHHI


159/599

SSS0 P#ilHealt#0 Pa*-I:I PHHI

Aside fro( te allowa%le ded&$tions and )ersonale/e()tions, an indi'id&al ta/)ayer (ay also ded&$tfro( is !ross in$o(e

4. --- $ontri%&tions2. PilHealt 1PHIC $ontri%&tions


160/599

Ta/)ayer (arried is !irlfriend on 6e$e(%er


161/599

A ta/)ayer, (arried, wit fi'e (inor $ildren, tree of te( are !ainf&lly e()loyed,)ro'ided te followin! dataCo()ensation In$o(e P 4?G,GGG1!ross of 4G ---, nion d&es, Pa! 3I+I0 Pilealt, net of P=?t 4< t (o. Pay and!ross of P4Gt /:(as %on&s0ross sales ?GG,GGGCost of -ales


162/599

42

FRINE

:ENEFITS

.e$inition


163/599

Mana*erial Em/loee

Tose wo are 'ested wit )owers or )rero!ati'es to laydon and execute mana*ement policies andor to ire,transfer, s&s)end, lay3off, re$all, dis$ar!e, assi!n ordis$i)line e()loyees. !"abor Code of The #hilippines$

S&/er1isor Em/loeeTose wo, in te interest of te e()loyer, effectielyrecommend such mana*erial actions if the exercise ofsuch authority is not merely routinary or $leri$al in nat&re%&t re@&ire &se of inde)endent *&d!(ent. !"abor Code ofThe #hilippines$

RanB-and-FileTose wo are not (ana!erial and s&)er'isory e()loyees.

.e Minimis :ene$its t d fil i l i l


164/599

eter ran3and3file or (ana!erials&)er'isory e()loyee,te followin! de (ini(is %enefits sall %e non3ta/a%le4.Monetized &n&sed 1acation lea1e credits of )ri'atee()loyees not e!ceedin* (= das d&rin* t#e ear ;2.Monetized 'al&e of 1acation and sicB lea1e credits )aidto !o'ern(ent offi$ials and e()loyees;

7)Medical cas# allo9ance to de)endents of e()loyees note/$eedin! PB?G )er e()loyee )er se(ester or P 42? )er(ont;)Rice s&2sid o$ P (0>== or one 14 sa$ of ?G3!. ri$e )er(ont a(o&ntin! to not (ore tan P 4,?GG;

>);ni$orm and clot#in* allo9ance not e/$eedin! P ?,GGG)er ann&(;)Act&al earl medical 2ene$its not e/$eedin! P 4G,GGG)er ann&(;

.e Minimis :ene$its L d ll t di P


165/599

) La&ndr allo9ance not e/$eedin! P


166/599

All oter %enefits !i'en %y te e()loyers wi$are not in$l&ded in te a%o'e en&(erationshall not e considered as 6de minimis7

enefits, and en$e, sall %e s&%*e$t to

in$o(e ta/ as well as witoldin! ta/ on$o()ensation.

E!am/le%A d i t 2G4? i d t f ll i % fit


167/599

A, d&rin! te 2G4?, re$ei'ed te followin! %enefits

Medi$al %enefits P 2?,GGG )er year Monetized lea'e $reditsDa$ation 14< days 4


168/599

4

*If !i'en to ranB-and-$ile em/loee, frin!e %enefits sall$onstit&te !ross in$o(e s&23ect to ta2&lar ta! rate 5>-7+@6 and P#P 8+0=== limit) Moreo'er, it sall %e $lai(edas a ded&$ti%le e/)ense IN"L;.E. in te salariese/)ense on te )art of te e()loyer.

Entry

"rin!e +enefits E/)ense //

Cas 1or fair 'al&e of )ro)erty //

Frin*e :ene$its


169/599

If !i'en to an e()loyee #oldin* a mana*erial or

s&/er1isor )osition, it sall %e s&%*e$t to frin!e %enefitta/, as follows

4.RC, NRC, RA, NRAET+


170/599

*

If !i'en to (ana!erial or s&)er'isory e()loyee, s&$ frin!e%enefits will %e s&%*e$t to frin!e %enefit ta/, $o()&ted asfollows

0ross Monetary Dal&e 7 Monetary Dal&e

14GG 3 A))li$a%le rate

"rin!e +enefit Ta/ 7 0ross Monetary Dal&e / A))li$a%le

ross Monetar Val&e


171/599

It in$l&des

4.Monetary Dal&e 7 a$t&ally !i'e

2."rin!e +enefit Ta/

Te !ross (onetary 'al&e is an ESPEN-E of ane()loyer.

Te frin!e %enefit ta/ is a "INAL TAS on te in$o(e of te(ana!erial s&)er'isory e()loyee, witeld %y te

e()loyer.

Monetar Val&e%Real Pro/ert


172/599

Real Pro/ert4. If te ownersi) is trans$erred to te e()loyee

T#e total FMV or cost e!cl&si1e o$ interest0

9#ic#e1er is a//lica2le)

2. If te ownersi) is retained %y te e()loyer, and t#e&s&$r&ct is onl *i1en to t#e em/loee%

FMV or cost0 9#ic#e1er is a//lica2le0 di1ided 2 +=ears di1ided 2 +

Monetar Val&e%Personal Pro/ert


173/599

Personal Pro/ert4. If te ownersi) is trans$erred to te e()loyee

Te total "MD or $ost e/$l&si'e of interest,wi$e'er is a))li$a%le.

2. If te ownersi) is maintained 2 t#e em/loer andonl t#e &s&$r&ct is *i1en to t#e em/loee%

"MD or $ost, wi$e'er is a))li$a%le, di1ided 2 >ears di'ided %y 2

Monetar Val&e%Real or Personal Pro/ert


174/599

Real or Personal Pro/ert

ere te )&r$ase )ri$e is )artially so&ldered%y te e()loyer

T#e act&al 5/artial amo&nt6 cas# *i1en2 t#e em/loer)

Monetar Val&e%"as# and Interest


175/599

"as# and InterestI$ "as#

Act&al "as# i1en

I$ an interest o$ an inde2tedness is $ree o$interest

T#e monetar 1al&e s#all 2e t#e interest $or*one

E!am/le%JHR Co()any !a'e te followin! to + d&rin! 2G4?, is 'ery $o()etiti'e


176/599

(ana!er

Ho&se in Ce%&, $onstr&$tion $osts

so&ldered %y JHR P


177/599

E!am/le%Te followin! infor(ation are )resented to yo& in $onne$tion wit te


178/599

Te followin! infor(ation are )resented to yo& in $onne$tion wit tedeter(ination of te ta/ on te frin!e %enefits !i'en to Earl, Di$e3Presidentof te Pa%e%e Cor)oration

Paid %y te $o()any wit offi$ial re$ei)ts in te na(e of Pa%e%eCor)oration

a.La)to) $o()&ter for Earl:s offi$e &se, P G,GGG.

%.Air3$onditionin! &nit for Earl:s offi$e &se, P


179/599

4BF

Nin*a Cor). a re!ional o)eratin! ead@&arters of a (&ltinational

Cor)oration, esta%lised in te Pili))ines )ro'ided its e()loyees$as and non3$as frin!e %enefits in 2G4G as followTotal "rin!e +enefits P4,GGG,GGGG of said a(o&nt was !i'en to ran and file e()loyees=G of said a(o&nt was !i'en to $or)orate offi$ers as follow

To resident $itizens =?

To non3resident aliens not en!a!ed in %&siness in te Pili))ines


180/599

4G

IN"OME TAXATIONON "ORPORATE

TAXPAYERS

O1er1ie9%


181/599

Te ter( %corporation& in$l&des )artnersi)s, no(atter ow $reated or or!anized, *oint3sto$$o()anies, *oint a$$o&nts 1$&entas en )arti$i)a$ion,asso$iations, or ins&ran$e $o()anies, %&t does notin$l&de

() *eneral /ro$essional /artners#i/s 5PPs and

+) 3oint 1ent&re or consorti&m for(ed for te )&r)ose of&ndertain! $onstr&$tion )ro*e$ts or en!a!in! in)etrole&( o)eration, $oal, !eoter(al and oter ener!yo)erations )&rs&ant to an o)eratin! or $onsorti&(

a!ree(ent &nder a ser'i$e $ontra$t wit te 0o'ern(ent.

Pro-Forma "om/&tation0ross re$ei)tssales //


182/599

0ross re$ei)tssales //

Less Cost of ser'i$esales 1//ross income $rom 2&siness or /ro$ession !! Add Passi'e In$o(es, not s&%*e$ted to final ta/ //

Ca)ital 0ains, not s&%*e$ted to C0T //Total ross Income !!

Less 6ed&$tions forIte(ized 6ed&$tions or #-6 1//Net #)eratin! Loss Carry3#'er 1N#LC# 1//

Ta!a2le Income !!N+L+/ is not applicale since the holdin* period is also notapplicale.

Note%In te $o()&tation of 0R#-- INC#ME, t#e same r&le


183/599

In te $o()&tation of 0R#-- INC#ME, t#e same r&le

s#all 2e o2ser1ed as in t#e case o$ an indi1id&alta!/aer , e/$e)t tat a $or)oration as no $o()ensationin$o(e and does not a'e winnin!s and )rizes.

In te $o()&tation of ALL#A+LE 6E6CTI#N-, tesa(e r&lin! sall %e o%ser'ed as in te $ase of anindi'id&al, e/$e)t tose s)e$ifi$ ite(s wi$ as adifferent stat&tory $eilin!s s&$ as te $arita%le$ontri%&tions 1?.

No Personal e/e()tions.

E!am/le% NIR" 1s) AAP A+C is a do(esti$ $or)oration en!a!ed in (er$andisin! %&siness. "or te$alendar year 2G4= it ad a net in$o(e )er %oos of P?GG GGG after


184/599

$alendar year 2G4=, it ad a net in$o(e )er %oos of P?GG,GGG, after

$onsiderin! a(on! oters, te followin!a.6i'idend re$ei'ed fro( a do(esti$ $or)oration P


185/599

4?

4. 6o(esti$ $or)orations are ta/ed on worldwide in$o(e, at


186/599

4. 0ross In$o(e Ta/ 10IT2. Nor(al Cor)orate In$o(e Ta/ 1NCIT


187/599

It is an o)tional in$o(e ta/ !i'en to $or)orateearners e@&i'alent to 4? of its !ross in$o(einstead of te


188/599

A DAT ta/ effort of = of 0NP

A G.F ratio of $onsolidated )&%li$ se$tor finan$ial)osition to 0NP

A'aila%le only to fir(s wose ratio of $ost of sales to!ross sales or re$ei)ts fro( all so&r$es is ??.

Te ele$tion sall %e irre'o$a%le for tree 1


189/599

E!am/le% A+C Cor). a do(esti$ $or)oration, in its fift year of o)eration in 2G4=, wi$ad a ta/ ref&nda%le of P4G GGG for te )re$edin! year for wi$ tere is a


190/599

ad a ta/ ref&nda%le of P4G,GGG for te )re$edin! year for wi$ tere is a$ertifi$ate of ta/ $redit, ad te followin! $&(&lati'e data

O4 O2 O< O=0ross )rofit fro( sale PGG,GGG P4,GG,GGG P2,=GG,GGG P


191/599

4F4

Te followin! are lia%le to MCIT %e!innin! te =tta/a%le year in wi$ s&$ $or)oration $o((en$ed its%&siness o)erations

.omestic "or/orations

Resident $orei*n cor/orations

Te 2 of !ross in$o(e is i()osed wene'er a$o()any

Has no ta/a%le ino$o(e; or

Has ta/a%le in$o(e %&t te a(o&nt of MCIT is!reater tan te NCIT 1


192/599

Te MCIT sall 2e carried o1er and credited a*ainstt#e normal ta! $or t#e ne!t t#ree 576 ears followin!te ta/a%le year were te $or)oration is ta/ed at MCIT.

Pro'ided, tat if te $or)oration is still ta/ed at MCIT

followin! s&$ year, te )re'io&s MCIT sall %e .EFERRE. and cannot 2e credited a*ainst t#eears M"IT)

Te tree3year $arry3o'er )ro'ision sall %e $o&nted

$ontin&ally re!ardless weter te $or)oration )aysMCIT or NCIT.

E!am/le% Ann&al Filin* A do(esti$ $or)oration or!anized in 4FF )ro'ided te followin! infor(ation


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+== +== +==8 +==G +=(=

Net -ales P=,GGG,GGG P?,GGG,GGG P,GGG,GGG PB,GGG,GGG PF,GGG,GGG

Cost of -ales 2,GGG,GGG


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Sol&tion%


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+== +== +==8 +==G +=(=Nor(al Ta/


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Sol&tion% Non-c&m&lati1e A do(esti$ $or)oration as te followin! non3$&(&lati'e data for 2G42

E/$ess MCIT in 2G44 P 4G GGG


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E/$ess MCIT in 2G44 5 P 4G,GGG

O4 O2 O< O=In$o(e, ?GG,GGG GG,GGG GG,GGG F?G,GGG6ed&$tions =G,GGG BGG,GGG =?G,GGG BBG,GGGNet Ta/a%le In$o(e 2G,GGG 4GG,GGG 4?G,GGG 4G,GGGNCIT 10=== >0===MCIT 12 (=0=== 4,GGG 42,GGG 4F,GGG

Ta/ 6&e 4G,GGG 0=== 80=== 7G0=== 0>==

Sol&tion% "&m&lati1e A do(esti$ $or)oration as te followin! non3$&(&lati'e data for 2G42

E/$ess MCIT in 2G44 5 P 4G GGG


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E/$ess MCIT in 2G44 P 4G,GGG

O4 O2 O< O=In$o(e, ?GG,GGG 4,


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Earnin*s Ta!It is a ta/ i()osed on i()ro)er a$$&(&lation ofearnin!s. 6Improperly accumulated earnin*s(I'E)7 are te )rofits of a $or)oration tat are)er(itted to a$$&(&late instead of %ein!

distri%&ted %y a $or)oration to its sareoldersfor te )&r)ose of a'oidin! te in$o(e ta/ witres)e$t to its sareolders or te sareoldersof anoter $or)oration.

Te rate of 4G of te I()ro)erly A$$&(&lated Ta/a%leIn$o(e, $o()&ted as follows

Ta/a%le In$o(e for te >ear //


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Ta/a%le In$o(e for te >ear //

AddIn$o(e e/e()t fro( ta/ //In$o(e e/$l&ded fro( !ross in$o(e //In$o(e s&%*e$t to final ta/, net //N#LC# //

Less

In$o(e ta/ )aid for te ta/a%le year 1//6i'idends a$t&ally or $onstr&$ti'ely )aidiss&ed fro( te a))li$a%le year:s ta/a%le in$o(e 1// A(o&nt reser'ed for te reasona2le needs 1//

Ta/ +ase for IAET //

Note Earnin!s for te reasona%le needs are en&(eratedas follows '(evenue (egulation No. ))++,-:

Allowan$e for te in$rease in te a$$&(&lation of earnin!s &) to 4GG of


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Allowan$e for te in$rease in te a$$&(&lation of earnin!s &) to 4GG of

te )aid3&) $a)ital of te $or)oration as of te %alan$e seet date,in$l&si'e of a$$&(&lation taen fro( oter years;

Earnin!s reser'ed for definite $or)orate e/)ansion or )ro*e$ts asa))ro'ed %y te %oard;

Earnin!s reser'ed for %&ildin!, )lants or e@&i)(ent a$@&isition as

a))ro'ed %y te %oard;Earnin!s reser'ed for $o()lian$e wit any loan $o'enant or )re3e/istin!o%li!ation esta%lised &nder a le!iti(ate %&siness a!ree(ent;

Earnin!s re@&ired %y law or a))li$a%le re!&lations to %e retained %y te$or)oration;

In $ase of s&%sidiaries of forei!n $or)orations in te Pili))ines, all&ndistri%&ted earnin!s intended or reser'ed in'est(ents witin tePili))ines as $an %e )ro'en %y $or)orate re$ords.


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E!ce/tions $rom IAETP&%li$ly3eld $or)orations

+ans and oter non %ans finan$ial inter(ediaries


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+ans and oter non3%ans finan$ial inter(ediaries

Ins&ran$e $o()anies

Ta/a%le 1%&siness )artnersi)s 1dee(ed to a'e a$t&allyor $onstr&$ti'ely re$ei'ed te ta/a%le in$o(e &nder -e$.B


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0ross In$o(e 4,?GG,GGG

+&siness E/)enses GG,GGG0ain on -ale of +&siness Assets G,GGGInterest on de)osits wit Metro%an, net of ta/ ?,GGG-ale of -ares of sto$s, not listed and traded

-ellin! Pri$e 4?G,GGG

Cost 44?,GGG6i'idends fro( Di$tory Cor)oration, do(esti$


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2G?

IN"OME TAXRET;RN FILIN

AN. PAYMENT OFIN"OME TAX

Income Ta! Ret&rn 5:IR Form6 .eadline $or Filin* and Pament

Ann&al Income Ta! Ret&rn <"or/orate5:IR Form (=+6

#n or %efore te 4?t day of te=t (ont of te followin! te$lose of te ta/a%le year


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5:IR Form (=+6 $lose of te ta/a%le year

&arterl Income Ta! Ret&rn5:IR Form (=+6

itin G days after te end ofea$ first < @&arters of te ta/a%leyear

Ann&al Income Ta! Ret&rn <Sel$-Em/loed Indi1id&al 5:IRForm (=(6

A)ril 4? of te s&$$eedin! year, anindi'id&al $an only &se $alendaryear

&arterl Income Ta! Ret&rn -Sel$-Em/loed Indi1id&als andMi!ed Income Earners 5:IRForm (=( 6

e'ery 4?t day on A)ril, A&!&st,No'e(%er and A)ril of tes&$$eedin! year.


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:IR Iss&ances and"o&rt .ecisions Relatedto Income Ta!

4. Val&ation o$ "ontri2&tions or i$ts Act&allPaid or Made in "om/&tin* Ta!a2le Income

Re'en&e Me(orand&( Cir$&lar 1RMC No. 32G4= dated 6e$e(%er


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1

?, 2G4=Tis $ir$&lar is iss&ed to clari$ t#e 1al&ation o$ contri2&tions or*i$ts act&all /aid or made in $o()&tin! ta/a%le in$o(e as )art of tes&%stantiation re@&ire(ent &nder Re'en&e Re!&lations No. 4


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Re'en&e Re!&lation No. 423 2G4< dated J&ly 42, 2G4<

Re4&irements $or ded&cti2ilit% Any in$o(e )ay(entwi$ is oterwise ded&$ti%le &nder te Code sall %eallowed as a ded&$tion fro( te )ayor:s !ross in$o(eonl i$ it is s#o9n t#at t#e income ta! re4&ired to 2e

9it##eld #as 2een /aid to t#e :&rea& in a$$ordan$ewit -e$tions ?B and ? of te Code.

No ded&$tion will also %e allowed notwitstandin!)ay(ents of witoldin! ta/ at te ti(e of a&dit

in'esti!ation or rein'esti!ationre$onsideration in $aseswere no witoldin! of ta/ was (ade in a$$ordan$e wit-e$tions ?B and ? of te Code.


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Re'en&e Re!&lations No. 43 2G42 dated #$to%er 22, 2G42

All ta/)ayers are (andated %y te +IR to (ae new sets of#Rs and -ales in'oi$es w&t s)e$ial se$&rity (arin!feat&res )rinted %y +IR 5 A$$redited )rinters only.

All #Rs and -ales in'oi$es sall %e 'alid only &ntil f&ll&sa!e of te a))ro'ed serial n&(%ers or fi'e years fro( itsiss&an$e wi$e'er $o(es first.

Tis so&ld %e effe$ti'e startin! Jan&ary 4, 2G4<

) Ta!a2ilit o$ Associations .&es0 Mem2ers#i/ FeesRecei1ed 2 "ondomini&m "or/orations


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Re'en&e Me(orand&( Cir$&lar 1RMC No. ?32G42dated #$to%er


212/599

"or ta/ )&r)oses, te followin! $onstit&te in$o(e ta/ )ay(ent or$o()ensation wi$ are s&%*e$t to in$o(e ta/

Asso$iation d&es

Me(%ersi) fees

#ter assess(ents$ar!es

Te )re'io&s inter)retation tat te assess(ent d&es are f&ndswi$ are (erely eld in tr&st %y a $ondo(ini&( $or)orationla$s le!al %asis and is ere%y a%andoned.

Note: The same rule applies to homeoner9s association per

&+ No. ;-231! dated


213/599

! ,

Li(itations on ded&$tionsOnl one 5(6 1e#icle for land trans)ortation is allowed for te &se of anoffi$ial or e()loyee, te 'al&e of wi$ so&ld not e/$eed P2.= (illion

No de/reciation sall %e allowed for ac#ts0 #elico/ters0 air/lanesand'or aircra$ts0 and land 1e#icles wi$ e/$eed te said tresold.

All related maintenance e!/enses on a$$o&nt of a non-de/recia2le1e#icle for ta/ation )&r)oses are also disallo9ed in its entirety.

Loss to %e in$&rred fro( sale of non3de)re$ia%le 'ei$le sall not %e allowedas ded&$tion fro( !ross in$o(e URe'en&e Me(orand&( Cir$&lar 1RMCNo. 2 32G4< dated 6e$e(%er , 2G42V

?. R&les on .ed&cti2ilit o$ .e/reciationE!/enses on Ve#icles


214/599

E/$e)tionnless te ta/)ayer:s (ainline of %&siness istrans)ort o)erations or lease of trans)ortatione@&i)(ent and te 'ei$les )&r$ased are &sed

in te said o)erations.Tis re!&lation sall tae effe$t i((ediately.1P&%lised in #$to%er 4B, 2G42

. +larifyin* the Taxaility of +lus /r*ani,ed and /peratedExclusiely for $leasure= &ecreation and /ther Non-$rofit

$urposes

Re'en&e Me(orand&( Cir$&lar 1RMC No.


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Re'en&e Me(orand&( Cir$&lar 1RMC No.


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24

ESTATE TAX

Trans$er Ta!ation%rat&ito&s


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A transfer (ay %e *rat&ito&s 1wito&t$onsideration or onero&s 1wit $onsideration.

Donacion mortis causa and donacion inter

ios are !rat&ito&s transfer.

"ON"EPT OF TRANSFER TAXATION


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rat&ito&s Onero&s 5:&siness Ta!es6() .onacion inter 1i1os

5deat#64. Dal&e3added Ta/2. #ter Per$enta!e Ta/es


219/599

(ade %y law e@&i'alent to testa(entary dis)osition 1in$onte()lation of deat.

It is an e!cise ta! 1a ta/ i()ose &)on te ri!t or)ri'ile!e, te o%*e$t of wi$ is te siftin! ofe$ono(i$ %enefits and te en*oy(ent of te )ro)erty

fro( te de$eased to te li'in!.It accr&es as o$ t#e time o$ deat# of te de$eased.

Te ta!/aer in estate ta/ation is te estate o$ t#edecedent re)resented %y te ad(inistrator, e/e$&tor

or le!al eirs.

"once/t o$ S&ccession


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5 a mode o$ ac4&isition %y 'irt&e ofwi$ te /ro/ert0 ri*#ts ando2li*ations to te e/tent of te 'al&e of

te ineritan$e, o$ a /erson aretransmitted tro&! #is deat# toanot#er or ot#ers %y 9ill or %yo/eration o$ la9.

"once/t o$ WillWill 5 is an a$t were%y a )erson is


221/599

Will is an a$t were%y a )erson is)er(itted wit te for(alities )res$ri%ed %ylaw, to $ontrol to a $ertain de!ree tedis)osition of is estate, to tae effe$t after

is deat. "ro( te (o(ent of deat of tede$edent, te ri!ts to te s&$$ession aretrans(itted, and te )ossession of teereditary )ro)erty is dee(ed trans(itted to

te eir.

inds o$ Will() Notarial or Ordinar Will 5 one wi$ is e/e$&ted in a$$ordan$e witte for(alities )res$ri%ed %y Art. G= to G of te New Ci'il Code. It is


222/599

te for(alities )res$ri%ed %y Art. G= to G of te New Ci'il Code. It is

te will tat is created $or t#e testator 2 a t#ird /art, &s&ally islawyer, follows )ro)er for(, si!ned and dated in front of te re@&ired%&(%er of witnesses and a$nowled!ed %y te )resen$e of a notary)&%li$.

2. Holo*ra/#ic Will 5 is a written will wi$ (&st %e entirel 9ritten 0dated and si*ned 2 t#e #and o$ t#e testator #imsel$ , wito&t tene$essity of any witnesses.

7) "odicil 5 A s&//lement or addition to a 9ill0 (ade after tee/e$&tion of a will and anne/ed to %e taen as )art tereof, %y wi$any dis)osition (ade in te ori!inal will is e/)lained, added or altered.

Elements o$ S&ccession

() .ecedent 5 te )erson wose )ro)erty is


223/599

trans(itted tro&! s&$$ession, wetertesta(entary, intestate, or (i/ed.

2. Heir 5 te )erson $alled to te s&$$ession

eiter %y te )ro'ision of a will or %y o)eration oflaw.

7) Estate 5 refers to all )ro)erty, ri!ts ando%li!ations of a )erson wi$ are note/tin!&ised &)on is deat.

T/es o$ S&ccession


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4. Testa(entary -&$$ession

2. Intestate -&$$ession


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t es& ts o t e des ! at o o a e ,(ade in a will e/e$&ted in te for( )res$ri%ed%y te law.

Te des$edent (ay dis)ose is )ro)erties inis last will and testa(ent in te (anner ewants, owe'er, #e m&st reser1e some $or $ertain )ersons wo are $alled %y te law ascom/&lsor #eirs)

.e$initionLe*itimate "#ild


226/599

+orn witin (arria!eIn$l&des le!ally ado)ted $ild; te sare of te le!allyado)ted $ild is e@&al to te sare of te le!iti(ate $ild.

In$l&des le!iti(ated $ild 1tat wo is ori!inally a nat&ral

$ild %&t s&%se@&ently le!iti(ated %y 'irt&e of a$t&al(arria!e

Ille*itimate c#ild

+orn o&tside (arria!e 1s)&rio&s, %astardNat&ral $ild 1$ild %efore %orn %efore a$t&al (arria!e

Testamentar S&ccession


227/599

Co()&lsory eirs are()Le*itimate c#ildren and t#eir descendants, wi$in$l&de le!ally ado)ted $ildren

2.In te a%sen$e of le!iti(ate $ildren and teir

des$endants, te le*itimate /arents or ascendants)


228/599

In te a2sence o$ com/&lsor #eirs, tes&$$essors wo&ld %e

Relati'es &) to >t# de*ree o$ consan*&init

If tere were no relati'es, te !o'ern(ent sall

inerit te wole estate.If tere is a will, te de$edent (ay na(e oter)ersons to inerit te free )ortion of te netdistri%&ta%le estate

E!am/le% A died lea'in! te followin! s&r'i'in! relati'es


229/599

+ ife L -ister C #nly -on M L:s !randda&!ter

6 #nly 6a&!ter N M:s -on

E Moter # E:s Moter

" "ater 0 C:s da&!ter

H 6:s son

I +roter

J Ne)ew 1I:s -on

K J:s son

Testamentar S&ccessionnder testa(entary s&$$ession, )ro)erties left %y te


230/599

2


231/599

of te total distri%&ta%le estate.If tere are le!iti(ate $ildren, teir sare 1in a!!re!atewill e@&al to one3alf of te total distri%&ta%le estate.

Te sare of te s&r'i'in! s)o&se if tere is a le!iti(ate

$ild is one3fo&rt, wile if tere se'eral le!iti(ate$ildren, te sare of te s&r'i'in! s)o&se is nor(allye@&al to te sare of one le!iti(ate $ild.


232/599

E!am/le%If te ereditary estate of te testator is P


233/599

42,GGG,GGG and te s&r'i'in! eirs or relati'esare (oter, s)o&se, fo&r le!iti(ate $ildren, onele!ally ado)ted son, one ille!iti(ate $ild, and a%roter and in is will, te testator is !i'in! allfree )ortion e@&ally to te s&r'i'in! eirs. Tesare of te s&r'i'in! s)o&se, fo&r le!iti(ate$ildren and one ille!iti(ate $ild sall %e

, and .


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Intestate S&ccession4. No free )ortion &nder intestate s&$$ession, en$e

8/18/2019 Tax

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