Present Income Tax System

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRER

PRESENT INCOME TAX SYSTEM

i INDIVIDUAL INCOME TAXATIONa SCHEDULAR TAX TREATMENT

(keyword IRR)i Classifies incomeii Provides different tax rulesiii Imposes different tax rates

b NET INCOME TAXATION COVERSi RCii NRCiii RAiv NRA-engaged in trade or

business in the Phil

c GROSS INCOME TAXATION COVERSi NRA-not engaged in trade or

business in the Phil

d INCOME TAX SITUSi Residence- RC RAii Place-NRA NRCiii Citizenship-RC

e INDIVIDUAL TAXPAYERS WHO ARE COMPENSATION EARNERS EXCEPT NRA-not engaged in tradebusiness in the Phil are entitled to Personal Exemptions

ii CORPORATE INCOME TAXATIONa GLOBAL TAX TREATMENT

(keyword xI-RR)i Not- generally classifies

incomeii generally provides different

tax rulesiii generally imposes different

tax ratesb Net income taxations covers

i Domestic Corporationsii Resident Foreign Corporations

c Gross Income Taxation coversi Non-resident foreign

corporationd Income tax situs

i Residence ndash Resident Foreign Corporation

ii Place- non-Resident Foreign Corporation

iii Nationality-Domestic Corporation

iii COMMON FEATURESa Pay as you file system

i Individuals-upon filing of their ITR

ii Corporations- upon filing of their quarterly corporate ITR and final adjustment corp returns

iv CREDITABLE WHOLDNG TAX SYSTEMa Withholding agent (source)-

withholds the tax and remits the same to the BIR

b Tax withheld- creditable against IT due

v FINAL WITHHOLDING TAX SYSTEMa Withholding agent (source)-

withholds the tax and remits the same to the BIR

b Tax withheld- final settlement of the tax liability on the income covered

GENERAL PRINCIPLES OF INCOME TAXATION IN THE PHIL ( SEC23)

SEC 23 General Principles of Income Taxation in the Philippines - Except when otherwise provided in this Code

(A) A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines

(B) A nonresident citizen is taxable only on income derived from sources within the Philippines

(C) An individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income derived from sources within the Philippines Provided That a seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade shall be treated as an overseas contract worker

(D) An alien individual whether a resident or not of the Philippines is taxable only on income derived from sources within the Philippines

(E) A domestic corporation is taxable on all income derived from sources within and without the Philippines and

1

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRER(F) A foreign corporation whether engaged or not in trade or business in the Philippines is taxable only on income derived from sources within the Philippines Income Capital

Classification of Taxpayers

a Individuals1) citizens

11 resident citizens (RC)12 non-resident citizens (NRC)

2) aliens21 resident aliens (RA)22 non-resident aliens (NRA)221 engaged in trade or business

within the Philippines (NRAETB)

222 Not engaged in trade orbusiness within the Philippines(NRANETB)

b Corporations1) Domestic (DC)2) Foreign

21 resident foreign corporation (RFC)22 non-resident foreign corporation(NRFC)

c Estatesd Trustse Partnerships

INDIVIDUALS

Situs of Taxation (Who are taxable)1 Resident Citizen (Art 4 Consti)

RESIDENT ndash a citizen is deemed as a resident of the Philippines unless he qualifies as a nonresident under Sec 22E of the NIRC

-taxable for income derived from all sources based on taxable (ie net) income

Section 1 The following are citizens of the Philippines [1] Those who are citizens of the Philippines at the time of the adoption of this Constitution[2] Those whose fathers or mothers are citizens of the Philippines

[3] Those born before January 17 1973 of Filipino mothers who elect Philippine

citizenship upon reaching the age of majority and

[4] Those who are naturalized in accordance with law

2 Non-resident Citizen

A non-resident citizen means aFilipino citizen

i who establishes to the satisfaction of the Commissioner the fact of their physical presence abroad with a definite intention to reside therein

ii who leaves the Philippines during the taxable year to reside abroad either as an immigrant or for employment on a permanent basis

iii who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year

iv who is previously considered as a nonresident and who arrives in the Philippines at any time during the taxable year to reside thereat permanently shall be considered nonresident for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines

v The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be for purpose of this Section [Sec22 (E)]

NOTES An OVERSEAS CONTRACT WORKER is taxable only on income from sources within the Philippines (Sec 23 (c))

NOTE FURTHER A seaman who is a Filipino citizen and who receives compensation for services rendered abroad as member of the complement of a vessel engaged exclusively in international trade is treated as an overseas contract worker

Length of stay is indicative of intention A citizen of the Philippines who shall have stayed outside the Philippines for 183 days or more by the end of the year is a non-resident citizen His presence abroad however need not be continuous [RR1-79]

3 Resident alien - means an individual whose

2

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERresidence is within the Philippines and who is not a citizen thereof [Sec22 (F)]

RESIDENT ndash residence is within the Philippines and who is not a citizen thereof An alien actually present in the Philippines who is not a mere transient or sojourner is a resident of the Philippines for income tax purposes A mere floating intention indefinite as to time to return to another country is not sufficient to constitute him a transient

taxable for income derived within the Philippines based on taxable (ie net) income

NON-RESIDENT ndash residence is NOT in the Philippines and who is not a citizen thereof

4 Non-resident alien engaged in tradeor business within the Philippines(Key NRAETB)

A non-resident alien means an individual whose residence is not within the Philippines and who is not a citizen thereof [Sec22 (G)]

The term trade or business includes the performance of the functions of a public office [Sec 22 (S)]

The term trade business or profession shall not include performance of services by the taxpayer as an employee [Sec 22 (CC)]

A non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during any calendar year shall be deemed a non-resident alien doing business in the Philippines Section 22(G) notwithstanding [Sec 25(A)(1)]

5 Non-resident aliens not engaged in trade or business within the Philippiness (Key NRANETB)

Note ONLY RESIDENT CITIZENS are taxable for income derived from sources within and without the Philippines All other individual income taxpayers are taxable only for income derived from sources within the Philippines

Note An overseas contract worker (OCW) is taxable only on income derived from sources within the Philippines [Sec 23 (B)(C)]

Note A seaman is considered as an OCW provided the following requirements are met

1 receives compensation for services rendered abroad as a member of the complement of a vessel and

2 such vessel is engaged exclusively international trade

NOTESWhat makes an alien a resident or non-

resident alien is his intention with regard to the length and nature of his stay Thus

a One who comes to the Philippines for a definite purpose which in its very nature may be promptly accomplished is not a resident citizenb One who comes to the Philippines for a definite purpose which in its very nature would require an extended stay and to that end makes his home temporarily in the Philippines becomes a resident though it may be his intention at all times to return to his domicile abroad when the purpose for which he came has been consummated or abandoned (Sec 5 RR 2)

bull Length of stay is indicative of intention An alien who shall have stayed in the Philippines for more than one year by the end of the taxable year is a resident alien

NOTE FURTHER An alien who shall come to the Philippines and stay for an aggregate period of more than one hundred eighty days during a calendar year shall be considered a non-resident alien in business or in the practice of profession in the Philippines [Sec 25(A)(1)] Thus if an alien stays in the Philippines for 180 days or less during the calendar year he shall be deemed a non-resident alien not doing business in the Philippines regardless of whether he owns

1 Stock in trade of the taxpayer or other property of a kind which would properly be included in an inventory of a taxpayer if on hand at the end of the taxable year (example Raw Materials Inventory Work in Process Inventory Office Supplies Inventory)

2 Property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business (example Merchandise Inventory)

3 Property used in the trade or business which is subject to the allowance for depreciation (example Office Equipment)

actually engages in trade or business therein (Mamalateo)

3

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERCORPORATIONS

Jurisdiction to Taxation (who are taxable)1 Domestic Corporation ndash created or organized in the Philippines or under its law [Sec 22(C)]2 Resident Foreign Corporation ndash engaged in trade or business within the Philippines [Sec 22(H)]3 Non-resident Foreign Corporation ndashnot engaged in trade or business within the Philippines [Sec 22(I)]

Corporationbull Includes1 Partnerships no matter how created or organized2 Joint-stock companies3 Joint accounts (cuentas en participacion)4 Associations or5 Insurance companies [Sec 22 (B)]

bull Excludes1 General professional partnerships2 Joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum coal geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government3 Co-ownership

Corporations exempt from income taxation (for income realized as such) under RA 84241 Those enumerated under Sec 30

bull Exempt corporations are subject to income tax on their income from any of their properties real or personal or from any other activities conducted for profit regardless of the disposition made of such income

2 With respect to GOCCrsquos the general rule is that these corporations are taxable as any other corporation except

a GSISb SSSc PHICd PCSO [Sec 27 (C)]

NOTE Sec 27 (c) of the NIRC amended by RA 9337 therefore PAGCOR is not included in the GOCCC exception and subject to tax

3 Regional or Area Headquarters under Sec22 (DD)

NOTE Regional operating headquarters (ROH) under Sec 22(EE) shall pay a tax of 10 of their taxable income

Note ONLY DOMESTIC CORPORATIONS are taxable for income derived from sources within and without the Philippines All other corporate income taxpayers are taxable only for income derived from sources within the Philippines

INCOME AND INCOME TAXATION

I INCOME DEFINED WHEN TAXABLE

Income ndash all wealth which flows to the taxpayer other than a mere return of capital

bull It is an amount of money coming to a personcorporation within a specified time whether as payment for services interest or profit from investment Unless otherwise specified it means cash or its equivalent Income can also be thought of as a flow of the fruits of ones labor (Conwi v Court ofTax Appeals)bull Income includes earnings lawfully or unlawfully acquired without consensual recognition express or implied of an obligation to repay and without restriction as their disposition

REQUISITES FOR INCOME TO BE TAXABLE

1) There must be a gain or addition to net worth2) The gain must be realized or received actually or constructively recipient must have complete dominion3) The gain must not be excluded by law or treaty from taxation

Notebull Not recognized as income - when funds were merely entrustedheld money in trust (with obligation to return) to taxpayer because taxpayer acquires no control and does not receive economic benefit from it

bull Proceeds of embezzlementswindling are income because embezzlerswindler already has complete dominion over them and can use such for his economic benefit

bull Increase in the value of property is not recognized as income this only constitutes an unrealized increase which becomes taxable income only upon disposition and realization of gains Same situation for stocks and stock dividendsbull Deposit with no interest does not produce income for the depositary there is no flow of wealth

4

CASES 1 MADRIGAL V RAFFERTY2 HOWDEN V CIR3 FISHER V TRINIDAD4 EISNER V MACUMBER5 CONWI V CTA6 VICTORIAS MILLING V PPA

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERbull In a debtloan situation it is important to determine whether there was an original intention to payconsensual recognition of an obligation to repay

bull If yes then the liability that results just offsets the increase in assets of the taxpayer borrower therefore no increase in net worth and no income derived from the debtloan

bull If no (as in the case of a swindlerestafa) the proceeds will be considered as income and therefore taxable in the hands of the borrower swindler

bull Income can be realized actually and constructively

bull Assignment of Income Doctrine ndash Ex A is entitled to his salary of P10m but assigns it to B for unknown reasons In this case both A and B realize income A constructively received income (because he was able to assign thus has complete controldominion over it) and B actually received it The income is taxable in the hands of both A and B

bull Doctrine of Constructive Receipt ndash Ex A was informed that his check dated December 16 is already available and he can get it anytime A did not get the check until January 30 In this case A constructively received income in December and is taxable in that taxable period

bull Not recognized as income if proceeds are merely a return of capital Ex Creditor lends debtor x amount Debtor repays x amount plus y interest Creditor does not have income on x amount as this is merely return on capital he has income only with respect to the amount of y interest

II PHILIPPINE INCOME TAX LAW a HISTORICAL BACKGROUND

b ACT OF US CONGRESS OF OCT 3 1913 GIVEN RETROACTICE APPLICATION ON MARCH 1 1913

c COMMONWEALTH ACT NO 466 (1939)d LATEST AMENDMENT

a RA 8424 1997 NIRCb RA 9243 DSTc RA 9337 INCOME AND VAT

III CRITERIA IN IMPOSING PHILPPINE INCOME TAX A Citizenship Principle ndash A citizen of

the Philippines is subject to Philippine income tax

(a) on his worldwide income if he resides in the Philippines or (b) only on his income from sources within the Philippines if he qualifies as nonresident citizen

B Residence Principle ndash resident alien is liable to pay income tax on his income from sources within the Philippines but exempt from tax on his income from sources outside the Philippines

C Source Principle ndash An alien is subject to Philippine income tax because he derives income from sources within the Philippines Thus a nonresident alien is liable to pay Philippine income tax on his income from sources within the Philippines such as dividend interest rent or royalty despite the fact that he has not set foot in the Philippines

IV TYPES OF PHILIPPINE INCOME TAX

A GRADUATED IT ON INDIVB NORMAL CORP IT ON CORPC MCIT ON CORPD SPECIAL IT ON CERTAIN CORPE CGT ON SALE OR EXHANGE OF

SHARES OF STOCK OF DOMESTIC CORP CLASSIFIED AS CAPITAL ASSET

F CGT ON SALE OR EXHANGE OF SHARES OF STOCK OF REAL PROP CLASSIFEID AS CAPITAL ASSET

G FINAL WHOLDING TAX ON CERTAIN PASSIVE NVESTMENT INCOME PAID TO RESIDENTS

H FINAL WHOLDING TAX ON INCOME PAYMENTS MADET NON- RSIDENTS

I FRINGE BENEFIT TAX ON FRINGE BENEFITS OF SUPERVISORY OR MANAGERIAL EMPLOYEES

J BRANCH PROFIT REMITTANCE TAXK TAX ON IAE OF CORP

V INCOME CAPITAL REVENUE RECEIPTS DISTINGUSHED

5

CASES 1 PAPER INDUSTRIES V CIR2 WESTERN MINDORO CORP V CIR

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERA INCOME-FLOW SERVICE OF WEALTH

FRUIT

INCOME CONNOTES GAIN DERIVED FROM LABOR CAPITAL OR PROPERTY EXCLUDING NON-INCOME ITEMS SUCH AS THE CAPITAL INVESTMENT COGS OR THOSE EXCLUDED BY LAW FROM INCOME TAXATION

Income ndash all wealth which flows into the taxpayer other than as a mere return of capital

B CAPITAL-FUND WEALTH TREE Capital ndash resource of person which can be used in producing goods and services

Capital is a fund income is a flow A fund of property existing at an instant of time is called capital A flow of services rendered by that capital by the payment of money from it or any other benefit rendered by a fund of capital in relation to such fund through a period of time is called income

Capital is wealth while income is the service of wealth The Supreme Court of Georgia expresses the thought in the following figurative language The fact is that property is a tree income is the fruit labor is a tree income the fruit capital is a tree income the fruit A tax on income is not a tax on property Income as here used can be defined as profits or gains (Madrigal v Rafferty)

Increase in Property Value ndash A mere increase in the value of property is NOT INCOME but merely unrealized increase in capital The increase in the value of property is also known as appraisal surplus or revaluation increment

C RECEIPTS- BROADER IN SCOPE MAY CONSTITUTE CAPITAL AS WELL AS INCOME

D REVENUE-ALL FUNDS OR INCOME DERIVED BY GVERNMENT WHETHER FROM TAX OR OTHER SOURCES

E TAXABLE INCOME

Income Tax ndash tax on all yearly profits arising from property possessions trade or business or as a tax on a personrsquos income

emoluments profits and the like (61 CJS 1559)

ndash tax on income whether gross or net (27 Am Jur 308)

Purpose(s) of Income Tax FiscalNon-Fiscal(ROM) raise revenue to defray the expenses of

the government offset regressive sales and consumption

taxes and together with estate tax mitigate the

evils arising from the inequalities of wealth by a progressive scheme of taxation which places the burden on those best able to pay

VI SOURCES OF INCOME A PROPERTY (CAPITAL)B LABOR(SERVICES)C SALEEXCHANGE OF CAPITAL

ASSET AND ACTIVITY

D INCOME DERIVED FROM OTHER SOURCES

a TREASURE FOUND OR PUNITIVE DAMAGES REPRESENTING PROFIT LOST

b AMOUNT RECEIVED BY MISTAKE

c CANCELLATION OF TAXPAYERrsquoS INDEBTEDNESS

d PAYMENT OF USURIOUS INTEREST

e TAX REFUNDf BAD DEBT RECOVERY

6

CASE 1 CIR V PAL

CASE 1 COM V BOAC

CASES 1 JAVIER V CA2 NORTH AMERICAN V BURNET


VII INCOME TAX

A NATUREB FUNCTIONSC BASIS- PARTNERSHIP THEORY

VIII REQUISITES FOR INCOME TO BE TAXABLE

1 There must be a gain or profit2 The gain must be realized or received

bull Doctrine of Constructive Receipt or Income ndash Ex A was informed that his check dated December 16 is already available and he can get it anytime A did not get the check until January 30 In this case A constructively received income in December and is taxable in that taxable period


3 The gain must not be excluded by law ortreaty from taxation

IX DOCTRINE ON DETERMINATION OF TAXABLE INCOME

A CLAIM OF RIGHT DOCTRINE

B SEVERANCE TEST THEORY

C CONTROL TEST

Tests on Taxability of Income

1 Flow of Wealth Test ndash The determiningfactor for the imposition of income tax iswhether any gain was derived from thetransaction

2 Realization Test - unless the income isdeemed realized there is no taxableincome

3 Economic-Benefit Principle - flow ofwealth realized is taxable only to the extentthat the taxpayer is economically benefited

IX GROSS INCOME

A GENERAL STATUTORY DEFINITION(SEC 32 NIRC)

I GENERAL STATUTORY DEFINITION

All income derived from whatever source including(but not limited to the following items) (GRIP CARD

7

CASE 2 COM V LEDNICKY

CASE 1 RUTKIN V US

CASE EISNER V MACEMBER

CASE 1 HELVERING V HORT2 CIR V JULIANE3 CIR V BOAC

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERGPP)

1) Gross income derived from the conduct of trade or business or the exercise of a profession2) Rent Income3) Interest Income4) Prizes amp winnings5) Compensation for services in whatever form paid including but not limited to fees salaries wages commissions amp similar items6) Annuities7) Royalties8) Dividend Income9) Gains derived from dealings in property10) Pensions11) Partnerrsquos distributive share from the net income of the GPP (distributive share from ordinary partnerships is taxable as dividends in this case the ordinary partnership has already been subject to ordinary corporate income tax)

ldquoall income derived from whatever sourcerdquo embraces all income not expressly exempted within the class of taxable income under the law irrespective of the voluntary or involuntary action of the taxpayer in producing the gains and whether derived from legal or illegal sources such as

1 Gains arising from expropriation of property which constitute income from dealings in property2 Income derived from illegal sources such as gambling theft embezzlement and smuggling3 Compensation for damages if it represents payment for loss of expected profits4 Bad debts previously charged-off but afterwards recovered5 Contest awards and prizes for commercial or non-commercial contests and6 Taxes previously deducted as an expense and subsequently refunded

II BROAD DEFINITION

Oslash The term ldquogross incomerdquo whenever used without qualification is comprehensive as defined above and is different from the limited meaning of gross income for purposes of minimum corporate income tax or the gross income tax of corporations

SEE BOOK- DIMAAMPAO

Gross Income- Gross income means all income derived from whatever source

Supplementary Discussion on Some Items Included in Gross Income1 Compensation Income

a income arising from an ER-EE relationship It means all remuneration

for services performed by an EE for his ER including the cash value of all remuneration paid in any medium other than cash [Sec 78(A)]

It includes1 Salaries and wages2 Commissions3 Tips4 Allowances5 Bonuses6 Fringe Benefits of rank and file EEs

b It does NOT include remuneration paid

sect For agricultural labor paid entirely in products of the farm where the labor is performed or

sect For domestic service in a private home or

sect For casual labor not in the course of the employers trade or business or

sect For services by a citizen or resident of the Philippines for a foreign govrsquot or an intrsquol organization [Sec 78(A)]

Withholding Tax on Compensation Income

The income recipient (ie EE) is the person liable to pay the tax income yet to improve the collection of compensation income of EEs the State requires the ER to withhold the tax upon payment of the compensation income It does not include income excluded or exempted by law

Fringe Benefits of Rank and File EEs

Basic Rule Convenience of the ER Rule If meals living quarters and

other facilities and privileges are furnished to an employee for the convenience of the employer and incidental to the requirement of the employeersquos work or position the value of that privilege need not be included as compensation

2 Gains Derived From Dealings In Property ndash

Dealings in property such as sales or exchanges may result in gain or loss The kind of property involved (ie whether the property is a capital asset or an ordinary

8

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERasset) determines the tax implication and income tax treatment as follows

sect In computing the gain or loss from the sale or other disposition of property the BASIS shall be as follows

1 Property acquired by purchase ndash its cost ie the purchase price plus expenses of acquisition

2 Property which should be included in the inventory ndash its latest inventory value [RR-2 sec 136]

3 Property acquired by devise bequest or inheritance ndash its fair market price or value as of the date of acquisition

4 Property acquired by gift or donation ndash the same as if it would be in the hands of the donor or at last preceding owner by whom it was not acquired by gift EXCEPT that if such basis is greater than the FMV of the property at the time of the gift then for the purpose of determining loss the basis shall be such FMV

5 Property (other than capital asset) acquired for less than an adequate consideration in moneyrsquos worth ndash

a) the amount paid by the transferee for the property or b) the transferorrsquos adjusted basis at the time of the transfer whichever is greater

6 Property acquired in a transaction where gain or loss not recognized ndash The basis shall be the same as it would have been in the hands of the transferor increased by the amount of gain recognized by the transferor on the transfer

3 Interest Income ndash eg Interest income from government securities such as Treasury Bills

4 Rental Income ndash bull Actual rent itself agrave included in gross income (taxable)bull Payments by lessee of obligations of lessor to third persons agrave considered as additional rent income of the lessor and therefore included in gross income (taxable)bull Advance Rentals agrave Receipt of advance rentals by the lessor may or may not constitute taxable income to him depending on the true nature of the so-called advance rentals

If the advance rental is in the nature of prepaid rent (for the lessee) received by the lessor under a claim of right and without restriction as to use the entire amount is taxable income of the lessor in the year received

If the amount received is in the nature of a security deposit for the faithful compliance by the lessee of the terms of the contract there is no income to the lessor unless the conditions which make the security deposit the property of the lessor occur (ie the lessee violates the terms of the lease agreement)

5 Dividends ndash Any dividend which is not exempt from income tax or which is not subject to final tax is taxable dividend included in the computation of the taxable income (gross income) in the income tax return at the end of the year

NOTE Liquidating Dividend ndash distribution of all the property of a corporation It is strictly not dividend

9

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERincome but rather a sale of shares of stock resulting in capital gain or loss

6 Annuities ndash income derived from a capital amount paid to an insurance company

7 Pensions ndash paid for past employment services rendered

8 Cancellation of debt ndash The cancellation or forgiveness of indebtedness may have any of three possible consequences

1 It may amount to payment of income If for example an individual performs services to or for a creditor who in consideration thereof cancels the debt income in that amount is realized by the debtor as compensation for personal services

2 It may amount to a gift If a creditor wishes merely to benefit the debtor and without any consideration therefore cancels the debt the amount of the debt is a gift to the debtor and need not be included in the latterrsquos report of income

3 It may amount to a capital transaction If a corporation to which a stockholder is indebted forgives the debt the transaction has the effect of a payment of dividend

9 Prizes and Awards ndash Contest prizes and awards received are generally taxable Such payment constitutes gain derived from labor

The EXCEPTIONS are as follows

Prizes and awards received in recognition of religious charitable scientific educational artistic literary or civic achievements are EXCLUSIONS from gross income if

a The recipient was selected without any action on his part to enter a contest or proceedings and

b The recipient is not required to render substantial future services as a condition to receiving the prize or award

Prizes and awards granted to athletes in local and intrsquol sports competitions and tournaments held in the Philippines and abroad and sanctioned by their national associations shall be EXEMPT from income tax

10 Damage recovery ndashbull Compensatory damages as constituting returns of capital are not taxable Thus amounts received as moral damages for

personal actions (such as alienation of affection libel slander or breach of promise to marry) are not taxablebull Recovered damages representing recoveries of lost profits are taxable just as profits are taxable in the regular course of business Thus damages recovered in patent infringement suits are taxable

11 Bad Debt Recovery ndashTax Benefit Rule ndash Bad debts claimed as a deduction in the preceding year(s) but subsequently recovered shall be included as part of the taxpayerrsquos gross income in the year of such recovery to the extent of the income tax benefit of said deduction There is an income tax benefit when the deduction of the bad debt in the prior year resulted in lesser income and hence tax savings for the company (Sec 4 RR 5- 99)

ILLUSTRATION

10


III FORMULAS USED FOR DETERMINATION OF

a GROSS INCOME = ALL INCOME LESS EXCLUSIONS

b NET OR TAXABLE INCOME= GROSS INCOME LESS ALLOWABLE DEDUCTIONS

c TAXABLE COMPENSATION INCOME= GROSS COMPENSATION INCOME LESS PERSONAL AND ADDITIONAL EXEMPTIONS (INDIVIDUAL TAXPAPERS)

d INCOME TAX DUE= TAXABLE OR NET INCOME MUTIPLIED BY INCOME TAX RATE

e INCOME TAX PAYABLE=INCOME TAX DUE LESS CREDITABLE WITHHOLDING TAXATION

IV GROSS INCOME TAXATION AND NET INCOME TAXATION DISTINGUISHED

A GROSS INCOME TAXATION

B NET INCOME TAXATION

1allows no deductions 1

deductions are allowed

2grants no exemptions 2 exemptions

3tax base is gross income 3

tax base is net income

C ADVANTAGES OF GROSS INCOME

TAXATION

D ADVANTAGES OF NET INCOME

TAXATION

1simplifies the IT system 1

fair and just due to the grant of deductions

2

does away with wastage of manpower and supples 2

tax audit minimizes fraud

3 substantial reduction in

3 provides equitable reliefs

corruption and tax evasion-exercise of discretion to allow

in he form of deductios exmptions and

E DISADVANTAGES OF GROSS INCOME

TAXATION

F DISADVANTAG

ES OF NET INCOME

TAXATION1 no deduction and

exemptions are allowed

1 vulnerable to corruption on acount of the margin of discretion in the grant of deductions

2

susceptible of fraud in the absence of general audit 2

confusing and complex process of filing ITR

3taxpayers lose internet to earn more thereby lessening their purchasing capacity

3difficultycostly to administer

X EXCLUSIONS FROM GROSS INCOME (SEC 32B NIRC)

I REASONS FOR EXCLUSION

A THEY REPRESENT RETURN OF CAPITAL OR ARE NOT INCOME GAIN OR PROFIT

B THEY ARE SUBJECT TO ANOTHER KIND OF IR TAX OR

C THEY ARE INCOME GAIN OR PROFIT THAT ARE EXPRESSLY EXEMPT FROM INCOME TAX UNDER THE CONSTITUTION TAX TREATY TAX CODE OR A GENERAL OR SPECIAL LAW

1 UNDER THE CONSTITUTION ndash Art XIV Sec 4(3)

All revenues and assets of non-stock non-profit educational institutions used actually directly and exclusively for educational purposes shall be exempt from taxes and duties

2 UNDER A TAX TREATY ndash Business profits of a foreign

corporation organized under the laws

11

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERof a treaty country from sources within the Philippines are not subject to Philippine IT unless such profits are attributable to a permanent establishment of the foreign corporation created or deemed created in the Philippines

3 UNDER TAX CODE [SEC 32(B)-EXCLUSIONS FROM GROSS

INCOME SEC 30-EXEMPT CORP AND SEC 60 (B)- EXEMPTION OF

EMPLOYESrsquoTRUSTS4 UNDER SPECIAL LAWS

a) RA 6657 (Comprehensive Agrarian Reform Package Law- gain arising from the transfer of agricultural property covered by the law shall be exempt from CGT)

b) RA 6975 (National Power Corp)- interest on bonds paid by NPC to foreign bondholders in US dollars and other foreign currencies regardless of whether or not a tax treaty exists between the Philippines and such other country

c) RA 7103 (Iron and Steel Industry Act) ndash interest income from peso-denominated loans with maturity of 5 years or more and interest income from foreign currency loans extended by domestic banks to the Steel Corporation of the Philippines is exempt from IT and withholding tax

d) RA 7279 (URBAN DEV HOUSING ACT OF 1992)- NHA is exempt from all kind of fees and charges whether local or national such as income and realty taxes which the private sector participating in socialized housing shall be exempt from

1 Project-related corporate or individual IT on income directly realized from the development andor improvement or socialized housing sites slum areas resettlement areas andor construction and sale of socialized housing units to qualified beneficiaries as approved by the HLURB or LGU concerned

2 CGT on sale of raw lands for use in socialized housing projects

e) RA 7459 (Inventors and Inventions Incentives Act of 1991)- prizes that winning inventors will receive from the nationwide contest for the most Innovative new and Renewable Energy Systems are exempt from taxes during the first 10 years reckoned from the date of the first sale f the invented products provided that such sale does not exceed P200000 during any 12 months period

f) RA 7653 (New Central Bank Act as amended by RA 8761) ndash BSP is

exempt from all national provincial municipal and city taxes

g) RA 7916 (PEZA LAW) ndash PEZA registered enterprise are given IT holidays of 6 or 4 years from date of commercial operation depending on whether their operations are considered pioneer or non-pioneer

h) RA 9178 (Brgy Miccro Business Enterprises Act of 2002) ndash BMBE shall be exempt from IT for income arising from the operation of the enterprises

II ITEMS EXCLUDED FROM GROSS INCOME UNDER SEC 23 NIRC

1 Proceeds of Life insurance ndash received in a single sum or installment are not taxable

Exception interest payments if such amount is held by the insurer under an agreement to pay interest theron

o Proceeds of life insurance policies paid to the heirsbeneficiaries upon the death of the insured

o If such amounts are held by the insurer under an agreement to pay interest the interest payments shall be included in the GI

o Insured must die to avail of total exemption If he survives theres only partial exemption 1048774 to the extent that the proceeds constitute return of capital (total amount of premiums paid)

General rule The proceeds of life insurance policies paid to heirs or beneficiaries upon the death of the insured

Reason Insurance is a contract of indemnity hence the proceeds should be treated as indemnity and not as gain or income

Exception If such amounts are held by the insurer under an agreement to pay interest thereon the interest payments shall be included in gross income

2 Amount received by insured as return of premium ndash (other than amounts paid by reason of the death of the insured and interest payments on such amounts) under a life insurance endowment or annuity

12

CASE 1 PLDT V CITY OF BACOLOD2 PLDT VS LAGUNA3 SMART V DAVAO

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERcontracts either during the term or at maturity of the contract

Cash Surrender Value- of the policy is also NON-taxable

Return of Premium- means a repayment of a party or the whole of the premiums paid

o Under life insurance endowment or annuity contracts received either during the term or at the maturity of the terms or upon surrender of the contract

General rule The amount received by the insured as a return of premiums paid by him under life insurance endowment or annuity contracts either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract

Reason This is a return of capital and not income Exception If the amounts received by the

insured (when added to the amounts already received before the taxable year under such contract) exceed the aggregate premiums or considerations paid (whether or not paid during the taxable year) then the excess shall be included in gross income (source unknown)

3 Gifts bequests and devises ndash value of property acquired by gift bequest devise or descent (Sec 64 RR 2) but not the income from such property

Also if the amount received is on account of services rendered whether constituting a demandable debt or not or the use or opportunity to use of capital the receipt is income

bull But income from such property shall be included in GIbull Must be characterized by disinterested generosity and pure liberalitybull Difficult to establish gift situations if there is an Er-Ee relationship (A bonusassistance as recognition of service rendered is not exempt)bull If given under

a) constraining force of any moral or legal duty or b) from the incentive ofc) an anticipated benefit of an economic nature or where it is a return for services rendered proceeds cannot qualify as a gift

bull Most critical consideration is the giverrsquos intention or motivebull Can be a gift if given on account of filial relationship

General rule The value of property acquired by gift bequest devise or descent

Reason These transactions are subject to transfer taxes ndash estate or donorrsquos taxes

Exception Income from such property as well as gift bequest devise or descent of income from any property in cases of transfers of divided interest shall be included in gross income

4 Compensation for injuries or sickness- Received through AccidentHealth Insurance or Workmenrsquos Compensation Act as compensation for personal injuriessickness + amount of damages received on account of such injuriessickness

o Damages will be exempt only if they arise together with personal injury however if damages only amount to return of capital it is exempt (Ex Damages from car accident exempt only if claim includes compensation for personal injury If no personal injury damages for car wreckage will only be exempt to the extent of the amount of the actual damage 1048774 return of capital)

o Must be physical injury not injury to rights

The amounts received as compensation for personal injuries or sickness plus the amounts of any damages received whether by suit or agreement on account of such injuries or sickness

5 Income exempt under treaty a) Income derived by the US Consular

Officials in the Phil In connection with such consular service (US-PI Consular Convention)

b) Income exempt under tax treaty with foreign countries

To the extent required by any treaty obligation binding upon the Phil govt

Income of any kind to the extent required by any treaty obligation binding upon the Government of the Philippines

13

CASE 1 PIROVANO V COM

CASE NDC vs COM (note under 1997 NIRC exemption of interest on govt securities is no longer provided


6 R etirement benefits pensions gratuities etc

1 RA 7641 RA 4917 and Sec 60 (B) of the tax code subject to the ff requisites

a Reasonable private plan maintained by the employer duly approved by the BIR for the exclusive benefit of the members employees

b Retiring official or employee has rendered at least 10 years of services

c Retiring official or employee is at least 50 years of age at the time of retirement and

d The benefit of exclusion is availed of only once

2 Separation benefits due to death sickness or other physical disability or for any cause beyond the control of the said official or employee

a TERMINAL LEAVE PAY- amount received by way of commutation of the employeersquos accumulated Leave credits as a result of his separation It is not considered compensation or services and is excluded from gross income considering that is paid when the employer has already severed his connection with his employee who is no longer working

3 SS benefits retirement gratuities received by resident or non-resident citizens from foreign government agencies and other private or public institutions

4 Benefits received from US Veterans Administration (RA 360) by veterans residing in the Philippines

5 Benefits received from SSS per RA 8282

6 Benefits received from the GSIS under RA 8291 including retirement gratuity

DISCUSSIONSa) RA 7641b) Amount received as a consequence of separation for any cause beyond control (death sickness or other physical disability)

o Sickness must be job threatening

1048774 must render taxpayer incapable of working (Ex Does not include STD)

o Benefits from separation due to retrenchment come under exemption (no choiceoption but if the Ee avails of an optional early retirement plan he cannot reason that he was separated for reasons beyond his control therefore he cannot claim exemption of the benefits on this ground

1048774 but he can claim under other grounds such as RPBP or RA 7641

c) Benefits received from a foreign government by resident of nonresident citizens or aliens who reside permanently in the Philippinesd) Veterans benefitse) Benefits under SSSf) Benefits received from GSIS

bull 2 Options under paragraph (a) Section 32(B)(6)

g) RA 7641o Conditions

(i) at least 60 years old

(ii) 5 years of service at time of retirement

o Availed if there is no reasonable private benefit plan (benefits under this option is less)o Limted exemption frac12 month salary for every year of service In RPBP all is excludable

h) Reasonable Private Benefit Plan

o Conditions (i) at least 50 yrs old(ii) in the service of same employer for at least 10 years at time of retirement

o Must be approved by BIRo A pension gratuity stock bonus or profit sharing plan maintained by an ER for the benefit of some or all of his officialsemployees wherein contributions are made by such ER for the officialsemployees or both for the purpose of distributing to such officials amp employees the earnings amp principal of the fund thus accumulated amp provided in the plan that no part of the income shall be used forbe diverted to any purpose other than for the exclusive benefit of the said officials amp employees

bull Service must be continuous14

CASES 1 CIR vs GCL RETIREMENT2 INTERCONTINENTAL VS

AMARILLA

CASE 1 COM VS CASTANEDA


bull You can ldquoavail of the benefits only oncerdquo (once yoursquove availed of RPBP you cannot avail of another RPBP) but you can avail of exemption under another ground

o Ex A government employee can claim exemption for retirement benefits received from the GSIS even after availing of RPBP

1048774 taxpayer can claim RPBP after qualifying as a private employee then under GSIS proceeds exemption after qualifying as a government employee

o Ex Employee can claim exemption under RPBP then later claim on the ground that the amount he received is a consequence of his separation in a subsequent job for any cause beyond his control

Terminal Leave Pay amount paid for the commutation of leave credits

o Excludable only for government employees (this exemption does not find support in NIRC but is backed by

RETIREMENT Benefits Pensions Gratuities etc-

a Retirement benefits received under RA 7641 and those received by officials and employees of private firms in accordance with a reasonable private benefit plan maintained by the employer

REQUISITES a The retiring employee has been

in the service of the same employer for at least 10 years

b The retiring employee is not less than 50 years of age at the time of his retirement

c The benefits shall be availed of by an employee only once

d That there be a reasonable private benefit plan as defined below

A reasonable private benefit plan means

sect a pension gratuity stock bonus or profit-sharing plan maintained by an employer for the benefit of some or all of his employees

sect wherein contributions are made by such employer for the employees

sect for the purpose of distributing to such employees the earnings and principal of the fund thus accumulated and

sect wherein it is provided in the plan that at no time shall any part of the corpus or income of the fund be used for or be diverted to any purpose other than for the exclusive benefit of the said officials and employees

b Any amount received by an employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer because of

death sickness other physical disability or for any cause beyond the control of

the employee (ie the separation of the employee must be involuntary and not initiated by him)

c The social security benefits retirement gratuities pensions and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions

d Payments of benefits due or to become due to any person residing in the Philippines under the laws of the United States administered by the United States Veterans Administration

e Benefits received from or enjoyed under the Social Security System

f Benefits received from the GSIS including retirement gratuity received by government officials and employees

egrave CASE LAW

sect BIR Ruling 125-98The phrase shall not have availed of the privilege under a retirement benefit plan of the same or another employer found in Sec 32 (B) (6) (a) of the Tax Code means that the retiring official or employee must not have previously received retirement benefits from the same or another employer who has a qualified retirement benefit plan

sect BIR Ruling 143-98The terminal leave pay of government employees whose employment is coterminous is exempt since it falls within the meaning of the phrase for any cause beyond the control of the said official or employee found in Sec 32(B)

7 M iscellaneous items (a) Income derived by foreign government (from investments in

15

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERPhilippines in loans stocks bonds or other domestic securities)

bull Refers only to passive income If the foreign government engages in trade income is taxable

(b) Income derived by govtits political subdivisions (from public utility or exercise essential governmental function)

bull Key Income should accrue to government if the income is retained by the public utility it is not exempt

1048774 look at charter of political subdivisionGOCC to determine whether its income accrues to the government or not

(c) prizes awards in sports competition sanctioned by national sports associations whether held in Philippines or abroad

bull Contemplates a particular competition not a cumulative achievement (Ex Sportsman of the year award does not qualify for exemption)

(d) Prizes amp awards under ff conditions

1 received in recognition of religious charitable scientific educational artistic literary or civic achievement but only if

2 recipient was selected without any action on his part

3 recipient not required to render substantial future services as a condition of receiving the prizeaward

Example Nobel prize awardbull Construed strictly take note of 7 categories

It does not include athletic achievement

bull Contemplates a rational selection

process cannot just be randomly selected

(e) 13th month pay amp other benefits (ie productivity incentives amp Christmas bonus)

1048774 Total exclusion shall not gt P30000

(f) GSIS SSS Medicare Pag-ibig contributions amp union dues of individuals(g) Gains form the sale of bonds debentures or other certificates of indebtedness with a maturity of more than 5 years

(h) Gains from redemption of shares in mutual

fund

BIR Ruling 125-98The phrase ldquoshall not have availed of the privilege under a retirement benefit plan of the same or another ERrdquo found in Sec 32 (B) (6) (a) of the Tax Code means that the retiring official or EE must not have previously received retirement benefits from the same or another employer who has a qualified retirement benefit plan

BIR Ruling 143-98The terminal leave pay of government employees whose employment is coterminous is exempt since it falls within the meaning of the phrase ldquofor any cause beyond the control of the said official or EErdquo found in Sec 32(B) of the CTRP

8 income derived by foreign government Income derived from(1) investments in the Philippines in domestic

securities (loans stocks bonds etc) or from (2) interest on deposits in banks in the Philippines by

i foreign governmentsii financing institutions owned controlled or enjoying refinancing from foreign governments andiii international or regional financial institutions established by foreign governments

9 income derived by the government or its political subdivision

Income derived from any public utility or from the exercise of any essential governmental function accruing to the Government of the Philippines or to any political subdivision thereof

10 prizes and awards in sport competition

All prizes and awards granted to athletes

(1) in local and international sports competitions and (2) sanctioned by their national sports associations

11 prizes and awards which met the conditions set in the Tax Code

Prizes and awards made primarily in recognition of religious charitable scientific educational artistic literary or civic achievement but only if

16

CASE 1 COM VS MITSUBISHI METAL RP

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERi recipient was selected without any action on his part to enter the contest or proceeding andii recipient is not required to render substantial future services as a condition to receiving the prize or award

12 13th month pay and other benefits-

Other benefits cover productivity ncentives and Christmas bonus

Total exclusion shall not notexceed P3000000

Gross benefits received by officials and employees of public and private entities Provided however That the total exclusion under this subparagraph shall not exceed Thirty thousand pesos (P30000) in excess of this amount is subject for taxation

13th Month Pay and Other Benefits Gross benefits received by employees

of public and private entities provided that the total exclusion shall not exceed P30000 which shall cover

i Benefits received by government employees under RA 6686ii Benefits received by employees pursuant to PD 851 (13th Month Pay Decree)iii Benefits received by employees not covered by PD 851 as amended by Memorandum Order No 28 andiv Other benefits such as productivity incentives andChristmas bonus

What happens if the benefits exceed P30000 agrave The amount in excess of P30000 will be considered as compensation income

GSIS SSS Medicare and other contributions GSIS SSS Medicare and Pag-ibig

contributions and union dues of individuals

gain from the sale of bonds debentures or other certificate of indebtedness

Gains realized from the sale or exchange or retirement of bonds debentures or other certificate of indebtedness with a maturity of more than 5 years

e gain from redemption of shares in mutual fund

Gains realized by the investor upon redemption of shares of stock in a mutual fund company

X INDIVIDUAL INCOME TAXATION

I Classification of Individual Taxpayers

a Resident Citizen (Art IV Consti)Section 1 The following are citizens of the Philippines [1] Those who are citizens of the Philippines at the time of the adoption of this Constitution[2] Those whose fathers or mothers are citizens of the Philippines [3] Those born before January 17 1973 of Filipino mothers who elect Philippine citizenship upon reaching the age of majority and [4] Those who are naturalized in accordance with law

b Non- Resident Citizen[1] Immigrant[2] Employee on a more or less permanent basis[3] Contract workers whose contracts of employment are renewed from time to time within or during the taxable year

c Resident Alien[1] Not a mere transient or sojourner[2] Maintains residence in the Philippines[3] Actual physical residence in the Philippines[4] His temporary stay 9with intention to return) is on an extended stay[5] Resides for more than 1 year[6] Losses his residency if he stays outside the Philippines for a continuous period exceeding 3 months as of and including December 31

d Non-resident Alien- neither citizen nor resident of the Philippines

[1] Non-resident alien engaged in trade or business in the Philippines-comes and stays in the Philippines for an aggregate period of more than 180 days during the calendar year (Sec 25[A] [1] NIRC)[2] Engaged in Trade or Business ndash includes the performance services within the Philippines[3] Foreign technician of a job contract for 1 year

d Non-resident Alien NOT engaged in trade or business in the Philippines

ndashHis income is taxed at 25 final tax based on gross or entire income He is taxed at 15 if employed by the following

[1] Regional or area headquarters or multinational corporations

17

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRER[2] Offshore banking units established in the Philippines[3] Petroleum service contractors or sub-contractors

II Categories of Income

1 COMPENSATION INCOME

1 DEFINITION- income arising from an ER-EE relationship It means all remuneration for services performed by an EE for his ER including the cash value of all remuneration paid in any medium other than cash [Sec 78(A)]

2 ELEMENTS OF EMPLOYER-EMPLOYEE RELATIONSHIP

Selection Payment of wages Power of Dismissal Control

3 REQUISITES FOR TAXABILITY


4 FORMS OF COMPENSATION AND TAX BASIS


It does NOT include remuneration paid For agricultural labor paid entirely in

products of the farm where the labor is performed or

For domestic service in a private home or

For casual labor not in the course of the employers trade or business or

For services by a citizen or resident of the Philippines for a foreign govrsquot or an intrsquol organization [Sec 78(A)]

5 SPECIAL RULES ON FRINGE BENEFITS

[Sec 33 of the NIRC]

A DEFINITION ldquoFringe Benefit Taxrdquo is a final income tax on the employee which shall be withheld and paid by the employer on a quarterly basis

Fringe Benefit means any good service or other

benefit furnished or granted in cash or in kind by an employer to an individual employee except rank and file employees

(The fringe benefit covered by Sec 33 refers to those enjoyed by managerial and supervisory employees)

ldquoFringe benefitrdquo means any good service or other benefit furnished or granted in cash or in kind by an employer to an individual employee (except rank and file employees) such as but not limited to the ff

1) housing2) expense account3) vehicle of any kind4) household personnel (such as maid driver ampothers)5) interest on loan at less than market rate to theextent of the difference between the market rateamp actual rate granted6) membership fees dues amp other expenses borneby the employer for the employee in social ampathletic clubs or other similar organizations7) expenses for foreign travel8) holiday amp vacation expenses9) educational assistance to the employee or hisdependents10) life or health insurance amp other non-life insurance premiums or similar amounts in excess of what the law allows

Persons liable The EMPLOYER (as a withholding

agent) whether individual professional partnership or a corporation regardless of whether the corporation is taxable or not or the government and its instrumentalities

Tax rate 32 (from January 1 2000 onwards) of the Grossed up Monetary Value (GMV) of fringe benefits

18

CASE BROTHERHOOD VS ZAMORA

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRER In the case of aliens the tax rates to

be applied on fringe benefit shall be as follows

1 NRANEBT 252 Aliens employed by regional HO 15 3 Aliens employed by OBU 154 Aliens employed by Petroleum Service5 Contractors and Subcontractors

ldquoGMVrdquo of the fringe benefit represents

1 the whole amount of income realized by the employee which includes the net amount of money or net monetary value of property which has been received plus

2 the amount of fringe benefit tax thereon otherwise due from the employee but paid by the employer for and in behalf of the employee

ldquoGMVrdquo of the fringe benefit shall be determined by dividing the monetary value of the fringe benefit by the Grossed up divisor The Grossed up divisor is the difference between 100 and the applicable rates

Tax Rate and Tax Base [Generally] 32 of the grossed-up

monetary value (GMV) GMV represents the whole amount of income realized by the employee How GMV is determined agrave GMV is determined by dividing the actual monetary value of the fringe benefit by 68 [100 - tax rate of 32] For example the actual monetary value of the fringe benefit is P1000 The GMV is equal to P147059 [P1000 068] The fringe benefit tax therefore is P47059 [P147059 x 32]

Special Cases For fringe benefits received by non-

resident alien not engaged in trade of business (NRANETB) the tax rate is 25 of the grossed-up monetary value (GMV) The GMV is determined by dividing the actual monetary value of the fringe benefit by 75 [100 - 25]

For fringe benefits received by alien individuals and Filipino citizens employed by regional or area headquarters regional operating headquarters offshore banking units (OBUs) or Foreign Service contractor the tax rate is 15 of the grossed-up monetary value (GMV) The GMV is determined by dividing the actual monetary value of the fringe benefit by 85 [100 - 15]

What is the tax implication if the employer gives lsquofringe benefitsrsquo to rank-and-file employees

Fringe benefits given to a rank and- file employee are treated as part of his compensation income subject to income tax and withholding tax on compensation income

Payor of Fringe Benefit Tax (FBT) ndash the employer [but the law allows the employer to deduct such tax as a business expense in determining his taxable income]

B NATURE OF FBT

Final tax imposed on the grossed-up monetary value of fringe benefit furnishedgranted to the EE by the ER whether an individual or corp (payable by the employer)

Effective 1198 34

1199 33

110032

Fringe benefit is an income of the employee subject to Fringe Benefit Tax but is payable by the Employer

Employer can deduct FBT from its taxable income

Fringe benefits are only for corporate officersmanagement For rank and file it is called an allowance

Allowances (benefits to rank and file) are not subject to FBT

C PURPOSE OF FBT

D MANAGERIAL SUPERVISOR RANK AND FILE EMPLOYEES ndash DEFINED

ldquoManagerial employeerdquo One who is vested with the powers or

prerogatives to lay down and execute 19

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERmanagement policies andor to hire transfer suspend lay-off recall discharge assign or discipline employees

ldquoSupervisory employeesrdquo Those who in the interest of the

employer effectively recommend such managerial actions if the exercise of such authority is not merely routinely or clerical in nature but requires the use of independent judgment

ldquoRank and File Employeesrdquo All employees not falling within any of

the above definitions are considered rank-and-file employees

shall mean all employees who are holding neither managerial nor supervisory position as defined in the Labor Code

In the case of rank and file employees fringe benefits other than those excluded from gross income under the Tax Code and other special laws are taxable under the individual normal tax rate

Deductibility to the Taxable income of the EMPLOYER

General Rule The amount of taxable fringe benefit

and the fringe benefits tax shall constitute allowable deductions from gross income of the employer

Exception If the basis for computation of the

fringe benefits tax is the depreciation value the zonal value or the fair market value only the actual fringe benefits tax paid shall constitute a deductible expense for the employer

The value of the fringe benefit shall not be deductible and shall be presumed to have been tacked on or actually claimed as depreciation expense by the employer

Provided however that if the aforesaid zonal value or fair market value of the said property is greater than its cost subject to depreciation the excess amount shall be allowed as a deduction from the employers gross income as fringe benefit expense (Sec 233[D] Rev Reg No 3-98)

E BENEFITS SUBJECT OF FBT [EXAMPLE]

Such as but not limited to the ff1) housing2) expense account3) vehicle of any kind4) household personnel (such as maid driver ampothers)

5) interest on loan at less than market rate to theextent of the difference between the market rate amp actual rate granted6) membership fees dues amp other expenses borne by the employer for the employee in social amp athletic clubs or other similar organizations7) expenses for foreign travel8) holiday amp vacation expenses9) educational assistance to the employee or hisdependents10) life or health insurance amp other non-life insurance premiums or similar amounts in excess of what the law allows

F BENEFITS NOT SUBJECT OF FBT [EXAMPLE]

A Fringe benefits not considered as gross income -

1 if it is required or necessary to the business of employer2 if it is for the convenience or advantage of employer

B Fringe Benefit that is not taxable under Sec 32 (B) ndash

Exclusions from Gross Income

C Fringe benefits not taxable under Sec 33 Fringe Benefit Tax

Fringe Benefits which are not taxable [Sec 33 of the NIRC consolidated with Sec 233(C) of RR 03-98] [RED CNC]

1) Fringe benefits which are authorized and EXEMPTED from tax under special laws such as the 13th month Pay and Other Benefits with the ceiling of P30 000

2) C ONTRIBUTIONS of the employer for the benefit of the employee to retirement insurance and hospitalization benefit plans

3) Benefits given to the RANK AND FILE employees whether granted under a collective bargaining agreement or not

4) D E MINIMIS benefits- benefits which are relatively small in value offered by the employer as a means of promoting goodwill contentment efficiency of Employees

5) If the grant of fringe benefits to the employee is required by the nature of or NECESSARY to the trade business or profession of the employer

6) If the grant of fringe benefits is for the CONVENIENCE of the employer [Convenience of the Employer Rule]

20


G BENEFITS CONSIDERED NECESSARY TO THE BUSINESS OF THE EMPLOYER OR ARE GRANTED FOR THE CONVENIENCE OF THE EMPLOYER [EXAMPLES]

H CONVENIENCE OF THE EMPLOYER RULE

If meals living quarters and other facilities and privileges are furnished to an employee for the convenience of the employer and incidental to the requirement of the employeersquos work or position the value of that privilege need not be included as compensation

When a fringe benefit is given solely for the convenience of the employer the fringe benefit is exempt from FBT because the employee does not recognize income from the benefit

bull Ex Expenditure on housing of engineer within factory premises is not subject to FBT

bull General Rule If housing is located outside it is subject to FBT bull Exception If the nature of the Errsquos business is hazardous to health of Ee housing can be located outside the factory without being subject to FBT

bull Ex If employee is given housing allowance in cash this will constitute compensation of the employee (income from whatever source) However if it qualifies as a Fringe Benefit then it will be subject to FBT and the burden is shifted to Er (Tax on Ee Burden on Er)

I DE MINIMIS DEFINED [EXAMPLES]

De minimis benefits ndash means those which are of relatively small value are offered by the employer as a means of promoting health goodwill contentment or efficiency of his employees such as the following (CLAMMP ndash RUST)

a Monetized unused vacation leave credits of private employees not exceeding 10 days during the year and monetized value of leave credits paid to government officials and employees

b M edical cash allowance to dependents of employees not exceeding P750 per semester or P125 per month

i BIR Ruling 019-02 To be considered ldquode minimisrdquo medical allowance the following conditions must concur

ii The amount given to the EE shall be for his own medical expense

iii The amount actually given and actually spent shall not exceed P10 000 in any given calendar year

iv The EE must fully substantiate with or in his name the medical allowance to be granted

c R ice subsidy of P1000 or 1 sack of 50 kg rice amounting to not more than P1000 (P 350 per month)

d U niform and clothing allowance not exceeding P3000 per year

e Actual yearly medical benefits not exceeding P10000

f L aundry allowance of P300 per month

g Employee achievement awards for length of service or safety achievement in the form of tangible personal property other than cash or gift certificate with an annual monetary value not exceeding P10000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees

h Christmas and major anniversary celebrations not exceeding P5000 per employee per annum

i Company picnics and sports tournaments in the Philippines and are participated exclusively by employees

j Flowers fruits books or similar items given to employees under special circumstances on account of illness marriage birth of a baby etc

k Daily meal allowance of overtime work not exceeding 25 of basic minimum wage

Tax implication of de minimis benefits EXEMPTED from tax However should

the amount of the benefits given be in EXCESS of the ceilings prescribed the following rules apply

o If given to managerial supervisory employees

The amount in excess of the ceiling prescribed is taxable as a fringe benefit (ie there will be a 32 tax imposed on the

21

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERgrossed-up monetary value of the residual amount)

o If given to rank-and-file employees

The amount in excess of the ceiling prescribed is taxable as salary or compensation income

BIR Ruling 023-02 Meal and food allowance although not for overtime work is considered de minimis if it does not exceed 25 of the basic wage The rules and regulations on de minimis benefits do not allow aggregation of the amounts set for each type of benefit

BIR Ruling 034-02 (Aug 16 2002) Representation and Transportation Allowance (RATA) and Personnel Economic Relief Allowance (PERA) are not subject to Income Tax and Withholding Tax Additional Compensation Allowance (ACA) is part of ldquoother benefitsrdquo under Sec 32(b)(7)(e) of the Tax Code of 1997 which are excluded from gross compensation income provided the total amount of such benefits does not exceed P30000 It is also not subject to withholding tax pending its formal integration into basic pay

Example of Benefits Necessary to the Trade Business of the Employer BIR Ruling 013- 02

Outstation Allowance given by the Philippine Gaming Management Corporation to its managerial and supervisory employees (who will be away from the office site for at least 8 hours to visit the lotto franchise holders for repair andor inspection of equipment) intended to cover meals and trip related expenses is clearly required by the nature of or necessary to the trade or business of the employer and hence not subject to the fringe benefits tax It is also not subject to withholding tax

Examples of Convenience of the Employer Rule

1 The value of the meals given to the employee is not taxable if the employer provides the meals for a substantial non-compensatory business purpose (generally when employee is required to be on duty during the meal period)

2 Lodging is not taxable if the employee must accept the lodging on the employerrsquos business premises as a condition of his employment

6 DOCTRINE OF CASH EQUIVALENT

7 ALLOWABLE DEDUCTIONS FROM GROSS COMPENSATION INCOME

A BASIC PERSONAL EXEMPTION [RA 9504]

Republic Act No 9504 AN ACT AMENDING SECTION 22 24 34 35 51 AND 79 OF REPUBLIC ACT NO 8424 AS AMENDED OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE OF 1997

Salient points of Republic Act No 9504

Those minimum wage earners shall be exempt from the payment of income tax on their taxable income Provided further that the holiday pay overtime pay night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax

One of the highlights of RA 9504 is the increase in tax exemption how much is the new annual personal and additional tax exemption as compared to the exemptions in the old tax exemption law

NEW OLDPersonal Exemption

Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000

Additional Exemption

For every Qualified Dependent

2500000

800000

22

CASES 1 COM VS SMITH2 COM VS LE BUE


A BASIC PERSONAL EXEMPTION

(RA 9504 JUNE 17 2008)

There shall be allowed a basic personal exemption amounting to Fifty thousand pesos (P50 000) for each individual taxpayer

In the case of married individual where only one of the spouses is deriving gross income only such spouse shall be allowed the personal exemption

II ADDITIONAL EXEMPTION FR QUALIFIED DEPENDENT CHILD P2500000 BUT NOT LIMITED IN EXESS OF FOUR

Additional Exemption for Dependents

There shall be allowed an additional exemption of Twenty-five thousand pesos (25000) for each dependent not exceeding four (4)

The additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals

In the case of legally separated spouses additional exemptions may be claimed only by the spouse who has custody of the child or children

dependent means a legitimate illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age unmarried and not gainfully employed or if such dependent regardless of age is incapable of self-support because of mental or physical defect

Who is a dependent for purposes ofadditional exemptions

A legitimate illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer

ndash not more than 21 years old unmarried and not gainfully employed OR

ndash regardless of age is incapable of self-support because of mental or physical defect

NOTE Only children may be considered ldquodependentrdquo for purposes of additional exemptions

Married Individuals

Additional exemptions are claimed by only one spouse Generally the spouse who is the gross compensation earner is the claimant of the additional exemptions

Where the husband and wife are both compensation income earners the husband is the proper claimant of the additional exemptions EXCEPT if there is an express waiver by the husband in favor of his wife as embodied in the withholding exemption certificate

When the spouses have business andor professional income only either may claim the additional exemptions at the end of the year

The wife claims the additional exemptions in the following instances

i husband has no incomeii husband works abroadiii Legally separated spouses

- Additional

exemptions can be claimed by the spouse with custody of the child or children (but the total amount for the spouses shall not exceed the maximum of four) [Sec 35(B) NIRC]

1 BASIS OF PERSONAL EXEMPTIONS

PERSONAL EXEMPTIONS- are arbitrary amounts allowed by law to be deducted from income to cover personal living or family expenses of the taxpayer These deductions are allowed on the theory that the minimum requirements of subsistence of a taxpayer should be free from tax

II TAXPAYERS ENTITLED TO PERSONAL EXEMPTIONS

Who may claim personal exemptions

Citizens (whether resident or non-resident) and resident aliens are allowed to avail of basic personal and additional exemptions Nonresident aliens engaged in trade or business are entitled to basic personal exemptions only by way of reciprocity but not to additional exemptions [Sec 35 NIRC]

Limit of BPE Allowed to NRAETB An amount equal to the exemptions allowed by the non-resident alienrsquos country to Filipino citizens not residing therein but deriving income therefrom but not to exceed the

23

CASES 1 CIR VS BAIER-NICKEL2 PANSACOLA VS CIR

CASE MADRIGAL VS RAFFERTY

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERamount fixed by NIRC[In other words whichever is LOWER]

III CONDITIONS FOR THE GRANT OF BASIC PERSONAL EXEMPTION TO NRA ENGAGED IN TRADEBUSINESS IN THE PHIL

IV HEAD OF THE FAMILY DEFINED

Head of the Family ndash1 Unmarried or legally separated person

witha one or both parents or b one or more brothers or sisters

or c one or more legitimate

recognized natural or legally adopted children living with and dependent upon the taxpayer for their chief support and

2 Such dependent must be living with AND dependent upon him for chief support

3 Where such brother sister or children are

a not more than 21 years of age b unmarried and c not gainfully employed or d where such dependents

regardless of age are incapable of self ndash support because of mental or physical defect

Note Senior Citizen Law (RA 7434 as amended by 9257) provides in section 4 that senior citizens shall be treated as dependents provided for in the NIRC as amended and as such individual taxpayers caring for them be they be relatives or not shall be accorded the privileges granted by the Code insofar as having dependents are concerned

Senior Citizen is1 any resident citizen of the

Philippines2 at least sixty 60 years old including

those who have retired from both government offices and private enterprises and

3 has an income of not more than sixty thousand pesos per annum subject to the review of the National Economic Development Authority(NEDA) every three years

1048774 NRAETB may deduct personal exemption (but NOT additional exemption) but only to the extent allowed by his country to Filipinos

not residing therein and shall not exceed the aforementioned amounts

1048774 NRANETB cannot claim any personal or additional exemption

Dependent = legitimateillegitimatelegally adopted

child chiefly dependent upon amp living with the taxpayer if such dependent is not gt 21 years old unmarried amp not gainfully employed OR if such dependent regardless of age is incapable of self-support because of mentalphysical defect

i For married individuals claimed by only 1 of the spouses

ii For legally separated spouses claimed only by the spouse who has custody of the children may be claimed by both as long as they have custody of the children but total amount claimed by both shall not exceed the maximum allowed

An illegitimate child is within the meaning of a ldquorecognized natural childrdquo

Under the provision on additional exemption for dependents illegitimate children are specifically included under the term ldquodependentsrdquo

A senior citizen whether relative or not living with the taxpayer or not can be classified as a dependent to make a taxpayer a head of a family not exceeding 4 (RA 7432)

In case of married individuals where only 1 of the spouses is deriving gross income only such spouse shall be allowed additional exemption

Chief support means more than one half of the requirements for support

Parents brothers and sisters who are qualified dependents may entitle the taxpayer to the personal exemption of P25000 as head of the family but not to the additional exemption of P8000 (obsolete)

bull Note Personal and additional exemptions

are available only to business income and compensation income earners

Non-resident aliens engaged in trade or business (NRAETB) may be entitled to personal exemptions subject to reciprocity

b) country from which he is a citizen has an income tax law and

c) the income tax law of his country allows personal exemption to citizens of the Philippines not residing therein but deriving income therefrom and not to exceed the amount allowed in NIRC

24

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERd) the personal exemption shall be

equal to that allowed by the income tax law of the country to a citizen of the Philippines not residing therein or the amount provided in the NIRC whichever is LOWER

V WHO ARE QUALIFIED DEPENDENTS

1) PARENTS2) BROTHERS AND SISTERS-FULL OR

HALF-BLOOD3) CHILDREN-LEGITIMAE RECOGNIZED

ILLEGITIMATE amp LEGALLY ADOPTED4) SENIOR CITIZAN5) BENEFACTOR

Qualified dependent children ndash legitimate recognized natural illegitimate and legally adopted The proper claimant of the additional exemption would be the husband being the head of the family except under the following cases

1) husband is unemployed2) husband is working abroad like an

OFW or a seaman3) husband explicitly waived his right

of the exemption in favor of his wife in the withholding exemption certificate

VI LIVING WITH MEANING

VII CHIEF SUPPORT DEFINED

ldquoChief supportrdquo principal or main support given regularly

such that withdrawal will result in destitute life for dependent includes situations where taxpayer is away from home on business or dependent is away at school

more than one-half of the requirements for support Hence if two children contribute equal amounts to the support of a parent neither of them qualify as head of the family

VIII RULES ON CHANGE OS STATUS (SEC35[C]) NIRC

Change of Status [Sec 35(C) NIRC]1 If taxpayer marries during taxable

year taxpayer may claim the

corresponding BPE in full for such year (ie no need to prorate the exemption)

2 If taxpayer should have additional dependent(s) during taxable year taxpayer may claim corresponding AE in full for such year

3 If taxpayer dies during taxable year his estate may still claim BPE and AE for himself and his dependent(s) as if he died at the close of such year

4 If during the taxable yeara) spouse dies orb) any of the dependents dies or

marries turns 21 years old or becomes gainfully employed taxpayer may still claim same exemptions as if the spouse or any of the dependents died or married turned 21 years old or became gainfully employed at the close of such year

i The death of the taxpayer during the taxable year shall not affect the amount of personal and additional exemptions his estate can claim as if he died at the end of such year

ii If the taxpayer got married or should have additional dependent (child born within the year) during the taxable year he may claim the corresponding personal exemptions in full for such year

iii If the spouse should die or any of the dependents become twenty one years of age or become gainfully employed during the taxable year the taxpayer may still claim the same exemptions as if heshe died or became twenty one years old or became gainfully employed at the close of such year

NOTE Individuals not entitled to personal and

additional exemptionso Non-resident alien NOT engaged

in trade or businesso Alien individual employed by

Regional or Area Headquarters of Multinational Companies

o Alien Individual employed by Offshore Banking Units

o Alien Individual employed by Pertroleum Service Contractor and Subcontractor

TIP When it comes to change of status the status beneficial to the taxpayer is used for purposes of claiming deductions as long as the taxpayer achieved such status at any time during the taxable period

25

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERIII PPHI- PREMIUM PAYMENTS ON HEALTH

ANDOR HOSPITALIZATION INSURANCE REQUISITES

An amount of premium on health andor hospitalization paid by an individual taxpayer (head of family or married) for himself and members of his family during the taxable year

REQUISITES FOR DEDUCTIBILITYa Insurance must have actually been

takenb The amount of premium deductible

from gross income does not exceed P2400 per family or P200 per month during the taxable year

c That said family had a gross income of not more than P250000 for the taxable year In case of married individuals only the spouse claiming additional exemption shall be entitled to this deduction

Who may Avail of this deduction1) Individual taxpayers earning purely

compensation income during the year

2) Individual taxpayers earning business income or in practice of his profession whether availing of itemized or optional standard deductions during the year

B BUSINESS TRADE PROFESSIONAL INCOME

1 INCOME COVERED1 INCOME DERIVED BY SELF-

EMLOYED FROM TRADE OR BUSINESS (TRADING MANUFACTURING MERCHANDISING FARMING AND OTHERS

a SELF-EMPLOYED- DEFINEDb SELF-EMPLOYED

2 INCOME DERIVED BY PROFESSIONALS FROM THE PRACTICE OF PROFESSION

a PROFESSIONALS-DEFINEDb GROSS INCME OF

FARMERS3 PASSIVE INVESTMENT INCOME ndash

DEFINEDa INTEREST INCOME

INTEREST ndash shall refer to the payment for the use or forbearance or detention of money regardless of the name it is called or denominated It includes the amount paid for the borrowers use of money during the

term of the loan as well as for his detention of money after the due date for its repayment

i DEFINITIONii EXAMPLES

Interest Income ndash eg Interest income from government securities such as Treasury Bills

b RENTAL INCOME i DEIFINITIONii SCOPE EXAMPLESiii TAXABILIT OF ADVANCE

BENEFITSRental Income ndash

bull Actual rent itself agrave included in gross income (taxable)bull Payments by lessee of obligations of lessor to third persons agrave considered as additional rent income of the lessor and therefore included in gross income (taxable)bull Advance Rentals agrave Receipt of advance rentals by the lessor may or may not constitute taxable income to him depending on the true nature of the so-called advance rentals



c DIVIDEND INCOME i DEFINITIONii KINDS

1 COMMON2 PREFERRED3 SCRIP4 INDIRECT5 LIQUIDATING

Dividends ndash Any dividend which is not exempt from income tax or which is not subject to final tax is taxable dividend included in the computation of the taxable income (gross income) in the income tax return at the end of the year


26


KINDS OF DIVIDENDS

1) Cash and Property DividendsIndividual Taxpayer

a From Domestic Corporations1048774 RC NRC RA ndash 10 (Sec 24A)1048774 NRAETB ndash 20 (Sec 25A2)1048774 NRANETB ndash 25 on gross income

(Sec 25B)b From Foreign Corporations

1048774 RC NRC RA NRAETB ndash 5-32 (Sec 24 25A1)

1048774 NRANETB ndash 25 on gross income (Sec 25B)

Corporate Taxpayera Foreign to Domestic Corp ndash 32(Sec 32A)b Domestic to Domestic Corp ndash Exempt intercorporate dividends (Sec 27D)c Domestic to Foreign Corp -

1048774 Resident Foreign Corp ndashExempt (Sec 28 [A] 7d)1048774 Nonresident Foreign Corp ndash15 subject to the condition stated in Sec 28 [B] 5 Otherwise it shall be taxed at 32 (See Commissioner vs Procter and Gamble GR No 66838 December 2 1991)

2) Stock Dividends

General rule Not subject to tax because it does not constitute income it represents transfer of surplus to capital account (Sec 73B 1997 NIRC)

Exceptions1 Sec 73B 1997 NIRC

a there is redemption or cancellation

b the transaction involves stock dividends

c and the ―time and manner of the transaction makes it ―essentially equivalent to a distribution of taxable dividends (see Commissioner vs Court of Appeals Court of Tax Appeals amp ANSCOR GR No 108576 Jan 30 1999)

2 the recipient is other than the shareholder (Bachrach vs Seifert GR No L-2659 October 12 1950)

3 change in the stockholderlsquos equity results by virtue of the stock dividend issuance

3) Liquidating Dividends ndash When a corporation distributes all of its assets in complete liquidation or dissolution

the gain realized or loss sustained by the stockholder whether individual or corporation is taxable income or deductible loss as the case may be (Sec 73A)

A liquidating dividend is not a dividend income The transaction is considered a sale or exchange of property between the corporation and the stockholder

d ROYALTY e PRIZES AND WINNINGS

a PRIZES AMOUNTNG TO MORE THAN P1000000

b WINNINGS EXCEPT SWEEPSTAKES AND LOTTO

f PARTNERS SHARE FROM THE NET INCOME AFTER TAX OF BUSINESS PARTNERSHIP JOINT ACCOUNT JOINT VENTURE OR CONSORTUM

IV OTHER SOURCES OF INCOME 1) CG FROM SALE OF SHARES OF STOCK

a IF NOT LISTED AND TRADED THROUGH STOCK EXCHANGE

i NET GAIN NOT OVER P100K=5

ii AMT IN EXCESS OF 100K=10

b IF LISTED AND TRADED THROUGH LOCAL STOCK EXCHANGE- frac12 OF 1 GROSS SELLING PRICE THE TAX IS IN THE NATURE OF PERCENTAGE TAX NOT A INCOME TAX

2) IF LISTED AND TRADED THROUGH LOCAL EXHANGE- frac12 OF 1 OF GROSS SELLING PRICE THA TAX IS IN THE NATURE OF PERCENTAGE TAX NOT AN INCOME TAX

3) ILLEGAL GAINS- GAMBLING BETTING LOTTERIES EXTORTION OR FRAUD

4) RECOVERY OF DAMAGES- TAXALE ndash IF REPRESENTS LOST PROFITINCOME

5) BAD DEBT RECOVERY- TAXABE IF IT RESULTS IN THE REDUCTION OF THE TAXAYERrsquoS TAX LIABILITY IN THE PREVIOUS YEAR THE TAX BENEFIT RULE OR THE DOCTRINE OF EQUITABLE BENEFIT APPLIES IN THIS CASE

a IT MUST BE CLAIMED AS A DEDUCTION FROM THE GROSS INCOME IN THE PRECEDING YEAR

b THE REDUCTION RESULTS IN A TAX BENEFIT

6) TAX REFUND- TAXABLE IF IT RESULTS IN THE REDUCTION OF THE TAXPAYERrsquoS LIABILITY IN THE PRECEDING YEAR THIS MEANS THAT THE TAX REFUNDED MUST BE

27

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERPREVIOUSLY CLAIMED AS DEDUCTION FROM GROSS INCOME TAX BENEFIT RULE LIKEWISE APPLIES

ANNUAL WITHHOLDING TAX TABLE

If Taxable Income is

Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +

10 of the excess over 10000

3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +


Sample Tax Computation

Step 1 Determine your total Gross IncomeStep 2 Compute for the Taxable IncomeStep 3 Compute for the Tax Due

Note Make sure that items prior to this are reviewed and understood

Given 1 A single employee with an annual gross income of P160 000 how much is the annual tax dueItems Notes

Gross 16000

Income 0

Less Personal amp Additional Exemption 50000

Taxable Income

110000

Over 70000 but not over 140000 = 8500 20 of the excess over 70000

Tax Due 165008500+ 20(110000-70000)

Given 2 Married employee with 3 children all under the age of 21 with a spouse that is currently not working on that taxable year With a monthly salary of P46 000 and received a 13th month pay of worth P 46000 At the same time earned a total of P20 000 on interest bearing account How much is the annual tax due

CHAPTER XII CORPORATE INCOME TAXATION

I CORPORATION AS DEFINED IN NIRC

28


A corporation shall include partnerships no matter how created or organized Joint stock companies joint accounts associations and insurance companies

But does not include for the purpose of imposing ordinary 35 corporate income tax

o general professional partnerships

o joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum coal geothermal amp other energy operations pursuant to an operating or consortium agreement under a service contract with the government

Corporations exempt from income taxation (for income realized as such) under RA 8424

1 Those enumerated under Sec 30bull Exempt corporations are subject to income tax on their income from any of their properties real or personal or from any other activities conducted for profit regardless of the disposition made of such income




3 Regional or Area Headquarters under Sec 22 (DD)


Note ONLY DOMESTIC CORPORATIONS are taxable for income derived from sources within and without thePhilippines All other corporate income taxpayers are taxable only for income derived from sources within the Philippines

General Types

1) Domestic Corporation is created or organized in the Philippines or under its laws2) Foreign Corporation is organized and existing under the laws of a foreign country

(a) Resident foreign corporation ndash foreign corp engaged in trade or business within the Philippines

(b) Nonresident foreign corporation ndash foreign corp not engaged in trade or business within the Philippines

I DOMESTIC CORPORATIONS

A In general

On taxable income from all sources within and without the Philippines

o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)

A CONSIDERED AS CORP UNDER NIRC

1 PARTNERSHIP DEFINED NO MATTER HOW CREATED OR ORGANIZED

General Rule Partnerships no matter how created are subject to corporate income tax

General co-partnerships (GCP) are partnerships which are by law assimilated to be within the context of and so legally contemplated as corporations The partnership itself is subject to corporate taxation The individual partners are considered stockholders and therefore profits distributed to them by the partnership are taxable as dividends

Exception o General Professional

Partnerships (GPPs) as such are not subject to income tax GPP means

1 a partnership formed by persons for the sole purpose of exercising their common profession and

2 no part of the income of which is derived from engaging in any trade or business [Sec 22(B)]

GPPs however are required to file returns of their income for the purpose of furnishing information as to the share in the net income of the partnership which the partners shall include in their individual returns

Members of the GPP are liable for income tax only in their separate and individual capacity Each partner shall report as gross income his distributive share actually or constructively received in the net income of the partnership

29


Kinds of Partnerships

1) General Professional Partnerships

bull Established solely for purpose of exercising common profession and not part of income derived from engaging in trade or business

bull As an entity it is not subject to income tax

bull Partners are liable for income tax on their distributive share (computed by dividing net income of GPP) Each partner shall report his distributive share as part of his gross income

2) TaxableBusinessOrdinary Partnership

bull All other partnerships no matter how created or organized

bull Includes unregistered joint ventures and business partnerships

bull Taxable as an entity o ordinary corporate income

taxbull Joint ventures are not taxable as

corporations when its purpose if

o a) undertaking construction projects b) engaged in petroleum coal and other energy operation under a service contract with the government

bull Partners are considered stockholders therefore their distributive share is taxed as dividends

2 JOINT STOCK COMPANIES3 JOINT ACCOUNTS4 ASSOCIATIONS OR5 INSURANCE COMPANIES

B EXCEPTIONS

1 JOINT CONSTRUCTION VENTURE2 GPP3 JV FOR ENGAGING IN PETROLEUM

COAL GEOTHERMAL

CHAPTER XIII CORPORATE INCOME TAXATION

I CORPORATION (DEFINED IN NIRC)

a PARTNERSHIS NO MATTER HOW CREATED OR ORGANIZED JOINT STOCK COMPANIES JOINT

ACCOUNTS ASOCIATIONS OR INSURANCE COMPANIES

b NOT INCLUDED IN NIRC DEFINITION OF A CORP ARE JOINT CONSTRUCTION VENTURE GPP JOINT VENTURE FOR ENGAGING IN PETROLEUM COAL GEOTHERMAL AND OTHER ENERGY OPERATIONS PURSUANT TO A CONSORTION AGREEMENT WITH THE AGREEMENT

II UNREGISTERED OR REGISTERED PARTNERSHIP- TAXABLE AS COPRORATION PROVIDED THE FF REQUISITE CONCUR

a) Agreement oral or written to contribute money property or industry to a common fund

b) Intention to divide the profits

III JOINT ACCOUNTS OR JV FORMED FOR PROFITS JOINT EMERGENCY OPERATIONS-

IV MAJOR GROUPS OF CORPORATIONS FOR INCOME TAX PURPOSES

30

CASE AFISCO INSURANCE VS COM

CASE 1 AFISCO INSURANCE VS COM

CASES 1 EVANGELISTA VS COM2 RALLOS VS RALLOS3 ONA VS COM4 PASCUAL VS COM5 OBILLOS SR VS COM

NBPP37A JOINT EMERGENCY OPERATIONS

(NO LEGAL PERSONALITY)

CASES COLLECTOR VS BATANGAS CO

NBPP37 B JOINT STOCK COMPANIES

CASES BROKI VS AMERICAN EXPRESS CO

NBPP37

A DOMESTIC CORPORATIONS


2 TAXBASE TAXABLE INCOME

3 TAX RATE 35 EFFECTIVE JAN 1 2009 PER RA 9337

4 SPECIAL DOMESTIC CORPORATIONS

D MCIT see pp 40-43

31

NBPP37


NBPP38A PRIVATE EDUCATIONAL INSTITUTION

B NON-PROFIT HOSPITAL

NB DEFINITION OF TERMS PP 39-40

CASES 1 FAR EAST VS NANKAI KOGYO2 GROSS PHILIPPINE BILLINGS DEFINED

NBPP40

C NON-RES FOREIGN CORP

I SOURCE OF INCOME W THE PHIL 2 TAX BASE GROSS INCOME 3 TAX RATE 35 EFECTIVE JULY 1 2005 30 EFFECTIVE JAN 12009 PER RA 9337 4 SPECIAL NON-RESIDENT FOREIGN CORP

CASE 1 NV REEDERJI AMSTERDAM VS COM

CASE 1 MANILA BANKING VS CIR2 CIR VS PAL3 MANILA BANKING VS CIR


E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45

F OTHER CORPORATE TAX RATES

G TAX EXEMPT CORP UNDER SEC 30 NIRC

32


1 COMMON TAX RATES

2 DOMESTIC CORP

3 RESIDENT FOREIGN CORP

CASE 1 COM VS MARUBENI2 BANK OF AMERICA VS CA

4 NON-RESIDENT FOREIGN CORP

CASE 1 COM VS PROCTOR amp GAMBLE

1 LABOR AGRICULTURAL OR HORTICUTURAL ORG NOT ORG PRINCIPALLY FOR PROFIT

2 MUTUAL SAVINGS BANKS AND

8 NON-STOCK NON PROFIT EDUCATIONAL INSTITUTIONS (RMC 76-2003)

CASES 1 CIR VS CA


H TAX EXEMPT GOVT OWNED AND CONTROLLED CORP (GOCC) (SEC 27[c] NIRC AS AMENDED BY RA 9337)

1 GSIS2 SSS3 PHIC4 PCSO

I TAX-EXEMPT CORP UNDER SPECIAL LAWS

1 COOPERATIVES ARE EXEMPTED FROM TAXES SUBJ TO CERTIN CONDITIONS UNDER RA 6938 RMC 48-91

2 FOUNDATION CREATED FOR SCIENTIFI ADVANCEMENT IS EXEMPT FROM TAX UNDER SEC 24 OF RA 2067

ALLOWABLE DEDUCTIONS FROM GROSS INCOME

DEDUCTION-

Definition Items or amounts which the law allows to be deducted from gross income in order to arrive at the taxable income

bull The basic principle governing deductions from gross income apply to all taxpayers

bull Because deductions are strictly construed against the taxpayer one seeking a deduction must point to some specific provisions of the statute in which that deduction is authorized amp must be able to prove that he is entitled to the deduction which the law allows

bull Adequate records should be kept to support the deductions

bull The deduction claimed must have been subjected to withholding tax if required

bull Deductions for income tax purposes partake of the nature of tax exemptions hence if tax exemptions are to be strictly construed then it follows that deductions must be STRICTLY construed

bull He must be able to prove that he is entitled to the deduction authorized or allowed (Atlas Consolidated Mining amp Devrsquot Corp vs CIR January 12 1981)

WHO MAY AVAIL OF THE DEDUCTIONS

1) Individuals(a)citizen(b)resident alien(c) non-resident alien doing business in

the Philippines(d)member of GPP

2) Corporations(a)domestic corp(b)resident foreign corp(c) proprietary educational institutions amp

hospitals(d)GOCCs

WHO CANNOT AVAIL OF DEDUCTIONS FROM GROSS INCOME

1 Citizens and resident aliens whose income is purely compensation income (except for premium payments on health andor hospitalization insurance)

2 Non-resident aliens not engaged in trade or business in the Philippines and

3 Non-resident foreign corporationTHE FOLLOWING ARE THE ALLOWABLE DEDUCTIONS FROM GROSS INCOME BASED ON CLASSES OF TAXPAYER

1 Individuals with gross income from employee employer relationship only (gross income only)

Premium payments on health andor hospital insurance (if requisites are complied with)

Personal exemptions and additional exemptions

2 Individuals with gross income from business or practice of profession

Optional Standard Deduction (OSD) OR Itemized deductions

Optional Standard Deductions ndash 10 of the gross income May be availed only by individuals (except nonresident aliens) who are not purely compensation income earners This is in lieu of the itemized deductions


Personal and additional exemptions

33




CASES 1 CIR VS CA

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRER3 Corporations

Itemized Deductions

4 Estates and Trusts

Section 62 of the NIRC

I BASIC PRINCIPLES

Basic Principles governing Deductions

1 The taxpayer seeking a deduction must point to some specific provisions of the statute authorizing the deduction and

2 He must be able to prove that he is entitled to the deduction authorized or allowed (Atlas Consolidated Mining amp Dev Corp vs Comm)

3 Any amount paid or payable which is otherwise deductible from or taken into account in computing gross income or for which depreciation or amortization may be allowed shall be allowed as deduction only if it is shown that the tax required to be deducted and withheld there from has been paid to the BIR (Sec 34[K])

Note Deductions for income tax purposes partake of the nature of tax exemptions hence if tax exemptions are to be strictly construed then it follows that deductions must also be strictly construed

A CONSTRUED STRICTLY AGAINST THE TAXPAYER

B COHAN RULE PRINCIPLE (RMC-23-2000)

THERE IS NO SHOWING THAT EXPENSES WERE INCURRED BUT CANNOT BE ASCERTAINED DUE TO ABSENCE OF DOCUMENARY EVIDENCE (RMC-23-2000)

C DEDUCTIONS AS DISTINGUED FROM EXCLUSIONS

D DEDUCTIONS AS DISTINGUISED FROM PERSONAL EXEMPTIONS

E DEDUCTIONS AS DISTINGUISHED FROM TAX CREDIT

II KINDS OF ALLOWABLE DEDUCTIONS

A ITEMIZED DEDUCTONS IN SEC 34 [A] TO [5] AND [M] NIRC

CHAPTER VII NIRC ALLOWABLE DEDUCTIONS

SEC 34 Deductions from Gross Income - Except for taxpayers earning compensation

34

CASE 1 ATLAS CONSOLIDATED MINING CO VS CIR

2 WESTERN MINOKO CORP VS CIR

3 COM OF CUSTOMS VS PHIL ACETYLENE CO

4 COM VS ARNOLDUS CARPENTRY SHOP

5 BPI VS TRINIDAD

CASE 1 CIR VS BICOLANDIA DRUG CORP

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERincome arising from personal services rendered under an employer-employee relationship where no deductions shall be allowed under this Section other than under subsection (M) hereof in computing taxable income subject to income tax under Sections 24 (A) 25 (A) 26 27 (A) (B) and (C) and 28 (A) (1) there shall be allowed the following deductions from gross income

(A) Expenses -

(1) Ordinary and Necessary Trade Business or Professional Expenses-

(a) In General - There shall be allowed as deduction from gross income all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on or which are directly attributable to the development management operation andor conduct of the trade business or exercise of a profession including

(i) A reasonable allowance for salaries wages and other forms of compensation for personal services actually rendered including the grossed-up monetary value of fringe benefit furnished or granted by the employer to the employee Provided That the final tax imposed under Section 33 hereof has been paid

(ii) A reasonable allowance for travel expenses here and abroad while away from home in the pursuit of trade business or profession

(iii) A reasonable allowance for rentals andor other payments which are required as a condition for the continued use or possession for purposes of the trade business or profession of property to which the taxpayer has not taken or is not taking title or in which he has no equity other than that of a lessee user or possessor

(iv) A reasonable allowance for entertainment amusement and recreation expenses during the taxable year that are directly connected to the development management and operation of the trade business or profession of the taxpayer or that are directly related to or in furtherance of the conduct of his or its trade business or exercise of a profession

not to exceed such ceilings as the Secretary of Finance may by rules and regulations prescribe upon recommendation of the Commissioner taking into account the needs as well as the special circumstances nature and character of the industry trade business or profession of the taxpayer Provided That any expense incurred for entertainment amusement or recreation that is contrary to law morals public policy or public order shall in no case be allowed as a deduction

(b) Substantiation Requirements - No deduction from gross income shall be allowed under Subsection (A) hereof unless the taxpayer shall substantiate with sufficient evidence such as official receipts or other adequate records (i) the amount of the expense being deducted and (ii) the direct connection or relation of the expense being deducted to the development management operation andor conduct of the trade business or profession of the taxpayer

(c) Bribes Kickbacks and Other Similar Payments - No deduction from gross income shall be allowed under Subsection (A) hereof for any payment made directly or indirectly to an official or employee of the national government or to an official or employee of any local government unit or to an official or employee of a government-owned or -controlled corporation or to an official or employee or representative of a foreign government or to a private corporation general professional partnership or a similar entity if the payment constitutes a bribe or kickback

(2) Expenses Allowable to Private Educational Institutions - In addition to the expenses allowable as deductions under this Chapter a private educational institution referred to under Section 27 (B) of this Code may at its option elect either (a) to deduct expenditures otherwise considered as capital outlays of depreciable assets incurred during the taxable year for the expansion of school facilities or (b) to deduct allowance for depreciation thereof under Subsection (F) hereof

(B) Interest-

(1) In General - The amount of interest paid or incurred within a taxable year on indebtedness in connection with the

35

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERtaxpayers profession trade or business shall be allowed as deduction from gross income Provided however That the taxpayers otherwise allowable deduction for interest expense shall be reduced by an amount equal to the following percentages of the interest income subjected to final tax

Forty-one percent (41) beginning January 1 1998

Thirty-nine percent (39) beginning January 1 1999 and

Thirty-eight percent (38) beginning January 1 2000

(2) Exceptions - No deduction shall be allowed in respect of interest under the succeeding subparagraphs

(a) If within the taxable year an individual taxpayer reporting income on the cash basis incurs an indebtedness on which an interest is paid in advance through discount or otherwise Provided That such interest shall be allowed a a deduction in the year the indebtedness is paid Provided further That if the indebtedness is payable in periodic amortizations the amount of interest which corresponds to the amount of the principal amortized or paid during the year shall be allowed as deduction in such taxable year

(b) If both the taxpayer and the person to whom the payment has been made or is to be made are persons specified under Section 36 (B) or

(c)If the indebtedness is incurred to finance petroleum exploration

(3) Optional Treatment of Interest Expense - At the option of the taxpayer interest incurred to acquire property used in trade business or exercise of a profession may be allowed as a deduction or treated as a capital expenditure

(C) Taxes-

(1) In General - Taxes paid or incurred within the taxable year in connection with the taxpayers profession trade or business shall be allowed as deduction except

(a) The income tax provided for under this Title

(b) Income taxes imposed by authority of any foreign country but this deduction shall be allowed in the case of a taxpayer who does not signify in his return his desire to

have to any extent the benefits of paragraph (3) of this subsection (relating to credits for taxes of foreign countries)

(c) Estate and donors taxes and

(d) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed

Provided That taxes allowed under this Subsection when refunded or credited shall be included as part of gross income in the year of receipt to the extent of the income tax benefit of said deduction

(2) Limitations on Deductions - In the case of a nonresident alien individual engaged in trade or business in the Philippines and a resident foreign corporation the deductions for taxes provided in paragraph (1) of this Subsection (C) shall be allowed only if and to the extent that they are connected with income from sources within the Philippines

(3) Credit Against Tax for Taxes of Foreign Countries - If the taxpayer signifies in his return his desire to have the benefits of this paragraph the tax imposed by this Title shall be credited with

(a) Citizen and Domestic Corporation - In the case of a citizen of the Philippines and of a domestic corporation the amount of income taxes paid or incurred during the taxable year to any foreign country and

(b) Partnerships and Estates - In the case of any such individual who is a member of a general professional partnership or a beneficiary of an estate or trust his proportionate share of such taxes of the general professional partnership or the estate or trust paid or incurred during the taxable year to a foreign country if his distributive share of the income of such partnership or trust is reported for taxation under this Title

An alien individual and a foreign corporation shall not be allowed the credits against the tax for the taxes of foreign countries allowed under this paragraph

(4) Limitations on Credit - The amount of the credit taken under this Section shall be subject to each of the following limitations

(a) The amount of the credit in respect to the tax paid or incurred to any country shall not exceed the same proportion of the tax against which such credit is taken which the taxpayers taxable income from sources

36

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERwithin such country under this Title bears to his entire taxable income for the same taxable year and

(b) The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken which the taxpayers taxable income from sources without the Philippines taxable under this Title bears to his entire taxable income for the same taxable year

(5) Adjustments on Payment of Incurred Taxes - If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer or if any tax paid is refunded in whole or in part the taxpayer shall notify the Commissioner who shall redetermine the amount of the tax for the year or years affected and the amount of tax due upon such redetermination if any shall be paid by the taxpayer upon notice and demand by the Commissioner or the amount of tax overpaid if any shall be credited or refunded to the taxpayer In the case of such a tax incurred but not paid the Commissioner as a condition precedent to the allowance of this credit may require the taxpayer to give a bond with sureties satisfactory to and to be approved by the Commissioner in such sum as he may require conditioned upon the payment by the taxpayer of any amount of tax found due upon any such redetermination The bond herein prescribed shall contain such further conditions as the Commissioner may require

(6) Year in Which Credit Taken - The credits provided for in Subsection (C)(3) of this Section may at the option of the taxpayer and irrespective of the method of accounting employed in keeping his books be taken in the year which the taxes of the foreign country were incurred subject however to the conditions prescribed in Subsection (C)(5) of this Section If the taxpayer elects to take such credits in the year in which the taxes of the foreign country accrued the credits for all subsequent years shall be taken upon the same basis and no portion of any such taxes shall be allowed as a deduction in the same or any succeeding year

(7) Proof of Credits - The credits provided in Subsection (C)(3) hereof shall be allowed only if the taxpayer establishes to the satisfaction of the Commissioner the following

(a) The total amount of income derived from sources without the Philippines

(b) The amount of income derived from each country the tax paid or incurred to which is claimed as a credit under said paragraph such amount to be determined under rules and regulations prescribed by the Secretary of Finance and

(c) All other information necessary for the verification and computation of such credits

(D) Losses -

(1) In General- Losses actually sustained during the taxable year and not compensated for by insurance or other forms of indemnity shall be allowed as deductions

(a) If incurred in trade profession or business

(b) Of property connected with the trade business or profession if the loss arises from fires storms shipwreck or other casualties or from robbery theft or embezzlement

The Secretary of Finance upon recommendation of the Commissioner is hereby authorized to promulgate rules and regulations prescribing among other things the time and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery theft or embezzlement during the taxable year Provided however That the time limit to be so prescribed in the rules and regulations shall not be less than thirty (30) days nor more than ninety (90) days from the date of discovery of the casualty or robbery theft or embezzlement giving rise to the loss

(c) No loss shall be allowed as a deduction under this Subsection if at the time of the filing of the return such loss has been claimed as a deduction for estate tax purposes in the estate tax return

(2) Proof of Loss - In the case of a nonresident alien individual or foreign corporation the losses deductible shall be those actually sustained during the year incurred in business trade or exercise of a profession conducted within the Philippines when such losses are not compensated for by insurance or other forms of indemnity The Secretary of Finance upon recommendation of the Commissioner is hereby authorized to promulgate rules and regulations prescribing among other things the time and manner by which the taxpayer

37

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERshall submit a declaration of loss sustained from casualty or from robbery theft or embezzlement during the taxable year Provided That the time to be so prescribed in the rules and regulations shall not be less than thirty (30) days nor more than ninety (90) days from the date of discovery of the casualty or robbery theft or embezzlement giving rise to the loss and

(3) Net Operating Loss Carry-Over - The net operating loss of the business or enterprise for any taxable year immediately preceding the current taxable year which had not been previously offset as deduction from gross income shall be carried over as a deduction from gross income for the next three (3) consecutive taxable years immediately following the year of such loss Provided however That any net loss incurred in a taxable year during which the taxpayer was exempt from income tax shall not be allowed as a deduction under this Subsection Provided further That a net operating loss carry-over shall be allowed only if there has been no substantial change in the ownership of the business or enterprise in that -

(i) Not less than seventy-five percent (75) in nominal value of outstanding issued shares if the business is in the name of a corporation is held by or on behalf of the same persons or

(ii) Not less than seventy-five percent (75) of the paid up capital of the corporation if the business is in the name of a corporation is held by or on behalf of the same persons

For purposes of this subsection the term not operating loss shall mean the excess of allowable deduction over gross income of the business in a taxable year

Provided That for mines other than oil and gas wells a net operating loss without the benefit of incentives provided for under Executive Order No 226 as amended otherwise known as the Omnibus Investments Code of 1987 incurred in any of the first ten (10) years of operation may be carried over as a deduction from taxable income for the next five (5) years immediately following the year of such loss The entire amount of the loss shall be carried over to the first of the five (5) taxable years following the loss and any portion of such loss which exceeds the taxable income of such first year shall be deducted in like manner form the taxable income of the next remaining four (4) years

(4) Capital Losses -

(a) Limitation - Loss from sales or Exchanges of capital assets shall be allowed only to the extent provided in Section 39

(b) Securities Becoming Worthless - If securities as defined in Section 22 (T) become worthless during the taxable year and are capital assets the loss resulting therefrom shall for purposes of this Title be considered as a loss from the sale or exchange on the last day of such taxable year of capital assets

(5) Losses From Wash Sales of Stock or Securities - Losses from wash sales of stock or securities as provided in Section 38

(6) Wagering Losses - Losses from wagering transactions shall b allowed only to the extent of the gains from such transactions

(7) Abandonment Losses -

(a) In the event a contract area where petroleum operations are undertaken is partially or wholly abandoned all accumulated exploration and development expenditures pertaining thereto shall be allowed as a deduction Provided That accumulated expenditures incurred in that area prior to January 1 1979 shall be allowed as a deduction only from any income derived from the same contract area In all cases notices of abandonment shall be filed with the Commissioner

(b) In case a producing well is subsequently abandoned the unamortized costs thereof as well as the undepreciated costs of equipment directly used therein shall be allowed as a deduction in the year such well equipment or facility is abandoned by the contractor Provided That if such abandoned well is reentered and production is resumed or if such equipment or facility is restored into service the said costs shall be included as part of gross income in the year of resumption or restoration and shall be amortized or depreciated as the case may be

(E) Bad Debts -

(1) In General - Debts due to the taxpayer actually ascertained to be worthless and charged off within the taxable year except those not connected with profession trade or business and those sustained in a transaction entered into between parties

38

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERmentioned under Section 36 (B) of this Code Provided That recovery of bad debts previously allowed as deduction in the preceding years shall be included as part of the gross income in the year of recovery to the extent of the income tax benefit of said deduction

(2) Securities Becoming Worthless - If securities as defined in Section 22 (T) are ascertained to be worthless and charged off within the taxable year and are capital assets the loss resulting therefrom shall in the case of a taxpayer other than a bank or trust company incorporated under the laws of the Philippines a substantial part of whose business is the receipt of deposits for the purpose of this Title be considered as a loss from the sale or exchange on the last day of such taxable year of capital assets

(F) Depreciation -

(1) General Rule - There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion wear and tear (including reasonable allowance for obsolescence) of property used in the trade or business In the case of property held by one person for life with remainder to another person the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant In the case of property held in trust the allowable deduction shall be apportioned between the income beneficiaries and the trustees in accordance with the pertinent provisions of the instrument creating the trust or in the absence of such provisions on the basis of the trust income allowable to each

(2) Use of Certain Methods and Rates - The term reasonable allowance as used in the preceding paragraph shall include but not limited to an allowance computed in accordance with rules and regulations prescribed by the Secretary of Finance upon recommendation of the Commissioner under any of the following methods

(a) The straight-line method

(b) Declining-balance method using a rate not exceeding twice the rate which would have been used had the annual allowance been computed under the method described in Subsection (F) (1)

(c) The sum-of-the-years-digit method and

(d) any other method which may be prescribed by the Secretary of Finance upon recommendation of the Commissioner

(3) Agreement as to Useful Life on Which Depreciation Rate is Based - Where under rules and regulations prescribed by the Secretary of Finance upon recommendation of the Commissioner the taxpayer and the Commissioner have entered into an agreement in writing specifically dealing with the useful life and rate of depreciation of any property the rate so agreed upon shall be binding on both the taxpayer and the national Government in the absence of facts and circumstances not taken into consideration during the adoption of such agreement The responsibility of establishing the existence of such facts and circumstances shall rest with the party initiating the modification Any change in the agreed rate and useful life of the depreciable property as specified in the agreement shall not be effective for taxable years prior to the taxable year in which notice in writing by certified mail or registered mail is served by the party initiating such change to the other party to the agreement

Provided however that where the taxpayer has adopted such useful life and depreciation rate for any depreciable and claimed the depreciation expenses as deduction from his gross income without any written objection on the part of the Commissioner or his duly authorized representatives the aforesaid useful life and depreciation rate so adopted by the taxpayer for the aforesaid depreciable asset shall be considered binding for purposes of this Subsection

(4) Depreciation of Properties Used in Petroleum Operations - An allowance for depreciation in respect of all properties directly related to production of petroleum initially placed in service in a taxable year shall be allowed under the straight-line or declining-balance method of depreciation at the option of the service contractor

However if the service contractor initially elects the declining-balance method it may at any subsequent date shift to the straight-line method

The useful life of properties used in or related to production of petroleum shall be ten (10) years of such shorter life as may be permitted by the Commissioner

39

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERProperties not used directly in the production of petroleum shall be depreciated under the straight-line method on the basis of an estimated useful life of five (5) years

(5) Depreciation of Properties Used in Mining Operations - an allowance for depreciation in respect of all properties used in mining operations other than petroleum operations shall be computed as follows

(a) At the normal rate of depreciation if the expected life is ten (10) years or less or

(b) Depreciated over any number of years between five (5) years and the expected life if the latter is more than ten (10) years and the depreciation thereon allowed as deduction from taxable income Provided That the contractor notifies the Commissioner at the beginning of the depreciation period which depreciation rate allowed by this Section will be used

(6) Depreciation Deductible by Nonresident Aliens Engaged in Trade or Business or Resident Foreign Corporations - In the case of a nonresident alien individual engaged in trade or business or resident foreign corporation a reasonable allowance for the deterioration of Property arising out of its use or employment or its non-use in the business trade or profession shall be permitted only when such property is located in the Philippines

(G) Depletion of Oil and Gas Wells and Mines -

(1) In General - In the case of oil and gas wells or mines a reasonable allowance for depletion or amortization computed in accordance with the cost-depletion method shall be granted under rules and regulations to be prescribed by the Secretary of finance upon recommendation of the Commissioner Provided That when the allowance for depletion shall equal the capital invested no further allowance shall be granted Provided further That after production in commercial quantities has commenced certain intangible exploration and development drilling costs (a) shall be deductible in the year incurred if such expenditures are incurred for non-producing wells andor mines or (b) shall be deductible in full in the year paid or incurred or at the election of the taxpayer may be capitalized and amortized if such expenditures incurred are for producing wells andor mines in the same contract area

Intangible costs in petroleum operations refers to any cost incurred in petroleum operations which in itself has no salvage value and which is incidental to and necessary for the drilling of wells and preparation of wells for the production of petroleum Provided That said costs shall not pertain to the acquisition or improvement of property of a character subject to the allowance for depreciation except that the allowances for depreciation on such property shall be deductible under this Subsection

Any intangible exploration drilling and development expenses allowed as a deduction in computing taxable income during the year shall not be taken into consideration in computing the adjusted cost basis for the purpose of computing allowable cost depletion

(2) Election to Deduct Exploration and Development Expenditures - In computing taxable income from mining operations the taxpayer may at his option deduct exploration and development expenditures accumulated as cost or adjusted basis for cost depletion as of date of prospecting as well as exploration and development expenditures paid or incurred during the taxable year Provided That the amount deductible for exploration and development expenditures shall not exceed twenty-five percent (25) of the net income from mining operations computed without the benefit of any tax incentives under existing laws The actual exploration and development expenditures minus twenty-five percent (25) of the net income from mining shall be carried forward to the succeeding years until fully deducted

The election by the taxpayer to deduct the exploration and development expenditures is irrevocable and shall be binding in succeeding taxable years

Net income from mining operations as used in this Subsection shall mean gross income from operations less allowable deductions which are necessary or related to mining operations Allowable deductions shall include mining milling and marketing expenses and depreciation of properties directly used in the mining operations This paragraph shall not apply to expenditures for the acquisition or improvement of property of a character which is subject to the allowance for depreciation

40

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERIn no case shall this paragraph apply with respect to amounts paid or incurred for the exploration and development of oil and gas

The term exploration expenditures means expenditures paid or incurred for the purpose of ascertaining the existence location extent or quality of any deposit of ore or other mineral and paid or incurred before the beginning of the development stage of the mine or deposit

The term development expenditures means expenditures paid or incurred during the development stage of the mine or other natural deposits The development stage of a mine or other natural deposit shall begin at the time when deposits of ore or other minerals are shown to exist in sufficient commercial quantity and quality and shall end upon commencement of actual commercial extraction

(3) Depletion of Oil and Gas Wells and Mines Deductible by a Nonresident Alien individual or Foreign Corporation - In the case of a nonresident alien individual engaged in trade or business in the Philippines or a resident foreign corporation allowance for depletion of oil and gas wells or mines under paragraph (1) of this Subsection shall be authorized only in respect to oil and gas wells or mines located within the Philippines

(H) Charitable and Other Contributions -

(1) In General - Contributions or gifts actually paid or made within the taxable year to or for the use of the Government of the Philippines or any of its agencies or any political subdivision thereof exclusively for public purposes or to accredited domestic corporation or associations organized and operated exclusively for religious charitable scientific youth and sports development cultural or educational purposes or for the rehabilitation of veterans or to social welfare institutions or to non-government organizations in accordance with rules and regulations promulgated by the Secretary of finance upon recommendation of the Commissioner no part of the net income of which inures to the benefit of any private stockholder or individual in an amount not in excess of ten percent (10) in the case of an individual and five percent () in the case of a corporation of the taxpayers taxable income derived from trade business or profession as computed without the benefit of this and the following subparagraphs

(2) Contributions Deductible in Full - Notwithstanding the provisions of the preceding subparagraph donations to the following institutions or entities shall be deductible in full

(a) Donations to the Government - Donations to the Government of the Philippines or to any of its agencies or political subdivisions including fully-owned government corporations exclusively to finance to provide for or to be used in undertaking priority activities in education health youth and sports development human settlements science and culture and in economic development according to a National Priority Plan determined by the National Economic and Development Authority (NEDA) In consultation with appropriate government agencies including its regional development councils and private philantrophic persons and institutions Provided That any donation which is made to the Government or to any of its agencies or political subdivisions not in accordance with the said annual priority plan shall be subject to the limitations prescribed in paragraph (1) of this Subsection

(b) Donations to Certain Foreign Institutions or International Organizations - Donations to foreign institutions or international organizations which are fully deductible in pursuance of or in compliance with agreements treaties or commitments entered into by the Government of the Philippines and the foreign institutions or international organizations or in pursuance of special laws

(c) Donations to Accredited Nongovernment Organizations - The term nongovernment organization means a non profit domestic corporation

(1) Organized and operated exclusively for scientific research educational character-building and youth and sports development health social welfare cultural or charitable purposes or a combination thereof no part of the net income of which inures to the benefit of any private individual

(2) Which not later than the 15th day of the third month after the close of the accredited nongovernment organizations taxable year in which contributions are received makes utilization directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated unless an extended period is

41

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERgranted by the Secretary of Finance in accordance with the rules and regulations to be promulgated upon recommendation of the Commissioner

(3) The level of administrative expense of which shall on an annual basis conform with the rules and regulations to be prescribed by the Secretary of Finance upon recommendation of the Commissioner but in no case to exceed thirty percent (30) of the total expenses and

(4) The assets of which in the even of dissolution would be distributed to another nonprofit domestic corporation organized for similar purpose or purposes or to the state for public purpose or would be distributed by a court to another organization to be used in such manner as in the judgment of said court shall best accomplish the general purpose for which the dissolved organization was organized

Subject to such terms and conditions as may be prescribed by the Secretary of Finance the term utilization means

(i) Any amount in cash or in kind (including administrative expenses) paid or utilized to accomplish one or more purposes for which the accredited nongovernment organization was created or organized

(ii) Any amount paid to acquire an asset used (or held for use) directly in carrying out one or more purposes for which the accredited nongovernment organization was created or organized

An amount set aside for a specific project which comes within one or more purposes of the accredited nongovernment organization may be treated as a utilization but only if at the time such amount is set aside the accredited nongovernment organization has established to the satisfaction of the Commissioner that the amount will be paid for the specific project within a period to be prescribed in rules and regulations to be promulgated by the Secretary of Finance upon recommendation of the Commissioner but not to exceed five (5) years and the project is one which can be better accomplished by setting aside such amount than by immediate payment of funds

(3) Valuation - The amount of any charitable contribution of property other than money shall be based on the acquisition cost of said property

(4) Proof of Deductions - Contributions or gifts shall be allowable as deductions only if verified under the rules and regulations prescribed by the Secretary of Finance upon recommendation of the Commissioner

(I) Research and Development-

(1) In General - a taxpayer may treat research or development expenditures which are paid or incurred by him during the taxable year in connection with his trade business or profession as ordinary and necessary expenses which are not chargeable to capital account The expenditures so treated shall be allowed as deduction during the taxable year when paid or incurred

(2) Amortization of Certain Research and Development Expenditures - At the election of the taxpayer and in accordance with the rules and regulations to be prescribed by the Secretary of Finance upon recommendation of the Commissioner the following research and development expenditures may be treated as deferred expenses

(a) Paid or incurred by the taxpayer in connection with his trade business or profession

(b) Not treated as expenses under paragraph 91) hereof and

(c) Chargeable to capital account but not chargeable to property of a character which is subject to depreciation or depletion

In computing taxable income such deferred expenses shall be allowed as deduction ratably distributed over a period of not less than sixty (60) months as may be elected by the taxpayer (beginning with the month in which the taxpayer first realizes benefits from such expenditures)

The election provided by paragraph (2) hereof may be made for any taxable year beginning after the effectivity of this Code but only if made not later than the time prescribed by law for filing the return for such taxable year The method so elected and the period selected by the taxpayer shall be adhered to in computing taxable income for the taxable year for which the election is made and for all subsequent taxable years unless with the approval of the Commissioner a change to a different method is authorized with respect to a part or all of such expenditures The election shall not apply to any expenditure paid or

42

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERincurred during any taxable year for which the taxpayer makes the election

(3) Limitations on Deduction - This Subsection shall not apply to

(a) Any expenditure for the acquisition or improvement of land or for the improvement of property to be used in connection with research and development of a character which is subject to depreciation and depletion and

(b) Any expenditure paid or incurred for the purpose of ascertaining the existence location extent or quality of any deposit of ore or other mineral including oil or gas

(J) Pension Trusts - An employer establishing or maintaining a pension trust to provide for the payment of reasonable pensions to his employees shall be allowed as a deduction (in addition to the contributions to such trust during the taxable year to cover the pension liability accruing during the year allowed as a deduction under Subsection (A) (1) of this Section ) a reasonable amount transferred or paid into such trust during the taxable year in excess of such contributions but only if such amount (1) has not theretofore been allowed as a deduction and (2) is apportioned in equal parts over a period of ten (10) consecutive years beginning with the year in which the transfer or payment is made

(K) Additional Requirements for Deductibility of Certain Payments - Any amount paid or payable which is otherwise deductible from or taken into account in computing gross income or for which depreciation or amortization may be allowed under this Section shall be allowed as a deduction only if it is shown that the tax required to be deducted and withheld therefrom has been paid to the Bureau of Internal Revenue in accordance with this Section 58 and 81 of this Code

(L) Optional Standard Deduction - In lieu of the deductions allowed under the preceding Subsections an individual subject to tax under Section 24 other than a nonresident alien may elect a standard deduction in an amount not exceeding ten percent (10) of his gross income Unless the taxpayer signifies in his return his intention to elect the optional standard

deduction he shall be considered as having availed himself of the deductions allowed in the preceding Subsections Such election when made in the return shall be irrevocable for the taxable year for which the return is made Provided That an individual who is entitled to and claimed for the optional standard deduction shall not be required to submit with his tax return such financial statements otherwise required under this Code Provided further That except when the Commissioner otherwise permits the said individual shall keep such records pertaining to his gross income during the taxable year as may be required by the rules and regulations promulgated by the Secretary of Finance upon recommendation of the Commissioner

(M) Premium Payments on Health andor Hospitalization Insurance of an Individual Taxpayer - The amount of premiums not to exceed Two thousand four hundred pesos (P2400) per family or Two hundred pesos (P200) a month paid during the taxable year for health andor hospitalization insurance taken by the taxpayer for himself including his family shall be allowed as a deduction from his gross income Provided That said family has a gross income of not more than Two hundred fifty thousand pesos (P250000) for the taxable year Provided finally That in the case of married taxpayers only the spouse claiming the additional exemption for dependents shall be entitled to this deduction

Notwithstanding the provision of the preceding Subsections The Secretary of Finance upon recommendation of the Commissioner after a public hearing shall have been held for this purpose may prescribe by rules and regulations limitations or ceilings for any of the itemized deductions under Subsections (A) to (J) of this Section Provided That for purposes of determining such ceilings or limitations the Secretary of Finance shall consider the following factors (1) adequacy of the prescribed limits on the actual expenditure requirements of each particular industry and (2) effects of inflation on expenditure levels Provided further That no ceilings shall further be imposed on items of expense already subject to ceilings under present law

43


B OSD IN SEC 34 (L) NIRC

(L) Optional Standard Deduction - In lieu of the deductions allowed under the preceding Subsections an individual subject to tax under Section 24 other than a nonresident alien may elect a standard deduction in an amount not exceeding ten percent (10) of his gross income Unless the taxpayer signifies in his return his intention to elect the optional standard deduction he shall be considered as having availed himself of the deductions allowed in the preceding Subsections Such election when made in the return shall be irrevocable for the taxable year for which the return is made Provided That an individual who is entitled to and claimed for the optional standard deduction shall not be required to submit with his tax return such financial statements otherwise required under this Code Provided further That except when the Commissioner otherwise permits the said individual shall keep such records pertaining to his gross income during the taxable year as may be required by the rules and regulations promulgated by the Secretary of Finance upon recommendation of the Commissioner

C SPECIAL DEDUCTIONS IN SEC 37 AND 38 NIRC AND IN SPECIAL LAWS LIKE BOI LAW [EO226]

1 SEC 37 Special Provisions Regarding Income and Deductions of Insurance Companies Whether Domestic or Foreign ndash

(A) Special Deduction Allowed to Insurance Companies - In the case of insurance companies whether domestic or foreign doing business in the Philippines the net additions if any required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts may be deducted from their gross income Provided however That the released reserve be treated as income for the year of release

(B) Mutual Insurance Companies - In the case of mutual fire and mutual employers liability and mutual workmens compensation and mutual casualty insurance companies requiring their members to make premium deposits to provide for losses and expenses said companies shall not return as income any portion of the premium deposits returned to

their policyholders but shall return as taxable income all income received by them from all other sources plus such portion of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves

(C) Mutual Marine Insurance Companies - Mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid to policyholders on account of premiums previously paid by them and interest paid upon those amounts between the ascertainment and payment thereof

(D) Assessment Insurance Companies- Assessment insurance companies whether domestic or foreign may deduct from their gross income the actual deposit of sums with the officers of the Government of the Philippines pursuant to law as additions to guarantee or reserve funds

2 SEC 38 Losses from Wash Sales of Stock or Securities -

(A) In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that within a period beginning thirty (30) days before the date of such sale or disposition and ending thirty (30) days after such date the taxpayer has acquired (by purchase or by exchange upon which the entire amount of gain or loss was recognized by law) or has entered into a contact or option so to acquire substantially identical stock or securities then no deduction for the loss shall be allowed under Section 34 unless the claim is made by a dealer in stock or securities and with respect to a transaction made in the ordinary course of the business of such dealer

(B) If the amount of stock or securities acquired (or covered by the contract or option to acquire) is less than the amount of stock or securities sold or otherwise disposed of then the particular shares of stock or securities the loss form the sale or other disposition of which is not deductible shall be determined under rules and regulations prescribed by the Secretary of Finance upon recommendation of the Commissioner

(C) If the amount of stock or securities acquired (or covered by the contract or option to acquire which) resulted in the non-deductibility of the loss shall be determined under rules and regulations prescribed by the Secretary of Finance upon recommendation of the Commissioner

44

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRER3 EXECUTIVE ORDER NO 226 July 16 1987

ndashTHE OMNIBUS INVESTMENTS CODE OF 1987

III KINDS OF ITEMIZED DEDUCTIONS

A BUSINESS EXPENSE

1 Requisites of Business Expense to be deductible

1) ordinary and necessary2) paid or incurred win the

taxable year3) paid or incurred in carrying on

a trade or business4) Substantiated with official

receipts or other adequate records

5) if subject to withholding taxes proof of payment to the BIR must be shown

6) must be reasonable under the circumstances

B Kinds of Business Expense1) Compensation for personal

servicesi Requisites for

deductibilityii Examples

2) Travelling expenses (Sec65amp66 RR2)

i Requisites for deductibility

3) Representation and entertainment expenses


4) Advertising and promotional expenses


5) Rent expense (RR 8-9 Oct 15 1990)

6) Cost of materials and supplies7) Repairs

45

CASES1 ATLAS VS MINING2 WELCH VS HELVERING3 COLLECTOR VS PHIL EDUC CO4 HOSPITAL DE SAN JUAN DE DIOS VS DIOS5 ESSO STANDARD EASTERN VS CIR6 BASILAN VS CIR7 CIR VS GEN FOODS

B INTEREST EXPENSES

Requisites for deductibility

CASES 1 KEUNZE VS CIR2 PICOP VS CA

C TAXES

1 EXCEPTION

2 REQUISITES FOR DEDUCTIBILITY

CASES 1 GUTIERREZ V COLLECTOR2 COM V AMERICAN RUBBER3 CEBER PORTLAND VS COLLECTOR

D TAX CREDIT


46

E LOSSES

CASES 1 MARCELO VS COLLECTOR2 CITY OF LUMBER VS DOMINGO3 PHIL SUGAR VS COLLECTOR4 PLARIDEL VS COLLECTOR5 CIR VS PRISCILLA 6 COM VS ASTURIAS7 PHIL SUGAR VS POSADAS8 CU UNJEING SONS VS BTA

F BAD DEBTS

CASES 1 COLLECTOR VS GOODRICH2 FERNANDEZ V COLLECTOR3 PRC VS COM4 PHILEX MINING VS CIR

G DEPRECATION

CASES 1 BASILAN ESTATES INC2 ZAMORA VS COLLECTOR3 LIMPAN INVESTM V COLLECTOR

H DEPLETION

I CHARITABLE AND OTHER CONTRIBUTION

J RESEARCH AND DEVELOPMENT EXPENDITURES

K EMPLOYERrsquoS CONTRIBUTION TO PENSION TRUST

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRERIV OSD-OPTIONAL STANDARD DEDUCTION

V SPECIAL DEDUCTIONS ALLOWED INSURANCE OMPANIES

VI ITEMS NOT DEDUCTIBLE

47


DEDUCTIBLE INTEREST EXPENSE

48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS

III COMPUTATION OF TAX ON ESTATE AND TRUSTS

CAPITAL TRANSACTIONS

55

i INDIVIDUAL INCOME TAXATION

ii CORPORATE INCOME TAXATION

iii COMMON FEATURES

iv CREDITABLE WHOLDNG TAX SYSTEM

v FINAL WITHHOLDING TAX SYSTEM

Situs of Taxation (Who are taxable)

CORPORATIONS

Jurisdiction to Taxation (who are taxable)

Corporation





C CONTROL TEST

Supplementary Discussion on Some Items Included in Gross Income

a Resident Citizen (Art IV Consti)





REQUISITES FOR DEDUCTIBILITY

REVIEWER- TAXATION CLASS of ATTY IBANEZ CHARMAGNE FERRER(F) A foreign corporation whether engaged or not in trade or business in the Philippines is taxable only on income derived from sources within the Philippines Income Capital

Classification of Taxpayers

a Individuals1) citizens

11 resident citizens (RC)12 non-resident citizens (NRC)

2) aliens21 resident aliens (RA)22 non-resident aliens (NRA)221 engaged in trade or business

within the Philippines (NRAETB)

222 Not engaged in trade orbusiness within the Philippines(NRANETB)

b Corporations1) Domestic (DC)2) Foreign

21 resident foreign corporation (RFC)22 non-resident foreign corporation(NRFC)

c Estatesd Trustse Partnerships

INDIVIDUALS

Situs of Taxation (Who are taxable)1 Resident Citizen (Art 4 Consti)

RESIDENT ndash a citizen is deemed as a resident of the Philippines unless he qualifies as a nonresident under Sec 22E of the NIRC

-taxable for income derived from all sources based on taxable (ie net) income

Section 1 The following are citizens of the Philippines [1] Those who are citizens of the Philippines at the time of the adoption of this Constitution[2] Those whose fathers or mothers are citizens of the Philippines

[3] Those born before January 17 1973 of Filipino mothers who elect Philippine

citizenship upon reaching the age of majority and

[4] Those who are naturalized in accordance with law

2 Non-resident Citizen

A non-resident citizen means aFilipino citizen

i who establishes to the satisfaction of the Commissioner the fact of their physical presence abroad with a definite intention to reside therein

ii who leaves the Philippines during the taxable year to reside abroad either as an immigrant or for employment on a permanent basis

iii who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year

iv who is previously considered as a nonresident and who arrives in the Philippines at any time during the taxable year to reside thereat permanently shall be considered nonresident for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines

v The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be for purpose of this Section [Sec22 (E)]

NOTES An OVERSEAS CONTRACT WORKER is taxable only on income from sources within the Philippines (Sec 23 (c))

NOTE FURTHER A seaman who is a Filipino citizen and who receives compensation for services rendered abroad as member of the complement of a vessel engaged exclusively in international trade is treated as an overseas contract worker

Length of stay is indicative of intention A citizen of the Philippines who shall have stayed outside the Philippines for 183 days or more by the end of the year is a non-resident citizen His presence abroad however need not be continuous [RR1-79]

3 Resident alien - means an individual whose

2

























3






















4



























5



FRUIT









E TAXABLE INCOME









ASSET AND ACTIVITY







6

CASE 1 CIR V PAL

CASE 1 COM V BOAC



VII INCOME TAX










C CONTROL TEST





IX GROSS INCOME




7


CASE 1 RUTKIN V US







II BROAD DEFINITION


SEE BOOK- DIMAAMPAO


















8
















9

















ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST
































3






















4



























5



FRUIT









E TAXABLE INCOME









ASSET AND ACTIVITY







6

CASE 1 CIR V PAL

CASE 1 COM V BOAC



VII INCOME TAX










C CONTROL TEST





IX GROSS INCOME




7


CASE 1 RUTKIN V US







II BROAD DEFINITION


SEE BOOK- DIMAAMPAO


















8
















9

















ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST





























4



























5



FRUIT









E TAXABLE INCOME









ASSET AND ACTIVITY







6

CASE 1 CIR V PAL

CASE 1 COM V BOAC



VII INCOME TAX










C CONTROL TEST





IX GROSS INCOME




7


CASE 1 RUTKIN V US







II BROAD DEFINITION


SEE BOOK- DIMAAMPAO


















8
















9

















ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST

































5



FRUIT









E TAXABLE INCOME









ASSET AND ACTIVITY







6

CASE 1 CIR V PAL

CASE 1 COM V BOAC



VII INCOME TAX










C CONTROL TEST





IX GROSS INCOME




7


CASE 1 RUTKIN V US







II BROAD DEFINITION


SEE BOOK- DIMAAMPAO


















8
















9

















ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









FRUIT









E TAXABLE INCOME









ASSET AND ACTIVITY







6

CASE 1 CIR V PAL

CASE 1 COM V BOAC



VII INCOME TAX










C CONTROL TEST





IX GROSS INCOME




7


CASE 1 RUTKIN V US







II BROAD DEFINITION


SEE BOOK- DIMAAMPAO


















8
















9

















ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









VII INCOME TAX










C CONTROL TEST





IX GROSS INCOME




7


CASE 1 RUTKIN V US







II BROAD DEFINITION


SEE BOOK- DIMAAMPAO


















8
















9

















ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST












II BROAD DEFINITION


SEE BOOK- DIMAAMPAO


















8
















9

















ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST























9

















ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST
























ILLUSTRATION

10

















TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST
























TAXATION


TAXATION



2








TAXATION

F DISADVANTAG

ES OF NET INCOME




2














11


























12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST

































12


























13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST
































13
































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST





































AMARILLA




























egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST


































egrave CASE LAW




15




















fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST



























fund













16



























17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST

































17



























18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST


































18

















B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST























B NATURE OF FBT


Effective 1198 34

1199 33

110032





C PURPOSE OF FBT


































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST






































20






























21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST





































21



















Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST


























Single

5000000

2000000

Head of the Family

5000000

2500000

Married

5000000

3200000



2500000

800000

22




(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST










(RA 9504 JUNE 17 2008)














Married Individuals






- Additional








23





































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST










































24


































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









































25
































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST







































26


KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









KINDS OF DIVIDENDS








2) Stock Dividends



























27




Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST











Tax Due is

1

Not Over 10000 = 5

2

Over 10000

but not over

30000 =

500 +


3

Over 30000

but not over

70000 =

2500 +


4

Over 70000

but not over

140000 =

8500 +


5

Over 140000

but not over

250000 =

22500 +


6

Over 250000

but not over

500000 =

50000 +


7

Over 500000 =

125000 +






Gross 16000

Income 0


Taxable Income

110000


Tax Due 165008500+ 20(110000-70000)




28














General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST





















General Types





A In general


o 32 (2000-2005)o 35 (2006-2008)o 30 (2009 ONWARDS)











29
















B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST























B EXCEPTIONS


COAL GEOTHERMAL











30









NBPP37






D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST












D MCIT see pp 40-43

31

NBPP37






NBPP40






E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









E IAET = 10

(SEC 29 NIRC RR 2-2001) pp 43-45



32


1 COMMON TAX RATES

2 DOMESTIC CORP








CASES 1 CIR VS CA








DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST















DEDUCTION-












hospitals(d)GOCCs













33




CASES 1 CIR VS CA


Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









Itemized Deductions



I BASIC PRINCIPLES
















34





5 BPI VS TRINIDAD



(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









(A) Expenses -











(B) Interest-


35










(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST

















(C) Taxes-















36









(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST
















(D) Losses -







37















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST






















(E) Bad Debts -


38



(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST










(F) Depreciation -












39













40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST




















40













41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST




















41


















42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST

























42











43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST


















43















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST






















44




A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST











A BUSINESS EXPENSE



















45


B INTEREST EXPENSES



C TAXES

1 EXCEPTION



D TAX CREDIT


46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









46

E LOSSES


F BAD DEBTS


G DEPRECATION


H DEPLETION







47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST











47



48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST










48


49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









49


50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









50


51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









51


52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









52


53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









53


ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









ESTATE AND TRUST

1 ESTATE

54


II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST









II TRUSTS



55



iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST










iii COMMON FEATURES




CORPORATIONS


Corporation





C CONTROL TEST








Present Income Tax System

Documents

Transcript of Present Income Tax System