Lecture Notes XIII
Selected Topics on Philippine Taxation
I. Sources of Revenue from Internal Revenue Tax
Internal Revenue Taxes are taxes that are specifically provided by R.A 8424- The National Internal Revenue Code of the Philippines Section 21 of the NIRC provides the following taxes, fees and charges that are deemed to be National Internal Revenue Taxes: 1. Income tax is the right to earn an income by engaging in an occupation, the basis of which is the net taxable income. 2. Business tax is the right to make an onerous transfer in the normal conduct of business, the basis of which is the net sale or gross receipts.
General Consumption tax or other percentage taxes- refers to percentage taxes on sales or gross receipts of non- VAT business. Percentage taxes are basically levied on the retail sales before consumption
Value-added tax- is levied on the consumption of goods and utilization of services in the Philippines - The value added tax is applied on every stage of distribution of materials, supplies and services purchased.
Excise tax- This is commonly levied on production and importation of products that are generally harmful to health -"sin products," these are collected with excise tax. Under the Tax Code, sin products include tobacco, alcohol and luxury items, among others. -Not all production and importation are subject to excise tax. Only those goods that are either harmful or wasteful are subject to excise tax to discourage their consumptions and usage
Note: In general, income tax is paid only when there is net income. When there are losses, income tax is not to be paid, except when the income of a corporation is subject to minimum corporate income tax (MCIT). However, the business is required to pay business tax whether there is net income or loss because the basis of business tax is net sales or gross receipts.
3. Transfer tax is the right to make casual and gratuitous transfer of one's property to the other person. a.
Estate tax- The transfer could be upon the death of the previous owner which would be subject to estate tax
- It is levied on the decedent’s estate and not on the heir receiving the property.
- The object of estate tax is to tax the transfer of economic benefits and enjoyment of property from a decedent person to the heir.
Donor's tax- “Gift Tax” the transfer could be during the lifetime of the donor (donation inter-vivos), which would be subject to donor's tax.
- Is an excise tax imposed on the right to transfer gratuitously, directly or indirectly, real and personal properties, tangible or intangible out of the owner’s liberality in favor of another that accepts the gift.
- Donor’s tax is not imposed on the donor, donee or property donated but upon the right of the donor to donate
4. Documentary stamp tax- is the tax on the right to enter into a transaction that is described in the document needed to be filed in any government office.
II. Personal Income Tax
Income- Income means all wealth, which flows into the taxpayer other than as a mere return of capital.
Gross Income- Gross income means all income derived from whatever source
Compensation for services, in whatever form paid, including but not limited to fees, salaries, wages, commissions and similar item •
Gross income derived from the conduct of trade or business or the exercise of profession •
Gains derived from dealings in property
Prizes and winnings
Partner's distributive share from the net income of the general professional partnerships
Exclusions from gross income
Amount received by insured as return of premium
Gifts, bequests and devises
Compensation for injuries or sickness
Income exempt under treaty
Retirement benefits, pensions, gratuities, etc.
income derived by foreign government...
References: Valencia, Edwin G. and Gregorio F. Roxas. Transfer and Business Taxation Principles and Laws with Accounting Applications. Baguio City: Valencia Educational Supply, 2009.
Bureau of Internal Revenue, www.bir.gov.ph/taxinfo/tax_income.html
Department of Finance. What you need to know about RA 9337 The Reformed Value Added Tax Law. www.vatreform.gov.ph
Republic Act 9504, The Reformed Value Added Tax Law www.lawphil.net/statutes/repacts/.../ra_9504_2008.html
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