INCOME AND BUSINESS TAXATION Flashcards
It refers to the inherent power of the state to demand enforced contribution for
a public purpose to support the government
Taxation as a power
It is the legislative act of laying a tax to raise income for the government to defray its necessary expenses.
Taxation as a process
are the enforced proportional contributions, generally payable in money, levied by the law-making body of the State by its sovereignty upon the persons or property within the jurisdiction for the support of the government and all public needs.
Taxes
Taxation is a means of allocating government burden to the
people.
Taxation as a mode of cost allocation
Theory of Taxation
Lifeblood Theory
Necessity Theory or Principle of Necessity
Ability to Pay Theory
Benefits Received Theory
Taxes are paid by the citizen to sustain the
activities and for the improvement of the government
Benefits Received Theory
Taxes are the lifeblood of the government; without it, the government can neither
operate nor survive.
Lifeblood Theory
Tax payments should be based relative to the ability of the taxpayers to pay.
Ability to Pay Theory
Tax laws are created to support the necessity of any state.
The burden for expenses to maintain the sovereignty, services of the government, and administrative expenses must be borne by its own people.
Necessity Theory or Principle of Necessity
Governing Bodies involved in Taxation
Department of Finance (DOF)
Bureau of Internal Revenue (BIR)
Bureau of Customs (BOC)
Tariff Commission (TC)
Land Transportation Office (LTO)
Duly Authorized Collectors
Local Offices
It is also called the Benefits-Protection Theory, wherein the basis of taxation is the reciprocal duties of protection and support between the state and its inhabitants.
Benefits Received Theory
has the main responsibility of managing the financial strength and fiscal policies of the government. It supervises and controls other agencies such as
Department of Finance (DOF)
The agency is tasked to assess and collect all taxes and necessary fees imposed by regulations, policies, and tax laws.
Bureau of Internal Revenue (BIR)
The office that is tasked to collect registration fees and motor vehicle
tax.
Land Transportation Office (LTO)
These are persons or banks authorized by BIR, BC, TC, and LTC to collect
taxes
Duly Authorized Collectors
These agencies are in charge of
implementing the policies set by the Tariff and Customs Code (TCC)
Bureau of Customs (BOC)
Tariff Commission (TC)
Provincial, City, Municipal, and Barangay Treasurer, etc
Local Offices
is a tax on a person’s income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions if any, authorized for such types of income, by the Tax Code, as
amended, or other special laws.
Income Tax
Types of Taxable Individuals
Resident Citizen (RC)
Non-Resident Citizen (NRC)
Resident Alien (RA)
Non-Resident Alien (NRA)
Special Taxpayers
A Filipino citizen who stayed permanently in the Philippines or stayed outside the
Philippines for less than 183 days during the taxable years.
Resident Citizen (RC)
A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis.
Non-Resident Citizen (NRC)
A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his
physical presence abroad with a definite intention to reside therein
Non-Resident Citizen (NRC)
A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time (183 days or more) during the taxable
year.
Non-Resident Citizen (NRC)
a person who is not a citizen of the Philippines but is residing within the Philippines, including foreign individuals who have stayed in the Philippines for more than one (1) year from date of
arrival
Resident Alien (RA)
who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated 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
Non-Resident Citizen (NRC)
An individual who shall come to the
Philippines and stay therein for an aggregate period of more than 180 days
Non-Resident Alien Engaged in Trade or Business (NRAETB)
An individual who is not a citizen
nor a resident and his stay does not exceed 180 days during the calendar year, and has no business income derived within the Philippines
Non-Resident Alien Not Engaged in Trade or Business (NRANETB)
An individual holding a managerial and/or technical positions employed by Regional
or Area Headquarters (RHQs), Regional Operating Headquarters (ROHQs) of Multinational Companies, Offshore Banking Units (OBU), and petroleum contractors and subcontractors.
Special Taxpayers
- Provision of 15% preferential rate will be retained for alien employees and Filipino employees occupying the same position employed by RHQs, ROHQs, OBUs, and petroleum service contractors and subcontractors.
- 15% preferential rate shall not be applicable to RHQs, ROHQs, OBUs, and
petroleum service contractors and subcontractors registered with the Securities and Exchange Commission (SEC) after January 01, 2018. - Existing RHQs, ROHQs, OBUs, and petroleum service contractors and subcontractors for qualified employees shall continue to avail of the preferential
tax rate for present and future qualified employees
R.A. No. 10963
(TRAIN Law)
15% preferential tax rate based on gross compensation income
1997 Tax Code
Those earning an annual salary of P250,000 or below will ____________ pay income tax
zero
Those earning between P250,000 and P400,000 per year will be charged an income tax rate of________ on the excess over P250,000.
20%
Those earning annual incomes between P400,000 and P800,000 will pay a fixed amount of __________ plus _______of the excess over P400,000
P30,000 plus 25%
Those with yearly salaries between P800,000 and P2 million will be charged a fixed amount of ________ plus_____ on the excess over P800,000
P130,000 plus 30%
High-income earners receiving salaries between P2 million and P8 million annually will pay a fixed amount of P________ plus ____% of the excess over P2 million
P490,000 plus 32%
the highest income tier receiving salaries of at least P8 million per year will have withholding taxes of ________ million plus ______of the excess over P8 million.
P2,410,000 plus 35%
Those earning between P250,000 and P400,000 per year will be charged a lower income tax rate of_________ on the excess over P250,000.
15%
___________________refers to the income derived by an employee. _______________all remuneration for services performed by an employee for his employer under an employee-employer relationship unless
exempted by the NIRC and pertinent laws.
Compensation income
BIR Form ______ is consistent
with the information contained in the employer’s BIR Form 1604-C.
2316
Taxpayers who derived solely from compensation are required to file BIR Form _____as their income tax return
(ITR).
1700
_____________ shall refer to a compensation earner who at the same time is engaged in business or practice of profession.
Mixed-income earner
means that the taxpayer derives his income from both compensation and
business or practice of profession.
Mixed income
is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange, or lease of goods or properties and services in the Philippines and on the importation of goods into the Philippines.
Value-Added Tax (VAT)
is an indirect tax, which may be shifted or passed on to the buyer, transferee, or lessee of goods, properties, or services. The party directly liable for the payment of the tax is the seller, importer, or service
provider, although the burden of the tax may be shifted to the consumer.
Value-Added Tax (VAT)
This tax means the VAT due on the sale, lease, or exchange of taxable goods or properties or services by any person registered or required to register under Section 236 of the Tax Code.
Output tax
means the VAT due on or paid by a VAT-registered on the importation of goods or local purchase ofmgoods, properties, or services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive input tax, and deferred input tax from the previous period
Input tax
