Professional Documents
Culture Documents
Income tax return a sworn instrument in w/c the TP discloses the nature & extent of his tax
liability by formally making a report of his income & allowable deductions for the taxable yr
in the prescribed tax form
CLASSES of ITRs
1.
2.
3.
4.
5.
Individual ITR
Corporation ITR
ITR of GPPs
Fiduciary ITR
Miscellaneaous Returns
Individual Return
SEC. 51. Individual Return. (A) Requirements. (1) Except as provided in paragraph (2) of this Subsection, the following individuals are required to file an income tax
return:
(a) Every Filipino citizen residing in the Philippines;
(b) Every Filipino citizen residing outside the Philippines, on his income from sources within the Philippines;
(c) Every alien residing in the Philippines, on income derived from sources within the Philippines; and
(d) Every nonresident alien engaged in trade or business or in the exercise of profession in the Philippines.
(4) The income tax return shall be filed in DUPLICATE by the following persons:
(a) A resident citizen - on his income from all sources;
(b) A nonresident citizen - on his income derived from sources within the Philippines;
(c) A resident alien - on his income derived from sources within the Philippines; and
(d) A nonresident alien engaged in trade or business in the Philippines - on his income derived from sources within the
Philippines.
Where
1.
2.
3.
4.
5.
to file?
Authorized agent bank
Revenue district officer
Collection agent
Duly authorized city treasurer where he is legally residing
Office of the commissioner
When to file?
On or before April 15 of each year
It is now mandatory for the H&W to compute separately their respective total taxable
incomes. If any income cannot be definitely attributed to either, the same shall be divided
equally between them. In any case, both should file only 1 consolidated return. The total
income tax payable is the sum of their total income tax determined separately.
What about persons with disability?
If the TP is unable to make his own return the return may be made by his duly
authorized agent/rep or by the guardian, who, in assuming the responsibility of
making the return, shall incur penalties for erroneous, false or fraudulent returns.
decedent is taxable directly to the HEIRs or beneficiaries. Each heir or beneficiary must
include in his ITR his DISTRIBUTIVE SHARE of the net income of the estate or coownership.
The personal & additional exemptions shall be allowed in full for the decedent & for the
heirs or beneficiaries & the estate is likewise entitled to exemptions provided in Sec
55.
When to pay (applies to both individuals and corporations)
SEC. 56. Payment and Assessment of Income Tax for Individuals and Corporation. (A) Payment of Tax. (1) In General. - The total amount of tax imposed by this Title shall be paid by the person subject thereto at the time
the return is filed. In the case of tramp vessels, the shipping agents and/or the husbanding agents, and in their
absence, the captains thereof are required to file the return herein provided and pay the tax due thereon before their
departure. Upon failure of the said agents or captains to file the return and pay the tax, the Bureau of Customs is
hereby authorized to hold the vessel and prevent its departure until proof of payment of the tax is presented or a
sufficient bond is filed to answer for the tax due.
(2) Installment of Payment. - When the tax due is in excess of Two thousand pesos (P2,000), the taxpayer other than a
corporation may elect to pay the tax in two (2) equal installments in which case, the first installment shall be paid at
the time the return is filed and the second installment, on or before July 15 following the close of the calendar year. If
any installment is not paid on or before the date fixed for its payment, the whole amount of the tax unpaid becomes
due and payable, together with the delinquency penalties.
(3) Payment of Capital Gains Tax. - The total amount of tax imposed and prescribed under Section 24 (c), 24(D), 27(E)
(2), 28(A)(8)(c) and 28(B)(5)(c) shall be paid on the date the return prescribed therefor is filed by the person liable
thereto: Provided, That if the seller submits proof of his intention to avail himself of the benefit of exemption of capital
gains under existing special laws, no such payments shall be required : Provided, further, That in case of failure to
qualify for exemption under such special laws and implementing rules and regulations, the tax due on the gains
realized from the original transaction shall immediately become due and payable, subject to the penalties prescribed
under applicable provisions of this Code: Provided, finally, That if the seller, having paid the tax, submits such proof of
intent within six (6) months from the registration of the document transferring the real property, he shall be entitled
to a refund of such tax upon verification of his compliance with the requirements for such exemption.
In case the taxpayer elects and is qualified to report the gain by installments under Section 49 of this Code, the tax
due from each installment payment shall be paid within (30) days from the receipt of such payments.
No registration of any document transferring real property shall be effected by the Register of Deeds unless the
Commissioner or his duly authorized representative has certified that such transfer has been reported, and the tax
herein imposed, if any, has been paid.
(B) Assessment and Payment of Deficiency Tax. - After the return is filed, the Commissioner shall examine it and
assess the correct amount of the tax. The tax or deficiency income tax so discovered shall be paid upon notice and
demand from the Commissioner.
As used in this Chapter, in respect of a tax imposed by this Title, the term "deficiency" means:
(1) The amount by which the tax imposed by this Title exceeds the amount shown as the tax by the taxpayer upon his
return; but the amount so shown on the return shall be increased by the amounts previously assessed (or collected
without assessment) as a deficiency, and decreased by the amount previously abated, credited, returned or otherwise
repaid in respect of such tax; or (2) If no amount is shown as the tax by the taxpayer upon this return, or if no return
is made by the taxpayer, then the amount by which the tax exceeds the amounts previously assessed (or collected
without assessment) as a deficiency; but such amounts previously assessed or collected without assessment shall
first be decreased by the amounts previously abated, credited returned or otherwise repaid in respect of such tax.
Sale or exchange of stock NOT traded thru the local stock exchange
Within 30 days after each transaction & final consolidated return on or before Apr 15
Sale or disposition of real property
Within 30 days following each sale or other disposition
Gains received by installment
Within 30 days from receipt of each installment
Corporate returns
SEC. 52. Corporation Returns. (A) Requirements. - Every corporation subject to the tax herein imposed, except foreign corporations not engaged in
trade or business in the Philippines, shall render, in duplicate, a true and accurate quarterly income tax return and
final or adjustment return in accordance with the provisions of Chapter XII of this Title. The return shall be filed by the
president, vice-president or other principal officer, and shall be sworn to by such officer and by the treasurer or
assistant treasurer.
(B) Taxable Year of Corporation. - A corporation may employ either calendar year or fiscal year as a basis for filing its
annual income tax return: Provided, That the corporation shall not change the accounting period employed without
prior approval from the Commissioner in accordance with the provisions of Section 47 of this Code.
(C) Return of Corporation Contemplating Dissolution or Reorganization. - Every corporation shall, within thirty (30)
days after the adoption by the corporation of a resolution or plan for its dissolution, or for the liquidation of the whole
or any part of its capital stock, including a corporation which has been notified of possible involuntary dissolution by
the Securities and Exchange Commission, or for its reorganization, render a correct return to the Commissioner,
verified under oath, setting forth the terms of such resolution or plan and such other information as the Secretary of
Finance, upon recommendation of the commissioner, shall, by rules and regulations, prescribe.
The dissolving or reorganizing corporation shall, prior to the issuance by the Securities and Exchange Commission of
the Certificate of Dissolution or Reorganization, as may be defined by rules and regulations prescribed by the
Secretary of Finance, upon recommendation of the Commissioner, secure a certificate of tax clearance from the
Bureau of Internal Revenue which certificate shall be submitted to the Securities and Exchange Commission.
(D) Return on Capital Gains Realized from Sale of Shares of Stock not Traded in the Local Stock Exchange . - Every
corporation deriving capital gains from the sale or exchange of shares of stock not traded thru a local stock exchange
as prescribed under Sections 24 (c), 25 (A)(3), 27 (E)(2), 28(A)(8)(c) and 28 (B)(5)(c), shall file a return within thirty
(30) days after each transactions and a final consolidated return of all transactions during the taxable year on or
before the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year.
SEC. 53. Extension of Time to File Returns. - The Commissioner may, in meritorious cases, grant a reasonable
extension of time for filing returns of income (or final and adjustment returns in case of corporations), subject to the
provisions of Section 56 of this Code.
All corporations, except (NRFC) foreign corporation not engaged in trade or biz in
Philippines (because theyre subject to final withholding tax already), are required to file:
o Quarterly income tax return, on a cumulative basis for the preceding quarters
(within 60 days following the close of each quarter)
o A final or adjustment return, on or before April 15
A corporation may use either calendar year or fiscal eyar basis for filing
For sale of exchange of stock not traded thru local stock exchanges, within 30 days after
each transaction and a final consolidated return of ALL transactions during the year
involuntary dissolution by the Securities and Exchange Commission, or for its reorganization, render a correct return
to the Commissioner, verified under oath, setting forth the terms of such resolution or plan and such other
information as the Secretary of Finance, upon recommendation of the commissioner, shall, by rules and regulations,
prescribe.
The dissolving or reorganizing corporation shall, prior to the issuance by the Securities and Exchange Commission of
the Certificate of Dissolution or Reorganization, as may be defined by rules and regulations prescribed by the
Secretary of Finance, upon recommendation of the Commissioner, secure a certificate of tax clearance from the
Bureau of Internal Revenue which certificate shall be submitted to the Securities and Exchange Commission.
After the corp adopts a plan or resolution for its dissolution, it must submit to the BIR,
within 30 days, a return specifying the terms of the resolution and other information. It
must secure a tax clearance certificate from the BIR which it will submit to the SEC before
its dissolution. (Sec 244, RR 2)
They have to submit to the BIR:
o A copy of the resolution
o Balance sheet at the date of dissolution and the income statement covering the
beginning of the year to the date of dissolution
o Names and addresses of the shareholders and their holdings
o Value and a description of the assets received in liquidation by each shareholder
(Sec 244, RR 2)
The approval of the SEC of liquidation is the starting point.
General professional partnerships and joint ventures for construction, and other exempt
corporations are STILL REQUIRED to file their tax return, which should specify:
o The items of gross income,
o The deductions allowed, and
o The names, TIN, addresses and shares of each partner
Fiduciary Returns
Guardians,
trustees,
executors,
administrator,
receivers,
conservators
&
all
persons/corporations acting in any fiduciary capacity, shall render, in duplicate, a return of
the income of the person, trust, or estate for whom or w/c they act, & be subject to all the
provisions in the Tax Code w/c apply to individuals in case such person, estate, or trus has a
GI of P20k or over during the taxable yr.
when acting for a corporation, a RECEIVER is NOT treated as a fiduciary, & in such case the
return shall be made as if by the corporation itself.
Miscellaneous Returns
1. Returns of withholding agents
2. Returns of information at source as to income payments other than payment described
in Sec 69
3. Returns of information of brokers
4. Returns as to information, etc of foreign corps
5. Returns of ERs covering tax withheld on wages
WT at source (57-59)
WT on quarterly individual & corporate income (74-76)
WT on wages (78-83)
Withholding of VAT (114,C)
Withholding of percentage tax (116-118)
Income subject to final tax refers to income wherein the tax due is fully collected through
the withholding tax system, wherein the payor of the income withholds the tax and then
remits it to the government.
Once full payment has been withheld and remitted, there is no more tax obligation.
The withholding agent is entitled to refund or tax credit. (CIR v Wander)
Principles of Final Withholding Tax (Section 2.57 (A), RR 2-98)
o The amount of tax withheld is full and final.
o The liability for payment of the tax rests primarily on the withholding agent as
payor.
i. In case he fails to withhold, he will be liable for the deficiency.
o The payee is not required to file an ITR for the particular income.
o The finality of the withheld tax is limited on that particular income and will not
extend to the payees other tax liability on said income.
i. For example a bank received income subject to final withholding tax, the
same income can still be subject to a percentage tax.
Basically, items under passive income are subject to FINAL TAX. And then you have other
FINAL TAXES here and there (like the FBT, BPRT, Capital Gains Tax, etc).
Kinds of WT at SOURCE:
1. Final Withholding Tax (FWT)
the amount of IT withheld by the withholding agent is constituted as a FULL &
FINAL payment of the IT due from the PAYEE on the said income.
The liability of payment of the tax rests primarily on the PAYOR as the withholding
agent. Thus, in case of his failure to withhold the tax or in case of under
withholding, the deficiency tax shall be collected from the payor.
The payee is not required to file an ITR for the particular income.
2. Creditable Withholding Tax
Taxes withheld on certain income payments are intended to equal or at least
approximate the tax due from the payee on said income.
The income recipient is still required to file an ITR, to report the income and/or pay
the difference bet the tax withheld & the tax due on the income.
Taxes withheld on income payments covered by the EWT & compensation income
are creditable in nature.
Cases When FWT @ Source Required:
1. @ 20% - passive income such as interest, royalties, dividends, prizes & other winnings
2. @ of 1% - CG presumed to have been realized from the sale/exchange of shares of
stock listed & traded through a local stock exchange
3. @ 6% - CG presumed to have been realized from the sale/exchange/other disposition
of real property
4. @ 25% - GI of NRAN
5. @ 15% - Gross compensation income received by aliens employed by RAH Qor ROH
Qof multinational corps, OBUs, & foreign petroleum service sub/contractors engaged in
petroleum operations in the PH
6. @ 30% - in the case of:
a. interests upon bonds, obligations or securities issued by domestic or RFCs
b. containing the so-called TAX FREE COVENANT clause (the obligor agrees to pay
any portion of the IT imposed upon the obligee, or to reimburse the obligee for
any portion of the tax, or to pay the interest without deduction for any tax w/c
the obligor may be required or permitted to pay thereon or to retain therefrom
under any law of the PH or any country),
c. payable either to citizens/aliens, residents/nonresidents
d. whether the interest or other payments upon those bonds, mortgages, deeds of
trust or other obligations are payable annually or at shorter or longer periods, &
whether the bonds, securities or obligations had been or will be issued or
marketed & the interest or other payment thereon paid, within or outside the
PH (57C)
7. @ 15% - in the case of branch profits remittances by a branch to its head office except
those activities under PEZA
8. @ 30% - GI of NRFC
9. @ 20% - interest on foreign loans contracted on/after Aug 1, 1986
10.@ 15% - dividends received by a NRFC from a domestic corp, liable to tax on
corporations, subject to the condition that the country in w/c the NRFC is domiciled
shall allow a credit against the tax due paid in the PH equivalent to 15% w/c represents
the difference bet the regular tax 30% on corps & the tax 15% on dividends to be
withheld by the corp
11.@ 25% - GI of NR Cinematographer film owners, lessors or distributors
12.@ 4.5% - rentals, lease & charter fees payable to NR owners or lessors of vessels
chartered by Ph nationals, to be withheld by the charterer, the withheld tax being a
final tax
13.@ not less than 7.5% - rentals, charter & other fees payable to NR lessors of aircraft,
machineries, & other equipment
14.@ 10% - interest income derived from foreign currency loans granted to residents
OBUs, or local commercial banks, including local branches of foreign banks
authorized by the BSP to transact business w/ OBUs
15.@ 10% - interest income derived from foreign currency loan granted by a depository
bank under the FCDS to residents OBUs in the Ph or other depository banks under the
said expanded system
16.@ not less than 1% but not more than 32% - the Sec of Finance may, upon the
recommendation of the CIR, require also the withholding of tax on items of income
payable to natural or juridical persons residing in the PH, by payoer-corporations or
persons as provided for by law w/c shall be credited against the IT liability of the TP for
the taxable yr (Sec 57B)
17.@ 32% - fringe benefit furnished or granted to the EE rank &file) by the ER, the final
tax being imposed on the grossed-up monetary value of the benefit
18.@ 10% - informers reward to persons instrumental to the discovery of violations of the
tax laws, based on the amt of revenues, surcharges or fees recovered and/or fine or
penalty imposed & collected, or the FMV of the smuggled/confiscated goods, or 1M per
case, whichever is lower.
Creditable Withholding Tax
(B) Withholding of Creditable Tax at Source. - The Secretary of Finance may, upon the recommendation of the
Commissioner, require the withholding of a tax on the items of income payable to natural or juridical persons, residing
in the Philippines, by payor-corporation/persons as provided for by law, at the rate of not less than one percent (1%)
but not more than thirty-two percent (32%) thereof, which shall be credited against the income tax liability of the
taxpayer for the taxable year.
Under the creditable withholding tax system, taxes withheld on certain income payments
are intended to equal or at least approximate the tax due of the payee on said income.
Creditable tax must be withheld AT SOURCE, but should still be included in the tax return
of the recipient.
1. Any excess shall be refunded and any deficiency shall be paid by the taxpayer.
The liability to withhold tax arises upon the accrual, not upon actual remittance. The
purpose of the withholding tax is to compel the agent to withhold under all circumstances.
1. Thus, it is when the right to receive income arises that determines when to include
that income as gross income, and when to apply withholding tax. (Filipinas
Synthetic v CA)
Creditable withholding tax intends to approximate the tax on the payee.
The subsequent remittal does not remove the burden on the income recipient. He still has
to file for the credit.
The payor withholds, and the payee gets credit. This is done so that the payor has
expenses that can be deducted, according to Section 34 (k)
Who are required to deduct and withhold for the creditable withholding taxes? (RR 2-98)
1. Any juridical person, whether or not engaged in trade or business
2. An individual, with respect to payments made in connection with his trade or
business
i. But for the disposition of real property, even those not engaged in trade or
business are withholding agents
3. All government offices including government-owned or controlled corporations, as
well as provincial, city and municipal governments.
15%
10%
Professional fees, talent fees for services but rendered by juridical persons
10%
Rentals for continued use or possession of real properties used in biz, which the
payor has not taken title
5%
5%
1%
15%
Income payment to certain brokers & agents, customs, insurance, real estate &
commercial brokers & fees of agents of pro entertainers
5%
10%
Real property which are NOT capital assets sold by a person engaged in the real
estate biz
1.5%/3%/
5%
7.5%
On additional payments by importers, shipping & airline companies to
government personnel for overtime services
15%
On the amount paid by any credit card company to any biz entity representing
the sale of goods, services made by them to cardholders
.5%
Payments made by any of the top 5,000 corporations to their local supplier of
goods
1%
1%
5%
Under such scenario, the critical part is the determination of the taxable base because some
taxes are chargeable to the payee (the non-resident or foreign party), while some are
chargeable to the (resident of Filipino party).
To illustrate the tax-free covenant above, let us assume that foreign party (say, A Co. Ltd.)
bills the equivalent of PhP1.5M for the lease of a specific machinery for use of a Philippine
local company (say, PhilCoy) under the contract. If the contract would provide that the
PhP1.5M PhilCoy will pay A Co. Ltd. is net of taxes, then, the above tax free covenant rule
would apply. Under the rules, lease of machinery by a non-resident foreign lessor is subject to
a final tax of 7.5% (Section 28(B)(4) of the Tax Code, as amended) so the final withholding tax
(FWT) on such lease payments may be applied as follows:
(E) Registration with Register of Deeds. - No registration of any document transferring real property shall be effected
by the Register of Deeds unless the Commissioner or his duly authorized representative has certified that such
transfer has been reported, and the capital gains or creditable withholding tax, if any, has been paid: Provided,
however, That the information as may be required by rules and regulations to be prescribed by the Secretary of
Finance, upon recommendation of the Commissioner, shall be annotated by the Register of Deeds in the Transfer
Certificate of Title or Condominium Certificate of Title: Provided, further, That in cases of transfer of property to a
corporation, pursuant to a merger, consolidation or reorganization, and where the law allows deferred recognition of
income in accordance with Section 40, the information as may be required by rules and regulations to be prescribed
by the Secretary of Finance, upon recommendation of the Commissioner, shall be annotated by the Register of Deeds
at the back of the Transfer Certificate of Title or Condominium Certificate of Title of the real property involved:
Provided, finally, That any violation of this provision by the Register of Deeds shall be subject to the penalties
imposed under Section 269 of this Code.
Withholding on Wages
Applies to ALL EMPLOYED individuals whether citizens or aliens deriving income from
compensation for services rendered in the Phil
(C) In the case of a trust administered in a foreign country, the deductions mentioned in Subsections (A) and (B) of
this Section shall not be allowed: Provided, That the amount of any income included in the return of said trust shall
not be included in computing the income of the beneficiaries.
SEC. 62. Exemption Allowed to Estates and Trusts. - For the purpose of the tax provided for in this Title, there shall be
allowed an exemption of Twenty thousand pesos (P20,000) from the income of the estate or trust.
SEC. 63. Revocable trusts. - Where at any time the power to revest in the grantor title to any part of the corpus of the
trust is vested (1) in the grantor either alone or in conjunction with any person not having a substantial adverse
interest in the disposition of such part of the corpus or the income therefrom, or (2) in any person not having a
substantial adverse interest in the disposition of such part of the corpus or the income therefrom, the income of such
part of the trust shall be included in computing the taxable income of the grantor.
SEC. 64. Income for Benefit of Grantor.(A) Where any part of the income of a trust (1) is, or in the discretion of the grantor or of any person not having a
substantial adverse interest in the disposition of such part of the income may be held or accumulated for future
distribution to the grantor, or (2) may, or in the discretion of the grantor or of any person not having a substantial
adverse interest in the disposition of such part of the income, be distributed to the grantor, or (3) is, or in the
discretion of the grantor or of any person not having a substantial adverse interest in the disposition of such part of
the income may be applied to the payment of premiums upon policies of insurance on the life of the grantor, such
part of the income of the trust shall be included in computing the taxable income of the grantor.
(B) As used in this Section, the term 'in the discretion of the grantor' means in the discretion of the grantor, either
alone or in conjunction with any person not having a substantial adverse interest in the disposition of the part of the
income in question.
SEC. 65. Fiduciary Returns. - Guardians, trustees, executors, administrators, receivers, conservators and all persons or
corporations, acting in any fiduciary capacity, shall render, in duplicate, a return of the income of the person, trust or
estate for whom or which they act, and be subject to all the provisions of this Title, which apply to individuals in case
such person, estate or trust has a gross income of Twenty thousand pesos (P20,000) or over during the taxable year.
Such fiduciary or person filing the return for him or it, shall take oath that he has sufficient knowledge of the affairs of
such person, trust or estate to enable him to make such return and that the same is, to the best of his knowledge and
belief, true and correct, and be subject to all the provisions of this Title which apply to individuals: Provided, That a
return made by or for one or two or more joint fiduciaries filed in the province where such fiduciaries reside; under
such rules and regulations as the Secretary of Finance, upon recommendation of the Commissioner, shall prescribe,
shall be a sufficient compliance with the requirements of this Section.
SEC. 66. Fiduciaries Indemnified Against Claims for Taxes Paid. - Trustees, executors, administrators and other
fiduciaries are indemnified against the claims or demands of every beneficiary for all payments of taxes which they
shall be required to make under the provisions of this Title, and they shall have credit for the amount of such
payments against the beneficiary or principal in any accounting which they make as such trustees or other
fiduciaries.
A trust is a legal arrangement where the owner of the property (trustor) transfers
ownership to a person (trustee) to hold and control the property for the benefit of another
person (beneficiary)
An estate is created by operation of law when an individual dies, leaving properties to
heirs.
Taxable estates and trusts are taxed in the same manner and on the same basis as in the
case of an individual.
The following are allowed deductions for the estate and trust:
o amount distributed to the beneficiaries, or
o amount collected by a guardian of an infant which is to be held or distributed as
the court may direct
in both these cases, the amount allowed shall be included in computing the
taxable income of the beneficiaries whether distributed to them or not
o Rule for income received by estates of deceased persons during the period of
administration or settlement of the estate, and in the case of income, which may
be either distributed to the beneficiary or accumulated: the amount paid or
credited to any legatee, heir or beneficiary shall be allowed as a deduction
Provided that the amount so allowed as a deduction shall be included in
computing the taxable income of the legatee, heir or beneficiary
Trusts and estates are entitled to a personal exemption equivalent to a single individual of
P20,000.
The income of a trust will be taxed to the:
o Trustor, if revocable trust
o Trustee, if irrevocable trust
When this provision will NOT apply: The income tax is NOT imposed on employees' trust
which forms part of a pension, stock bonus or profit sharing plan of an employer for the
benefit of some or all of his employees
o if contributions are made to the trust by such employer, or employees, or both, for
the purpose of distributing to such employees the earnings and principal of the
fund accumulated by the trust in accordance with such plan; and
o if under the trust instrument it is impossible, at any time prior to the satisfaction of
all liabilities with respect to employees under the trust, for part of the corpus or
income to (within the taxable year or thereafter) be used for, or diverted to,
purposes other than for the exclusive benefit of the employees.
o Any amount, however, actually distributed to any employee or distributee shall be
taxable to him in the year in which so distributed to the extent that it exceeds the
amount contributed by such employee or distributee.
Where any part of the income of a trust is, or in the discretion of the grantor
or of any person not having a substantial adverse interest in the disposition of
such part of the income
(within the taxable year or thereafter) used for, or diverted to other purposes (than for
the exclusive benefit of its EEs).
HOWEVER, any amount actually distributed to any EE or distribute shall be TAXABLE to the
extent that it exceeds the amount contributed by such EE or distributee.
IF the amount is received by the EE or his heirs from his ER as a consequence of his
SEPARATION from the service for any cause BEYOND his CONTROL exempt from tax
regardless of age or length of service.
*Any excess in the retirement fund after paying all liabilities & claims against the fund w/c will
revert to the company or employer is subject to income tax.
Deductions
Net Income
Exemption (P20k)
Taxable Income
Tax rate in 24A
Amt of Tax
Tax to be paid
by each trustee
In the case of trusts administered in a foreign country, the deductions mentioned above (A&B)
are NOT ALLOWED.
The taxable income of the trusts undiminished by any amounts distributed, paid or credited to
the beneficiaries will be taxed to the TRUSTEES..
However, the income included in the return of the trustees
is NOT included in computing the income of the beneficiaries.
Revocable trust one where, under the trust instrument, the power to revest in the grantor
title to the property transferred to the trust or any part of the corpus of such trust is vested
1. In the GRANTOR, either alone or in conjunction with any person not having substantial
adverse interest in the disposition of such part of the corpus, or the income therefrom;
or
2. In ANY PERSON not having a substantial adverse interest in the disposition of such part
of the corpus or the income therefrom.
*The income of the trust shall be included in computing the taxable income of the grantor who
still retains for himself control over the trust.
INCOME for BENEFIT of GRANTOR
SEC. 64. Income for Benefit of Grantor.(A) Where any part of the income of a trust (1) is, or in the discretion of the grantor or of any person not having a
substantial adverse interest in the disposition of such part of the income may be held or accumulated for future
distribution to the grantor, or (2) may, or in the discretion of the grantor or of any person not having a substantial
adverse interest in the disposition of such part of the income, be distributed to the grantor, or (3) is, or in the
discretion of the grantor or of any person not having a substantial adverse interest in the disposition of such part
of the income may be applied to the payment of premiums upon policies of insurance on the life of the grantor,
such part of the income of the trust shall be included in computing the taxable income of the grantor.
(B) As used in this Section, the term 'in the discretion of the grantor' means in the discretion of the grantor, either
alone or in conjunction with any person not having a substantial adverse interest in the disposition of the part of
the income in question
Income of a trust is held or distributed for the benefit of the grantor where any part of the
income
1. Is, or in the discretion of the grantor or of any person not having a substantial adverse
interest in the disposition of such part of the income may be held or accumulated for
future distribution to the grantor, or
2. May, in the discretion of the grantor or of any person not having a substantial adverse
interest in the disposition of such part of the income be distributed to the grantor, or
3. Is, or in the discretion of the grantor of any person not having a substantial interest in
the disposition of such part of the income, may be applied to the payment of premiums
upon policies of insurance on the life of the grantor.
*Such part of the income of the trust shall be included in computing the taxable income of the
grantor.
in the discretion of the grantor in the discretion of the grantor, either alone or in
conjunction with any person not having a substantial adverse interest in the disposition of
the part of the income in question.
Sec 64 is designed to prevent the TP from escaping the progressive tax rates on
individuals by the trust device where he retains control over the trust income.
FIDUCIARY RETURNS
SEC. 65. Fiduciary Returns. - Guardians, trustees, executors, administrators, receivers, conservators and all
persons or corporations, acting in any fiduciary capacity, shall render, in duplicate, a return of the income of the
person, trust or estate for whom or which they act, and be subject to all the provisions of this Title, which apply to
individuals in case such person, estate or trust has a gross income of Twenty thousand pesos (P20,000) or over
during the taxable year. Such fiduciary or person filing the return for him or it, shall take oath that he has
sufficient knowledge of the affairs of such person, trust or estate to enable him to make such return and that the
same is, to the best of his knowledge and belief, true and correct, and be subject to all the provisions of this Title
which apply to individuals: Provided, That a return made by or for one or two or more joint fiduciaries filed in the
province where such fiduciaries reside; under such rules and regulations as the Secretary of Finance, upon
recommendation of the Commissioner, shall prescribe, shall be a sufficient compliance with the requirements of
this Section.
SEC. 66. Fiduciaries Indemnified Against Claims for Taxes Paid. - Trustees, executors, administrators and other
fiduciaries are indemnified against the claims or demands of every beneficiary for all payments of taxes which
they shall be required to make under the provisions of this Title, and they shall have credit for the amount of such
payments against the beneficiary or principal in any accounting which they make as such trustees or other
fiduciaries.
Fiduciary Returns:
1. Guardians, trustees, executors, administrators, receivers, conservators, and all persons
or corporations, acting in any fiduciary capacity, shall render, in duplicate, a return of
the income of the person, trust, or estate for whom or which they act, and be subject
to all the provisions of the Tax Code w/c apply to individuals in case of such person,
estate, or trust has a GI of P20,000 or over during the taxable yr.
2. Such fiduciary or person filing the return for him or it, shall take OATH that he has
sufficient knowledge of the affairs of such person, trust, or estate to enable him to
make such return & that the same is, to the best of his knowledge & belief, true &
correct & be subject to all the provisions w/c apply to individuals.
3. A return made by or for one or to or more fiduciaries in the form prescribed filed in the
municipality or city in w/c such fiduciary resides shall be sufficient compliance w/ the
requirement of fiduciary returns.
4. A fiduciary acting as a guardian of a minor or other incap person must make a return
for such minor or incap person & pay the tax unless such minor or incap person
himself makes a return or cause it to be made. The parent is held to be the natural
guardian of a minor child.
*When acting for a corporation, a RECEIVER is not treated as a fiduciary, & in such case the
return shall be made as if by the corporation itself.
Returns in Case of 2 or More Trusts
1. Where, in the case of more than 1 trust, w/ the same creator and the same trustee, but
for different beneficiaries the TRUSTEE should make a SEPARATE return for each of
the trusts in his hands.
2. Where a trustee holds trusts, by different creators for the benefit of the same
beneficiary he should also make a return for each trust SEPARATEly.
3. Where a person creates 2 or more trusts in favor of the same beneficiary appointing 2
or more trustees, trustees should each make a SEPARATE return for each trust but in
such case, the CIR will consolidate the net incomes of the different trusts & compute
the tax on such consolidated income, allowing only one absolute exemption of P6,000.