TAXATION : the act of

laying tax

Purpose of Taxation :
1.
Revenue purposes
2.
Regulatory purposes
3.
Compensatory purposes

Taxes : are the

enforced
proportional
contributions from
persons and
property levied by
the law making body
of the state by virtue
of its sovereignty for
the support of the
government and
public needs

NATURE OF
TAXATION
Inherent power of
sovereignty
Essentially legislative in
function
For public purposes
The strongest of all the
inherent powers of the
government
Territorial in operation
Subject to constitutional
and inherent limitation

NATURE OF THE POWER

OF TAXATION

It is inherent in sovereignty
It is legislative in character
It is subject to Constitutional
and Inherent limitation

BASIC PRINCIPLE OF A SOUND

TAX SYTEM
1.
2.

3.

FISCAL ADEQUACY
EQUALITY OR THEORITICAL JUSTICE :
based on ability to pay principle
ADMINISTRATIVE FEASIBILITY

ESSENTIAL CHARACTERISTIC OF TAX

It is an enforced contribution
It is generally payable in money
It is proportionate in character
It is levied on persons or property
It is levied by the state which has a jurisdiction over the person
or property
It is levied by the law making body of the state
It is levied for public purposes

Non Revenue Objectives of

Taxation

Strengthen anemic enterprise

Protect local industries
Bargaining tool
Halt inflation
Reduce inequalities in wealth
Promote science
Implement police power

TAX EXEMPTION

RELIGIOUS PURPOSES
RELIGIOUS,CHARITABLE, AND EDUCATIONAL ENTITIES, NON PROFIT CEMETERIES
AND CHURCES
NON-STOCK, NON-PROFIT EDUCATION INSTITUTION
THOSE WHICH HAD BEEN VETO BY THE PRESIDENT
GOVERNMENT ENTITIES
Business league, chamber of commerce or board of trade not organized for profit
General professional partnership
Labor. Agricultural, or horticular organization not organized principally for profit
Gifts made in account of marriage by parents to each of their legitimate. Recognized
natural or adopted children
Gifts for use of the national government
Gifts made in favor of educational institution, social welfare corporation, research
organization
Benefit payment to member made by the GSIS and SSS
Benefits from the US government through US veterans administration
Prize receive by winners in charity horse race
The annual senior citizen income of not more than P60,000 per annum
NON TERRITORIAL JURISDICTION

Constitutional Limitations

Due Process of Law

Equal Protection of the Law
Rule of uniformity and equity in taxation
No imprisonment for non payment of poll tax
Non-impairment of the obligations of contracts
Non-infringement of religious freedom
No appropriation for religious purposes
Exemption of religious, charitable, and educational entities, non-profit
cemeteries, and churches from property taxation
Exemption of non-stock, non-profit educational institutions from taxation
Concurrence by a majority of all members of the Congress for the passage of a
law granting tax exemption
Power of the President to veto any particular item or itens in a revenue or tariff
bill
Non-impairment of jurisdiction of the Supreme Court in tax cases

INHERENT LIMITATIONS

Requirement that levy must be for a public

purpose
Non-delegation of the legislative power to
tax
Exemption from taxation of government
entities
International Comity
Territorial Jurisdiction

Prohibition against
appropriation for religious
purposes

Prohibition against
infringement of religious
freedom

Basis : No Law shall be

made respecting an
establishment of religion,
or prohibiting the free
exercise thereof. The free
exercise and enjoyment of
religious profession and
worship, without
discrimination or
preference, shall forever
be allowed xxx (Sec. 5, Art.
III)

Basis : No public money or

property shall be appropriated,
applied, paid or employed,
directly or indirectly for use,
benefit or support or any sect,
church, denomination, sectarian
or institution or system of
religion or of any priest,
preacher, minister or other
religious teacher or dignitary as
such, except when such, except
when such priest, preacher,
minister or dignitary, is
assigned to the armed forces, or
any penal institutions, or
government orphanage or
leprosarium. (Sec. 29, Art. VI)

Prohibition against taxation of

religious, charitable, educational
entities

Basis : Charitable
institutions, churches and
parsonages or convents
appurtenant thereto,
mosques, non-profit
cemeteries, and all lands,
buildings and improvements
actually, directly, and
exclusively used for religious,
charitable or educational
purposes shall be exempt
from taxation (Sec. 28, Art
VI)

Prohibition against taxation of non-stock,

non-profit educational institution

Basis : All revenues and

assets of non-stock, nonprofit educational
institutions used actually,
directly, and exclusively for
educational purposes shall
be exempt from taxes and
duties xxx (Sec. 4, Art. XIV)
Subject to conditions
prescribed by law, all grants,
endowments, donations or
contributions used actually,
directly and exclusively for
educational purposes shall
be exempt from tax (Sec.4,
Art. XIV)

GRANTING OF TAX EXEMPTION

No law granting any tax exmption shall be

passed wihtuot the concurrence of a
majority of all members of the Congress
(Sec. 28 (4) Art. VI)

Delegation to the President

For purposes of practicality and expediency,

our Constitution expressly allows Congress
to authorize the President to fix within
specified limits, and subject to such
limitations and restrictions as it may
impose, tariff rates, import or export quotas,
tonnage and wharfage dues and other duties
or imposts.xxx(Sec.28, Art.VI)

Requirement of Uniformity Prohibition against

imprisonment for non-payment
and Equity
of poll tax

Basis : The rule of

taxation shall be uniform
and equitable (Sec.28,
Art. VI)

Basis : No person shall be

imprisoned for debt or
non payment of a poll tax
(Sec.20, Art.III)

STAGES OR PROCESSES OF TAXATION

1.

2.

3.

Levy determination of certain amount or

of certain percentage to be imposed on
persons, property or acts
Assessment : computation of the sum due,
giving of notice, making of the demand
Collection : taking or getting by proper
governmental agencies if taxes imposed

When to pay taxes

On or before April 15 of the current year

Classification of taxes
1. As to subject matter or object :
a. Personal, poll or capitation
b. Property
c. Excise
2. As to who bears the burden :
a. direct
b. indirect
3. As to determination of amount
a. specific
b. ad valorem
4. As to purpose :
a. general, fiscal or revenue
b. special or regulatory

5. As to scope
a. National
b. Municipal
6. As to graduation or rate
a. proportional
b. progressive
c. regressive

Kinds of National Internal Revenue Taxes

1.
2.
3.
4.

Income Tax
Estate and Donor Tax
Value Added Tax
Other percentage taxes : on
small business enterprise, on
carriers, on franchise holders,
on persons paying for overseas
communications, on banks and
non-bank financial
intermediaries, on life
insurance, on proprietors,
lessees or operators of
amusement, on winners of
prizes in horse races and jaialai, on sale, barter or
exchange of stocks

5. Excise tax on certain

goods
6. Documentary stamp tax
7. Other taxes : custom
duties, sugar adjustment
tax, narcotic drugs,
travel tax, private motor
vehicle tax, energy tax,
special education fund
tax

Income tax : tax on the net

income or the entire
income realized in one
taxable year
Transfer taxes:
Estate tax :tax on the right
of the deceased person to
transmit his estate to his
lawful heirs or
beneficiaries
Inheritance tax : tax on the
right of the heirs or
beneficiaries to receive the
estate of the deceased
person

1.

2.

Gift taxes :
Donors tax : tax levied on
the act of giving
Donees tax :
Value Added tax : uniform
tax imposed on each sale,
barter or exchange or
lease of goods, properties
or services

Value Added Tax

A uniform tax (0% or

10%) imposed on each
sale, barter, exchange or
lease of goods, properties
or services in the course of
trade or business as they
pass along the production
and distribution chain, the
tax being limited only to
the value added to such
goods, properties, or
services by seller,
transferor or lessor

It is levied on every
importation of goods

NATURE OF VAT

It is a privilege tax
It is a percentage tax
It is an indirect tax

RATE AND BASE OF THE TAX

1. On sale of goods or properties : tax is equivalent

to 10% of the gross selling price or gross value in
money of the goods or properties sold, bartered or
exchanged
2. On imported goods : tax is equivalent to 10%
based in total value used by the Bureau of Customs
3. On sale of services and use or lease of properties :
tax is equivalent to 10% of gross receipts derived by
any person engaged in the sale or exchange of
services for a fee or consideration including the use
or lease of properties whether real or personal

COMPUTATION OF THE TAX

Gross sales/rptsx
1/11

Output Tax

Less :purchase of
goods x 1/11

Input Tax

Output Tax Input

Tac

VAT payable

Sales
(domestic)

P660,000

Brokerage

330,000

Total

990, 000

Output Tax (1/11)

P90,000

Importation

P220,000

Local
purchases:
Raw
Materials

66,000

Supplies

44,000

Capital
Equipment

165,000

Services

Total

55,000

330,000

550,000

Less : Input
Tax

50,000

VAT PAYABLE

P40,00

Percentage Taxes are taxes measured by a certain

percentage of the gross selling price or gross value
of goods sold

Persons or enterprise Liable for percentage

taxes
Small business enterprise (<P500,000: 3%)
Domestic carriers (3%)
International carriers (3%)
Franchise grantees (3%)
Overseas Communications (10%)
Banks and Financial Intermediaries
Finance Companies (5%)
Life Insurance companies (5% of the premium)

Amusement
a. Proporietors or lessees or operators of
amusement places (cockpits, cabaret (18%),
boxing exhibition (10%), professional
basketbal games (15%), race tracks and jai
alai (30%)
`b. Winners in horse races (10% of the
dividend)

EXCISE TAX
taxes imposed on certain specified goods or articles manufactured or produced
in the Philippines for domestic sale or consumption and to things imported to
the Philippines.

Goods subject to excise taxes

1.

2.

Excise Tax :
Specific tax : weight or
volume
Ad valorem : value

Goods manufactured or
produced in the Philippines for
domestic sale or consumption
Imported items
Alcohol products :distilled
spirits, wines and fermented
liquor
Tobacco products : scrap
cuttings, tobacco, cigars and
cigarettes
Petroleum products
Misc.goods
Mineral products

Rates are levied in terms of

Volume
Length
Weight
Number

DOCUMENTARY STAMP TAX

Tax on documents,
instruments, and papers
evidencing the
acceptance, assignment,
sale or transfer of an
obligation, rights or
property incident

EFFECTS OF FAILURE TO STAMP

TAXABLE INSTRUMENTS

The document can not be

recorded in the government
registry
Such document, instrument
or paper or any record or
transfer of the same shall not
be admitted or used in
evidence in any court
No notary public or other
officer authorized to
administer oaths shall add
his jurat
Subject to penalty violation

Custom Duties
taxes levied by the government on goods exported from or
imported into the country

Classification
Regular : ad valorem,
specific, alternate,
compound
Special

Special Custom Duties

Dumping duty : imposed on a specific kind or

class of foreign article which is being imported
into, or sold for exportation to the Philippines
at a price less than the fair value
Countervailing duty : imposed on articles,
upon the production, manufacture or export of
which any bounty or subsidy is directly or
indirectly granted in the country of origin
and/ or exportation
Marking duty : on articles and containers
which have not been properly marked in any
official language in the Philippines
Retaliatory or discriminatory duty : imposed
upon articles of a foreign country which
discriminates against Philippine commerce

SUGAR ADJUSTMENT TAXES

commonwealth act 567
Purpose

To stabilize the sugar

industry
To obtain readjustment
benefits derived from sugar
industry
To limit the production of
sugar to areas more
economically suited for the
production
To afford labor employed in
the industry a living wage
and to improved their
working condition

Persons liable
Proprietors or operators
of mills in centrifugal
sugar
Owners or persons in
control of sugar lands

Taxes on Narcotic Drugs

tax imposed on drugs which produces insensibility, melancholy or

dullness of mind with delusions and which may be habit forming
(RA 953)

Fixed or Annual
Occupation Taxes
Specific Tax
Transfer Tax

The travel tax is a levy imposed by the Philippine

government on the following individuals who are
leaving the country irrespective of the place where the
air ticket is issued and the form or place of payment, as
provided for by Presidential Decree (PD) 1183, as
amended:

A. Citizens of the Philippines;

B. Permanent resident aliens whose immigration status maybe any of the following:
Sec. 13 Quota or Preference Immigrant Visa
Sec. 13 A Visa issued to an Alien Spouse of Philippine Citizen
Sec. 13 B Child born outside the Philippines by a 13A Mother
Sec. 13 C Child born in the Philippines by a 13A Mother
Sec. 13 D Loss of Citizenship by a Filipino Woman by her Marriage to an Alien
Sec. 13 E Returning Resident
Sec. 13 G Former Natural-born Citizen of the Philippines who was Naturalized by a
Foreign Country
TRV Temporary Residence Visa
RA 7919 Alien Social Integration Act of 1995
RC /RFC Recognition as Filipino Citizen
RA 7837 Permanent Resident

C. Non-resident aliens who have stayed in the Philippines for more than one(1) year.
Note: Non-immigrant aliens who have not stayed in the Philippines for more than a year are
not covered by the travel tax. However, PTA F356 need to be prepared by the ticketing officer
for passengers with the following immigration status except for FGO & their dependents (Sec.
9E) who have stayed for more than a year, they have to secure Travel Tax Exemption
Certificate.
EO 408 / E0 Tourist without visa
- EO 21 Stay valid for 21 days
- 11 Days Stay valid for 11 days
- 7 Days Stay valid for 7 days
BB Balikbayan
Sec. 9A Temporary Visitor coming for business or for pleasure or for reasons of health
Sec. 9B Transit Passengers
Sec. 9C Foreign Seamen
Sec. 9D Treaty Trader / Investor
Sec. 9E Foreign Government Officials
Sec. 9F Foreign Students
Sec. 9G Pre-arranged Employee
47 A2/PEZA Special Non-immigrant Visa
47B Refugees
PD 1034 Executives of Multinational Companies
EO 63 / EO 226 / RA 8756 Omnibus Investment Act of 1987
- SIRV - Special Investor Resident Visa

RA 7227 Bases Conversion and Development Act of 1992

- SSIV - Subic Special Investor's Visa
- SSRV - Subic Special Retiree Visa
- SSRV - Subic Special Retiree Visa
- SSWV - Subic Special Working Visa
- SCWV - Special Clark Working Visa
EO 1037 / SRRV Special Resident Retiree Visa
EO 191 Granting No-Visa Entry for Initial Stay of 7 Days for Chinese
Nationals who are holders of Macao - Portuguese Passport
LOI 911 / LOI Granting No-Visa Entry for Initial Stay of 7 Days for
holders of HK-British-HK-SAR Passport
As mandated by the law, the taxes are divided among the Philippine
Tourism Authority (PTA), the National Parks Development
Committee (NPDC), the National Commission for Culture and the
Arts (NCCA), Commission for Higher Education (CHED), and the
General Fund of the National Government for use in government
programs.

Travel Tax rates

First Class
Passage Economy Class
Passage
Full rate PHP 2700 PHP 1620
Standard reduced
rate PHP 1350 PHP 810
Privileged reduced
rate for Overseas Contract Workers'
(OCWs) dependents PHP 400 PHP 300

Travel Tax Exemption

Section 2 of PD 1183, as amended, provides that the following are exempted

from the payment of the travel tax:

Foreign diplomatic representatives

Employees of the United Nations (UN) Organization
or its agencies

United States (US) Military Personnel including

dependents and other US nationals with fares paid
for by the US Government or on US Governmentowned/chartered transport facilities.

Filipino Overseas Contract Worker

International carrier crew
Filipino permanent residents abroad whose stay in the Philippines is less than one (1)
year.
Philippine Foreign Service personnel assigned abroad and their dependents
Philippine government (excluding government-owned and controlled corporations)
employees on official travel
Grantees of foreign government-funded trips
Students with approved scholarships by appropriate government agency
Infants (2 years & below)
Personnel (and their dependents) of Philippine offices of multinational companies not
engaged in business in the Philippines
B. RA 6768 provides for the exemption of the following from payment of the travel tax:
Balikbayans whose stay in the Philippines is less than one (1) year

Family members of former Filipinos accompanying the latter

C. Section 2-A of PD 1183, as amended, states that the following

are entitled to a standard reduced travel tax rate:
Minors from 2 to 12 years

D. Section 2-B of PD 1183, as amended, states that the following

are entitled to a privileged reduced travel tax rate:
Legitimate spouse of overseas contract worker (OCW)
Legitimate unmarried children of OCW below 21 years old

PRIVATE MOTO VEHICLE TAX

EO 43 (RA 4136) Land

Transportation and Traffic
Code
Purpose :
Nationalization
Discourage the
uneconomic consumption
of fuel
Revenue
SCHEDULE (L,M,H:Age)

ENERGY TAX

RRA 776 (Civil

Aeronautics Act of the
Philippines)
Purpose:
Fuel Conservation
Revenue
Conserving energy
((BP Blg.36)

Energy Tax

It shall be paid to and withheld by electric

utilities from their respective residential
customers along with their monthly electric
billings. The owner or proprietor, operator, or
any person in charge of the public utility shall,
within 20 calendar days after the end of each
calendar month in which the tax is collected
file a true and correct return with the
Commissioner of Internal Revenue and remit
within the same period the total amount of tax
collected.

FORMS OF ESCAPE FROM

TAXATION
1. Shifting : the transfer of the

burden of a tax by the

original payer or the one
whom the tax is asses or
imposed to another or
someone else

FORWARD : burden of tax is

transferred from a factor of
production through factors
of distribution until it settles
finally on the consumer
BACKWARD : burden of the
tax is transferred by
consumer through factors of
distribution to the factors of
production
Onward Shifting : tax is
shifted two or three times
either forward or backward

P (t) =100(90+10) ;
110
PR(110)=
(110+10)120(10%)13
2=132
PRB
BR-P

B132(120)120R--P(100)
BRP

PR----B
P--RxB

FORMS OF ESCAPE FROM

TAXATION
2. TAX CAPITALIZATION :
reduction of the price of
the taxed object equal to
the capitalized value of
future taxes which the
purchaser expects to be
called upon to pay

3. TRANSFORMATION : the
manufacturer or producer
upon whom the tax has
been imposed, fearing the
loss of his market if he
should add the tax to the
price, pays the tax and
endeavors to recoup
himself by improving his
process or production
thereby turning his units
of product at a lower cost

100sqm. : 1M:

P800,000+200,000=
P1M

P700,000/800,000
Capital tax :

S, Bread, drinks
P10,000 ; P10,000, P10,00
1,000; 1,000; 1,000
P11,000,/10, 11,000/10,
11,000/ 10
Per plate P110/30
, P110, P110
3spnful
10combo meal
30+30+30 = 90

FORMS OF ESCAPE FROM

TAXATION
4. TAX EVASION : the use
of the tax payer of
illegal and fraud

5. TAX AVOIDANCE : use

of the tax payer of
legally permissible
alternative tax rates or
methods inorder to
avoid or reduce tax
liability

ABS CBN

100M : 10 M
BB : 10M
GK: 10 M
SSI : 5M
En: 15 M
Total charitable and socio projects :40M
100M-40M = 60 M ; 6M (4M)

1.

FACTORS
IN
TAX EVASION

2.

The end to be achieved

An accompanying state
of mind which is
described as evil
3. A course of action
which is unlawful

TAX ADMINISTRATIVE AGENCIES

Bureau of Internal
Revenue
Bureau of Customs
Court of Tax Appeals
Ordinary Court
Supreme Court

REMEDIES AVAILABLE FOR THE GOVERNMENT

TO COLLECTION OF TAXES

ADMINISTRATIVE

Distraint of personal
property
Levy of real property
Enforcement of forfeiture
Enforcement of tax lien
Entering into compromise of
tax cases
Requiring the filing of bonds
Requiring proof of filing
income tax returns

Giving of rewards to informers

Imposition if surcharge and
interest
Making arrest, search or seizure
Deportation of aliens
Inspection of books of accounts
Use of national tax register
Obtaining information on tax
liability of any person

Distraint of Personal Property

involves the seizure by the
Government of personal property tangible or intangible - to enforce
the payment of taxes, followed by
the public sale of such property, if
the Taxpayer fails to pay the taxes
voluntarily
Requisites :
Taxpayer must be delinquent in the
payment of tax
There must be subsequent demand
The taxpayer must fail to pay the
delinquent tax at the time required
The period within which to assess
the tax has not yet been prescribed

Two Kinds
Actual Distraint :
taking of possession
of the personal
property out of the
tax payer into that of
the government
Constructive
Distraint : the owner
is prohibited from
disposing of his
personal property

Properties subject to Distraint

In general : All goods, chattels, or effects and

other personal property belonging to the
taxpayer
Bank Accounts : (RA 1405)

Levy of Real Property

refers to the same act of seizure, but in this

case of real property, and interest in or
rights to such property in order to enforce
the payment of taxes. As in the distraint of
personal property, the real property under
levy shall be sold in a public sale, if the taxes
involved are not voluntarily paid following
such levy.

ENFORCEMENT OF FORFEITURE

It implies a divestiture of property without

compensation, in consequence of default or
offense. > losing> property transferred to
another without the consent of the owner
and wrongdoer
Personal Property
Real Property

COMPROMISE OF TA X
LIABILITY

TAX LIEN

It is a legal claim or charge

on property, either real or
personal, established by
law as a security in default
of the payment of taxes

It is a contract whereby
the parties, by reciprocal
concessions, avoid
litigation or put an end to
one already commenced

REMEDIES AVAILABLE FOR THE GOVERNMENT

TO COLLECTION OF TAXES
ADMINISTRATIVE
Inventory taking of stock
in trade and making
surveillance
Prescribing gross sales
and receipts
Termination of tax period

ADMINISTRATIVE
Prescribing real property
value
Inquiring into bank
deposit account
Requiring registration of
taxpayers

REMEDIES AVAILABLE FOR THE GOVERNMENT

TO COLLECTION OF TAXES
JUDICIAL

Ordinary civil action

Criminal action

300,000; tax due :

300,000-250,000= 50,000 x .30 = 15,000 (

30% of the excess of 250,000
Tax due : 50,000 + 15,000
Tax due : 65,000/12= 5.400

Meaning of taxable income

Income base of tax rate : the amount of income

upon which the tax rate prescribed by law is
applied to get the amount of income tax
payable
Net Income : pertinent items of gross income
specified in the tax code less deductions, if any,
including personal and additional exemption
Non Exempt Income : all incomes of the tax
payer which are subject to tax or which are not
exempted from taxation

ITEMS OF GROSS INCOME

Compensation for services

Gross income derived from conduct of trade or business
Gains derived from dealings in property
Interests
Rents
Royalties
Dividends
Annuities
Prize and winnings
Pensions
Partners distributive share from the net income

REQUISITES FOR INCOME TO BE

TAXABLE

1. There must be gain or profit

2. The gain must be received and realized
3. The gain must be excluded by law or
treaty from taxation

EXCLUSIONS : are
incomes that are
exempt from tax. They
are not considered in
determining gross
income

DEDUCTIONS : are
items or amounts
which the law allows
to be deducted under
certain conditions
from the gross income
of taxpayer in order to
arrive at the taxable
income

30,000/ mo x 12 = 360,000
SSS: 1,500x 12= 18,000
PhilH= 100x12= 1,200
PG = 500x 12 = 6,000/ total 25, 200
Single, but has :child 5yrs
Head of the family / dependent 16,500
(37,500+16,500=54,000
360,000-25,200-54,000 =280,800 (taxable income)
Tax due :( 50,000+30%% of the excess of 250,000
280,800-250,000 =30,800x.3 =9,240
Tax due : 50,000 + 9,240 = 59,240