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    Tax

    Uploaded by

    Shobs Panganiban
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    © All Rights Reserved
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    Part 1- General Principles of Taxation 4b. Tavabion, Detined 2. Theory ant hasty of Taxation paix: fagalton : a. frumay % bo Secondary fe. Comperisatury ¢ 4, Haturre ani! tent of the Power te Tire 4 a, Scope 4 Yb, obeats 4 5) Vestetial Characteristes 7 Braman of lid Toe + 7. Pluasaes of Taxaliod) & #6. Rlenents aa Uist Tax System * 9. iinet pes ol Sonne Taw System + 10. Detnition of Faxaton, Fininc Dome Wiel Bolin OWT 1b, Seni conte. between Taxathon, Frninedt Doaialn adel Police: Power #12. Differences between Taxation, Eminent Doavalty and Police Power 13. Clasaltic ation oF Taxes: Tax a. Ayre purpane » to. AS to Subject matter As to incidence di. AS to ardent As to rate: AS to authority lanposing the tax 14, Taxes as Distinguished from c. Penalty d. Special Assessmenit eB. feeventhe C Conton duties ~ "y, Debt A awit 1 Subsidy J. Public Finance 15. Limitations On the Power To Tax a Inherent Limitations (1) Public Purpose (2) International Comity (3) Tervitorjality (4) Non-delegation of the Power to Tax 4 (a)'Exceptions {h) Powers that cannot be Delegated by Congress (5) Exemption of Government Agencies Constitutional Limitations (1) Due Process (2) Equal Protection of law (3) Uniformity (4) Progressive System of ‘Taxation (5) Non-impairment of contracts (6) Non-imprisonment for nonpayment'of poll tax (7) Appropriation, revenue and taritf bills must originate exclusively in the House of Representatives (8) Presidential Veto (9) Presidential Power to fix tariff rates (10) Freedom of the press (11). Freedom of religion (12) Exemption from property tax of properties of religious, educational and charitable institutions (13) Tax. exemption granted to a non-stock, non-profit educational and charitable institutions (14) No public money or property shall be used for a particular sect, priest, religious ministers, etc. (15) Grant of tax exernptions (16) Grant of power to tax to local government units (17) Money collected for a special purpose shall be considered a special fund; an . (aa) Mtusve appellate jurisdiction of the Supreme Court over judgments of _Jower.caurts involving the legality of taxes, Imposts,- assessments, fees and penalty. al 3 16. Doctrines/Principles In Taxation b. c Doctrine of Sovereign Equality ) Doctrine of the Most Favored Nation Clause Doctrine of Primary Jurisdiction ’ SN Fe>t NS spo 17. 18. J 19. 20. 21. 22. Doctrine of Judicial Non- Interference The Marshall dictum The Holmes doctrine Principles of Approval of an administrative interpretatidn thru reenactment The Prospectivity of Tax Laws doctrine The Imprescriptibility of Tax Laws National taxes are not subject to Legal Compensation The Principle of Strictissioni Juris ‘The Doctrine of Estoppel The Doctrine of Faqitable Recoupment Taxpayer's Suit Sources of Tax Laws Situs or Sbjécts of Taxation a. Factors Determinativest the Situs Double Taxation Definition Kinds International Juridical double taxation, defined Methods Used In Tax Treaties to avoid Double taxation Remedies Against Double Taxation Paose Forms of Escape From Taxation Tax Evasion and Tax Avoidance Defined Differentiate Factors that Constitutes Tax Evasion Instances of Tax Evasion aso Exemption From Taxation Defined Nature Characteristics of Tax Exemption Privilege How created Sources of Tax Exemptions Types: + ™paoge (1) Asto creation (2) As to abject (3) As to extent g. Grounds for grant of exemption Constcuction of Tax Exemption Statutes Exceptions to the Strict Construction Rule k. Extent of Tax Exemptions The “In Liew of All Taxes" cla m. The doctrine of Usage, defined n, Tax Amnesty, defined 0. Difference between ‘Tax Exemption and Tax Amnesty 1h, Principles Governing Tax Exemptions i j defined ~ S23. Construction of Tax Laws a. When mandatory? b. When directory? c. The ruleon the construction of tax laws d. The Principle of Pari-Materia Part I: a The Bureau of Internal Revenue a. Composition of the BIR b. Powers of the BIR c. The Police Powers of the BIR d. Powers of the CIR that cannot he delegated e. Two Kinds of Powers of Administrative Agencies f. Powers of the Revenue Regional Director g. Powers of the Revenue District Officers of the BIR Part IIT — Income Taxation ( My . Vgwalate) 1. The General Principles of Income Taxation in the Philippines 2. Kinds of Income Taxation 3.- Items of gross income from sources within the Philippines (Sec. 42, NIRC) 4. Rule On Income Within and without The Philippines (Sec. 40, NIRC) a. The Fifty (50%) Per cent Rule 7 5. Income tax, defined 6. Nature of Income Tax 7. Functions of Income - park IV — The Present Income Tax System of the Philippines , 1, The Philippine Income Tax Law a. Historidal Background 2. The Pur] nd Salient Features of RA 9504 J 3. Basic Features of our Present Income Tax System |. The Global Income Taxation and the Schedular Income Taxation, Defined/Compared .. Semi-schedular or semi-global Tax System, defined . The Difference between Gross Inc ‘ome Taxation and Net Income Taxation + The Advantages and Disadvantages of Net Income Taxation and Gross Income Taxation * Income, defined 9. Capital; defined 10. Receipt, defined : LL. Retéipt; defined 4 i . 12. Forms of Income 13. Test on the realization of In ncome: a "a. Severance test , b. Substantial alteration Test Flow of Wealth Theory d. Doctrine of Ownership, Command or Central uf Income e. Doctrinewf Proprietary interest f. Claim of Right Doctrine g. Doctrine-oF Actuat Receipt of Income h. Doctrine of Constructive Rec celpt i, Doctrine of Involuntary Conversion of Property - Jj. Doctrine of Cash Equivalent 14. Factors that determines the Iniposition of Philippine Income Tax 15. Kinds of Income Tax uncler RA 8424 16. Imposition of Philippine Income Tax a. On Net’ Income b. On Gross Income c. Asa Final Tax 17. Possible Source of Income for Tax Purpose 18. Classification of Income as to Source 19. “Income from whatever source derived”, defined, examples 20, Imputed income, defined 21. Income Exempt from Tax 22, Methods that may be used by the CIR to determine taxable income. Part V — Taxable Income 1. Taxable Income, defined. "2. Requisites For Income to he Taxable 3. Taxpayers Subject to Net Income Tax uncer Sacs. 24 (A) (1) (a); 24 (A) (0) (by; 24 (A) (i) (c); 25 (A) (1); 27 (A), (B); and 28 (A), NIRC. 4, Net Income, defined, 5, Taxpayer's,Subject to Gross Income Tax (Sec. 32 4, NIRC). 6. Gross Income, define 7. Gross Compensation Income, defined. 8, What constitutes other benetits, + 9, Passive Incomes Subject To Final Tax (Sec. 24 (Is) (c) and (D), NIRC. part VI ~ Exclusions From Income Taxation 1. Exclusion, defined 2. Distinction between Exclusions and Allowable Deductions 3. Ttems Excluded From Gross Income (Sec. 32 (14), NIRC Part VII ~ Individual Income Taxation ~ 1. The Individual Taxpayer's under RA 8424 2. Resident Citizen ~ + 3. Non-Resident Citizen, defined a. Three Types of Non-resident citizen under the Tax Code 4. Resident alien, defined a. Factors To Determine Residency 5. Non-Resident Alien, defined a. Kinds of Non-Resident Alien 6. Special Aliens a. Multinational companies, defined b. The “180 day rule” 7, RA 9295 (The Dual Citizenship Law) 8. Computation of Taxable Income of Individual Taxpayers a, Groups of Individual Taxpayers, classified — ~ b. Computation formula for each group 9. Rates of Tax 10..Allowance for Personal Exemption a. Personal Exemption, defined! 11, Additional Exemption for Dependents, 12, Meaning of Dependents under RA 9504 anc RA 9994 13. Rules On Changes of Status Part VIII — Corporate Taxation . Corporate Tax Rates . Corporation, defined: . Joint Stock Company, defined Joint Accounts, defined . Partnership: Partnership, defined b. Elements of a Partnership c. Classification of Partnership Based on Its Nature and Purposes: (1) General Professional Partnership, Defined, (a) Nature (b) Exemption from Tax vane (c) Share in General Professional Partners Classification of Partnership For Tax Purpos: Kinds of Partnership not Subject To Income: ‘lax Tax Liability of Partners In Exempt Partnership Partnership Subject to Income Tax Share of Partners in All Taxable Partnership After-tax Net Profits, defined. Filing of Tax Return (1) Of Exempt Partnership (2) Of, Taxable Partnership k. Rules On Partnership ibject To.Carporate Income Tax Co-ownership 1. When is there co-ownership? a. In General b. For Income Tax Purpose 2. Taxation of Co-Ownership —— == a When Co-Ownership is Subject To Income Tax b. When Co-Ownership is not Subject to Income Tax (1) Tax Liability of Co-Owners in Exempt Co-Ownership 3. Tax On Income of Undivided Inherited Property 4, Rule on How Co-Ownership is Subject to Income Tax 5. Rules On°Co-Ownership 8. Classification of Corporations: . a. Domestic Corporation, defined. b. Resiclent Foreign Corporations, defined. c. Non-Resident Foreign Corporations, defined. d, Special Corporations: (1) Special Domestic Corporations, classified aa. Predominance Test Rule bb, Unrelated trade, business or other activities - cc. Preferential ‘Tax Rule (2) Special Resident Foreign Corporation aa, Resident International Carrier i. International Air Carrier |. Offline Carrier bb. International Shipping Corporations cc. Offshore Banking Units (OBUs) 1. Forelgn Currency Division Unit (FCDUs) dd. Regional or Area Headquarters-of Multinational Corporations, defined ee. Regional Operating Headquarters of Multi-National Corporations (3) Special Non-Resident Forelgn Corporations: ‘aa. Non-resident lessors of vessels chartered by Philippine Nationals bb. Non-resident lessor of aircrafts, machineries, and other equipment cc. Non-resident cinematographic film owner, lessor or distributors 9. Tax Exempt Corporations under Sec. 30, NIRC 10. Corporations Subject to Net Income Tax (Sec. 27 and 28 (A), NIRC erpa \ No 11. Corporation Subjected to Gross Income Tax (Ser 28 (), NIRC 42. Domestic Corporations Subject to Special Tax Rates (Sec. 27 (B), NIRC 13. Corporate Income Subject to Final Tax: a, On Domestic Corporations (See, 27 (D) (1:5) (1) Interest (Sec. 27 (L) (1) (2) Capital Gains From Sales of Shares of Stock not traded in Stock Exchange (Sec. 27 (D) (2) (3) Income under EFC (D) (See. 27 (1) (3) (4) Capital gains Realized trom the Sale, Exchange or Disposition of Lands and/or Buildings (Sec. 27 (ID) (5) b. On Resident Foreign Corporations (1) Income Derived by OBU (Sec. 28 (A) (4); (2) Tax on Branch Profits Remittances (Sec, 78 (A), NIRC; (3) Interest from Deposits and yields or any other Monetary Benefit From. Deposit “stibstitutes, trust Funds and Similar Arrangement and Royalties (Sec. 28 (A) (7) (ai (4) Income derived under FCO (Sec. 28 (A) (7) (b); and . ” (5) Capital Gains from Sales of Shares of Stock not Traded in Stock (Sec..28 (AV (7) (c). : On Non-Resident Foreign Corporations: . 1. Gross Income (Sec, 28 (B) (1); 2. Cinematographic Fllon Owner, Lessor or Distributor (Sec. 28 (B) (2); 3. Owner or Lessor of Vessels Chartered by Philippine Nationals (Sec. 28 (1) (3); 4. Owne: or Lessor of Alicrafi, Machineries and Other Equipment (Sec. 26 (1) (4); : . Toterest On Foreign Leans (Sec. 28 (B) (5) (a); and . Intercorporate Dividends (Sec. 28 (B) (5) (b); and : . Capital Gains from Shaves of Stock not Traced in Stock (Sec. 28 (B) (5) (©). Now Taxabllity of Cast and/or property dividend Issued by 4 Corporation: . Dividend, defined . Stock dividend, defined . Disguished dividend, defined Cases when redemption of stocks is nat taxable . Holding period, defined. Vaone New Taxes Introduced Under RA 8424: 1, Fringe Benefil lax (FBT) . Fringe benefit tax, defined, . Nature of the PBT ... Gross-up monetary value (GMY), how determined |. Computation of the FB Employers subject to the FBT Taxable Fringe Benetits meangce VY g. Fringe benefits that is NOT tavable fh. Exceptions from FET i. Filing and payment of the FBT return 2. Minimuin Corporate Income Tax of 2% (VCIT) Purpose of the Imposition of the Mc VW Amposiban of the MCir Felief from the MCIT Effectivity of the MCIT Carry forward of exc ess MCIT, defined Exceptions to the MCIT Comparison between the normal income tax and the MCIT 8. Payment of the MCIT 3. Improperly Accumulated Farnings Tax of 10% (IAET) a. Imposition of the TAET b. Concept of the IAET - Nature of the IAET Purpose of IAET © Corporation Liable for IAET (@) Closely-held corporations, defined f. Entities to which IAET is Not Applicable 9. Meaning of IAET as Taxable Income h. “Immediately Test”, defined. an (1) Jes relevance to IAET 4. Option Corporate income Tax (oct) a. Applicability of the OCLT b. When allowed. NOE Senn part 1X ~ Allowable Deductions From Gross Income 1. Basic Principles 4. Strict Construction Against The Taxpayer b. The Cohan Rule Principle Deductions as Distinguished from Exclusions 4. Deductions as Distinguised from Personal Exemptions . Deductions as Distinguished from Tax Credit 2. Deductions, defined 3. Kinds of Deductions 4. Entitied to Avail of Itemized Deductions: a. Resident Citizen} . Non-resident Citizen} - Sec. 24 (A), NIRC b, . Resident Alien i d. Non-resident Alien Engaued In Trade or Business in the Philippines Sec. (A), NIRC Partners in General Professional Partnership, Sec. 26, NIRC Domestic Corporations, Sec. 27, NIRC | a Proprietary Educational institutions and Hospital which are Non-Profit, Sec, 2/ (8), NIRC. oop 9 ment owned of controlles rations, a 1 oe honest Sc. 27 ia} CMpOraONS, agencies or instrumentaites Resident Forelyn Corporations, Sec, terized Deductions from Gross Thea ENE Expenses Interest Taxes Losses Bad Debts Depreciation Depletion of Oil andl Gas Wells and Mines Charitable and Other Contributions Research and Development Pension Trust Optional Stanclard Decluctions; and Premium Payments On Health and/or Hospitalization Insurance of an Indiviciual Taxpayer 6. On Business Expense: a, Nature and Scope b. Requisites for Decluctibility - (1) Ordinary Expense, detined (2) Necessary Expense, defined 3) Paid or Incurred within the year, defined Kinds of Business Expense (1) Compensation for personal services aa. Requisites (2) Travelling Expenses aa. Requisites (3) Rentals aa. Requisites bb. Items deductible under Rental Expense (4) Entertainment; amusement and recreation expehses aa. Requisites bb. Expenses Not Treated as Entertainment, Amusenient and Representation. Fxpenses cc. Illegal Expenses (5) Cost of Materials and Supplies (6) Equipment Used in Trade or Business (7) Operating Expenses of Transportation (8) Maintenance and Incidental Repairs (9) Advertising and other Selling Expenses (10) Insurance Premiums. (11) Expenses To Farmers aa. Non-deductible expenses to Farmers (12) Other Business Expenses d. Expenses allowable to Private Fducational Institutions 7. On Interest Expense 5. CRT ose >paogss 10 » Interest, defined Requisites for Deducubiity of Internet Expenses Interest expense as amended by Raat Tax arbitrage, defined Deductible interest Expense Non-deductible interast expense. 9. Related parties, defined, On Taxes a. In general b. Exception © Requisites for deciuctibiity (1) Exceptions 4. Taxpayers allowed to clain taxes as deductions (1) Resident Citizen (2) Non-resident cltizen, OCW and seamen (3) Resident alien (4) Non-resident alien engaged in tradé or business in the Philippines (5) Members of a general professional parine vship. (6) Domestic corporation (7) Resident For relgn Corporation Deductible taxes: examples f. Non-deductible taxes: examples g. Limitations on Deductions of Resident - h. Taxes that can be claimed as Tax Credit (1) Tax credit, defined, : (2) Purpose of Tax Credit (3) Taxpayer's Entitled! to Claim Tax Credits, (4) Taxpayer not entitled to claim Tax Credits (5) Taxes that can be claimed as Tax Credits @ Country Limitation Rule, defined ‘b. Formula for Computation (6) When Tax Credit is applied On Losses « a. Losses covered b, Requisies for Bedrictibilieg ~ (1) The Marcelo Doctrine ¢. Allowed Deductible losses to non-resident Foreign Con Porations 4. Amount deductibie on losses sustained froin property connected with busi trade or profession: : (1) In case of total destruction (2) In case of partial destruction & Types of Losses, defined, clstinguished (1) Ordinary losses (2) Capital tosses s aa. Examples: | losses from sale or exchange of capital asset Hl Losses resulting tram securities becoming worthless and which are Ppeanse iness, 39, NIRC M4 capital assets iil. Los: 25 from short sales of propeity \v. Losses due: to failure to exercise privilege or option te Duy oF sell property * (3) Special Losses aa. Kinds: i. Wagering Loss, defined li, Losses Gn Wash Sales of Stocks ili, Abandonment Losses in Petroleum operation and proxkxtng well 1V. Losses due te voluntary removal building metdent reNeNnst OF replacements, (aa) exception V. Loss of useful value of capital asset due to changes #9 Desiness conditions vi. Losses trom sales or exchange of p operty between related GaYNFEF (aa) Related taxpayers-detined vii, Losses of Farmers fF. Losses which are not Deductible : (1) Examples g. Net Operating Loss Carry-Over (NOLCO), defined (1) Requisites ror Decluctibility (2) Substantial change in the ownership of thy: Business oF Entesprtse, detinest (3) Who may avail of NGLCO? (4) Who may not claim NOLCO? (5) Relationship of NOLCO to MCT (6) Net Operating Loss for Miners Other Than Oil andl Gas Wells 10. On Bad Debts a. Bad debls, defined b. Requisites for decluctibility . Who can avail of bad debts deduction? =~ +d. How much is deductible (1) Exceptions e, The Tax Benefit Rule 11. On Depreciation a. Depreciation, defined b. Capital Expenditures Subject to Depreciation Allowance: ¢. Requisites for, Deductibility d. Persons Entitled To Claim Depreciation Allowance e. Kinds of Properties Subject fo Depreciation Mow f. Properties Not Subject to Depreciation Allowance g. Basis of Sum Recoverable by Depreciation h. When to Deduict Depreciation Allowance |. Depreciation Allowance Deductible by Non resident Alors Eagagedt I Drake or __ Business in the Philippines or Resident Foreign Corporations J. Depreciation Allowance of Non-resident allen oy non-resident Hweiyed COA At Kk. Depreciation Allowance On Praperty Held by One Daron for Le wth the Remainder to Another Person, How Computed, ADCS Xv Depreciation Atlowanic §. Methods of Cony He Adiustinent of al & Deprea, Peon Poperty Held bn ip 4 eld in Vast, ulin Depreciation Allowance Howance lation Allowance otk De Depreciation Proper ised i HOH Of Properties Used In Petroleum Operations A Depreciation of Propertiv On Denlotay oF Pepetties Usectin Mining Operations a. Depletion, detined, Who may claim depletion allowance (1H) Economic interest, detined © How thtangible exploration and development driling cost Is applied Exploration Expenditures, detined e. Development Expenditures, defined f Development stage, derined 4. Depletion of Oil and Gas Wells and Mines 1. Requisites tor Dedtictiiity i. Formula for Computation (2) An general (2) Computation for natural gas and oil aa. Unit of phineral for depletion bb. Number of units of mineral remaining as of the taxable year J. lection to Deduct Exploration and Development Expenditures K. Depletion of Oil and Gas Wells and Mines Deductibles by a Non-resident Alien Individual or Foreign Corporation 13, Charitable and Other Contributions a. Requisites For Deductibilily b. Non-Stock Non-Profit Corporations or Organlzations C. NonBovernment Organizations, d._ Kinds of Chantable Contiibutions e. Limitations In Amount f. Contributions Deductible in Full g. Contributions Subject to Linitations h. Valuation 1. Proof of Deduction 14, On Research and Development Expense a. Amount Deductible b._ Kinds of Tax Expenditures (1) As Revenue Expenditures aa, Requisites For Deductibility (2) As-Heterred xpenses'(Pre-Operating Expense) ” = aa. Requisites For Deductibility cc. Limitations On Deduction With Respect to Research and Development Expense 15, Pension Trusts a. Pension Trusts, defined b. Requisites For Deductibility 16. Premium Payments On Health and/or Hospitalization, Insurance of an Individual ‘Taxpayer How Computed. 13 & Requisites car p, : es. eductib . w Oona Slandare Decluetion "Taxpayers Entitled To (4 weapaver “To Claim the Optional f for Allowance of the Optional si me ve i 7 lard eduction Part X~ Estatos and Trusts 1. Estate, defined Kinds of Estate For 1 : 3. Burden of income 4. Rules On Taxability of Estates, 5. Composition of the Gross Income of the Fs S Additional Special Deductions Makan Tilses and Trust z Formula For Computation OF Taxable fncome of Estates a. Fiduciary, defined. b. Cestsei que trust, defined, 9. Essential Elements of a Trust 10. Trust, how created, + LL. Patties to a trust. 12. Kinds of Trust a. Examples of Ordinary Trust b. When is a Trust Revocable <= + 13, Composition of the Grass Income of Trusts 14. Rules On Taxability of Trust 15. Taxable Trust a, When Income of the Trust Is Taxable to the Grant b, When is Income of the Trust taxable to the Trustee. cc. When is [rtvome of the Trust taxable to the Benefx dary. 16. One-layered Taxation Regime in Taxable Trust and Estate Tax, defined. 17. Formula For Computation of Taxable Income of Trust 18, Formula For Computation of the Consolidated Income of Several Trusts. “19. Exceptions of a Taxable Trust “a. _ Requisites of Exemption of Employees’ Trust Fiom Income Tax a wcesi He CMS ; ver” part XI=-.Capital Transaction: @% Purposes Taxation On ates, Capital Gains and Capital | osses 1. Requisites for Recognition of Capital Gain or Loss 2. Determination of Gain or Loss from Sale of Property a, General Rule (1) Formula of Computation With Respect to Sale uf Property (2) Formula of Computation With Respect to Exchange of Property 3. ‘Cost Basis of Property" ~~ ~~ ~ a, Adjusted Basis of Property, cofined., (1) Formula for the Computation of Adjusted Basis, (2) Transactions Where “use of basis" is required. Taxpayer's Asset, defined, 5. Ordinary Assets, defined 6. Capital Assets, «letined. 7. Capital Transaction, defined, 8. Capital Gain, dutine a. Tax Rate (1) If property sold ts real property (2) IF shares of domestic. corporation are: traded though the exchange (3) IF property sold are shares of domestic corporations nia listed or traced in the exchange or are listed but not sold thvoujh tie exchange 9. Capital Loss, defined. 10. Net Capital Gain, defined. 11. Net Captial Loss, defined. 12. Net Capital Loss Cairy-Over Principle (NCLCO), dcfined. 13. Holding Period, deine. 14. Loss Limitation Rule, defined. 15, Ordinary Gain, defined 16. Ordinary Loss, defined. 17. Kinds of Assets a. Ordinary Assets b, Capital Assets (1) Short-term capital assets bel for £2 unouths or fess by ain lncividual tercpayer (2) Long-term capital assels held for more than 12 montis by an Indlividu taxpayer 18. Importance of Knowing whether assets are capital or orUinary 19. Gain or Income not Subject to the Gracluated or Murine Income Tax 20, Distinctions between Sale of Capital Asset ancl Orinary Asset

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