Taxation

 Torres (2018) p.212-219

 Taxation generates incomes to defray government expenses

To raise funds for government programs and services

TAX is enforced as a contribution but it is proportionate to the citizen’s ability

to pay.

Tax is levied on persons and property as well as on business

transactions, privileges, and benefits

Types of taxes
 National (through BIR)
 Local
National taxation system is based on the National Internal Revenue Code of
1997 or R.A. no.8424 or Tax Reform Act 1997

CAPITAL GAINS TAX is imposed on gains that may have been realized by a
seller from the sale, exchange, or other disposition of capital assets located in
the Philippines including conditional sales.

DOCUMENTARY STAMP TAX

 Tax on documents
 Instruments
 Assignment
 Sale
 Property incident
 loan agreements
 papers evidencing the acceptance transfer of an obligation
 rights

Documentary stamp taxes are evident on:

 Bank promissory notes
 Deed of sale
 Deed of assignment on the transfer of shares of corporate stock
ownership

Donor’s tax
1. Donation or gift
2. The tax imposed on gratuitous transfer of property between two or more
persons who are living at the time of the transfer.
3.Applicable whether the transfer is in trust or otherwise.
4. The gift is direct or indirect.
5. Property is real or personal, tangible or intangible based on graduated
schedule of the tax rate
ESTATE TAX
 Tax on the right of the deceased person to transmit his/her estate to lawful
heirs and beneficiaries at the time of death and on certain transfers which
are made by law as equivalent to testamentary disposition.
 It is a tax imposed on the privilege of transmitting property upon the death
of the owner.
 It is based on the laws in force at the time of death notwithstanding the
postponement of the actual possession or enjoyment of the estate by the
beneficiary

INCOME TAX
 Is a tax on all annual profits made from property ownership, profession,
trades or offices
 Tax on a person’s income, emoluments, profits

Self-employed individuals and corporate taxpayers pay quarterly income

taxes from 1st Q to the 3rdQ. Instead of filing quarterly income tax on the 4th
quarter, they file and pay their annual income tax return for the taxable year

Individual income tax is based on graduated schedule of tax rate

Corporate income tax is based on a fixed rate prescribed by the tax law or
special law

Percentage tax
 The business tax imposed on persons or entities who sell or lease goods,
properties, or services in the course of trade or business whose gross
annual sales or receipts do not exceed the amount required to register as
VAT- registered taxpayers
Percentage taxes
1. based on a fixed rate
2. paid monthly by business or professionals.
However, some special industries and transactions pay percentage tax
quarterly.

Value-Added Tax
1. business tax imposed and collected from the seller in the course of trade or
business on every sale of properties (real or personal)
2. Lease of good or properties
3. Vendors of services

 Indirect tax (it can be passed on to the buyer causing increase of prices
of most goods and services bought and paid by consumers)
 VAT returns are filed and paid monthly and quarterly

EXCISE TAX- is a tax imposed on goods manufactured or produced in the

Philippines for domestic sale or consumption or any other disposition
Imposed on things that are imported
WITHHOLDING TAX ON COMPENSATION
 Tax withheld from the individuals receiving purely compensation income
arising from an employer-employee relationships
 remitted to BIR by the employers

EXPANDED WITHHOLDING TAX

It is prescribed only for certain payors like those withheld on rental income
and professional income.

FINAL WITHHOLDING TAX

 Prescribed only for certain payors and is not creditable against the income
tax due of the payee for the taxable year

WITHHOLDING TAX ON GOV. MONEY PAYMENTSis the withholding tax

withheld by government offices including government-owned or controlled
corporations, and local government units before making any payments to
private individuals, corporations, partnerships and/or associations.

Local taxes are imposed by the Local Government Units in accordance with
Republic Act 7160 or the Local Government Code of 1991. (Provinces, cities,
municipalities, and barangays)

LOCAL TAXES

Local Taxes are collected based on R.A. 7160

1. Tax on Transfer of Real Property Ownership
 Sale
 Donation
 Barter
 Transfer of ownership of real property

2. Tax on Business of Printing and Publication is imposed on printing

and publication businesses
 books
 cards
 posters
 leaflets
 handbills
 certificates
 receipts
 pamphlets

3. Franchise Tax-not exceeding 50% of 1 percent of the gross annual

receipts of the preceding calendar year based on the incoming receipt within
the territorial jurisdiction where the franchise is selling in.

4. Tax on Sand, Gravel, and Other Quarry Resources-on ordinary stones,

sand, gravel, earth and quarry resources extracted from public lands – beds
of seas, lakes, rivers, streams, creeks, and other public waters within the
territorial jurisdiction
5. Professional Tax-annual tax on each person engaged in the exercise or
practice of his or her profession that requires government examination, like
licensure examinations

6. Amusement tax-from the proprietors, lessees, or operators of theaters,

cinemas, concert hall, circuses, boxing stadia, and other places of
amusement

7. Annual Fixed Tax for Every Delivery Truck or Van of Manufacturers or

Producers, Wholesalers of, Dealers, or Retailers of Certain Products -
annual fixed tax for every truck, van or any vehicle used by manufacturers,
producers, wholesalers, dealers, or retailers in the delivery or distribution of
distilled spirits, fermented liquor, soft drinks, cigars, cigarettes, and other
products to sales outlets or consumers whether directly or indirectly, within the
province.

8.Tax on business-imposed by cities or municipalities on business for the

issuance of business license or permit to start operations based on the
schedule of rates prescribed by the local government code, as amended.

9.Fees for Sealing and Licensing of Weights and Measures- Imposed for
the sealing and licensing of weight and measures.

10. Fishery rentals, fees, and charges- Are imposed by the municipality /city
to grantees of fishery privileges in the municipality/city waters to build fish
corrals, oysters, mussels, or other aquatic beds or bangus fry areas and
others as specified in the LGU

11. Community Tax-tax levied by cities or municipalities to every Filipino or

alien living in the Philippines
 18 years old or over who has been regularly employed on a wage or
salary basis for at least thirty 30 consecutive working days during the
calendar year, or who is engaged in business or occupation or who owns
real property with an aggregate assessed value of 1000 or more

12. Taxes levied by the barangays on stores or retailers with fixed

business establishments
Gross sales of P50 000 or less – for city
Gross sales of P30 000 or less - municipality
(Tax will be computed at a rate not exceeding 1% on such gross sales or
receipts.)

13. Service Fees or Charges-collected by the barangay for services

rendered in connection with the regulation or the use of barangay-owned
properties or service facilities (palay, copra, tobacco dryers)

14. Barangay Clearance Fee-collected by the barangays upon issuance of

barangay clearances