TAXATION LAW 1 SYLLABUS

UDM SY 2021-2022

I. GENERAL PRINCIPLES

A. Definition, Concept and Purposes of Taxation / Nature and Characteristics of Taxation

1. Definition or Concept of Taxation

2. Nature and Characteristics of Taxation

Inherent Power:

3. Purposes of Taxation

a. Revenue-raising

b. Non-revenue/special or regulatory

4. Tax distinguished from other forms of exactions

a. Tariff

b. Toll

c. License fee

d. Special assessment

e. Debt

f. Penalty

g. Subsidy

h. Revenues

B. Power of Taxation as distinguished from:

1. Police Power

2. Power of Eminent Domain

C. Theory and Basis of Taxation

1. Lifeblood Theory

2. Necessity Theory

3. Benefits-Protection Theory (Symbiotic Relationship)

D. Jurisdiction over Subject and Objects

E. Principles of a Sound Tax System

1. Fiscal Adequacy

2. Administrative Feasibility

3. Theoretical Justice

F. Scope and Limitations of Taxation

1. Scope of Taxation

2. Limitations on Taxation

a. Inherent Limitations (Characteristics of Taxation)

b. Constitutional Limitations

G. Stages or Aspects of Taxation

H. Definition, Nature, and Characteristics of Taxes

I. Requisites of a Valid Tax

J. Kinds of Taxes

1. As to object

2. As to burden or incidence

3. As to tax rates

4. As to purposes

5. As to scope or authority to impose –

 6. As to graduation

K. Sources of Tax Laws

L. General Concepts in Taxation

1. Prospectivity of Tax Laws

2. Imprescriptibility of Tax Laws

3. Situs of Taxation

4. Double Taxation

5. Escape from Taxation

6. Tax Exemption

7. Doctrine of Equitable Recoupment

8. Prohibition on Compensation and Set-off.

9. Compromise

10. Tax Amnesty

11. Power to Tax and the Power to Destroy

12. Taxpayer’s Suit and Citizen’s Suit

M. Construction and Interpretation of Tax Laws, Rules and Regulations

1. Tax Laws

2. Tax Rules and Regulations

3. Tax Exemption and Tax Exclusion

4. Penal Provisions of Tax Laws

5. Non-retroactive Application to Taxpayer

II. NATIONAL TAXATION

A. The Taxing Authority Under the NIRC

1. Power and Duties, and Organization of the Bureau of Internal Revenue

2. Power of the President to Reorganize the Executive Department

3. Jurisdiction, Powers and Functions of the Commissioner of Internal Revenue

4. Rule-making authority of the Secretary of Finance

B. Income Tax

1. Definition, Nature, and General Principles of Income Taxation

a. Income Tax Systems –

b. Features of the Philippine Income Tax Law

c. Criteria or Principles in Imposing Philippine Income Tax

d. General Principles of Income Taxation

 
e. Types of Philippine Income Tax. –

f. Kinds of Taxpayers –

(1) Individual Taxpayers

(a) Citizens

(i) Resident citizens

(ii) Non-resident citizens

(b) Aliens

(i) Resident aliens

(ii) Non-resident aliens

(1) Engaged in trade or business

(2) Not engaged in trade or business

(c) Special Class of Individual Employees

 (i) Minimum wage earner

(2) Corporations

(a) Domestic corporations

(b) Foreign corporations

(i) Resident foreign corporations

(ii) Non-resident foreign corporations

(3) Partnerships (General Business Partnerships)

(4) General Professional Partnerships

(5) Estates and Trusts

(6) Co-ownerships

g. Taxable Period

(1) Calendar Period

(2) Fiscal Period

(3) Short Period

2. Concept of Income

a. Definition of Income and Nature of Income

b. When income is taxable

(1) Existence of income

(2) Realization of income

(a) Tests of Realization of Income

(b) Actual vis-à-vis Constructive receipt

(3) Recognition of income

c. Tests in determining whether income is earned for tax purposes

 (1) Realization test

(2) Claim of right doctrine or doctrine of ownership,

command, or control

(3) Economic benefit test, doctrine of proprietary interest

(4) Severance test

d. Methods of Accounting

(1) 2 Primary Methods: Cash Method and Accrual Method

(2) Special Method: installment, percentage of completion (on long-term contracts),

deferred payment

e. Situs of Income Taxation

3. Gross Income

a. Definition –

b. Gross Income, Net Income, and Taxable Income

c. Sources of Income Subject to Tax

d. Exclusions from Gross Income

(1) Rationale for the Exclusions

(2) Taxpayers Who May Avail of the Exclusions

(3) Exclusions distinguished from Deductions and Tax Credit

(4) Exclusions Under the Constitution –

(5) Exclusions Under the Tax Code

(6) Exclusions under Special Laws –

(7) Exclusions Under Tax Treaty

4. Deductions from Gross Income

a. General Rules and Requirements for Deductibility

 b. Concept Return of Capital (Cost of Sales or Services) –

c. Types of Deductions from Gross Income

(1) itemized deductions

(2) optional standard deduction

(3) special deductions

d. Itemized Deductions

(1) Expenses (business expenses)

(2) Interest

(3) Taxes

(4) Losses

(5) Bad debts

(6) Depreciation

(7) Charitable and other contributions

(8) Contributions to pension trusts

e. Optional Standard Deduction

f. Items Not Deductible

5. Income Tax on Individuals

a. Income Tax on Resident Citizens, Non-resident Citizens, and Resident Aliens

(1) Coverage: income from all sources within and without the Philippines; exceptions

(2) Taxation on Compensation Income

(a) Inclusions

(1) Monetary compensation

(i) Regular salary/wage

 (ii) Separation pay/retirement benefit not otherwise exempt

(iii) Bonuses, 13th month pay, and other benefits not exempt

(iv) Director’s fees

(2) Non-monetary compensation

(i) Fringe benefit not subject tax

(b) Exclusions

(1) Fringe benefit subject to tax

(2) De minimis benefits

(3) 13th month pay and other benefits and payments specifically excluded from
taxable compensation income

(c) Deductions

(1) Personal exemptions and additional exemptions

(2) Health and hospitalization insurance

(3) Taxation of compensation income of a minimum wage earner

(i) Definition of Statutory Minimum Wage

(ii) Definition of Minimum Wage Earner

(iii) Income also subject to tax exemption: holiday pay, overtime pay, night
shift differential, and hazard pay

(3) Taxation of business income/Income from practice of profession

(a) Schedular

(b) 8% option

(4) Taxation of partners in a general professional partnership

(5) Taxation of Passive Income

(a) Passive income subject to final tax

 (1) Interest income

(2) Royalties

(3) Dividends from domestic corporation

(4) Prizes and other winnings

(b) Passive income not subject to final tax

(6) Taxation of Capital Gains

(a) Income from sale of shares of stock of a Philippine corporation

(1) Shares traded and listed in the stock exchange

(2) Shares not listed and traded in the stock exchange

(b) Income from the sale of real property situated in the Philippines

(c) Income from the sale, exchange, or other disposition of other capital assets

b. Income Tax on Non-resident Aliens Engaged in Trade or Business

(1) General rules

(2) Cash and/or property dividends

(3) Capital gains

c. Income Tax on Non-resident Aliens Not Engaged in Trade or Business

d. Income Tax on Aliens employed by Regional Headquarters, Regional Operating

Headquarters, Offshore Banking Units, and petroleum service contractors

e. Individual Taxpayers Exempt from Income Tax

(1) Minimum Wage Earners (RA 9504) (Note: Senior Citizens who are considered as
MWE are also exempted (RA 9994)

(2) Exemptions granted under international agreements

6. Income Tax on Corporations

a. Income Tax on Domestic Corporations

(1) Taxation of DC in general

(a) Regular Corporate Income Tax (RCIT)

(b) Minimum Corporate Income Tax (MCIT)

(i) Imposition of MCIT

(ii) Carry forward of excess minimum tax

(iii) Relief from the MCIT under certain conditions

(iv) Corporations exempt from the MCIT

(v) Applicability of the MCIT where a corporation is

governed both under the regular tax system and a
special income tax system

(c) Taxation of passive income

(i) Passive income subject to tax

(1) Interest from deposits and yield or any other monetary benefit from deposit
substitutes and from trust funds and similar arrangements and royalties

(2) Capital gains from the sale of shares of stock not traded in the stock
exchange

(3) Income derived under the expanded foreign currency deposit system

(4) Intercorporate dividends

(5) Capital gains realized from the sale, exchange, or disposition of lands
and/or buildings

(ii) Passive income not subject to tax

(d) Taxation of capital gains

(i) Income from sale of shares of stock

(ii) Income from the sale of real property situated in the Philippine

(iii) Income from the sale, exchange, or other disposition of other capital assets

(e) Improperly accumulated earnings tax (IAET)

 (2) Proprietary educational institutions and non-profit hospitals

(3) Government owned or controlled corporations, agencies and instrumentalities

(4) Foreign currency deposit units

(5) Allowable deductions

(a) Itemized deductions

(b) Optional standard deduction

b. Income Tax on Resident Foreign Corporations (RFC)

(1) Taxation of RFC in general

(a) Regular Corporate Income Tax (RCIT)

(b) Minimum Corporate Income Tax (MCIT)

(c) Branch Profit Remittance Tax (BPRT)

(d) Taxation of passive income

(e) Taxation of capital gains

(2) RFC subject to preferential tax rates (special corporations)

(a) International carriers doing business in the Philippines

(b) Foreign currency deposit units and off-shore banking units

(c) Regional or area headquarters and regional operating headquarters of

Multinational Companies

(3) Allowable deductions

(a) Itemized deductions

(b) Optional standard deduction

c. Income Tax on Non-resident Foreign Corporations (NRFC)

(1) Taxation of NRFC in general

(2) NRFCs subject to preferential tax rates

 (a) Interest on foreign loans

(b) Inter-corporate dividends

(c) Capital gains from sale of shares of stock not traded in the stock exchange

(d) Non-resident cinematographic film owner, lessor or distributor

(e) Non-resident owner or lessor of vessels chartered by Philippine nationals

(f) Non-resident owner or lessor of aircraft machineries and other equipment

d. Corporations Exempt from Income Tax

(1) Propriety Educational Institutions And Hospitals

(2) Government-Owned or Controlled Corporations

(3) Other Exempt Corporations

e. Tax on other business entities

(1) Taxation of General Partnerships

(2) Taxation of General Professional Partnerships

(3) Taxation of Co-ownerships

(4) Taxation of Joint Ventures and Consortia

(5) Taxation on Estates and Trusts

7. Filing of Returns and Payment of Income Tax

a. Definition of Tax Return and Information Return

b. Individual Income Tax Returns

(1) Who are required to file ITR

(2) Individuals exempted to file ITR

(3) Substituted filing of ITR

(4) When to file ITR

 (5) Where to file ITR

c. Corporate Income Tax Returns

(1) Quarterly Income Tax

(2) Final Adjustment Return

(3) When to file ITR

(4) Where to file ITR

(5) ITR of corporations contemplating dissolution or reorganization

d. Return on capital gains realized from sale of shares of stock and real estate

e. Penalties for non-filing of returns

f. Other penalties related to filing of returns

8. Withholding Taxes

a. Concept of Withholding Taxes

b. Final withholding tax

c. Creditable withholding tax

(1) Expanded withholding tax

(2) Withholding tax on compensation

d. Fringe Benefit Tax

e. Duties of a withholding agent