Philippine Income Taxation Rules for Individuals

1.
A person whose father is a citizen of the Philippines and who resides in the Philippines qualifies as a resident Filipino
citizen.
2. A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires
him to be physically present abroad at least 183 days during the taxable year is a non-resident citizen.
3. One who comes to the Philippines for a definite purpose which in its nature would require an extended stay and to
that end makes his home temporarily in the Philippines, although it may be his intention at all times to return to his
domicile abroad is a resident alien.
4. A non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period more than
180 days during any calendar year shall be deemed a “non-resident alien doing business in the Philippines.”
5. The tax base of individual taxpayers is generally net income from sources in the Philippines except in the case of
resident citizen and non-resident alien not engaged in trade or business in the Philippines.
6. The tax base for Philippine income tax purposes of a non-resident alien not engaged in trade or business in the
Philippines is gross income from sources within the Philippines.
7. Under the R.A. No. 10963 (TRAIN), personal exemptions are no longer allowed in the nature of a deduction from
gross or net income for personal, living or family expenses of all individual taxpayers.
8. Before the implementation of R.A. No. 10963 (TRAIN), the basic personal exemption allowed to individual taxpayers
is P50,000.
9. Before R.A. No. 10963, the basic personal exemption allowed to non-resident alien engaged in the trade or business
in the Philippines is the higher between what is allowed in his country and what is allowed in the Philippines.
10. Before R.A. No. 10963, the amount of the additional exemption is P25,000 for children (nit exceeding four), who are
chiefly dependent upon the taxpayer; living with the taxpayer; unmarried; not gainfully employed and not more
than 21 years old.
11. Before R.A. No. 10963, there is no minimum number as to the qualified dependent children for additional exemption
purposes.
12. Married individuals, whether citizens, resident or nonresident aliens, who do not derive income purely from
compensation, shall file a return for the taxable year to include the income of both spouses, but where it is
impracticable for the spouses to file one return; each spouse may file a separate return of income but the returns to
filed shall be consolidated by the Bureau for purposes of verification for the taxable year.
13. For married individuals, the husband and wife shall compute separately their individual income tax based on their
respective total taxable income and they shall file separate returns.
14. If any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of
the spouses, the same shall be assumed to be the income of the husband.
15. The term “minimum wage earner” shall refer to a worker in the private sector paid the statutory minimum wage, or
to an employee in the public sector with compensation income of not more than the statutory minimum wage in the
non-agricultural sector where he/she is assigned.
16. Minimum wage earners shall be exempt from the payment of income tax on their taxable income.
17. The holiday pay, overtime pay, night shift differential pay, and hazard pay received by such minimum wage earners
shall likewise be exempt from income tax.
18. Individuals earning purely compensation income shall be taxed based on the graduated income tax sales.
19. Self-employed individuals and/or professionals whose gross sales or receipts do not exceed the VAT threshold shall
have the options to be taxed at graduated income tax rate on taxable income or an eight percent (8%) tax on gross
sales or gross receipts and other non-operating income in excess of Two-hundred fifty thousand pesos (P250,000).
20. If the gross sales and receipts of self-employed individuals and/or professionals do not exceed the VAT threshold
and such individuals opt to be taxed at 8% income tax rate, their gross sales and receipts shall not be subject to
percentage tax under Section 116.
21. The amount of P250,000 allowed as deduction under the law for taxpayers earnings solely from self-employment or
practice of profession is not applicable for mixed income earner under the 8% income rate option.
22. Unless the taxpayer signifies in the 1st quarter of the taxable year the intention to elect the 8% income tax, the
taxpayer shall be considered having availed of the graduated rates under Section 24 (A) of the Tax Code, as
amended, and such election shall be irrevocable.
23. When an individual taxpayer engaged in business or practice of profession avails of the graduated rates under
Section 24 (A), he shall also be liable to business tax, either VAT or percentage under Section 116, depending on his
gross annual sales or receipts
24. The taxable income from both compensation and business shall be combined for purposes of computing the income
tax due if the taxpayer chose to be subject under the graduated income tax rates.
25. If at any time during a given taxable year, a taxpayer’s gross sales or receipts exceeded the VAT threshold, he/she
shall automatically be subjected to the graduated rates under Section 24 (A) of the Tax Code, as amended.
26. Individual taxpayers engaged in business or practice of profession can avail of the Optional Standard Deduction
(OSD) except non-resident aliens.
27. An individual taxpayer who avails of OSD is no longer allowed to deduct premium payments on health and/or
hospitalization insurance.
28. An individual who is a pure compensation income earner cannot avail of OSD.
29. The OSD allowed to individual taxpayers shall be a maximum of forty percent (40%) of gross sales (if on accrual
basis) or gross receipts (if on cash basis) during the taxable year.
30. The “cost of sales” in case of individual seller of goods, or the “cost of services” in the case of individual seller of
services, are not allowed to be deducted for purposes of determining the basis of the OSD.
31. Before R.A. No. 10963 (TRAIN), the deductible health and/or hospitalization insurance premium is P2,400 per family
per year or P200 per month whichever is lower provided the nuclear family’s total gross income does not exceed
P250,000 during the year.
32. Under R.A. No. 10963 (TRAIN), in case of married taxpayers, the spouse claiming the additional exemption for
qualified dependent shall be the same spouse to claim the deduction for premium payments.
33. All establishments, supplying certain goods and services for the exclusive use and enjoyment or availment, of a PWD
shall give a discount of 20%.
34. The benefactor of a senor citizen shall NOT be entitled to claim the additional exemption P25,000 per dependent
(not exceeding four).
35. All establishments, supplying certain goods and services for the exclusive use and enjoyment or availment, of the
senior citizen shall give a discount of 20%.
36. An estate is a taxpayer if it is under settlement or administration.
37. A trust is a taxpayer if under the terms of the trust the fiduciary may accumulate or distribute the income, in his
discretion.
38. Under R.A. No. 10963 (TRAIN), the personal exemption of an estate or a trust is P20,000.
39. If under the term of the trust the income of the trust shall be applied for the benefit of the grantor, the income that
shall be applied for the benefit of the grantor shall be taxable to the grantor.
40. When an estate or a trust is a taxpayer, a distribution of the year’s income to an heir or beneficiary is a special item
of deduction for the estate/trust and a special item of income to the heir/beneficiary.
41. A pure compensation income earner files his income tax return on or before April 15 of the succeeding year.
42. Under the TRAIN, the income tax return (ITR) shall consist of a maximum of four (4) pages in paper form or
electronic form.
43. Individual taxpayers shall not be required to file an annual income tax return if receiving purely compensation
income, regardless of amount, from only one employer in the Philippines for the calendar year, the income tax of
which has been withheld correctly by the said employer (tax due equals tax withheld).
44. An individual engaged in business or practice of profession shall file a final adjusted return on or before May 15.
45. The income tax return of an individual taxpayer shall be filed in the Revenue District Office where his legal residence
or principal place of business is.
1. The tabular tax rates under Section 24 (A) is imposed on the net income of all individual taxpayers except non-
resident alien not engaged in trade or business.
2. Final tax rates on certain passive income shall be imposed when such income are from Philippine sources.
3. Passive income from sources outside the Philippines shall be subject to regular income tax when received by a
resident citizen.
4. All prizes from sources within the Philippines excluding prizes amounting to P10,000 or less shall be subject to final
tax.
5. Under R.A. No. 10963 (TRAIN), winnings including Philippine Charity Sweepstakes and Lotto winnings are subject to
20% final tax when received by resident or citizen and non-resident alien engaged in trade or business in the
Philippines.
6. Under R.A. No. 10963 (TRAIN), winnings including Philippine Charity Sweepstakes and Lotto winnings are subject to
25% final tax when received by non-resident alien not engaged in trade or business in the Philippines.
7. Under R.A. No. 10963 (TRAIN), prizes amounting to P10,000 or less shall be subject to tax under Sec. 24 (A) while
Philippine Charity Sweepstakes and Lotto winnings amounting to P10,000 or less shall be exempt from income tax
when received by resident or citizen and non-resident alien engaged in trade or business in the Philippines.
8. Under the TRAIN, interest income received by resident citizen or resident alien from a depository bank under
expanded foreign currency deposit system shall be subject to 15% final tax but exempt from Philippine income tax
when received by a non-resident individual, whether citizen or alien.
9. Interest received from depository bank under expanded foreign currency deposit system, jointly in the name of a
non-resident citizen and his spouse who is a resident citizen, shall be fully exempt from Philippines income tax.
10. Interest income from long-term deposit or investment evidenced by certificates issued by a financial institution
other than a bank in denomination of P10,000 shall be subject to final tax.
11. Interest income from long-term deposit or investment evidenced by certificates issued by a bank to an individual in
denomination of P10,000 shall be exempt from Philippine income tax unless received by a non-resident alien not
engaged in trade or business.
12. The tax on dividends shall apply only on income earned on or after January 1, 1998.
13. Income forming part of retained earnings as of December 31, 1997 shall not, even if declared or distributed on or
after January 1, 1998, be subject to the tax on dividends.
14. Cash and/or property dividends actually or constructively received from a domestic corporation or from joint stock
companies and insurance or mutual fund companies and regional operating headquarters of multinationals shall be
subject to final tax.
15. Share of an individual in the distributable net income after tax of a partnership including general professional
partnership of which he is a partner shall be subject to final tax.
16. Share of an individual in the net income after tax of an association, a join account, or a joint venture or consortium
taxable as a corporation of which he is a member or co-venturer shall be subject to final income tax.
17. Interest income from a debt instrument not within the coverage of deposit substitute shall be subject to regular
income tax.
18. Interest income from a debt instrument (loans obtained from 20 or more individual or corporate lenders) shall be
subject to final tax.
19. Interest on government debt instrument and securities regardless of number of lenders at the time of the
origination shall be subject to final tax.
20. Interest from overdue accounts receivable shall be subject to final tax.
21. Under the TRAIN, sale of shares of stock listed but not traded in the local stock exchange shall be subject to capital
gains tax of 15% on net capital gain.
22. Sale, barter, transfer and/or assignment of shares of stock of publicly-listed companies not compliant with
mandatory minimum public ownership (10% of the publicly-listed companies’ issued and outstanding shares,
exclusive of any treasury shares) shall be subject to capital gains tax.
23. Capital gains from sales of real property classified as capital asset located within the Philippine is subject to capital
gains tax.
24. The tax on disposition of real property classified as capital asset by individual to the government or any of its
political subdivisions or agencies or to GOCCs shall be determined either under Section 24 (A) for the normal rate of
income tax for individual citizens or residents or under Section 24 (D) (1) for the final tax on the presumed capital
gains of property at 6% at the option of the taxpayer-seller.
25. Capital gains presumed to have been realized from the sale or disposition of their principal residence by natural
persons, the proceeds of which is fully utilized in acquiring or constructing a new principal residence within 18
calendar months from the date of sale or disposition shall be exempt from capital gains tax.
26. The buyer/transferee of real property classified as capital asset shall withhold from the seller and shall deduct from
the agreed selling price/consideration the 6% capital gains tax which shall be deposited in cash or manager’s check
in interest bearing account with an Authorized Agent Bank (AAB) under an Escrow Agreement between the
concerned Revenue District Officer, the Seller and the Transferee, and the AAB.
27. The Commissioner of Internal revenue shall be duly notified by the taxpayer within 30 days from the date of sale or
disposition through a prescribed form of his intention to avail of the capital gains tax exemption.
28. The tax exemption from the 6% capital gains tax can be availed of every year as long as there is a sale of real
property classified
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32. Before the TRAIN, the 15% tax on gross income within the Philippines shall also be imposed to Filipinos employed
and occupying managerial and technical position similar to those occupied by aliens employed by these offshore
banking units.
33. Any income earned from all other sources within the Philippines by the special alien employees shall be subject to
regular income tax rate under Section 24(A)(2)(a) of the Tax Code, as amended, without prejudice to the application
of preferential tax rates under existing international tax treaties.
34. Under the TRAIN, the 15% final tax on gross income within the Philippines shall also be imposed to Filipinos whether
or not there is an alien executive occupying managerial or technical position.
35. Before TRAIN, Filipinos employed by ROHQs or RHQs in a managerial or technical position shall have the option to
be taxed at either 15% of their gross income or at the regular rate on taxable compensation income under Section
24 (A).
36. Before TRAIN, all other Filipino employees not employed in a managerial or technical position are considered as
regular employees and shall be subject to the regular income tax rate on their taxable compensation income or 15%
of their gross income.
37. Before TRAIN, Filipinos exercising the option to be taxed at fifteen percent (15%) preferential rate for occupying the
same managerial or technical position as that of an alien employed in an ROHQs or RHQs must meet all following
requirements namely: Position and Functional Test; Compensation Threshold Test; Exclusivity Test.
38. Before TRAIN, the Position and Functional Test requires that the Filipino employee must occupy managerial position
or technical position and must actually be exercising such managerial or technical employee functions pertaining to
said position.
39. Before TRAIN, in order to be considered a managerial or technical employee for income tax purposes and to pass the
Compensation Threshold Test, the employee must have received, or is due to receive under a contract of
employment, a gross annual taxable compensation of at least P975,000 (whether or not this is actually received.)
40. For Exclusivity Test, the Filipino managerial or technical employee must be exclusively working, with one or more
employers during the same calendar year, for the ROHQs or RHQs as a regular employee and not just a consultant or
contractual personnel.
1. A general professional partnership is not subject to corporate income tax.
2. All joint ventures are subject to corporate income tax.
3. A general professional partnership is a partnership formed by persons for sole purpose of exercising their common
professions, no part of the income of which is derived from engaging in any trade or business.
4. The term “domestic”, when applied to a corporation, means created or organized in the Philippines or under its
laws.
5. The term “resident foreign corporation”, when applied to corporation, means a corporation which is not domestic
and with a branch established in the Philippines.
6. The term “non-resident foreign corporation” applies to a foreign corporation not engaged in trade or business within
the Philippines.
7. Domestic corporations including taxable partnerships and joint ventures are taxed on their net income from sources
within and outside the Philippines.
8. A non-resident foreign corporation is taxed on its gross income from sources within the Philippines.
9. A resident foreign corporation is taxed on its net income within the Philippines.
10. Corporations except non-resident foreign corporations can avail of the optional standard deduction (OSD).
11. In the case of corporate taxpayers, the OSD allowed shall be in an amount not exceeding forty percent (40%) of their
gross income.
12. Corporations that can avail of OSD are allowed to deduct the cost of sales or cost of services.
13. For OSD purposes of corporation, the term gross income shall include all income except those that are subject to
final withholding tax at source.
14. Proprietary educational institutions and non-profit hospitals may be subject to a special rate of 10% on their net
income from sources within the Philippines only.
15. Capital outlays for expansion of school facilities may either be deducted as expenditures or depreciated over the
estimated life.
16. A general professional partnership and the partners comprising such partnership may avail of the optional standard
deduction only once, either by the general professional partnership or the partners comprising the partnership.
17. International carriers are taxed at 21/2% on their Gross Philippine Billings.
18. Gross Philippine Billings (for international air carrier) refers to the amount of gross revenue derived from carriage of
persons, excess baggage, cargo or mail originating from the Philippines in a continuous and uninterrupted flight,
irrespective of the place of sale or issue and the place of payment of the passage documents.
19. Gross Philippine Billings (for international shipping) means gross revenue whether for passenger, cargo, or mail
originating from the Philippines up to final destination, regardless of the place of sale or payment of the passage or
freight documents.
20. Income from foreign currency transactions with non-residents, Offshore Banking Units (OBUs) in the Philippines,
local commercial bank including Philippine branches of foreign banks shall be exempt from all taxes except net
income from transactions specified by Secretary of Finance.
21. Interest income from foreign currency loans granted to residents other than OBUs or local commercial banks shall
be subject to 10% final withholding tax.
22. Any income of non-resident (individual or corporation) from Offshore Banking Units (OBUs) shall be exempt from
income tax.
23. Total profits applied or earmarked for remittance without deduction for the tax component shall be subject to tax
on branch profit remittance (except on activities registered with PEZA) at 15%.
24. Regional or area headquarters is a branch established in the Philippines by multinational companies and which
headquarters does not earn or derive income from Philippines and which acts as supervisory, communications and
coordinating center for their affiliates, subsidiaries or branches in the Asia-Pacific Region and other foreign markets.
25. Regional operating headquarters is a branch established in the Philippines by multinational companies which is
engaged in different services and is subject to Philippine income tax at 10% of its net income within the Philippines.
26. A non-resident owner or lessor of vessels chartered by Philippine and other nationals shall be subject to a special
rate of 41/2% of its gross rentals within the Philippines.
27. Person engaging in business as partners in a general professional partnership shall be liable for income tax only in
their separate and individual capacities.
28. Under the TRAIN, income payments to partners of general professional partnership are subject to 15% creditable
withholding tax, if the income payment to the partner for the current year is P720,000 or more.
29. The share of partners in the net income of a taxable partnership shall be subject to final withholding tax.
30. Local contractors engaged in construction business and forming a Joint Venture to undertake construction project
must likewise be duly licensed by the Philippine Contractors Accreditation Board (PCAB) of the Department of Trade
and Industry (DTI) to be exempted from corporate income tax.
31. Joint ventures involving foreign contractors covered by a special license as contractor by the PCAB and where the
appropriate Tendering Agency (government office) certifies that the project is foreign financed/internationally-
funded project and that international bidding is allowed under the Bilateral Agreement shall be exempt from
Philippine income tax.
32. The share in a taxable joint venture’s net income is treated as inter-corporate dividend which is generally exempt
from income tax except when the co-venturer is an individual in which case such share in a taxable joint venture
shall be subject to final withholding tax.
33. The share in a non-taxable joint venture’s net income is subject to regular corporate income tax, in case of
corporation co-venturer, or regular income tax for individuals, in case of individual co-venturer.
34. Co-ownership is generally not taxable because the activities of the co-owners are usually limited to the preservation
of the property owned in common and collection of the income therefrom.
35. Where inherited property remained undivided for more than 10 years, and no attempt was ever made to divide the
same among the co-heirs, nor was the property under administration proceedings no held in trust, the property
should be considered as owned by an unregistered partnership and the income derived therefrom shall be subject
to corporate income tax.
36. When the income of the co-ownership is invested by the co-owners in business or other income producing
properties, the co-ownership will be subject to tax as a corporation because the co-owners have constituted
themselves into a partnership.
37. Every corporation subject to tax shall render, at least in duplicate a true and accurate quarterly income tax return
and final or adjustment return.
38. Corporations not engaged in trade or business in the Philippines (NRFC) shall be required to file income tax return if
they have income from Philippine sources.
39. Declaration of quarterly corporate income tax on a cumulative basis shall be made not later than 60 days from the
close of each of the first three quarters of the taxable year, whether, calendar or fiscal year.
40. The final adjustment return covering the total taxable income for the preceding calendar or fiscal year shall be filed
on or before 15th day of the 4th month following the close of the taxable year.
41. If the sum of the quarterly tax payments made during the taxable year is not equal to the total tax due on the entire
taxable income of that year, the corporation shall either pay the balance of tax still due, or carry over the excess
credit, or be credited or refunded with the excess amount paid.
42. Once the option to carry-over the excess amount shown on its final adjustment return has been made, such option
shall be considered irrevocable for the taxable period.
43. The corporate income tax return shall be filed in the RDO having jurisdiction over the location of the principal office
of the corporation filing the return or place where the main books of accounts and other data from which the return
is prepared are kept.
44. A non-profit corporation is exempted from corporate income tax if it is listed under Section 30 of the Tax Code.
45. The income of whatever kind and character of the organizations enumerated under Section 30 of the Tax Code from
any of their properties, real or personal, or from any of their activities conducted for profit regardless of the
disposition made of such income, shall be exempt from corporation tax.
1. Domestic corporations are taxed on net income from sources within and without the Philippines.
2. Resident foreign corporations are taxed on net income within the Philippines only.
3. Non-resident foreign corporations are taxed on gross income within the Philippines only.
4. Interest income from a debt instrument not within the coverage of deposit substitute from Philippine sources
received by a domestic corporation is subject to regular tax.
5. Interest income from a debt instrument within the coverage of deposit substitute from Philippine received by
corporations is subject to final tax.
6. Interest on government debt instrument and securities (regardless of number of lenders at the time of the
origination) received by corporations is subject to final tax.
7. Interest from overdue accounts receivable in the Philippines received by domestic and resident foreign corporations
shall be subject to regular corporate income tax.
8. Under the TRAIN, capital gains from sale of shares of stock not traded in the local stock exchange are subject to 15%
capital gains tax if received by a domestic corporation.
9. Under the TRAIN, capital gains from sale, barter, transfer and/or assignment of shares of stock of publicly-listed
companies not compliant with mandatory minimum public ownership (10% of the publicly-listed companies’ issued
and outstanding shares, exclusive of any treasury shares) is subject to 15% capital gains tax if received by
corporations.
10. All income, whether or not passive income, received by a non-resident foreign corporation shall be subject to final
tax except interest income from transactions with depository banks under expanded system and income from
foreign currency transactions with non-residents, OBUs in the Philippines, local commercial bank including branches
of foreign banks.
11. Dividend received from a domestic corporation by a non-resident foreign corporation is subject to 15% final tax
subject to condition that the country where the non-resident foreign corporation is domiciled allows a credit for
taxes deemed paid in the Philippines equivalent to 15%.
12. Dividends from a domestic corporation received by domestic and resident foreign corporations are exempt from
13. Interest on foreign loans contracted on or after August 1, 1986 received by non-resident foreign corporation is
subject to 20% final tax.
14. Under the TRAIN, interest received from depository bank under expanded foreign currency deposit system received
by corporations shall be subject to 71/2% final tax.
15. Interest income from long-term deposit or investment evidenced by certificates issued by BSP received by domestic
and resident foreign corporation shall be subject to regular corporate income tax.
16. Interest income from long-term deposit or investment evidenced by certificates issued by BSP received by NON-
RESIDENT FOREIGN CORPORATION is subject to 30% final tax.
17. Sale of land and/or building classified as capital asset located in the Philippines by domestic corporation is subject to
6% capital gains tax.
18. Sale of real property classified as ordinary asset owned by domestic corporation which is not habitually engaged in
real estate business is subject to 6% creditable withholding tax and therefore subject to regular corporate income
tax.
19. Income derived under expanded foreign currency deposit system by depository bank from foreign currency
transactions with non-residents, OBUs in the Philippines, local commercial bank including branches of foreign banks
shall be exempt from Philippine income tax.
20. Interest income from foreign currency loan granted by domestic and resident foreign depository banks under
expanded system to residents other than OBUs in the Philippines and other depositor bank shall be subject to 10%
final tax.
21. The President, upon the recommendation of the Secretary of Finance may, effective January 1, 2000, allow
corporation to be subjected to optional corporation tax.
22. The tax rate of optional corporate income tax is 15% based on the net income.
23. The option to be taxed based on gross income shall be available only to firms whose ratio of cost of sales to gross
sales or receipts from all sources does not exceed 55%.
24. The election of the gross income option by the corporation shall be irrevocable for the five (5) consecutive taxable
years during which the corporation is qualified under the scheme.
25. The Minimum Corporate Income Tax (MCIT) is imposed on all corporations excluding non-resident foreign
corporation.
26. The 2% MCIT is based on the gross income from Philippine and outside sources in case of domestic corporation and
gross income from Philippine sources in case of resident foreign corporation.
27. Special domestic corporations such as proprietary educational institutions and non-profit hospital shall not be
covered by MCIT as long as they are taxed at the preferential rate of 10%.
28. Non-resident foreign corporations including the special non-resident foreign corporations shall not be subject to
MCIT.
29. For the purpose of the MCIT, the term “gross income” means gross sales less sales returns, discounts, and
allowances and cost of goods sold, in case of sale of goods, or gross revenue less sales returns, discounts, allowances
and cots of services/direct cost, in the case of sale of services.
30. The term “gross income” for MCIT purposes will also include all items of gross income enumerated under Sec. 32 (A)
of the Tax Code, as amended, except income exempt from income tax and income subject to final withholding tax.
31. A domestic corporation that registers with the BIR in the year 2015 shall be covered by MCIT starting 2019.
32. With the imposition of MCIT, a corporation with net loss shall still pay tax.
33. The tax due shall be higher between the regular corporate income tax and the minimum corporate income.
34. The computation and the payment of MCIT, shall apply at the time of filing of the quarterly and annual corporate
income tax returns.
35. Any excess of the minimum corporate income tax over the normal corporate income tax shall be carried forward
and credited against the normal income tax for the three (3) succeeding taxable years.
36. The Secretary of Finance is authorized to suspend the imposition of minimum corporate income tax on any
corporation which suffers losses provided such corporation has not committed any fraudulent act in filing previous
years’ income tax returns.
37. In addition to other taxes imposed, there is imposed for each year on the improperly accumulated taxable income of
each corporation an improperly accumulated earnings tax equal to 10% of the improperly accumulated taxable
income.
38. The improperly accumulated earnings tax shall apply to all corporations except non-resident foreign corporation.
39. The fact that any corporation is a mere holding company or investment company shall be prima facie evidence of a
purpose to avoid the tax upon its shareholders or members.
40. The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of a
business shall be determinative of the purpose to avoid the tax upon its shareholders or members, and such
determination made by the BIR cannot be disputed.
41. Once the profits have been subjected to IAET, the same shall no longer be subjected to IAET in later years even if not
declared as dividends.
42. Profits which have been subjected to IAET when finally declared as dividends shall be subject to tax on dividends.
43. To avoid the payment of IAET, dividend must be declared and paid or issued not later than one (1) year following the
close of the taxable year.
44. Improperly accumulated earnings tax shall be paid within 15 days after one year following the close of the taxable
year if dividends are not declared and paid or issued.
45. Sale or real property by a corporation which is registered with and certified by the Housing and Land Use Regulatory
Board (HLURB) or the Housing and Urban Development Coordinating Council (HUDCC) shall be exempt from income
tax.
1. As a general rule dividends received from domestic corporation or foreign corporation are treated as income from
sources within.
2. Dividend from foreign corporation where the ratio of the gross income derived from Philippine sources over the
total world gross income of such foreign corporation for the preceding 3 years prior to declaration of dividends is
more than 85% shall be considered as income purely from Philippine source.
3. A dividend from a foreign corporation shall be considered as income partly from within the Philippines and partly
from outside the Philippine if the ratio of Philippine gross income over the total gross income for the preceding 3
years prior to declaration of dividends is less than 50%.
4. The test of source of rentals, whether real or personal, is based on the location of property.
5. Royalties are considered income from sources within the Philippines if they come from the use of intangible
personal property located in the Philippines.
6. Rentals or royalties from intangible personal property in the Philippines are considered income from sources within
the Philippines.
7. Gains, profits and income from the sale of real property are from sources within the Philippines if the real property
sold is located in the Philippines.
8. Gains, profits and income from the sale of personal property, purchased without and sold within the Philippines
shall be treated as income derived in full from sources within the Philippines.
9. Expenses, losses and other deductions properly allocated to income from sources within shall be deducted from the
items of gross income derived from sources within the Philippines.
10. A ratable part of expenses, interests, losses and other deductions effectively connected with the business or trade
conducted exclusively within the Philippines which cannot definitely be allocated to some items or class of gross
income shall be deducted from the items of gross income derived from sources within the Philippines.
11. Compensation for labor or personal services performed outside the Philippines shall be considered income from
sources within the Philippines if it pertains to resident citizen.
12. Rentals or royalties from property located outside the Philippines or from any interest in such property including
rentals or royalties for the use of or for the privilege of using outside the Philippines, patents, copyrights, secret
processes and formulas, goodwill, trademarks, trade brands, franchises and other like properties shall be considered
income from sources outside the Philippines.
13. Gains, profits and income from the sale of real property located outside the Philippines shall be considered income
from sources without the Philippines if the transaction takes place in the Philippines.
14. Gains, profits and income from the sale of personal property produced in whole or in part by the taxpayer within
and sold without the Philippines shall be considered as income partly within and partly without the Philippines.
15. Gains, profits and income from the sale or personal property produced in whole or in part by the taxpayer without
and sold within the Philippines shall be considered as income purely without the Philippines.
16. Income from services performed partly within and partly without the Philippines shall be considered as income
partly within and partly without the Philippines.
17. Gains, profits and income derived from the purchase of personal property within and its sale without the Philippines
shall be treated as derived entirely from sources without the Philippines.
18. Gains, profits and income derived from the purchase of personal property without and its sale within the Philippines
shall be treated as derived entirely from sources within the Philippines.
19. Gain from sale of shares of stock in a domestic corporation regardless of where the said shares are sold shall be
treated as derived entirely from sources within the Philippines.
20. Gains, profits and income from the sale of real property are from sources within the Philippines if the real property
sold is located outside the Philippines.
1. Income tax return is a sworn statement in which the taxpayer discloses the nature and extent of his tax liability by
formally making a report of his income and allowable deductions for the taxable year in the prescribed form.
2. Every nonresident alien engaged in trade or business or in the exercise of profession in the Philippines is also
required to file an income tax return.
3. Individual taxpayers receiving purely compensation income, regardless of amount, from only one employer in the
Philippines for the calendar year, the income tax of which has been withheld correctly by the said employer shall not
be required to file and income tax return.
4. The Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes filed by the
employers of employees receiving purely compensation income, regardless of amount, from only one employer in
the Philippines for the calendar year, shall be tantamount to the substituted filing of income tax returns by said
employees.
5. Minimum wage earners (MWE) who work in the private sector and being paid the statutory minimum wage (SMW),
as fixed by Regional Tripartite Wage and Productivity Board or National Wages and Productivity Commission,
applicable to the place where he/she is assigned shall be exempt from income tax and shall not be required to file an
income tax return.
6. Employees in the public sector with compensation income of not more than the SMW in the non-agricultural sector,
as fixed by Regional Tripartite Wage and Productivity Board or National Wages and Productivity Commission,
applicable to the place where he/she is assigned shall be exempt from income tax and shall be required to file an
income tax return.
7. An individual deriving compensation concurrently from two or more employers at any time during the taxable year
shall file an income tax return.
8. The filing of the ITR of an individual deriving income purely from compensation who is required to file an income tax
return shall be on or before the fifteenth (15th) day of April of each year covering income for the preceding taxable
year.
9. When the tax due is in excess of two thousand pesos (P2,000), the taxpayer including a corporation may elect to pay
the tax in two (2) installments.
10. Non-EFPS filers or taxpayers are now mandatorily required to use eBIR forms starting September 1, 2014.
11. Married individuals, whether citizens, resident or nonresident aliens, who do not derive income purely from
compensation, shall file separate returns for the taxable year.
12. Where it is impracticable for the spouses to file one return, each spouse may file a separate return of income but
the returns so filed shall be consolidated by the Bureau of Internal Revenue for purposes of verification for the
taxable year.
13. The income of unmarried minors derived from property received from a living parent shall be included in the return
of the parent without exceptions.
14. If the taxpayer is unable to make his own return, the return may be made by his duly authorized agent or
representative or by the guardian or other person charged with the care of his person or property.
15. The fact that an individual’s name is signed to a filed return shall be prima facie evidence for all purposes that the
return was actually signed by him.
16. Before TRAIN, corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or
output exceed one hundred fifty thousand pesos (P150,000) shall have their books of accounts audited and
examined yearly by Independent Certified Public Accountants and their income tax returns accompanied with a duly
accomplished Account Information Form (AIF).
17. Electronic Filing and Payment System (EFPS) refers to the system developed and maintained by the Bureau of
Internal Revenue (BIR) for electronically filing tax returns, including attachments, if any, and paying taxes thereon,
specifically through the internet.
18. Filing Reference Number refers to the control number issued by the EFPS to acknowledge that a tax return, including
attachments, has been successfully filed electronically.
19. Confirmation Number refers to the control number issued by the authorized agent bank (AAB) to the taxpayer and
BIR to acknowledge that the taxpayer’s account has been successfully debited electronically in payment of his tax
liability.
20. Acknowledgement Number refers to the control number issued by the AAB to the BIR to confirm that tax payment
has been credited to the account of the government or recognized as revenue (internal revenue tax collection) by
the Bureau of Treasury.
21. For all returns that will be e-filed by large taxpayers starting August 1, 2002, e-payment of the taxes due thereon
through EFPS shall become mandatory unless otherwise notified by Commissioner of Internal Revenue.
22. Upon receipt of a notification letter duly signed by the Commissioner of Internal Revenue, it becomes mandatory to
the volunteering two hundred (200) or more non-large taxpayers, including their branches located in the
computerized revenue district offices, to file their returns and pay their taxes thru EFPS.
23. Large Taxpayers’ enrollment shall be limited only to the EFPS Authorized Agent Banks authorized to serve them and
who are capable to accept e-payments.
24. The electronic copies of the returns in their original format e-filed by a taxpayer can be accessed by him via EFPS for
a period of six (6) months from filing.
25. In cases of disputes regarding the contents of returns filed via EFPS, the contents shown or stored in the ITS Server
of the BIR shall govern.
26. The paper copy of the audited financial statements shall be filed within fifteen (15) days from the date of filing of BIR
Form No. 1702.
27. Failure to comply with the provisions of the regulations pertaining to EFPS shall be penalized upon conviction for
each act or omission by a fine of not more than one thousand pesos (P1,000) or suffer imprisonment of not more
than six (6) months or both.
28. For the third and subsequent offenses in complying with the provisions of the regulations pertaining to EFP, no
compromise shall be entertained or allowed.
29. Over-the-counter cash payment shall not exceed the maximum amount per tax payment of P10,000.00.
30. Payment through Tax Debit Memo (TBM) is not acceptable as payments for withholding taxes, fringe benefit tax,
and for taxes fees and charges collected under special schemes or procedures or programs of the Government or
BIR.
TX 1402-A: Compliance Requirements
TRUE OR FALSE: Write word True if the statement is correct and the word False if the statement is incorrect. When your
answer is False, underline the word or phrase that makes the statement incorrect.
1. A person maintaining a head office, branch or facility shall register with the Revenue District Officer having
jurisdiction over the head office, branch or facility.
2. For purposes of registering business, the term “facility” may be limited to sales outlets, places of production,
warehouses or storage places.
3. Under the TRAIN, all persons subject to an internal revenue tax shall, at the point of each sale and transfer of
merchandise or for services rendered valued at One hundred pesos (P100) or more, issue duly registered
receipts or sale or commercial invoices, showing the date of transaction, quantity, unit cost.
4. Where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or
invoices shall be issued which shall show the name, business style, if any, and address of the purchaser,
customer or client.
5. Where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or
receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser.
6. All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print
receipts or sales or commercial invoices before a printer can print the same.
7. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to
be printed are serially numbered and shall show, among other things, the name, business style. Tax
Identification Number (TIN) and business address of the person or entity to use the same, and such other
information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.
8. All persons who print receipt or sales or commercial invoices shall maintain a logbook/ register of taxpayers who
availed of their printing services.
9. The logbook/ register shall contain the names, Taxpayer Identification Numbers of the persons or entities for
whom the receipts or sales or commercial invoices were printed and number of booklets, number of sets per
booklet, number of copies per set and the serial numbers of the receipts or invoices in each booklet.
10. All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep a
journal and a ledger or their equivalents.
11. Under the TRAIN, corporations, companies, partnerships or persons whose gross annual sales, earnings,
receipts or output exceed Three million pesos (P3,000,000), shall have their books of accounts audited and
examined yearly by Independent Certified Public Accountants and their income tax returns accompanied with a
duly accomplished Account Information Form (AIF).
12. Corporations, companies, partnerships or persons shall keep the books or records in any language.
13. All taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting
records, for a period of five (5) years reckoned from the day following the deadline in filing a return, or if filed
after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in
the books of accounts.
14. The taxpayer shall retain hardcopies of the books of accounts, including subsidiary books and other accounting
records within the first five (5) years reckoned from the day following the deadline in filing a return, or if filed
after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in
the books of accounts.
15. Thereafter, the taxpayer may retain only an electronic copy of the hardcopy (paper) of the books of accounts,
subsidiary books and other accounting records in an electronic storage system which complies with the
requirements set forth under the Regulations.
16. The term “other accounting records” includes the corresponding invoices, receipts, vouchers and returns, and
other source documents supporting the entries in the book of accounts.
17. The term “last entry” refers to a particular business transaction or an item thereof that is entered or posted last
or latest in the books of accounts when the same was closed.
18. If the taxpayer has any pending protest or claim for tax credit/ refund of taxes, and the books and records
concerned are material to the case, the taxpayer is required to preserve his/her/its books of accounts and other
accounting records for ten (10) years.
19. Unless a longer period of retention is required under the NIRC or other relevant laws, the independent Certified
Public Accountant (CPA) who audited the records and certified the financial statements of the taxpayer, equally
as the taxpayer, has the responsibility to maintain and preserve electronic copies of the audited and certified
financial statements including the audit working papers for a period of ten (10) years from the due date of filing
the annual income tax return or the actual date of filing thereof, whichever comes later.
20. For income tax purposes, examination and inspection shall be more than once in a taxable year, except in the
cases where fraud, irregularity or mistakes, is determined by the Commissioner or the taxpayer requests for
reinvestigation.
END
TX 1403-A: Drill In Withholding Taxes
1. The obligation of the payor to deduct and withhold the tax under Section 2.57 of Revenue Regulations No. 2-98
arises at the time an income payment is paid or payable, or the income payment is accrued or recorded as an
expense or asset, whichever is applicable, in the payor’s book, whichever comes later.
2. When an income is not yet paid or payable but the same has been recorded as an expense or asset, whichever is
applicable, in the payor’s books, the obligation to withhold shall arise in the last month of the return period in
which the same is claimed as an expense or amortized for tax purposes.
3. All withholding agents shall, regardless of the number of employees and payees, whether the employees/payees
are exempt or not, submit an alphabetical list of employees and list if payees on payments subject to credible
and final withholding takes which are required to be attached as integral part of the Annual Information Returns
(BIR Form No. 1604CF/1604E) and Monthly Remittance Returns (BIR Form No. 1601C, etc.).
4. The excess of the withheld tax over the tax due on his return shall be refunded to him subject to the authority of
the Commissioner to refund taxes under Sec. 204 of the NIRC (Authority of the Commissioner to Compromise,
Abate and Refund or Credit Taxes.)
5. If the income tax collected at source is less than the tax due on his return, the difference shall be paid in
accordance with the provisions of Sec. 56 of the Tax Code (Payment and Assessment of Income Tax for
Individuals and Corporations.)
6. Creditable and final withholding taxes deducted and withheld by the withholding agent shall be paid upon filing
a return in duplicate with the authorized agent banks located within the Revenue District Office (RDO) having
jurisdiction over the residence or principal place of business of the withholding agent.
7. In places where there is no authorized agent banks, the return shall be filed directly with the Revenue District
Officer, Collection Officer of the duly authorized Treasurer of the city of municipality where the withholding
agent’s residence or principal place of business is located, or where the withholding agent is a corporation,
where the principal office is located except in cases where the Commissioner otherwise permits.
8. Generally, taxes withheld for the months of January to November shall be remitted not later that the 10th day
after the end of each month (15th day if under EFPS) and for the month of December not later than 15th day of
the following year (January 20 if under EFPS)
9. Every person subject to any internal revenue ax shall register once with the appropriate Revenue District Officer
within twenty (20) days from date of employment, or on or before the commencement of business, or before
payment of any tax due, or upon filing of a return, statement, or declaration as required in this Code.
10. The registration shall contain the taxpayers’s name, style, place of residence, business and such other
information as may be required by the Commissioner in the form prescribed therefore.
TRUE OR FALSE: Write the word True when the statement is correct and the word False when the statement is
incorrect. When your answer is False, underline the word or phrase that makes the statement false.
1. Documentary Stamp Tax (DST) is a tax on documents, instruments, loan agreements, and papers evidencing the
acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.
2. DST is in nature of an excise tax levied on the exercise by person of certain privileges conferred by the law for
the creation, revision, or termination of specific legal relationship through the execution of specific instruments.
3. The DST rates shall be applicable on all documents not otherwise expressly exempted from law,
notwithstanding the fact they are in electronic form.
4. Under R.A. 8792, otherwise known as the Electronic Commerce Act, electronic documents are the functional
equivalent of a written document under existing laws, and the issuance thereof is therefore tantamount to the
issuance of a written document, and therefore subject to DST.
5. DST are levied dependent on the legal status of the transactions giving thereto.
6. DST must be paid upon the issuance of the instruments, without regard to whether the contracts which gave
rise to them are rescissible, void, voidable, or unenforceable.
7. DST is imposed against the person making, signing, issuing, accepting, or transferring the document or facility
evidencing the aforesaid transaction.
8. In general, DST may not be imposed on the transaction itself or upon the document underlying such act.
9. Any of the parties to the transaction shall be liable for the full amount of the documentary stamp tax due.
10. As between themselves, the parties may agree on who shall be liable or how they may share on the cost of the
DST.
11. Whenever one of the parties to the taxable transaction is exempt from the DST, the other party who is not
exempt shall be the one directly liable for the tax.
12. The provisions of Presidential Decree No. 1045 notwithstanding, any person liable to pay documentary stamp
tax upon any document subject to tax under Title VII of the Tax Code shall file a tax return and pay the tax in
accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation
of the Commissioner.
13. Except as provided by rules and regulations promulgated by the Secretary of Finance, upon recommendation of
the Commissioner, the documentary stamp tax return prescribed shall be filled within ten (10) days after the
close of the month when the taxable document was made, signed, issued, accepted, or transferred, and the tax
thereon shall be paid at the same time the aforesaid return is filed.
14. Revenue Regulations No. 6-2001 provides that the DST return shall be filed within five (5) days after the close of
the month when the taxable document was made, signed, accepted or transferred and the tax thereon shall be
paid at the same time the aforesaid return is filed.
15. Except in cases where the Commissioner otherwise permits, the documentary stamp tax return shall be filed
with and the tax due shall be paid through the authorized agent bank within the territorial jurisdiction of the
Revenue District Office which has jurisdiction over the residence or principal place of business of the taxpayer.
16. In places where there is no authorized agent bank, the documentary stamp tax return shall be filed with the
Revenue District Officer, collection agent, or duly authorized Treasurer of the city or municipality in which the
taxpayer has his legal residence or principal place of business.
17. In lieu of the filing of documentary stamp tax return, the tax may be paid either through purchase and actual
affixture or by imprinting the stamps through a documentary stamp metering machine, on the taxable
document, in the manner as may be prescribed by rules and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner.
18. An instrument, document or paper which is required by law to be stamped and which has been signed, issued,
accepted or transferred without being duly stamped, shall not be recorded.
19. An instrument, document or paper or any copy thereof or any record of transfer of the same which is required
by the law to be stamped shall not be admitted or used in evidence in any court until the requisite stamp or
stamps are affixed thereto and cancelled.
20. No notary public or other office authorized to administer oaths shall add this jurist or acknowledgement to any
document subject to documentary stamp tax unless the proper documentary stamps are affixed thereto and
cancelled.
21. Starting January 1, 2018, the DST on the original issue of shares of stock is Two pesos (P2.00) on each Two
hundred pesos (P200), or fractional part thereof, of the par value, of such shares of stock.
22. In the case of the original issue of shares of stock without par value DST is based upon the actual consideration
for the issuance of such shares of stock.
23. In the case of stock dividends DST is based on the actual value represented by each share.
24. The DST on sales, agreements to sell, memoranda of sales. Deliveries or transfer of shares or certificates of stock
are Two pesos (P2.00) on each Two hundred pesos (P200), or fractional part thereof, of the par value, of such
shares of stock.
25. Only one DST shall be collected on each sale or transfer of stock from one person to another, regardless of
whether or not a certificate of stock is issued, indorsed, or delivered in pursuance of such sale or transfer.
26. In the case of stock without par value DST is equivalent to fifty percent (50%) of the documentary stamp tax
paid upon the original issue of said stock.
27. Starting January 1, 2018, the DST on bank checks, drafts, certificates of deposit not bearing interest, and other
instruments is P3.00 on each bank check, draft, or certificate of deposit not drawing interest.
28. Starting January 1, 2018, the DST on every original issue of debt instrument is One peso and fifty centavos
(P1.50) on each Two hundred pesos (P200), or fractional part thereof, of the issue of any such debt instruments.
29. There shall be collected a documentary stamp tax of P15 when the consideration, or value received or
contracted to be paid for such realty, after making proper allowance of any encumbrance, does not exceed One
thousand pesos (P1,000), based on the consideration contracted to be paid for such realty or on its fair market
value, whichever is higher.
30. There shall be collected a documentary stamp tax of P15 for each additional One thousand pesos (P1,000), or
fractional part thereof in excess of One thousand pesos (1,000) of such consideration, based on the
consideration contracted to be paid for such realty or on its fair market value, whichever is higher.
31. For such debt instruments with terms of less than one (1) year the DST is based on the proportional amount in
accordance with the ratio of its term in number of days to three hundred sixty-five (365) days.
32. When it appears that the amount of the documentary stamp tax payable on realty has been reduced by an
incorrect statement of the consideration in any conveyance, deed, instrument or writing subject to such tax the
Commissioner, provincial or city Treasurer, or other revenue officer shall, from the assessment rolls or other
reliable source of information, assess the property of its true market value and collect the proper tax thereon.
33. Transfers exempt from donor’s tax under section 101 (a) and (b) of the Tax Code shall be exempt from the
documentary stamp tax imposed.
34. No DST shall be collected on grants, patents or original certificates of adjudication issued by the Government,
whereby any land, tenement, or other realty sold shall be granted, assigned, transferred, donated, otherwise
conveyed to the purchasers, or purchasers, or to any other persons designated by such purchaser or purchasers.
35. Issue price shall refer to the face value of the debt instrument.
END
THOT: We cannot discover new oceans unless we have the courage to lose sight of the shore. – Teen Estee
1. Any amount paid out for new buildings or for permanent improvements or betterments, made to increase the
value of any property or estate shall not be allowed as deduction from gross income.
2. Premiums paid on any life insurance policy covering the life of any person financially interested in any trade or
business carried on by the taxpayer, individual or corporate, when the taxpayer is directly or indirectly a
beneficiary shall not be allowed as deduction from the gross income.
3. Premiums paid on any life insurance policy covering the life of any person financially interested in any trade or
business carried on by the taxpayer, individual or corporate; when the family of the insured is directly or
indirectly a beneficiary is deductible from the gross income.
4. In computing net income, no deduction shall in any case be allowed in respect of losses from sales or exchanges
of property directly or indirectly between members of the family.
5. In computing net income, no deduction shall in any case be allowed in respect of losses from sales or exchanges
of property directly or indirectly between a grantor and the beneficiary.
6. The deductible items shall be allowed as deduction only if it is shown that the tax required to be deducted and
withheld there from has been paid to the BIR.
7. No deduction will also be allowed notwithstanding payments of withholding tax at the time of the audit
investigation or reinvestigation/reconsideration in cases where no withholding of tax was made in accordance
with Secs. 57 and 58 of the Tax Code.
8. A taxpayer can deduct an item or amount from the gross income only if there is a law authorizing such a
deduction.
9. For income tax purposes, a taxpayer is free to deduct from the gross income the full amount or a lesser amount
of the deduction allowed or not claim any deduction at all.
10. As long as business related, expenses that are ordinary and necessary and paid or incurred during the year do
not necessarily have to be substantiated with sufficient evidence, such as official receipts or other adequate
records to be allowed a deduction from the gross income.
11. Salaries paid by employers to employees who are absent because they are in the military, naval or other service
in the government, but who intend to return at the conclusion of such service are not deductible from the gross
income.
12. Ostensible salary paid by a corporation which is actually a distribution of dividends or part of payment for a
property are allowed as deduction provided the employee renders actual services.
13. Travel expenses, here and abroad, which are reasonable and incurred or paid while away from home in the
pursuit of trade, business or profession shall be deductible as ordinary and necessary expenses.
14. Rentals and/or other payments which are required as a condition for the continued use or possession of
property shall be allowed as deduction provided they are reasonable, business or profession-related and
taxpayer has not taken or is not taking title or in which he has no equity other than that of a lessee, user or
possessor.
15. Entertainment, amusement and recreation expenses during the taxable year are deductible provided they are
paid or incurred during the taxable year, directly connected to business, trade or profession and not contrary to
law, morals, public policy or public order.
16. The term “entertainment, amusement and recreation expenses” includes representation expenses and/or
depreciation or rental expense relating to entertainment facilities.
17. The term “entertainment facilities” shall refer to a yacht, vacation home or condominium and any similar item of
real or personal property used by the taxpayer primarily for the entertainment, amusement, or recreation of
guests or employees.
18. Expenses for events organized for promotion, marketing and advertising including concerts, conferences,
seminars, workshops, conventions, and other similar events shall qualify as entertainment, amusement and
recreation expenses.
19. Notwithstanding the ceiling imposed on the entertainment, amusement and recreation expenses, the claimed
expense shall be subject to verification and audit for purposes of determining its deductibility as well as
compliance with the substantiation requirements.
20. If a taxpayer is found to have shifted the amount of the entertainment, amusement and recreation expense to
any other expense in order to avoid being subjected to the ceiling, the amount shifted shall be disallowed in its
totality, without prejudice to such penalties as may be imposed by the Tax Code.
21. A private educational institution had capital outlays of depreciable assets for the expansion of school facilities,
for income taxation, it may deduct the capital outlays as expense during the year or depreciate them over the
estimated useful life at its option.
22. As a rule, the interest must be on an indebtedness of the taxpayer; otherwise, it is not deductible.
1. The Commissioner of Internal Revenue may compromise the payment of any internal revenue tax if there is reasonable
doubt as to the validity of the assessment and when the taxpayer is financially incapacitated.
2. The Commissioner of Internal Revenue may cancel or able tax liability if the tax or any portion thereof appears to be
unjustly or excessively assessed or the administration and the collection costs involved do not justify the collection of
the amount due.
3. The Commissioner of Internal Revenue may credit or refund taxes erroneously or illegally received, penalties imposed
without authority, the value of internal revenue stamps when returned in good condition by the purchaser and the
value, upon proof of destruction, of unused stamps are unfit for use.
4. Delinquent accounts may be compromised excluding those with duly approved schedule of installment payments.
5. Cases under administrative protest maybe compromised even after issuance of the Final Notice of Assessment to the
taxpayer which, are still pending in the Regional Offices, Revenue District Offices, Legal Service, Large Taxpayer Service,
Collection Service, Enforcement Service and other offices in the National Office.
6. Civil tax cases being disputed before the courts can be compromised.
7. Collection cases filed before the courts can be compromised.
8. Criminal violations, other than those already filed in court of those involving criminal tax fraud, can be compromised.
9. Withholding tax cases cannot be compromised unless the applicant-taxpayer invokes provisions of law that cast doubt
on the taxpayer`s obligation to withhold.
10. Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer can be
compromised,
11. Delinquent accounts with duly approved schedule of installment payments cannot be compromised.
12. Criminal tax fraud cases confirmed as such by the Commissioner of Internal Revenue or his duly authorized
representative cannot be compromised.
13. Criminal violations already filed in court cannot be compromised.
14. Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the original
assessment and the taxpayer is agreeable to such decision by signing the required agreement form for the purpose can
be compromised.
15. Cases which become final and executory after final judgement of a court, where compromise is requested on the ground
of doubtful validity of the assessment cannot be compromised.
16. The offer to compromise a delinquent account or disputed assessment on the ground of reasonable doubt as the validity
of the assessment may be accepted when it is shown that the delinquent account or disputed assessment is one
resulting from jeopardy assessment.
17. Jeopardy assessment is the technical term for a tax assessment made by an authorized Revenue Officer (RO) without the
benefit of complete or partial audit, in light of the RO`s belief that the assessment and collection of a deficiency tax will
be jeopardized by delay caused by the taxpayer`s failure to comply without audit and investigation requirements to
present his books of accounts and/or pertinent records, or substantiate all or any of the deductions, exemptions or
credits claimed in his return.
18. The offer to compromise a delinquent account or disputed assessment on the ground of reasonable doubt as to the
validity of assessment may be accepted when it is shown that the assessment seems to be arbitrary in nature, appearing
to be based on presumption and there is reason to believe that it is lacking in legal and/or factual basis.
validity of the assessment may be accepted when it is shown that the assessments made based on the “Best Evidence
Obtainable Rule” and there is reason to believe that the same can be disputed by sufficient and competent evidence.
validity of the assessment may be accepted when it is shown that the assessment was issued within the prescriptive
period for assessment as extended by the taxpayer`s execution of Waiver of the Statute of Limitations the validity or
authenticity of which is being questioned or at issue and there is strong reason to believe and evidence to prove that it is
not authentic.
validity of the assessment may be accepted when it is shown that the assessment is based on an issue where a court of
competent jurisdiction made and advance decision against the Bureau, but for which the Supreme Court has not
decided upon with finality.
validity of the assessment may be accepted when it is shown that the taxpayer failed to file an administrative protest on
the account of the alleged failure to receive notice of assessment and there is no reason to believe that the assessment
is lacking in legal and/or factual basis.
validity of the assessment may be accepted when it is shown that the taxpayer failed to file a request for reinvestigation
or reconsideration within 30 days from receipt of final assessment notice and there is reason to believe that the
assessment is lacking in legal and/or factual basis.
24. The term ‘utilization’ means any amount in cash or in kind (including administrative expenses) paid or utilized to
accomplish one or more purposes or paid to acquire an asset used (or held for use) for which the accredited non-
government organization was created or organized.
25. The amount of any charitable contribution of property other than money shall be based on the acquisition cost of said
property.
26. Deduction of amounts contributed to charity is based on public policy and provisions allowing deductions of charitable
contributions should not be narrowly construed, hence, deduction for contributions may still be allowed even if the
taxpayer fails to attach receipts.
27. A taxpayer may treat research or development expenditures which are paid or incurred by him during the taxable year
in connection with his trade, business or profession as ordinary and necessary expenses which are not chargeable to
capital account.
28. Research and development expenses treated as deferred expenses shall be allowed as deduction ratably distributed
over a period of not less than sixty (60) months beginning with the month in which the taxpayer first realizes benefits
from such expenditures.
29. Research and development deduction shall not apply to any expenditure for the acquisition or improvement of land, or
for the improvement of property to be used in connection with research and development of a character which is
subject to depreciation and depletion.
30. 30. Research and development deduction shall not apply to any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any deposit or ore or other mineral, including oil or gas.
31. Contributions to pension trust during the taxable year to cover the pension liability accruing during the year shall be
allowed as a deduction under ordinary and necessary expenses.
32. Contribution for current pension is deductible in full and shall be considered ordinary and necessary expense.
33. Contribution for past pension is apportioned in equal parts over a period of 10 years.
34. 34. The deductible items shall be allowed as deduction only if it is shown that the tax required to be deducted and
withheld therefrom has been paid to the BIR.
35. 35. No deduction will also be allowed notwithstanding payments of withholding tax at the time of the audit investigation
or reinvestigation/reconsideration in cases where no withholding of tax was made in accordance with Secs. 57 and 58 of
the Tax Code.
36. Individuals other than non-resident aliens can avail of the Optional Standard Deduction (OSD).
37. Corporations other than non-resident foreign corporations can avail of the Optional Standard Deduction (OSD).
38. In lieu of the itemized deductions, an individual subject to tax under Section 24, other than a nonresident alien, may
elect a standard deduction in an amount not exceeding forty percent (40%) of his gross sales or gross receipts.
39. The “cost of sales” in case of individual seller of goods, or the “cost of services” in the case of individual seller of
services, is not allowed to be deducted for purposes of determining the basis of the OSD.
40. In the case of domestic corporation or a resident foreign corporation, it may elect a standard deduction in an amount
not exceeding forty percent (40%) of its gross income.
41. “Cost of services” means all direct costs and expenses necessarily incurred to provide the services required by the
customers and clients and shall not include interest expense except in the case of banks and other financial institutions.
42. Passive income which has been subjected to a final tax at source shall not form part of the gross income for purposes of
computing the forty percent (40%) optional standard deduction.
43. If the GPP availed of itemized deductions, the partners are not allowed to claim the OSD from their shares in the net
income because OSD is a proxy for all the items of deduction allowed in arriving taxable income. This means that the
OSD is in lieu of the items of deductions claimed by the GPP and the items of deductions claimed by the partners.
44. If the partner also derives other gross income from trade, business or practice of profession apart from and distinct from
his share in the net income of the GPP, the deduction that he can claim from his other gross income would follow the
same deductions availed of from his partnership income.
45. An individual who is a pure compensation income earner cannot claim deduction for health and/or hospitalization
insurance payment.
46. To be allowed a deduction for health and/or hospitalization insurance premium, the taxpayer’s family has a gross
income of not more than P250,000 for the taxable year.
47. Total family income of P250,000 includes primary income and other income from sources received by all members of the
nuclear family.
48. The maximum amount of P2,400 is deductible by the spouse who paid for the health and/or hospitalization insurance.
49. The term “nuclear family” shall include father, mother, unmarried children living together as one household, single
parent with children and single person living alone.
50. In the case of married taxpayers, only the spouse claiming the additional exemption for dependents shall be entitled to
deduct premium payments on health and/or hospitalization.
TRUE OR FALSE: Write word True if the statement is correct and the word False of the statement is incorrect. When your
1. The additions to the tax or deficiency tax prescribed shall apply to all taxes, fees and charges imposed under the Tax
Code.
2. The amounts so added to the tax shall be collected at the same time, in the same manner and as part of the tax.
3. If the withholding agent is the Government or any of its agencies, political subdivisions or instrumentalities, or a
government-owned or controlled corporation, the employee thereof responsible for the withholding remittance of the
tax shall be personally liable for the additions to the tax prescribed herein.
4. The term “person”, as used for the additions to the tax purposes, includes an officer or employee of a corporation who
as such officer, employee or member is under a duty to perform the act in respect of which violation occur.
5. Failure to file any return and pay the tax due thereon as required under the provisions of the Tax Code or rules and
regulations on the date prescribed shall be subject to 50% surcharge. Filing a return with an internal revenue officer
other than those with whom the return is required to be filed, unless otherwise authorized by the Commissioner of
Internal Revenue shall be subject to 25% surcharge.
6. A person who is not VAT-registered issues an invoice or receipt showing his TIN, followed by the word “VAT” shall be
subject to 50% civil penalty of the tax or of the deficiency tax.
7. Willful neglect to file the return within the period prescribed by the Tax Code or rules and regulations shall be subject to
25% surcharge.
8. A false or fraudulent return willfully made will be subject to 50% civil penalty of the tax or of the deficiency tax.
9. Failure to report sales, receipts, or income in an amount exceeding 30% of that declared per return is considered
substantial under declaration of taxable sales, receipts or income and shall constitute prima facie evidence of a false or
fraudulent return.
10. 10. A claim of deduction in an amount exceeding 30% of actual deductions is considered substantial overstatement of
deductions and shall constitute conclusive evidence of a false or fraudulent return.
11. Recurrence of understatement of income or overstatement of deductions for more than one taxable year is not a prima
facie evidence of a false or fraudulent return.
12. Deficiency is a civil penalty imposed by law as addition to the main tax required to be paid.
13. In case the taxpayer, without notice from the Commissioner or his duly authorized representative, voluntarily files a
return, only 25% surcharge shall be imposed for late filing and late payment of the tax in lieu of the 50% surcharge.
14. The 50% surcharge shall be imposed in case the taxpayer files the return only after prior notice in writing from the
Commissioner of Internal Revenue or his duly authorized representative.
15. Under the TRAIN, there shall be assessed and collected on any unpaid amount of tax, interest at the rate of double the
legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the
BangkoSentral ng Pilipinas (BSP) from the date prescribed for payment until the amount is fully paid.
16. Any person required to pay the tax who is qualified and elects to pay the tax on the installment under the provisions of
the Tax Code, but fails to pay the tax or any installment hereof, or any part of such amount or installment on or before
the date prescribed for its payment shall be subject to interest on extended payment.
17. A fine of P1,000 shall be imposed in the case of each failure to file an information return, statement or list, or keep any
record, or supply any information required by the Tax Code or by the Commissioner on the date prescribed therefor.
18. The aggregate amount to be imposed for such all failures in the preceding number during a calendar year shall not
exceed Twenty-five thousand pesos (P25,000).
19. Any person required to withhold, account for, and remit any tax imposed by this Code or who willfully fails to withhold
such tax, or account for and remit such tax, or aids or abets in any manner to evade any such tax or the payment
thereof, shall, in addition to other penalties provided for under the Chapter on additions to tax, be liable upon
conviction to a penalty equal to the total amount of the tax not withheld, or not accounted for and remitted.
20. Any employer/withholding agent who fails or refuses to refund excess withholding tax shall, in addition to the penalties
provided in the Title X of the Tax Code (Statutory Offenses and Penalties), be liable to a penalty to the total amount of
refunds which was not refunded to the employee resulting from any excess of the amount withheld over the tax actually
due on their return.
21. A compromise in extra-judicial settlement of the taxpayer`s criminal liability for his violation is consensual in character,
hence, may not be imposed on the taxpayer without his consent.
22. Delinquency is the amount still due and collectible from a taxpayer upon audit or investigation.
23. In no case shall the compromise penalty differ in amount from those specified under Revenue Memorandum Order No.
19—2207, except when duly approved by the Commissioner or concerned Deputy Commissioner, or in proper cases, by
the Regional Directors.
24. The schedule of compromise penalties shall not prevent the Commissioner or his duly authorized representative from
accepting a compromise amount higher than what is provided in the schedule.
25. Although all amounts of compromise penalties incident to violations shall be itemized in the assessment notice and/or
demand letter, the same should not form part of assessment notice that reflects deficiency basic tax, surcharge and
interest but should appear in a separate assessment notice that reflects deficiency basic tax, surcharge and interest but
should appear in a separate assessment notice/demand letter as the amount suggested to the taxpayer to pay in lieu of
criminal prosecution.
1. The taxable income shall be computed upon the basis of the taxpayer’s annual accounting period (fiscal year or calendar
year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such
taxpayer.
2. If no method of accounting has been so employed or if the employed does not clearly reflect the income, the
computation of taxable income shall be made in accordance with a method as in the opinion of the Commissioner
clearly reflects the income.
3. The taxable income shall be computed on the basis of the calendar year if the taxpayer is an individual.
4. Corporations, partnerships and associations, with the approval of the Commissioner of the Internal Revenue first
secured, may file their returns and compute their income tax on a fiscal year basis.
5. The amount of all items of gross income which the taxpayer received, shall be included in the gross income for the
taxable year, unless, under methods of accounting permitted under Section 43 of the Tax Code, any such amounts are to
be properly accounted for as of a different period.
6. In case a taxpayer dies, amount accrued up to the date of his death shall be included in the computation of his taxable
period where the date of his death falls unless it is properly includible in such period or prior period.
7. If a taxpayer, other than an individual, changes the basis of computing net income from fiscal year to calendar year, with
the approval of the Commissioner of Internal Revenue, a separate final or adjustment return shall be made for the
period between the close of the last fiscal year for which return was made and the following the December 31.
8. No return for income tax can be made for a period of more than twelve months.
9. Persons whose gross income is derived in whole or in part from building, installation or construction contracts covering a
period in excess of one (1) year shall report income upon the basis of percentage of completion.
10. The accounting method should adhere strictly to generally accepted accounting principles.
11. It is recognized that no uniform method of accounting can be prescribed for all taxpayers, and the law contemplates that
each taxpayer shall adopt such forms and systems of accounting as are in his judgment best suited his purpose.
12. The doctrine of constructive receipt of income is designed to prevent the exclusion from taxable income of items, the
actual receipt of which could, at the option of a taxpayer on the cash basis, be deferred or indefinitely postponed.
13. A taxpayer who changes the method of accounting employed in keeping his books shall secure consent of the
Commissioner of Internal Revenue before computing his income upon such new method for purposes of taxation.
14. When the gross income is reported partially in each taxable year in proposition to collections made in such period as it
bears on the total contract price, this refers to installment sales method.
15. Dealers of personal property who regularly sell or otherwise dispose of personal property on an installment plan may
report under installment method only if the initial payments do not exceed 25% of the selling price.
16. Persons who made a casual sale or casual disposition of personal property may report income under the installment
method regardless of the selling price of such personal property.
17. An individual who sells or disposes of real property, considered as a capital asset, and is otherwise qualified to report the
gain under installment method may pay the capital gains tax in installments under rules and regulations to be
promulgated by the Secretary of Finance, upon the recommendation of the Commissioner.
18. Incidentally, net worth method is not an accounting method at all, but merely an evidence of income.
19. A farmer whose crop is harvested or gathered after more than one year from the time of planting may use crop year
method.
20. All taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting records,
for a period of ten (10) years reckoned from the day following the deadline in filing a return, or if filed after the deadline,
from the date of the filing of the return, for the taxable year when the last entry was made in the books of accounts.
21. The taxpayer shall retain hardcopies of the book of accounts, including subsidiary books and other accounting records,
for a period of five (5) years reckoned from the day following the deadline in filing a return, or if filed after the deadline,
from the date of the filing of the return, for the taxable year when the last entry was made in the books of accounts.
22. The term “last entry” refers to a particular business transaction or an item thereof that is entered or posted last or latest
in the books of accounts when the same was closed.
23. If the taxpayer has any pending protest or claim for tax credit/refund of taxes, and the books and records concerned are
material to the case, the taxpayer is required to preserve his/her/its books of accounts and other accounting records
until the case is finally resolved.
24. Unless a longer period of retention is required under the NIRC or other relevant laws, the independent Certified Public
Accountant (CPA) who audited the records and certified the financial statements of the taxpayer, equally as the
taxpayer, has the responsibility to maintain and preserve electronic copies of the audited and certified financial
statements including the audit working papers for a period of ten (10) years from the due date of filing the annual
income tax return or the actual date of filing thereof, whichever comes later.
25. The invoice or receipt shall be valid for five (5) years from the date of the permit to use.
True or False: Write word True if the statement is correct and the word False if the statement is incorrect. When your
1. The additions to the tax or deficiency tax prescribed shall apply to all taxes, fees and charges imposed under the Tax
Code.
2. The amounts so added to the tax shall be collected at the same time, in the same manner and as part of the tax.
3. If the withholding agent is the Government or any of its agencies, political subdivisions or instrumentalities, or a
government-owned or controlled corporation, the employee thereof responsible for the withholding and remittance
of the tax shall be personally liable for the additions to the tax prescribed herein.
4. The term “person”, as used for the additions to the tax purposes, includes an officer or employee of a corporation
who as such officer, employee or member is under a duty to perform the act in respect of which violation occur.
5. Failure to file any return and pay the taxdue thereon as required under the provision s of the Tax Code or rules and
regulations on the date prescribed shall be subject to 50% surcharge. Filing a return with an internal revenue officer
other than those with whom the return is required to be filed, unless otherwise authorized by Commissioner of
Internal Revenue shall be subject to 25% surcharge.
6. A person who is not VAT-registered issues an invoice or receipt showing his TIN, followed by the word “VAT” shall be
subject to 50% civil penalty of the tax or the deficiency tax?
7. Willful neglect to file the return within the period prescribed by the Tax Code or rules and regulations shall be
subject to 25% surcharge.
8. A false or fraudulent return willfully made will be subject to a 50% civil penalty of the tax or of the deficiency tax.
9. Failure to report sales, receipts or income in an amount exceeding 30% of that declared per return is considered
substantial under declaration of taxable sales, receipts or income and shall constitute prima facie evidence of a false
or fraudulent return.
10. A claim of deduction in an amount exceeding 30% of actual deductions is considered substantial overstatement of
deductions and shall constitute conclusive evidence of a false or fraudulent return.
11. Recurrence of understatement of income or overstatement of deductions for more than one taxable year is not a
prima facie evidence of a false or fraudulent return.
12. Deficiency is a civil penalty imposed by law as addition to the main tax required to be paid.
13. In case the taxpayer, without notice from the Commissioner or his duly authorized representative, voluntarily files a
return, only 25% surcharge shall be imposed for late filing and late payment of the tax in lieu of the 50% surcharge.
14. The 50% surcharge shall be imposed in case the taxpayer files the return only after prior notice in writing from the
Commissioner of Internal Revenue or his duly authorized representative.
15. Under the TRAIN, there shall be assessed and collected on any unpaid amount of tax, interest at the rate of double
the legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the
Bangko Sentral ng Philippines (BSP) from the date prescribed for the payment until the amount is fully paid.
16. Any person required to pay the tax who is qualified and elects to pay the tax on installment under the provisions of
the Tax Code, but fails to pay the tax or any installment hereof, or any part of such amount or installment on or
before the date prescribed for its payment shall be subject to interest on extended payment.
17. A fine of P1,000 shall be imposed in the case of each failure to file an information return, statement or list, or keep
any record, or supply any information required by the Tax Code or by the Commissioneron the date prescribed
therefor.
18. The aggregate amount to be imposed for ali such failures in the preceding number during a calendar year shall not
exceed Twenty five thousand pesos (P25,000).
19. Any person required to withhold, account for and remit any tax imposed by this Code or who willfully fails to
withhold such tax, or account for and remit such tax, or aids or abets in any manner to evade any such tax or the
payment thereof, shall, in addition to other penalties provided for under the Chapter on additions to tax, be liable
upon conviction to a penalty equal to the total amount of the tax not withheld, or not accounted for and remitted.
20. Any employer/withholding agent who fails or refuses to refund excess withholding tax shall, in addition to the
penalties provided in the Title X of the Tax Code (Statutory Offenses and Penalties), be liable to a penalty to the total
amount of refunds which was not refunded to the employee resulting from any excess of the amount withheld over
the tax actually due on their return.
21. A compromise in extra-judicial settlement of the taxpayer’s criminal liability for his violation in consensual in
character, hence, may not be imposed on the taxpayer without his consent.
22. Delinquency is the amount still due and collectible from a taxpayer upon audit or investigation.
23. In no case shall the compromise penalty differ in amount from those specified under Revenue Memorandum Order
No. 19-2007, except when duly approved by the Commissioner or concerned Deputy Commissioner, or in proper
cases, by the Regional Directors.
24. The schedule of compromise penalties shall not prevent the Commissioner or his duly authorized representative
from accepting a compromise amount higher than what is provided in the schedule.
25. Although all amounts of compromise penalties incident to violations shall be itemized in the assessment notice
and/or demand letter, the same should not form part of assessment notice that reflects deficiency basic tax,
surcharge and interest but should appear in a separate assessment notice/demand letter as the amount suggested
to the taxpayer to pay in lieu of criminal prosecution.
1. The Commissioner of Internal Revenue may compromise the payment of any internal revenue tax if there is
reasonable doubt as to the validity of the assessment and when the taxpayer is financially incapacitated.
2. The Commissioner of Internal Revenue may cancel or abate tax liability if the tax or any portion thereof appears to
be unjustly or excessively assessed or the administration and the collection costs involved do not justify the
collection of the amount due.
3. The Commissioner of Internal Revenue may credit or refund taxes erroneously or illegally received, penalties
imposed without authority, the value of internal revenue stamps when returned in good condition by the purchaser
and the value, upon proof of destruction, of unused stamps that are unfit for use.
4. Delinquent accounts may be compromised excluding those with duly approved schedule of installment payments.
5. Cases under administrative protest maybe compromised even after issuance of the Final Notice of Assessment to
the taxpayer which, are still pending in the Regional Offices, Revenue District Offices, Legal Service, Large Taxpayer
Service, Collection Service, Enforcement Service and other offices in the National Office.
6. Civil tax cases being disputed before the courts can be compromised.
7. Collection cases filed before the courts can be compromised.
8. Criminal violations, other than those already filed in court or that involving criminal tax fraud, can be compromised.
9. Withholding tax cases cannot be compromised unless the applicant-taxpayer invokes provisions of law that cast
doubt on the taxpayer’s obligation to withhold.
10. Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer can be
compromised.
11. Delinquent accounts with duly approved schedule of installment payments cannot be compromised.
12. Criminal tax fraud cases confirmed as such by the Commissioner of Internal Revenue or his duly authorized
representative cannot be compromised.
13. Criminal violations already filed in court cannot be compromised.
14. Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the
original assessment and the taxpayer is agreeable to such decision by signing the required agreement form for the
purpose can be compromised.
15. Cases which become final and executory after final judgment of a court, where compromise is requested on the
ground of doubtful validity of the assessment cannot be compromised.
validity of the assessment many be accepted when it is shown that the delinquent account or disputed assessment is
one resulting from a jeopardy assessment.
17. Jeopardy assessment is the technical term for a tax assessment made by an authorized Revenue Officer (RO) without
the benefit of complete or partial audit, in light of the RO’s belief that the assessment and collection of a deficiency
tax will be jeopardized by delay caused by the taxpayer’s failure to comply with audit and investigation requirements
to present his books of accounts and/or pertinent records, or substantiate all or any of the deductions, exemptions
or credits claimed in his return.
validity of the assessment may be accepted when it is shown that the assessment seems to be arbitrary in nature,
appearing to be based on presumption and there is reason to believe that it is lacking in legal and/or factual basis.
validity of the assessment may be accepted when it is shown that the assessments made based on the “Best
Evidence Obtainable Rule”and there is reason to believe that the same can be disputed by sufficient and competent
evidence.
validity of the assessment may be accepted when it is shown that the assessment was issued within the prescriptive
period for assessment as extended by the taxpayer’s execution of the Waiver of the Statute of Limitations the
validity or authenticity of which is being questioned or at issue and there is strong reason to believe and evidence to
prove that it is not authentic.
validity of the assessment may be accepted when it is shown that the assessment is based on an issue where a court
of competent jurisdiction made an advance decision against the Bureau, but for which the Supreme Court has not
decided upon with finality.
validity of the assessment may be accepted when it is shown that the taxpayer failed to file and administrative
protest on account of the alleged failure to receive notice of assessment and there is reason to believe that the
validity of the assessment may be accepted when it is shown that the taxpayer failed to file a request for
reinvestigation or reconsideration within 30 days from receipt of final assessment notice and there is reason to
believe that the assessment is lacking in legal and/or factual basis.
validity of the assessment may be accepted when it is shown that the taxpayer failed to elevate to the Court of Tax
Appeals (CTA) an adverse decision of the Commissioner of Internal Revenue, or his duly authorized representative,
in some cases, within 20 days from receipt of such adverse decision and there is reason to believe that the
25. The prescribed minimum percentage of compromise in case of doubtful validity is 40% of the basic assessed tax.
26. The minimum percentage of compromise on a per tax type assessment basis of an individual whose only source is
from employment and whose monthly salary is P10,500 or less, if single, or P21,000 or less, if married, and has no
leviable/distrainable assets other than family home is 10%.
27. The minimum percentage of compromise on a per tax type assessment basis of an individual without any source of
income is 10%.
28. The minimum percentage of compromise on a per tax type assessment basis of a taxpayer with zero net worth or
with negative net worth is 10%.
29. The minimum percentage of compromise on a per tax type assessment basis of an already non- operating
companies for a period of 3 years or more as of date of application for compromise settlement is 20%.
30. The minimum percentage of compromise on a per tax type assessment basis of a dissolved corporation or an
already non-operating companies for a period of less than three (3) years is 20%.
31. The minimum percentage of compromise on a per tax type assessment basis of a declared insolvent, bankrupt
taxpayer is 20% unless it/he falls under any of the cases subject to a different percentage.
32. The minimum percentage of compromise on a per tax type assessment basis of a taxpayer suffering from a surplus
or earnings deficit resulting to impairment in the original capital by at least 50% is 40%.
33. The Commissioner shall not consider any offer for compromise settlement on the ground of financial incapacity of a
taxpayer with Tax Credit Certificate (TCC) issued, on hand, or in transit.
34. The Commissioner shall not consider any offer for compromise settlement on the ground of financial incapacity of a
taxpayer with pending claim for tax refund or tax credit with the BIR, Department of
35. Finance One-Stop-Shop Tax Credit and Drawback Duty Center (Tax Revenue Group or Investment
36. Incentive Group) and/or the court.
37. The Commissioner shall not consider any offer for compromise settlement on the ground of financial incapacity if a
taxpayer does not waive in writing his privilege of the secrecy of bank deposits.
38. Except for offers of compromise where the approval is delegated to the Regional Evaluation Board
39. (REB), all compromise settlements within the jurisdiction of the National Office (NO) shall be approved by the
majority of all members of the National Evaluation Board (NEB) composed of the Commissionerand his Deputy
Commissioners.
40. All decisions of the NEB, granting the request of the taxpayer or favorable to the taxpayer, shall have the
concurrence of the Commissioner.
41. Offers of compromise of assessment issued by the Regional Office involving basic deficiency taxes of
42. P500,000 or less and for minor criminal violations discovered by the Regional and District Offices, shall be subject to
the approval by the Regional Evaluation Board (REB).
43. The compromise offer shall be paid by taxpayer upon filing of the application for compromise settlement and no
application for compromise settlement shall be processed without the full settlement of the offered amount.
44. In case of disapproval of the application for compromise settlement , the amount paid upon filing of such
application shall be deducted from the total outstanding tax liabilities.
45. If the offer of compromise is less than the prescribed minimum percentage of compromise settlement, the same
shall always be subject to the approval of the National Evaluation Board (NEB).
46. Filing of the return/payment made at the wrong venue, among others, is an instance when penalties and/or
interest imposed may be abated or cancelled on the ground that the imposition is unjust and excessive.
47. An assessment brought about or the result of the taxpayer's non-compliance with the law due to a difficult
interpretation of the said law is an instance when penalties and/or interest imposed may be abated or cancelled
on the ground that the imposition is unjust and excessive.
48. An instance, among others, where interest is not abated is when the taxpayer fails to file a return and pay the tax
on time due substantial losses from prolonged labor dispute, force majeure or legitimate business reverses.
49. Assessment confirmed by lower court but appealed by the taxpayer to a higher Court and an assessment reduced
after reinvestigation but taxpayer is still contesting reduced assessment, among others, are instances when the
tax liabilities, penalties and/or interest imposed on taxpayer may be abated or cancelled on the ground that the
administration and collection costs are more than the amount sought to be collected.
50. The Commissioner has the sole authority to abate or cancel tax, penalties and/or interest.
51. The application for abatement or cancellation of tax, penalties and/or interest should be acted upon by the
processing office within five (5) days from receipt by said office and the BIR National Office has thirty (30) days
within which to act on the case.
52. No credit or refund of the taxes or penalties shall be allowed unless the taxpayer files in writing with the
Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty.
53. A return filed showing an overpayment shall be considered as a written claim for the credit or refund.
54. A Tax Credit Certificate validly issued the provisions of the Tax Code may be applies against any internal revenue
tax, excluding withholding taxes, for which the taxpayer is directly liable.
1. The civil remedies for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting
from delinquency shall be by summary proceedings and judicial proceedings.
2. The civil remedies of summary proceedings are distraint of personal property and levy upon real property and
interest in or rights to real property.
3. Judicial proceedings for the collection of internal revenue taxes, fees, or charges, and any increment thereto
resulting from delinquency are limited to civil actions only.
4. Either of the summary or judicial or both simultaneously may be pursued in the discretion of the authorities
charged with the collection of such taxes.
5. The remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than P100.
6. The judgement in the criminal case shall not only impose the penalty but shall also order payment of the taxes
subject of the criminal cases as finally decided by the Commissioner.
7. In constructive distraint personal property is not physically taken.
8. In constructive distraint personal property is merely held as security to answer for any future tax delinquency.
9. The Commissioner or his duly authorized representative shall seize and distraint personal property, in case of actual
distraint, if the amount of delinquent tax is more than P1,000,000.
10. The Commissioner only shall have the power to lift order of distraint.
11. If any time prior to the consummation of the sale all proper charges are paid to the officer conducting the sale, the
goods or effects distrained shall be restored to owner.
12. After the expiration of the time required paying the delinquent tax or delinquent revenue, real property may be
levied upon before, simultaneously or after distraint of personal property belonging to the delinquent taxpayer.
13. Levy shall be affected by writing upon a duly authenticated certificate showing the name of the taxpayer and the
amount of the tax and penalty due from him a description of the property upon which levy is made.
14. Written notice of the levy shall be mailed to or served upon the delinquent taxpayer only.
15. The property sold maybe redeemed by the delinquent taxpayer within one year from the date of sale by paying the
amount of public taxes, penalties and interest thereon from the date of delinquency to the date of sale with 15%
interest per annum of the purchase price from date of purchase to the date of redemption.
16. The owner shall not be deprived of the possession of the property sold and shall be entitled to the rents and other
income thereof until the expiration of the time allowed for redemption.
17. The remedy by distraint on personal property and levy on realty maybe repeated if necessary until the full amount
due, including all expenses, is collected.
18. Both the warrants of distraint and garnishment are on personal property by and in possession of the taxpayer.
19. Warrant of levy requires advertisement once a week for three (3) weeks.
20. No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue
tax, fee or charge imposed by Tax Code without any exception.
21. Tax lien is a legal claim or charge on property, either real or personal, as security from the payment of a tax
obligation.
22. The remedy for enforcement of statutory penalties of all sorts shall be by criminal or civil action, as the particular
situation may require, subject to the approval of the Commissioner.
23. Internal revenue taxes shall be assessed within three (3) years after the due date, or from the day the return was
filed, where a return is filed beyond the due date.
24. A return filed before the due date shall be considered as filed on such due date.
25. An assessment is not a requirement for collection of tax.
26. If there is an assessment, whether or not the return filed was false or fraudulent, collection shall be made within
five (5) years from the date of assessment either by summary proceedings or judicial proceedings.
27. An assessment shall be made at any time within ten (10) years after the discovery of the falsity, fraud or omission in
case a return filed was false or fraudulent with intent to evade tax or when no return was filed.
28. If before the expiration of the 3-year period, both the Commissioner and the taxpayer have agreed in writing to its
assessment after such time, assessment may be made within the period agreed.
29. The running of the period on the making of assessment and the beginning of distraint or levy or a proceeding in
court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner
is prohibited from making the assessment or beginning distraint or levy or any proceeding in court and for 60 days
thereafter when the taxpayer requests for a reinvestigation, which is granted by the Commissioner.
30. The running of the period on the making of assessment and the beginning of distraint or levy or a proceeding in
court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner
is prohibited from making the assessment or beginning distraint or levy or any proceeding in court and for 60 days
thereafter when the warrant of distraint or levy is duly served upon the taxpayer, his authorized representative, or
a member of his household with sufficient discretion, and no property could be located.
1. An assessment is the official action of an officer authorized by law in ascertaining the amount of tax due under the
law from a taxpayer.
2. An assessment notice is a formal demand sent to the taxpayer requiring payment within a specified time of the tax
due from him including interest and civil penalties.
3. A pre-assessment notice is always required before a formal assessment notice is sent.
4. If after review and evaluation by the Commissioner or his duty authorized representative, as the case may be, it is
determined that there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said Office
shall issue to the taxpayer a Preliminary Assessment Notice (PAN) for the proposed assessment.
5. The Preliminary Assessment Notice (PAN) shall show in detail the facts and the Law, rules and regulations, or
jurisprudence on which the proposed assessment is based.
6. The taxpayer has to respond within fifteen (15) days from date of receipt of the PAN.
7. If the taxpayers fail to respond within fifteen (15) days from date of receipt of the PAN, he shall be considered in
default, in which case, a Formal Letter of Demand and Final Assessment Notice (FLD/FAN) shall be issued calling for
payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.
8. If the taxpayer, within fifteen (15) days from the date of receipt of the PAN, responds that he/it disagrees woth the
findings of deficiency tax or taxes, an FLD/FAN shall be issued within fifteen (15) days from filing/submission of the
taxpayer's response, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable
penalties.
9. The Formal Letter of Demand and Final Assessment Notice (FLD/FAN) shall be issued by tje Commissioner only.
10. The FLD/FAN calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and
regulations, or jurisprudence, on which the assessment is based; otherwise, the assessment shall be void.
11. The taxpayer or its authorized representative or tax agent may protest administratively against the aforesaid.
FLD/FAN within thirty (30) days from date of receipt thereof.
12. The taxpayer or its authorized representative or tax agent may protest administratively, by filing a written request
for reconsideration or reinvestigation, against the aforesaid FLD/FAN within thirty (30) days from date of receipt
thereof.
13. Request for reconsideration refers to a plea of re-evaluation of an assessment on the basis of existing records
without need of additional evidence which may involve both a question of fact or of law or both.
14. Request for reinvestigation refers to a plea of re-evaluation of an assessment on the basis of existing records
without need of additional evidence that a taxpayer intends to present in the reinvestigation which may also
involve a question of fact only.
15. For requests for reinvestigation, the taxpayer shall submit all relevant supporting documents in support of his
protest within sixty (60) days from date of filing of his letter of protest, other-wise, the assessment shall become
final.
16. The sixty (60)-day period for the submission of all relevant supporting documents shall not apply to requests for
reconsideration.
17. If the protest is denied, in whole or in part, by the Commissioner's duly authorized representative, the taxpayer may
either appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the said decision or
elevate his protest through request for reconsideration to the Commissioner within thirty (30) days from date of
receipt of the said decision.
18. No request for reinvestigation shall be allowed in administrative appeal and only issues raised in the decision of the
Commissioner's duly authorized representative shall be entertained by the Commissioner.
19. If the protest is not acted upon by the Commissioner's duly authorized representative within one hundred eighty
(180) days counted from the date of filing of the protest in case of a request for reconsideration, the taxpayer may
either appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty (180) -day period or
await the final decision of the Commissioner's duly authorized representative on the disputed assessment.
20. If the protest is not acted upon by the Commissioner’s duly authorized representative within one hundred eighty
(180) days counted from date of submission by the taxpayer of the required documents within sixty (60) days from
the date of filing of the protest in case of a request for reinvestigation, the taxpayer may either appeal to the CTA
within thirty (30) days after the expiration of the one hundred eighty (180) -day period or await the final decision of
the Commissioner's duly authorized representative on the disputed assessment.
21. If the protest or administrative appeal, as the case may be, is denied, in whole or in part, by the Commissioner, the
taxpayer may appeal to the CTA within thirty (30) days from date of receipt of the said decision.
22. If the taxpayer fails to appeal to the CTA within thirty (30) days from the date of receipt of the Commissioner's
adverse decision, the assessment shall become final, executory and demandable.
23. A motion for reconsideration of the Commissioner's denial of the protest or administrative appeal, as the case
may be, shall not toll the thirty (30)-day period to appeal to the CTA.
24. If the protest or administrative appeal is not acted upon by the Commissioner within one
hundred eighty (180) days counted from the date of filing the protest, the taxpayer may either
appeal to the CTA within thirty (30) days from after the expiration of the one hundred eighty
(180)-day period or await the final decision of the Commissioner on the disputed assessment
and appeal such final decision to the CTA within (30) days after the receipt of a copy of such
decision.
25. In case of inaction on protested assessment within the 189-day period, the option of the
taxpayer to either file a petition for review with the CTA within 30 days after the expiration of
the 180-day period or await the final decision of the Commissioner or his duly authorized
representative on the disputed assessment and appeal such final decision to the CTA with 30
days after the receipt of a copy of such decision, are mutually exclusive and the resort to one
bars the application of the other.
26. A taxpayer’s remedy against an erroneously or illegally paid tax is to file a formal claim for
refund with the BIR within two (2) years from the date of the discovery of the erroneous
payment of the tax.
27. The relevant documents that support the request for refund shall be submitted within sixty (60)
days from filing of claim for refund.
28. If the request for refund is rejected by the BIR, the taxpayer has to file an appeal with CTA,
raising questions of facts and/or law within 30 days but within the 2-year period required for
filing a formal claim for refund from receipt of final unfavorable decision on the claim for refund
or from the lapse of 180 days.
29. If the tax is paid in installments, the two-year period shall be counted from the date of final
payment.
30. The filing of the claim for refund with the BIR and the Institution of judicial action with the CTA
to recover the tax can be done either simultaneously or one after the other within the 2-year
period to protect the interest of the taxpayer.
31. The commissioner may, even without written claim therefor, refund or credit any tax, where the
face of the return upon which payment was made, such payment appears clearly to have been
erroneously paid.
32. A refund check or warrant which shall remain unclaimed or uncashed within three (3) years from
the date the said warrant or check was mailed or delivered, shall be forfeited in favor of the
Government and the amount shall revert to the general fund.
33. A Tax Credit Certificate issued, which shall remain unutilized after 5 years from the date of issue,
shall, unless revalidated, be considered invalid, and shall not allowed as payment for internal
revenue tax liabilities of the taxpayer, and the amount covered by the certificate will revert to
the general fund.
34. The running of the 2-year peremptory period cannot be suspended.
35. There is hereby created a Court of Tax Appeals (CTA) which shall be the same level as the Court
of Appeals, possessing all the inherent powers of the Court of Justice.
36. The CTA shall consist of a Presiding Justice and eight (8) Associate Justices
37. Five (5) Justices shall constitute a quorum for sessions en banc and two (2) Justices for session of
a Division.
38. The affirmative votes of five (5) members of the Court en banc shall be necessary to reverse a
decision of a Division but a simple majority of Justices present is necessary to promulgate a
resolution or decision in all cases.
39. The affirmative votes of two (2) members of a Division shall be necessary for the rendition of a
decision or resolution in the Division Level.
40. The CTA shall exercise exclusive appellate jurisdiction to review by appeal decision of the CIR in
cases involving disputed assessments, refunds of internal revenues, fees or other charges,
penalties in relation thereto, or other matters arising under NIRC or other laws administered by
the BIR.
41. The CTA shall exercise exclusive appellate jurisdiction to reviewby appeal inaction by the CIR in
cases involving disputed assessments, refunds of internal revenue taxes, fees and other charges,
penalties in relation thereto, or other matters arising under NIRC or other laws administered by
the BIR, where the NIRCE provides a specific period for action, in which case the inaction shall be
deemed a denial.
42. The CTA shall exercise exclusive appellate jurisdiction to review by appeal decision of the
Commissioner of the property affected, fines, forfeitures or other penalties, in relation thereto,
or other matters arising under the Customs.
43. The CTA shall exercise exclusive appellate jurisdiction to review by appeal decisions of the
Secretary of Finance on customs cases elevated to him automatically for review from decisions
of the Commissioner of Customs which are adverse to the Government under Sec. 2315 of the
Tariff and Customs Code.
44. The CTA has exclusive original jurisdiction over all criminal offenses arising from violations of the
NIRC or Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue
or the Bureau of Customs.
45. The CTA has exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties.
END
1. Taxation is the act of laying a tax, i.e. the process of means by which the sovereign, through its lawmaking body,
raises income to defray the necessary expenses of government.
2. Power of eminent domain it’s the power of the State or those to whom the power has been delegated to take
private property for public use upon paying the owners a just compensation to be ascertained according to law.
3. Police power is the power of the State to enact such laws in relation to persons and property as may promote
public health, public morals, public safety and general welfare of the people.
4. For police power the amount imposed depends on whether the activity is useful or not.
5. Power of eminent domain may not raise money for the government.
6. In police power of the State, the person who is parting with his money or property is presumed to receive a benefit.
7. Equality in taxation means “Taxes must be based on the taxpayer’s ability to pay”.
8. Under fiscal adequacy, a basic principle of a sound tax system, the government should not incur a deficit.
9. Administrative feasibility, a basic principle of a sound tax system, is met when Congress evolves a progressive
system of taxation as mandated in the Constitution.
10. To be exercised to promote public welfare is not a basic principle of a sound taxation system.
11. Based on the ability to pay is not a characteristic of the State’s power to tax.
12. The power of taxation is inherent in sovereignty being essential of the existence of every government. Hence, even
if not mentioned in the Constitution, the State can still exercise the power.
13. Taxation is essentially a legislative function. Even in the absence of any constitutional provision, taxation power falls
on Congress as part of the general power of lawmaking.
14. Taxes may be imposed to raise revenue or to provide incentives for certain activities within the State.
15. For the exercise of the power of taxation, the state can tax anything at any time.
16. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on the taxing
power.
17. A tax reform at any given time underscores the fact that taxation is a power that is very broad.
18. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious (expecting
obedience) need.
19. The power of taxation proceeds upon the theory that the existence of the government is a necessity, that it cannot
continue without means to pay its expenses and that for this means it has a right to compel all its citizens and
property within its limits to contribute.
20. The basis of taxation is the reciprocal duties of protection and support between the State and its inhabitants.
21. To implement the police power of the State to promote the general welfare is a compensatory purpose purpose of
taxation.
22. The principal (primary) purpose of taxation is to raise revenue for government needs.
23. The power of taxation is comprehensive, plenary, unlimited, and supreme and, therefore, not subject to inherent
and constitutional limitations.
24. Levying or imposition or tax is essentially administrative in character.
25. Power of eminent domain may be exercised by public service companies and public utilities.
26. Inherent limitations are part and parcel of the power of taxation and originate from the very nature of taxation.
27. The tax imposed is for public purpose when the proceeds of the tax are used for the support of the State or for
some recognized objects of government or directly promote the welfare of the community.
28. A tax imposed for the improvement of sugar industry satisfies the public purpose limitation.
29. The purpose to be accomplished by taxation need not be exclusively public. Although private individuals are
directly benefited (e.g. giving aid to flood victims), the tax will still be valid provided such benefit is only incidental.
30. The principle of separation of powers ordains that each of the three branches of the government has exclusive
cognizance of and is supreme in matters falling within its own constitutionally allocated sphere satisfies the
limitation that there should be no improper delegation of the taxing power.
31. Being legislative in nature, the power to tax may not be delegated, except to local government (to be exercised by
the local legislative bodies thereof) or political subdivisions or when allowed by the Constitution.
32. The power to tax is limited to the territorial jurisdiction of the taxing government stems from the principle that we
pay taxes for the protection and services provided by the taxing authority which could not be provided outside the
territorial boundaries of the taxing state.
33. Source of taxable income is the place or authority that has the right to impose and collect taxes.
34. Allowance of deduction or tax credit for foreign taxes is a remedy against multiplicity of situs.
35. Government agencies performing governmental functions are exempt from tax unless expressly taxed while those
performing proprietary functions are subject to tax unless expressly exempted.
36. International law is a fundamental rule in taxation starting that the property of one country may not be taxed by
another country.
37. The Philippine Constitution has expressly adopted the generally accepted principles of international law as part of
the law of the land.
38. A violation of inherent limitations can amount to taking of property without due process of law.
39. Any tax law contravening any of the inherent limitations of taxation, in effect, will likewise be unconstitutional.
40. A tax imposed both on the occupation of fishing and fishpond operation constitutes an objectionable double
taxation.
41. An income tax on persons engaged in leasing or selling real property and VAT on their sales/receipts constitute an
objectionable double taxation.
42. Our Constitution prohibits double taxation.
43. If double taxation occurs, the taxpayer may seek relief under the uniformity rule or equal protection guarantee.
44. Direct double taxation means taxing twice, by the same taxing authority, within the same jurisdiction or taxing
district, for the same purpose, in the same year (or taxing period) some of the property in the territory.
45. Due process of law requires that compliance with procedural requirements must be followed strictly to avoid
collision course between the state’s power to tax and the individual’s recognized rights.
46. A fixed license fee on the sale of bibles and other religious literature is a violation of non-infringement of religious
freedom.
47. No person shall be imprisoned for non-payment of poll tax.
48. A revenue bill must originate from the House of Representative and on the same bill the Senate may propose
amendments.
49. The President shall have the power to veto any particular item or items in an appropriation, revenue, or tariff bill,
but the veto shall not affect the item or items to which he does not object.
50. Uniformity requires that all subjects or objects of taxation, similarly situated are to be treated alike or put on equal
footing both in privileges and liabilities.
51. The basis or test of exemption of real properties owned by religious or charitable entities from real property taxes
is ownership of the real property.
52. No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of
Congress present during the deliberation of the tax exemption bill.
53. Public money or property may be appropriated for the use, benefit or support of any priest, preacher, minister or
dignitary assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium.
54. That a feasibility study needs or need not look into the taxes of different political subdivisions of government which
may be alternative sites of the business because the local taxes of a political subdivision need to be exactly the
same as with the local taxes of another political subdivision.
55. All revenues and assets of non-stock, non-profit education institutions used actually, directly, and exclusively for
educational purposes shall be exempt from taxes and duties.
56. Upon the dissolution or cessation of the corporate existence of such non-stock, non-profit education institutions,
their assets shall be disposed of in the manner provided by law.
57. Proprietary educational institutions, including those cooperatively owned, may likewise be entitled to such
exemptions subject to the limitations provided by law including restrictions on dividends and provisions for
reinvestment.
58. An inherent limitation of taxation may be disregarded by the application of a Constitutional limitation.
59. The property of an educational institution operated by a religious order is exempted from property tax, but its
income is subject to income tax.
60. The power of taxation is shared by the legislative and executive departments of government.
61. One of the characteristics of our internal revenue laws is that they are generally prospective in operation although
the tax statute may nevertheless operate retrospectively, provided it is clearly the legislative intent.
62. Some franchise holders who are paying the franchise tax are being required by an amendatory law to pay the
value-added tax, while others remain subjected to franchise tax. This is unconstitutional.
63. A franchise cannot be amended by an amendment of a special law, which granted the franchise.
64. That a taxpayer will derive no benefit from the tax is not acceptable for legally refusing to pay the tax.
65. That the prescriptive period for the tax has elapsed is acceptable for legally refusing to pay the tax.
1. Tax is enforced contribution levied by the State by virtue of the sovereignty on persons and property within its
jurisdiction for the support of the government and public needs.
2. One of the characteristics of tax is that it is generally payable in money.
3. Regular payment is an essential characteristic of tax.
4. Based on the ability to pay is not an essential characteristic of tax.
5. Documentary stamp tax is national tax imposed by the national government.
6. Community tax is a national tax imposed by local government.
7. Tax on business is a property tax.
8. Income tax and transfer taxes are examples of direct taxes.
9. The basic community tax of P5.00 of an individual is a direct tax.
10. Tax of a fixed proportion to the value of the property with respect to which the tax is assessed and requires the
intervention of assessors or appraisers to estimate the value of such property before the amount due from each
taxpayer can be determined is known as ad valorem tax.
11. Customs duty is not a general or revenue tax.
12. Real property tax is not an example of an excise tax.
13. A kind of tax where rate increases as the tax base increases Is known as progressive tax.
14. License fee is a demand of ownership.
15. Toll is based on the cost of construction of public improvement used.
16. Special assessment is an enforced proportional contribution from owners of lands for special benefits resulting from
public improvements.
17. License fee describes the statement, “that the state has complete discretion on the amount to be imposed, after
distinguishing between a useful and non-useful activity.
18. The distinction of permit or license from tax is that license fee is one which involves an exercise of police power.
19. The distinction of a tax from permit or license is that a tax is one in which there is generally no limit on the amount
that may be imposed.
20. Debt as distinguished from tax is that debt may be paid in kind.
21. Penalty is designed to regulate conduct.
22. Subsidy is a pecuniary aid directly granted by the government to an individual or private commercial enterprise
deemed beneficial to the public.
23. Tariff may refer to a book rates drawn usually in alphabetical order containing the names of several kinds of
merchandise with the corresponding duties to be for the same.
24. Revenue comprises all kinds of funds including taxes.
25. In case of deductions and exemptions on income tax returns, doubts shall be resolve strictly against the taxpayer.
26. Where the statute granting the exemption provides for the liberal interpretation thereof tax exemptions must not be
strictly construed.
27. Tax avoidance is not a legal way of not paying tax.
28. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title
passes abroad instead in the Philippines is not a scheme of shifting the incidence of taxation.
29. Forward shifting takes place when the burden of the tax is transferred from a factor or production through the
factors of distribution until it finally settles on the ultimate purchaser or consumer.
30. Tax evasion (tax dodging) is the use by the taxpayer of illegal means to defeat or lessen the payment of tax.
31. Concurrence by a majority of all members of the Congress who are present during the deliberation is required for
the passage of a law granting tax exemptions.
32. All appropriation, revenue or tariff bills shall originate from either the House of Representatives or the Senate.
33. The Senate may propose or concur with amendments to all appropriation, revenue or tariff bills that shall originate
from the House of Representatives.
34. The President shall have the power to veto any particular item or items in an appropriation, revenue, or tariff bill,
but the veto shall not affect the item or items to which he does not object.
35. The Congress may authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues
and other duties or imposts.
1. Domestic corporations are taxed on net income from sources within and without the Philippines.
2. Resident foreign corporations are taxed on net income within the Philippines only.
3. Non-resident foreign corporations are taxed on gross income within the Philippines only.
4. Interest income from a debt instrument not within the coverage of deposit substitute from Philippine sources
received by a domestic corporation is subject to regular tax.
5. Interest income from a debt instrument within the coverage of a deposit substitute Philippine sources received
by corporations is subject to final tax.
6. Interest on government debt instrument and securities (regardless of number of lenders at the time of the
origination) received by corporations is subject to final tax.
7. Interest from overdue accounts receivable in the Philippines received by domestic and resident foreign
corporations shall be subject to regular corporate income tax.
8. Under the TRAIN, capital gains from sale of shares of stock not traded in the local stock exchange are subject to
15% capital gains tax if received by a domestic corporation.
9. Under the TRAIN, capital gains from sale, barter, transfer and/or assignment of shares of stock of publicly-listed
companies not compliant with mandatory minimum public ownership (10% of the publicly-listed companies’
issued and outstanding shares, exclusive of any treasury shares) is subject to 15% capital gains tax if received by
corporations.
10. All income, whether or not passive income, received by a non-resident foreign corporation shall be subject to
final tax except interest income from transactions with depository banks under expanded system and income
from foreign currency transactions with non-residents, OBUs in the Philippines, local commercial bank including
branches of foreign banks.
11. Dividend received from a domestic corporation by a non-resident foreign corporation is subject to 15% final tax
subject to condition that the country where the non-resident foreign corporation is domiciled allows a credit for
taxes deemed paid in the Philippines equivalent to 15%.
12. Dividends from a domestic corporation received by domestic and resident foreign corporations are exempt from
13. Interest on foreign loans contracted on or after August 1, 1986 received by non-resident foreign corporation is
subject to 20% finals tax.
14. Under the TRAIN, interest received from depository bank under expanded foreign currency deposit system
received by corporations shall be subject to 7 ½ % final tax.
15. Interest income from long-term deposit or investment evidenced by certificates issued by BSP received by
domestic and resident foreign corporation shall be subject to regular corporate income tax.
16. Interest income from long-term deposit or investment evidenced by certificates issued by BSP received by NON-
RESIDENT FOREIGN CORPORATION is subject to 30% final tax.
17. Sale of land and/or building classified as capital asset located in the Philippines by domestic corporation is
subject to 6% capital gains tax.
18. Sale of real property classified as ordinary asset owned by domestic corporation which is not habitually engaged
in real estate business is subject to 6% creditable withholding tax and therefore subject to regular corporate
income tax.
19. Income derived under expanded foreign currency deposit system by depository bank from foreign currency
transactions with non-residents, OBUs in the Philippines, local commercial bank including branches of foreign
banks shall be exempt from Philippine income tax.
20. Interest income from foreign currency loan granted by domestic and resident foreign depository banks under
expanded system to residents other than OBUs in the Philippines and other depository bank shall be subject to
10% final tax.
21. The President, upon the recommendation of the Secretary of Finance may, effective January 1, 2000, allow
corporation to be subjected to optional corporation tax.
22. The tax rate of optional corporate income is 15% based on the net income.
23. The option to be taxed based on gross income shall be availably only to firms whose ratio of cost of sales to
gross sales or receipts from all sources does not exceed 55%.
24. The election of the gross income option by the corporation shall be irrevocable for the five (5) consecutive
taxable years during which the corporation is qualified under the scheme.
25. The Minimum Corporate Income Tax (MCIT) is imposed on all corporations excluding non-resident foreign
corporation.
26. The 2% MCIT is based on the gross income from the Philippines and outside sources in case of domestic
corporation and gross income from Philippine sources in case of resident foreign corporation.
27. Special domestic corporations such as proprietary educational institutions and non-profit hospital shall not be
covered by MCIT as long as they are taxed at the preferential rate of 10%.
28. Non-resident foreign corporations including the special non-resident foreign corporations shall not be subjected
to MICT.
29. For the purpose of the MCIT, the term “gross income” means gross sales less sales returns, discounts, and
allowances and cost of goods sold, in case of sale of goods, or gross revenue less sales returns, discounts,
allowances and cost of services/direct cost, on the case of sale of services.
30. The term “gross income” for MCIT purposes will also include all items of gross income enumerated under Sec. 32
(A) of the Tax Code , as amended, except income exempt from income subject to final withholding tax.
31. A domestic corporation that registers with the BIR in the year 2015 shall be covered by MCIT starting 2019.
32. With the imposition of MCIT, a corporation with net loss shall still pay tax.
33. The tax due shall be higher between the regular corporate income tax and the minimum corporate income.
34. The computation and the payment of MCIT, shall apply at the time of filing of the quarterly and annual
corporate income tax returns.
35. Any excess of the minimum corporate income tax over the normal corporate income tax shall be carried forward
and credited against the normal income tax for the three (3) succeeding taxable years.
36. The Secretary of Finance is authorized to suspend the imposition of minimum corporate tax on any corporation
which suffer losses provided such corporation has not committed any fraudulent act in filing previous year’s
income tax returns.
37. In addition to other tax imposed, there is imposed for each year on the improperly accumulated taxable income
of each corporation an improperly accumulated earnings tax equal to 10% of the improperly accumulated
taxable income.
38. The improperly accumulated earnings tax shall apply to all corporations except non-resident foreign
corporation.
39. The fact that any corporation is a mere holding company or investment company shall be prima facie evidence
of a purpose to avoid tax upon its shareholders or members.
40. The fact that the earning or profits of a corporation are permitted to accumulate beyond the reasonable needs
of a business shall be determinative of the purpose to avoid the tax upon its shareholders or members, and such
determination made by the BIR cannot be disputed.
41. Once the profits have been subjected to IAET, the same shall no longer be subjected to IAET in later years even if
not declared as dividends.
42. Profits which have been subjected to IAET when finally declared as dividends shall be subject to tax on
dividends.
43. To avoid the payment of IAET, dividend must be declared and paid or issued not later one (1) year following the
close of the taxable year.
44. Improperly accumulated earnings tax shall be paid within 15 days after one year following the close of the
taxable year if dividends are not declared and paid or issued.
45. Sale of real property by a corporation which is registered with and certified by the Housing and Land Use
Regulatory Board (HLURB) or the Housing and Urban Development Coordination Council (HUDCC) shall be
exempt from income tax.
1. The provision under Local Government Taxation shall govern the exercise by provinces, cities, municipalities, and
Barangays of their taxing and other revenue-raising powers.
2. Taxation shall be uniform in each local government unit.
3. The collection of local taxes, fees, charges and other impositions may be delegated to any private person provided
such delegation is approved by the Sanggunian.
4. The revenue collected pursuant to the provisions of the Local Government Code shall inure solely to the benefit of,
and be subject to disposition by, the local government unit levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein.
5. Each local government unit shall, as far as practicable, evolve a progressive system of taxation.
6. The power to impose a tax, fee, or charge or to generate revenue under this Code shall be exercised by the head of
the Executive branch of the local government unit concerned through an appropriate ordinance.
7. The province may impose a tax on the sale, donation, barter, or on any other mode of transferring ownership or title
of real property at the rate of not more than fifty percent (50%) of one percent (1%) of the total consideration involved
in the acquisition of the property or of the fair market value in case the monetary consideration involved in the transfer
is not substantial, whichever is higher.
8. The sale, transfer or other disposition of real property pursuant to R.A. No. 6657 (Comprehensive Agrarian Reform
Law of 1988) shall be subject to real estate tax.
9. The Registrar of Deeds of the province concerned shall, before registering any deed, require the presentation of the
evidence of payment of real estate tax.
10. The provincial assessor shall likewise require the presentation of the evidence of payment of real estate tax, before
cancelling an old tax declaration and issuing a new one in place thereof.
11. Notaries public shall furnish the provincial treasures with a copy of any deed transferring ownership or title to any
real property within thirty (30) days from the date of notarization.
12. It shall be the duty of the seller, donor, transferor, executor or administrator to pay the tax herein imposed within
thirty (30) days from the date of the execution of the deed or from the dare of the decedent’s death.
13. On any business subject to the excise, value-added or percentage tax under the National Internal Revenue Code, as
amended, the rate of the municipal tax shall not exceed two percent (2%) of gross sales or receipts of the preceding
calendar year.
14. A business subject to local tax shall, upon termination thereof, submit a sworn statement of its gross sales or
receipts for the current year.
15. If the tax paid during the year be less than the tax due on said gross sales or receipts of the current year, the
difference shall be paid before the business is considered officially retired.
16. The business taxes imposed under Section 143 of the Local Government Code shall be payable for every separate or
distinct establishment or place where business subject to the tax is conducted and one line of business does not become
exempt by being conducted with some other business for which such tax has been paid.
17. The tax on a business must be paid by the person conducting the same.
18. In cases where a person conducts or operates two (2) or more of the businesses mentioned in Section 143 of the
Local Government Code which are subject to the same rate of tax, the tax shall be computed on the combined total
gross sales or receipts of the said two (2) or more related businesses.
19. In cases where a person conducts or operates two (2) or more businesses mentioned in Section 143 of the Local
Government Code which are subject to different rates of tax, the gross sales or receipts of each business shall be
separately reported for the purpose of computing the tax due from each business.
20. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by
not more than fifty percent (50%) except the rates of professional and amusement taxes.
21. No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained
from the Barangay where such business or activity is located or conducted.
22. The application for barangay clearance shall be acted upon within seven (7) working days from the filing thereof.
23. In the event that the barangay clearance is not issued within seven (7) working days from the filing thereof, the city
or municipality may issue the said license or permit.
24. All local taxes, fees, and charges shall be collected by the provincial, city, municipal, or Barangay treasurer, or their
duly authorized deputies.
3. A general professional partnership is a partnerships formed by persons for sole purpose of exercising their
common professions, no part of the income of which is derived from engaging in any trade or business.
laws.
5. The term “resident foreign corporation”, when applied to corporation, means corporation which is not domestic
6. The term “non-resident foreign corporation” applies to a foreign corporation not engaged in trade or business
within the Philippines.
7. Domestic corporations including taxable partnerships and joint ventures are taxed on their net income from
sources within and outside the Philippines.
11. In the case of corporate taxpayers, the OSD allowed shall be in an amount not exceeding forty percent (40%) of
their gross income.
14. Propriety educational institutions and non-profit hospitals may be subject to a special rate of 10% on their net
estimated life.
16. A general professional partnership and the partners comprising such partnership may avail of the optional
standard deduction only once, either by the general professional partnership or the partners comprising the
partnership.
17. International carriers are taxed at 2 ½% on their Gross Philippine Billings.
18. Gross Philippine Billing (for international air carriers) refers to the amount of gross revenue derived from
carriage of persons, excess baggage, cargo, or mail origination from the Philippines in a continuous and
uninterrupted flight, irrespective of the place of sale or issue and the place of payment of the passage
documents.
origination from the Philippines up to final destination, regardless of the place of sale or payment of the passage
or freight documents.
local commercial bank including Philippine branches of foreign banks shall exempt from all taxes exempt from all
taxes except net income from transactions specified by Secretary of Finance.
21. Interest income from foreign currency loans granted to residents other than OBUs or local commercial banks
shall be subject to 10% final withholding tax.
22. Any income of non-resident (individual or corporation) from Offshore Banking Units (OBUs) shall be exempt
from income tax.
23. Total profits applied or earmarked for remittance without deduction for the tax component shall be subject to
tax on branch profit remittance (except on activities registered with PEZA) at 15%.
headquarters does not earn or derive income from Philippines and which acts as supervisory, communications
and coordinating center for their affiliates, subsidiaries or branches in the Asia-Pacific Region and other foreign
markets.
25. Regional operating headquarters is a branch established in the Philippine income tax at 10% of its net income
26. A non-resident owner or lessor of vessels chartered by Philippine and other nationals shall be subject to a
special rate of 4 ½% of its gross rentals within the Philippines.
27. Persons engaging in business as partners in a general professional partnership shall be liable for income tax only
in their separate and individual capacities.
28. Under the TRAIN, income payments to partners of general professional partnership are subject to 15%
creditable withholding tax, if the income payment to the partner for the current year in P720,000 or more.
29. The share of partners in the met income of a taxable partnership shall be subject to final withholding tax.
30. Local contractors engaged in construction business and forming a Joint Venture to undertake construction
project must likewise be dully licensed by the Philippine Contractors Accreditation Board (PCAB) of the
Department of Trade and Industry (DTI) to be exempted from corporate income tax.
31. Joint ventures involving foreign contractors covered by a special license as contractor by the PCAB and where
the appropriate Tendering Agency (government office) certifies that the project is foreign
financed/internationally-funded project and that international budding is allowed under the Bilateral Agreement
34. A general professional partnership is a partnerships formed by persons for sole purpose of exercising their
common professions, no part of the income of which is derived from engaging in any trade or business.
laws.
36. The term “resident foreign corporation”, when applied to corporation, means corporation which is not domestic
37. The term “non-resident foreign corporation” applies to a foreign corporation not engaged in trade or business
38. Domestic corporations including taxable partnerships and joint ventures are taxed on their net income from
sources within and outside the Philippines.
42. In the case of corporate taxpayers, the OSD allowed shall be in an amount not exceeding forty percent (40%) of
their gross income.
45. Propriety educational institutions and non-profit hospitals may be subject to a special rate of 10% on their net
estimated life.
47. A general professional partnership and the partners comprising such partnership may avail of the optional
standard deduction only once, either by the general professional partnership or the partners comprising the
partnership.
48. International carriers are taxed at 2 ½% on their Gross Philippine Billings.
49. Gross Philippine Billing (for international air carriers) refers to the amount of gross revenue derived from
carriage of persons, excess baggage, cargo, or mail origination from the Philippines in a continuous and
uninterrupted flight, irrespective of the place of sale or issue and the place of payment of the passage
documents.
origination from the Philippines up to final destination, regardless of the place of sale or payment of the passage
or freight documents.
local commercial bank including Philippine branches of foreign banks shall exempt from all taxes exempt from all
taxes except net income from transactions specified by Secretary of Finance.
52. Interest income from foreign currency loans granted to residents other than OBUs or local commercial banks
shall be subject to 10% final withholding tax.
53. Any income of non-resident (individual or corporation) from Offshore Banking Units (OBUs) shall be exempt
from income tax.
54. Total profits applied or earmarked for remittance without deduction for the tax component shall be subject to
tax on branch profit remittance (except on activities registered with PEZA) at 15%.
headquarters does not earn or derive income from Philippines and which acts as supervisory, communications
and coordinating center for their affiliates, subsidiaries or branches in the Asia-Pacific Region and other foreign
markets.
56. Regional operating headquarters is a branch established in the Philippine income tax at 10% of its net income
57. A non-resident owner or lessor of vessels chartered by Philippine and other nationals shall be subject to a
special rate of 4 ½% of its gross rentals within the Philippines.
58. Persons engaging in business as partners in a general professional partnership shall be liable for income tax only
in their separate and individual capacities.
59. Under the TRAIN, income payments to partners of general professional partnership are subject to 15%
creditable withholding tax, if the income payment to the partner for the current year in P720,000 or more.
60. The share of partners in the met income of a taxable partnership shall be subject to final withholding tax.
61. Local contractors engaged in construction business and forming a Joint Venture to undertake construction
project must likewise be dully licensed by the Philippine Contractors Accreditation Board (PCAB) of the
Department of Trade and Industry (DTI) to be exempted from corporate income tax.
62. Joint ventures involving foreign contractors covered by a special license as contractor by the PCAB and where
the appropriate Tendering Agency (government office) certifies that the project is foreign
financed/internationally-funded project and that international budding is allowed under the Bilateral Agreement
TEST I – TRUE OR FALSE: Write the word True when the statement is correct and the word False when the statement
is incorrect. When your answer is False, underline the word or phrase that made the statement incorrect.
1. The term “Senior citizen or elderly” refers to any Filipino who is a resident of the Philippines, and who is 60 years
old and above.
2. The term “senior citizen or elderly” may apply to senior citizens with “dual citizenship” status provided they prove
their Filipino citizenship and have at least 6 months residency in the Philippines.
3. Person with disability shall refer to an individual suffering from restriction or different abilities, as a result of
mental, physical, or sensory impairment to perform activity in a manner or within the range considered normal for
human being.
4. A person with disability, minor or legal age, and who is a Filipino citizen, who may or may not be related to his
benefactor and who is living with and dependent upon such benefactor for his/her chief support shall qualify as a
dependent.
5. The exemption from income tax given to minimum wage earners applies to senior citizens only.
6. Senior citizens and PWDs are exempted from income tax if their taxable income does not exceed personal
exemptions.
7. All establishments, supplying certain goods and services for the exclusive use and enjoyment or availment of senior
citizens are PWDs, shall give a discount of 10%.
8. The monthly utilization of water and electricity by the Senior Citizen supplied by public utilities will be subject to a
5% discount whether or not the bill is in the name of the Senior Citizen.
9. 50% discount is allowed for electricity, water and telephone consumption if consumed by a Senior Citizen Center
administered by the Government or domestic NGOs organized and operated primarily for the purpose of promoting
the well-being of abandoned, neglected, unattached or homeless Senior Citizens.
10. Sale of certain goods and services to Senior Citizens and PWDs shall be exempt from the value-added tax.
11. A senior citizen who is also a PWD can claim a total of 40% discount—20% for being a Senior Citizen and 20% for
being a PWD.
12. In the purchase of goods and services which have promotional discount, the senior citizen or PWD can avail of the
promotional discount or senior citizen/PWD discount, whichever is lower.
13. Only the actual amount of the discount granted or a sales discount not less than the statutory rate, whichever is
higher, based on the gross selling price can be deducted from the gross income, net of value-added tax, if
applicable, for income tax purposes, and from gross sales or gross receipts of the business enterprise concerned, for
VAT or other percentage tax purposes.
14. Only the actual amount of the discount granted or a sales discount not less than the statutory rate, whichever is
higher, based on the gross selling price can be deducted from gross sales or gross receipts of the business
enterprise concerned, for VAT or other percentage tax purposes.
15. The benefactor of a senior citizen shall NOT be entitled to claim the additional exemption of P25,000 per dependent
(not exceeding four) allowable only to a married individual or head of family with qualified dependent
child/children under Sec. 35(B) of the Tax Code.
16. PWDs, who are within the fourth degree consanguinity or affinity to the taxpayer, regardless of age, who are not
gainfully employed and chiefly dependent upon the taxpayer, shall be treated as dependent under Sec. 35 (b)
(additional exemption)
17. The identification card issued by the particular Office of the Senior Citizen Affairs (OSCA) shall not be honored
nationwide.
18. ID issued by the city or municipal mayor or the barangay captain of the place of residence can be used as proof for
claiming discount and exemption from VAT by a Person With Disability (PWD)
19. Fifteen percent (15%) of the total amount paid as salaries and wages to senior citizens shall be allowed as additional
deduction from the gross income of the employer of senior citizens regardless of the length of service tendered by
the senior citizen.
20. Establishments granting sales discount to Senior Citizens (promotional discount, the 20% discount, the 5% discount
on water and electric consumption, or the 50% discount on electricity, water and telephone consumption by Senior
Citizen Center) on their sales of goods and /or service shall be entitled to deduct the said sales discounts from their
gross income subject to certain conditions.
21. Establishments granting sales discount to PWD (promotional discount, the 20% discount) on their sales of goods
and/or service shall be entitled to deduct the said sales discounts from their gross income subject to certain
conditions.
22. The tax exemption granted to Senior Citizens does not apply to the 20% final tax on certain passive income.
23. A Senior Citizen shall not exempt from VAT or other Percentages Taxes, if he is self-employed or engaged in
business or practice of profession
24. A Senior Citizen shall not exempt from capital gains tax on certain capital gains.
25. Funeral and burial services for death of Senior Citizen/PWD are exempt from Value-Added Tax.
-END-
THOT: “Dreams not acted remain dreams.” – Tamthewise

1. ECOZONES or “Special Economic Zones” (SEZ) shall refer to selected areas with highly developed or which have the
potential to be developed into agri-industrial, industrial, tourist, recreational, commercial, banking, investment and
financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations.
2. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZ), free trade
zones and tourist/recreational centers.
3. For purposes of the income tax holiday, it shall be date specified in the Registration Agreement or the date when the
particular ECOZONE export enterprise actually begins production of the registered product for commercial purposes,
whichever comes first, irrespective of phases or modules or schedule of development.
4. The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides
incentives to needed investments.
5. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods and
adopt measures that help make them competitive.
6. Applying and registration of investment with the Board of Investments requires submission of a notarized application
indicating the type of projects, how the activity relates to those listed in the Investment Priorities Plan, the production
capacity geared to export, the capital structure of the enterprise, and the nationality of its investors.
7. In addition, the company must submit a feasibility report, containing five-year projected financial statements.
8. PEZA- registered economic zone enterprise shall not enjoy exemption from duties and taxes on importation of
merchandise as well from national taxes and local taxes and licenses, among other fiscal incentives.
9. Newly- registered pioneer firms shall enjoy income tax holiday for six (6) years from commercial operations.
10. Newly- registered non-pioneer firms shall enjoy income tax holiday for six (6) years from commercial operations.
11. Expanding firms shall enjoy income tax holiday for three (3) years from commercial operation of the expansion.
12. In exceptional cases, ECOZONE Export or Free Trade Enterprises undertaking new activities distinct from their
registered operations may qualify as new projects subject to the setting up of separate books of accounts.
13. In cases where an enterprise is undertaking new activities distinct from their registered operations, the income tax
holiday shall apply only to sales of the new products.
14. The income tax holiday for expansion projects, shall apply only to the extent of the actual increase in production.
15. In general, modernization and rehabilitation shall be entitled to income tax holiday.
16. For ECOZONE Export or Free Trade enterprises, the income tax holiday incentive may be extended for an extra year
in certain cases but in no case to exceed a total period of eight (8) years for pioneer registered enterprises.
17. As a general policy, the basis for determining whether an area of economic activity may be considered pioneer or
non-pioneer shall be the Investment Priorities Plan prepared yearly by the Board of Investments.
18. An area of activity shall be accorded non-pioneer status if it may be determined categorically as falling in such
classification using the Investment Priorities Plan (IPP).
19. The approval of the application for registration as an ECOZONE Export or Free Trade Enterprise shall indicate such
status and the corresponding incentives the ECOZONE Export or Free Trade Enterprise may avail of under the Act.
20. Pioneer status may be extended to an ECOZONE Export or Free Trade Enterprise only after the evaluation of their
application for such status.
21. A tax credit equivalent to fifty percent (50%) of the value of national internal revenue taxes and customs duties that
would have been waived on the machinery, equipment and spare parts, had these items been imported shall be given to
the new or expanding ECOZONE Export or Free Trade Enterprise which purchases machinery, equipment and spare parts
from a domestic manufacture.
22. The importation of breeding stocks and genetic materials by an ECOZONE Export Enterprise shall be subject to taxes
and duties.
23. For the first five (5) years from registration, a qualified ECOZONE Export or Free Trade Enterprise shall be allowed to
deduct from its taxable income an amount equivalent to fifty percent (50%) of the wages corresponding to the
increment in the number of direct labor for skilled and unskilled workers subject to certain conditions.
24. The use of consigned machinery, equipment and spare parts which are reasonably needed in the registered
operations and for the exclusive use the ECOZONE Export or Free Trade Enterprise beyond the period permitted under
the laws, rules and regulations may be permitted by PEZA is another fiscal incentive given to PEZA-registered economic
zone enterprises.
25. An ECOZONE Export or Free Trade Enterprise not availing of the incentives under Section 6 herein may avail of the
incentives under the Decree subject to the regulations that shall be prescribed by the Board of Investment and by the
Department of Finance / Bureau of Internal Revenue.
-END-
THOT: “Avoid saying things are hard, instead say they are challenging.” – Tamthewise
TX 2002 (1) A: DRILL IN OMNIBUS INVESTMENT CODE
1. The Board of Investments shall be composed of six (6) governors.
2. The Secretary of Trade and Industry shall be concurrently Chairman of the Board and the Undersecretary of the
Department of Trade and Industry and Investments shall be concurrently the Vice-Chairman of the Board and its
Managing Head.
3. The three (3) representatives from the other government agencies and the private sector shall be appointed by
the President for a term of six (6) years.
4. The Board of Investment shall be responsible for the regulation and promotion of investments in the Philippines.
5. “Preferred areas of investments” shall mean the economic activities that the Board of Investment shall have
declared as such as in accordance with Article 28 which shall be either non-pioneer or pioneer.
6. “Pioneer enterprise” shall mean a registered enterprise engaged in the manufacture, processing or production,
and not merely in the assembly or packaging of goods, products, commodities or raw materials that have not
been or are not being produced in the Philippines on a commercial scale.
7. Not later than the end of March of every year, the Board of Investments, after consultation with the appropriate
government agencies and the private sector, shall subunit to the President an Investment Priorities Plan.
8. No economic activity shall be included in the Investment Priorities Plan unless it is shown to be economically,
technically and financially sound after thorough investigation and analysis by the Board of Investment.
9. The determination of preferred areas of investment to be listed in the Investment Priorities Plan shall be based
on long-run comparative advantage, taking into account the value of social objectives and employing economic
criteria along with market, technical, and financial analyses.
10. To be entitled to registration under the Investment Priorities Plan, an applicant must satisfy the Board of
Investment that he is a citizen of any country with money to invest, in case the applicant is a natural person.
11. To be entitled to registration under the Investment Priorities Plan, an applicant must satisfy the Board of the
Investment, in case of a partnership or any other association, that it is organized under Philippine laws and that
at least sixty percent (60%) of its capital is owned and controlled by citizens of the Philippines.
12. To be entitled to registration under the Investment Priorities Plan, an applicant must satisfy the Board of
Investment, in case of a corporation or a cooperative, that it is organized under Philippine laws and that at least
sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by Philippine
nationals as defined under Article 15 of this Code, and at least sixty percent (60%) of the members of the Board
of Directors are citizens of the Philippines.
13. Applications shall be filed with the Board of Investment, recorded in a registration book and the date appearing
therein and stamped on the application shall be considered the date of official acceptance.
14. The Board of investment is authorized to adopts rules and regulations to facilitate action on applications filed
with it; prescribe criteria for the evaluation of several applications filed in one preferred area; devise standard
forms for the use of applicants and delegate to the regional offices of the Department of Trade and Industry the
authority to receive and process applications for enterprises to be located in their respective regions.
15. Applications filed shall be considered automatically approved if not acted upon by the Board within fifteen (15)
working days from official acceptance thereof.
16. Any order or decision of the Board shall be final and executory after thirty (30) days from its promulgation.
17. Within the said period of thirty (30) days, said order or decision may be appealed to the Office of the President.
18. Where an appeal has been filed, said order or decision shall be final and executory ninety (90) days after the
perfection of the appeal, unless reversed.
19. A registered enterprise under this Code shall be issued a certificate of registration under the seal of the Board of
Investment and the signature of its Chairman and/or such other officer or employee of the Board as it may
empower and designate for the purpose.
20. For six (6) years from commercial operation for pioneer firms and four (4) years for non-pioneer firms, new
registered firms shall be fully exempt from income taxes levied by the National Government.
21. For the first five (5) years from registration a registered enterprise shall be allowed an additional deduction from
the taxable income of fifty percent (50%) of the wages corresponding to the increment in the number of direct
labor for skilled and unskilled workers if the project meets the prescribed ratio of capital equipment to number
of workers set by the Board of Investment.
22. Within five (5) years from the effectivity of this Code, importations of machinery and equipment and
accompanying spare parts of new and expanding registered enterprises shall be exempt to the extent of one
hundred percent (100%) of the custom duties and national Internal revenue tax payable thereon.
23. A tax credit equivalent to fifty percent (50%) of the value of the national revenue taxes and customs duties that
would have been waived on the machinery, equipment and spare parts, had these items been imported shall be
given to the new and expanding registered enterprise which purchases machinery, equipment and spare parts
from a domestic manufacturer.
24. Subject to the provisions of Section 29 of Commonwealth Act Number 613, as amended, a registered enterprise
may employ foreign nationals in supervisory, technical or advisory positions for a period not exceeding five (5)
years from its registration extendible for limited periods at the discretion of the Board: the period set forth
herein.
25. Subject to the Regulations to be issued by the Secretary of Finance, upon the recommendation of the
Commissioner of the Bureau of Internal Revenue, the 5% special income tax on gross income earned pursuant to
Section 24 of R.A. No. 7916, as amended, shall be directly paid and remitted by registered ECOZONE enterprises
as follows: 3% to the national government and 2% to the Treasurer’s Office of the Municipality or City where the
ECOZONE registered enterprise is located.
THOT: “Never look back at past failures, they are sunk cost and will no longer affect the future.”- Tamthewise
TX 2002 (2) A: DRILL IN BMBE AND DTAs
1. The term “Barangay Micro Business Enterprise (BMBE)” refers to any business entity or enterprise engaged in the
production, processing or manufacturing of products or commodities, including agro-processing, trading and service,
whose total assets including those arising from loans but exclusive of the lad on which the particular business entity’s
office, plant and equipment situated, shall not be more than Three Million Pesos (P3,000,000.00).
2. For BMBE purposes, the term “services” shall exclude those rendered by any one, who is duly licensed by the
government after having passed a government licensure examination, in correction with the exercise of one’s
profession.
3. For BMBE purposes, the term “assets” refers to all kinds of properties, real or personal, owned by the BMBE and used
for the conduct of its business.
4. The Certificate of Authority for BMBE shall be effective from a period of two (2) years, renewable for a period of two
(2) years for every renewal.
5. Only juridical persons, or cooperative, or association having in the qualifications as BMBE may apply for registration as
BMBE.
6. The BMBE shall report to the city or municipality of any change in the status of its ownership structure, and shall
surrender the original copy of the BMBE Certificate of Authority for notation of the transfer.
7. All BMBEs shall be exempt from the income tax for income arising from the operations of the enterprise.
8. The LGUs are mandated either to reduce the amount of local taxes, fee, and charges imposed or to exempt the BMBEs
from local taxes, fees, and charges.
9. The BMBEs shall be exempt from the coverage of the Minimum Wage Law.
10. All employees of BMBE shall not be entitled to the benefits given to any regular employee such as social security and
healthcare benefits.
11. For purposes of compliance with Presidential Decree No. 717 and Republic Act No. 6977, as amended, loans granted
to BMBEs shall be computed at twice the amount of the face value of the loans.
12. Any existing laws to the contrary notwithstanding, interests, commissions and discounts derived from the loans by
the LBP, DBP, PCFC and SBGFC granted to BMBEs as well as loans extended by GSIS and SSS to their respective member-
employees shall be exempt from gross receipts tax (GRT).
13. A BMBE Development Fund shall be set up with an endowment of Three Hundred Million Pesos (P300,000,000.00)
from the Philippine Amusement and Gaming Corporation (PAGCOR) and shall be administered by the SMED Council.
14. Any person who shall willfully violate any provision of this Act or who shall in any manner commit any act to defeat
any provision of this Act shall, upon conviction, be punished by a fine of not less than Twenty-five Thousand Pesos
(P25,000.00) but not more than Fifty Thousand Pesos (P50,000.00) and suffer imprisonment of not less than six (6)
months but not more than two (2) years.
15. In case of non-compliance with the provisions of Sec. 9 of this Act, the BSP shall impose administrative sanctions and
other penalties on the concerned government financial institutions, including a fine of not less than Five Hundred
Thousand Pesos (P500,000.00).
16. The nature and purpose of DTAs are avoidance of double taxation and prevention of fiscal evasion with respect to
taxes on income.
17. In the exemption method, the income or capital which is taxable in the state of source or situs is exempted in the
state of residence, although in some instances it may be taken into account in determining the rate of tax applicable to
the taxpayer’s remaining income or capital.
18. In the credit method, although the income or capital which is taxed in the state of source is still taxable in the state
of residence, the tax paid in the former is credited against the tax levied in the latter.
19. To avail of tax treaty benefits the taxpayer must secure a ruling from the Bureau of Internal Revenue (BIR) through
the International Tax Affairs Division (ITAD) that he may avail himself of preferential rates under existing tax treaties.
20. In case of conflict between the provisions of a tax treaty and domestic law, the provisions of the tax treaty generally
prevail over the provisions of the domestic law.

Philippine Income Taxation Rules for Individuals

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Philippine Income Taxation Rules for Individuals

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2. Taxation shall be uniform in each local government unit.

THOT: “Dreams not acted remain dreams.” – Tamthewise

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