3F 2018–2019 MAB–BPGD– BDM–S VEM–JFAM
TAXATION II – DLC TRANSCRIPT
(February 18, 2019)
Q: Will capital assets affect deduction in losses?
We will first determine if the property is a capital or ordinary asset. Let us suppose an
air conditioner unit, installed in your house. You acquired it for 20K, and later you will
sell it, you will probably only sell it for a lower amount because of the depreciation. So
that will be a capital loss, because it is a capital asset, and not an ordinary loss.
If you happen to buy pieces of jewelry and after some time, needing money, you sold
the pieces of jewelry. Chances are, it will be selling at a higher price than the acquisition
cost, because pieces of jewelry appreciates rather than depreciates so there will be a
capital gain. We will now be checking, who is the taxpayer. Is he an individual or is it
a corporation or a juridical being? If it is an individual, and the transaction is here in
the Philippines, because of the principle that you learned in Tax 1, if you are selling
movable, it will be the place of sale. Lex loci celebrationis. If the thing is sold in the
Philippines, so there is an income within.
If the seller happens to be an individual, we will check how long you were in possession
of the capital asset, before you disposed them. If it is for more than 12 months, then
only 50% of the gain or loss will be recognized. If it is not more than 12 months, so the
entire gain or loss, as the case may be, will be recognized. So in my example, if the
aircon unit was acquired for 20K and you were able to sell it for 4K, there is a loss of
16K. How much of the loss will be recognized? Because you were in possession for
longer than 12 months, only 8K will be recognized as loss. 50%.
How about for the pieces of jewelry? If the pieces of jewelry were acquired for 8K, and
you were able to sell it for 20K, there is a gain of 12K. How long were you in possession?
More than 12 months? Then only 6K will be recognized. But if not more than 12 mos.,
then the entire 12K will be recognized.
Now you will now compare the loss and the gain, which is bigger? If the gain will be
bigger than the loss, there is net capital gain; and that net capital gain is added as part
of your taxable income. Included in the income tax earned. But if the loss is bigger, then
you cannot deduct the capital loss in that year it is incurred. You will wait for the
following year, you may have other capital assets transactions. That loss will be
deducted in the succeeding years as net capital loss carry over.
But if the seller happens to be a corporation, forget the holding period; whether 12
months or not more than 12 months or less than 12 months. It is to be recognized at
100%, no more considering the 50%. So the gain is 12K. We also compare which is
bigger now, capital gain or capital loss? Then we arrive at the net. If it is a net capital
gain, it is added as part of taxable income of the corporation. If it is a net capital loss,
forget the capital loss, it cannot be deducted and you will not carry over.
In the event however, what you are selling is an immovable like a piece of land. If it is
a piece of land, and it is sold, we will just get the fair market value of the land, if not
given the zonal value or the assessed value, compare it with the selling price.
Whichever is higher, will be multiplied by 6%. That is the tax for that transaction. It
will no longer be added as part of taxable income. There is a final tax if immovable,
whether individual or corporation. However, if that piece of property, like a land, is
sold to the government, not because of expropriation proceedings, no exercise of
eminent domain, it is sold voluntarily to a government agency. Let’s say the
government, wants to have a public school building, the DepEd offers to buy the land
and it is sold to the agency, then the owner/seller will have the option. To report as part
of taxable gain, the difference between the selling price and the cost of the land or to
just pay the 6% of the selling price; if sold to the government.
Now if we are talking of intangibles, like shares of stock, because you may be buying
San Miguel shares to become a stockholder. If you are a stockholder of a corporation,
and later you will sell your shares; then you will identify, are the shares you sold, listed
in the stock exchange or not. If listed in the stock exchange, whether there is a gain or
a loss, it is of no significance, because the selling price will be subjected to stock
transaction tax of 6/10 of 1%. However, if it is not listed in the stock exchange, there
must be a gain. If there is no gain, there is no tax. If there is a gain, because it is not
listed, then we will check. The old law is saying, the first 100k gain is 5%, the excess is
10%. Under the TRAIN Law, it will now be 15% of the selling price. That is the capital
asset transaction, selling capital asset.
You must know when an asset is a capital, and when is it ordinary.
Q: If there will be more deductions than income, will there be tax liability?
If you are a taxpayer, and we are computing the taxable income, you will get your gross
income. If you are engaged in business, gross income, meaning if you are selling, get
first your net sales. Net sales should be the amount of sales less discounts, less repairs,
less allowances (etc.); you will arrive at the net. You then will deduct the cost of the
sales. After you deduct the cost, you will arrive at gross profit or gross income. From
the gross income, you are now allowed to deduct either itemized deduction, or optional
standard deduction; because you are an individual.
But if you are corporation, we arrive at the gross income, the OSD is 40% of the gross
income. So the 60% is the taxable income. If you are an individual, you are not to get
the gross income, you are to get the net sales. You do not deduct cost of sales. OSD for
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individual will be 40% of the net sales or net receipts, as the case may be. So for the computation—ang tax kasi is 30%-- minus yung final tax ng interest income mo sa
individual, the 40% is in lieu of the cost and expenses. For the corporation, kapalit lang bangko 20%; divided by the corporate tax rate of 30%.
siya ng expenses; hindi siya kapalit ng cost. So sa corporation, you can deduct the cost,
(30%-20%)/30% = 33% ; so ang multiplier 33%
and then you can deduct the 40%. Sa individual, you do not deduct the cost, you deduct
the 40%; instead of cost and other deductions. Q: What is the remedy of a taxpayer who is a resident citizen, taxed outside (Manny
Pacquiao hypo)
Now if you feel you do not want the OSD, then you will deduct the itemized.
He is a resident citizen, at dahil resident citizen siya, he will be taxed for his sources of
First item will be the expenses. Then you will identify. If the taxpayer is saying “I
income whether inside or outside the country. Sa America, ang tingin sa kanya ng
incurred expenses.” We check, will that expenses enhance the value of the asset,
American government, nonresident alien. Kasi nandoon lang to fight. Pero chances are,
prolong the value of the asset? Then do not consider it a deduction as ordinary
the US government will collect taxes, because he earned the income in US soil. Senator
expenditure/ revenue expenditure, it will be a capital expenditure. When you say
Pacquiao will file his ITR here. Lahat ng kinita niya sa PH, pati mga kinita niya sa ibang
capital, you add it to the cost of the asset that was benefited by the expenditure. Kasi
country, and in that fight may kinita siya sa America, idadagdag niya. Aalisin niya ang
yung effect ng expenditure, to prolong the life of the asset. If it is not to prolong the life
mga ginastos niya sa training, yung mga ibabayad nya sa trainer, yung mga igagastos
of the asset, or enhance it value, then it is revenue expenditure; you can deduct.
niya kasi business related expenses yun. Kasi ang boxing, practice of profession yan e,
Halimbawa, yung building natin. Tingin natin, medyo matanda na siya e, alam nyo kaya taxable din sa net income. Matapos mong ibawas ang mga allowable deduction,
pag nagkaka edad ang building, hihina na. A condominium, the estimated life is 50 makukuha ni Senator Pacquiao ang kanyang taxable income. Kung ikaw ang
years, because of the wear and tear. So nag depreciate na siya. So paano naman if accountant niya, and tax na binayad niya sa foreign country, mamimili ka.
lumindol, considering the age of the building, may risk. Hihintayin pa ba natin yun?
Option 1 – ideduct mo sa kanyang income, para bumaba ang taxable income.
Our lives will be in danger. So nagkasundo tayo, members ng board, “ba’t di natin ipa
Halimbawa nagbayad siya ng 1M doon, convert it to peso, 50M. So ang kanyang
strengthen ang building?” So that if it will be strengthened, there will be expense. Will
taxable income dito, bawasan mo ng 50M. Yung matitirang taxable income, yun na lang
the expense incurred, will the improvement introduced to the building be only for 1
ang itatax dito. Bilang accountant, icompare ko.
year? Probably more than. So it will prolong the life of the asset. Yung nagastos hindi
pwede ideduct. Idadagdag doon sa asset na nagbenefit. Pero if it will not prolong its Option 2 – Wag kong ideduct as deduction. Babayaran ko ang taxable income ko, di ko
life, then ideduct mo kaagad as expenditure. ibabawas ang 50M. Kunin mo na ang tax due. Pag nakuha mo na ang tax due, pwede
mong ideduct as tax credit. Less taxes paid to foreign country. So halimbawa ang na
What if nangutang tayo? Sisingilin tayo ng tubo. Pag siningil ka ng tubo, e di may
compute mo na tax liability ni senator 120M, magkakaroon ka ngayon ng tax credit na
expense. Pwede ba ideduct? Titingnan mo requisites ng tax code. Paano if inutangan
– initially 50M, tapos icompare mo ang 50M sa magkano ang ratio nung income sa
mo tatay mo. Because you are a related taxpayer, hindi papayag ang tax code to deduct.
America na dinagdag mo over total income. Halimbawa:
What if third person? May we deduct? We must determine. Is the interest demanded
prepaid, or not prepaid? Kasi baka ibabawas sa amount ng loan e. Titingnan mo rin Income sa America = 100M
kung kailan ang payment. Baka naka periodic amortization, baka naka lump sum.
What if may pera ka sa bangko, that you can withdraw, para maiwasan yung pag- Taxed in PH Total Income (including 100M from US) = 400M
utang. E sabi mo, paano if gagamitin ko ang pera sa bangko, e di wala na akong pera
So 100M over 400M, multiplied by tax due—which we computed as 120M
sa bangko, wala na akong utang. Hindi na ako magbabayad ng interest expense. Kaya
lang, paano pag may iba akong emergency? Wala man lang akong savings. So you (100M/400M)*120M = 30M
choose not to withdraw the money. Magkakaroon ka ng interest expense; pero meron
ka ring interest income. Sabi ng code, yung interest expense na ideduct mo, babawasan Ang pwede mong ibawas sa tax liability ni Senator Pacquiao ay 30M.
mo ng amount ng interest income na kinita mo; multiplied by the applicable percent. Pero halimbawa, ang ratio 2 over 4 (e.g. 200M/400M); multiplied by tax due of 120M
If with interest income subject to final tax, it is to be reduced by the amount of interest (200M/400M)*120M = 60M
income, multiplied by the applicable rate. Today the applicable rate, using the simple

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E diba binayad nya 50M, ang ideduct lang nya 50M. It is the amount you paid or the
proportionate amount in the Philippines; whichever is lower. So ang matitira nyang
tax liability 70M.
Tax Due 120M – 50M = 70M
So hindi siya lugi, maibabawas nya yun. Bakit siya inassess? E tama naman pala yung
ginawa nyang pag deduct? Hahanapan ka ng proof na binayaran sa America ang tax
doon. Pag wala kang mapakitang proof na nagbayad ka, sisingilin ka dito. Yan ang tax
credit. Option mo: ideduct yun tax or icredit.
Tax avoidance – the employment of lawful means to minimize taxes
Q: Fringe Benefit, employee was given a car, is it taxable?
Distinguish muna, anong klaseng employee and binigyan. Rank and file or managerial.
Kapag binibiyan ang empleyado ng mga medyo malalaking halaga na. Doon muna
tayo sa maliliit; ang mga De Minimis benefit, di mo tinatax yan. Maliban na lang if
lalagpas sa ceiling kasi may mga ceiling. If lumagpas sa ceiling, yung excess,
icocompare mo doon sa bonuses na under the TRAIN law, 90K. Kasi pag nagtatrabaho
ka, meron ka nung tinatawag na 13th month pay, may bonus ka. Halimbawa ang
sweldo mo lang 40K, e di ang bonus mo 13th month pay 40K; may space pa na 50K.
Tapos binigyan ka ng rice subsidy, binigyan ka ng clothing allowance, medical
allowance, binigyan ka ng cash gift. So yung mga benefits na yan binigay sayo; e, puro
lagpas sa ceiling. Lahat ng lagpas, icocompare sa balance ng 13th month pay; diba may
50K pa. Kung yung total ng excess ay 52K, e 50K na lang ang bakante. Yung 50K aalisin
mo pa, 2K na lang taxable.
Yung principle na yan, kakalimutan mo kung kaya binigay yung benefit ay for the
convenience of the lawyer or it is a necessary consequence of employment.
Q: There are two classmates who entered into a partnership, where they will share
equally the income. How much will each get if the net income is 1M, cash in bank
10K, and the dividend from the domestic corporation is 10K.
We will identify first, did they put up a General Professional Partnership? Or a
Business Partnership? Pag business partnership, they are there to engage in business,
the partnership is taxable the way we tax a corporation. Kaya yung nagging property
nila na 1M is subject to the corporate tax of 30%, may matitirang 700K. I-add mo na
yung dalawang income na hindi taxable; yung dividend at yung bank interest. Kasi
nabawasan na yun ng 20% tax nung bangko e. So 720K, they divide it equally so 360K.
Yung 360K, babawasan ng final withholding tax na 10% so 36K. Yung matitira, yun
yung matatanggap ng partners.
MAB–BPGD– BDM–S VEM–JFAM
Pag General Professional Partnership, yung buong 1020K paghahatian nila. Tapos
yung magiging share nila, idadagdag as part of taxable income. Kasi hindi pa natatax
yun. Babawasan nila yun ng creditable withholding tax na 10%, kasi ang natanggap ng
bawat isa, hindi lumagpas ng 720K. Pag GPP, at ang tatanggapin mo lalagpas ng 720K,
babawasan ng 15% ng partneship. Pag hindi lumagpas ng 720K ang share mo, 10%.
Pag natanggap mo, idadagdag mo sa taxable income, alisin mo lang yung may final tax
na. Tapos later, icompute mo and tax due, ibabawas mo yung creditable withholding
tax.
Kapag GPP, ang share ni partner subject to creditable withholding tax. Pag business
partnership, share ni partner, subject to final withholding tax.
Q: Taxpayer A bought a car for 1M and used it for 1 year. There are maintenance
expenses of 250K and sold the car for 800K. How will you know if there is a gain or
loss?
We determine is the car used in business. If the car is used in business, therefore
ordinary asset. You can then deduct the depreciation. Kasi kukunin mo yung book
value. Cost is 1M less depreciation of 350K; book value 650K. Naibenta mo ng 800K,
may gain na 150K –ordinary gain. Pag capital asset, wala nang depreciation. Because
the BIR will not allow you to deduct depreciation, because the asset, though
depreciating, is not used in business. Kapag binenta mo ng 800K and yung cost mo 1M,
meron kang loss na 200K—ang tawag dun, capital loss. Kapag ordinary asset, at
personal or movable property, compare the selling price with book value. Pag capital
asset, compare the selling price with the acquisition cost.
Q: A taxpayer sold 2 parcels of land, one in the Philippines and one in US. Both of
which realized gain. How will these transactions result to taxable income or passive
income.
If the two lands are not used in business, they were purchased before for investment
purposes, the sale of the land in the Philippines is subject to final tax of 6%; passive
income. But the sale in the land in the US is subject to taxable income. I-add mo yung
gain doon as part of taxable income. Why? We cannot require the US government to
collect the 6%, we don’t have jurisdiction over the property. We have jurisdiction over
the Filipino owner.
Kung ginagamit mo yung land dito for business, kunin mo yung selling price niya less
cost; may gain, idadagdag mo sa taxable income. Kung for investment mo siya, selling
price/FMV, whichever is higher multiplied by 6% passive income, final tax.
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Q: After working in a law firm for 8 years, two lawyers created their own law firm,
they pooled their own resources and decided to form a partnership in 2019, they also
put up a bookstore selling lawbooks. In 2019, what will they include in their ITR?
They will have two partnerships. A GPP, because it is a law firm, and a business
partnership. Yung income ng law firm, yung share nila doon, idadagdag as taxable
income. Yung share nila sa tindahan ng law books, final tax yun. Kasi itatax mo yung
partnership na yung ng 30%. Yung GPP, hindi taxable; yung share ng partner ang
taxable. Yung Business partnership, taxable; yung share nila doon, taxable pa rin. Kasi
magkaiba ang entity. We tax the partnership, we tax the partner. Hindi siya double
taxation, kasi you are taxing two taxable persons.
(March 11, 2019; Midterm Exam Q&A)
1. Mrs. X died intestate leaving her spouse and four children as the only heirs. The
estate included a four-door apartment which was being rented to tenants. Within
the years, an extrajudicial settlement of the estate was executed from the heirs,
each of them receiving their due share. The surviving spouse assumed
administration of property. Each year the net income from the rental property
was distributed to all. BIR issued deficiency income tax assessments for having
entered into an unregistered partnership. In their defense, heirs claimed that
there is only co-ownership between them. Decide. (Facts are similar to a 1997 Bar
Q)
Ganito yun, namatay yung nanay diba? So may naiwang property. The property will
now be under co-ownership. Una. Kasi wala pa silang partition ng property. So ano ang
titingnan mo? If it is conjugal property, one half of that belongs to the father. So hindi
siya subject sa tax, ang one half. The other one half will now be available to the surviving
spouse, sa father and to the children, and dahil walang sinabi na will, intestacy. The
children, and the surviving spouse, will divide the one half into five; and this property
is subject to estate tax but not to income tax.
Later, si husband nag administer ng property; at dahil inadminister mo lang, there is
only co-ownership. That co-ownership is not a taxable co-ownership. The purpose of
co-ownership is only preservation and enjoyment of the property co-owned. The fruits
and income realized therefrom is not taxable to the co-ownership. But the share each co-
owner will receive, will report it as part of their taxable income. However after the
partition, they decided not to take the fruits and income, they invested it. So from the
time there was investment, they converted it now to a partnership; engaged now in
business, desiring to have profit. Only from that time.
MAB–BPGD– BDM–S VEM–JFAM
So from the time na inherit, wala pa, kasi co-ownership. Therefor report it as part of
their taxable income. When it was constituted for profit, there was a partnership. From
that time, it will be treated as if it were a corporation for taxation purposes. The shares
of these heirs will no longer be included as part of the taxable income; because their
shares will be subjected to final withholding tax. But the income will first be subjected
to 30% corporate tax. The remainder, their share, will be subjected to each as final
withholding tax. 17:09
2. SA Airways, a foreign corporation, organized under the laws of a foreign country.
Its commercial airplanes do not operate within Philippine territory, or service
passengers embarking from Philippine airports. The firm is represented in the
Philippines by its general agent, Resophil. SA Airways sells airline tickets
through Resophil, and these tickets are serviced by SA outside the Philippines.
For tax purposes, the BIR contends that SA Airways should pay 3% of their Gross
Philippine Billings. Decide if SA Airways can be considered
a) resident international carrier
b) non-resident international carrier
(Facts similar to 2009 Bar Q)
Ang pagkakaiba kasi ng resident international carrier, may landing rights dito.
Halimbawa ikaw, pupunta ka ng America. So pinaguusapan natin, outgoing flights.
We will not be thinking of incoming flights. Mamili ka, will you board PAL, or will you
board United Airlines, etc., basta eroplano na hindi dito inorganize. Pag sumakay ka
ng PAL, whether direct flight or connecting flight, di kana baba sa isang foreign
country to transfer to a foreign aircraft. Pag direct flight, diretso ka sa USA. Yung PAL,
since domestic corporation yan, sisingilin ka ng VAT. Pero dahil outgoing,
international, 0%. Pero subject sa VAT.
Pag sumakay ka sa United Airlines, registered yan sa ibang bansa. So yan ay definitely
foreign. Pero dahil may landing rights siya dito, resident yan. Resident International
Carrier. Yung ibabayad mo na plain fare mo, let’s say, direct flight siya. Lahat ng
binayad mo sa kanya, meron siyang percentage tax na sinigil sa’yo na 3%. Maliban lang
if may reciprocity and country nya with the Philippine Government. Kung may
reciprocity, walang tax yung passenger; pero may tax ang cargo. Pag yung country
walang reciprocity, whether passenger or cargo, sisingilin yan ng 3% tax. Ibabayad nyo
sa kanila, ibibigay nila sa PH government. Pag may reciprocity, ang wala lang ay yung
passenger. Yung magiging income ng foreign airline, subject din sa 2.5% income tax.
The 3% is tax on business, percentage tax yun. The 2.5% is tax on income, based on
gross Philippine billings. They are not allowed to deduct any expenses or deductions
their tax on gross Philippine billings.
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Kapag ka naman, hindi direct flight, may connecting flight. Yung binayad mo, pag Non-profit hospitals are not exempt from tax. They are subject to 10% tax on income.
nagbayad ka na kasi, diretso na yun. Hindi ka na nagbabayad sa connecting airline. Although using the word “non-profit.” The counter part of non-profit hospital is
proprietary educational institution. So in our example, we also have an educational
● PH ---------- ● X Airline/Country ----------- ● US
institution. It must not declare dividends, otherwise they will be considered a
Yung sisingil sa’yo hanggang US. X airline walang business sa PH, but deriving income corporation. Then we check.
from the PH. Kasi ang binayad mo sa agent mo sa PH hanggang US na. Si agent na ang
If it is a school, we check the predominance test. From where do you derive income? Is
magbabayad sa X Airline. At dahil ganun, itong ating resident international carrier,
your income from a school related activity, at least 50% of the total income? If yes, then
subject sa 3%. Itong non-resident (X to US carrier) subject to corporate tax. Kasi hindi
you are a school; and therefore taxed at 10% only.
siya resident international carrier, siya ay isang non-resident foreign corporation
deriving income from the Philippines. If you are a non-stock, non-profit and not distributing dividend, we will check. Are
your revenues, actually, directly, and exclusively used for educational purposes?
Para ma try mo. Pupunta ka ng America, sasakay ka ng may connecting flight.
Otherwise, taxed.
Magbabayad ka pa ba sa aircraft na lilipatan mo? Hindi. Yung binabayad mo sa PH,
kasama na ang fare nila. So meron silang agent na nagsingil ng bayad. Kaya itatax nyo. If we see that more than 50% of the total income, is derived from revenues unrelated to
school operations, you are masquerading as a school, but actually for profit—taxed as
Follow-up Q: What if in this case, the aircraft did not land in the Philippines, they
a corporation.
are only deriving income from the agent?
4. Company incorporated year 2010, determine tax liability per year.
They are not engaged in business in the Philippines, but with income derived from the
Philippines. Wala silang license, and you don’t expect them to secure a license. They
2016 2017 2018
get passengers from their country, it is just that the passengers are brought by either a Gross Income 10m 12m 14m
Philippine airline or a foreign airline. Here is the PH, there will be planes coming from Allowable Deductions 9.5m 12.2m 12.8m
the PH, and these planes may be registered in the PH; so domestic corporations. There Net Income 0.5m (0.2m) 1.2m
will also be corporations who are not organized in the PH; but they are here, and they
are engaged in business. That’s the reason why we call them resident foreign
Year 2016
corporations; but they have a license.
N = 0.5m x 30% =150k
There are aircrafts who do not come to the PH, they will wait for the passengers in their M = 10m x 2% = 200K
countries; and some of their passengers will come from the PH. So these passengers
will pay their fare, and so the PH govt will impose taxes. 3% percentage tax. These Year 2017
airlines will collect 3% from the passengers; because the tax is supposed to be imposed N = (0.2m) = 0
on the passengers. The 3% is forwarded to the BIR. The planes will now take off, M = 12m x 2% = 240K
bringing their passengers to foreign country 1, for ultimate trip to foreign country 2. So
there will be an aircraft waiting there, so these passengers coming from the Philippines Year 2018
will alight and will board this foreign aircraft. These passengers will no longer pay this N = (NI – NOLCO) x 30%
foreign aircraft, because their fair is up to foreign country 2. The aircrafts in foreign N = (1.2m-0.2m) x 30% = 300K
country 1 do not have business in the PH, but derive income therein. So you did not M = 14m x 2% = 280K
pay to foreign airlines directly, but you already paid them through the agent who is in N = 300K – Deferred Charges MCIT
the Philippines N = 300K – (240K + 50K)
N = 10K
3. One non-stock and charitable educational institution and one non-stock and
charitable hospital. The paid 30% corporate income tax, and afterwards these two Because in 2016, it is already in its sixth year, we have to compare the normal tax with
institutions asked that they be exempted from the payment. Decide. the minimum. The normal is based on net taxable income, multiplied by the

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appropriate tax 30%. Compare it with the minimum it should make, so that’s 2% of
gross. (see computation year 2016) 150k versus 200k, and you will pay whichever is
higher. In year 2017, we have negative income. So tax due is zero. But our minimum
12m x 2%, magbabayad ka ng 240K, mas mataas.
Nalugi ka na, may tax ka pa. May exemption. May option. What will be your option if
you suffer a loss but there is MCIT? You will write a letter to the Secretary of Finance
through the CIR, asking for exemption from the MCIT. Reason is because of losses.
There are three grounds where losses are entertained as a justifying situation: (1)
prolonged labor dispute; (2) force majeure/ fortuitous event; and (3) due to legitimate
business reverses. How long is prolonged? If the labor dispute is for more than 6 mos.,
then you are justified.
You will pay 240K or avail the exemption. Assuming you pay, in 2018, because you are
not exempt from tax, losses from the previous three years, can be used to offset the
income. Deduct the loss from 2017 from 1.2m. 1m will be the remainder, we multiply
by 30%, 300K. compare it with the 280K. Since normal tax is higher, we will be paying
300K. Because the normal is higher, the deferred charges from the past 3 years can be
used to offset the tax liability. The deferred in 2016 is 50K, in 2017 240k. You will only
be paying to the BIR 10K.
5. *question inaudible* There is a charitable institution, where some of its income
comes from shop owners, canteens etc., Is the property taxable?
Yes. That is the case of YMCA (Cf. CIR v. YMCA, G.R. No. 124043) Kailangan kasi, if it
is for charitable purposes, all amounts received must be actually, directly, and
exclusively used. Makikita mo may iba doon ginamit for administrative purposes. If
you will be using, for administrative purposes, dapat not more than 30% must be used,
otherwise there will be tax. Kasi ang mga yan, inorganize yan, exempt sa tax. But you
cannot hide under the cloak of being non-stock and non-profit, a charitable institution;
if you are using the things you receive as income, for purposes of profit. You must not
be getting any profit therefrom. The profit if any, must only be used for the purposes
of the organization. You are not supposed to be distributing to the members comprising
the organization. Because otherwise, it becomes a business undertaking.
6. In 2017, Dana Corp issued 10,000 common shares and 10,000 preferred shares to
Ivan Corp. In 2018, Dana Corp redeemed 4,000 common shares from Ivan Corp.
Ivan Corp then exchanged 6,000 common shares for 10,000 preferred shares. The
BIR assessed Dana Corp for deficiency tax.
Do the issuance and redemption of shares, and exchange of shares necessarily
created income thus, taxable?
MAB–BPGD– BDM–S VEM–JFAM
The common shares were exchanged for preferred shares of the same corporation. Ivan
Corp is a stockholder of Dana. The shares of stock of Dana, belong now to Ivan, and
later Ivan exchanged some of the shares from common to preferred. There is no
transaction yet. Nothing was mentioned as to the value of the shares. And even if the
value is higher, unless and until you dispose the shares, you will not realize income
therefrom. You probably only will have an expectancy that there will be income. There
is no merger there, no consolidation. The valuation of the shares is probably the same
don’t look at how many shares were exchanged.
If there will be subsequent sale by Ivan, we just compare selling price with acquisition
cost—the historical cost of the common shares. Not the value of the preferred at the
time of the exchange.
Assuming that the common shares were acquired on January, and the exchange took
place on March. Let’s suppose the preferred shares, which were received in exchange
for common will be sold some time July. If sold in July, we now identify. Are the shares
listed or not listed in the stock exchange? Because if it is listed in the stock exchange,
we will not mind whether there is gain or there is loss. What we mind is the transaction.
We tax you at 6/10 of 1%.
If it is not traded, we are interested in getting the selling price (July) less cost. Why?
Because it is not traded. There is gain, that gain will be taxed. Nothing was mentioned
that Ivan is a dealer of securities, therefore, the shares are capital assets; not ordinary
assets. The gain realized, under the train law, will be taxed at 15%. If shares of stock
are sold, we determine, ordinary or capital asset? Thereafter, we will now check how
they will be taxed.
7. Land of spouses was expropriated by the government. They were subjected by
the BIR to deficiency income tax, the spouses contend that they did not agree to
the action of the government and should not be taxed on income. Is the deficiency
income tax proper?
If the property that was expropriated is a capital asset, and it was not voluntarily sold.
Because if it is voluntarily sold, the owner will have the option, to be taxed at 6% capital
gains tax or to report as part of taxable income the excess of the selling price over the
cost. Option on the part of the owner.
In expropriation proceedings, we will check, if the amount that was just compensation
will be greater than the FMV of the property, there is profit. Profit is whatever is the
source; whether legal or illegal, whether you want it or don’t. If you realize income
therefrom, we will tax you, not on capital gains tax. But if there is none, then there is
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no taxable income. If land is taken by the government, to avoid taxes, all you have to
do is object; para lumabas na expropriation.
8. Respondent incurred advertising expenses to promote “Nestang”. BIR
disallowed such expenses stating that it took up to half of the company’s
marketing expenses. Respondent argued that the advertising expenses were used
to improve the reputation of the product. Decide
There is long term benefit. It will be a capital expenditure, partly. Let’s suppose, it will
enhance the image of the corporation and therefore we will capitalize. That part, that
will pertain to the current year may be deducted. When you say we capitalize, we do
not deduct that as capital expenditure, you will spread it over the life that will be
benefited. It is deductible every year until the expenditure it totally deducted. Unlike
revenue expenditure, the benefit is only for the current year. If the benefit is only for
the current year, then deduct as an expense for that year. Because it will enhance the
reputation of the company, then it will not be only for one year. Capital expenditure,
not a revenue expenditure.
9. Philex Mining entered into a contract (joint venture) with Basco Gold Mining.
Later Basco incurred losses, and Philex mining deducted it as bad debts expense
from the taxable income. The BIR disallowed such deduction. Decide.
(Cf. Philex Mining v. CIR, G.R. No. 148189)
In a joint venture agreement, whatever profits you realize therefrom, the JV is not
taxable. But it will be reported by the two corporations in their respective income tax
return, as part of the taxable income, the share that they will receive therefrom. This is
not construction pala no? mining?
Pag JV for construction projects, walang tax yan. Pero pag other projects, treated as a
corporation. Tapos yung magiging share nila, hindi na itatax. Exempted na. Kasi
magiging dividends received by a domestic corp from a domestic corp.
At dahil hindi yan JV contruction contract, yan ay taxable. It is a taxable corporation.
Later if there is profit, that profit is taxed at 30%. The remainder will be distributed to
the two corporations in accordance with their agreement. They will consider this,
distribution of income which is a dividend. Dividend from domestic to domestic,
exempt from tax. If one is a foreign corporation, dividend received by a foreign
corporation from a domestic corporation, we distinguish. Are you a resident foreign or
non-resident foreign? Because if you are a resident foreign, also exempt. If you are non-
resident foreign you are taxed at final tax of 15% under the tax deemed paid principle,
that the difference will be considered already paid.
MAB–BPGD– BDM–S VEM–JFAM
In this case, the JV incurred a loss. If there is a loss we determine, what is the income
and how long has it been in existence? But because it is current, we don’t apply the
MCIT. And the losses will be deducted by the joint venture.
Follow up Q: Philex was contending that they should be allowed to deduct bad debts
because the agreement between Philex and Basco, was in the nature of a loan. In this
case he should not be allowed to deduct?
Depende sa appreciation mo, kasi may grounds e. Sabi ng BIR you cannot deduct
because hindi ka naman talaga umutang, kasi binigyan ka ng power to be in charge e.
---------- Break.
10. There was an issuance of preferred and common shares, then there was a
redemption by the DANA Corporation. And then the IVAN Corporation, there
was an exchange, 6,000 common shares to 10,000 preferred shares. How do we
know if it is taxable? (Midterm exam question)
*continuation of #6 midterm exam Q
So, the first according to you is redemption. Assuming it was probably redeemable
shares and probably the owner of the shares sold it to the corporation. How much
would be the redemption cost? Because there will be gain on redemption. So you will
check how was the redemption effected. Is it a redemption of redeemable shares? You
learned that in your Corporation Code, correct? That sometimes instead of borrowing
money from prospective debtor (?) (01:35) who will charge interest and we will report
in the books “payables”, which may not be a good sign. Might as well avoid payables
and issue redeemable shares. Anyway, they will be the same, because the shares can
later be reacquired and then repaid. The redemption will be the amount also we receive
from the buyer. Unless there will be appreciation in the value of the shares, because in
redeemable shares we’ve already agreed how much will be the valuation of the shares,
because the stockholder concerned during the time that the shares are not yet being
redeemed by the corporation can effect (?) (02:18) it as a part of the capital. Because
they are outstanding shares. It is just that the corporation reserved the right to have the
shares back. And so, you will also be entitled to receive dividend during the time
because you are a stockholder. It is just that your shares can be reacquired. If the
corporation reacquires the shares, will the corporation retire or put the shares in the
treasury? And how much was the redemption cost? Was the redemption cost lower
than the amount we receive from the stockholder concerned or was it higher? It is
higher because probably the value of the shares will go up, if it is par value shares.
Because if it is par value shares, we let the public determine the value, maybe it is no
par value. So we just compare the acquisition cost or the redemption cost. Insofar as
the exchanges are concerned, because according to you, common shares were
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exchanged with preferred shares, so there is no transaction really that will result to
profit. Assuming the value’s greater, that will only be an expectancy. There is no
tangible benefit yet. We just replace an asset with another asset. The shares will be
exchanged with another shares. So unless and until we sell, so in your example, IVAN
owns common and it will be exchanged to preferred. So the shares that were acquired
were not sold. In its place we received preferred. So there will be no profit, there will
be no gain yet because there is no tangible consideration we received. Unless IVAN
sells the preferred shares the preferred shares, so if IVAN sells the preferred shares
acquired in exchange of common shares, that’s the time we can determine what will be
the consequences of the sale, and not on the exchange. If the sale will result to gain or
will result to loss, how do we treat the gain or how do we treat the loss? We identify.
Is IVAN engaged in dealership of shares or no? If IVAN acquired the shares by way of
investment so the shares are capital assets, then we apply the rule on capital asset
transaction, where it may be taxed using a final tax or probably we will tax it now based
on whether it was listed or not listed.
Now if IVAN, and this is not in the problem, so if IVAN is a dealer in securities so the
shares are inventory, correct? Inventory because you are selling shares of stocks and
this will be, we consider a gain realized resulting therefrom by comparing the results
of the sale. Selling price less the cost of the shares given to DANA in exchange for
preferred. So if today, assuming it is not listed, we acquire the common shares for 100
per share. And here we exchange it with preferred. We lose the common. We have
preferred. The value will still be the same, because there’s no transaction yet. It’s the
possible the value is greater or higher. We don’t mind because it is not being sold yet,
follow? And then later we will sell. Now we will have a selling price. Because it is not
listed. We’re interested in getting the cost, correct? The cost will the acquisition cost.
And the difference will be either the gain or the loss. If it is a loss, then we do not deduct
capital losses from ordinary gain. You will wait for the succeeding year to check the
net capital loss carry over. That Net Capital Loss Carry Over will now be part of the
cost of the acquisition which resulted to the washing, if there is washing. We do not
deduct, kerek? Did you understand?
But if it is traded, the shares are traded in the stock exchange, we don’t mind the cost.
We mind the selling price, whether there’s gain or loss! So even if there is loss, there
will be tax, because it is a stock transaction tax. We tax the transaction. We don’t tax
the result of the transaction. The selling price will be taxed at 6/10 of 1%. And I will not
ask for amount, I will only be asking for the principle, except for one situation. Every
exam, we’ll have one computation like that which is very easy, because we just apply
the principle, kerek? You are probably afraid because of the figures. Don’t use the
figures, use the principle. Compare normal with minimum. That’s it oh, pay whichever
is higher. And then later if there’s a loss, then in the succeeding year, deduct the loss,
deduct the differed charge, the amount that you will pay. Isn’t that in the theory? Yeees.
MAB–BPGD– BDM–S VEM–JFAM
Q: In relation to the previous problem, the BIR treated the redemption as a dividend
(Atty D: Yes), how should we decide the case?
That is not actually a dividend because it is a redemption. A dividend, we distinguish.
Is it a cash dividend, a property dividend, stock dividend? Here, the problem is telling
you, it is a redemption. So when you redeem, you don’t give additional. Because when
it is a dividend, cash dividend, if the corporation gives you dividends, you keep the
shares and you receive cash. That is a dividend. If it is a stock dividend, you will be
given shares in addition to your shares. So you don’t lose your shares if dividend. If
you are a stockholder, assuming this is a stock (ung illustration niya sa table gamit ung
class cards and water bottle and something pa) this is cash, this is property. Inventory
is a property. Cash, dividend, stock dividend. You are a stockholder. I give you this,
you receive dividend. You keep your shares. I give you this, you receive dividend. You
keep your shares. I give you this, you receive dividend. You keep your shares. (inulit
talaga ni sir, idk kung aling item ung pinepertain huhu). But in the problem, I take your
shares! So how can it be a dividend? Correct? You are losing your status as a
stockholder. In receiving dividends, you do not lose your status as a stockholder. Kaya
‘pag stock dividend, dadami ung shares mo. Kaya nga ‘pag stock dividend, natutunan
mo sa Corporation, ‘di taxable ‘to. Why is the stock dividend not taxable? Because you
don’t get any benefit out of stock dividend. You only increase the number of shares.
But the outstanding shares will also increase. Pero ‘pag cash dividend, naku, diba ang
cash dividend hindi na pinapa approve sa stockholders? Pero ang stock dividend
pinapaapprove sa stockholder, why? Declaration of stock dividend, you learned in
Corporation Code, will necessarily result to appropriation of the retained earnings. The
retained earnings will be restricted because you will get the payment for the shares
(under the Trust Fund Doctrine, no shares shall be issued unless fully paid, correct?).
So the payment will come from the retained earnings (RE). So you debit the RE, you
appropriate it para mabayaran ‘to. Ang stock dividend. Pero ang cash dividend, sino
ba naman ang tumatanggi sa cash? Kaya hindi na ‘yan pinapaapprove. In all cases, the
debit is to RE. We restrict the RE. Debit RE. Debit RE, Debit RE. Puro RE kasi it
presupposes that we declare dividends out of profit. You do not declare dividends out
of capital, except if you are on the liquidation stage, malamang wala pa kayo run sa
Corporation, diba? Papunta palang kayo.
11. There is an employee employed for 25 years with Robinson. The employee
decided to retire at the age of 55. The employer Robinson set up a private benefit
plan for the benefit of the employee which was approved by the BIR. Aside from
the private benefit plan, there was also this trust fund for the benefit of the
employees where the employee was able to contribute 80k. During his
retirement, he received 250k as a result of the private benefit plan and 280k from
the trust fund. The question here is whether they are taxable and whether they
are included in the gross income? (Midterm exam question)
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The amount you receive because you retire, under a qualified retirement program by
the corporation as approved by the BIR, provided *inaudible* (13:49) you’re at age 50
and you’re *inaudible* (13:55). So the amount you receive there is definitely an
exclusion. What about the amount you receive? You invested this much, 80. You
receive 280, correct? So, the excess is income.
Q: So, the income is taxable? (Atty D: Of course!) At what rate?
Part of taxable income. It will be included in your ITR. It’s not passive income. It’s part
of taxable income. It’s not a dividend, you’re not a stockholder. It is an income realized
from your investment. Nag invest ka. ‘Yung amount you invested is exempt, kerek?
And the income, however, is taxable, because it did not come from you. The
contribution of the employer, if there is contribution by the employer, it will be exempt.
But the excess over your contribution is income, kerek? Because the money probably
was lent to others. So may income. The difference is income. Income is from whatever
source, whether from legal or illegal. Edi lalo na ‘yan legal ‘yan.
If you are claiming exemption, according to the law that gives you the exemption law
on strictissimi juris, taxation is the rule, exemption is the exception. You’re saying it is
exempt, give me a law. May law ba na nagsasabi na income you derive from the trust
fund is exempt? Wala eh, edi i-tax. Pero sabi ng law, your contribution to that is exempt.
At ‘yung qualified retirement plan, tignan mo ah, retirement benefit may not be
exempt, may be exempt. Hindi porket retirement benefits sasabihin mong exempt. May
requirement eh. Kapag hindi mo nameet ang requirement, edi taxable. It will be
subjected to withholding tax at hindi natin masasabing final withholding tax kasi may
other income ka eh. We are *inaudible* (16:18) your income then we apply the tax table,
correct?
Kapag individual, may tax table, unless piliin mo ‘yung 8%. E diyan bawal ka pumili
ng 8 kasi compensation income ‘yan eh. Nakakapili ka lang ng 8% kapag business
income.
Q: If Mr. A dies today, what will his heirs pay, the income or estate tax?
If Mr. A dies today, and today is March 11. From January 1 to March 11, Mr. A probably
realized income and ITR will be submitted April 15 pa next year. So the income realized
from January up to today is not yet reported to the BIR. And therefore you will income
tax for that income. Follow? Now today he will be leaving properties behind. So we
will get all the properties belonging to Mr. A. This will be the gross estate of Mr. A.
Follow? And then we will deduct the allowable deductions to arrive at the taxable
estate. We subject it to estate tax. And that is for the estate today. Tomorrow, the estate
of Mr. A may still be there because it is unthinkable that the heirs will be able to
immediately partition the estate. And if the heirs will not be able to immediately
MAB–BPGD– BDM–S VEM–JFAM
partition the estate and some of the properties comprising the estate may be earning
income. Probably he owns a commercial building, the tenants will still pay. Probably
he owns a fishpond. The fishes will still be harvested. So there will be income. And
who will pay the income [tax]? The heirs? No, the estate. This is income of the estate.
And the estate is treated as an individual. And therefore to tax the income, the gross
income realized by the properties comprising the estate less the allowable deductions
therefrom to arrive at the taxable estate.
We now determine the tax due by using the table. So that will be the consequences. If
later the heirs will come to senses and they want to avoid income tax of estate, they
may agree to partition the estate. Then that property comprising the estate that will be
awarded to heir, the income will now be reported by the heir as part of the taxable
income of the heir. And then we tax the heir using the table. And so you see
consequences of a death of a person. It will result to estate tax, income tax, depending
on what’s happening on the estate. ‘yun ang isang pang bargain mo if you’re a lawyer.
Kapag may namatay, immediately partition the estate. So that there will be as many
taxpayers as there may be heirs. Kung apat kayong anak o lima, hatiin niyo na, para
ung income ng property mahati sa lima. And so may kanya kanyang table. Mababa
ang tax. Kasi kapag hindi niyo hinati, the income is taxed as one. And imagine if that
income is very high, it will be taxed already the ceiling is already 35%. Ang taas ng rate.
So bibigyan mo siya ng computation, “Kapag hindi po ninyo hinati, eto ‘yung tax
consequence and kayong mga heir nag aaway nagdududahan kayo. Samantalang kung
mahahati niyo…” ‘Yun nga lang maganda rin ‘pag ‘di nila nahati kasi ikaw ‘yung
lawyer nila. Tuluy tuloy ang bayad. Wag mo siya bibigyan ng computation kasi
marerealize nila, “Uy ang laki ng matitipid natin ah, tapos magkakasundo sundo pa
tayo.” Bayaan mo silang magkakagalit, correct? Ang pangit naman niyan. Pero hindi
natin ‘yan trabaho, Bedan lawyers tayo eh. We give them the proper advice.
Q: If Mr. A is married, how do we know which properties belonged to him or to his
wife?
Okay, parang hindi mo naman natutunan sa Persons ‘yan, correct? Si A married.
Alamin muna natin, may prenuptial agreement ba? Napakaimportante, kaya nga
“pre”, before. Ngayon, chances are kung ikaw ay mag aasawa, malamang hindi kayo
gagawa ng prenuptial agreement. Mas gusto mo ikasal ka nalang kaysa mag agree pa
whatever. So if there’s prenuptial, no problem because we will just check the
agreement.
If there’s no agreement, then we will check the date of marriage. Natutunan mo August
3 88 effectivity ng Family Code. Kapag kinasala ka before Aug 3 88, then you will be
under the conjugal partnership of gains (CPG). At sa CPG, apat ang exclusive. Kapag
9
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on or after Aug 3, you’ll be under absolute community (AC). Tatatlo lang. San nagkaiba
‘yun, sir?
Kapag naka AC, importanteng malaman ang napangasawa mo ba may anak sa unang
asawa? May legitimate ba? Kasi kapag may legitimate descendant, exclusive ang
property niya. Tama? Kung walang legitimate descendant by a former marriage,
magiging community property. Kaya kapag nag asawa ka ng mayaman, mayaman ka
na. Kasi AC. Pero kung may anak siya sa unang asawa, legitimate descendant,
exclusive niya ‘yan.
Ngayon, what if nakamana during marriage? Ke conjugal ke community, exclusive
‘yan, correct? Maliban kung macoconvince mo siya na iconvert to other property.
Under AC, if your spouse will inherit a piece of land or cash, syempre exclusive niya
‘yan kasi gratuitous title. Eh kinonvince mo siya, “Magkano tinutubo niyan sa bank?”
Sabi niya ganito,”Ang liit, 2%.” “Magkano nainherit mo?” “100 million.” “Magkano
lang ‘yung 2% niyan. 2 million a year lang. Bakit hindi natin ibili ng lupa? Patayuan
natin ng apartment houses. Imagine, 100 million ‘yan. Kahit 20 doors ng apartment
doors ng apartment houses mapapatayo natin. Paupahan mo nalang ng 10k. Times 20
doors, 200k a month. Times 12 months in a year. 2.4 million. Syempre magbabayad
tayo ng taxes niyan, pero still 2.4 million is 2.4 million.” “Malaki ang income natin.”
“Oo naman.”
And so the property is now converted to another property. And dahil naka AC, it
becomes community. Pero kapag naka CPG, property you acquire by purchase, by sale,
by redemption ay exclusive pa rin. Kaya walang kwenta kapag CPG. Exclusive pa rin.
And then property we will acquire through our industry, under AC will be community
except if kasi diba may mga wives nagtatrabaho. So from their salary, they will
probably be buying appliances, community. They will be buying cars, community.
Pero kapag for personal and exclusive use ni spouse, kahit galing sa industry niya,
exclusive. Kagaya ‘yung bumili ang asawa mo ng bags, shoes, dress, exclusive ‘yan kasi
for personal use. Except kung alahas, correct? Kapag alahas, community. Kapag ‘yung
alahas namana niya, exclusive kasi under gratuitous eh. If the piece of jewelry will be
inherited, acquisition is by gratuitous title. Exclusive, including fruits and income
therefrom. But if the jewelry will be purchased from the industry of the spouse, that
will be belong to both. ‘Yan ang way to determine sa Persons. ‘Yan din naman sa Tax
Code.
Q: If the allowable deduction is greater than the gross income, thereby resulting to
a loss, will there be a tax liability if individual?
‘Yung Tax Code, hindi niya dinistinguish kung ang may loss ay corporation o
individual. And when the law does not distinguish, let us not distinguish. Walang
MAB–BPGD– BDM–S VEM–JFAM
siyang MCIT kasi hindi siya corporation. Pero meron siyang Net Operating Loss Carry
Over. So meron siyang operating loss carry over, kasi siya ay sole proprietorship. A
sole proprietorship is not taxable. Who is taxable? The sole proprietor.
Ang business kasi sole proprietorship, partnership, and corporation.
Q: What’s the difference between winnings and prizes?
Kapag sinabi mong winnings, doon sa konsepto ng Tax Code, gambling winnings.
Wagering transactions. To wager is to gamble eh.
Ang prizes pwedeng inaward because of your energy, because of your industry. Kaya
nga if prizes are given in recognition of your exemplary performance in the field of
charitable, artistic, religious, civil, educational, literary, scientific achievements, we will
not subject to tax the prizes you will receive provided two conditions are met:
1. You did not take an active part to join. You may participate, but you did not join.
Now how can I participate if I did not join? Somebody entered you. You were
nominated.
2. You are not required to render future service as a condition for receiving the award.
At by special law, ‘yung prizes you will receive, because of international competition
in the field of sports.
Kapag sinabing winnings, gambling winnings arising from legal gambling winnings
and illegal gambling winnings. Legal because it is authorized by the government like
races, cockfighting, PAGCOR. “Sir, how will I know that the gambling activity legal?”
It is authorized. ‘Yung feeling mo na nandun ka, place a bet, and it will not be raided
by police, legal ‘yan. But if there is fear, illegal ‘yan. Kaya nga ‘yang legal gambling
activities mo, winnings derived will be part of your taxable income. Subalit, the loser
can demand that you return the winnings, kerek? It is an exemption to the in pari
delicto rule. Para maiwasan ang illegal gambiling activities. Anu-ano ‘yan? Mahjong,
tong its, pusoy.
Q: Ung raffle na 20k, is it taxable?
Raffle prizes, hindi binago ‘yan. If the prize comes from Philippine source, importante
ung 10k. Follow? 10k and below, taxable as part of taxable income. More than 10k,
taxable but not part of taxable income. It is subject to final tax of 20%. So, in both cases,
it will be taxable. It is just how to tax, ‘yun ang difference.
So kapag tumama ka sa raffle ng SM, you win a plantsa, arinola. So hindi siya lagpas
ng 10k. That amount will not be subjected to tax by the promoter of the contest. But the
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amount you receive is income. Add mo other income – prizes. You will be taxed using
the graduated rate.
Eh ang tinamaan mo ay Mercedez Benz. Alangan namang hindi lagpas ng 10k ‘yan,
correct? Before, the sponsor gives you the prize, it will demand you pay 20%. To
simplify, ung kotse 5 million, magbayad ka muna ng 1 million. Eh hindi mo
mabayaran, hindi mo makukuha. Mafoforfeit ung prize mo, nakalagay dun. Meron
silang conditions eh. May mga hindi nakakakuha. Kaya ang ginagawa ng iba
binebenta. Kasi kung ikaw naman ang bibili, you will tell the winner, “Oh you did not
win 5 million. You only 4 million, kasi 20% of 1 million will go to the BIR. Kaya kung
gusto mo bilhin ko ‘yan, malapit na maforfeit eh. Hati nalang tayo. 2 million bigyan
kita. And then ako na ang magbabayad ng tax. Nakatipid din ako ng 2 million.” Sa
buyer, 3 million ang lalabas, because he gives the winner 2 million, he pays the BIR 1
million, he gets a car 5 million. Tumuba naman siya.
Ngayon ang nagiging kalakaran, inaassume na ng promoter or sponsor ung tax
consequence. Kaya minsan nakalagay sa baba, tax free. Don’t be misled the statement
“Tax free”. Tax free on your part kasi babayaran na ni promoter.
Q: Paano po ‘yung sa Beda po, ung paraffle po last sem?
Kasi charitable ‘to eh. Ang lahat ng proceeds nila, they do not distribute by way of
dividend. They will just devote it to improve their teaching and propagate teaching.
Actually, directly, exclusively used for educational purposes.
Tatlong klase ang paaralan diba. Kaya titignan mo naman, hindi nagdedeclare ng
dividend. Tignan mo nga oh. *points sa classroom* Kaya titignan mo kung sino ‘yung
recipient.
Q: After the promoter paid the tax, what will happen, is there a consequence as to
the winner?
What do you mean, nabayaran na ‘yung tax eh?
(Refer to discussion in number 8) At hindi pwedeng sabihin mo na, “Sir, ‘di wag nalang
niyang ireport sa BIR.” No, i-cclaim niya ‘yan as expense eh. Advertising expense niya
‘yan eh. Promotional expense. Kasi bumili siya ng kotse eh. The promoter will buy a
car. Hindi naman siya nag aassemble ng car eh. Bibili sila, magiging expense nila ‘yon.
So i-cclaim mo as expense. Makikita ng BIR, “You’re claiming this as expense, nasa’n
‘to?” Kasi sisingilin ng BIR si promoter, hindi si winner. Si winner sisingilin ni
promoter. Si promoter ifforward ung tax kay BIR. So as far as the BIR is concerned, the
taxpayer is the promoter or the sponsor. But in the eyes of the promoter, para maibayad
niya, kukunin niya sa raffle winner.
MAB–BPGD– BDM–S VEM–JFAM
Q: Clarification lang, sir, kasi sabi niyo we have to look at the recipient. So dun sa
situation sa Beda ung nagparaffle tapos student ung nanalo, itatax ung student?
Hindi, kasi nga ‘yung sponsor nito may exemption. Kasi school related activity. May
exemption sila kasi hindi niya ginagawa ‘yan palagi. Kasabay lang ‘yan to defray the
expenses ng celebration. Panggastos lang ‘yun. At ‘yung mga prizes, most probably,
hindi niya binili. Kaya hindi niya iddeduct. Kasi kahit anong gawin niya, wala siyang
taxable income. The school is not taxable. Hindi siya gagawa ng ITR for income tax
purposes. Wala siyang tax. Ang tinatax, proprietary educational institutions. Ung
example natin, correct? Wag mo itatax kasi religious institution, non-stock non-profit,
wala ka namang proof na dinedeclare nila ung income nila to members.
Q: The snack bars will be taxed?
The snack bars ay, ang itatax mo sila. Hindi Beda may-ari niyan. Ung rent ay connected.
If you lease part of your property where those who will benefited are the students,
therefore school related activity.
Pero itatax mo ‘yung Pizza Hut, ano pa ba ‘yung nandiyan, Starbucks? Wendy’s. Sila
kasi separate entity. Ung income nila, hindi pupunta sa Beda. Ung income nila, sa
kanila. So the BIR will tax them. At hindi naman sila mag ooccupy ng space kung
walang income.
Ang pagbubukas ng canteen, tindahan, bookstore, ng kahit dormitory, this will be
considered school related activity because the customers are the students. Incidental
lang na sometimes may outsiders. Kasi minsan may mga mag eenroll, hindi pa sila
estudyante.
Eh sasabihin mo, “Eh sir paano ung CEU, may Tim Hortons sa labas?” It is not a
religious charitable institution. It is a proprietary educational [institution]. Hindi siya
Catholic school. Correct me if I’m wrong. Hindi ko kasi alam set up niya, baka mga
madre.
Q: Yung question sa exam, sir, ung transfer ng shares. Diba exempted sir. Pwede po
bang basis ng exemption from tax ung intercorporate transfer of dividends as stock
dividends?
Kapag nagbigay kasi ng dividends, domestic to domestic, expressly sinabi ng law,
exempt. So wala tayong magagawa kasi ‘yun ang sabi ng law. Nag exchange lang sila
ng shares. Hintayin mo ibenta para malaman mo. May fluctuations. Mere appreciation
in the value of stocks is not income. Kasi for all you now, next week bababa. Walang
gain, walang loss kasi nasayo pa rin siya. I-dispose mo. Kapag dinispose mo, that’s the
time you realize.
11
 3F 2018–2019
(April 8, 2019)
Under the train law, may threshold kayong 3M, if you are a seller then you identify
first, sa VAT kasi may 3 transaction, dalawa don subject sa VAT, yung isa don exempt
sa VAT, If you are subject to VAT you pay either 12% or 0% or you are exempt from
VAT. The code enumerated transactions which are exempt from VAT. So when you are
listed as exempt regardless of the amount you will not pay VAT. If you are not included
in the list as exempt therefore you are subject to VAT, as simple as that. The law
enumerates which are exempt, (may sinabi siyang legal maxim here) Because there is
an enumeration and you don’t fall under the enumerated items you pay either 12% or
0%. The code provides those which our subject to zero percent, and so if you know the
enumeration of exempt and enumeration of 0%, all that you don’t know will be subject
to 12%.
Mga sumusunod na sale or importation shall be exempt from VAT. Apat yan.
Lima exempt yung sale, 3 exempt yung importation, yung walo exempt from services.
If you import drinks, import apples, worth 10million pesos, will there be vat imposed?
Wala. kasi sabi ng code sale or importation of agricultural and marine food products
in their natural state shall will notbe subject to vat, nasa listahan siya e.
Pag nag grocery ka sa sm, sa robinson, rustans, ano mga pwede mo bilhin jan? bili ka
ng isda. Galunggong etc. wala sila vat dahil marine food products in their original state.
Bumili ka ng prutas, camachile, duhat, saging walang vat kahit binili mo pa yan sa
savemore o rustans sa supermarket kasi agricultural food products. At kung sakali
mang magkaron ng processing so long as the processing falls under any of the 7 stages
of processing, they are still in their original state. Freezing drying salting smoking
stripping? boiling roasting yang pito yan original state kaya wala vat.
MAB–BPGD– BDM–S VEM–JFAM
Bumila ka halimbawa ng tuyo, yan ay salting shempre walang vat. Bumuli ka gatas,
may VAT yan kasi may processing. Kaya titignan mo lagi resibo mo pag grocery
nakahiwalay lagi vatable at not vatable. Kasi yung gatas may pasteurization kaya may
vat wala yan sa pito eh, parang yung mineral water may vat kasi may processing kasi
nadistilled pa. pati bigas wala vat, kasi original yun kasi may stripping lang. pero
kapag bibili ka extra rice sa Jollibee may vat na yan kasi may cooking. Pangalawa
fertilizer, seed, feeds, seedlings yan ay walang vat kasi agricultural yan e except those
for specialty animals may limang klase ng feeds na vinavat feeds for 1) fighting cocks
(dalawa klase ang chicken, pang sabong at tinola, kapag feeds ay para sa chicken for
human consumption walang vat pero kung primary for fighting may VAT) panabong
ang breed ay texas ang texas cocks pang fighting yan yung mga kulay puti tinola yan,
yung feeds pang texas may vat yan 2) feeds for race horses makikita mo naman sa
itsura yung mga pang kalesa smaller big tummy shorter limbs unlike race horses na
bigger smaller tummy longer limbs mas matatangkad kapag pagkain ng pang karera
may VAT yan. 3) kapag feeds for zoo animals may VAT yan 4) feeds for pets para sa
aso pusa may vat yan, pagkain naman ng baboy wala kasi for human consumption 5)
feeds for fish sa aquarium. Yan lang yung lima na may vat all others walang VAT.
Pangatlong grupo, sale or importation ng aircraft or vessel whether such ay para sa
domestic or international use, whether passenger kaya kung ikaw ay Philippine
airlines mag import ka ng barko walang vat pati eroplano, pati benta ng eroplano
walang vat.
Pang apat, sale and importation of books, newspapers, journals, inquirer, star walang
vat yan.
Next, eto mga sales lang. ng mga cooperatives, lending cooperatives, multipurpose,
credit, non electric, non credit, non agricultural, yang anim na cooperatives na yan
walang vat provided that they are registered sa cooperative development authority.
12
 3F 2018–2019
Next, pagka naman sale ng low cost housing units, residential lots yun lang dapat
certified ng HLURB at dpat socialized housing hindi yung mahal dapat may threshold
na 3M
And then export sales if you are not vat registered. If you are vat registered, you are
subject to vat kapag nagexport ka 0, pero pag not registered exempted ka in either case
walang babayarang output kasi kapag subject ka sa zero anything multiplied to zero
eh zero
Yung Iba naman ay Importation of personal and household and effects brought by
returning citizens or those intending to reside permanently in the Philippines alam mo
kasi sabay na rin natin yung professional instruments and implements na dala dala ng
returning citizen at those intended to reside permanently in the phillipines kagaya mo
there may be occasions when you will go out of the country at malamang may bibilin
ka doon, for personal use, walang vat yun pero kung dinala mo ay commercial quantity
you will be subjected to vat. Kaya tignan mo yung mga dala dala ng mga returning
citizen and those intending to reside permanently walang vat, yun yung mga
balikbayan boxes.
And yung importation of fuel, goods and supplies at yung engaged ng international
air or sea transport, simply stated ang Philippine airlines engaged in international air
transport, so rather than buy aviation fuel in the phillipines they import kasi walang
vat.
And the service of the following walang vat.
Yung mga subject sa percentage tax, like common carrier yung nga lang mag
didistinguish ka is it common carrier by air land or water. Kapag by land inaalam mo
what do u transport, passengers or cargoes? Kasi kung passengers by land subject ka
sa percentage tax na 3 % pero kapag cargoes, may percentage din yon. Pero kung
trucking may dala ka container van malamang mga goods laman nun and that goods
subject to vat at titignan yung thereshold. Kapag lumampas gross receipt mo ng 3M,
subject ka sa vat pero kung hindi OPT na 3% lang. pero kapag passenger di na inaalam
yung amount OPT na.
If I operate common carrier by air or water alamin muna if domestic or international.
Kapag domestic, like Philippine airlines cebu pacific, pag aalamin kung yung byahe
san pupunta yan ba ay manila to davao manila to cebu so within Philippine territory
so kung within Philippine territory may vat na 12%. Eh pano kung manila to los
angeles, manila to Tokyo byaheng international may vat na zero percent.
Now so okay na tayo sa common carrier.
MAB–BPGD– BDM–S VEM–JFAM
So ung services rendered by millers, tatlo lang, all the others may vat na, millers of
palay into rice, … sugar cane into raw sugar. Yung muscovado raw sugar parin yan
ang may vat yung refined yung magiging white na. yun yung may vat.
And agricultural contract plowers (?)
Yung mga services rendered by medical,dental,hospital and veterinary halimbawa
gusto mo malaman bakit yug ihi mo pinupuntahan ng langgam gusto mo malaman
sugar mo, so punt aka hospital yung services nay un walang vat. Yung navavat eh
services rendered by doctors. Or kaya yung aso mo eh ooperahan kasi may kidney
stone yung vet clinic walang vat. Nagpacheck up ka bibig mo masakit ngipin mo
services rendered by dental clinics wala ring vat. Or kaya nagpagawa ka ngipin mo
walang vat yan.
Vat and non vat (?) financial intermidiaries wala rin.
And time will come may trabaho ka na, sa law firm, emplaydo ka na may sueldo, wala
ring vat, services rendered under employee and employer relationship
Services by Proprietary educational institutions provided duly recognized by deped,
ched, tesda as the case may be.
Regional or area headquarters of multinational corporations and those exempt from
vat are international agreements
And all others whose gross receipts do not exceed 3M. and finally leasing of residential
units provided that the rent shall not be more than 15k a month. Kaya kung nakatira
ka sa apartment shempre may lessor hanganng di lumalagpas sa 15k walang vat. For
example, may apartment 5 units paupa niya 20k a month isa ka sa mga umuupa
magkano singil sayo kung ang upa ay 20k? meron siyang 5 apartment. Sisingilin ba
siya vat? Shempre hindi.
Pano kung sampong pintong apartment, 20k singil niya sa bawat isa, may vat?
Shempre hindi pano kung ang pinapaupahan eh 15 na pinto, maningil pa ng vat? Oo
maningil na. kapag sampo ang pinapaupahan 20k per unit, in one month makakasingil
siya ng 200 kasi sampo eh, in one month, in one year 2.4M eh hindi lumampas sa 3M
na threshold kasi sampo lang eh. Pano pag 15, edi 300k a month times 12, edi 3.6M edi
lampas kaya may vat.
Halimbawa, merong isang 100 doors ng apartment, bawat isa 15k per door. May vat?
Wala kasi di lumampas sa 15k na renta.
Kaya dapat lampas ng 15k at lampas ng 3M.
13
 3F 2018–2019
Q: When charging the the VAT for the lease, for example 20k ,12% of 20k? or the
excess?
Yes 12% of the contract price or lease. So halimbawa, subject sa vat kasi 20k, ang
kagandahan sa vat imposed on the lessor pero can be shifted to the lessee or buyer.
Pero hindi naman yan mappupunta sa bulsa ni lessor eh ipapadala nia yan kay BIR.
Q: Sa 3M na annual gross receipts, calendar or fiscal year?
Sir: Depende kung invidivial or corporation kasi and individual lagi nka calendar year
yan pero ang mga corporation may option. Calendar year 12 month period start jan 1
and end dec 31 of the same year at kapag fiscal year start any day other than jan 1 for
example april 1 you will end 12 months later, march 31. Lagi siyang 12 month period.
And individual laging calendar year yan. Corporation lng nakakapili.
Mapunta naman tayo sa transcations na zero rated, may vat pero walang babayaran
kasi nga zero eh. Perong ikaw magexport at vat registered ka as distinguish from
foreign currency denominated sale. Ano pagkakaiba? Halimbawa I am a seller or
manufacturer in the Philippines and you are residing in us. Pero pwede Pilipino ka or
American. Dito naman residing in Australia pwedeng Pilipino ka or Australian.
Oorder ka ng goods sakin. Pano mo ko babayaran? Using foreign currency pano mo
papadala thru the banking system. Shempre icoconfirm ng banko ko bayad na yan
tatanugnin kita san ko send goods sabi mo dito sa US so sabi ko okay I will put goods
in a vessel bound for US therefore export sales paid in foreign currency.
Australia naman, how will I deliver, sabi mo I have relative in PH saknya mo ideliver
pero u pay me using a foreign currency, meaning foreign currency denominated sale.
Syempre magtataka ka bakit oorder pa sayo magbabayad pa in foreign currency why
not yung relative nalang from PH umorder sayo? Mas mahal. Mas mahal pag domestic
sale kesa export sale. Mas mahal goods sa PH kesa binebenta mo outside kasi we
encourage export. Kapag ikaw nasa austrailia, sisingilin ko lang na vat zero. So ang
selling price ko 100, 100 bayaran mo walang vat e. pero kung kamaganak mo order
sakin may vat pa na 12% mapapamahal.
Kaya minsan magtataka ka bakit yung mga imported articles dumarating na mas mura.
Ganon din tayo yung ineexport natin darating don mas mura din. Parang ung ating
goods maka compete sa world market pati excise tax wala. Iniimpose lang yun for
imported goods or goods manufactured in the ph for domestic consumption. For
export, wala e.
MAB–BPGD– BDM–S VEM–JFAM
Zero rated din yung mga nasa PEZA. Meron kasi mga enterprises na ineencourage
yung mga zero rate under omnibus investment code. Alam mo we are trying to attract
foreign corporations to come. You will be given preference sa tax. Ang mga peza
binabayaran lang 5% special rate sila. Gross income ang tinatax sa kanila. Hindi net.
Sino mas okay? Di natin alam.
Ang ineexamine ng BIR mga net kasi mdami ka idededuct kapag gross walang dayaan
yan eh.
May mga income rin kasi na subject to withholding tax kapag subject na don, hindi na
subject sa income tax na 30 percent rate. Kaya sometimes, bigger yung kanilang net
income.
Ang pagcompute ng babayarang vat, kunin mo lang output tax depende sa actual sales
at deemed sales. Shempre madali actual kasi actual yun yung yung deemed sale kahit
wala talagang sales. Naka enumerate naman jaan. 5 instances, there is output tax
although there is no actual sales. Transfer use or consumption not in the ordinary
course of business, halimbawa ako yung chief operating officer at vp of sales at
kinausap ko kayo kayo yung aking executive committee. Sabi ko execom how can we
let the public know that our goods is at par or better than competitors eh ang ating
products mga shampoo sabon.
Ano iaadvise mo sakin? I want the public will know that our products are our par or
better in the competition? Punta tayo sa mga schools pamigay na samples.
At the end of the day, we consume 2M worth of inventories, will there be vat? Shempre
hindi. The law provides the transfer or the use or consumption must not be in the
ordinary course of business. Kelangan business magbigay ng sample for the public to
know our goods.
Kaya kelan siya isusubject? Halimbawa, the wife of one of the major stockholders,
business ng company ay to sell lingerie. Asking sa showroom kung anjan si sir mo,
meron ba stock sabi nung employee nako maam display lang po dito wala po tayong
avail items. Sabi sa problem, kinuha ni madam yung nakadisplay tell ur boss I am
getting this. Can u object? Kasama yan inventories eh. Is there a vat? Yes. Because the
use its not in the course of business. So if there is consumption of inventory not in the
course of business, it is subject to vat.
Yung isa pa, there president of the corporation, I will bring my employees to a birthday
blowout, sir ano gagawin ko will I order food, sabi ni boss, let our products be given to
the employees. There is vat kasi consumption not in the course of business. In one of
the stockholders meeting, one of the members, mister chair can I call the attention of
the board, ano yon? Out stockholders are ___ the past few years we are earning money
they are expecting dividend. Can we do something about it. May nagsuggest okay lets
14
 3F 2018–2019
declare. Pero sabi ng treasure pero president we are using it for expansion. Pero if we
will declare dividend we cannot expand unless we borrow money. Lets just declare
dividends. 3 sachet of shampoo for every share or bottle of shampoo or 10kilos of
hotdog for every share. So ikaw stockholder bibigyan kita hotdog 10 kilo per share.
At the end of the day, naubos inventory. Deemed sale? Yes. The distribution of
inventory to stockholders.
Next, sabi ni director, mr president our creditors are also expecting? May I read to you
the letters. . Unless I received payment within 15 days I will be constraint to institute
the legal action to protect my interest. Mr president tignan mo to, we don’t want suits.
You will make offer to them, we are not bankrupt but no money we have plenty of
inventory we will pay you in kind. The valuation of inventory will be at cost in
payment of the obligation. Yung mga gusto we will you hotdogs, soap, shampoo. If
you don’t want this, sue us. Wala kami pambayad so we will ask the court for
suspension of payment under the FRIA LAW. Kasi di naman kami insolvent. u cannot
make attachment kasi benefit yan ng fria law. E naconvince natin. Pumayag sila sa
dacion en pago. Governed by law on sales. And therefore the inventory shall be
considered sold therefore vatable.
Pang apat if goods are put on consignment and still unsold after 60 days. Meron kasi
na consignment sales, naka consign lang, yung mga dept store like sm, Robinsons di
naman lahat yang goods ay owned ni seller. Marami jan naka consign lang. may
consignment. Kaya kita mo kanya kanya sila ng seller. Yung uniform nila may
nakalagay yung nirerepsent nila na company. Dapat maibenta nila within 60 days
kapag hindi gagawin ni consignor ay withdraw, kapag di nawithdraw after 60 days
papasok si BIR deemed sold na. vatable na.
And finally, retirement and cessation from business. Yan ang magiging sources ng
output tax mula sa output tax magbabawas ka ng mga input tax mga actual inputs,
transitional inputs, presumptive inputs tapos icocompare mo output and input. Ano
mas mataas. Kapag mataas ang output wala ka babayaran. Magbabayad ka kapag
mataas yung output. Kunwari output mo 1M tapos input 900k lang edi magbayad ka
pa ng 100k. vat good tawag. pano naman kung mataas input kesa output, wala ka
babayaran pero may excess gagamitin mo next period. Maliban nalang kung galling sa
zero rated or export pag galng sa zero rated pwede mong iclaim for refund.
San galling yung transitional input. You become subject of vat for the first time.
Kunwari this year, last year ang total sales di lumampas sa 3M kaya di subject sa vat.
Pero this year we are planning to increase prices even if we included volume but we
increasing selling price baka lumampas tayo 3M, magpaparegister ka na. so you will
be subject to vat for the first time. Kapag meron ka panininda inventory multiply natin
MAB–BPGD– BDM–S VEM–JFAM
sa 2% ang lalabas lamang icocompare mo sa magkanong vat na binayaran mo deduct
whichever is higher.
Sa presumptive input tax, wala ka binayarang input pero the business is being
encouraged by the government bibigyan ka 4% minimum tax.
Anim na businesses yan eh na ineencourage ng government. Processors and
manufacturers of sardines, mackarels, cooking oil, refined sugar, packed noodle instant
meals and milk. Yan anim nayan meron kang 4%presumptive input tax on agricultural
products. Ewan ko ba nung naamend may na omit na word. Dati yan 4 percent on
agricultural and marine used as ingredients. Today sa bago nawala yung marine. Eh
sa 6 na products nayan ang main ingredient ay marine. Kapag ikaw nagprocess ka ng
mackerel at sardines, ang main ingredient niyan ay marine product di ka makapag
deduct ng 4% kasi ang sabi agricultural lang e. eh ang ginagamit mo isda marine.
Makaka deduct lang on agricultural like tomatoes, sibuyas, bawang, luya, sigarilyas,
mani. Singkamas, lagay mo jan. pero yung apat nakikinabang talaga. Yung mga
manufacturer ng milk, nakikinabang yan kasi main ingredient eh agricultural e.
nakikinabang sila sa 4 percent. Lalo cooking oil main ingredient nyan eh coconut, corn,
veggies agricultural yan. Parang yung noodle main ingredient ay wheat agricultural
nanaman. And also, refined sugar galing sa agricultural din yan. Kaya yung iba
gumagamit na rin ng agricultural product parang yang sardines and mackerel, ang
nilalagay eh bangus eh agricultural yan pati tilapia. Sir pano ko malalaman kung
marine or agricultural. Yung marine nasa dagat hindi cinuculture, hinahanayaan lang.
ang agricultural nasa fishpond inaalagaan yan.
EXCISE TAX
Ang excise tax on business imposed only on two taxpayers. So all others, hindi
nararanasan ang excise tax. Yun nga lang ang excise tax is being added. Kaya nafefeel
pa rin ng buyers. Kasi the excise tax collected or imported. So the moment you import
goods, there is excise tax and all manufacturers for domestic consumption. So there
will be no excise tax on subsequent distribution, on wholesale, retail, wala na siyang
excise. Kaya if the excise tax is collected from the manufacturer, it was already added
to the selling price. Kaya nga excise tax on imported articles, pag nag import ka
kinukuha ang landed cost. Landed cost is composed of dutiable value between the
Cost, Insurance, Freight plus excise taxes plus other charges before release of customs
custody. Itototal yun ang landed cost. Yun ang kagandahan ng VAT. The VAT
therefore, is also imposed on Excise Tax because excise tax is part of landed cost and
landed cost is the basis of the VAT. It appears walang sinisingil na excise tax sa
wholesaler, distributors pero nakadepende yun sa price ng importer sa kanila. So
which is better? Is it to be taxed using ad valorem or to be taxed using specific? It
depends as to who are the competitors. Because when we say we will tax you based on
15
 3F 2018–2019
ad valorem, the tax rate or the amount will be based on the value and therefore if your
goods will be priced higher, you pay more in ad valorem. In specific, regardless of the
valuation, if you belong to the same group/same category, you will be taxed at the same
rate. So kung ikaw ay, ang kalaban mo, mas mataas ang halaga, mataas ang cost niya,
ipipilit mo sa Congress mag-ad valorem. Kasi kung ang kalaban mo ang presyo, 100,
at ikaw 80, at pag naka-ad valorem, to simplify the computation, assuming naka-10%
ad valorem eh ang cost nya 100, so 10 ang kanya. Sayo 80, 8 nalang. So ang magiging
gap niyo sa market, aside from the 20, difference in cost, plus yung tax na 2. Kaya
ipipilit mo sa Congress, mag-lolobby ka sa Congress, ngayon baka magsusupport ka
sa candidate, meron kang political contribution sa candidate, correct? Diba? Not to be...
(not relevant) Kaya pag nagbigay ka ng campaign contribution sa candidate, dapat
gastusin niya. Pag di niya ginastos, magiging income niya. Subject to income tax,
correct? Eh pag ginastos naman niya, baka ma-over spending niya. Kaya di niya
gagastusin. Kaya ikaw magcocompute ka kung may business ka. (Irrelevant mga
kasunod)
Congressman, baka pwede ad valorem. Kasi pag ad valorem, mas malaki magiging tax
ng kalaban mo kasi mas mahal siya. Yun namang kalaban mo, hindi mo alam
nagcontribute din ka Congressman. Pag nagcontribute siya, siya naman maglolobby.
Congressman, baka pwede namang specific. So si Congressman, walang tinatanggap
na bribe, correct? Wala. Akala niyo lang kaya siya gumanun, eh wala eh. Wala namang
masama. Eh talaga namang isusubject yung goods mo into excise tax. It’s just a matter
of determining will it be ad valorem? Or will it be specific? (Irrelevant na mga kasunod)
Kasi di mo talaga malalaman, which is better.
Halimbawa, kung ako ay manufacturer ng San Miguel Beer at ang kalaban ko Asia
beer, yung Beer na Beer, correct? Eh malamang, ayaw ko ng ad valorem kasi ang SMB
is priced higher than Beer na Beer. Pag nag-ad valorem mas mahal yung ___ ko,
dadagdagan mo pa. Ipipilit ko mag-specific para parehas lang. Ipipilit ng Beer na Beer,
ad-valorem dapat. Naintindihan mo significance? Ang ginagawa nalang nila, tinataas
yung rate para siguro mataas ang kanilang tax collection. Lately, ang tinaas yung
cigarettes. Mas mahal pa yung stick ng cigarette, yung tax niya sa dating cost eh. Kaya
isang stick siguro ng cigarette mga five pesos na eh. Di naman? Seven? Yung isang
stick? (Irrelevant na mga kasunod)
(Sir gave examples of luxury cars being imported or locally assembled here in the
Philippines which are subject to excise tax.)
Am I clear? Kelan binabayaran yan? Before removing the goods from customs’ custody,
kung imported or the place of locally manufactured, the excise tax must be paid,
otherwise, your goods may be confiscated by the State. At pag kinonfiscate ng State, it
does not necessarily follow na i-bibid niya. Option yan, pero lately hindi binibid eh,
sinisira. To serve as notice and warning to all these importers or these manufacturers
who are not paying the tax, we mean business. Hindi namin ibibid, kasi kung i-bibid,
MAB–BPGD– BDM–S VEM–JFAM
baka sila pa ang manalo at pag laging nanalo, baka ma-kaugalian lagi nalang ipapabid.
Eh di sirain natin. (Nagkwento si sir ng destruction ng smuggled luxury cars)
Dalawa lang ang tinatax diyan sa excise ah. Therefore, kung ayaw mo mapasubject sa
excise tax at manufacturer ka, manufacture ka for export. Huwag manufacture for
domestic consumption. So kung ano manufacturer ako ng Beer, i-eexport ko para
walang excise. Pag dito ko naman binenta, kaya lang, yung excise tax sinisingil ko rin
naman sa buyer. Kaya okay lang. (Irrelevant kasunod)
VAT GOV’T TRANSACTION 5% AND 7%
Halimbawa seller ka, may dalawang bumibili sayo private individual saka
government. Pagpalagay mo selling price mo, 100 tama? Meron kang VAT rate na 12%.
Kapag ang bumili sayo private individual, ang ibibigay niya sa’yong cash, yung Selling
price, 100 correct? At yung VAT na 12% diba? Kaya 112 ang matatanggap mo. Pero
benta mo lang, ang credit mo jan, sales. 100 lang. Tapos ito yung output tax, ay 12.
Journal Entry:
Cash 112
Sales 100
Output VAT 12
Itong 12 na ‘to ipapadala mo sa BIR follow? Less kung ano mang input tax meron ka,
ayos? So kung i-aassume mo, walang input tax, yung 12, pupunta rin sa government.
So ang talagang papasok lang sa bulsa mo, 100. Kasi 100 lang binenta mo. The 12 is
collected from the seller by the BIR but the seller collects the VAT from the buyer. So
parang channel lang si seller.
Kapag binenta mo yan sa government, ang cash na ibibigay sayo ni government, ay
yung selling price na 100, correct? Tapos sisingilin mo si government ng VAT na 12%.
Kaya lang yung 12% na yan, yung 7% lang ang ibabayad sa’yo ng government, 7 lang.
So 7 plus 100 ay 107. Kaya ang cash mo 112. Yung 5%, ibinawas na ng government,
pero siningil ko sya ng 12. Ito na ngayon yung fnal withholding tax mo. Kaya ang credit
mo, meron kang Sales na 100, tama? So all in all ang tinanggap mo lang ay 107, tama?
Pero siningil mo ng 12%. Yung 5%, final withholding tax nasa government na, yan na
yung mapupunta sa BIR. So may 100 ka dito. Meron kang output tax na 12, tama? Kasi
112 lang din yan eh, winithhold lang ng government. So ito, papadala ko sa BIR diba?
Sabi, hindi na. Hindi mo na ipapadala sa BIR kasi meron ka nang pinadalang 5.
Follow? Tapos magbabawas ka ng input tax correct? Yung input tax mo raw, hindi mo
na pwede ideduct as input, gagawin mo na siyang cost. Gastos mo na siya. Cost mo na
on expense. Minus mo yung 7%, standard input tax, i-minus mo yan as if income.
16
 3F 2018–2019 MAB–BPGD– BDM–S VEM–JFAM

Bakit? Kasi ang siningil mo sa government, 12. Ang ibinayad mo lang, 5. May natirang
7. I-minus mo sa gastos mo. Kasi hindi ka gumastos ng 12.
Pag binenta mo sa private individual, forgetting the input ha, ang nasa bulsa mo lang
magkano? 100 lang talaga. Kasi bibigay mo to sa government. Ang nasa bulsa mo
magkano? Wala ka nang ibibigay sa government diba? Kasi binawasan na ng 5. Sobra
ng pitong piso correct? Ang sabi diba magdededuct ka ng cost? Bawasan mo ng 7,
because meron kang income na 7. Your pocket is richer by 7. It should only be 100 but
you have 107. Kaya bawasan mo ng 7.
So ibig mo sabihin sir, mas maganda magbenta sa government? Sometimes, maganda.
Sometimes, hindi. Kelan siya maganda? Kung wala kang input. Kasi kung wala kang
input, ___ ka ng 7. Pero kung may input ka, hindi mo na madedect eh. Magiging gastos
na. Gastos na siya, dapat asset siya eh. I-dededuct mo lang siya as cost.
Q: So regardless po kung proprietary or governmental [function ng government]?
Yes.
INCOME TAX OF SHARES IN IPO; SECONDARY OFFERING
Q: If the corporation shares are not listed in the stock exchange,
Your shares are not available to the public, so if you want to sell your shares, you will
be looking for a buyer. You directly sell to the buyer. But if your shares are available to
the public, therefore they are traded in the stock exchange. Follow? Assuming this is a
corporation under existing stockholders and you want to get bigger pero wala naman
kayong pang-subscribe sa shares niyo. Marami pa kyong admission shares. So nag-
propose kayo, why not open to the public? Because our existing stockholders cannot
subscribe, ayaw niyo eh. Eh tinatax pa tayo sa rate. Ang laki ng rate. Sa train law, 15%
ng gain ang tax niyan. Samantalang pag hindi listed, maliit ang rate, ½ of 1% eh
ngayon, 6/10 of 1% na sila. Kahit na, wala pang 1%. Yun nga lang ang pagkakaiba,
selling price. Dito, gain. Sabi natin, why not offer our shares to the public para yung
mga stockholders later pag magbebenta, mababa lang yung tax. Based lang sa selling
price. Are you willing to buy the ____. Dun ka nalang sa public. Mag-IPO. Initial Public
Offering. Magkakastock transaction tax. You are taxing the transaction. There is a
transition from not listed to listed, may transition. At ang tax nun depende, what will
be the percentage of the shares we will initially share to the public vis a vis the resulting
of standing shares.
unissued. Therefore, pag nagbenta ka, ilan na ang magiging outstanding? 1200 na.
Diba? Kasi 1000 dati plus 200. Gano kalaki yan? Not more than 25%. Walang 35 yan
dib a. Sabi itatax tayo, sa naging selling price niya. Yung selling price niya itatax yan
ng 4%. Sabi natin, ang taas naman. Pwede naman natin maibaba. Damihan natin yung
ibebenta sa public pero pag dinamihan natin, dadami outstanding. Lalong liliit ang
ownership natin. Yun ang catch, correct? Tignan mo nga kung 400, sabi nung isang
stockholder. 400, edi magiging 1400 na. Tama? Pag kinuha mo yang percentage nyan
that’s more than 25% but less than 33%. Yung selling price niyan itatax at 2% nalang.
Eh sabi nila, diba mataas pa rin yan? Edi dagdagan natin. Pag dinagdagan natin, lalaki
ang outstanding, liliit ang interest mo. Pero gusto natin makatipid eh,edi ayan sige.
600 over 1/6. Lalagpas na yan ng 33 and 1/3%. Yung selling price, itatax na ng ___.
Tapos sabi nila, pano kung later? Later naisipan natin mag-___ pa kasi may natitira pa
eh, correct? So sa secondary offering na. Wala na siyang stock transaction tax. Exempt
na siya, pero meron syang DST. Magbabayad nalang ng Documentary Stamp Tax.
Hindi mo siya ma-circumvent eh. Pag marami kang i-ooffer, mababa ang rate pero onti
ang exempt later. Konti ang i-offer mo, marami ang exempt mo later, mataas naman
yung rate. (Irrelevant mga kasunod)
CAPITAL GOODS AS DEDUCTIBLE INPUT TAX IN VAT
Kunwari bumili ka ng machine, kapag bumili ka ng machine titignan ang aggregate
acquisition per month. Kasi baka dalawa, tatlo binili mo eh. Hindi siya per acquisition.
Pag lumagpas ng 1 Million yung acquisition cost mo, all input taxes will be spread over
the life of the capital good or 5 yrs whichever is shorter. Pag hindi lumagpas ng
1Million, immediately deduct it. Para di ka malito ah, bumili ka ng capital goods.
Acquisition mo, exclusive of VAT, hindi kasama ang VAT. Acquisition cost mo, let’s
say bumili ka for the month of April. April 8 bumili ka for 800,000 tapos April 20 bumili
ka for 1.2 Million. Times 12%. So ang mangyayari jan, may VAT yan, ang total
acquisition mo, 2 Million. Di ka pwedeng magdeduct kaagad. Magsspread ka, titignan
mo ano yung life nito. Let’s say ang life nito, mabubuhay lang for 4 yrs, ito 6 yrs. So
ang pag-compute mo ngayon niyan 800,000 times 12% ilan? 96,000. I-didivide mo by
48, correct? So ang idededuct mo lang for the month of April, 2000 lang. Tapos, ito
naman, 1.2 times 12, 144,000. I-divide mo by 5 yrs. Divide mo by 60. Magkano nagyon
yan? 2400. Ito lang yung deductible input tax for April. Mag-dededuct ka lang ng 4400.

Halimbawa, bago yung ating public offering, tayo ay may outstanding shares. Before
the IPO, outstanding shares, 1000. Eh marami pa tayong unissued shares. Let’s say
meron pa tayong unissued shares na 2000. Mag-uusap tayo ngayon. Ilan ang i-IPO
natin. How many shares are we willing to sell to the market. Kasi pag binenta natin,
lalaki outstanding, liliit ang interest natin sa corporation. So nagkasundo tayo, konti
lang para tayo pa rin ang mag-kwan. So IPO tayo. Sabi natin, 200 lang. 10% ng

17
 3F 2018–2019 MAB–BPGD– BDM–S VEM–JFAM

Apr 8 Acquisition cost 800,000 (May 9, 2019)

VAT x 12%
Sub-total 96,000
Life of Asset / 48 2,000

20 Acquisition cost 1,200,000

VAT x 12%
Sub-total 144,000
Life of Asset / 60 2,400
Deductible Input Tax
For the month of April 4,400

Eh dumating ang May. Sa May, bumili ka May 8. Bumili ka 400,000. Bumili ka May 20,
600,000. Total niya, 1m lang correct? Hindi lumagpas kaya times 12. 48, tas eto 72. Ang
total niyan 120, at saka i-dededuct mo rin yung para sa April. Mag-dededuct ka ng
4,400. Kaya ang total na idededuct ko, 124,400. So monthly, eto magdededuct ka til 4
yrs hanggang maubos, eto 6 yrs. Eto, onti-onti, ito agad-agad. Kaya pagdating ng June,
aalamin mo kung magsspread ka or hindi, pag ganito magdededuct ka pa rin sa June,
hanggang sa maubos.

May 8 Acquisition cost 400,000

VAT x 12% 48,000

20 Acquisition cost 600,000 Why do we have the MCIT? Because taxes are the lifeblood of the state. Without the
VAT x 12% 72,000
taxes, how can the state survive? And so, for example, the family needs P1,000 for the
Deductible Input Tax
day, the father only had 600, the family will suffer so on a broader perspective, the state
For the month of May 120,000
needs 1,000, but your tax liability is only 600, what will happen to the government? The
Add: Deductible Input Tax
government will have no money so there is now this MCIT assuming you are now in
For the month of April 4,400
Total Deductible Input Tax your 4th year of operation because for new corporations MCIT is available only on the
As of May 124,400 4th year of operation. Now we will get the gross income during the year, based on
calendar or fiscal year, depending what the corporation will prefer. So assuming the
Eto naman deductible to, input tax for May, ito para sa April. Hindi sila sabay corporation chooses calendar year. The year will start at January 1 and end in December
mauubos. Mauna mauubos yung 4 yrs, tas yung isa after 5 yrs ubos. So in effect, mga 31 and assuming it is the now the 4th, 5th or 6th year of operation. We will get how much
input taxes sa capital goods, nadededuct din, it’s a matter of when? Deductible agad? is the gross income realized by the corporation. So there will be no deduction of
Pag di lumagpas ng 1M yung aggregate. It’s not on a per acquisition. It’s on aggregate expenses but there will be deduction for returns and allowances. Gross income if you
acquisition, itototal mo in a month. So if gusto mo i-deduct agad, 2M ang bibilhin mo, are selling goods, gross receipts if you are selling services. now we have the gross less
magkaiba ng month. Bumili ka on May 31 and June 1, maidededuct mo lahat. Wag mo allowable deductions (expenses, losses, taxes). So from gross income after deducting
bibilhin in 1 month. Mag iispread ka. Applied only to those who engaged in business.
the deductions we will arrive at net income for the year, net income to be multiplied
by the corporate tax rate which is 30% compare that with the gross income.

Gross income amounted to say 10M, expenses amounted to say 9.5 M so your net
income is 500k. we will now compare NCIT versus MCIT. How do we arrive at the

18
 3F 2018–2019
minimum, Gross income of 10M x 2% versus Normal which is the Net income of 500k
x 30%. So 10M x 2% =200k, 500k x 30%=150k. so which is higher? The normal, so we
will pay the government 200k because the government needs 200k but your liability is
only 150k, so that is the minimum to be paid but that is not your tax liability. Your tax
liability is only 150k. what will happen to that excess 50k? it will be your advanced
payment of future taxes. When the time comes that your normal is higher, you can
now deduct that 50. So assuming in the succeeding year, gross income amounted to
12M and your deductions amounted to 10M, how much is the net? 2M. now get
minimum is 12M x2%= 240k, normal is 2M x30% =600k, which is bigger? Normal. Now
you will pay the normal which is 600k minus 50k (excess in the previous year) so you
will now only pay 550k.
However what if, If on the succeeding year the minimum is still higher, so you can
choose the 50k, you will pay the minimum. follow? On the third year, the mimimum is
still higher, you cannot use the excess you paid in the first two years, you can only use
the excess you paid, if in the succeeding year, the normal is higher. If the minimum is
higher you do not use the excess up to 3 years. On the 4th year, the normal must be
higher than the minimum for you to be able to use the excess in the past 3 years. If the
minimum is still higher, you lose the right to use this. It is an expense. So you have 3
years to use the excess payment during the prior 3 years.
Q: so in this case sir, the taxpayer has no right to choose between normal and
minimum? So whichever is higher, even in the first payment, that will be the one to
be paid?
The MCIT, the minimum will only be used when the normal is lower. The moment
your normal is higher, that is your tax due.
Q: assuming that the 5th year the normal is higher. Can you deduct the 2nd, 3rd and 4th
year?
So in the first 4 years the minimum is higher, in the 5th year the normal is higher, you
can deduct the 4th year. YES, you will just loss the first year, and so on. So the availment
if the next 3 years.
Q: sir, what if in the first year the difference in the normal and minimum, lets say
500k sa second year, mas mataas yung normal ng 100k, third year mas mataas yung
normal yung 100k, maccaryover po sya sir?
Always pay the minimum if it is higher than the normal kaya nga sya minimum, you
cannot go lower.
Q: so in your example sir, when in the 4th year, you have to exhaust the first year?
MAB–BPGD– BDM–S VEM–JFAM
Yes, better kasemaeexpire sya e. Halimabawa ang excess nya ditto 100k, excess ka ditto
ng 100k, excess ka ng 100k, edi pag dating mo ditto ang normal 200k ang minimum
150k edi ba matass yung 200 gamitin mo to tsaka to (1st ans 2nd 100k). may natitira ka
pa na 100k na pwede gamitin sa next. All excess over the minimum tp normal can be
carried over on the next 3 years. After the 3rd year period wala na.
Q: sir, automatic ba yung pag credit nun? Or choice ng taxpayer when nya iaapply?
Kung ayaw mo iaapply ok lang sa BIR, iaapply mo kase mawawala yung right mo e.
although hindi mo choice it is imperative.
Q: so kailangan i-indicate sa returns na aavail mo yun?
Oo, ang entry kase sa libro, deferred charge MCIT. Halimbawa 2019, 2020, 2021, kase
ang mangyayari nyan kapag yung normal mo ditto lets say 200k ang minimum mo
250k , ang ilalagay mo sa libro, nilalagay nila liability mo e. debit provision for income
tax, yung talaganag liability mo 200k. debit mo din yung minimum corporate income
tax as of 2019, 50k, credit income tax payable. 250k, payable kase kung naka calendar
year ka isasara ang libro December 31 2019, ang liability ng tax binabayaran end ng
april 15, 2019. Sabi ng TRAIN law May 15, sabi ng BIR April 15, so conflict, e sino
masusunod? BIR who has the power to interpret. The NIRC is on the commissioner. So
if you do not agree may remedy available. Pag di mo ina-avail, bahala ka na.
Q: Wala ba exceptions dun sa expiration nung 3 year period, example sir, if yung
accountant may gross negligence without authority by not applying for the tax
deduction, wala ba exceptions yun sir?
The corporation, ang remedy ng taxpayer, is after your accountant, why sacrifice the
people of the Philippines?
Q: What if the business is closed but there is still an excess, can it claim for tax
refund?
No, kase bakit ka magsasara? Kase may loss? Kaso may incentive e, option mo not to
pay the minimum. If lets say nalugi ka ediba gross income x 2% may net loss ka, edi
wala ka tax liability. Pero meron kang gross income e. gross income 10M, deductions
11M so net loss. So gross income x 2% = 0 so normal is ) so bayaran mo yung 200k,
MCIT yun e, sabi ng code in case of loss, then you have the option, send a letter to the
secretary of finance, to the CIR asking for exemption from MCIT on the following
grounds , losses due to prolonged labor disputes, due to force majeure, due to
legitimate business reverses. Wala ka babayaran. Kaya ano icclaim mo, di ka naman
magbabayad. At bukod pa dun, sabi ng law that loss you suffered in that year, let us
look what will happen in the next 3 years. Should you have income in the next 3 years,
19
 3F 2018–2019
that loss can be deducted from the gross income. And you will have lesser amount to
pay. Provided di ka nagpa exempt sa tax kase kung nagpaexempt ka di mo maddeduct.
Q: What happens to input taxes, first on capital goods, sale to government and sale
involving exempt transactions?
Pag capital goods, we will check, how much is the acquisition for the month and it is
aggregate acquisition not per acquisition. The moment the acquisition is in excess of
1M then you will spread the input tax over the estimated life of the capital goods for 5
years, whichever is shorter. If it is an input tax to the sale to the government, 7% of the
12% will now be used to offset the deduction for expenses. However the 5 % will be the
final tax. If it is an exempt transaction, then the input tax cannot be used as credit. You
cannot deduct that as input tax, you will deduct that as excess.
Si taxpayer, had the following sales during the month, lagay natin ng export sya, 3M,
amount net of VAT, wala pang VAT. Meron syang 3 domestic sales, sale subject to 12%
-4M, sale which are exempt from VAT-2M, sale to the government 1M
Export sale -3M
Domestic sales
Sale subject to 12%- 4M
Sale exempt from VAT – 2M
Sale to the government -1M
Total sale 10M
Syempre, magtataka ka bakit iba-iba. Halimbawa, ang business ko, mga agricultural
supply, nagbebenta ako ng mga fertilizers,feeds. Meron foreign buyer, bumili sakin ng
mga patuka sa manok, fertilizer or feeds, inexport ko, 3M. follow? And then ikaw
bumili ka sakin ng patuka sa manok, sabi ko sayo, ano yung manok mo, sabi mo texas.
At ikaw naman bumili ka sakin ng mga patuka, para sa mga poultry chicken. So hindi
kita sisingilin ng VAT, so yung 4M na binili mo sakin magdadagdag ng 12% diba? Ikaw
naman na bumuli ng patuka ng manok para sa poultry chicken, 2M lang babayaran
mo. Plus 3% OPT. di ka nagbabayad ng VAT e. pag di ka subject sa VAT sa OPT ka e.
abay tumawag sakin ang government, DAR, bumili ng fertilizer, or Bureau of Animal
Industry, of Bureua of Farm Industry, 1M, sisingilin ba sya ng VAT? Sisingilin ko sya.
Kaso depende sa inorder nya sakin. Kapag binili nya sakin, meron syang kinuculture
na for business purposes, sisingilin ko yan. Remember, the government is exempt from
tax pero sa nangyari na to hindi si government ang tinatax, ako e, VAT is an indirect
tax, imposed on the seller. Not on the buyer. It is just because that it is an indirect tax,
the burdern may be shifted to the seller by the buyer.
MAB–BPGD– BDM–S VEM–JFAM
Meron ako ngayong input taxes. Para dun sa mga binenta ko, yung inexport ko may
input tax ako na lets say 200k. dun sa domestic sale subject to 12%- input tas na 240k,
dun sa exempt- input tax ako na 140k, tapos input tax sa binenta sa government lets
say 100k.
Input tax
Export sale -3M 200k
Domestic sales
Sale subject to 12%- 4M 240k
Sale exempt from VAT – 140k
2M
Sale to the government -1M 100k
Total sale 10M
Input tax capital goods 100k
E mayroon pa ako capital goods, airconditioning units, machinery, ang input tax ko
dun 100k. ang tanong nya kase anong mangyayari sa input tax nya. Yang input tax nay
an dun sa inexport ko mamimili ako, either ask for a refund or use that as tax credit.
Pero yung para sa 12%, hindi mo sya pwede iclaim as refund. Only he has tax credit.
Tapos yung mga binili ko na airconditioning units mga machinery, iaalocate ko dun sa
apat na transactions, kase all the transactions benefited from the capital goods in
proportion to the sale. At yung sa government, ibabawas mo yung 5%, yun na yung
final tax. The government deducts 5% so the 7% is collected from the government, but
no longer remit it… so deduction mo sa expenses mo.
Q: In relation to that, may a taxpayer may be subjected to both VAT or OPT or yng
OPT kung ano lang yung nasa enumeration sa codal?
Ganito, your transaction cannot be subjected to both. It is either you are paying VAT
or OPT. but one taxpayer can be subjected to both. Tignan mo sa example ko ang sale
ay agricultural product, fertilizers, feeds, kapag ang binenta ko sayo feeds para sa mga
acquarium fishes, para sa pets, sisingilin kita sa VAT, subject ako e, di na nya ako
sisingilin ng 3% OPT kase nag VAT. E nagbenta din ako ng feeds para sa poultry
chicken, di na ako sisingilin ng VAT. Kerek? So meron kang OPT because you have
transactions which are exempt from VAT and have transactions subject to VAT. Pwede
kang not subject to VAT pero may OPT ka or wala ka sanang VAT dahil subject ka sa
OPT e gusto mo magpa VAT. Halimbawa, sale mo 3M lang o edi wala ka VAT, meron
kang OPT, e nanghihinyang ka sa input tax mo. Because if you are not subject to VAT.
You cannot deduct that as input tax. You can deduct that as expense. Kaya kung gusto
mo magamit yung input tax, mag register ka.
20
 3F 2018–2019
Gawin nating simple. Nagbebenta ako patuka para sa mga texas chicken, na binili ko
rin, ang total sales ko 3M, hindi ako subject sa VAT. Although yung binenta ko dapat
may VAT. Yung kalaban ko 4M sya may VAT sya, although pareho kami ng binenta.
E halimbawa, hindi tayo parehong lagpas, kunyare ang selling price mo 100pesos sa
kanya 100 din. At pareho kayo di lumalagpas ng 3M, ako yung buyer and the thing
that I will buy I will use that as raw material, hindi ako ultimate consumer, ako ay
engage in business. Kasi kung hindi ako engage in business, wala ako pake sa input
tax. E nanghihinayang ka sa inpt tax mo, kaya magpapregister ka. So if you sell selling
price plus 12, and you sell selling price plus 3. Im the buyer, the thing that I will buy,
what will I do with the thing? Gagamitin ko sa business ko. Kanino ako bibili sa 112 o
103? I will not buy from 103, because if I will but to 103 my cost will be 103. Because
the 3% is a percentage tax expense. If I will buy for 112, my cost will be 100 because the
12 may be deducted for my future taxes. Kaya nga ng Value added tax, tinawag na
value added, it is a tax on the value added. To simplify, magkano ko binili 100 plus 12.
So yung 12 is an asset. So magkano gusto mong tubo? 50 halimbawa, so bebenta ko sya
150, how much did you add? 50? How much is 12% of 150? So magkano sisingilin ko
sa buyer? 10 plus 12%. So 12% of 150? 18. Yung 18 output tax ko. Ediba may utang ako
na 12. So magkano na lang ipapadala ko sa BIR? 18-12? 6, so yung 6% na lang ibabayad
ko.
Q: Situs of Donor’s Tax
When we talk about donor’s tax, there are 3 taxpayer who are taxable on gifts made
within and without. If you are a resident citizen, non-resident citizen, resident alien,
gifts you make whether within or without will be taxable. Ang tinitignan natin paano
natin sya malalaman, kung ang gifts ay within or without, titignan mo yung real
property ba or personal property. At kunsakali intangible, titignan mo 85% rule. Like
shares of stock, titgnan mo is what is donated are shares of stock, titignan mo who
issued the shares of stock. Kapag shares of stock issued by a domestic corporation. The
donation is always within and that ittax ka kahit na ikaw ay foreigner. Kaya kapag
binenta ang shares of stock issued by a domestic corporations, the sale is within kahit
ibenta ko yan sa America. Kasi domestic yung corporation. Kapag yung corporation
foreign, identify mo, sya ba resident or nonresident. Pag resident foreign yan, titgnan
mo yung 85%. Sa estate tax makikita mo, pag 85% mo, nagiging estate within. Pag
nag85% within nay an, pag hindi without yan. Pag lupa yan, where is the land. If the
land is situated in the Philippines. E sir paano makakapagadonate ng lupa ang isang
non-resident alien.
Di naman sya bawal maka acquire ng real property, bawal lang sya by purchase. Even
if you are not a Filipino, pero ang parents mo Filipino. Nakamana ka. O kaya pag ikaw
ay former Filipino, you can still buy lands in the Philippines may limit nga lang sa area.
MAB–BPGD– BDM–S VEM–JFAM
Makakabili ang American ng lupa sa pilipinas kahit residential, kahit agricultural, if
that foreigner used to be a Filipino. (bakit parang di nyo alam yan, e kayo ay third na )
Q: sir, may you discuss the insufficient consideration, both on the donor and the
estate tax?
1 2 3
FMV time of transfer 8M 8M 8M
Consideration 6M 6M 8M
received
FMV time of Death 9M 5M 9M
Value to be added to 3M 0 0
GE
For example no. 1 the consideration received must be lower than the FMV at the time
of transfer. After you have established that the consideration received is less. The value
of the FMV at the time of death must be deducted from the consideration received.
Here, the FMV is 8M the consideration is 6M, and therefore the consideration is
insufficient. So there was a transfer for insufficient consideration. Subtract now the
consideration received from FMV at the time of death, you will arrive at 3M. here in
the second example, also insufficient, subtract the consideration received from the FMV
at time of death, 6M is higher so it will not to a taxable transfer. In the 3 rd example, the
consideration is sufficient, the section does not apply.
Conclusion, therefore, even if it is a transfer for insufficient consideration, it may not
result to a taxable estate. It will only result to a taxable estate, if consideration received
is insufficient is less at FMV at the time of death.
Q: Discuss po ng sa vanishing deductions
Pag sinabing vanishing deduction kailangan muna ang first transfer either donation or
estate and the next transfer is by estate. So dapat, first transfer nasubject sa donor or
estate, and second transfer must be subject to estate. Within 5 years yan. Pag lumagpas
nan g 5 years hindi na pwede. So example si A namatay ng May 9, 2019, iniwan nya
ang property na to. Ang FMV ng property is 8M, kukunin natin ang GE ni A. GE of A
plus etong 8M na to, e meron pa syang ibang property. Tapos mamanahin ni B ang
property ni A. bago mamana, one has to pay estate tax, but within 5 years si B namatay.
Lets say B dies on December 25, 2022. Tapos yung property para malipat sa heir nya
lets say kay C dapat magbayad ng estate tax. So kakaestate mo pa lang ieestate mo na
naman. Titingin mo yung value nung property. Titignan mo ko kung nagaapreciate o
nagddepreciate. Kunin mo yung GE of B plus 9M. so maglalagay ka ngayon
deductions. So isa sa deduction, vanishing deduction. May formula yan. What if later
21
 3F 2018–2019 MAB–BPGD– BDM–S VEM–JFAM

si C namatay on May 8, 2025. Within 5 years. So para malipat sa heirs ni C magbabayad

ng GE ni C. titignan mo ngayon kung magkano yung halaga. Lets say 10M, iddeduct
mo yung dedections. Ang nangyari pag within 5 years magdededuct ka ng vanishing
deductions. There can be no successive vanishing deductions. Only 1, magpalipas ka
muna ng isa, hintayin mo muna mamatay si D, pag namatay si D within 5 years
magkakaroon ulit.

May 9, December May 8,

2019(dies) 25, 2025(dies)
2022(dies)
1st A-8M B-9M C-10M
(Donation
to estate)
2nd(Estate to
estate)
If in the prior decedent, there was a claim for vanishing deductions, the subsequent
death will not have vanishing deductions. That persons who dies subsequently cannot
claim even if he dies within 5 years. And remember to claim for vanishing deduction.
The first transfer must be subjected to donor’s or estate tax. And the second must be
estate.

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