Income is regarded as the
best measure of taxpayers’
ability to pay tax.
It is an excellent object of
taxation in allocation of
government costs.
The tax concept of income
is simply referred to as
gross income under the
NIRC.
Any inflow of wealth to the
taxpayer from whatever
source, legal or illegal, that
increases net worth.
Income from employment
Trade
Business or exercise of
profession
Income from properties
Other sources such as
dealings in properties
Other regular or casual
transactions
1. It is a return on capital
that increases net worth.
2. It is net realized benefit.
3. It is not exempted by law,
contract, or treaty.
Increases net worth is
income subject to income
tax.
Merely maintains net
worth; hence, it is not
taxable improvement in net
worth indicates an ability to
pay tax.
The value of life is
immeasurable by money.
Under Sec. 32 of the NIRC
proceeds of life insurance
policies paid to the heirs or
beneficiaries upon death
the insured, whether in a
single sum or otherwise, are
exempt from income tax.
Any excess amount
received over premiums
paid by the insured
surrender or maturity of the
policy.
Gain realized by the insured
from the assignment or sale
of his insurance policy.
Interest income from the
unpaid balance of the
proceeds of the policy
Any excess of the proceeds
received over the
acquisition costs and
premium payments by an
assignee of a life insurance
policy
Any compensation received
in consideration for the loss
of health such as
compensation for personal
injuries or tortuous acts is
deemed a return of capital.
Cannot be measured
financially
Any indemnity received as
compensation for its
impairment is deemed a
return of capital exempt
from income tax.
Results in decrease in net
worth
Merely maintains net worth
Does not decrease net
worth
Increase net worth, a return
on capital
The recovery of lost profits
through insurance,
indemnity contract, or legal
suits constitutes a taxable
return on capital.
Proceeds of crop or
livestock insurance
Guarantee payments
Indemnity received from
patent infringement suit
Any form of advantage
derived by the taxpayer.
There is benefit when there
is an increase in the net
worth of the taxpayer. An
increase in net worth
occurs when one receives
income, donation or
inheritance.
Properties increase but
obligations also increase
resulting in an offsetting
effect in net worth.
Under the law, the finder
has an obligation return the
same to the owner.
Receipt of money or
property to be held in trust
for, or to be remitted to
another person
Means earned
It requires that there is a
degree of undertaking or
sacrifice from the taxpayer
to be entitled of the
benefit.
There must be an exchange
transaction.
The transaction involves
another entity.
It increases the net worth
of the receipt.
The increase in wealth of
the taxpayer in the form of
appreciation or increase in
the value of his properties
or decrease in the value of
his obligations in the
absence of a sale or barter
transaction is not taxable.
Increase in value of
investments in equity or
debt securities
Increase in value of real
properties in equity or debt
securities
Increase in value of real
properties held
Increase in value of foreign
currencies held or
receivable
Decrease in value of foreign
currency denominated debt
by virtue of favorable
fluctuation in exchange
rates
An exchange but does not
cause a loss of capital
Involves actual physical
taking of the income in the
form of cash or property
Involves no actual physical
taking of the income but
the taxpayer is effectively
benefited
Does not increase his net
worth is not income due to
the total absence of
benefit.
Income of qualified
employee trust fund
Revenues of non-profit,
non-stock educational
institutions
SSS, GSIS, Pag-IBIG or
PhilHealth benefits
Salaries and wages of
minimum wage earners and
qualified senior citizen
Regular income of Barangay
Micro-business Enterprise
Income of foreign
governments and foreign
government-owned
controlled corporations
Income of international
missions and organizations
with income tax immunity
Those who are citizens of
the Philippines at the time
of adoption of the
constitutions on Feb. 17,
1987
Those whose fathers or
mothers are citizen of the
Philippines
Those born before Jan. 17,
1973 of Filipino mothers
who elected Filipino
citizenship upon reaching
the age of majority
Those who are naturalized
in accordance with the law
Refers to the properties,
rights, and obligations of
the deceased person not
extinguished by his death
An arrangement whereby
one person transfer
property to another person,
which will be held under
the management of a third
party
Corporation that is
organized in accordance
with Philippine laws
It includes one-person
corporations (OPC) owned
and registered by resident
citizens in the Philippines
One organized under a
foreign law
A foreign corporation which
operates and conducts
business in the Philippines
through a permanent
establishment
A foreign corporation which
does not operate or
conduct business in the
Philippines
Domestic or foreign corp.
which are subject to special
tax rules or preferential tax
rates
A corporation with a single
stockholder who may be
natural person, trust, or an
estate
Business organization
owned by two or more
persons who contribute
their industry or resources
to a common fund for the
purpose of dividing the
profits from the venture
Formed by persons for the
sole purpose of exercising a
common profession, no
part of the income of which
is derived from engaging in
any trade or business
Not a taxable entity
Formed for profit, a taxable
corporation
Business undertaking for a
particular purpose
It may be organized as a
partnership or a
corporation
Those formed for the
purpose of undertaking
construction projects or
engaging in petroleum,
coal, geothermal and other
energy operations pursuant
to an operating consortium
agreement under a service
contract with the
Government

All other joint ventures are

taxable as corporations

Joint ownership of a
property formed for the
purpose of preserving the
same and/or dividing its
income

The place of taxation of

income
It is the jurisdiction that has
the authority to impose tax
upon the income

Types of Income
Interest income
Royalties

Rent income
Service income

Place of Taxation
Debtor’s residence
Where the intangible is
employed
Location of the property
Place where the service is
rendered

If the ratio of the Philippine

gross income over the
world gross income of the
resident foreign corporation
in the three-year period
preceding the year of
dividend declaration is:
-at least 50%, the portion of
the dividend corresponding
to the Phil. Gross income
ratio is earned within
-less than 50%, the entire
dividends received is
earned abroad