TAXATION LESSON NO 4 PART 1 Computation of Income under RA8424 UP TO DE MINIMIS BENEFITS

Okay this is the individual income taxation based on ra8424 or comprehensive income tax reform
program of 1997. So take a look at the um presentation here uh we have the different kinds of taxpayers
we have the employee individuals lang tayo ah self-employed partner in a general professional
partnership estates and trust meron tayong apat na klase individual taxpayers: employee, self-
employed, partner in a general professional partnership and estates and trust now the formula for the
computation of income tax. Vary vary is according to the kind of individual taxpayer so a formula for the
employee will be this one under the old law so we have the gross income then we have the deduction
the not for the employee wala kasi compensation sya itemized deduction wala rin kasi compensation
meronng kasi tayong tinatawag noon na personal exemption and additional exemption noon 50,000 for
the taxpayes and kung may anak siya 25,000 for each child maximum of four children so 100,000 yung
maximum kung apat yung anak and then meron pa tayong tinatagal na health insurance premium kung
meron kang binabayaraan ka na insurance yung taxpayer now itong lahat na ito under the train law
nawala na yan tinanggal na yan pinalitan na yan 250,000 tax exemption so later on pag-aaralan natin yan
pero for now ito ang for the ctrpm ito ang computation you have the gross income which is the
compensation income and then the deduction personal additional and health insurance premium so you
arrive at the uh on taxable net income so yung taxable mong net income will be subject to the 0 to 32%
tax rates then you have your tax due now meron tayong creditable withholding tax dun sa
compensation every end of the every pay uh payday merong binabawas diyan na withholding tax dun sa
mga employees off mo muna yung camera mo okay so uh yung tax due a yun babawas nya yung
monthly tax with health ngayon kasi meron tayong batas na tinatawag na yung annuallyzation or
withholding taxes pag um sinabing ganun at the end of the year dapat lahat ng tax due compensation
income tax or yung mga nagtratrabho sa opisina eh dapat na ano na kolekta na nasa kanina na yung
taxes for the whole year kunyari liable yung tax payer na um 100,000 tax for the year at the end of year
kailangan na kolecta na lahat yun wala nang tax due or wala ng tax refund ok yan ang tinatawag na
annualize income kaya mostly yung mga compensation income earners wala na silang binabayaran na
tax sa BIR um exempt na lang kung meron silang business another than their employment or marami
silang lawyers multiple employers ang kanina baka meron silang other employer katulad ko dati noon
nagtuturo ako sa school and then nagwowork ako sa BIR therefore at the end of the period yung sa BIR
compensation zero na yun wala na kung babayaran na tax pero dahil na meron akong other self-
employment doon magkakaroon ako ng tax payable or tax refundable depende yun tax na kolecta na
withhold sakin kesa don sa dapat kung bayaran so meron and compensation income earner merong
binabayaran meron tinatanggal na tax sa kanya and employer nya every payment payday ang gagawin
ng employer ireremint sa BIR so habang nagbabayad yung employer ng compensation sa employee
nagreremint ito sa BIR tapos at the end of the period uh ang ibibigay na lang ng employer dun sa
employee ay certificate ng compensation tax na income tax na remintted sa BIR yun yung tinatawag na 2
0 3 6 kapag magfifile ng income tax return at the end of the year ang formed nun ay 1700 so 1,700 series
yun tapos kapag certificate ng withholding ang tawag dun ay 2036 yun ang ibibigay ng employer sa
employee tapos ang employee gagawa siya ng 1700 form yun naman ang ififile ng employee sa BIR kung
may meron pa siyang tax payment or tax refundable pero kung wala naman 2036 na lang ang kanyang
document, nakukuha ba? Maglagay lang kayo ng reaction uli. So dito sa nakikita nyo na quarterly
payments hindi ko Makita tong tuldok ito paramakita ko, so ito meron tayong quarterly payments wala
ito ano wala itong compensation pangbusiness lang toh itong creditable withholding meron itong
compensation na ang nagwiwithhold ay ang kanyang employer so you compute for the tax due you
apply the 0 to 32 percent tax rate and then you deduct creditable withholding tax kung ano yung matira
yun yung tax payable or refundable. Payable kung mas malaki yung tax due kapag mas malaki yung tax
due kailangan kesa dito sa withholding tax now tax payable yun so now yung tax refundable kung yun
yung tax due ay lesser than sa creditable withholding tax kung mas maliit yung tax kung mas malaki yung
tax na naka withhold may refundable kung mas malaki yung tax kung maliit yung na withhold so tas
payable so this is for the employee. Reaction reaction ha kung ano, tapos kung may question kayo, you
can present your question na. Now we have this self-employed naman again ito yung mga businessman
yung mga sole proprietors so meron silang gross income ito yung gross income nila from business ito
gross income ng mga employee for their employer now sa business may option sila kung same optional
standard deduction which is 40 percent of the gross income or itemized reduction pagsinabi mong
optional standard deduction hindi ka na mag prepresent ng resibo ng pinagbayaran magclaclaim lang
ang business ng 40 percent deduction from the gross income minus 40 percent 60 percent taxable yung
business, now pagka uh itemized deduction magprepresent ang business ng official receipt ng mga
pinagbayaran yang expenses para makaclaim siya ng deduction so ito yung income niya, so it’s either
optional standard deduction or itemized deduction hindi pwede na optional and itemized kapag pinii
ang optional 40 kapag pinili ang standard deduction isa isahin niya yung nagastos so same personal and
additional benefit personal and additional exemptions are granted to the self-employed or businessman
pareho lang lahat ng personal and additional exemption meron ang employee meron din ang
businessman so same tax rate zero to 32 um my creditable for withholding tax din ang business kung
itong kanyang negosyo ay subjects sa creditable withholding tax meron kasi tayong tinatawag na
creditable withholding tax nag require ang BIR ng na yung mga business na ito ay mga subjects sa
withholding tax tulad yung mga nagpapaupa ng commercial establishments yung mga umuupa sa kanila
business operators yung mga yun yung mga business operators na to magbabayad sa kanila ng rent
itong rent na to babawasan na ng mga business operators ng 5 percent at sila na ang magreremint sa
BIR you called it creditable withholding tax hindi lahat ng business ay subjects sa creditable withholding
tax pero yung rental business is subject to that so meron siyang creditable withholding tax at the same
time meron siyang um nabura ko na ito quarterly payment of taxes the quarterly payments of taxes
required kasi ang mga businesses that every quarter magfifile sila ng ITR nila, ang quarterly income tax
return nila u701 series so quarterly income payment of taxes doon sa quarterly income payment of
taxes um pweding cocomputin na agad yung income nila for the quarter and then ififile na nila sa BIR so
every quarter commulative yung income nila cumulative din yung expense nila so sila imiminus na lang
taxes binayara nila nung previous quarter so merong quarter income tax payment at merong creditable
withholding tax payment that would be the total taxes paid in advance imimimus yan don sa tax due at
tax payable the end of the period. So pag-sinabing dito na tayo sa partner in a general professional
partnership. Yung partnership, general professional partnership is not taxable but the partners in that
gpp are taxable in the same manner as self-employed individuals so makikita niyo rito pareho lang
partners in general professional partnership the gross income, optional standard deduction, or itemized
deduction then you have the net income then the allowable deductions fifty thousand, twenty five
thousand and two thousand four hundred then the same tax rate so pare pareho lang toh self-employed
and partner in a general professional partnership we have the same creditable quarterly and creditable
then we have the same net income so parehong parehong ang formula ng self-employed at PGPP um
distinguished lang yung klase nang taxpayer the PGPP itself is not taxable but the individual but the
partners shares in the GPP are taxable so kunwari A B C nag accounting firm, yung accounting firm gp
siya hindi siya taxable pero yung share ni A ni B na kinuha dun sa income nila na nakuha don sa ay
subject sa individual income tax now we have these estates and trust ano ba tong estates and trust
katulad ni Dolphy taxable siya as an individual um self-employed siya professional siya now nong
namatay siya ehh sa dami ng kanyang asawa at anak hindi pa madistribute ang kanyang property so
during that time na hindi pa nadidistribute kanyang property niya ang tawag don ay estates of Dolphy
Quizon during dependency ng distribution ng property kumikita yung estates ni Dolphy Quizon so yung
income na yun ng estate ni Dolphy Quizon is called estate hindi mo itatax sa individual kasi patay na siya
hindi mo din ma tax yung airs kasi hindi pa naman sila nakaka acquire ng right over the property so
itatax mo mismo yung property itself and you call that estate. Now how about trust yung trust naman
katulad naman yan ni Niño Muhlach when he was still working as a child star, yung nanay niya at tatay
niya hindi natin matatax hindi naman yung nanay at tatay ang kumita si Niño Muhlach kasi bata pa
naman si Niño Muhlach so what the parents did was to create a trust fund for Niño Muhlach lahat ng
income ni Niño Muhlach ay ilalagay sa trust na yun lahat ng expenses niya aalisin dun sa trust na yun so
usually a trust is a bank so ang bangko ang nagmamanage ng pera ni Niño Muhlach so yung bangko
gagawa yan ng report na sa income and expenses ni Niño Muhlach then yun yung itatax kung magkano
ang kinita at magkano ang expenses kung ano yung amount ng taxable yun yung itatax ng BIR hindi si
Niño Muhlach kasi bata pa siya hindi yung parents kasi hindi naman yung parents ang kumikita but the
trust for Niño Muhlach. So it is considered as a taxpayer but hindi na subject siya parang business din
umm pero subject siya sa personal exemption pero hindi katuad ng individuals which is fifty thousand ito
twenty thousand at wala din additional exemption kasi wala naman anak so twenty thousand flat lang
ang kanyang deduction then we have the same tax rate and then kung merong withholding ito meron
um may quarterly declaration din at tsaka merong creditable withholding na income yung business kasi
si Niño maraming business noong araw yung pera niya iniinvest ng bangko sa mga~ ngayon meron
siyang bake shop hindi natin alam kung noon pa yan nung bata pa siya pero nung mga bata pa siya yung
pera nya iniinvest niya sa bangko yun all different activities. Okay so may question ba kayo dito sa topic
na toh? Discuss muna natin, may mga nagquestion na yata. Ano ba, may chat ba? Ano pong mga
business ang gumagamit ng 40% optional standard deduction, yun yung question no, anong mga
business, um its an option, kumbaga lahat ng business, kahit anong business yan pwede mag op- uh
gumamit ng 40% deduction pero usually advisable yan sa mga uh businesses na malaki ang income
maliit ang expenses katulad ng mga rental business um yung mga nag papaupa, maliit lang ang mga
expenses nyan eh once na create mo na yung building or space for rent, kita ka nalang ng kita jan eh
wala ka na masyadong expenses, repairs um bihira nalang naman ang repairs, so yan ang nagcle-claim
usually, usually ng ano 40% optional standard deduction tsaka yung iba na mga ayaw mga ano uh audit
audit pa ng BIR mga resibo nila, tinatamad magpaaudit they can claim 40% deduction kasi pagka
nagclaim ka ng 40% deduction, hindi na titignan yung libro mo eh yung resibo mo nalang eh kasi wala ka
na nga irerecord na expense, yung libro mo para nalang yan sa managerial purposes pero for taxation
purposes hindi na kasi ang titignan nalang ng BIR jan tama ba yung dineclaire mong sales? Edi ang
titignan lang jan resibo lang ng OR mo na inisyu, invoices mo ng business mo na iniisyu mo sa customer
yun lang ang titignan because the expenses are covered by the 40% optional deduction. Okay na yun
lang ang tanong nyo dun? And that is a good question. I will go to the next topic, wala ng questions?
Clear na ba? Teka muna bago ako lumipat sa next topic, clear na ba o walang reaction reaction muna,
yung mga puso jan tsaka like, di ba tinuruan ko na kayo mag react, okay na? May pumuso na tsaka
naglike, will go to the next. Tandaan nyo to ah classification yung diniscuss natin ah classification ng
Individual taxpayer, ito classification yan, tapos yung formula, ito yung formula nya di ba,in the sense
mahirap yung taxation kasi you cater to the different needs of the taxpayers hindi yung isang formula
lang para sa lahat ng taxpayers no um yung employees, self-employed, general professional partnership
estate and trust merong different ways of computing taxes tapos niyan yung si employees kasi merong
supervisory and rank and file so sa self-employed merong subject creditable, subject sa hindi, maraming
kinocover na area hindi mo kailangan talaga pagaralan ang details. So we go to the general principles of
income taxation in the Philippines itong general principles na to hindi naman nabago ng paint ito pa rin
yung general principles, we go back to our lesson so we go to the general principles in um income
taxation in the Philippines so same we have the same ano principles in CTRP and Train Law. So general
principles of income taxation: (A) a citizen of the Philippines residing there in is taxable on all income
derived from sources within the Philippines so citizen residing there in so anong ibig sabihin niyan ay
resident citizen kapag resident citizen taxable on all income within and without the Philippines, sa loob
at labas ng bansa katulad ni manny pacquiao Filipino citizen siya at nakatira siya sa Pilipinas lahat ng
income niya dito sa pilipinas at sa ibang bansa ay taxable under the Philippine jurisdiction. Now (B) non-
resident citizen is taxable only on income derived from sources within the Philippines so kahit na citizen
siya at resident na siya so ang taxable na lang ay ang income within the Philippines. (C) An individual
citizen of the Philippines who is working and deriving income from abroad as an overseas contract
worker is taxable only on income derived from sources within the Philippines provided that a seaman
who is a citizen of the Philippines and who receives compensation for services rendered out abroad as a
member of the complement of a vessel engaged exclusively in international trade shall be treated as an
overseas contract worker. So yung seaman kailangan abroad at tska exclusively in international trade
now ang seaman tska OFW ay ano sila resident citizen sila kasi they intend to go back to the Philippines
every time na wala na silang trabaho sa ibang bansa but for taxation purposes considered as non-
resident sila para ang taxes nila nababayaran ayon lang taxes ay yon lang income from the Philippine
sources, yung income nila outside the Philippines or income nila abroad hindi naitatax ng BIR or ng
Philippine government. So meron na tayong classification of individual taxpayers. Ahm so we have this
citizen individual and alien, pag sinabi nating citizen those who are born yung ating definition ng citizens
under the 1987 constitution, ito yon, pag hindi sila ganon alien sila so these are citizens who are born of
Filipino parents or who acquired Filipino citizenship by the process of naturalization ito walang ganong
process uhm so, yang citizen na yan at alien na yan ay further classified into resident citizen, non-
resident citizen and resident alien and non-resident alien. Itong non-resident alien engaged classified
further into engage in trade or business um not engage in trade or business and engage in trade or
business. Not engage trade in business is further classified into special aliens and ordinary. So under the
CTRP ito yung classification ng individual bakit natin kina-classified ng ganto yung individuals? Yung
kanina um classification ng taxpayers yon. Ngayon classification ng individual. Now, bakit natin kina-
classify kasi it depends eh. Kapag resident citizen taxable an all income within and without the
Philippines, pag non-resident yan only on income within the Philippines, yung alien ganon din taxable
lang sya on income within the Philippines, so lahat ng klase ng tax payers ay taxable on income within
the Philippines only based on the principle of territoriality pero itong resident citizen is an exemption to
the territoriality rule because he is the taxable on income within and without the Philippines. Now,
under the CTRP classified ang not engage in trade or business na non-resident alien ito yung mga
employed byy offshore banking unit uhm, multinational petroleum exploration business, itong special
aliens nato tinanggal nato ng uhm ni President Duterte by reason of the veto uh inadopt ulit ito ng Train
Law, under that Train Law, uh clinassify pa rin nila yung persons not engaged in trade or business into
special aliens and ordinary aliens pero si President Duterte nag veto sya sabi nya hindi na kailangan pa
magkaron ng classification na yang not engage trade in or business, wala na special special dyan pare-
pareho na silang ordinary aliens kasi ang special alien subject 15% tax lang eh. Tapos itong ordinary alien
25% ang tax nila so pag veto ni President Duterte tanggal na tong preferential tax lahat sila subject nasa
25% tax okay? Yan yung mga pagbabago sa Train Law. So ito yung special aliens yung employees of
foreign uhm petroleum service contractor, subcontractor, offshore banking units, Regional operating
headquarters of multinational corporations. Regional operating ano to pareho lang. Regional area
headquarter of multinational eto operating headquarters then offshore banking units and then service
petroleum contactor if you will take note these are all American ano um multinational eh hindi naman
pro american si President Duterte so lahat yan inequal na nya, hindi na nya binigyan ng preferencial tax
rate. So who are citizen of the Philippines? Pinag aralan na natin yan sa ating unang topic so kabisado
nya na yan. So who are residents? A person who is living or dwelling in certain place permanently or for
considerable length of time. The place where a man makes his home, or where he dwells permanently
of for an extended period of time is said to be a resident of that place. So yung mga OFW dun sila
nakatira. Permanently sa pilipinas nagtatrabaho lang sila sa ibang bansa pero for taxation purposes non-
resident sila. (1) A citizen of Philippines who works and derives income from abroad and whose
employment thereat requires him to be physically present abroad most of the time during the taxable
year, shall be considered a non-resident citizen. Legally speaking ha in other forms in other laws like
civil law, criminal law this is not the definition of a resident citizen sa taxation lang natin idedefine na
non-resident citizen yung tao kapag yung income nya nasa abroad. Pero sa ibang batas hindi, sa taxation
lang yan. So take note of that kung bakit ko ine-emphasize. Okay (2) overseas contract worker seaman.
Okay this is an important um provison. (3) A citizen who has been previously considered as non-resident
citizen and who arrives at the Philippines at any time during the taxable year to reside permanently in
the Philippines shall likewise be treated as a nonresident citizen for the taxable year in which he arrives
in the Philippines with respect to his income derived from sources abroad until the date of his arrival in
the Philippines, anong ibig sabihin nyan? Kung dati ka na-consider na non-resident citizen tas naging
resident citizen kana kasi kung non-resident citizen ka taxable ka only on income within the Philippines
pero pag naging resident citizen kana on all income kana. This the case of Grace Poe bago sya mag punta
ng pilipinas. Si Grace Poe non-resident citizen sya nasa America sya, so may income sya sa America at
may income din sya sa Philippines so her property is in the Philippines dahil nga nasa America sya non-
resident sya so hindi sya taxable on her income in the Philippines uh outside the Philippines. Now
nabaligtad yung situation nakatira na sya sa pilipinas pero meron din sya property sa abroad, resident na
sya ngayon ng pilipinas so taxable na sya on income within and without the Philippines. Now what is the,
the question here is kunwari during the taxable period, July sya dumating sa pilipinas so yung income
nya January to July na pag dating nya, hindi taxable yung income nya abroad pero nung July na naging
resident na sya frome there all, lahat ng naging income nya ay taxable within and without the
Philippines, so tandaan nyo to. So, who is an OCW or OFW? OCW or OFW is a Filipino citizen employed
outside the Philippines and is physically present in that country or territory in order to perform work. His
wages and salaries are paid by an employer based abroad and are not borne by any entity or employer
in the Philippines. To be officially recognize as an OFW, the Filipino must be duly registered as such with
the Philippine Overseas Employment Administration (POEA) and must possess a valid Overseas
Employment Certificate (OEC). So hindi mo lang sasabihin OFW kailangan papatunayan mo na OFW ka.
This happens, this happened in the case of Rose uh ano ba apilido non, uh yung nanalo sa ano sa x factor
uh Filipino sya kini-claim nya na overseas contract worker sya so yung income nya sa televin as e factor
winner ay hindi taxable under Phiippine jurisdiction uh hinahabol sya ni Commisioner Henares because
hindi sya nakapag present na proof na OFW sya. So kung wala kang proof na OFW ka kahit na doon ka pa
nag tatrabaho sa ibang bansa kasi mayrooon mga cases na bakbak yung passport eh so these are not
legitimate OFW’s. So ang kino-consider lang ng batas ay yung mga legitimate OFW workers so kung
legitimate sya the the income from the x factor kahit na hindi sya part ng compensation will not be taxed
because kapag OFW ka ang taxable lang naman sayo ay income within the Philippine territory. Yung
income outside the Philippine territory will not be taxed. So yun yung case ni Rose Montana ba yon you
make a research on that kung sino yung nanalo sa x factor na hinahabol ni commissioner Henares anong
pangalan nya at ano yung datails ng case nya. Pero ito yon yung application na kailangan valid yung
registration with the POEA. Oh itong seamen ganon din kailangan registered din na MARINA and then
kailangn meron sya seamens book atsaka yung requirement na International Trade yung kanyang vessel
hindi domestic trade kasi minsan seaman nga nasa ibang bansa pero Philippines yung ano yung vessel
nya, hindi pwede, resident citizen padin yung classification nya. This is the principle now, the non –
resident alien indivual who shall come to the Philippines and stay herein for an aggregate period or
more than one hundred eighty days during any calendar year shall be deemed as nonresident alien
engaged in business in the Philippines. So ito yun ano requirement don sa mga alien katulad ni ano Ryan
Bang. si Ryan Bang ay non-resident alien and stays in the Philippines for more than 180 days so he is
considered as a non-resident alien engage in trade or business. Pero kung mapoprove nya yung income
nya dun sa ano ABSCBN subject lang sya sa compensation income hindi sya engage in trade or business.
Who are alien? Aliens, baka ito yung iniisp nyo yung extraterrestrial. Aliens are person who are not
citizen of the country where they live. Don ka sa isang bansa na kung saan hindi ka citizen, Kunyari si
Ryan Bang nandito sa pilipinas pero hindi naman sya citizen ditto so he is an alien here. Tapos yung mga
Pilipino na nasa abroad pero wlaa naman silang green card don, alien sila don pero pag naka aquire sila
ng green card sa katulad sa america na acquire sila ng green card then citizen na sila don. Alien sila sa
atin, citizen sila don. So the general formula for the computation of income tax, so we have this kanina
prinesent natin yung gross income, gross income yung nasa formula natin kanina pero how to arrive at
this gross income is another thing. So may principles na all income from whatever source whether legal
or illegal is taxable, so this is the universe this is the um total income so from the total income this
reduce it by the exclusion from gross income. The law provides for the exlusion from gross income so all
income from whatever source whether legal or illegal are taxable minus exclusions from gross income to
arrive at gross income. Mahirap unawain ang taxation kasi maraming libro at teacher ang pagturo nila ng
taxation nagsisimula sa gross income tapos ipapasok nalang nila ang discussion ng all income from
whatever source kaya magulo pero sa totoong buhay lahat ng income illegal are taxable minus the
exlusion magkaiba ng paraan ng pag compute ng tax ng illegal source at legal source. Yung pinag
uusapan natin kanina, legal source yon pero yun ang formula, so pano ang formula kapag illegal yung
income tax whether are not filed with the BIR? Syempre illegal yon hindi mo yan dapat sabihin kay pano
malalaman ng BIR na illegal income ka? So illegal income are taxed using net worth method, so what is
net worth method? In the net worth method, the taxpayer’s net income is determined both at the
beginning and at the end of the same taxable year. The increase or decrease in net worth is adjusted by
adding all noun-deductible expenses and subtracting therefrom non-taxable receipt, as determined
under the prevailing tax rules. The resultant figure is the BIR’s computed taxable income before
allowable and personal additional exemptions for individual taxpayers. The computed taxable income
will be compared to the taxpayer’s declared income as BIR forms It is appears at the declared income is
lower than the BIR’s computed amount based on the net worth method, then the tax payer should
explain the difference to the BIR. Any unexplained increase is net worth will be presumed to be derived
from taxable sources, and hence, will be assessed for deficiency taxes. So ano ibig sabihin, ito yung
taxpayers nag pass sya ng ng income tax return pero hindi naniniwala yung BIR na tama yung finile nya
na letter, what the BIR is going to do will be to conduct a surveillance and external audit of the
taxpayers, iga-gather ng BIR lahat ng documents to prove his property kaya nga yung mayayaman eh
diba inilalagay nila sa pangalan ng ibang tao yung property nila wag sila ma search ng BIR, yung mga
politiko natin nilalagay nila sa pangalan nila ng mga tauhan nila yung property nila para hindi ma-search
ng BIR diba kasi that wil part of taxable income kaya marami noon yung panahon ni President Cory
Aquino marami sila na maraming yumaman na hindi sinasadya kasi nag EDSA Revolution yung mga
tauhan ni President Marcos or nung mga naka upo na nagiging dami eh na acquire nila yung property on
their own kasi nakapangalan sakanila eh, nagakaron ng napunta sakanila yung property marami ganyang
cases as illegal income. Kasi ang BIR tiitgnan yung mga tax declaration nung property, mag coconduct
yan pupunta yan sa city hall, sa provincial government titignan yan mga tax declaration yung mga
malalaking property knaino naka pangalan so pag nakita nila ito may ari pala ito ng ganitong lupa, ang
dami nya makikita naman yan eh sa tax declaration. Pwede mag conduct ng research don tapos ico-
consolidate lahat miski pupunta yan sa minsan sa ano may power of mag investigate ang BIR punta yan
sa mga nagbebenta ng real estate, tignan kung sino yung mga bumibili ng mamahalin lupa, punta yan sa
Toyota or sa mga high end na mga car dealer’s titignan kung sino yung mga buyers ng car. So makikita
nila kung sino yung mga mararaming pera sa pilipinas. So mag co-conduct sila ng surveillance don sa
mga tao na yon. Idedetermine kung tama nga ba yung taxes na binabayaran nila. Pag nadetermined na
hindi pareho then yun yung tinatawag na net worth method, ia-access for the difference. Kunwari bumili
ng 3 million na bahay or 5million or 7 million na bahay tapos dineclare lang na tax nya eh para sa 2
million lang na uh income yan yung difference ng 2 million o let say 9 million yan yung kanyang nabili ia-
access ng BIR yan at gagawing subject sa tax. Kung may question kayo lagay nyo lang sa chat box ha.
Para pag tapos ng discussion ng topic ay ma-discuss natin. What is the legal basis for the use of the net
worth method in computing the taxable income of the individual taxpayers? The use of the net worth
method is founded on the 1997 Tax code, as amended. Under section 43 (and this exist still in the Train
Law) thereof, the taxation income shall be computed upon the basis of the taxpayers annual accounting
period in accordance with the method of accounting regularly employed in keeping the books of
accounts such taxpayers but if no such method of accounting has employed, or if the method employed
does not clearly reflect the income, the computation shall be made in accordance with such method as
in the opinion of the Commissioner reflects the income. Moreover, under Section 6 of the said Tax code,
when there is reason to believe that the return filed by the taxpayers is false, incomplete or erroneous,
the commissioner shall assess the proper tax on the best evidence containable. When I was a examiner
so ang process namin ganito, idedemand naming yung libro ng taxpayers yung libro mismo yung io-audit
nain kung tama ba yung declaration sa income tax return at kung tama yung naka declare sa libro, then
mag coconduct din kami ng ocular inspection ng business kung nag rereflect nga ba na operation ng
business yung mga financial reports ng taxpayers ngayon kung hindi pa din kami satisfied yun yung
sinabe ko na magcoconduct kami ng surveillance using the best evidence obtainable. So meron legal
basis hindi yon harassment, kasi kung taalaga naman gastos ng gastos ang laki tapos ito lang naka
declare na income di may tinatago yan. So that is a subject for investigation. Masarap maging examiner
minsan kasi uma-acting ka kunyari patambay tambay ka lang doon sa tindahan buyer ka. I serve as an
examiner for 10 years and I enjoyed my work as an examiner talaga kasi para akong imbestigador eh
nawala kang baril ang panlaban mo ang talino mo tsaka yung political skills mo, so very challenging
maging examiner although death defying din kasi madami kaming mga kaibigan napapatay eh pag di ka
magaling mag conduct ng examination mo and you cannot validly ah vouch for your findings eh
mapapatay ka talaga. Yung Makati Director na napatay happened to be a friend, classmate ko sya sa
foundation course kasi during that time of commissioner nagbibigay ng exam for the examiner to the
value trainor kami yung nag rereform sana ng BIR non maglalagay ng mabuting ugali sa BIR during that
time of President Ramos but the congress did not allow as to have an integrity kasi hindi nila tinaas yung
sweldo namin eh dun na nakabasi yung integrity mo eh malaki ang sweldo mo therefore pang
hihinayangan mo mawala so magiging yung integrity mo pangangalagaan mo, eh hindi sinusuportahan
kung bakit ganito tayo sa pilipinas because the congress did not approved all the vision na talagang i-
professionalize ng BIR kami sana yung mag coconduct ng ano ng transformation pero hindi yon nanalo
hindi yon naging totoo sa buhay natin so we are here now back were be there. Pero kungnnatuloy yon
ang ganda yon ng vision don eh lahat ng examiners na all of high integrity and provity talagang
niresearch nila and I was so happy na ganon pala ang perception ng aking mga region ko kasi ako
pinadalang representative ng davao eh to be a values trainor so it was an honor for me to be consider as
that kind of trainor kaya ako nakapag turo dito sa PUP ngayon kahit na examiner ako because of that
integrity kasi usually walang integrity yung mga examiner eh kaya nangongtong lang but I am
exceptional examiner during my time kasi ako yung kmi tinatawag na cream of the commissioner yung
talagang kami yung nag lalaunch sana ng transformation for the BIR. So yung sa Makati na friend ano
kasama naming sa values training I was wondering eh talagang kasi sya yung pinaka magaling na sa
classmate namin sa values training program ba yon at that time ano sya eh nag wowonder ako eh and
we have this other friend na talaga naman kurap napatay din doon walang question kasi kilala mo na
puro kalokohan eh eto naman is aim wondering kung na convert na ba sya into some other form of he
was not dignified na papangatawan nya yung findings nya kaya sya nawala sa mundo so ganoon ka
challenging yung work ng isang examiner into work your wisdom palagi ka nakapsychological battle
kailangan magaling ka talaga kumapa ng puso at isip ng kausap mo eh other wise, wala eh sasabit ka
kung san san eh marami kang cases, yung mga classmates ko marami silang cases, marami silang mga
denunciation. One time yung boss ko tinawag yung mga officemates ko nagtatampo kami kasi hindi kami
tinawag parang hinidi kami importante and then yung lumabas sila tinanong naming bat kayo tinawag
may mga cases pala sila na dinown sila ng tax, ha nainggit pa naman kami kasi baka magandang case
ibigay sainyo tapos kami wala, ayun pala kaya hindi kami tinawag you see it’s a very challenging working
talagang laban ka every day and you also for the taxpayers hindi mo naman kaaway taxpayers pero
sometimes nagiging kaaway mo during the conduct of examination yan yung mahirap kung yan
ibabalance eh but it is a very rewarding work sana itaas ang sweldo ng examiners para ako kasi yung
naiwan sa davao and examiner ako pero naging supervisor ako ng mga examiner so pag hindi ko gusto
yung trabaho ng examiner ibabalik ko sakanila, you review your work hindi maganda yan. So ako yung
strict na reviewer ayaw na nila magpa audit sakin pag ako daw yung rereview ng trabaho nila
kinabayaran nila yung taga assign wag daw ibigay sakin kasi talagang bumabalik ako reports nila eh
because the cases I handled in BIR are the ones will be elevated to the legal office for the prosecution,
ako nag rereview ng mga cases na ganon bago ko ibigay sa legal office kailangan nareview ko ng tama
itong mga examiner minsan pawordi wordi anf report, sabi ko you cannot stand scrutiny, itong sila
pagdilaw yan yung mga examiner naming noon sa Davao mga magagaling talaga and prominent family
ewan ko bat nainvolve. I’m sorry I answered my son. So eto na yung exclusion for ang haba ng kwento
ko para lang maano kayo sa buhay ng examiner. Exclusion from gross income so we have gross income
legal and illegal babawasan ko ng exclusion arrive at the gross income so ano ano yung mga exclusion?
You have to memorize this items ito parin naman yung exclusion under the train law, so exclusion is
difference from the deduction baka kasi maconfuse kayo sa exclusion and deduction yung exclusion
after the total income within and without legal and illegal, yung deduction comes after gross income. So
an exlusion is not the same as a deduction. A deduction is a subtraction from gross income to arrive at
taxable income. An exclusion does not even count as gross income therefore it cannot become part of
taxable income although it may seem that an exclusion inreases wealth. So these are the exclusiom from
gross income, exclusion really increase wealth kasi nagkakaron ka ng income pero hindi sya part ng gross
income, nagka pera ka pero hindi sya magiging part ng gross income. So we have the (1) life insurance
the proceeds of life insurance policies paid to the heirs of beneficieries upon the death of the insured,
whether in a single sum of otherwise, but if such amounts are held by the ensurer under an agreement
to pay interest thereon, the interest payments shall be included in gross income. So nagtake ng life
insurance yung tao para sa sarili nya and namatay sya so proceeds ibabalik don sa beneficieries nya sa
anak nya or sa asawa nya. Hindi nagkapera yung anak tsaka yung asawa pero hindi taxable yon as
income because these are exclusions from gross income. Pero kung yung policy nagsasabi na mag kikita
ng interest yung uh premiums na binabayad ng policy holder then that interest will be subject to income
tax pero yung premiums hindi subject, exclusion yun. (2) Amounts received by insured as return of
premium, hindi namatay pero ibinalik yung pera kasi nag ano nag mature na yung term ng insurance, so
yung ibinalik na pera kasi hindi naman yun uh income, nag increase yung pera nung ano nakareceive
noon pero hindi naman yun form ng income kasi dating pera niya yun na ibinayad niya, ibinabalik lang
ulit sa kanya. So that is an exclusion from gross income. (3) Gifts, bequests and devises, pare pareho lang
to, gifts, bequest and devises, pare pareho lang yang gifts kaya lang pag sinabi mong bequests and
devices, uh personal property and real property. The value of property acquired by gift, bequest, devise,
or descent (pamana): Provided however, that income from such property, as well as gifts, bequest,
devise or descent of income from any property, shall be included in the. So itong ano ah value of the
property acquired by gifts, bequest, devise and descent, yung value mismo nyan ay hindi part ng gross
income, hindi taxable yan as income pero taxable yan as gift, bequest or devise or subject sya sa donors
tax ot inheritance tax pero for income taxation hindi sya kasama, exclusion sya. Income sya actually pero
not subject to income tax but subject to donors and estate tax, pero kung may income yung property na
yun, then income from that property will subject to income tax. Kunwari nagdonate ng real property, ng
hous- ng building, commercial building, dinonate, yung value ng building at saka ng land na dinonate eh
hindi subject yan sa income tax, subject yan sa donors tax pero dahil building yan, may rental jan, yung
rental na kinikita that will be subject to income tax. That will form part of the gross income, ang
excluded lang yung value ng property pero yung income ng property subject yan sa, part yan ng gross
incocme. So (4) Compensation for Injuries or Sickness- amounts received, through Accident or Health
Insurance or under Workmen’s Compensation Acts as compensation for personal injuries or sickness,
plus the amount of any damages received, whether by suit or agreement, on account of such injuries or
sickness. Sp compensation ang pangalan pero hindi sya part ng gross income dahil ang purpose ng
compensation na yan is to restate the person in his original productive state kumbaga after the injury
nawalan sya ng capacity to earn eh, babayaran sya ngayon para maka acquire sya ng capacity to earn,
ma-change nya yung buhay nya into a different productive life. Yung dating productive life nya nabago
because of the injury but he can acquire another productive life. So he is being compensated for the
injury to rehabilitate himself and be more productive, to be productive again in some other way. So
hindi taxable yun kasi, although binayaran, nagkapera yung tao pero nabawasan yung ano ih yung
productivity nung tao because of the injury ibinabalik lang sa kanya kung ano ang nawala sa kanya, kung
ano yung nasira sa kanya. So (5) income exempt under treaty- income of any kind, to the extent required
by any treaty obligation binding upon the government of the Philippines. So ito kailangan you know the
memorandum of agreement entered into the Philippines with other ano with other countries kasi ito
ang mga exempt transaction katulad meron tayong mga EPSA (Export Processing Zone) di ba may mga
ganyan ganyan PIZA, EPSA sa Bataan meron din nyan sa Cavite marami nyan dito ah nagkakaroon yan ng
treaty bago gawain yang mga EPSA EPSA na yan meron yang mga treaty oh pano ba itatax yang mga
magfoform ng business dito. So you have to look into that agreement or into that treaty, ano ba
nakapaloob dun sa treaty na yun, exempt ba yan sa income tax? Usually exempt yan sa income tax
because that is an investment um enticement para maencourage mo yung mga investors mag invest sa
Philippines, binibigyan yan ng mga tax privileges, meron yang mga ganyan so you have to read, di tayo
makakapagbigay ng general ano general categorization jan because individual uh each uh treaty has
peculiar terms and conditions so you have to inquire into the terms and conditions of the treaty para
malaman mo kung tax ano nga ba yan exempt nga ba yan. So (6) Retirement Benefits, Pensions,
Gratuities, so (a) retirement benefits received under Republic Act no. 7641 and those received by
officials and employees of private firms, whether individual or corporate, in accordance with a
reasonable private benefit plan maintained by the employer. So what’s reasonable? Will be determined
by the circumstances, okay the term reasonable private benefit plan means pension, gratuity, stock
bonus, or profit sharing plan maintained by the employerfor the benefit of some or all of his officials or
employees, wherein contributions are made by such employer for the officials or employees, or both for
the purpose of distuingishing to such officials and employees the earnings and principal of the fund thus
accumulated, and wherein it is provided in said plan that no time shall any part of the corpus or income
of the fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said
offcials and employees. So nagset up ng benefit, retirement benefit plan yung business para sa
employees and officials, so lahat ng activities nun para lang sa benefits ng employees and official so that
is the reasonable pero kung mag eengage in some other activities yung ano yung plan, yung purpose ng
plan edi hindi na yung reasonable kasi kailangan for the exclusive benefit of the officials and employees.
So (6) retirement benefits, pension, gratuities: Provided, the retiring official or employee has been in the
service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the
same time, yung kanina what is a reasonable plan, retirement plan ngayon ito naman pano makako-
kung makatanggap yung official or employee ng benefit kalian yan non-taxable or excluded from the
gross income, so when the official has been in the service of the same employer for at least ten (10)
years tapos yung retiring employee or official is not less than fifty (50) years old and the benefits granted
under this pension plan shall be availed of by an official or employee only once. So pano ba yan? Para ka
maka- masabing yung income um yung benefit na nakuha mo from the pension plan is non-taxable or
exclusion from gross income, kailangan nagserve ka dun sa employer na yun for not less than ten years
and at the time of retirement ay not younger than fifty years old ka now kailangan once mo lang yun,
once mo lang yun na avail yung exemption, yung exemption once mo lang naavail, katulad kunwari, ako I
work with BIR for ten years, kunwari umalis ng BIR at the age of fifty at nakakolekta ako ng retirement
benefits ko, so yung retirement benefits ko na yun hindi yun subject sa uh hindi yun part ng gross
income although nakakuha ako ng benefits sa BIR hindi yun taxable. What if nakakuha ako ng retirement
benefits ko pero less than fifty years old ako, subject yun sa uh part yun ng aking gross income kasi hindi
sya exclusion. What if less than ten years yung aking employment don and yet nakareceive ako ng
retirement benefits ko although above fifty years old na ko then part parin yun ng gross income kasi
hindi ten years yung na serve ko dun. Clear na ba yun? Kailangan more than ten years or at least ten
years sa same employer at not less than fifty years old. Eh pano kunwari exempt ako sa BIR 10 years ako
nagtrabaho sa BIR at 50 years old ako nagretire dun nakakuha ako ng benefits now nagtrabaho ako sa
PUP at the age of 65 makakaclaim ulit ako ng benefits ko, ito bang benefits na pension benefits ko sa
PUP ay magiging part ng gross income ko? Yes, kasi naexempt na ko nun sa BIR eh so kahit na less than
uh at least ten years yung service ko sa PUP and more than 50 years old na ako part parin yun ng taxable
income ko or ng gross income ko kasi nakaclaim na ko ng una kong retirement benefit na exempt, yun
ang ibig sabihin nyan, nakukuha ba? Walang reaksyon? Nakukuha pa ba? Nasa exclusion palang tayo ha
so hanggang today siguro exclusions muna tayo tandaan nyo lang yung unang pinakita ko sa inyo na
detailed formula, ito yung exclusion bago tayo pumunta sa gross income. Yung una kong diniscuss sa
inyo yung gross income pero bago tayo pumunta sa gross income dapat alam nyo pano makarating sa
gross income. So all income from whatever source, whether legal or illegal minus exclusion, tong
exclusion kailangan memorized kasi ito yung imaminus nyo dun eh para maka arrive kayo sa tamang
gross income kung isasama nyo itong exclusion magkakamali kayo ng computation, Okay (b) Any
amount received by an official or employee or by his heirs from the employer as a consequence of
separation of such official or employee from the service of the employerbecause of ddeath, sickness or
other physical disability or for any cause beyond the control of the said official or employee, exclusion
parin. (c) Provisions of any existing law to the contrary notwithstanding, social security benefits,
retirement gratuities, pensions and other similar benefits received by resident or nonresident citizens of
the Philippines or aliens who come to reside permanently in the Philippines from foreign government
agencies and other institutions, private or pubic. Who come to reside permanently in the Philippines
from foreign government agencies and other institutions, social security benefits, retirement benefits
gratuities, pensionand other similar benefits received by resident or nonresident of the Philippines pero
itong aliens who come to reside in the Philippines from other foreign government agencies or other
institutions basta pension and retirement benefits. Ito yung sa state uh yung veterans, pension ng mga
veterans exempt din, okay. Yung SSS retirement benefits exclusion parin hindi exemption exclusion
okay. GSIS benefits excluded sa gross income. (a) Income derived from Foreign Government- income
derived from investments in the Philippines in loans , stocks, bonds or other domestic securities on
deposit in the Philippines by foreign government so yung mga foreign governments yung tax payer.
Financing institutions owned, controlled and international or regional itong yung mga corporation
naman ang mga ito eh exclusion, excluded yan sa mga income nila. (b) Income derived from the
government or its political subdivisions, so yung mga income ng government agencies. Ito (c) Prizes and
awards, made primarily in recognition of religious, charitable ito yung mga purpose dapat ah, charitable,
scientific, educational, artistic, literary, or civic achievement yan yang mga yan awards and prizes and
awards na yan exclusion yan from gross income pero may requirement eh, kailangan magconqour yung
mga elements na to or tong requirements na to. (i) The recipient was selected without any action on his
part to enter the contest, wala syang ginawa tatanggap lang sya ng award. (ii) The Recipient is not
required to render substantial future services as a condition, no future services wala talaga syang
ginawa, present, past, present and future kaya lang sya tina- uh nakakuha ng award so pano yun?
Religious, charitable, scientific, educational, artistic, literary yung mga novel prize winner, hindi sila
compelled gumawa nung mga ginagawa nila, they were not required to do those things but they did
those things and they’re and for that nagkaroon sila ng recognition. Payment of award or prize will not
be part of the gross income, kunwari nagkaroon ng ulirang, search for ulirang empleyado award, search
for ulirang empleyado at meron kang cash prize dun, yan taxable bay yun? Part ba yun ng ano, parang
hindi sya religious tsaka charitable, scientific, educational, artistic hindi. Taxable yun kasi hindi ito
kasama sa mga purposes eh o kailangan yun ang purpose ng activity mo eh. Kung sumali ka sa miss
universe nanalo ka Pia Wurtzbach, taxable ba yung income yung prize ni Pia as Miss Universe? Yes,
taxable yun kasi they performed activities prior to the award. Sumali ka sa Pinoy Big Brother, may prize
dun hindi naman yun kasama ditto sa mga activities na to so taxable yun. Pero yung kunwari, meron
kang nagawang kabutihan, katulad jan si ano Rosa Rosal, very philanthrophic, nag heheld sya ng red
cross, binigyan siya ng award and that ward may kasamang cash prize, taxable ab yun? hindi kasama sya
sa purpose eh classification eh. All prize, ito naman sa sports, all prizes and awards granted to athletes in
local and international sports competitions and tournaments whether held in the Philippines or abroad
and sanctioned by their national sports associations. So kailangan sanctioned by national sports
associations. So yung laban ni Pacquiao taxable yun kasi wala naman tayong, commercial ano naman
yun, mga commercial fights naman yun eh. Di katulad ng mga seagames, yung mga Olympic games yan
mga tax exmept, exclusion from gross income yan kasi Philippines yung nirerepresent nila hindi
commercial ano business. 13th month pay another benefits, 13 th month pay natin dati 82,000 ngayon
90,000 na to di ba, so this will be 90,000 now. Yung uh gross benefit uh 13 th month pay and other
benefits not exceeding 90,000 will be part of the exclusion from gross income. Okay mga benefits
received by employees under certain Republic Acts o benefits received from medicare SSS GSIS. Gains
from the sale of bonds, debentures yung mga short term investments sa government bonds and
debentures. Yan Mutual gains on mutual funds exempt excluded, Oh ito yung Fringe benefits not
taxable, meron tayong tinatawag na fringe benefit na de minimis ito yung benefits na small value hindi
kasama sa computation ng gross income yan pero meron uh fringe benefit na binibigay sa managerial
employees, yung fringe benefit na binibigay sa managerial employees taxable yun pero hindi part ng
compensation income nya it is stocks in different manner pero yun de minimis benefit hindi sya kasama
talaga sa computation ng gross income kung within the threshold sya kasi may threshold ang mga de
minimis benefits kapag ang mga de minimis benefits within the threshold hindi sya part ng gross income
pero um kapag nag exceed sya sa gross inc- uh sa threshold magiging part sya ng gross income.
Remember that, will go to the details of that in the computation of compensation of income pero for
now ito yung mga exclusions eh, so tatandaan nyo na na exclusions sya within the threshold pero when
more than the threshold hindi sya uh magiging part na sya ng gross income pero icconsider mo parin
yung 90% uh 90,000 exclusion ganito ididiscuss na natin muna, compensation earner meron syang De
minimis benefits, Nay magsaing na kayo ah, oo magsasaing na kami, joke lang ay sorry po. Ang employee
meron syang gross compensation income nasabi na natin yang mga exclusions di ba, after the exclusion
mer-, ito yung mga exclusion ngayon pero ito qualified exclusion kasi nagfoform part sila ng gross
income eh although exclusions sila upto a certain point nagiging part parin sila ng um gross income, ang
De minimis benefits within the threshold exclusion from gross income pag nagexceed sya sa threshold
iaadd mo sya sa 90,000 na exclusion from gross income na other benefits kspsg nsg exceed p yung,
kapag lumampas ng 90,000 yung other benefits together with De minimin benefit yung excess nung
magiging part ng gross income. So iqualify natin kasi ito yung masalimuot na exclusion from gross
income, exclusion sila if within the limits so may limit individual individual meron limit yung De minimis
benefits kapag individually nag exceed sila sa threshold na yun yung excess nay un iadd sa ating benefit
which should not exceed 90,000 pag nagexceed sa 90, 000 yung other benefits yung excess magiging
part ng gross income so tandaan nyo yun. Okay ito na yung mga de minimis benefits (a.) Moneteized
unused vacation leave credits of employees not exceeding ten days, remind nyo ko pag time na ha so
I’m not, hanggang ano ba tayong oras? 10:30 so we still have 12 mins tapusin nalang natin tong De
minimis benefits. Okay next meeting nalang tayo mag de minimis benefits maingay na, okay class okay
na ba sa inyo, reaction? Mag sstart tayo next meeting sa De minimis. Okay so let’s call it a day, medyo
marami na ang nasa utak nyo baka hindi nyo na rin maabsorb uh last item today is Deminimis benefit
remind nyo lang ako ha okay ? Keep safe God bless sige sge teka muna sagutin ko muna tong dalawang
tanong bago tayo mag end. Pagdating po sa pagdetermine ng classification resident and nonresident
citizen need po ba na tuloy tuloy ang 100 no aggregate lang yun kumbaga kunwari dumating sya January
tapos umalis sya February so pwede na yun basta aggregate yung total stay nya sa Philippines, okay ?
Babye na, end ko na meeting o nasagot ko na yung isa ha yung aggregate na 180.