CLASSIFICATION OF INCOME INCOME TAX BUSINESS TAX OTHERS/NOTES:

A. Compensation Normal Tax - Subject to exemptions

- Fringe benefits Tax are Final Tax
B. Business
 Profession/Service Normal Tax VAT or OPT - Excise tax if nonessential
 Sale of Goods (ordinary assets) Normal Tax VAT or OPT - Excise tax if nonessential
- Except those Exempt from
Business Tax
C. Passive Income Normal or Final Tax
D. Capital Gains
 Sale of capital assets
 Real properties and securities Capital Gains Tax
 Others and RP outside PH Normal Tax
 Securities Trades in SEC OPT
GENERAL RULES ON TAXES:

SPECIFICATIONS:

 INCOME TAX
1. Individual
2. Corporation
  BUSINESS AND TRANSFER TAXES
A. Imposition of Tax based on Nature of Transaction

TRANSFER GAIN DOCUMENTATION/PROCESSING

MODE OF TRANSFER:
BUSINESS:
 VAT VAT (w/ ET if not essential) Income Tax Doc Stamp Tax
 Non VAT OPT (w/ ET if not essential) Income tax Doc Stamp Tax
CASUAL:
 Onerous Capital Gains Tax or Income Tax Doc Stamp Tax
 Inheritance Estate Tax No Gain Doc Stamp Tax
 Donation Donor’s Tax No Gain Doc Stamp Tax
OTHERS:
 Importation Subject to Business Tax (VAT/OPT/ET) regardless of the nature of the transaction. (Whether made in the
ordinary course of business or not)
Subject to Income Tax
Subject to Excise Tax if nonessential goods are obtained.

B. VAT, OPT, ET

VAT OPT ET
Sale of Goods or Services
1. In General /
2. Exempt from VAT /
3. Exempt from Business Taxes
Sale of Sin products and Nonessential Goods / /
or Services / /

**This is applicable if you are running a single type of business or just pertaining to a single transaction.
***In case of Mixed Transactions or two or more businesses, the taxpayer may pay both VAT and OPT at the same time. Provided, that it
should be pertaining to different transactions. This is in the perspective of the Taxpayer.
 ESTATE TAX:
GROSS ESTATE
1. Property owned by the decedent
2. Decedent’s Interest
 Dividends declared before his death,
received after death
 Partnership profit which have accrued
before his death
 Usufructuary and rights
3. Properties not physically in the estate
 Transfer in contemplation of death
 Transfers with retention or reservation of
certain rights
 Revocable Transfers
 Transfers under general power of
appointment
 Transfers for insufficient consideration
TREATMENT NOTES
Inclusion in the GE - In case of Intangible properties of NRAs, if
its situs is within the Philippines, the
inclusion of the same is subject to the
reciprocity clause.
- With reciprocity – excluded
- Without reciprocity – included
Inclusion in the GE
Inclusion in the GE - Have already been transferred during the
lifetime of the decedent but is still subject
to estate tax
Inclusion in the GE
Inclusion in the GE
Inclusion in the GE
Inclusion in the GE - Applicable to the donor and donee of the
power when they die
Inclusion in the GE - When the consideration received is less
than the FMV of the property at the time of
sale/transfer; hence, the excess of the FMV
at the time of death over the consideration
received is the amount to be included in
the GE
- But even if the consideration received is
lesser than the FMV at the time of death,

4. Claims against insolvent persons (accounts
receivable)
5. Proceeds of Life insurance
DEDUCTIONS
ORDINARY:
a) LITe
1. Losses
2. Indebtedness
3. Unpaid Taxes
4. Claims Against Insolvent Persons
(Accounts Receivable)
b) Transfer for Public Use
c) Vanishing Deductions (within 5 years only)
 Less than or 1 year = 100%
 Beyond 1 – 2 years = 80%
 Beyond 2 – 3 years = 60%
 Beyond 3 – 4 years = 40%
 Beyond 4 – 5 years = 20%
Inclusion in the GE
Inclusion in the GE
Inclusion in the GE
Deduction from the GE
Deduction from the GE
Deduction from the GE
Inclusion in the GE (whole)
Deduction from the GE
Inclusion in the GE
Deduction from the GE
Inclusion in the GE
Deduction from the GE
but the it was not lesser than the FMV at
the time of sale/transfer, then the same
must not be included.
- The incapacity of the debtor should be
proven but not necessarily done judicially.
- When the beneficiary of the insurance is
the EXECUTOR OR ADMINISTRATOR,
whether revocable or irrevocable, it is still
included in the GE of the decedent.
- When a 3rd party is the beneficiary, only
revocable transfers are included in the GE.
- When the problem is silent, the
presumption is REVOCABLE, hence,
included.
Formula for NRA:
GE Ph/GE world x Total LITe
- If silent, presumed that the property lost is
already included in the GE
- Only the uncollectible amount should be
deducted.
- Deductible only if not more than 30% of
the proceeds were used for administration
purposes
Formula:
Value to take (lower value)
Less; Mortgaged assumed and paid by the donee
Equals: Initial Basis
Initial basis/GE Ph x Lit + TPU
Equals: Final Basis
Final Basis x % based on the date from death to the
 date of receipt of the gift
SPECIAL:
a) Standard Deduction Deduction from the GE
d) Family Home Inclusion in the GE
Deduction from the GE
- For RESIDENTS only
e) Proceeds received by heirs under RA 4917 Inclusion in the GE
Deduction from the GE
- For RESIDENTS ONLY
NET SHARE OF THE SURVIVING SPOUSE Deduction from the GE
- 5,000,000 for Resident
- 500,000 for NRA
- Included in the GE but not deductible if
single
- The amount to be deducted should be the
FMV of the FH or 10,000,000 which ever is
LOWER. Should not exceed 10M.
- Deductible only if married or head of the
family
- If married, the basis of the limit is 50% of
the value of FH
- Requisites under RA 4917 must be present.
- If married only
- Net Conjugal Properties before Special
deductions/2