Nation Taxation

 NIRC
 Kinds of taxes
o Income tax
o VAT
o Donors tax
o Percentage tax
o Excise tax
o Documentary stamp tax
o Estate Tax
 Classification of taxes
o Business tax- Vat and Percentage tax
o Transfer Tax- Estate and Donors tax
o Manufacture and production and importation tax- Excise tax
o Tax on execution of Documents- Documentary stamp tax
 Remedies:
o Government; and
o Taxpayer
 Collection and Procedure
 In case of doubt whether to impose or not: do not impose tax on the taxpayer bcus it is a burden
 In case of doubt re tax exemption: strictly construed on the taxpayer

 Compensation Income Earner- individual earning compensation only (Er-E relationship,sweldohan)

 Self-employed professional- Individual exercising your profession (hindi Sweldohan)
 Mixed Income Earner - Compensation earner+ trade/ business or exercise of profession
 Source of Income of Corp- engaging trade or business (corporate taxpayer)
 Depends on the nature of the transaction you have to determine what kind of taxes imposable
 Income- expense cycle
 Taxable period- taxes are computed based on taxable period of 12 months’ either
o Calendar yr- beginning from Jan 1 to dec31 (Individual or Corporation
o Fiscal ye- 12 months beginning from any first day of any month ad ending 12 months (only corporation)
 Income
o Gross receipts- selling services
o Gross sales- selling goods
o Gross Income – after the cost of sales
o Net income – after the allowable deductions
 Withholding Tax – taxed at source. One way of advance payment of taxes. The source of income is under
obligation to withhold taxes and remit it to BIR. (income net of tax – already withhold taxes)
o Creditable- Can be subject to any kind of taxes. Withheld at source and remit also to BIR
o Final- withholding at source and remitting to BIR but the income withheld cannot be any more taxed by
any other kind of taxes
 Gross Income Tax – No authorize deduction.
 8% tax- applicable only to self-employed professional or self-employed individual, provided that your gross
receipts/ sales do not exceed 3M

1. Individual Compensation Income Earner – Net Income Tax (graduated tax of 0-35%)
 2. Individual SEP/ SEI- NIT (0-35%) or 8% (provided does gross receipts or gross sales does not exceed 3M in re to
VAT threshold). The 8% applies to in excess of 250K
3. Individual who are Mixed income earners – compensation income is subject to NIT, income in trade/ business/
profession is subject to NIT or 8% provided does not exceed 3M. The 8% applies to all, no in excess

Kinds of Individual Taxpayer

1. RC- citizen of ph who resides in ph
2. NRC (specific)
a. Those who leave the ph and who prove to the satisfaction of the CIR their physical presence abroad with
intention of residing therein permanently
b. Those who leave ph for employment and whose contracts requires them to be physically present abroad
c. Immigrants
d. Seaman
 Former NRC and during the 12-month period you decided to go back to ph permanently, you are classified
differently during the year- you are classified as RC
 But if you are a RC and you went to USA as an immigrant during the 12-month period (eg: august 21) you are still
classified as RC until Dec 31. You are considered NRC beginning Jan 1, 2022
3. RA
 Not a citizen of Ph but residing in Ph
4. NRAETB (indicators, any of the ff)
 Alien who stays in Ph for an aggregate period of more than 180 days (181 days)
 Principle of habitually, alien who regularly enters into commercial transactions here in ph regardless of
period of time
 Alien who puts up a branch of a business here in Ph
 Appointment of agents,
 Hiring employees
5. NRANETB

 Dual citizenship is not for purposes/ does not apply to tax code.
Kinds of Corporate Taxpayer
1. DC – corp incorporated in accordance with Ph laws, regardless of foreign equity
2. RFC- Incorporated in accordance with foreign laws
3. NRFC

Dividends
 Issued by DC- income within, whoever the recipient taxpayer is taxable
 Issued by FC- income within unless 3 yrs prior to the declaration of the dividends the income of such foreign
corp within the ph is less than 50% of its total income, a portion of its 100k shall be treated as within ph sources
in proportion to income derived in ph (GR: entire 100K is taxable, xpn: unless 3 yrs prior to the declaration of the
dividends the income of such foreign corp within the ph is less than 50% of its total income, a portion of its 100k
shall be treated within in proportion)
 All dividends issued by foreign corp is subject to net income tax

 GR: All items of income are taxable

 XPN:
o There is specific law providing for tax exemption and
o income is one of the item of exclusions of income
 Default rate is NIRC/ graduated tax (if you don’t choose 8% or you do not choose any of the rate)
  If you are individual taxpayer self-employed or SEI whose gross sales/ receipts does not exceed 3M in a year,
taxpayer may choose the rate of 8% on the gross receipts or gross sales, provided you choose the 8% at the start
of the year which is irrevocable for that year.

Interest on Bank Deposits

 In peso account- FWT is 20%

 In foreign currency account- FWT is 15%
o However, in case of long term/ time deposit which we do not exterminate within a period of 5% the
interest is exempt from income tax
o If preminate on the 4 yrs- tax is 5%
o If preterminate on the 3yrs – tax is 12%
o If preterminate after 3 yr period- tax rate at 20%

Royalties
 Rate is 20%
 Except for literary which is at 10%

Prizes and Winnings (Game of Chance)

 FWT at the rate of 20%
o PCSO and Lotto Winnings 10K and bellow- no tax
o PCSO and Lotto Winnings more than 10K- 20%
o Other prizes and winnings (raffle) 10k and below- subject to net income tax
o Other prizes and winnings (raffle) more than 10k- subject to fwt 20% rate
 If you win in a foreign country tax is NIT of 8%

 FMV/ assessed value of real property can be seen in the tax declaration
 Power of BIR to declare zonal valuation of real proper
 FMV/ zonal value of land and house is different

Involuntary Sales (to govt/ expropriation)

 You choose 6% rate or Net Income Tax- preferred bcus you gain no income
 Foreclosure of mortgage: CGT of 6% attached and paid at the point of consolidation in favor of the highest
bidder paid by him (no redemption from the mortgagor)

Exemption from CGIT of 6% (residence)

 Applicable to all kinds of taxpayers (RC, RA, NRAETB, NRANETB)
 Since aliens can acquire residence in ph by way of succession, condo corp, former rc (exclusive)

CORP Taxpayer
 NIT is fixed 30% (global)

Charitable Institutions, churches, convents, parsonages, nonprofit cemeteries, mosques

 Exempt from RPT provided ADE use for their purpose
 Case sample: home for the agent exempt from RPT ADE use.
o Income (out of selling xmas cards)- not taxable because income as such of charitable institution
o Donated Income to charitable institutions etc – not taxable income. No donor’s/ estate tax provided that
not more than 30% of the gift is used for admin purposes
  The donation is not deductible from the gross income of compensation income earner who
donated
 The donation is deductible from the gross income of SEP/SEI/ Mixed Income earner- allowed to
claim deduction up to 10% prior to donation, 5% if corporation
o Income from rent tax from business- taxable at rate of 30% NIT
o Income from bank deposit – taxable subject to FWY of 20%
o Even if these incomes be use for charitable purpose, the income is not exempt from IT

Nonstock, nonprofit educational institution’

 Exempt from RPT, Income tax, tariff and customs ADE use for educational purpose
o If land is leased to commercial purpose subject to RPT subject to 30% NIT bcus not ADE use
o Income derived from tuition fees, no income tax provided ADE use, rental income is exempt provided
ADE used for educational use (“as such other purpose”)
o Interest on bank deposits provided ADE used, exempt from income tax
o Donated Income to the institutions etc – not taxable income. No donor’s/ estate tax provided that not
more than 30% of the gift is used for admin purposes
 The donation is not deductible from the gross income of compensation income earner who
donated
 The donation is deductible from the gross income of SEP/SEI/ Mixed Income earner- allowed to
claim deduction up to 10% prior to donation, 5% if corporation
o

Proprietary educational institutions/ proprietary hospitals

 Exempt from rpt if ADE use under LGC
 If land is leased to commercial purpose subject to RPT basis id LGC
 Income (tuition fees/ related trade activities used for ADE exempt
 Income from unrelated activities (rentals) does not exceed 50% of its total income then preferential rate of 10%
shall be applied. If exceeds 50% then subject to NIT of 30%

Govt educational institutions

 No rpt if beneficial use pertains to govt. Basis: LGC
 Subject to RPT if the beneficial use pertains to a non-exempt entity (eg: lease to taxable person)
 Tuition fee income- exempt from income tax “as such”
 Rental Income- taxable under NIT rate of 30%
 Bank deposit Income- taxable of FWT of 10%
o If rental and bank deposit income were used for educational purpose, they will not be exempted from
tax
 Income from Donors- not taxable income because items of exclusion from gross income.
o Donation is exempt from donor’s and estate tax in full. (donation to gov’t or any of its instrumentalities
and agencies are exempt from taxes)
o Allowed as deduction from gross income of donor? – if compensation earner, no. If donor is SEP/SEI?
Mixed/ Corp allowed as deductible in full provided declared as priority project of the gov’t. If not
declared priority project by the govt then apply the 5-10% rate)

Gov’t
 Income of govt agencies/ for govt functions not subject to tax
 Income of govt agencies from the exercise of proprietary functions shall be subject to 30% NIT
 Real property owned by govt ise exempt from RPT
 o Except beneficial use is leased to taxable person, subject to tax
 Gifts in favor of govt: not taxable bcus exclusion from gross income
o Donation is exempt from donor’s and estate tax in full. (donation to gov’t or any of its instrumentalities
and agencies are exempt from taxes)
o Allowed as deduction from gross income of donor? – if compensation earner, no. If donor is SEP/SEI?
Mixed/ Corp allowed as deductible in full provided declared as priority project of the gov’t. If not
declared priority project by the govt then apply the 5-10% rate)

GOCC
 GR: subject to tax
 Xpn: SSS, PhilHealth, Pag-ibig

 GR: All types of Income are subject to tax

 XPN: Specifically exempted and excluded by law from computation of gross income

OSD
 Gross receipt/ sales – cost of sales (puhonan)= gross income
 You get the 40% OSD from the gross income

Itemized Deductions (ID)

 Gross receipt/ sales – cost of sales= gross income – ID= Taxable income (20% for Individual to 30% for corp)
 There must be a receipt showing actually incurred expense
 All business expenses whether legal or illegal (salary of your accountant in shabu business) is allowed as business
expenses
 Tax benefit rule applies to
o Casualty loss recovered
o Bad debts recovered
o Taxes recovered

 You cannot claim input/ output VAT if you are not BIR registered
 If your gross sales/ receipts do not exceed 3M threshold VAT registration is not required

Donor’s Tax
 Subject matter of donation
o Real property
o Tangible personal property
o Intangible personal property
 Kinds of Donors
o RC
o NRC
o RA
o NRA
 Taxability is dependent on the location of the property whether the property is within or without
 Only properties of NRA in the Ph shall be subject to donor’s tax
 All properties of RC, NRC, RA within and without Ph shall be subjected to donor’s tax
 GR: situs of taxability of intangible personal property follows the nationality of the donor (shares of stocks). XPN:
o Sec104 NIRC
o Reciprocity rule – in order to reduce the impact of double taxation in a broad sense
  If you sell at loss a property in your ordinary course of business – no donor’s tax
 If you sell at loss a personal capital property- donor’s tax will be imposed (considered as a gift)

REMEDIES under NIRC

Filing of Returns
 All national taxes are self –assessed taxes by taxpayer covered by a return and paid as you filed, as compared to
local taxes are automatic assessment
 Due of a return for Individual compensation earner is April 15.
o Substituted filing applies only to a purely compensation earner who only have one employer during the
yr, it is the employer who shall files the return for and in behalf as a substitute
o If you have several employer during the year, your deadline to file a return is also April 15
o If you have several employers for a year, substituted filing for an employer to file a return is Feb 28
 Return of an SEP/SEI you file for a quarterly return on May 15, Aug15, Nov15 and the final return on or before
April 15 of the following year (Calendar yr)
 VAT returns are filed quarterly
 Donors tax return are filed 30 days from gifts
 Estate tax are filed 1 yr from death
 Filed a late return: 25% penalty + interest of double the legal interest (12%) per annum computed in a daily basis
of delay.
o In case of fraud: 50% surcharge+ interest of 12% per annum
 Amendment of a Return:
o Can you amend the return you filed? Yes. Original+ amended return.
o When allowed to amend: within 3 yrs from the date of the filing original return provided that no notice
of investigation is received by the taxpayer.
 If you did not file a return: BIR have the power to issue a return for you and in your behalf
 Return filed in a wrong venue: as if you filed no return at all and paid no tax
 BIR finds something wrong on the return you filed: (Admin process to Judicial process)
o BIR issues LOA or authority to investigate
o Issue PAN
o Issue FAN
o Taxpayer could protest the FAN
o BIR will either grant, deny, or sits on it/ inaction for 180 days on the protest of taxpayer
o Protest not complete: The protesting taxpayer may submit supporting/ lacking documents to the BIR.
The 180 days reckoned from the date of receipt of the documents of the BIR and not from the date of
submission
o If protest is denied- got to/ appeal to CTA division within 30 days from receipt of the decision of BIR
o If partly grant/ denied- can go to CTA division within 30 days from decision of BIR
o Inaction of BIR of 180- may go to CTA division within 30 days after the lapse of 180 days or wait for the
decision of BIR if 30 days already lapsed
o Judicial Process: CTA div
o MR/ NT of the decision of CTA Div is mandatory in order to go to CTA en banc
 If you failed to file an MR/NT, decision of CTA Div will become final since CTA en banc will deny
your protest
 BIR can still collect taxes notwithstanding the protest case. No injunction on taxes re life blood theory

Collection of taxes:
o Admin
 Warrant of Levy
  Warrant of Distraint
 Compromise
 Forfeiture
 Garnishment
o Judicial
 Civil
 Criminal case
 Does not result in tax deficiency- jurisdiction of regular courts is based on the prescribed
penalty. CTA does not exercise exclusive original jurisdiction without tax deficiency
 Results in tax deficiency – Prosec shall file the information in a court who have the
jurisdiction depending on the jurisdictional amount of the regular courts based on tax
deficiency. CTA may exercise exclusive and original jurisdiction if the deficiency is more
than 1M and above exclusive of interest etc
Periods of Collection
o 5 yrs from receipt of the FAN
o 10 yrs from the discover of fraudulent or non-filing of return (BIR here may directly collect the taxes
notwithstanding non-issuance of FAN)
o Those period covered by the waiver/ compromise

Grounds for refund

 Illegally assessed
 Illegally collected
 Erroneously assessed
 Erroneously collected

2 stages of refund
 Admin- taxpayer file a claim within 2 yrs from payment
 Judicial- file a claim within 2 yrs from payment

 The BIR must decide you claim of refund within 90 days from filing
 If BIR denied: files a judicial claim before CTA Div within 30 days from decision, files MR, got to CTA en banc
within 15 days and go to SC within 15 days
 MR is not requirement in CTA en banc to SC but you can still file an MR if you want bcus ROC is suppletory to the
tax code

TAX REMEDIES

ASSESMENTS OF TAXES
LOCAL TAXATION
 LGC
 Ordinary local taxes indicated in LGC
 Ordinary local taxes passed by Local Sanggunian – not in the code but authorized by the Code to be levied
 Real Property tax
 Remedies
o LGU
o Taxpayer
 Collection and proceeding