TAXATION

Taxation
◦ Taxation is the power of the state to assess and collect
taxes. These taxes are necessary to run the government.
◦ Inherent power of the sovereign, exercised through the
legislature, to impose burdens upon subjects and objects
within its jurisdiction for the purpose of raising revenues to
carry out the legitimate objects of government.
◦ Taxes are the enforced proportional contributions from
persons and property levied by the law-making body of
the State by virtue of its sovereignty for the support of the
government and all public needs.
Purpose of Taxation
1. To raise revenue - to gather funds for the operation of the
government.

2. To regulate - to regulate activities deemed inimical to public.

Example: “sin tax” for cigaretes and alcoholic drinks. ”vanity tax” for
beauty products and cosmetic surgery .

3. To protect - taxation is used to protect local industries.

BUREAU OF INTERNAL
REVENUE (BIR)
In the Philippines the BIR is mandated
by law to assess and collect all national
internal revenue taxes, fees, and
charges and to enforce all forfeitures,
penalties, and fines connected
therewith, including the execution of
judgements in all cases decided in its
favor by the Court of tax appeal sand
the ordinary courts.
 Direct and Indirect Taxes
◦ DIRECT TAXES- A direct tax is paid directly to the government by an individual or
organization. For example, a homeowner pays personal property taxes directly to the
government, and a family pays its own federal income taxes. Direct taxes cannot be
shared or passed onto other parties.

◦ INDIRECT TAXES- Indirect taxes are basically taxes that can be passed on to another
entity or individual. It is usually imposed on a manufacturer or supplier who then passes
on the tax to the consumer. The most common example of indirect tax is the excise tax
on cigarettes and alcohol. Value Added Tax (VAT) is also an example of an indirect tax.
Different Kinds of Taxes
in the Philippines
◦ Capital Gains Tax – is a tax imposed on the gains presumed to have
been realized by the seller from the sale, exchange, or other
disposition of capital assets located in the Philippines, including
pacto de retro sales and other forms of conditional sale.
◦ Documentary Stamp Tax – is a tax on documents, instruments, loan
agreements and papers evidencing the acceptance, assignment,
sale or transfer of an obligation, rights, or property incident thereto.
Examples of documentary stamp tax are those that are charged on
bank promissory notes, deed of sale, and deed of assignment on
transfer of shares of corporate stock ownership.
◦ Donor’s Tax – is a tax on a donation or gift, and is imposed on the
gratuitous transfer of property between two or more persons who
are living at the time of the transfer. Donor’s tax is based on a
graduated schedule of tax rate.
Different Kinds of Taxes in the Philippines
◦ Estate Tax – is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs
and beneficiaries at the time of death and on certain transfers which are made by law as equivalent to
testamentary disposition. Estate tax is also based on a graduated schedule of tax rate.
◦ Income Tax – is a tax on all yearly profits arising from property, profession, trades or offices or as a tax on
a person’s income, emoluments, profits and the like. Self-employed individuals and corporate taxpayers
pay quarterly income taxes from 1st quarter to 3rd quarter. And instead of filing quarterly income tax on
the fourth quarter, they file and pay their annual income tax return for the taxable year. Individual income
tax is based on graduated schedule of tax rate, while corporate income tax in based on a fixed rate
prescribe by the tax law or special law.
◦ Percentage Tax – is a business tax imposed on persons or entities who sell or lease goods, properties or
services in the course of trade or business whose gross annual sales or receipts do not exceed the amount
required to register as VAT-registered taxpayers. Percentage taxes are usually based on a fixed rate. They
are usually paid monthly by businesses or professionals. However, some special industries and
transactions pay percentage tax on a quarterly basis.
Different Kinds of Taxes in the Philippines
◦ Value Added Tax – is a business tax imposed and collected from the seller in the course of trade or
business on every sale of properties (real or personal) lease of goods or properties (real or personal) or
vendors of services. It is an indirect tax, thus, it can be passed on to the buyer, causing this to increase the
prices of most goods and services bought and paid by consumers. VAT returns are usually filed and paid
monthly and quarterly.
◦ Excise Tax – is a tax imposed on goods manufactured or produced in the Philippines for domestic sale
or consumption or any other disposition. It is also imposed on things that are imported.
◦ Withholding Tax on Compensation – is the tax withheld from individuals receiving purely
compensation income. This tax is what employers withheld in their employees’ compensation income and
remit to the government through the BIR or authorized accrediting agent.
◦ Expanded Withholding Tax – is a kind of withholding tax which is prescribed only for certain payors
and is creditable against the income tax due of the payee for the taxable quarter year. Examples of the
expanded withholding taxes are those that are withheld on rental income and professional income.
Different Kinds of Taxes in the Philippines
◦ Final Withholding Tax – is a kind of withholding tax which is prescribed only for certain payors and is
not creditable against the income tax due of the payee for the taxable year. Income Tax withheld
constitutes the full and final payment of the Income Tax due from the payee on the said income. An
example of final withholding tax is the tax withheld by banks on the interest income earned on bank
deposits.
◦ Withholding Tax on Government Money Payments – is the withholding tax withheld by government
offices and instrumentalities, including government-owned or -controlled corporations and local
government units, before making any payments to private individuals, corporations, partnerships and/or
associations.
 ◦ Tax on Transfer of Real Property
Ownership – tax imposed on the sale,
donation, barter, or on any other mode of
transferring ownership or title of real property.

Local Taxes ◦ Tax on Business of Printing and Publication

in the – tax on the business of persons engaged in
the printing and/or publication of books, cards,
Philippines posters, leaflets, handbills, certificates, receipts,
pamphlets, and others of similar nature.

◦ Franchise Tax – tax on businesses enjoying a

franchise, at the rate not exceeding fifty
percent (50%) of one percent (1%) of the gross
annual receipts for the preceding calendar
year based on the incoming receipt, or
realized, within its territorial jurisdiction.
 ◦ Tax on Sand, Gravel and Other Quarry
Resources – tax imposed on ordinary stones,
sand, gravel, earth, and other quarry resources,
as defined under the National Internal Revenue
Code, as amended, extracted from public
Local Taxes lands or from the beds of seas, lakes, rivers,
streams, creeks, and other public waters within

in the its territorial jurisdiction.

Philippines ◦ Professional Tax – an annual professional tax

on each person engaged in the exercise or
practice of his profession requiring
government examination.
◦ Amusement Tax – tax collected from the
proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia,
and other places of amusement.
 ◦ Annual Fixed Tax For Every Delivery Truck
Local Taxes or Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in,

in the Certain Products – an annual fixed tax for

every truck, van or any vehicle used by

Philippines
manufacturers, producers, wholesalers, dealers
or retailers in the delivery or distribution of
distilled spirits, fermented liquors, soft drinks,
cigars and cigarettes, and other products as
may be determined by the sangguniang
panlalawigan, to sales outlets, or consumers,
whether directly or indirectly, within the
province.
 Tax on Business – taxes imposed by cities,
municipalities on businesses before they will be
issued a business license or permit to start
operations based on the schedule of rates
prescribed by the local government code, as
amended. Take note that the rates may vary
among cities and municipalities. This is usually
Local Taxes what businesses pay to get their Business Mayor’s
Permit.

in the Fees for Sealing and Licensing of Weights and

Measures – fees for the sealing and licensing of
Philippines weights and measures at such reasonable rates as
shall be prescribed by the sangguniang bayan of
the municipality or city.

Fishery Rentals, Fees and Charges – rentals,

fees or charges imposed by the municipality/city
to grantees of fishery privileges in the
municipal/city waters, e.g., fishery privileges to
erect fish corrals, oysters, mussels or other
aquatic beds or bangus fry areas and others as
mentioned in the local government code, as
amended.
 Community Tax – tax levied by cities or
municipalities to every inhabitant of the
Philippines eighteen (18) years of age or over
who has been regularly employed on a wage
Local Taxes or salary basis for at least thirty (30)
consecutive working days during any calendar
in the year, or who is engaged in business or
occupation, or who owns real property with an
Philippines aggregate assessed value of One thousand
pesos (P1,000.00) or more, or who is required
by law to file an income tax return.
- Community tax is also imposed on every
corporation no matter how created or
organized, whether domestic or resident
foreign, engaged in or doing business in the
Philippines.
THANK YOU!
GROUP 6
MEMBERS:
ANTONIS, JENETH LEDESMA, PAMELO
AVILA, CRISTELLE NICOLE OPIZ, ALYSSA P.
BUGARING, MARIA CRISTINA SAMSON, CHARMAINE
CELADA, JOANNA MARIE TABARINO, RODA
JUGADO, RENELYN VILLANUEVA, MARIA ELIZABETH P.
LAMBAYONG, VIA