Principles and

Processes of Income
and Business
Taxation
OBJECTIVES
Define income and Business
taxation and, its principles and
process
Explain the distinction between
income & business taxation
Differentiate the kinds of
income and business taxation
 TAXATION
. It is the process which
our government, through
our lawmakers, raises
income to pay its
necessary expenses

3
PURPOSES OF TAXATION
These can be classified into primary and secondary purposes

The Primary Purpose of taxation is to provide the proper funding needed to run the
government. The money collected from taxes will finance the projects that will
promote the general welfare of our people.
Secondary purposes of taxation
 By Imposing high customs duties or taxes on imported
goods, local products made in the Philippines would
remain competitive.
 By Imposing progressive taxes, It will reduce inequalities
between the wealth and income of our people.
 By increasing taxes, The government may mitigate the
effect of an impending inflation.
 BASIC PRINCIPLE OF SOUND TAX
SYSTEM
Theoretical Justice Administrative Fiscal Adequacy
The tax burden should be
Feasibility The sources of revenue
proportionate to the Administrative feasibility must be sufficient to meet
taxpayer's ability to pay. means tax laws and government
regulations must be expenditures. and other
capable of being. public needs.
 THREE INHERENT POWERS OF THE
GOVERNMENT
Eminent Domain
 This is the power of the government to take private property, upon payment of just
compensation, to be used for public purposes.
Police Power
 This is the power of our government to make laws that will promote public health,
morals, safety and welfare of the people.
Taxation
 The power of government to collect taxes that will be used to finance the
different people needed by the people.
 The two biggest classification of
INCOME TAXATION income taxpayers are the:

. Individuals

. Corporation
 For income tax purposes,
individuals can be further classified
into four namely

Non-resident Resident Alien Non-resident

Resident Citizen citizen Alien
A person who is
A person who is A person who is a citizen of another A person who is
Filipino citizen and citizen of another foreign country but citizen of another
who lives a resides foreign country and resides here in the foreign country and
here in the does not also reside Philippines during the does not also reside
Philippines. here in the taxable year. in the Philippines.
Philippines.

They can be further classified as one who is either:

Engaged in trade or business(NRA-ETB)
Not engaged in trade or business(NRA-NETB)
 KINDS OF INCOME
Compensation Income • This is the income being received by employees
working for different companies. This is usually in the
form of salaries, bonuses and allowances.

Business or Professional • This is the income generated by entrepreneurs (business)

or by different professionals like lawyers, doctors and
Income accountant (professional income). They do not work as
employees of other people.

Passive Income • These are income generated by different investments

made by the individual.
PERSONAL EXEMPTION
These are amounts that can be deducted from certain individuals gross income
before it will be subjected to the income tax table it can be classified into basic
personal exemptions and additional exemptions for dependent children.

Basic Personal Exemptions

All of kinds of individual, except those classified as non- resident alien not
engaged in trade or business, allowed a basic exemption of P50,000 a year.
This is applicable to qualified individuals, whether single, married or
widow/widower.
 The amount of allowable personal
exemptions for NRA-ETB Iis the lower
between the amount allowed under
Philippine tax laws (P50,000) and the
allowable personal exemption being
given by such NRA in such Foreign
Country.
QUALIFICATIONS FOR DEPENDENTS
The Following are the qualification before a child may be considered a
dependent for tax purposes:

 Must be a legitimate, illegitimate or legally adopted child of the

taxpayer.
 Must be Chiefly Dependent upon Taxpayer and still living with them.
 Must not be more than 21 years old, unmarried and is not gainfully
employed.
 Though more than 21 years old, is incapable of self support because of
mental or physical defect.
 PRESENTED BY:
RONA MAE DORDAS
CHERRIE CORONEL MOLINA
MARK ANGELO MOROTA
SEATWORK:
1. IT IS THE PROCESS WHICH OUR GOVERNMENT, THROUGH OUR LAWMAKERS, RAI SES INCOME TO PAY ITS
NECESSARY EXPENSES.
2-5. GI VE THE BASIC PRI NCI PLE OF SOUND TAX SYSTEM
6. THIS I S THE POWER OF GOVERNMENT TO COLLECT TAXES THAT WILL BE USED TO FINANCE THE
DIFFERENT PEOPLE NEEDED BY THE PEOPLE.
7. THE POWER OF GOVERNMENT TO COLLECT TAXES THAT WI LL BE USED TO FI NANCE THE DI FFERENT
PEOPLE NEEDED BY THE PEOPLE.
8. THIS I S THE POWER OF THE GOVERNMENT TO TAKE PRI VATE PROPERTY, UPON PAYMENT OF JUST
COMPENSATION, TO BE USED FOR PUBLIC PURPOSES
9-10. THE TWO BIGGEST CLASSIFICATION OF INCOME TAXPAYERS
11-13. GIVE THE THREE KINDS OF I NCOME
14-15. GIVE AT LEAST TWO QUALI FI CATION FOR DEPENDENTS