1. Taxation is defined as a state power to enforce proportional contribution from subjects for public purposes. It is a legislative process of levying taxes and a mode of distributing government costs.
2. There are two main theories of allocating taxation - the benefit received theory and the ability to pay theory. The ability to pay theory argues those with more income should pay more in taxes.
3. Taxes are essential and indispensable for continued government operation. They are the "lifeblood" that allows governments to provide services to citizens.
1. Taxation is defined as a state power to enforce proportional contribution from subjects for public purposes. It is a legislative process of levying taxes and a mode of distributing government costs.
2. There are two main theories of allocating taxation - the benefit received theory and the ability to pay theory. The ability to pay theory argues those with more income should pay more in taxes.
3. Taxes are essential and indispensable for continued government operation. They are the "lifeblood" that allows governments to provide services to citizens.
1. Taxation is defined as a state power to enforce proportional contribution from subjects for public purposes. It is a legislative process of levying taxes and a mode of distributing government costs.
2. There are two main theories of allocating taxation - the benefit received theory and the ability to pay theory. The ability to pay theory argues those with more income should pay more in taxes.
3. Taxes are essential and indispensable for continued government operation. They are the "lifeblood" that allows governments to provide services to citizens.
TAXATION Simply comfort of living in a civilized and
peaceful society which is maintained by
Defined as a State power, a legislative the government process, and a mode of government Taxpayers cannot avoid payment of cost distribution. taxes under the defense of absence of AS A STATE POWER benefit received Direct receipt or actual availment of Taxation is an inherent power of the government services is not a state to enforce a proportional precondition to taxation contribution from its subject for public purpose Automatic THEORIES OF ALLOCATION Constitution not needed 1. Benefit received theory AS A PROCESS a. The more benefit one receives Taxation is a process of levying taxes by from the government, the more the legislature of the state to enforce taxes he should pay. (VAT) proportional contribution from its subject 2. Ability to pay theory for public purpose a. Taxpayers should be required to Levying-pagpapataw contribute based on their relative capacity to sacrifice for the AS A MODE OF COST DISTRIBUTION support of the government Taxation is a mode by which the state (Income Tax) allocates its costs or burden to its b. Those who have more should be subjects who are benefited by its taxed more even if they benefit spending less Within its jurisdiction only c. Those who have less shall contribute less even if they receive more of the benefits THEORY OF TAXATION ASPECTS OF THE ABILITY TO PAY THEORY Government’s necessity for funding Vertical Equity Every government provides public o The extent of one’s ability to pay services including defense, public order is directly proportional to the and safety, health, education, and social level of his tax base protection among others o More income = more tax System of government is indispensable o Gross concept to every society Horizontal Equity Government cannot exist without a o Requires consideration of the system of funding particular circumstance of the taxpayer o Less expense = more tax BASIS OF TAXATION o Net concept Mutuality support between the people and the government Government provides benefits to the THE LIFEBLOOD DOCTRINE people through public services Taxes are essential and indispensable People provide the funds that finance to the continued substance of the the government (taxes) government Without taxes, government would be paralyzed for the lack of motive power to RECEIPT OF BENEFITS IS PRESUMED activate or operate it The receipt of benefits by the people is Upon taxations depends the conclusively presumed government’s ability to serve people for Every citizen or resident of the state whose benefit taxes are collected directly or indirectly benefits from public IMPLICATION OF THE LIFEBLOOD services rendered by the government DOCTRINE IN TAXATION Daily free usage of public infrastructures, access to public health 1. Tax is imposed even in the absence of a or educational services, protection and constitutional grant security of person and property 2. Claims for tax exemption are construed against taxpayers 3. Government reserves the right to 5. Exist independently of the constitution choose the objects of taxation and are exercisable by the government 4. Courts are not allowed to interfere with without a constitutional grant the collection of taxes a. Constitution may impose 5. In income taxation: conditions or limits for their a. Income received in advance is exercise taxable upon receipt 6. Presuppose an equivalent form of b. Deduction for capital compensation received by the persons expenditures and prepayments affects by the exercise of power is not allowed as it defers the 7. Exercise of these powers by the LGU collection of income tax may be limited by national legislature c. A lower amount of deduction is preferred when a claimable expense is subject to limit (lower SCOPE OF TAXATION POWER expense) d. A higher tax base is preferred Comprehensive when the tax object has multiple Plenary tax bases (higher income) Unlimited Supreme o Taxation is not absolutely INHERENT POWERS OF THE STATE unlimited.
Taxation power, police power, and
eminent domain LIMITATIONS OF THE TAXATION POWER Natural, inseparable, and inherent to every government A. INHERENT LIMITATIONS No government can sustain or TERRITORIALITY OF TAXATION effectively operate without these powers The exercise of there powers by the Public services are provided within the government is presumed understood boundaries of the state and acknowledged by the people from Government can only demand tax the very moment they establish the obligations upon its subjects or government residents within its territorial jurisdiction Naturally exercisable by the government Two-fold obligations of taxpayers: even in the absence of an express grant o Filing of returns and payment of of power in the constitution taxes (tax return) Exists independently o Withholding of taxes on expenses and its remittance to TAXATION POWER the government (deduct) Power of state to enforce proportional Exceptions: contribution from its subjects to sustain o In income taxation, resident itself citizens and domestic corporations are taxable on POLICE POWER income derived both within or General power of state to enact laws to outside the PH (Jollibee) protect the well-being of the people o In transfer taxation, resident Regulation and restriction citizens, non-resident citizens, and resident aliens are taxable EMINENT DOMAIN of transfer of properties located Power of state to take private property within or outside the PH for public use after paying just INTERNATIONAL COMITY compensation Cannot be avoided or rejected Countries of the world agreed to one Ex: road widening fundamental concept of co-equal sovereignty where all nations are SIMILARITIES OF 3 POWERS OF STATE deemed equal with one another 1. Necessary attributes of sovereignty No country is powerful that the other 2. Inherent to the state Each country observes mutual courtesy 3. Legislative in nature or reciprocity between them 4. All ways in which the state interferes o Governments d not tax the with private rights and properties (cash- income and properties of the property) governments o Governments give primacy to Tax laws should neither be harsh nor their treaty obligations over their oppressive own domestic tax laws Aspects of due process: Embassies or consular offices of foreign o Substantive due process – tax government in the PH including must be imposed only for public international organizations and their purpose, collected only under non-filipino staff are not subject to authority of a valid law and only income taxes or property taxes by the taxing power having Income of foreign government and jurisdiction foreign government-owned and o Procedural due process – should controlled corporations are not subject be no arbitrariness in to income tax assessment and collection of taxes, and government shall PUBLIC PURPOSE observe the taxpayer’s right to Tax is intended for the common good notice and hearing Must be exercised absolutely for the Assessments shall be public purpose made within 3 years from Cannot be exercised to further any the filing of return or from private interest the date or actual filing, Nakikinabang ang nakararami whichever is later Collection shall be made EXEMPTION OF THE GOVERNMENT within 5 years from the government normally does not tax itself date of assessment as this will not raise additional funds but EQUAL PROTECTION OF THE LAW will only impute additional costs NIRC, gov properties and income from No person shall be denied the equal essential public functions are not subject protection of the law to taxation This applies where taxpayers are under o Income of the gov from its the same circumstance and conditions properties and activities Ex: balot & penoy conducted for profit, including UNIFORMITY RULE IN TAXATION income from government-owned and controlled corporations is Uniform and equitable subject to tax Taxpayers under dissimilar circumstances should not be taxed the NON-DELEGATION OF TAXING POWER same Legislative taxing power is vested Taxpayers should be classified exclusively in congress and is not according to commonality in attributes delegable. Each class is taxed differently Legislative in nature Taxpayers under the same class are Exceptions: taxed the same o Constitution, LGU are allowed to Uniformity is relative equality exercise the power to tax to PROGRESSIVE SYSTEM OF TAXATION enable them to exercise their fiscal autonomy Congress shall evolve a progressive o Tariff and customs code, system of taxation president is empowered to fix the Tax rates increase as the tax base amount of tariffs to be flexible o increases trade conditions It is consistent with the taxpayer’s ability o Other cases that require to pay expedient and effective Aids in an equitable distribution of administration and wealth to society by taxing the rich more implementation of assessment than the poor and collection of taxes NON-IMPRISONMENT FOR NON-PAMENT B. CONSTITUTIONAL LIMITATIONS OF DEBT OR POLL TAX
OBSERVANCE OF DUE PROESS OF LAW No one shall be imprisoned because of
his poverty and for inability to pay debt No one should be deprived of his life, Except from escape from tax liberty, or property without due process Applies only when debt is acquired by of law the debtor in good faith Debt acquired in bad faith is a criminal leprosarium is not considered religious offense punishable by imprisonment appropriation Tax arises from law and a demand of EXEMPTION FROM TAXES OF THE sovereignty REVENUES AND ASSETS OF NON-PROFT, Debt arises from private contracts NON-SOCK EDUCATIONAL INSTITUTIONS Non-payment of tax compromises public INCLUDING GRANTS, ENDOWMENTS, interest (crime) DONATIONS, OR CONTRIBUTIONS FOR Non-payment of debt compromises EDUCATIONAL PURPOSES private interest Applies only to basic community tax Constitution recognizes the necessity of (sedula) education in state building by granting Non-payment of additional community tax exemption on revenues and assets tax is an act of tax evasion punishable of non-profit educational institutions by imprisonment Applies only on revenues and assets that are actually, directly, and exclusively NON-IMPAIRMENT OF OBLIGATION AND devoted for educational purposes CONTRACT NIRC, exempts government educational State should not set aside its obligations institutions from income tax and from contracts by the exercise of its subjects private educational institutions taxation power to a minimal income tax Ex: hindi na magbabayad ng utang ang CONCURRENCE OF A MAJORITY OF ALL gov ng utang sayo dahil magbabayad ka MEMBERS OF CONGRESS FOR THE rin ng tax PASSAGE OF A LAW GRANTING TAX FREE WORSHIP RULE EXEMPTION PH gov adopts free exercise of religion Grants of tax exemption must proceed and does not subject its exercise to only upon a valid basis taxation In approval of an exemption law, an Properties and revenues of religious absolute majority/majority of all member institutions, tithes or offerings, are not of congress, not relative subject to tax majority/quorum majority, is required Does not extend to income from In withdrawal of tax exemption, only properties/activities of religious relative majority is required institutions that are proprietary or Ex: 400 people commercial in nature o 200+1 is valid o Tax laws: 100+1 is relative EXEMPTION OF RELIGIOUS, CHARITABLE majority OR EDUCATIONAL ENTITIES, NON-PROFIT o Tax exemptions: 200+1 is CEMETERIES, CHURCHES AND MOSQUES, LANDS, BUILDINGS, AND IMPROVEMENTS absolute majority FROM PROPERTY TAX NON-DIVERSIFICATION OF TAX Applies for properties actually, directly, COLLECTIONS and exclusively used for charitable, Tax collections should be used only for religious, and educational purposes public purpose Doctrine of use: Should never be diversified or used of o Only properties actually devoted private purpose for religious, charitable, or educational activities are exempt NON-DELEGATION OF THE POWER OF from real property tax TAXATION
NON-APPROPRIATION OF PBULIC FUNDS Taxation power as part of lawmaking is
OR PROPERTY FOR THE BENEFIT OF ANY vested exclusively in congress CHURCH, SECT, OR SYSTEM OF RELIGION Delegation may be made on matters involving the expedient and effective Gov should not favor any particular administration and implementation of system of religion by appropriating assessment and collection of taxes public funds or property in support Administrative agencies: Department of Cannot donate to particular religion from Finance and Bureau of Internal tax money Revenue Compensation to priests, imams, or o Issues revenue regulations, religious ministers working with military, rulings, orders, or circulars to penal institutions, orphanages, or interpret and clarify he application of law o They are not allowed to 2. ASSESSMENT AND COLLECTION introduce new legislations within Tax law is implemented by the their quasi-legislative authority administrative branch of the government Implementation involves NON-IMPAIRMENT OF THE JURISDICTION assessment/determination of the tax OF THE SUPREME COURT TO REVIEW TAX liabilities of taxpayers and collection CASES Incidence of taxation All cases involving taxes can be raised Administrative act of taxation to and be finally decided by the supreme court of the PH Hindi pwede tanggalin ang power ng SITUS OF TAXATION supreme court Place of taxation APPROPRIATIONS, REVENUE, OR TARIFF Frame of reference whether the tax BILLS SHALL ORIGINATE EXCLUSIVELY IN object is within or outside the tax THE HOUSE OF REPRESENTATIVES, BUT jurisdiction of the taxing authority THE SENATE MAY PROPOSE OR CONCUR Examples: WITH AMENDMENTS o Business tax situs – where the business is conducted/operated Laws that add income to the national o Income tax situs on services – treasury and those that allows spending where they are rendered must originate from the house of o Income tax situs on sale of representatives while senate may goods – place of sale concur with amendments o Property tax situs – location of EACH LOCAL GOVERNMENT UNIT SHALL property EXERCISE THE POWER TO CREATE ITS Intangible: domicile of OWN SOURCES OF REVENUE AND SHALL owner unless property HAVE A JUST SHARE IN THE NATIONAL acquired a situs TAXES elsewhere o Personal tax situs – place of LGU can make local taxes residence
STAGES OF THE EXERCISE OF TAXATION
OTHER FUNDAMENTAL DOCTRINES POWER MARSHALL DOCTRINE 1. LEVY OR IMPOSITION Enactment of a tax law by congress Power to tax involves the power to called impact of taxation destroy Legislative act in taxation Taxation power can be used as an Congress is composed of: instrument of police power, unless for o House of representatives revenue only o Senate Ex: cigarettes Tax bills must originate from house of HOLME’S DOCTRINE representatives Each may have their own versions of a Taxation of not the power to destroy proposed law which is approved by both while the court sits bodies Taxation power may be used to Tax bills cannot originate exclusively build/encourage beneficial activities: from senate grant of incentives Matters of legislative discretion in the Ex: creation of ecozones with tax exercise of taxation holidays o Determining the object of taxation PROSPECTIVITY OF TAX LAWS o setting the tax rate/amount to be Tax laws are prospective in operation collected Income moving forward, not previous o determining the purpose for the Income tax laws may operate levy which must be public use retrospectively if intended by congress o kind of tax to be imposed under justifiable conditions o apportionment of the tax NON-COMPENSATION OR SET-OFF between national and local gov o situs of taxation Taxes are not subject to automatic set- o method of collection off or compensation Taxpayer cannot delay payment to wait DOUBLE TAXATION for the resolution of a lawsuit involving When same taxpayer is taxed twice by his pending claim against government the same tax jurisdiction for the same Pag may utang ang gov, bawal thing compensate Exceptions: ELEMENTS OF DOUBLE TAXATION o Where taxpayer’s claim has already become due and Primary element demandable such as when the o Same object gov already recognized the Secondary element same and an appropriation for o Same type of tax refund was made o Same purpose of tax o Cases of obvious overpayment o Same taxing jurisdiction of taxes o Same tax period o Local taxes TYPES OF DOUBLE TAXATION NON-ASSIGNMENT OF TAXES Direct double taxation Tax obligations cannot be o All elements of double taxation assigned/transferred to another entity by exist contract o Discouraged Shall not prejudice the right of the gov to Indirect double taxation collect o At least one of the secondary elements of double taxation is IMPRESCRIPTIBILITY IN TAXATION not common Government’s right to collect taxes does ESCAPES FROM TAXATION not prescribe unless law provides Taxes do not prescribe The means available to the taxpayer to Tax prescribes if not collected within 5 limit or even avoid the impact of taxation years from the date of assessment In absence of assessment, tax CATEGORIES OFF ESCAPES FROM prescribes if not collected by judicial TAXATION action within 3 years from the date of A. THOSE THAT RESULT TO LOSS OF return is require to be files GOVERNMENT REVENUE Taxes due from taxpayers who id not file a return or those who filed fraudulent 1. TAX EVASION returns do not prescribe Any act to illegally reduce or avoid DOCTRINE OF ESTOPPEL payment of tax Tax dodging Misrepresentation Gov is not subject to estoppel 2. TAX AVOIDANCE Error of gov employee does not bind the Any act that reduces or escapes taxes gov by any legally permissible means JUDICIAL NON-INTERFERENCE Tax minimization
Courts not allowed to issue order 3. TAX EXEMPTION
against gov to collect taxes Immunity, privilege, freedom STRICT CONSTRUCTION OF TAX LAWS Granted by constitution, law, contract Tax holiday Not open for interpretation Taxation is the rule, exemption is the B. THOSE THAT DO NOT RESULT LOSS OF exception GOVERNMENT REVENUE Vague tax laws: 1. SHIFTING o Against gov, in favor of tax payers Process of transferring tax burden to o Means no tax law other taxpayers Vague tax exemption laws VAT – last consumer of item pays o Against taxpayers, in favor of Forms of shifting: gov o Forward shifting – manufacturers o Means no exemption law to wholesalers; retailers to customers o Backward shifting – customers to owners o Onward shifting – any tax shifting 2. CAPITALIZATION SOURCES OF TAXATION LAWS Adjustment of the value of an asset 1. Constitution caused by changes in tax rates (hindi 2. Statutes & Presidential Decrees muna nila ibebenta) 3. Judicial decisions/case laws Value of a mining property will decrease 4. Executive orders & batas Pambansa when mining output is subjected to 5. Administrative issuances higher taxes (backward shifting) 6. Local ordinance 3. TRANSFORMATION 7. Tax treaties & conventions with foreign countries Elimination of wastes or losses by 8. Revenue regulations taxpayer to form savings to compensate for the tax imposition or increase in taxes TAX Reduce losses Dinidiskartehan nila para mababa ang An enforced proportional contribution tax levied by the lawmaking body of state to raise revenue for public purpose ELEMENTS OF A VALID TAX TAX AMNESTY Levied by taxing power Chance to reform Must not violate constitutional & inherent General pardon limitations Absolute forgiveness Must be uniform & equitable Penalties + interests will be gone Must be for public purpose Covers civil + criminal liabilities (pangkalahatan) Past violations Must be proportional in character (ability Retrospective to pay) Conditional upon the taxpayer paying Generally payable in money (cash) the gov a portion of tax CLASSIFICATION OF TAXES TAX CONDONATION A. AS TO PURPOSE Tax remission a. Fiscal/revenue tax – for general Forgiveness of tax obligation under purpose justifiable grounds b. Regulatory – to regulate, for No payment required general welfare Covers civil liabilities c. Sumptuary – levied to achieve Prospective social/economic objectives B. AS TO SUBJECT MATTER a. Personal, poll/capitation – on TAXATION LAW persons; residents Any law arises from the exercise of b. Property tax – on properties; taxation power real/personal c. Excise tax/privilege tax – TYPES OF TAXATION LAWS imposed upon performance of an act, enjoyment of privilege 1. TAX LAWS – provide for assessment C. AS TO INCIDENCE and collection of taxes a. Direct tax – both impact and a. National Internal Revenue Code incidence of taxation rest upon b. Tariff and Customs Code same taxpayer; statutory c. Local Tax Code taxpayer is economic taxpayer d. Real Property Tax Code b. Indirect tax – paid by any person 2. TAX EXEMPTION LAWS – grant certain other than initial taxpayer; immunity from taxation statutory taxpayer is not a. Minimum Wage Law economic taxpayer (VAT) b. Omnibus Investment Code of D. AS TO AMOUNT 1987 a. Specific tax – fixed amount c. Barangay Micro-Business imposed on per unit basis; kilo, Enterprise Law liter, meter d. Cooperative Development Act b. Ad valorem – fixed proportion TAX REVENUE upon value of tax object; estate -amount imposed -all income tax collections E. AS TO RATE TAX TOLL a. Proportional tax – flat/fixed rate; -demand of -demand of emphasizes equality (VAT, sovereignty ownership donor’s tax, estate tax) -depends on needs -depends upon value b. Progressive/graduated tax – of gov of property -by gov -by gov & private increasing rate as tax base entities increases; tax table basis c. Regressive tax – decreasing tax rates as tax base increase; not TAX DEBT applicable in PH -law -contracts d. Mixed tax – tax rates which is a -imprisonment -non-imprisonment combination of any type of tax above TAX SPECIAL F. AS TO IMPOSING AUTHORITY ASSESSMENT a. National tax – by national -amount imposed on -levied on lands government persons adjacent to public i. Income tax – annual improvement income, gains/profits ii. Estate tax – gratuitous transfers upon death TAX TARIFF iii. Donor’s tax – gratuitous -amount imposed -import/export transfer by living donor commodities iv. VAT – consumption tax collected by VAT TAX PENALTY business taxpayers -for support of gov -to discourage and v. Other percentage tax – act consumption tax collected by non-VAT business taxpayers TYPES OF TAX SYSTEM vi. Excise tax – sin products: A. AS TO IMPOSITION alcohol, cigarettes vii. Documentary stamp tax – 1. Progressive – income, local business taxes tax on documents, 2. Proportional – corporate income & instruments, loan businesses agreements, and papers evidencing the 3. Regressive – not employed in PH acceptance, assignment, sale/transfer of obligation, B. AS TO IMPACT right or property incident 1. Progressive – direct taxes: cannot be shifted; b. Local tax – by municipal/local impacts more on the rich gov i. Real property tax 2. Regressive – indirect taxes: shifted by ii. Professional tax business to customers iii. Business taxes, fees, charges iv. Community tax LARGE TAXPAYERS v. Tax on banks A. AS TO PAYMENT 1. VAT – 200k per quarter last year TAX REVENUE -amount imposed -all income 2. excise tax – 1M tax paid last year collections 3. income tax – 1M annual income tax paid last year TAX LICENSE FEE 4. withholding tax – 1M annual withholding tax -taxation power -police power payments/remittance from all types -imposed to any -to regulate exercise object to raise -before business 5. percentage tax – 200k percentage tax revenue paid/payable per quarter last year -after business 6. documentary stamp tax – 1M aggregate no measurement of value amount per year compensation for loss = return of capital B. AS TO FINANCIAL CONDITIONS & LIFE RESULTS OF OPERATIONS immeasurable by money 1. gross sales – 1B total annual exempt from income tax taxable return on capital from insurance: 2. net worth – 300M total at end of year o excess amount received over 3. gross purchases – 800M total annual last premiums paid year o interest income from unpaid balance of proceed of policy 4. top corporate taxpayer listed and published o excess of proceeds received by SEC over acquisition costs & premium payments
INCOME HEALTH
Best measure of taxpayer’s ability to pay compensation for loss of health
tax personal injuries return of capital INCOME TAXATION HUMAN REPUTATION Gross income/taxable income Taxable income = item of gross income moral damage indemnity as compensation for GROSS INCOME impairment Any inflow of wealth that increases net return of capital exempt from income worth tax: o oral defamation/slander o alienation of affection ELEMENTS OF GROSS INCOME o breach of promise to marry
1. Return on capital that increases net
worth REALIZED BENEFIT 2. Realized benefit 3. Not exempted by law, contract, treaty Benefit o Any form of advantage o Increase in net worth RETURN ON CAPITAL o Income, donation, inheritance Not benefits: Wealth that increases net worth o Receipt of loan Subject to income tax o Discovery of lost properties RETURN OF CAPITAL o Receipt of money/property to be held in trust/remittance Maintains net worth Realized Not taxable o Earned *improvement in net worth = ability to pay tax o Sale/barter
RECOVERY OF LOST CAPITAL REQUISITES OF REALIZED BENEFITS
Lost of capital = decrease 1. Exchange Maintains net worth 2. Involves another entity 3. Increases net worth RECOVERY OF LOST PROFITS *you have ability t pay taxes if you have sale of Lost of profits = maintains/do not goods/services decrease increases net worth *increase in fv of asset/decrease in liabilities return on capital that increases net worth are not income for insurance, legal suits, indemnity taxation purposes contracts TYPES OF TRANSFERS 1. Bilateral transfers/exchanges – income CAPITAL ITEMS DEEMED WITH INFINITE tax; onerous transactions VALUE a. Sale b. Barter 2. Unilateral transfers – transfer tax; MODE OF RECEIPT/REALIZATION gratuitous transactions BENEFITS a. Succession (transfer upon death) 1. Actual receipt – physical taking of b. Donation income (cash/property) 3. Complex transactions 2. Constructive receipt – no physical taking a. Partly but effectively benefitted a. Offset of debt in consideration for *FV-SP=Transfer Tax the sale of goods/services *SP-Cost=Income tax b. Deposit of income c. Matured detachable interest coupons on coupon bonds not ANOTHER ENTITY yet encashed d. Increase in the capital of a Natural partner from the profit of Juridical partnership TAXABLE ENTITIES Separate entities INFLOW OF WEALTH WITHOUT INCREASE o Relatives IN NET WORTH o Corporations o Partner & partnership No benefit = no income o Parent company & subsidiaries o Receipt of property in trust o Sister companies o Borrowing of money under obligation to return NOT TAXABLE ENTITIES If no intention to return, income Sales of home office to branch office Businesses of a proprietor INDIVIDUAL TAXPAYERS BENEFITS IN THE ABSENCE OF CITIZEN TRANSFERS Citizens on feb 2, 1987 Not taxable Fathers/mothers are citizens of PH Unrealized gains/holding gains Born before jan 17, 1973 o Increase in value of investments Naturalized with law in equity/debt securities NON-RESIDENT CITIZEN o Increase in value of real properties held Physically present abroad with intention o Increase in value of foreign to reside there currencies held/receivable Leaves PH during taxable year to reside o Decrease in value of foreign abroad; as immigrant/employee currencies denominated debt permanently o Birth of animal offspring, Works and derives income from abroad accruals of fruits & requires him to be physically present o Increase in value of land due to abroad most of the time during taxable discovery of mineral reserves year (183 days) o If vacation, still resident RENDERING SERVICES ALIENS Exchange but does not cause loss of capital Individuals who are not Filipinos Item of gross income RESIDENT ALIEN Whose residence is within the PH and EXEMPTION OF UNREALIZED INCOME who is not a citizen No definite intention as to his stay Income realized in non-cash properties One who comes to the PH with definite are received in cash but taxpayer used purpose that require an extended stay the same to acquire and makes his home temporary in PH Taxable at FV of property received Acquired residence in PH retains his Operates and conducts business in PH status until he abandons the same and through permanent establishment actually departs from PH (branch) Stayed in the PH for more than 1 year as of end of taxable year NON-RESIDENT FOREIGN CORP. NON-RESIDENT ALIEN Does not operate or conduct business in Whose residence is not within the PH PH and not a citizen Transacts directly to residents outside NON-RESIDENT ALIEN (ETB) its branch Stayed in PH for more than 180 days ONE-PERSON CORPORATION during taxable year Single stockholder who may be natural NON-RESIDENT ALIEN (NETB) person, trust/estate Came to PH for a definite purpose which PARTNERSHIP may be promptly accomplished Owned by two or more persons Stayed for not more than 180 days General Professional Partnership during the year o Not taxable o Formed for the exercise of profession ESTATE o Should be in same profession Properties, rights and obligations of a Business Partnership deceased not extinguished by his death o Formed for profit o Estate under judicial settlement o Taxable – individual taxpayer; estate is taxable on income of properties JOINT VENTURE o Estate under extra-judicial With particular purpose settlement – exempt entities; Exempt Joint Venture heirs are taxable on income of o Formed for the purpose of properties construction projects or engaged TRUST in petroleum, coal, geothermal and other energy operations Agreement where grantor/trustor under a service contract with gov transfers property to beneficiary, which Taxable Joint Venture will be held under the management of o All other joint ventures are trustee/fiduciary taxable o Trusts that are irrevocably designated by the grantor – CO-OWNERSHIP individual taxpayer; trust is Formed to preserve property/divide it taxable on income of property income o Trusts that are designated as Not taxable revocable by the grantor – not Co-owners are taxable on their share of taxable entities, not considered income as individual taxpayer; grantor is Taxable as corporation if reinvests the taxable on income of property income to other ventures/income- If silent, revocable producing properties
CORPORATE TAXPAYERS PRESUMPTIONS
DOMESTIC If citizen = resident Corporation organized in accordance If alien = resident with PH laws If NR alien = NETB Incorporates in PH even in controlled by If corp = domestic foreigners If foreign corp = non-resident
FOREIGN Organized in a foreign law *calendar year – individual, corp
RESIDENT FOREIGN CORPORATION *fiscal year – corp only