TAXATION

• Define income and business

taxation and its principles
and processes
• Distinguish individual from
business taxation
• Explain the procedure in the
N S :
S O V E computation of gross
E S T I
L JEC taxable income
O B • Identify the BIR Forms
WHAT IS
TAX?
ARE TAXES
IMPORTANT?
WHY OR WHY
NOT?
 Principles of Taxation

• TAXES are considered revenue of the government that funds

government expenditures and programs. This is also known as
enforced responsibility.
• INCOME TAX is defined as the tax on the net income or the entire
income realized in one taxable year.
• The process by which the government collects them is TAXATION.
• Governing tax law in the Philippines is the National Internal
Revenue Code of 1997. The BIR (Bureau of Internal Revenue) is
the primary implementing agency of this law.
 TRAIN LAW
(Tax Reform for Acceleration and Inclusion (TRAIN)
REPUBLIC ACT No. 10963

https://www.youtube.com/watch?v=3C455VwtqxA
 WHO IS REQUIRED TO PAY INCOME TAX IN THE
PHILIPPINES?
• A citizen of the Philippines, living in the Philippines, is taxable on all income
earned inside and outside of the Philippines;
• A non-resident citizen is taxable only on income earned in the Philippines;
• An OFW is taxable only on income earned in the Philippines;
• A foreigner living in the Philippines is taxable only on income earned in the
Philippines;
• A domestic corporation is taxable on all income derived from sources inside
and outside the Philippines; and
• A foreign corporation is taxable only on the income derived inside the
Philppines
 List of sources of income
• Compensation for services in whatever form paid, including but not limited to
fees, salaries, wages, commissions, and similar items;
• Gross income derived from the conduct of trade or business
• Gains derived from dealings in property
• Interests
• Rents
• Royalties
• Annuities
• Dividends
• Prized and winnings
• Pensions
• Partner's distributive share from net income of general partnership
 INDIVIDUAL COMPENSATION INCOME

• Employed individuals that earn compensation income pay their income taxes
monthly.
• Philippine individual income tax is progressive.
• The withholding tax deduction is computed based on the employee's gross
compensation (net of mandatory statutory contributions), tax status, the timing
of compensation payment, and using the published BIR withholding tax table.
• If the tax withheld is greater than the tax due, there is a tax refund.
• If the tax withheld is lesser than the tax dues, there is a tax payable.
 BASIC MONTHLY PAYROLL COMPUTATION

Photo by: SirChua'sAccountingLessons

 STATUTORY CONTRIBUTIONS

SSS is a social insurance program

that aims to provide protection to
its members and beneficiaries,
while GSIS serves as the
counterpart social insurance
program for those who work in
government. SSS members can avail
of maternity, sickness, disability,
retirement, funeral and death
benefits

Photo by: SirChua'sAccountingLessons

 STATUTORY CONTRIBUTIONS

PhilHealth implements the

National Health Insurance
Program that aims to provide
Filipinos with financial
assistance and access to
affordable health services. It
covers hospital costs, subsidy
for room and boarding,
medicine, and professional
services.

Photo by: SirChua'sAccountingLessons

 STATUTORY CONTRIBUTIONS

Pagtutulungan sa
Kinabukasan: Ikaw, Bangko,
Industria at Gobyerno or
PAG-IBIG answers the
national need for savings
program and affordable
housing financing

Photo by: SirChua'sAccountingLessons

 ANNUAL WITHHOLDING TAX TABLE

Credits to: SirChua'sAccountingLessons

De Minimis Benefits

Photo by: SirChua'sAccountingLessons

PERSONAL INCOME TAX
EXHIBIT #1

Credits to: SirChua'sAccountingLessons

 EXHIBIT #1

Credits to: SirChua'sAccountingLessons

 EXHIBIT #1

Credits to: SirChua'sAccountingLessons

EXHIBIT #1
PURE BUSINESS INCOME TAX

In addition to 3% Percentage Tax/Quarter

● VAT THRESHOLD = 3 MILLION Gross Sales ( It is used to determine

the income tax liability )
PURE BUSINESS INCOME TAX
KEY TERMS:
● Gross receipts include all revenue in whatever form received or accrued (in
accordance with th entity's accounting method) from whatever source, including
from the sales of products or services, interest, dividends, rents, royalties, fees
or commissions, reduced by returns and allowances. Retrieved from:
https://www.cooley.com/news/insight/2021/2021-01-07-sba-defines-gross-receipts-second-draw-ppp-loans#:~:text=Gross%20receipts%
20include%20all%20revenue,reduced%20by%20returns%20and%20allowances.

● Gross sales is the total sales transactions net of VAT, if applicable, reported
during the period, without any other deduction. However, gross sales subject to
the 8% income tax rate option shall be net of the following deductions:

- Sales Returns and Allowances for which a proper credit or refund was made
- Discounts determined and granted at the time of of sale Retrieved from
https://www.youtube.com/watch?v=EdcF5ZdOgs4
PURE BUSINESS INCOME TAX
(Quarterly Income Tax)

Credits to: Gerard Carpizo

PURE BUSINESS INCOME TAX
(Quarterly Income Tax)

Credits to: Gerard Carpizo

 BIR Forms

The BIR Form 1902 is the

tax form used to register
new employees (either
with one employer or
multiple employers) in
the Philippines. It should
be filed within 10 days from
the hiring date, or before
paying any income tax due
or filing a tax return.
 BIR Forms

The BIR Form 1901 is the tax

form that self-employed and
mixed-income individuals
use to register before
starting or while running a
business, or when opening a
new branch.
BIR Forms

The BIR Form 1700 is

a document filed for
Income Tax Return.
This return shall be
filed by every resident
citizen deriving
compensation income
from all sources, or
resident alien and
non-resident citizen
with respect to
compensation income
from within the
Philippines.
BIR Forms

BIR Form No.

1701 shall be
filed by
individuals who
are engaged in
trade/business
or the practice
of profession
including those
with mixed
income.
 BIR Forms

A Certificate to be
accomplished and issued
to each employee
receiving salaries, wages
and other forms or
remuneration by each
employer indicating
therein the total amount
paid and the taxes
withheld therefrom during
the calendar year.
TAX AVOIDANCE VS TAX EVASION
 TAX EVASION

Credits to: Rappler

-FIN-