Escape from Taxation

• Means or methods by which the taxpayer saves the tax or

escapes the burden of tax payment.
• It may or not result in a loss of revenue to the
government.
• Legal or illegal means
 Forms of Escape from Taxation

• Do not reduce revenue collection by the government

a. Shifting
b. Capitalization
c. Transformation
• Result in a loss of revenue for the government
d. Result in a loss of revenue for the government
e. Tax evasion
f. Tax avoidance
 Forms of Escape from Taxation

• Do not reduce revenue collection by the government

a. Shifting - transfer of tax burden by one on whom the tax is assessed to another
b. Capitalization - Reduction in the selling price of income-producing property by an amount
equal to the capitalized value of future taxes that may be paid by the purchaser

c. Transformation - a method by which the manufacturer or producer upon whom the tax is
imposed pays the tax and strives to recover such expenses through lower production costs without sacrificing
quality of the product.

• Result in a loss of revenue for the government

d. Result in a loss of revenue for the government
e. Tax evasion
 Forms of Escape from Taxation

• Do not reduce revenue collection by the government

a. Shifting - transfer of tax burden by one on whom the tax is assessed to
another (example: general sales taxes, transferred from the business to the
consumers)
b. Capitalization - Reduction in the selling price of income-producing
property by an amount equal to the capitalized value of future taxes that may be
paid by the purchaser (e.g., a decline in the price of land that offsets an increase in property
taxes)
c. Transformation - a method by which the manufacturer or producer upon
whom the tax is imposed pays the tax and strives to recover such expenses through
lower production costs without sacrificing the quality of the product.
 Forms of Escape from Taxation

• Result in a loss of revenue for the government

d. Tax evasion - fraudulent or forbidden schemes or devices
designed to lessen or defeat taxes.
Example: Failure to file a return or make false declarations on a
return, such as exaggerated or fake deductions and unreported income.
• e. Tax avoidance - exploitation by the taxpayer of the legally
permissible alternative tax rates or methods of assessing taxable
property or income to reduce tax liability.
Example: Advance deeds, loan payments, grants, tax deductions, credits,
or exemptions that are legally available to reduce tax liability
 Forms of Escape from Taxation
• Result in a loss of revenue for the government

f. Exemption from taxation - grant of immunity to persons or

corporations or to persons or corporations of a particular class from a
tax which persons and corporations generally within the same taxing
district are obliged to pay.
Example: individual taxpayers with annual taxable income amounting
to PhP250,000.00 or below are still exempt from paying income tax,
while the rest of taxpayers, except those with taxable income of more
than PhP8,000,000.00, will have lower tax rates ranging from 15% to
30%, previously 20% to 32%
 Tax Amnesty

• Tax amnesty allows taxpayers to voluntarily disclose and pay

tax owing in exchange for avoiding tax evasion penalties.

Set-off or compensation.
Taxes are not subject to set-off or compensation.
• A person cannot refuse to pay tax on the grounds that the
government owes him an amount equal to or greater than the
tax being collected.
 Taxpayer’s suit

• A taxpayer has a sufficient personality and interest to seek

judicial assistance with a view of restraining what he believes
to be an attempt to unlawfully disburse public funds.
• Immunity from all criminal and civil obligations arising from
non-payment of taxes.
• General pardon is given to all taxpayers.
• It applies only to past periods (retroactive application).
 REFERENCES

• https://lawphil.net/judjuris/juri1998/aug1998/gr_125704_1998.html

• https://barretttaxlaw.com/

• https://www.linkedin.com/pulse/situs-taxation-nelson-gargoles

• https://www.slideshare.net/fimportado/general-principles-of-taxation-38514961

• DBM.gov.ph

• Income Taxation by Ferdinand C. Importado CPA, MBA

• https://www.slideshare.net/fimportado/general-principles-of-taxation-38514961
Taxation Rate in the
Philippines

Shahria K. Mautante &

Jamaica A. Auxtero-
Barrientos
 1. Income Tax Rate
Tax Rate in
the 2. Sale Tax Rate/ VAT Rate
Philippines
3. Corporate Tax Rate
1. Income Tax Rate (5 % -32 %)

❑ The Income of residents in the Philippines is taxed

progressively up to 32 %. Residents' citizens are taxed
on all their net income derived from sources within
and outside the Philippines.

❑ For non-resident, whether an individual or not of

the Philippines, is taxable only on income derived
from sources within the Philippines
Forms of Tax
in the
Philippines

• Above rates apply to individuals who derive income

from business or from the practice of profession
 2. Sales Tax/ VAT Rate (12 %)

• VAT is a value added sales tax used

Forms of Tax in the Philippines which is 12 %.
in the
Philippines • 12 % VAT of the gross selling price
(GSP) is imposed all importation,
sale, barter, exchange or lease of
goods or properties and sale of
services.
Example:
 ❑Corporation
Is defined under Tax Code (RA 8424), as
amended the Corporate Recovery and Tax
Incentives for the Enterprises Act/ (CREATE) .

Is an artificial being created y the operation

of law, having the right of succession and the
powers, attributes and properties expressly
authorized by law or incident to it’s existence.
 Corporation
Corporate income tax

From July 2020 to 2022, foreign companies will be

eligible for a reduced corporate income tax (CIT)
rate of 25 percent, down from the regular rate of
30 percent. The reduction in the headline CIT rate
was passed by the CREATE Act, which also
stipulates the further reduction of the CIT rate by
one percent per year to finally reach 20 percent in
2027 for foreign companies
https://www.aseanbriefing.com/news/a-guide-to-taxation-in-the-philippines/
 Corporation
Corporate income tax

From July 2020 to 2022, foreign companies will be

eligible for a reduced corporate income tax (CIT)
rate of 25 percent, down from the regular rate of
30 percent. The reduction in the headline CIT rate
was passed by the CREATE Act, which also
stipulates the further reduction of the CIT rate by
one percent per year to finally reach 20 percent in
2027 for foreign companies
https://www.aseanbriefing.com/news/a-guide-to-taxation-in-the-philippines/
 Classification of Corporation:
1. Domestic Corporation
This are corporations form or organized in the
Philippines laws.
2. Foreign Corporation
This are corporations form or organized or
existing other than your Philippine laws.

https://www.rd.go.th/fileadmin/user_upload/AEC/A
seanTax-Philippines.pdf
Considered as Corporation :
1. Joint Stock Companies
2.Joint Ventures
3. Joint Accounts
4. Partnerships except GPP
5. Insurance Companies
6. Associations

https://www.rd.go.th/fileadmin/user_upload/AEC/
AseanTax-Philippines.pdf
 Rates of income Tax on Domestic Corporations :

a. Regular Corporate Income Tax (RCIT) - taxable

income derived during each taxable year from all
1.Domestic sources within and without the Philippines at 30%
Corporation tax rate on taxable income.

b. Minimum Corporate Income Tax (MCIT) - this 2 %

on gross income staring on the fourth taxable year
following the beginning of operations, if there is
zero income or net loss. or computed MCIT is higher
than regular corporate income (RCIT)
 Illustrative Problem : A corporation was formed at the
beginning of 2015. The Statement of Comprehensive
Income at the end of 2020 showed the following amounts
for the current taxable year:
1.Domestic CASE 1.
Corporation

Regular Corporate Income Tax (RCIT)

Taxable Net Income 3,000,000
Multiplied by Corp.Income Tax Rate 30%
Regular Corporate Income Tax Due 900,000
 Illustrative Problem : A corporation was formed at the beginning
of 2015. The Statement of Comprehensive Income at the end of
2020 showed the following amounts for the current taxable year:

CASE 2.

Select whichever is higher between computed Regular Corporate

Income Tax (RCIT) versus Minimum Corporate Income Tax (MCIT).
Using Regular Rate :

Regular Corporate Income Tax (RCIT)

Taxable Net Income 500,000
Multiplied by Corp. Income Tax Rate 30%
Regular Corporate Income Tax Due 150,000
Using Regular Rate:

Gross Profit 8,000,000

Multiplied by MCIT Rate 2%
Minimum Corporate Income Tax 160,000
Select whichever is higher between computed Regular
Corporate Income Tax (RCIT) versus Minimum
Corporate Income Tax (MCIT).

Regular Corporate Income Tax Due 150,000

Minimum Corporate Income Tax 160,000

Therefore,

Minimum Corporate Income Tax Due 160,000