1.

INCOME TAX
A tax on all yearly profits arising from property, professions, trades, or offices, or
A Tax on a person’s income, emoluments, profits and the like
It may succinctly defined as a tax on income, whether gross or net, realized in one taxable year.

Nature of Income Tax

National Tax
Tax imposed by the National Government (specifically the legislative department)
It is the BIR who implements or administers the collection of taxes You cannot go to the
municipal treasurer to pay your income taxes. Even if your payment is received by the municipal
treasurer, it will be as if you have not paid because it is a wrong jurisdiction.
Excise Tax
It is levied upon the right or the privilege of a person to receive income or profits, of which not
all taxpayers have the privilege to do so
Direct Tax
The tax burden is borne by the income recipient upon whom the tax is imposed. It is tax
demanded from the very person, who it is intended for and who should pay the tax.

Purposes of Income Tax

Fiscal Purpose
1. To provide large amounts of revenue (general revenue)
Non-Fiscal Purpose
2. To offset regressive sales and consumption taxes
3. To mitigate the evils arising from the inequalities in the distribution of income & wealth which
are considered deterrents to social progress, by a progressive scheme of taxation.

General Principles of Income Taxation

A RESIDENT CITIZEN is taxable on all income derived from sources WITHIN AND
WITHOUT the Philippines.
A NON-RESIDENT CITIZEN is taxable only on incomes derived from sources WITHIN the
Philippines.
AN OVERSEAS CONTRACT WORKER is taxable only on income from sources WITHIN the
Philippines. A seafarer who is a citizen of the Philippines and who receives compensation for
services rendered abroad as a member of the complement of a vessel engaged exclusively in the
international trade shall be treated as an overseas contract worker.
An ALIEN INDIVIDUAL whether a resident or no of the Philippines, is taxable only on income
derived from sources WITHIN the Philippines.
A DOMESTIC CORPORATION is taxable on all income derived from sources WITHIN AND
WITHOUT the Philippines.
A FOREIGN CORPORATION whether engaged or not in trade of business in the Philippines, is
taxable only on income derived from sources WITHIN the Philippines.

2. EXCISE TAX
An excise, or excise tax, is any duty on manufactured goods that is levied at the moment of
manufacture rather than at sale. Excises are often associated with customs duties (which are
levied on pre-existing goods when they cross a designated border in a specific direction);
customs are levied on goods that come into existence – as taxable items – at the border, while
excise is levied on goods that came into existence inland.
Although sometimes referred to as a tax, excise is specifically a duty; tax is technically a levy on
an individual (or more accurately, the assessment of what that amount might be), while duty is a
levy on particular goods.
An excise is considered an indirect tax, meaning that the producer or seller who pays the levy to
the government is expected to try to recover their loss by raising the price paid by the eventual
buyer of the goods. Excises are typically imposed in addition to an indirect tax such as a sales
tax or value-added tax (VAT). Typically, an excise is distinguished from a sales tax or VAT in
three ways:
an excise is typically a per unit tax, costing a specific amount for a volume or unit of the item
purchased, whereas a sales tax or value-added tax is an ad valorem tax and proportional to the
price of the goods, an excise typically applies to a narrow range of products, and an excise is
typically heavier, accounting for a higher fraction of the retail price of the targeted products.

3. VAT
Value-added tax (VAT) is a consumption tax on goods and services that is levied at each stage of
the supply chain where value is added, from initial production to the point of sale. The amount
of VAT the user pays is based on the cost of the product minus any costs of materials in the
product that have already been taxed at a previous stage.
VAT is based on consumption rather than income. In contrast to a progressive income tax,
which levies more taxes on the wealthy, VAT is charged equally on every purchase. More than
160 countries use a VAT system. It is most commonly found in the European Union (EU).
Nevertheless, it is not without controversy.

Advocates say VAT raises government revenues without charging wealthy taxpayers more,
as income taxes do. It also is considered simpler and more standardized than a traditional sales
tax, with fewer compliance issues.
VAT was largely a European creation. It was introduced by French tax authority Maurice Lauré
in 1954, although the idea of taxing each stage of the production process was said to have first
been floated a century earlier in Germany.

4. DONOR’S TAX
Basics of Donor's Tax
Donor's Tax is a tax imposed on the transfer of property by way of gift or donation. In the
Philippines, it is governed by the National Internal Revenue Code and other pertinent
regulations. Donor’s tax applies to both real and personal properties and can range from
immovable properties like land to movable properties like cash and jewelry.

Tax Rates and Exemptions

The Tax Reform for Acceleration and Inclusion (TRAIN) Law amended the donor's tax rate to a
flat rate of 6% based on the net gift, which is computed as the fair market value of the property at
the time of donation minus any liabilities that may be attached to it.
Certain exemptions exist for donations made to qualified domes, such as educational and
charitable institutions. Further, gifts made to relatives in direct line (parents to children or vice
versa) may qualify for exemptions or deductions, such as the "dowry" or "donation propter
nuptials," which is a donation made by reason of marriage.

Computation and Valuation

To compute the donor's tax, one needs to ascertain the fair market value of the property being
donated at the time of the donation. This value serves as the basis for the application of the 6%
tax rate.

Filing and Payment

The donor is required to file a donor's tax return within thirty (30) days after the date the
donation was made. Payments must also be made within the same period. Late payments are
subject to penalties and interest.

Documentation Required
For a valid donation, a Deed of Donation must be executed. It's advisable to have this notarized
for the purpose of registration and as a strong evidentiary document. For immovable properties,
the transfer of the title must also be registered with the Registry of Deeds.

Conclusion
Understanding the complexities surrounding donor's tax is essential for both the donor and the
done. Proper valuation, compliance with tax laws, and timely filing can mitigate potential legal
issues and ensure a smooth transfer of assets