Lumbera The Tax Queen

Ollivander’s Notes
“You’re a lawyer, Harry” - Hagrid

TAX JURISTS LECTURE: JOAP REPLAY (Atty. Rizalina Lumbera) – 2021 BAR REVIEW
National Taxation (NIRC – Train Law) Local Taxation (LGC of 1991) Tariff & Customs Duties (CMTA)
Kinds: Kinds: Kinds:
1. Income 1A. Ordinary Local Taxes - Code -Not discussed (not part of Bar Syllabus)
2. VAT* 1B. Ordinary Local Taxes – Passed by Local Sanggunian
3. Donor’s** 2. RPT
4. %*
5. Excise***
6. DST****
7. Estate**
* - Business Tax
** - Transfer Tax
*** - Tax in the manufacture, production, and importation
**** - Tax when you execute a document representing a certain transaction
Remedies (Gov’t & Taxpayer): Remedies (LGU & Taxpayer): Remedies (BOC & Taxpayer):
-Collection -Collection -Collection
-Procedure -Procedure -Procedure
Cases: Cases: Cases:

-SC, CTA, Jurisprudence -SC, CTA, Jurisprudence -SC, CTA, Jurisprudence
Basic Tenets in Tax:

1. In case of doubt whether or not to impose, do not levy because taxes are burden.
2. In case of exemptions, strictly construed against the taxpayer.
BIR Regulations: RR, RMC, RMO – these form part of law of the land Sanggunian Resolutions, Ordinances
NATIONAL INTERNAL REVENUE CODE AS AMENDED BY TRAIN LAW

Types of Taxpayers
A. Natural Person
1. Compensation Income Earner
2. Self-Employed Individual (Business/Trade)
3. Self-Employed Professional (Practice of Profession)
4. Mixed Income Earner
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B. Juridical Person
1. Income from Trade/Business
 Act of earning is already subject to Income Tax.

 When you are engaged in trade/business/exercise of profession, there will be VAT or Percentage Tax
 When you spend on expense, this creates income. Any excess between income and expense will be spent on investment on assets (Real Property, Tangible Personal Property, Intangible
Personal Property), bank savings, shares of stocks, or insurance which will either way be subjected to tax (withholding tax or income tax). Other excess which are donated inter vivos will
be subjected to Donor’s Tax. All of the foregoing transactions involve documents as proof of transaction which is subject to DST. Those who are engaged in business of manufacturing,
producing, and importing will have an additional Excise Tax.
 When you die, you will still be subjected to Estate Tax.
INCOME TAX
1. Income-Expense Cycle
2. Taxable Period – always 12 months
o Calendar Year – can be used by Natural Persons or Corporations
o Fiscal Year – only used by Corporations
3. Income: anything that flows into the wealth or increases the net worth of the taxpayer other than the mere return of capital.
o Gross Receipts (GR): you are selling service; Gross Sales (GS): you are selling goods
o Gross Income (GI): amount AFTER Cost of Sales (COS)
o Net Income (NI): amount AFTER the Allowable Deductions (AD)
Gross Sales/Receipts. XXX

Less: COS (XXX)
Gross Income XXX
Less: AD (XXX)
Taxable Net Income XXX
Multiply: Tax Rate XX%
Tax Due XXX
4. To determine if it is taxable income, ask:

o Did you receive anything (cash or kind)?
o If yes, is it income?
o If yes, is it taxable? You have the determine the ff:
 Sources of income (w/in or w/out)
 Kinds of taxpayers
 Kinds of income
 Items of inclusions, exclusions, exemptions
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 Deductions
 Capital Gains v. Capital Loss
 Ordinary Gains v. Ordinary Loss
 Capital Asset v. Ordinary Asset
 Capital Expenditures v. Ordinary Expenses
 Holding Period
o What kind of tax and rate?
5. Kinds of Income Taxes
o Net Income Tax System (NIT): GI – AD = TNI x % = Tax Due – CWT = Tax Payable
o Withholding Tax: withheld tax at source; advance collection of taxes
 Creditable Withholding Tax (CWT): all taxes withheld will be credit against the taxes due the taxpayer
 Final Withholding Tax (FWT): here, no other tax will be imposed on the transaction so what was withheld was not creditable per se.
 Expanded Withholding Tax (EWT)
o Gross Income Tax: no AD. GI x % = Tax Due
o 8% Tax: applicable only if you are a self-employed professional/individual, provided that your GS/GR does NOT exceed 3M (TRAIN).
o FBT, MCIT, IAET, BPRT, Inter-Corporate Dividends Tax (ICDT)
TAXPAYER KINDS OF TAXPAYER SOURCE (Sec. 42, NIRC) KINDS OF IT/RATES (Sec. 24)
PH (W/IN) FC (W/OUT) A – ALL B– C – CG D – CG E – Inter- MCIT IAET
INCOME PASSIVE on SS on RP corp. Div
NATURAL RC: citizen of the PH, residing in the Principal; Taxable NIT or 8% FWT FWT FWT - - -
PERSON PH Taxable
-Compensation NRC: Taxable Principal; NOT NIT or 8% FWT FWT FWT - - -
Income Earner (1) Those who leave the PH and Taxable
-Self-Employed proved to the satisfaction of CIR
Individual/ their PHYSICAL PRESENCE
Professional ABROAD with INTENTION of
-Mixed Income RESIDING therein
Earner PERMANENTLY
(2) Those who leave PH for
employment and their contracts
require them to be physically present
abroad most of the time –
OFW/OCW
(3) Immigrants
(4) Seaman
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NOTE: Those NRC who went back
to the PH with the intention to reside
here permanently mid-year, your
status will be converted from NRC to
RC.
On the other hand, if you are a RC

intending to reside abroad
permanently mid-year, your status
will not be converted from RC to
NRC mid-year but you will be taxed
as RC until end of the year. Your
change in status will be changed for
tax purposes, next year.
RA: citizen of foreign country who Taxable Principal; NOT NIT or 8% FWT FWT FWT - - -
resides in the PH; the intention to Taxable
reside must be manifest
NRA-ETB: any of the following Taxable Principal; NOT NIT or 8% FWT FWT FWT - - -
indicators- Taxable
(1) 180-day period: alien stayed in
aggregate for more than 180 days in
the PH
(2) principle of habitually: alien
regularly enters into commercial
transactions in the PH regardless of
period of time
(3) alien puts up a branch of his
business in the PH
(4) alien who appointed agents
(5) alien is hiring employees
NRA-NETB: any alien not having Taxable Principal; NOT GIT at 25% GIT at 25% FWT FWT - - -
any of the indicators mentioned in Taxable FT FT
the NRA-ETB.
SPECIAL NRA-NETB: even GIT at 25% GIT at 25% FWT FWT - - -
considered as NETB they are FT FT
employed in OBUs, OPSC, MNCs
(Sec. 25 b to d, NIRC); “expats”
CORPORATION DC: corporation incorporated in Principal; Taxable NIT at 30% FWT FWT FWT From DC: 2% FT in 10% FT
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accordance with PH laws. It may or Taxable (CIT) Exempt lieu of NIT
may have foreign equity, regardless
of %.
RFC: incorporated in any law other Taxable Principal; NOT NIT at 30% FWT FWT - From DC: 2% FT in -
than PH laws; engaged in trade or Taxable Exempt lieu of NIT
business
NRFC: not engaged in trade or Taxable Principal; NOT GIT at 30% 30% FT FWT - From DC: - -
business Taxable 15% FWT
NOTE: A – catch all provision; all those not falling under B, C or D will fall under A unless exempted or excluded by law. Those income under B, C and D must be sourced in the PH.
RULE: All income ara taxable. Except those provided under the law as:
1. Exempted
2. Excluded (Sec. 32 b, NIRC)
DOUBLE TAXATION
1. Direct Duplicate Double Taxation (broad sense): acceptable; allowed but frowned upon; not illegal but the law provides the remedies to reduce the impact (e.g. tax credit)
2. Indirect Duplicate Double Taxation (strict sense): illegal; unconstitutional for being violative of the equal protection clause.
 Elements of Double Taxation in the strict sense:
i. Taxing twice
ii. Same subject matter
iii. Same taxable period
iv. Same kind of tax
v. Same purpose
CRITERIA IN DETERMINING SITUS OF INCOME

1. Compensation – where service is rendered; regardless of where payment is made or frequency of payment
2. Interest
a. On bank deposits
 If the bank that issued the interest is in the PH – w/in
 Otherwise – w/out
b. On loans, obligations, debentures, promissory notes
 If the debtor who paid the interest is a resident of the PH, then the interest income of the creditor is source within.
o ILLUSTRATION: Debtor X is:
A. RC – w/in
B. NRC – w/out
C. RA – w/in
D. NRA – w/out
E. DC – w/in
F. RFC – w/in
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G. NRFC – w/out
 If the debtor is a non-resident of the PH, the interest income paid to the creditor is source without.
3. Income from Real Properties, Rentals and Royalties
Rule: Lex Rei Sitei
a. Property located in the PH – w/in
b. Property located outside the PH – w/out
4. Dividends
a. Issued by DC – w/in
b. Issued by FC – w/in
 EXCEPT: if 3 years prior dividend declaration, FC earned income within the PH which is less than 50% of its total income – a portion of the dividends shall be treated as
income w/in.
o Pro-rata computation: (Income from PH/Total income) x Dividends declared by FC
o ILLUSTRATION:
A. XYZ Corp. (DC) – issued dividends of 100K to X, shareholder = dividend here is source w/in
B. XYZ Corp. (FC) – issued dividends of 100K to X, shareholder = dividend will be:
i. GR: w/in
ii. EXN: XYZ Corp. (FC) declared dividends of 100K to X in 2020
XYZ Corp. (FC) USA Principal Place of Business PH Branch
-Earnings:
2019 4M 1M
2018 7M 2M
2017 3M 1M
14M 4M
Here, the 4M PH earnings are less than 15% of the total 18M earnings
Pro-rated Computation: (4M/18M) x 100K = 22,222 is the portion of the dividends that will be considered as w/in. The remaining 77,778 is w/out.
KINDS OF INCOME TAX AND RATES - INDIVIDUAL

A. ALL INCOME
 Under the TRAIN law, 8% tax rate ONLY applies to SEP/SEI whose GR/GS does NOT exceed 3M in a year. The 8% must be applied to GR/GS AND the option to use 8% must be
made at the start of the year. Such choice is irrevocable until the end of the year.
 If you do not choose the 8% at the start of the year, the default rate is NIT (graduated rates applied to NI).
 If your GR/GS exceeds 3M, you have to apply the default rate of NIT. 8% tax rate is NOT available.
 If the choice of 8% is applicable, this is applied to the amount in excess of 250K of the GS/GR. However, this 250K exemption is not applicable to MIE because the 250K exemption
is equivalent to the NIT graduated rate first row as 0%.
 CIE can only use NIT graduated rates.
INDIVIDUAL GS/GR INCOME TAX VAT
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TAXPAYER RATE
CIE - NIT Graduated Rates No
SEI/SEP Not exceeding 3M NIT or No
8% applied to GS/GR No
Ratio: exempt for not exceeding 3M threshold
Exceeding 3M NIT Yes
MIE Compensation Part NIT No
-
Trade/Business Part NIT or No
Not exceeding 3M 8% applied to GS/GR No
Exceeding 3M NIT Yes
B. PASSIVE INCOME (DERIVED FROM PH SOURCES)

1. Interest on Bank Deposits
 If local bank – 20% FWT
 If foreign currency – 15% FWT
 In case of long-term deposit (time deposit) not pre-terminated for a period of 5 years – Exempt
Pre-terminate on the:
o 4th year – 5%
o 3rd year – 12%
o Less than 3 year – 20%
2. Royalties
 20%
Except:
o Literary and musical compositions – 10% preferential rate
3. Prizes & winnings
 These came from games of chance
 PCSO and lotto winnings:
o 10K and below – Exempt
o Exceeding 10K – 20% FWT
 Other prizes and winnings such as in casino or raffle
o 10K and below – forms part of NI subject to NIT; there is no exemption.
o Exceeding 10K – 20% FWT
4. Dividends
 Issued by DC – 10% FWT
 Issued by FC – subject to NIT because this is not derived from PH sources
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C. CAPITAL GAINS ON SALE OF SHARES OF STOCK (DERIVED FROM PH SOURCES)
 Requirements:
1. It must shares of a DC
2. It must be capital asset
3. Untraded/sale NOT coursed through stock exchange
 Rate: 15% FWT
 If shares of stock is of a FC, taxed under A (NIT)
 If shares of stock is held as ordinary asset, any gain on sale shall be taxed under A (NIT)
D. CAPITAL GAINS ON SALE OF REAL PROPERTY (DERIVED FROM PH SOURCES)

 Requirements:
1. It must be real property (land, building)
2. Located in the PH
3. Held as capital asset
4. Sold
 Rate: 6% FWT of the FMV (found in tax declaration) or GSP or Zonal Valuation at the time of sale, whichever is highest.
 If real property is located outside the PH, taxed under A (NIT)
 If real property is considered as ordinary asset, any gain on sale will be taxed under A (NIT)
 Involuntary sale:
o In expropriation proceedings, it still falls under this income D but the seller has the option to choose between:
1) 6% FWT or
2) NIT
Note: In reality, it is better to choose NIT because just compensation is equivalent to the FMV; hence, the income you got does not produce any premium to be considered as Net
Taxable Income.
o In foreclosure of REM, at the point of foreclosure, there is none CGT yet as well as during the foreclosure sale. CGT attaches and becomes due ONLY at the point of
consolidation of the title to the highest bidder who will be ultimately liable to pay the CGT.
 EXEMPTION FROM CGT; REQUISITES: (APPLICABLE TO ALL KINDS OF TAXPAYERS)
1. Sale of actual principal residence
2. 30 days from the sale, you inform the BIR that you are availing of the exemption
3. 18 months from sale, buy or build another actual principal residence
4. Avail of the exemption once every 10 years
5. Historical cost is considered in determining how much will be subjected or exempted from CGT of 6%
 Additional Notes on Exemption from CGT
1. In case of condo units which are residential in nature, CGT rule is also applicable.
2. If the lot owner is different from the house owner and both are sold at the same time, the house owner has the right to claim the exemption because of the actual residence
requirement.
3. If you own both the house and lot, you can apply for the exemption of both.
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4. If ancestral house and lot, the actual occupant/resident of the house shall be entitled to the CGT exemption but ONLY to the portion which pertains to his share in the
inheritance.
5. It is applicable to ALL kinds of taxpayers
 “Actual Principal Residence”: place where one is absent, he has the intention to return to.
 Aliens, by way of exception, are allowed to avail properties in the PH by way of:
1) Inheritance
2) Purchase of condo units
3) If you are formerly a Filipino citizen
ASSET CLASSIFICATION FOR TAX PURPOSES (Sec. 39, NIRC)

RULE 1: Determine asset classification
1. Capital Asset: asset other than ordinary asset
2. Ordinary Asset
a. Stock in trade
b. Inventory
c. Finished goods for sale
d. Property used in trade or business subject to allowance of depreciation
e. Real property used in trade or business of taxpayer
NOTE: We classify assets between capital and ordinary because capital asset will NOT have tax effect on you unlike in ordinary asset which will have tax effect as you use them and
forms part of operations.
RULE 2: In asset, even if its value depreciate or appreciate while you are using them, whether capital or ordinary, you do NOT have any income. Any increase in value to be considered income, it
must first be realized.
RULE 3: Once you sell the asset and you realized income or incurred a loss, there will be a corresponding tax consequence.
 To determine gains/losses: FMV at the time of sale must be the basis and NOT the historical/acquisition cost.
 If you sell it at a loss, there is no income tax but the government will still tax you with Donor’s Tax.
RULE 4: If asset sold is shares of stocks in a DC NOT traded through the local stock exchange, the corresponding sale falls under Income C above which is subject to 15% FWT.
RULE 5: If asset sold is real property held as capital asset, sale falls under Income D above which is subject to 6% FWT.
KINDS OF INCOME TAX AND RATES – CORPORATION

a. ALL INCOME
 Those coming from the primary and secondary purposes of the corporation’s operations
 30%
 For DC and RFC, tax base will be NI while for NRFC, it will be GI
b. PASSIVE INCOME
a. Local Currency/Peso: 20% FWT
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b. Foreign Currency Deposit in a local bank: 15%
c. Exemption on long-term deposits not pre-terminated within 5 years does NOT apply. Same with the rules on pre-terminated long-term deposits
2. Royalties (no literary or musical compositions)
a. Corporations cannot earn royalties on literary or musical compositions because they are not capable of making such. This only pertains to ordinary royalties subject to 20%
Corporation cannot have prizes & winnings because they can never win on one.
Dividends are not under Passive Income because it belongs to another classification of income.
c. CAPITAL GAINS ON SALE OF SHARES OF STOCK

 Same requisites as Individuals
d. CAPITAL GAINS ON SALE OF REAL PROPERTY

 Same requisites as Individuals
 The exemption from CGT of 6% does NOT apply to a corporation
 CGT on Real Property does NOT apply to RFC and NRFC because FC are not allowed to own real property in the PH
e. INTER-CORPORATE DIVIDENDS
 DC to DC: Exempt
 DC to RFC: Exempt
 DC to NRFC: 15% FT
f. MCIT
 2% on GI not GR/GS
 Imposed beginning the 4th year following the commencement of operations
 Provided that 2% tax on the GI > NIT on NI.
 MCIT is NOT applicable to NRFC.
g. IAET
 In addition to all kinds of taxes
 10% FT on all earnings which are retained beyond reasonable business needs
 IAET is NOT applicable to RFC and NRFC
EXEMPT DOMESTIC CORP. FROM NIT UNDER a (Sec. 30, NIRC)

 11 corporations listed under the law.
 The exemption ONLY pertains to income under a or those which they were able to receive pursuant to their main purpose or primary business operations
 Any other income not falling under a will be continued to be taxed as such
Under the Constitution and LGC 1991, the following are exempt from RPT:
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a) Charitable/Religious Institutions
 Charitable institutions, churches, mosques, convents, non-profit cemeteries, parsonages including land, building and improvement [REAL PROPERTIES] ACTUALLY,
DIRECTLY, EXCLUSIVELY (ADE) used for charitable, religious, educational purpose – Exempt from RPT
ILLUSTRATION:
PROPERTY OWNED BY HOME FOR THE AGED (CHARITABLE NON-STOCK, NON-PROFIT
CORP)
BLDG 1 BLDG 2
Rented Out to Mcdo, Jbee, KFC
BLDG 3 OFFICE LIBRARY
1. RPT (Basis: Constitutional provision)

 Bldg 1, 2, 3, Office, Library – Exempt under because ADE
 Rented out to Mcdo, Jbee, KFC – NOT Exempt because not ADE
2. Income Tax (Basis: Sec. 30 E, NIRC)
 They earn income by making Christmas cards w/ 1M income – NOT taxable because it is income “as such”
 Rentals from Mcdo, Jbee, KFC of 100K – Taxable under NIT a at 30%
3. They put their 1.5M earnings in bank which earned interest of 20K – Taxable under b at 20% FWT because it is an “activity conducted for profit regardless of disposition”; even if
this interest income is used for charitable purpose, it will not negate taxability.
4. Donor’s Tax/Estate Tax
 If X donates 2M to the Home for the Aged, it is income and sourced at within but NOT taxable under Sec. 32 B(3), NIRC – Exclusions from Gross Income
 Is it subject to Donor’s or Estate Tax? – there is NO Estate Tax (Sec. 87) or Donor’s Tax (Sec. 101) provided:
o 30% Restriction: NOT more than 30% of the gift is used for administration purposes by Home for the Aged, donee
 Is it deductible from GI of X, donor?
o If X is a CIE – NOT deductible
o If X is an SEP/SEI/MIE – deductible up to 10% of the taxable income prior to donation. If X is a corporation, rate is 5% (Sec. 34 H, NIRC)
b) Non-Stock Non-Profit Educational Institutions

 All revenues and assets of non-stock, non-profit educational institutions ACTUALLY, DIRECTLY, EXCLUSIVELY used for educational purpose – Exempt from taxes (RPT
and ALL internal revenue taxes) and duties (tariff and customs duties)
ILLUSTRATION:
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PROPERTY OWNED BY NSNP EDUCATIONAL INSTITUTION
BLDG 1 BLDG 2 BLDG 3

GY DOR
Rented Out to Mcdo, Jbee, KFC
M M
LIBRAR OFFIC PARKING CANTEE
Y E LOT N
1. RPT (Basis: Constitution)

 All parts except those rented out to Mcdo, Jbee and KFC – Exempt because of ADE
2. Income Tax
 Tuition Fee 2M – as long as ADE used, no income tax under Constitution
 Rentals 1M – as long as ADE used, no income tax under Constitution
 DLSU v. CIR: SC held that in case of NSNP, we apply the Constitution; hence, all types of income as long as it is ADE used for educational purpose, it shall be exempt
from tax. Summary of doctrines:
o (1) The exemption from tax of educational institution is constitutionally guaranteed.
o (2) Sec. 30, NIRC as far as NSNP educational institution is concerned is declared null and void.
o (3) Any type of income, all revenues of whatever kind shall not be subject to income tax as long as ADE used is substantiated by proof.
 Proof that income is ADE used by NSNP educational institution must be provided (AFS)
 Under the Constitution, interest income as long as ADE used – exempt
 DLSU v. CIR doctrine also applies here
 Same principles as above under Charitable/Religious Institutions
c) Proprietary Educational Institutions

1. RPT (Basis: LGC 1991)
 Property ADE used - Exempt under LGC 1991 Sec. 2,3,4
 Property not ADE used – Subject to RPT under LGC 1991
2. Income Tax (Sec. 27 B)
 Tuition Fee – Related Trade or Activity
 Rental Income – Not Related Trade or Activity
 Sec. 27 B – if the income from unrelated trade or activity does:
o NOT exceed 50% of total income – 10% preferential rate
o Exceeds 50% - 30% NIT rate
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 Same principles as above under Charitable/Religious Institutions
d) Government Educational Institution (Basis: Sec. 30 I, NIRC)

1. RPT
 Property is owned by the Republic AND beneficial use is for the gov’t – Exempt (Sec. 234 LGC 1991)
 Property leased out to Mcdo, Jbee, KFC – NOT exempt because the beneficial use is not for the gov’t
2. Income Tax
 Tuition Fee – “as such” hence no tax
 Rental Income – taxable because it is an activity conducted for profit, regardless of disposition; NIT at 30% under a
3. Interest Income on Bank Deposit
 Taxable because it is an activity conducted for profit, regardless of disposition; 20% FWT under b
 If X donates 2M to the Gov’t Educational Institution, it is income and sourced at within but NOT taxable under Sec. 32 B(3), NIRC – Exclusions from Gross Income
 Is it subject to Donor’s or Estate Tax? – No. The 30% restriction is NOT applicable when donation is made to the gov’t as it is considered as transfer for public use (Sec. 86
and 101, NIRC).
 Is it deductible from GI of X, donor?
o If X is a CIE – NOT deductible
o If X is an SEP/SEI/MIE – deductible in full provided that it is declared as a priority project of the gov’t. Otherwise, 10% (individual donor) and 5% (corporate donor)
restriction will apply.
e) Charitable Hospitals
 Apply the same rules on Charitable Institutions above
 If NSNP Charitable Hospital – apply the following rules:
o RPT – if ADE used, exempt. If not ADE, taxable (Constitution)
o St. Luke’s Medical Center v. CIR
f) Proprietary Hospitals
 Apply the same rules on Proprietary Educational Institutions
g) Governmental Agencies
 GR: Gov’t cannot tax itself
 Specific Rules:
i. Income of Gov’t Agencies from exercise of governmental function – not taxable (Sec. 32 B, misc. item #7). It is considered as an item of exclusion from computation
of GI and therefore, not taxable.
ii. Income of Gov’t Agencies from exercise of proprietary function – taxable at 30% NIT rate.
iii. Real properties owned by the Republic or any of its agencies or instrumentalities – Exempt from RPT EXCEPT when the beneficial use pertains to a non-exempt
entity.
iv. Donation in favor of the gov’t:
 Not taxable because it is an item of exclusion from GI
 For purposes of Donor’s/Estate tax, gifts are not subject to such and the 30% restriction rule does not apply.
 Gifts; deductibility on donee:
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i. CIE – not deductible
ii. SEI/SEP/MIE – deductible in full provided that the project-recipient was declared a priority project. Otherwise, 10% or 5% restriction on
deductibility applies.
v. GOCCs
 Treated as ordinary DC. They are subject to tax EXCEPT:
a. SSS
b. Philhealth
c. Pag-Ibig
d. PCSO
INCLUSIONS & EXCLUSIONS

G.R: All income are taxable
EXN: (1) Exempted by law; (2) Excluded by law from computation of GI
Inclusions (Sec. 32 A) – CG2DIR2AP3

1. Compensation for services rendered including fees, commissions, and similar items
 CIE – there is an employer-employee relationship; there is net income but without VAT.
TYPE OF EMPLOYEE BASIC PAY/TAX OT, HP, HAZARAD PAY, DE MINIMIS BENEFIT OTHER
NSD BENEFITS
Limit In Excess 90K Limit In Excess of 90K
Managerial/Supervisory Compensation; NIT - Exempt Exempt FBT; If not FBT,
NIT
Will become Other Benefits
Rank & File Compensation; NIT Added to Basic Pay; NIT Exempt Exempt NIT
MWE Statutory Min. Wage; Exempt Exempt Exempt Exempt NIT
 If the other benefits is given to you and furnished by the employer:
o For the convenience of the employer; OR
o Necessary to the trade/business of the taxpayer
NO tax!
2. Gross Income from exercise of profession or other business
 SEP – no employer-employee relationship; Option between NIT or 8% and there is VAT if you’re GR/GS > 3M.
3. Gains derived from dealings in property – e.g. gains derived from sale of ordinary assets (shares and real properties)
4. Dividends
5. Interest on (1) loans, debentures and other obligations; and (2) bank deposits
6. Rentals
7. Royalties
8. Annuities
9. Prizes & Winnings
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10. Pensions
11. Partner’s Distributive Share in GPP
 General Professional Partnership (GPP): established exclusively for the exercise of common profession of partners and no part of income is derived from trade or business. GPP is not
subject to tax.
 General Co-Partnership (GCP): Any partnership other than GPP
Exclusions (Sec. 32 B)
These are excluded by way of deductions. They are still declared as part of income and later on included by way of deductions.
1. Proceeds of life insurance policy received by heirs or the taxpayer
 However, the interest on the proceeds shall form part of GI and subject to tax
2. Return of premiums
 Just a return of capital; hence, no tax
3. Gifts, Bequests, and Devices
INCOME TAX DONOR’S/ESTATE TAX
No tax Subject to tax
Except:
1. In favor of Charitable, Religious, NSNP
Educational Institutions – subject to 30%
restriction
2. In favor of Gov’t – In full
Note: If the property donated realizes income, such income is included in GI and taxable but the property donated is the one not subject to tax.
4. Income exempt via treaty
5. Compensation for injuries or sickness
 Payment or reimbursement due to reparation of damage (actual damages) – not considered as an income; not taxable
 Moral, exemplary, nominal damages – taxable
6. Retirement Benefits & Pensions
 All retirement benefits are no tax
PRIVATE SECTOR GOV’T SECTOR
A. With private retirement plan ALL retirement benefits and pensions are NOT subject to tax
Requirements:
1. At least 50 years of age
2. Private retirement plan was approved by BIR
3. Rendered continuous service for 10 years
4. No part of the fund is used by the employer for any purpose other than for the benefit of the employees
B. No private retirement plan
Requirements:
1. At least 60 years of age
15
2. Rendered continuous service of 20 years
 Resignation: financial assistance given by employer – taxable
 Dismissal:
o without cause; reinstatement: backwages and moral damages – taxable; atty’s fees and cost of suit – not taxable EXCEPT when the award is more than the actual expense, the
excess shall be treated as income.
o without cause; in lieu of reinstatement: separation pay – not subject to tax for causes beyond the control of the employee; backwages, moral, exemplary damages – taxable; atty’s
fees and cost of suit – not taxable EXCEPT when the award is more than the actual expense, the excess shall be treated as income.
o Installation of labor saving device, retrenchment, redundancy, automation and severe business losses: separation pay – not subject to tax because for causes beyond the control of
the employee
7. Miscellaneous Items
1) Income derived by foreign gov’t – interest paid to foreign gov’t by PH gov’t due to debts
 Ratio: International Comity
2) Income derived by the Gov’t or its political subdivisions
3) Prizes & Awards
 Not in games of chance
 Made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement ONLY if:
o Recipient did not actively participate to join the contest; AND
o Winner is not required to render future service
4) Prizes & Awards in sports competition
 Awards sanctioned by the National Sports Commission
th
5) 13 month pay and Other Benefits
 SSS, GSIS, Gov’t Remittances
 Contributions to labor unions
ALLOWABLE DEDUCTIONS (AD)

TAXPAYER KINDS OF KINDS OF IT/RATES (Sec. 24)
TAXPAYER A – ALL B– C – CG on SS D – CG on RP E – Inter-corp. Div
INCOME PASSIVE
INDIVIDUALS RC NIT or 8% FWT -
-CIE NRC -
-SEP
-SEI RA -
-MIE NRA-ETB -
NRA-NETB GIT at 25% FT FWT -
SPECIAL NRA-NETB -
CORPORATIO DC NIT at 30% FWT FWT From DC: Exempt
N
16
RFC - From DC: Exempt
NRFC GIT at 30% FT FWT - From DC: 15%
FWT
RULES:
1. ONLY those taxed at NIT are with AD. No deductions for NRA-NETB and NRFC
2. FWT or GIT – no deductions
3. Purely CIE – no deductions
 Personal and Additional exemptions are already repealed in the TRAIN law
4. Kinds of Deductions
 OSD – Sec. 34 L, NIRC
 Itemized Deductions – Sec. 34, NIRC
Both are available to individuals and corporations. These can ONLY be used against Income from Trade/Business/Exercise of Profession.
5. If the option of 8% tax rate is chosen – no deduction allowed
INDIVIDUAL GS/GR INCOME TAX VA PERCENTAGE DEDUCTIONS

TAXPAYER RATE T TAX
CIE - NIT Graduated Rates No No -
SEI/SEP Not exceeding 3M NIT or No Yes OSD/ID
8% applied to GS/GR No No - (entitled to 250K limit)
Exceeding 3M NIT Yes No OSD/ID
MIE Compensation Part NIT No No -
-
Trade/Business Part NIT or No Yes OSD/ID
Not exceeding 3M 8% applied to GS/GR No No - (NOT entitled to 250K limit)
GS/GR INCOME TAX RATE VAT PERCENTAGE DEDUCTIONS

TAX
CORPORATION
Not exceeding 3M NIT No Yes OSD/ID
OSD COMPUTATION
GR/GS XX
Less: COS (XX)
GI XX
Multiply: OSD Rate 40%
17
OSD Amount XX
Hence, 60% of your GI = TNI x Tax Rate% = Tax Due

Note: ORs NOT needed to substantiate OSD.
ITEMIZED DEDUCTIONS COMPUTATION

-Only applies to NIT system
GR/GS XX
Less: COS (XX)
GI XX
Less: AD (XX) —> EITLBD2CPR
TNI XX
Multiply: Tax Rate XX%
Tax Due XX
Less: TC/CWT (XX)
Tax Payable XX
Requirements of ID:
1) Necessary in trade or business;
2) Reasonable in amount; AND
3) Actually paid/incurred
If one of the above is absent, it is an UNAUTHORIZED deduction.
Itemized Deductions (EXCLUSIVE LIST; Sec. 34, NIRC)

1) Expenses
 Reasonable allowance for salaries and wages including, OT, HP, HazPay, NSD, DMB
 Reasonable allowance for utilities
 Rentals – provided that the lessee does not acquire any interest other than a possessor
o If rent-to-own agreement, where a lessee acquires interest other than mere possessor, claim of rentals as AD is not allowed.
 Purchase of Real Property/Personal Tangible Property – CANNOT be claimed as expense. It is considered as ordinary asset subject to depreciation (the purchase is considered as capital
expenditure)
 Marketing expenses –
o To maintain the sales are in the nature of goodwill: NOT allowed as deductions (considered as capital expenditure);
o To increase sales – allowed as deductions because this is considered as marketing collaterals to boost sales.
 Expenses contrary to law, morals, public policy, customs or tradition – e.g. bribe money; NOT allowed as ID whether business is legal or illegal.
2) Interest on loans
 Deductible on the part of the debtor
18
 The proceeds of the loan must be used on the trade/business
3) Taxes
 RPT on land and building of the principal place of business
 Any tax refund that was previously deducted will be considered as part of GI in the year of recovery (Tax Benefit Rule)
4) Casualty Losses
 Requirements:
o Arises from theft, robbery, fire, storm, shipwreck, embezzlement; AND
o Loss is not compensated by insurance
 In case of loss of property, the amount of claim of loss must be the book value of the property.
o Subsequent recovery of the property after claiming the loss as deduction, apply the Tax Benefit Rule.
5) Bad Debts
 Deductible on the part of the creditor
 Requisites:
1) Incurred in connection to trade or business of creditor (creditor must be engaged in the business of lending)
2) Determined to be worthless and completely charged off
 Tax Benefit Rule – subsequent recovery of bad debt is considered as part of GI in the year of recovery.
6) Depreciation
 Real Property Depreciation Period – 15 to 25 years
 Personal Tangible Property Depreciation Period - 5 years
7) Depletion
8) Charitable Contributions
DONEE DONOR/% OF AD RESTRICTION
Charitable Institution Individual – up to 10% of the taxable income PRIOR to this deduction; whichever is LOWER
Religious Institution Corporation – up to 5% of the taxable income PRIOR to this deduction; whichever is LOWER
NSNP Educational Institution
Government Can be deducted in FULL provided it is for priority project of the gov’t.
Otherwise, 5% or 10% restriction is applicable
9) Pensions
 Contributions to private retirement plan of the employees made by the employer.
 Life insurance premium for all employees paid by employer – CANNOT be claimed as deduction because this is NOT a regular business expense
10) Research & Dev’t
 Professional and Research & Dev’t fees paid for the conduct of research or feasibility studies concerning the business.
Notes:
 It must be substantiated with ORs or documented. Absence of which, the expense will NOT be allowed.
Who are NOT entitled to any form of deductions?

19
 CIE
 NRA-NETB
 NRFC
 If the income belongs to Income B, C, and D (whether taxpayer is individual or corporation)
VALUE-ADDED TAX
 Form of indirect tax; passed-on tax
 It covers the following:
o Sale of goods in connection w/ trade/business
o Sale of service in connection w/ trade/business
o Importation of goods
 Act of importation that is subject to VAT. Subsequent selling of such will be subjected to another VAT.
 12%
 If you are the seller = output vat; buyer = input vat
 Output vat less input vat = vat payable (excess output vat)
 If input vat > output vat, credit the excess input for the succeeding quarters
 You CANNOT claim input vat if you are NOT VAT-registered.
 If your GR/GS > 3M and you did not pass on the vat to your buyers, the law will presume that you have collected such from the buyer.
Zero-Rated VAT
 Vatable but the rate is 0.
 Applicable to sale of goods and service and export sales. Importing is not included; it is always subject to 12% vat
 Transaction is not subject to vat at all stages
 Input vat allowed to be credit against output vat
 Any excess input vat can be subject to tax refund
VAT-Exempt Transactions
 Transaction is not subject to vat only at a particular stage
 Input vat NOT allowed to be credited against output vat
 These are the following prominent enumeration (Sec. 109 BB):
1) Sale of goods in the original state (e.g. fish)
2) Rentals of apartment units NOT exceeding 15K.
3) GR/GS do NOT exceed 3M
 You do not need to be vat-registered. However, you are still liable to other percentage tax of 2% of GS/GR.
4) Sale of property NOT exceeding 3M
20
DONOR’S TAX
 Applicable to individuals and corporations
 Inter vivos: transfer which take effect during the lifetime of the donor and donee
 Basis:
o Real Property – FMV or assessed value or zonal valuation, whichever is highest at the time of gift
o Personal Property, tangible or intangible – FMV at the time of gift
o Shares of stock – value of corporation divided by number of shares of stock to determine the price per stock donated.
 It is computed based on calendar year (January to December)
o Cumulative reporting for every subsequent donation within the year subject to deduction of previous donor’s tax paid earlier within the same year.
 Gratuitous; no consideration
 250,000 – gift free from donor’s tax (cumulative amount during the calendar year)
 6% of the basis of the value listed above
 Formula: Gross Donation - Authorized Deductions = Taxable Net Gift (in excess of 250K) x 6% = Tax Due
 Taxability depends on the location of the property
 GR: In determining situs of intangible personal property, they follow the domicile of the owner (Mobilia Sequitur Personam)
o EXN: Sec. 104 – shares, obligation, or bonds issued by corporation organized or constituted in the PH, shall be considered to be situs within.
 EXN to the EXN: Reciprocity Rule
 If you sell property OTHER THAN REAL PROPERTY and when the FMV > consideration, the difference will be deemed a gift and shall be subject to donor’s tax.
o EXN: if sale is made in the ordinary course of trade or business, it will be considered as adequate and NOT subject to donor’s tax (TRAIN law)
o Ordinary course of business, requisites:
 Bona fide transaction
 At arm’s length
 Free from donative intent
 Political/Campaign Contributions; Requirements must concur to be considered official:
o Gift is for campaign purposes
o Within official campaign period
o Subject to 5% CWT
o SOCE filed by candidate whether winning or losing
Failure to meet any of the above requirement, everything will be subjected to donor’s tax in excess of the 250K exemption
DONORS DONOR’S TAX? (Sec. 106, NIRC) ALLOWABLE

(INDIVIDUAL/CORP) DEDUCTTIONS: IF DONEE
PROPERTY PROPERTY GOV’T EXEMPT INSTITUTIONS
WITHIN WITHOUT
RC Yes Yes Deductible in full subject to 30% limitation requirement on administrative
Deductible in full
NRC Yes Yes expenses to be used by donee.
21
RA Yes Yes
NRA Yes No
ESTATE TAX
 Applicable to Individuals
 Mortis causa transfers
 NO more requirement for filing Notice of Death (TRAIN law)
 Period to pay: 1 year from death (TRAIN law)
 Basis:
o Real Property – FMV or assessed value or zonal value, whichever is higher at the time of death
o Tangible Personal Property – FMV at the time of death
o Intangible Personal Property – FMV at the time of death
 Shares of stock – value of corporation divided by number of shares of stock to determine the price per stock at the time of death
 Taxability depends on the location of the property
 6%
 Formula: Gross Estate – Authorized Deductions = Taxable Net Estate x 6% = Tax Due
 No 250K exemption
 Gross Estate: value of all properties at the time of death whether real or personal
 To determine situs of the property: same as above in donor’s tax (Sec. 104, NIRC)
 Gross Estate (GE); Inclusions: DT2RP3
o Decedent’s Interest
o Transfer for Insufficient Consideration
 Transfer happened during the lifetime of the decedent which is at the same time in contemplation of death or revocable or property passing under general power of
appointment, you need to include in your Gross Estate the value of the property at the time of death less consideration paid.
o Transfer in Contemplation of Death
 You are still alive and you sold the property because you know you are about to die.
o Revocable Transfers
o Property Passing Under General Power of Appointment
o Proceeds of Life Insurance Policy
 Rules:
1) If the designated beneficiary is himself, estate, executor or administrator whether revocable or irrevocable – include in the GE
2) If designated beneficiary is other than those in no. 1 AND revocable – include in GE
3) If designated beneficiary is any person other than no. 1 AND irrevocable – excluded from GE; hence, exempt from estate tax
o Prior Interests
 RULE: Degree of Control – if you have an interest, right, ownership, or control of the property at the time of your death, it is included in the computation of the GE.
 Allowable Deductions (AD):
22
o Unpaid Mortgage
 Debtor is the decedent
 Add the value of the property subject to mortgage in the GE then deduct the unpaid mortgage
 If NRA, the deduction will only be a portion of unpaid mortgage in proportion of the property located in the PH
o Unpaid Taxes
 Priority claim of the gov’t upon liquidation of estate
o Casualty Loss
 If you die and within 1 year from death, a casualty occurs, it can be claimed as deduction from GE BUT for purposes of income tax, you can no longer deduct it.
o Claims Against the Estate
 Debtor died
o Claims Against Insolvent Persons
 Creditor died
 Add the credit to the GE first then deduct the uncollectible credit
o Transfer for Public Use
 In case of NRA, deductible in full
o Conjugal Share of the Surviving Spouse
 For NRA, deductible in full BUT ONLY to the assets located in the PH
o Standard Deduction
 5M – RC, NRC, RA
 500K - NRA
o Family Home
 10M
 Not applicable to NRA
o Vanishing Deduction
 Property previously taxed
 Allowed if and ONLY if located within the PH
 Previous Estate of Decedent —> Present Decedent is entitled to claim the VD.
 How Much? If the previous decedent died before present decedent within:
1) 0-1 year – 100%
2) 1-2 years – 80%
3) 2-3 years – 60%
4) 3-4 years – 40%
5) 4-5 years – 20%
6) 5 years and above – 0% (no longer allowed deduction)
o Retirement Benefits
 Add the RB to the GE first before deducting it
Note: Funeral, Judicial, and Medical Expenses are NO longer deductible (TRAIN law)
23
DONOR’S TAX vs. ESTATE TAX

DONOR’S AD; DONEE ESTATE TAX? GROSS AD
DECEDENT
TAX? (Sec. 106, ESTATE
DONORS
NIRC) (Sec. 85)

(I/C)
(I)
W/IN W/ GOV EXEMPT W/IN W/ UM UT CL CAE CAIP TP CS SD FH VD RB
OUT INST. OUT U of
SS
RC Yes Yes RC Yes Yes Yes Yes Yes Yes Yes Yes Yes 5M 10M Ye Yes
s
NRC Yes Yes NRC Yes Yes Yes Yes Yes Yes Yes Yes Yes 5M 10M Ye Yes
Deductible in
Deductible See Inclusions s
full subject to
RA Yes Yes in full RA Yes Yes above Yes Yes Yes Yes Yes Yes Yes 5M 10M Ye Yes
30% limitation
s
NRA Yes No NRA Yes No Proportion Proportion Proportion Proportion Proportion Yes Yes 500 No Ye No
* K s
* - Only with respect to conjugal assets located in the PH.
REMEDIES (NIRC & TRAIN)

ADMINISTRATIVE PROCESS JUDICIAL PROCESS
TAXPAYER BIR TAXPAYER BIR CTA DIVISION (Appellate CTA EN BANC SC
Return + Amended Return, if Assessment (Process) Protest – filed within 30 days 1. Deny Jurisdiction) Losing party in the MR/MNT Losing party in the CTA En
any 1. LOA – Letter of Authority to from receipt of FAN 2. Grant  30 day period to may file an appeal within 15 Banc may file an appeal to the
 Good Faith (GF) investigate. BIR can require (condition sine qua non; non- 3. Partly Deny/Grant appeal (sine qua non days from receipt of decision SC within 15 days from
 Fraud/Bad Faith you to submit documents extendible period) 4. Sit on It (Inaction) – 180 period) receipt of decision.
(F/BF) 2. PAN – Preliminary A. Motion for Reconsideration days from receipt of complete  ONLY the taxpayer
 No Return Assessment Notice. Taxpayer is – no additional documents protest. can appeal to the
o BIR has given 15 days to reply. B. Motion for Reinvestigation CTA Division
the power  PAN NOT required: - with additional documents to Incomplete protest: BIR will because what is
to file a 1. Involves excise tax be submitted require to submit within 60 being appealed is the
return on 2. Mathematical error days the lacking documents BIR’s decision
your in the return (BIR will not specify what  CTA Decision:
behalf 3. Involves documents) after filing 1. Grant
discrepancy in protest. In this case, the 180- 2. Deny
withholding tax per period will be counted from 3. Partly Grant/Deny
return vs. per amount the receipt of the BIR of the
remitted. submitted documents. Sine qua non
4. Etc. requirement: The
3. FAN – Final Assessment Decision of BIR will be sent losing party must file
Notice in a Final Letter of Demand within 15 days from
 Requisites of a valid (FLD). receipt of prejudicial
FAN: decision:
1. In writing – no In case of inaction of the BIR, 1. MR; or
form required the taxpayer MAY: 2. MNT
2. Addressed to the 1. Appeal to CTA Division Failure to file
24
taxpayer – addressed within 30 days after the MR/MNT makes the
declared in the return expiration of 180-day period; CTA’s decision final
or and executory.
If you change your 2. Wait for the decision then
address, it is your file an appeal to the CTA There is an
duty to update your Division within 30 days from MR/MNT in case of
records in the BIR. It receipt of decision (even protest appealed to
cannot be used as a beyond the 180-day period) courts because here,
defense for non- CTA Division hears
receipt of FAN if BIR and tries the case.
sent it to your old
address.
3. Providing the basis

in fact and in law the
amount of tax due
Absence of which
makes the FAN null
and void.
4. Providing for
amount of tax due
(breakdown)
5. Demand to pay
6. Due date to pay tax
7. Signed by duly
authorized
representative
8. Validly served to
taxpayer
Kinds of Service:
A. Personal Service
B. Substituted Service
to a person with
sufficient discretion
There must be
witness (e.g. brgy
official)
If the taxpayer
/person with
sufficient discretion
refuses to accept, the
25
one serving must note
such as proof that
indeed service has
been made.
If corporation:
A. Follow ROC on
service of summons
B. In case of absence
of any duly
authorized persons to
receive – serve to any
person in the
principal office
indicated in the BIR
registration.
It is NOT necessary that the

taxpayer received the FAN
within the prescriptive period.
What is important is that the
BIR issued the FAN before the
expiration of the prescriptive
period.
Failure to follow this process is

denial of due process; hence,
the FAN is null and void.
NOTES
Deadline of Filing: Prescriptive Period to Assess:
CIE – April 15 1. GF filing before due date – 3
SEI/SEP/MIE – Quarterly years from due date
Returns 1 (May 15), 2 (Aug GF on due date – 3 years from
15), 3 (Nov 15) and Annual due date
Return (Apr 15) GF beyond due date – 3 years
CORP – Quarterly Return 1, from actual date of filing
2, 3 (60 days following the 2. F/BF filing – 10 years from
close of the quarter) and discovery
Annual Return (Apr 15, if 3. No return (BIR can: (1) file a
calendar year; on or before the return for you; or (2) issue a
15th day of the 4th month FAN)
following the close of the -10 years from discovery
fiscal year, if fiscal year) 4. Waiver – when periods above
CGT – 30 days from sale is about to expire and the BIR
8% ITR – Quarterly 1, 2, 3 has not yet issued a FAN, BIR
and Annual Returns (same as may require taxpayer to execute
26
SEI/SEP/MIE) a waiver. It is a contract
VAT – Quarterly 1, 2, 3 and between taxpayer and BIR to
Annual Return allow BIR to issue FAN beyond
prescribed periods.
Donor’s – 30 days from gift  Strict requirements
Estate – 1 year from death for a valid waiver:
1) In writing
Failure to File on the 2) Signature of
Deadline; Effect: taxpayer
1. 25% penalty or 50% penalty AND date
in case of fraud of
2. 12% interest (double the execution
legal interest rate) are
Computed on a daily basis indicated on
from day of delay the face of
waiver
3) Signature of
BIR officer
AND date
of
acceptance
are
indicated on
the face of
waiver
4) Duly
notarized (3
copies)
 Failure to comply
with any of the above
requirements makes
the waiver invalid.
 Waiver must be
executed before the
prescriptive period.
Hence, dates of
execution and
acceptance must be
before the expiration.
 All national taxes are self-assessed taxes; taxpayer computes for his own tax due.
 Return: verified statement prepared by the taxpayer providing for material information relevant to the kind of tax you are paying for.
 Pay-as-you-file system
 Substitute Filing: if purely CIE ONLY have one employer for the entire year, it is the employer who files the return in behalf of the employee. (Deadline of filing: February 28)
 Amended Return – can be filed within 3 years from the date of the filing of the original return provided that there is NO notice of investigation is received by the taxpayer
27
 Where to File: in your respective RDOs
 Wrong venue = as if you did not file any return nor pay any tax at all despite acceptance by BIR.
 The right of the gov’t to collect is independent of the procedure of protest above. NO injunction rule can lie against collection.
COLLECTION
Administrative
 Notice of levy
 Warrant/Distraint
 Compromise
 Forfeiture
 Garnishment
Judicial
 Civil case – regular courts have jurisdiction; filed by BIR
o RTC (original) – within MM, principal tax due > 400K; outside MM, > 300K —> appeal to CTA division within 30 days —> CTA en banc —> SC.
o MTC – within MM, principal tax due < 400K; outside MM, < 300K —> appeal to RTC (appellate) —> CTA en banc within 15 days —> SC.
o CTA – exclusive original jurisdiction when principal tax due is 1M and above exclusive of interest, penalties, and surcharges —> SC
 Criminal case
o Kinds
1. Does not result in tax deficiency – jurisdiction of the court is determined on the PRESCRIBED penalty. CTA does NOT exercise jurisdiction in this case.
2. Result in tax deficiency – becomes mode of collection of BIR; information to be filed by the fiscal shall be filed depending on the jurisdictional amount of the courts.
 CTA may exercise exclusive original jurisdiction when the tax deficiency is 1M and above exclusive of interest, penalties, and surcharges.
Periods of Collection
PERIOD TO COLLECT PERIOD TO COLLECT MAY BE
SUSPENDED
With FAN 5 years from receipt of FAN Grounds (Sec. 222, NIRC)
Without FAN (in cases of F/BF filing or non-filing) 10 years from discovery
REFUND
1. Ordinary Claim (Sec. 229, NIRC)
Grounds (exclusive):
 Illegally Assessed
 Illegally Collected
 Erroneously Assessed
 Erroneously Collected
Stages:
28
ADMINISTRATIVE JUDICIAL CLAIM
CLAIM
TAXPAYER TAXPAYER
Filed 2 years from payment Filed within the SAME 2-year period or within 30 days from receipt of BIR on the refund, whichever is EARLIER.
Failure to file within the same 2-year period makes the decision of the BIR on the claim final and executory.
2. Refund of Excess Input Vat in Zero-Rated Transaction (Sec. 112, NIRC)

Stages:
ADMINISTRATIVE CLAIM JUDICIAL CLAIM
TAXPAYER TAXPAYER
Filed 2 years from close of quarter when the 0% vat transaction occurred. If the decision of BIR is denial, the taxpayer MUST file judicial claim for refund to CTA
Division within 30 days.
BIR
Upon receipt of claim, BIR is now required to decide within 90 days (TRAIN Law). The 120-day The losing party in the decision of the CTA Division may file an MR (condition sine qua
inaction period of the BIR in the old rules (prior TRAIN) is already repealed. non) then appeal to CTA En Banc within 15 days, then to SC within 15 days.
Between CTA En Banc and SC, MR is NOT required. It is only required if the appeal is
from CTA Division to CTA en banc.
29

Lumbera The Tax Queen

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Ollivander’s Notes

“You’re a lawyer, Harry” - Hagrid

Cases: Cases: Cases:

Basic Tenets in Tax:

NATIONAL INTERNAL REVENUE CODE AS AMENDED BY TRAIN LAW

 Act of earning is already subject to Income Tax.

Gross Sales/Receipts. XXX

4. To determine if it is taxable income, ask:

On the other hand, if you are a RC

CRITERIA IN DETERMINING SITUS OF INCOME

KINDS OF INCOME TAX AND RATES - INDIVIDUAL

INDIVIDUAL GS/GR INCOME TAX VAT

B. PASSIVE INCOME (DERIVED FROM PH SOURCES)

D. CAPITAL GAINS ON SALE OF REAL PROPERTY (DERIVED FROM PH SOURCES)

ASSET CLASSIFICATION FOR TAX PURPOSES (Sec. 39, NIRC)

KINDS OF INCOME TAX AND RATES – CORPORATION

c. CAPITAL GAINS ON SALE OF SHARES OF STOCK

d. CAPITAL GAINS ON SALE OF REAL PROPERTY

EXEMPT DOMESTIC CORP. FROM NIT UNDER a (Sec. 30, NIRC)

Rented Out to Mcdo, Jbee, KFC

BLDG 3 OFFICE LIBRARY

1. RPT (Basis: Constitutional provision)

b) Non-Stock Non-Profit Educational Institutions

BLDG 1 BLDG 2 BLDG 3

1. RPT (Basis: Constitution)

c) Proprietary Educational Institutions

d) Government Educational Institution (Basis: Sec. 30 I, NIRC)

INCLUSIONS & EXCLUSIONS

Inclusions (Sec. 32 A) – CG2DIR2AP3

ALLOWABLE DEDUCTIONS (AD)

INDIVIDUAL GS/GR INCOME TAX VA PERCENTAGE DEDUCTIONS

GS/GR INCOME TAX RATE VAT PERCENTAGE DEDUCTIONS

Hence, 60% of your GI = TNI x Tax Rate% = Tax Due

ITEMIZED DEDUCTIONS COMPUTATION

Itemized Deductions (EXCLUSIVE LIST; Sec. 34, NIRC)

Who are NOT entitled to any form of deductions?

DONORS DONOR’S TAX? (Sec. 106, NIRC) ALLOWABLE

DONOR’S TAX vs. ESTATE TAX

NIRC) (Sec. 85)

REMEDIES (NIRC & TRAIN)

3. Providing the basis

It is NOT necessary that the

Failure to follow this process is

2. Refund of Excess Input Vat in Zero-Rated Transaction (Sec. 112, NIRC)

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