INCOME TAXATION

General Principles

 Income derived from sources within or without the Philippines by

Filipino citizens
 Non resident citizen is taxable in income derived from sources
within the Philippines
 OFWs income are non taxable except income from sources within
the Philippines
 Income of aliens are taxable from sources within the Philippines
 Domestic corporations: income within and without the Philippines
 Foreign corporations: income derived from sources within the
Philippines.
Income

 All wealth which flows into the taxpayer other than as a mere
return of capital.
Income tax

 Tax on the net income or the entire income realized in one

taxable year.
Functions of Income Tax

 Provide large amounts of revenues

 Offset regressive sales and consumption taxes; and together with
estate tax
 Mitigate the evils arising from the inequalities in the distribution
of income and wealth which are considered deterrents to social
progress, by a progressive scheme of taxation.
Nature and Purpose

 Generally regarded as excise tax. It is a tax on the right to earn

income by an individual or entity for governmental needs
 Self-assessing or self-computed
 Imposed to raise revenue
Classification of Taxpayers

 Individua
 Corporations
 General Partnership
 Estate and trusts
Taxable Income

 The amount of the income upon which the tax rate prescribed by
law is applied to get the amount of income tax payable.

- The taxabale income is defined in terms of how it is determined,

i.e., it means the pertinent items of gross income specified in the
Tax Code less the deductions, if any, including personal and
additional exemptions.
Gross income

 All income of whatever kind and derived by a taxpayer from

whatever source but not including exempt income and items of
gross income subject to final tax.
Items of Gross Income

 Compensation for services in whatever form paid including salaries, commissions,

and similar items
 Gross income from conduct of trade or business or exercise of a profession
 Gains derived from dealings in property
 Interests
 Rents
 Royalties
 Dividends
 Annuities
 Prizes and winnings
 Pensions
 Partner’s distributive share from the net income of the general professional
partnerships