PREFERENTIAL TAX
SENIOR CITIZENS LAW AND
MAGNA CARTA FOR DISABLED PERSONS
EXEMPT CORPORATIONS
AND FISCAL INCENTIVES
Compensation as MWE – Exempt from income tax
All establishments
Goods and services
Exclusive use
Export Enterprises – manufacturing, assembling, processing
Deductible from GI/GS/GR:
HIGHER
Actual discount granted
Sales discount not less than statutory rate
Goods
Domestic Enterprises – edi yung hindi export :)
Goods and services
Medical, dental, medicines, etc.
VAT on fare – land, air, sea
Hotel, lodging place, theater, cinema
Funeral and burial services
Special Corporate Income Tax [SCIT or Gross Income Tax]
↳ In lieu of ALL national and taxes (except RPT - developers)
*activities w/in ECOZONE
*only to registered activities
Flu, pneumonia vaccines
Basic necessities (exclude pastry & cakes)*
Prime commodities (meats, groceries)*
5%
Net of sales discounts, returns, allowances
Less of cost of sales or direct costs
Direct Costs:
↳ Direct salaries, wages and labor expenses
↳ Raw materials used, WiP, Finished Goods sold
↳ Supplies and fuels used
↳ Depreciation – related to registered activity
↳ Rent and utility charges
↳ Finance charge – not capitalized to fixed assets
La
N st
O M
T
i
FO nu
R te
SA by
LE H
e
Professional fees:
Physicians, medical, dental
Health workers (n/a to PWD)
Hotel, lodging place, theater, cinema
Funeral and burial services
Only one discount – if BOTH Senior citizen and PWD
↓
Promotional
Higher discount
SC & PWD Discount
*Max of P 1,300 per week [so 1,300 x 5%]
*No VAT exemption if goods are already discounted
Senior Citizens
 Resident – 60 years old and above
 Dual citizenship – atleast 6 months residency
Discounts and Exemptions ONLY for Senior Citizens:
↳ 5% discount for monthly water and electricity bills
! Registered in the name of senior citizen
! Max 100kWH(E); 30 cubic meters(W)
! Per household, not per senior citizen
↳ 50% water, electricity and telephone
! Consumed by Senior Citizen Centers
! Administered by Government or NGO
! For abandoned, homeless senior citizens
Deduction Incentives for Establishments
Employment atleast 6 months
15%
SC’s income does not exceed poverty level
↳ of the amount paid as salaries and wages
Sales discounts
Promotional discount
5% on water and electricity
20% discount
50% water, electricity, telephone
↳ Senior Citizen Centers
Persons with Disability
 Any age, Filipino citizen
 Restriction on abilities [mental, physical, sensory]
3% National
2% Local Government
Gross Income
5%
Service
le
s
VAT Exempt
IT, BPO Tourism
Logistics and Warehousing
Agro-industrial Manufacturer
Eco-Zone Development Ops
Facility and Utility Providers
70% of sales/services
are exported
rc
u
20% Discount
BOI – Registered Enterprises
Enhanced Deductions [additional deductions]
10% - buildings and structures
↳ Depreciation
20% - machineries and equipment
► Not including admin and support services
↳ Labor expense – 50% (not including admin, managerial)
↳ Domestic Input – 50% - directly used for registered export
↳ Power expense – 50% - for directly related activities
↳ Reinvestment allowance – Manufacturing RBEs
► Reinvested undistributed profits under SIPP
► Max of 50% within 5 years
↳ R&D – 100% [2x] – for directly related activities
► Only for salaries of Filipino employees; and
► Local organization expenditures
↳ Training - 100% [2x]
► Filipino employees, local activities
► Approved by IPA based on SIPP
↳ Enhanced NOLCO
► NOL during first 3 years from the start
► Carried over within 5 consecutive taxable years
following the year of such loss
Incentives under CREATE Law
Export
Income Tax
Holiday1
4-7 years
4-7 years
After Income Tax Holiday
.
Incentive
SCIT
ED
Duration
10 years
5 years
Tax Rate
5%
20% or 25%
Domestic*
Atleast 500M 4-7 years
ED
5 years
20% or 25%
Below 500M 4-7 years
×
×
20% or 25%
*Engaged in ‘critical’ activities under Strategic Investment Priority Plan
*With a minimum investment capital of P500 Million.
SCIT – based on Gross Income (after deductions) – only for EXPORT
ED – based on Net Taxable Income
Period of Availment under SIPP [Years of ITH]
1
Deduction Incentives for Establishments
Certification from DOLE
25%
Accredited by DOLE and DOH
↳ of the amount paid as salaries and wages
N/A if under BP 344 (sidewalks, ramps, etc)
50%
Deduction from Net Taxable Income
↳ cost of improvement/modification to accommodate PWDs
Proof to Avail
 Identification Card
↳ SC:
OSCA ID or anything to indicate 60 years old ↑
↳ PWD:
Barangay/Municipal ID; NCWPD ID (transport)
 Passport
NO EXEMPTION
- CGT (NL shares)
- Donor’s Tax
- 20% FWT
- CGT (6% Cap A)
- Estate Tax
- 10% FWT
- 7.5% on FCDS - VAT/OPT (employed - Excise Tax
or engaged Bus/Prof)
- DST
NCR
NCR Adjacent Metro Areas
Other areas
TIER I
4
5
6
TIER II
5
6
7
TIER III
6
7
7
TIER I – high potential job creation; takes place in market
failures; creation though innovation; essential support to
critical industries; emerging potential advantage [medyo poor]
TIER II – Produce import substitutes, goods that are not
available locally, but critical to industries (ex. oil refines)
TIER III – R&D; science and health breakthroughs; high
paying jobs; new knowledge and intellectual properties,
patents, copyrights; highly technical manufacturing;
transformation of economy [mala-robotic sa sci-fi movie]
Barangay Micro-Business Enterprises
Assets not exceeding 3M (excluding land); agro-processing and
trading services; DTI-registered. Fees to LGU not exceeding P1,000
- Annual Registration Fee: P500
- Required to file Annual Information Return: 15th day of fourth month after close of taxable year
*Regional District Office or Municipal Treasury
REMEDIES OF THE TAXPAYER
still liable to deficiency or
did not address discrepancy
30 days to provide docs
LOA issued to RO
found liable
RO audit
120 days
still
unresolved
10 days
PAN
disagrees
CIR or Rep
5 days to explain
Notice of
Discrepancy
Taxpayer
Failed or disagreed
FAN/FLD
180/240 days
to conduct audit
180 - RDO Cases
240 - Large Taxpayer cases
LOA
↳ Must be e-LOA
↳ one LOA every year only, request to cancel
other if there are multiple
illegally, erroneously,
↳ Separate LOAs if audit is more than one year excessive payment
Paid within 30 days
30 days to protest
-Personal delivery
-Substituted (only if not present or known)
-Mail
No protest filed
Protest by filing
Request for
Reconsideration
FDDA
Final Decision on
Disputed Assessment
Request for
Reinvestigation
60 days to submit
additional documents
Tax credit
2 years to
PAN not needed (FAN agad)
 Mathematical error
 Discrepancy between tax w/held
and remitted by w/holding agent
 Refund or credit is carried over and
applied
 Unpaid excise tax due
 Articles are sold by exempt to
non-exempt person
15 days to reply
Taxpayer
30 days to be served
GR: PAN is required before FAN
(Due process)
Discussion of Discrepancy
Shall in no case be extended beyond
30 days from receipt of NoD
Failed to submit
Claim for refund
from BIR
DENIED
CIR to decide
180 days
30 days
Request for
Reconsideration
to Commissioner
DENIED
30 days
within 2 year-period
May be
simultaneous
NOT ACTED
ADVERSE: 15 days
CTA en banc
Await decision
DENIED 😛
ADVERSE: 15 days
(Administrative Appeal)
Same CTA Division
DENIED
30 days
rc
u
within 30 days
Appeal to Court of Tax Appeals (CTA)
REMEDIES OF THE GOVERNMENT
ASSESSMENT
Ordinary
Fraud/Failure
Assess Collect
3 years 3 years
10 years 5 years
Facts and law
Computation of tax liabilities
Specific period
within 3 years
(w/c is later)
May be extended
after last day of filing
date of filing
False/fraudulent return evasive intent
↳ 10 years from discovery
Agreed-upon by CIR and taxpayer
↳ before expiry of 3-year period
COLLECTION [After issuance of FAN]
3 years after finality of assessment
5 years (fraud/omission) even without assessment
Distraint (seizure)
[Personal]
*
Levy
[Real]
*
Actual – possession transferred
Constructive – prohibited to dispose
Forfeited to government if no bidder
CIR -public auction
-private sale (approval SecFin)
*
may be pursued simultaneously
Court Action
↳ CIVIL – to collect taxes
less than 1M - RTC/MTC
► Principal amount
at least 1M
- CTA
↳ CRIMINAL – acquittal from evasion: not a bar to civil actions
NOTE: Deficiency tax – not assessed nor collected if < P 100
Tax Audit
GR: only ONCE every taxable year
XPN: fraud or mistakes; request of reinvestigation; CGT
Notice to Submit Documents
Checklist ⇢ 10 days ⇢ 1st Notice ⇢ 10 days ⇢ 2nd Notice ⤵
(order to produce) Subpoena Duces Tecum ⇠ 10 days
Best Evidence Obtainable
(TP fails to obey SDT)
lost/refusal to submit
false/incomplete reports
Estimation is allowed – XPN: arbitrary and capriciously
Jeopardy Assessment – assessed without the benefit of a
complete or partial audit by authorized revenue officer
Other Notices
 Tax Verification Notice – for ONETT (estate, donor’s, CGT)
 Letter Notice – “no-contact-audit”; cannot be a sub to eLOA
↳ 5 days to reconcile, 30 days to settle
REMEDIES FOR BOTH TAXPAYER AND GOVERNMENT
Compromise [last resort]
↳ Can be entered even if a civil case has been filed
↳ Taxpayer: offer to pay CIR: acceptance
↳ “Compromise penalty” = in lieu of criminal prosecution
15 days
ADVERSE
GROUNDS:
! Assessment lacks legal/factual basis
! Failed to receive notice caused failure to file protest
! Based on Best Evidence Obtainable Rule
! Delinquency resulted from jeopardy assessment
! Waiver of Statute of Limitation is not authentic
! SC has no finality of decision
! Financial incapacity (+ waiver under Bank Secrecy Law)
CANNOT BE COMPROMISED:
! Withholding tax cases; criminal tax fraud cases
! Criminal violations already filed
! Final/executory cases (XPN: financial incapacity)
! Estate tax cases (XPN: doubtful valid assessment)
! Reinvestigation/Reconsi reduces original assessment
La
N st
O M
T
i
FO nu
R te
SA by
LE H
e
Valid Assessment
Failure to file
judicial
appeal
on time
makes the
assessment
FINAL,
EXECUTORY,
and
DEMANDABLE
le
s
Supreme Court
Amounts
(minimum)
Financial incapacity – 10% of basic tax
Doubtful validity - 40% of basic tax
Approval
Basic tax exceeds P1M
⇣
Settlement – below minimum rates
by National Evaluation Board (1 Commissioner, 4 Deputies)
Abatement or Cancellation
Unjust or Excessive Assessment:
↳ Wrong venue, TP’s mistake caused by erroneous RO
↳ Non-compliance because of difficult law interpretation
↳ Labor disputes, substantial losses, beyond control
► Only surcharge and compromise, not interest
Unjust Administrative and Collection Cost
CIVIL PENALTIES
(Applies to all taxes and withholding agents)
FILED
(but deficient)
DUE DATE
DEFICIENCY
DELINQUENT
Tax on Return < BIR Audit
Not paid correctly
(Interest)
(Interest + Surcharge)
↳ Surcharge is not imposed on deficiency
↳ Interest on deficiency and delinquency is not simultaneous
Surcharge
25%
Failure to pay on time
Wrong venue hahahaha
Fail to pay full or part (returnable)
Fail to pay full (return not required)
Willful neglect
Filed after written notice
False or fraudulent return
↳ 30%
Understate: income
Overstate: deductions
Interest 12% [20% before 2018]
Deficiency
Failure to pay in full the amount
Delinquency
due when installment is applied
Extended payment
50%
Administrative Penalties
 Failure to include
required attachment
 Failure to w/hold and remit
 Failure to refund excess WT
P1,000 each failure
Max P25,000 a year
= tax not withheld
= refund not refunded
Paid before
GR:
removal from production [local]
removal from BoCustom [import]
(landed on)
(sold/used)
Eco-zone ⇢ exempt
Outside ⇢ excisable
XPN: Petroleum – paid by importer
↳ excisable in Eco-zone/Freeport
TRANSACTION
BASIS
DST
Original issuance of shares
Par Value
P2 per P200
No-par value shares
Actual consideration
P2 per P200
Stock dividends
Actual value of shares
P2 per P200
XPN: The issuing corporation should remit the payment of DST
Sale of share (previously issued)
Par Value
P1.5 per P200
50% of DST paid on
P1.5 per P200
original issuance
DST still imposable whether or not certificate of stock is issued
No-par value shares
Exempt Transfer of Securities
↳ Borrowing/lending - Securities Borrowing and Lending Program
↳ Sale through PSE (STT – in lieu of income tax, and DST)
↳ Fixed income, securities under secondary market
↳ Tax-free exchange (Merger/conso, recap, reorganization)
↳ Derivatives, repurchase agreements
La
N st
O M
T
i
FO nu
R te
SA by
LE H
e
Automobile: [4 or more wheels]
Exempt [BTS JEEP; ExEmPT]
↳ Bus, Truck
↳ Special purpose [Fire truck, Mixer]
↳ Jeepney
↳ Purely E-vehicle
► If hybrid: 50% exempt lang
↳ Pick-ups, single cab
DOCUMENTARY STAMP TAX
If unpaid: Document is still valid; not admissible to court,
not registered to registry of deeds (not recorded)
GR: Any party is liable.
If one is exempt, the one who is not exempt is liable.
Other exemption
Removal
Export
Exclusive use w/in PEZA
Used for Test-run
Delivery to tax-exempt [Embassies, ADB]
Minimum Selling Price
80% x (SRP – Excise - VAT)
NOTE: SP includes cost of aircon, radio, installation in a car
Mineral Products [inorganic substance]
 Marketable state (with no chemical change)
 Quarry resources (no metals) – used for construction
Paid by operators, lessees, miners, manufacturer of MP
↳ LIABLE: who is in possession in case of non-payment
Paid
before removal
20 days after end of quarter (malayo kasi minahan)
Cosmetic Surgery
Improving, altering (pag pumanget haha), enhancing
Subject: Invasive cosmetic surgery
 Surgery entering the body or skin
 Rhino (ilong), pwet, dodo, lypo (taba), face/neck lift, eyelid
Exempt: Non-invasive and Amelioration
✖ Air dissector??, Laser/light, injectables
✖ Deformity – defect or abnormality
✖ Injury, disfiguring disease, infection
✖ Covered by PhilHealth
5% of GR – 10 days after close of the month
Non-Essential Goods
Jewelry (precious metals) [fine and immitated]
↳ 20% of wholesale price/importation
EXEMPT: Qualified Jewelry Enterprise
↳ BOI Accredited; Entitled to 50% training deduction
Subject:
 Perfume, toilet water (pabango)
 Yachts, Vessels for pleasure or sports.
 Tobacco Products, Heated tobacco
 Cigar, cigarettes, vapor,
✖ EXPT: Import to Eco-/Freeport Zones
↳ Still subject: cigar/rettes, alcoholic (duty-free)
✖ EXPT: if duty-free shops is GOCC
 Alcoholic products [FAQ]
 Wines
covered by rules of affixtures
 Distilled spirits
Including: flavored beer, Gin
 Fermented liquor
EXPT: Tuba, basi, tapuy
Paid: before removal or advanced payment
le
s
Based on Gross Selling/Receipts Price
► If price is < cost + expense, GSP shall be:
 (cost + expense) + atleast 10% profit
 CIR may add profit for taxing purposes
 Sweetened beverages (non-alcoholic)
 Sweetened juice, tea, carbonated (soda)
 Flavored water, energy/sports drinks
 Powdered, cereal and grained drinks
 Other sweetened non-alcoholic beverage
EXPT (on sweetened beverages):
✖ Meal replacement, medical beverages
✖ Fermented liquor, wine, distilled spirits
↳ Because subject to tax on alcoholic beverages
✖ 100% Natural fruit juice, all milk products
✖ Kapeeeee
rc
u
EXCISE TAX
Remove VAT, add excise, then add VAT
↳ National and Indirect
↳ Ad valorem (value) and specific (volume)
↳ Proportional and progressive
↳ Privilege/Transactional
Bank checks and drafts
Check, Deposit, Paymt
P3
Debt instruments
Issue price
P1.5 per P200
less than 1 year
Proportionate to date
P1.5 per P200
The issuer of debt instrument is liable; XPN: agreement (borrower)
Bill of Exchange or Drafts
1
Acceptance
2
Foreign bills of exchange
1
Drawn outside but payable in PH
Face Value
P0.6 per P200
Face Value
P0.6 per P200
Face Value
P0.6 per P200
2
Drawn inside but payable outside
Exempt Indebtedness
↳ Loan, notes, not exceeding P250,000 (personal use only)
↳ Interbank/department advances (same legal entity)
↳ Credit sales (only that executed by seller/service provider)
↳ Bank deposits with no fixed term/maturity
↳ Interbank call loans (not more than 7 days)
↳ Business conduct with BSP
↳ Assignment of debt (same maturity or remaining period)
Life insurance policy
Not exceeding 100k
> 100k to 300k
> 300k to 500k
> 500k to 700k
> 750k to 1M
More than 1M
Property Insurance1
Other (indemnity, bonds, title)
Amount of insurance
Amount of premiums
Amount of premiums
EXEMPT
P20
P50
P100
P150
P200
P0.5 per P4
P0.5 per P4
Annuities (ex. retirement)
Premiums or installment P1 per P200
Pre-need plans
Premiums or contribtion P0.4 per P200
Indemnity bonds (surety) 2
Amount of premiums
P0.3 per P4
1
No DST for reinsurance contracts (only on first insurance)
2
Ex. construction activity. EXPT: required in legal proceedings
RULE: Always paid by the insurance company
Exempt Insurance Policies
↳ Fraternal, beneficiary, cooperative
↳ Assignment of policy (same maturity or remaining period)
First P2,000
Leases (each year, real only)
every P1,000
Fractional excess
Mortgage, pledge, (land) E&Trust1
Not exceeding P5,000
Amount loaned
Each 5k in excess of 5k
Amount loaned
2
Sale, donation (real property)
Consi vs FV (higher)
1
For estate and trust: whether real or personal
Subsequent advances: additional DST
2
Goverment transaction: Based on actual consideration
P6
P2
P40
P20
P15 per P1k
Exempt Property Transactions
↳ Grants, patents, certificates from government
↳ If exempt from donor’s tax (gift to gov’t, charity, educational)
↳ Assignment of mortgage or lease (same maturity, period)
↳ Tax-free exchange (Merger/conso, recap, reorganization)
Omitted: Certificates (diploma, notary: P30); Warehouse receipts (P30);
Bills of lading (P2 or P200); Proxy voting (P30); Power of attorney (P10)
Loose Stamps: P15 (max P200)
Deadline: 5th day of following month
Comparisons of VAT Transactions
If opted 8%:
Optional
Exempt, cannot avail; except exceeds 3,000,000
↳ Prospectively liable starting next month
Not required but elects to register
Non-cancellable for 3 years
Non-cancellable forever (Radio and TV)
Can carry over excess input VAT
Separately bill Output VAT to customer
Entitled to input tax credit
Can claim refund
12%
Yes
Yes
Yes
Zero
Exempt
Yes
Yes
When a non-VAT person issues a VAT invoice/receipt
↳ Liable to VAT and 50% surcharge; cannot claim input tax credit
VAT on Goods or Properties
Sale of Goods or Properties:
 Actual receipt – cash basis (at time of sale) rendered or not
 Constructive receipt – placed at the control of seller
↳ Bank deposit/transfer of amount without restriction
↳ Offsetting with debtor’s obligation
 Transactions Deemed Sale – tax base is the market value
↳ GSP is unreasonably lower (30% more than MV)
↳ Transfer, use, or consumption or goods originally
intended for sale in the course of business
↳ Distribution to SHs as share in profit; CRs as payment
↳ Consignment if not sold within 60 days of consignment
↳ Existing inventories at retirement/cessation of business
NOTE:
1. If disposition does not result into a VATable transaction or
deemed sale, there is input tax benefit even without output tax.
2. Unused input tax by the dissolved corporation as a result of
merger/conso is absorbed by new or surviving corporation
La
N st
O M
T
i
FO nu
R te
SA by
LE H
e
Liable
Introduction
GS/GR for 12 months exceeds P3,000,000
Reasonable grounds – VAT registrable
Radio, TV franchise – exceeds P10,000,000
Importer – whether in the course of trade or not
rc
ul
es
VALUE-ADDED TAX
Tax on consumption, indirect, may be shifted
NOTE:
 Taxpayer becomes liable to VAT but fails to register:
► Liable to whole Output VAT
► Cannot separately bill output VAT, cannot be shifted
► No Input tax can be claimed
► Liable for fines and sanctions
 If main business is exempt: cannot elect for VAT
 Incidental/Isolated transactions:
► If an exempt sale – Exempt
► If a zero-rated sale – Liable (12%)
Registration
 Commencing business – simultaneous with bus. Registration
 Who exceeded threshold – before end of next month
 Radio and TV – 30 days from end of the year
 Opted to register – 10 before beginning of the taxable quarter
Cancellation of Registration
Effective next month after approval of cancellation
 Written application – if not exceeded P3,000,000
 Ceased business, no expectation to resume within 12 months
 Sole – change of ownership
 Partnership and Corporation – dissolution
 Merger and Consolidation
 Failure to start business [FAQ], or becomes exempt
 Did not exceed 3M within 3 years, or revocation after 3 years
OTHER MATTERS
1. Supplementary Receipts or Invoices (delivery, DM/CM,
acknowledgement, PO, JO, bill of lading, etc.) are not valid
proof to support claims for INPUT TAXES
2. Service rendered by NRA in PH – considered in the course of
trade or business (even if not in a regular basis)
3. Subsidence or livelihood – exempt from business taxes.
4. Gross Sales – mean less returns, allowances, and discounts
- cash discounts (conditional) – not allowed
- trade discounts (time of sale) – allowed
VAT on Importation – based on landed cost
Customs duty + brokerage + DST + Excise
Sale of Tax-free Goods to NON-Exempt
IMPORT ⇢ EXEMPT PERSON (ex. embassy) ⇢ sold to NON-EXEMPT
[VAT exempt]
[Liable as importer]
Sale or Exchange of Real Property
Selling price
FV (which is higher)
Sale not in ordinary course of business
Residential house and lot by Not used in business
Used (incidental)
a non-dealer
Residential house and lot by More than 3,199,200
3,199,200 or less
a real estate dealer
EXEMPT
CGT (6%)
VAT
VAT
EXEMPT
Sale on Installment: Initial payment does not exceed 25% of GSP/CP
Sale on Deferred-Payment: > 25% of gross selling/contract price
INITIAL PAYMENT = Down payment + Installment during the year
Including excess mortgage (Mortgage – Cost = excess)
Sale of residential lots are no longer exempt
VAT on Services
Performed within the Philippines
 Lease or use of intangible rights
 Assistance ancillary for enjoyment of property/right
 Service by non-resident person in connection with the use of
property or rights purchased from that non-resident person
 Lease of motion picture films, films, tapes and discs
 Lease or right of use for radio, TV, satellite, cable
NOTE: Zero-rated - service performed for a foreign client within PH
Lessors of Property (see exempt lease of property)
 Properties located in PH – based on gross rentals
 Rental/royalties to NRFC – licensee is liable on behalf
 Advanced payment – VATable when received
↳ excluding: Loan to lessor, option money, security deposit
Professionals – including actors, singers, athletes, etc.
 GPP – deposits received as income
↳ Expenses to be claimed – should be in the name of GPP
Others haha dami
 VAT to lessors or distributors of films, not to sale of tickets
 VAT to toll operators, not to the toll fees. Operators are liable
 Dealers in securities – GSP less cost of security sold
 Lending investors – other than non/quasi/banks, financial co.
 NON-life insurance companies – OPT kapag life insurance
Zero-Rated Sales
If VAT is not billed separately, it is deemed inclusive
Cross-border Doctrine: taxed only on where items are consumed
Export sales/services
 Sale and actual shipment: PH to Foreign
 SALE of goods, supplies, equipment, and fuel – engaged in:
↳ International shipping or international air transport, provided:
► Only for exclusive use for goods and passenger transport
► PH port directly to foreign port
► 12% VAT: portion of such items used for other purposes
↳ Sale of power, or fuel generated through renewable energy
Effectively Zero-Rated [FAQ: different from zero-rated]
 Sales to PEZA and Freeport-Zone registered
 Sales to entities granted with indirect exemption - special laws
Removed from Zero-Rated [Now 12% VAT under TRAIN]
✖ Processing, manuf for outside business and subsequently exported
✖ Sub/contractors whose export sales > 70% of annual production
✖ Foreign currency denominated sales under IRR or BSP
✖ Export sales under Omnibus Investments Code and special laws
✖ Sale of gold to BSP (now exempt)
Freeport and Eco-zones are considered outside PH custom territories
Zero-rated: Sale to PAGCOR: VAT registered but exempt under law
Value Exempt
TRANSPORTATION
SERVICE
International
[PH-Abroad]
VEHICLE
Sale
Importation
Lease
Years of Stay Outside
Did not avail before arrival within:
FUEL or
GOODS
Land
Air/water
DOMESTIC C ORPO
Air/water
FOREIGN C ORPO
Sale
Importation
3%
12% VAT
12% VAT
12% VAT
Passenger
Goods/Cargoes
Passenger
Goods/Cargoes
0%
0%
EXEMPT
3%
Domestic Shipment/Air Transport
EXEMPT
International Shipment/Air Transport
Domestic Shipment/Air Transport
International Shipment/Air Transport
Domestic Shipment/Air Transport
International Shipment/Air Transport
P150,000
Less than 5 years
6 months
P250,000
5 to not > 10 years
5 years
P350,000
10 or more years
10 years
 Appliances – one of every kind; max 60 days after return
 Balikbayan boxes – max P150,000, not for sale, 3x a year
 De minimis importation – goods valued P10,000 or below
 Professional instruments; tools of trade, occupation or
employment, wearing apparel, domestic animals.
 IMPORTATION: Fuel, goods, supplies to international...
D. Medical, dental, hospital, veterinary, laboratory services
 XPN: Rendered by professionals (see above)
 Sale of medicine for in-patients [XPN: VAT if out-patient]
E. Sale or importation under CREATE Law
 For diabetes, high cholesterol, hypertension (E: Jan 1, 2019)
 For cancer, mental illness, tuberculosis (E: Jan 1, 2023)
 COVID Related – vaccines, medicines (NE: June 30, 2023)
F. Agricultural contract growers and millings (ex. palay to rice)
G. Private Educational Institutions (DepEd, CHED, and TESDA)
H. Services under employer-employee relationship
I. Regional or Area Headquarters [RHQ]
↳ NOTE: ROHQs – (10% income tax), (12% VAT)
J. Banks, non-banks (quasi-banking), financial intermediaries
✖ Cooperatives
✖ Home-owners, condominium association dues
A. Agricultural Cooperatives [CDA]
 Sales to non-members (original state)
 Importation: direct farm inputs, mach&equipment & parts
 Coop not the producer: only sales to members are exempt
B. Lending activities by credit/multipurpose cooperative [CDA]
C. Non-agri, non-electric, non-credit [CDA]:share cap max 15k
✖ Residential Properties
A. Low-cost housing and Socialized housing
B. Lease of Residential Units (VAT or OPT if commercial)
Monthly rent atleast P15,000 (regardless of aggregate)
EXEMPT
Monthly rent exceeds P15,000 (subject to 3M threshold) VAT/OPT
Regular Input Vat
REQUISITES
1. Transaction – VAT is passed on to a VAT-registered taxpayer
↳ Goods – when sold, used, converted. Even if in accrual basis
↳ Service – VAT has actually paid
2. Registration – claimed only by VAT-registered persons
↳ Importation – upon release of goods from customs
↳ Purchase of Goods - upon consummation of sale
↳ Service or Lease – upon payment
3. In the course of trade or business
4. Attribution – directly attributable or ratable portion
5. Documentation – to substantiate input tax credit
↳ Invoice – proof of transaction or sale (accrual basis)
↳ Official receipt – proof of payment
↳ VAT invoice – sale, barter, exchange of goods or properties
↳ VAT official receipt – for services and lease of goods/properties
Importation of goods
Import entry, BOC receipt, other docs
Purchase of goods/prop
Invoice
Purchase of real property Public instrument + VAT invoice
Services
Official receipt
✖ Export sales by not VAT-registered persons
✖ Treaties
✖ Sale of gold to BSP (previously zero-rated)
✖ Tax-free exchange ✖ Printers and publishers – regular/subscription basis
NO LONGER APPLICABLE
Amortization of Input Vat on aggregate purchase of depreciable capital
goods exceeding P1M in one calendar month [E: December 31, 2021]
REPAIRS
Passenger
Goods/Cargoes
Passenger
Goods/Cargoes
rc
ul
es
Domestic
[PH-PH]
La
N st
O M
T
i
FO nu
R te
SA by
LE H
e
Exempt Goods, Properties, and Services
✖ Senior citizens and PWD’s - Sale of essential/basic goods
A. Hotel, lodging, sports, recreation, restaurants, hospitals
✖ Exempt goods and services
A. Agricultural, marine food products – “original state”
Agricultural [CCROP MO]
Marine
Livestock
Poultry
Corn grits, Copra
Fish
Cow, bulls
Fowl (pabo)
Raw sugar – now muscovado Lobster
Calves, pig Duck
Ordinary salt
Shrimp,Prawn Sheep, goat Geese
Polished/Husked rice
Oyster, clams Rabbit
Turkey
Molasses
Trout, etc.
Means unprocessed even undergone simple processing:
 Preparation – boiling,broiling,grinding,roasting,husking
 Preservation – freezing, drying, salting, smoking
 Packaging – vacuum, shrink wrapping, tetra-pack, etc.
B. Fertilizers, feeds, including ingredients (except for pets)
C. Importation: Personal or household effects (returning)
Domestic Shipment
International Shipment
INPUT VAT
Special Rules
Presumptive Input VAT – 4% for purchase of primary
agricultural products (not including fish and marine) as inputs for
processing or manufacturing of: peyborit mo
Sardines
Milk
Packed instant noodles
Mackerel
Cooking Oil
Refined Sugar
12% VAT
0%
12% VAT
EXEMPT
12% VAT
0%
Transitional Input VAT – for those who become liable to VAT
Basis: HIGHER of
2% of beginning inventory [LCNRV]
Actual VAT paid on such inventory
Withholding VAT
A. For lease/service payments to non-residents
 12% VAT is remitted to BIR:
↳ BIR Form 1600-VT: Monthly Remittance Return
► 10 days following the month the withholding was made
↳ BIR Form 2306: Certificate of Final Tax Withheld at Source
► On or before Jan 31 of the ff. year or upon request
B. Sales to Government: Now a 5% CREDITABLE withholding VAT
 5% is withheld by the government
 7% is paid by the taxpayer
↳ Excess of 7%:
Expense: Actual input > 7% payment
Income: Actual input < 7% payment
Input VAT Refund or Tax Credit
For: VAT-Registered whose sales are effectively-zero or zero-rated
Refund: Within 2 years after close of the taxable quarter of sale
CIR: 90 days from submission of filing and OR/invoices to decide
Denial of CIR: must be in writing + legal and factual basis
Appeal to CTA: within 30 days from denial
Tax Credit Certificate: pwede to pay any internal revenue taxes
Deadlines
Monthly VAT: NO LONGER Required
Quarterly VAT: 25th day following the close of the quarter
AMENDED: Standard Input VAT – 7% final withholding VAT of sales to
government; based on selling prices, now creditable WVAT [E: Jan. 1, 2021]
Real or Personal Tangible Properties
Situs
Resident or Citizen
Non-resident alien
- Wherever
- In Philippines only
Exempt:
Intangible properties of NRA (within PH) under reciprocity rule
↳ Franchise – exercised in Philippines
↳ Share or rights - any partnership or Industry established in PH
↳ Eighty-five (85%) of share, obligations, bonds by FC is w/in PH
↳ SOB issued by Domestic corporations (sociedad anonima)
↳ SOB of Foreign Corp that acquired a business Situs in PH
La
N st
O M
T
i
FO nu
R te
SA by
LE H
e
Inclusions in Gross Estate
 Life insurance proceeds
Beneficiary
Revocable Irrevocable
Third persons
Included
EXEMPT
Estate, executor or administrator
Included
Included
 Insufficient Consideration Transfer – selling price below FV
Fair value at time of transfer
basis if insufficient (SP < FVT)
Consideration (Selling price)
basis of amount included in GE
FV at time of death
Deductions
Ordinary Deductions
 Losses - within 1 year
↳ Costs incurred in settlement of estate
↳ Casualties – including robbery, theft, embezzlement
↳ Not compensated by insurance (or the portion)
↳ Losses not claimed as deduction for income tax
↳ Incurred not later than last day of payment of estate tax
 Claims against the estate/insolvent persons
Against Estate
Insolvent Person
Decedent
DEBTOR
CREDITOR
Ordinary Deduction
Pecuniary debt
Uncollectible portion
Requisites (Against Estate): [CPA SEN]
i. Not Condoned or prescribed
ii. Personal obligation at time of death
iii. Adequate and full consideration and good faith
iv. Substantiated within 3 years
v. Enforceable and valid in law
vi. Notarized (no need if financial institution)
 Unpaid Taxes – accrued before death
↳ Not including income tax, RPT, estate tax.
 Unpaid Mortgages – include FV of property in GE first
 Transfer for Public Use
↳ Transfers for the use of government or political subdivisions
for public purpose (deduction from exclusive property)
 Vanishing Deductions (Property Previously Taxed)
↳ Death of present must not exceed 5 years from death of
prior decedent or date of donation
↳ Must have formed part of prior decedent’s estate or gift
↳ Estate tax must have been finally determined and paid
↳ No vanishing deductions were allowed for prior decedent
le
s
6% based on Net Taxable Estate
Gross Estate – fair value at time of death
↳ Real property – HIGHER of Zonal vs Assessed
↳ Personal Properties – purchase price (recent purchase)
► If not recent: Pawn value x 3
↳ Listed shares – Quotation at time of death
► If no available: arithmetic mean (High-Low)
↳ Unlisted Common Shares – Book value
↳ Unlisted Preference Shares – Par value
rc
u
ESTATE TAX [transfer mortis causa]
EXCLUDE: Bona fide sales: Selling price = or > FV time of transfer
 Transfer in Contemplation of Death
Condition
When?
Status
Before death
No, Donor’s Tax
Fulfilled
At/After death
INCLUDED to GE
Not fulfilled
INCLUDED to GE
Waived (transferred) Malamang before
No, Donor’s Tax
 Revocable Transfers (pwede bawiin, so kay decedent pa rin)
Power to revoke transfer
Status
Exercised or Not
INCLUDED
Waived
Expired before death
Expired after death
INCLUDED
 Transfer under General Power of Appointment
↳ In favor of anybody (not designated, no transfer yet)
 Void Transfers – nullified transfers, reverted back to decedent
Exclusions/Exemptions in Gross Estate
 Merger of usufruct in the owner of the naked title
(TAX)
LOLO [decedent]
APO [owner of naked title]
(TAX)
USUFRUCTUARY
EXCLUDED
“ako muna gagamit” [no title]
 Transfer or delivery of the inheritance or legacy by fiduciary
heir or legatee to the fideicommissary (form of trust)
(Tax)
(EXEMPT)
Decedent
Fiduciary Heir
Fideicommissary
 Transmission from first heir in favor of another beneficiary in
accordance with the desire of the predecessor
↳ A special power of appointment (specific designation)
 Bequest, devises, legacies, transfer to social welfare, cultural,
charitable institutions (religious, educational: NOT excluded)
↳ No part of net income inures to benefit of any individual
↳ Not more than 30% is used for administration purposes
 Exclusive property of spouse
Before Marriage
During Marriage
Properties owned or acquired
Exclusive – exclusive money
CPG
Exclusive
Conjugal – common fund
ACP
Community
Community
Acquired through labor or industry
CPG
Exclusive
Conjugal
ACP
Community
Community
Acquired through gratuitous title
CPG
Exclusive
Exclusive
ACP
Community
Exclusive
Acquired through labor
CPG
Exclusive
Conjugal
ACP
Community
Community
NOTE: Under Absolute Community of Properties [On or after 8-3-88]
1. Personal property and exclusive use: Exclusive
XPN: Jewelry - Community; Exclusive if inherited
2. Property before marriage who has legitimate descendant in former
marriage – Exclusive
Special Deductions
 Family Home – including land, must be in PH
↳ Lower FV (Declared in GE vs. Interest); Max P10,000,000
 Standard Deduction
↳ Resident or Citizen – P5,000,000;
NRA – P500,000
 Retirement Benefits (RA 4917) – include in GE first
↳ Amount received by heirs from the employer
Foreign Tax Credit
LIMIT A (Per Country)
LIMIT
ACTUAL ALLOWED
Country A
NE Country A
Worldwide NE
x PH tax due = xx
xx
Country B
NE Country B
Worldwide NE
x PH tax due = xx
xx
LOWER
LIMIT A
LIMIT B (Total Foreign NE)
Country A
LOWER
LIMIT
Total Foreign NE
x PH tax due = xx
Worldwide NE
ACTUAL ALLOWED
xx
LOWER
LIMIT B
Which is lower between limit A or B, or the actual foreign taxes paid
Filing
Who: Administrator or Executor (primary obligation to pay)
What: BIR Form 1801
When: 1 year from decedent’s death
↳ Extension for Filing: Meritorious cases – Max 30 days
► No extension for fraud, negligence, disregard of IRR
↳ Extension for Payment:
► Judicial settlement – Max 5 years
► Extra-judicial settlement – Max 2 years
Pro-forma
Gross Estate
L:Ordinary Deductions
L:Special Deductions:
Standard Deduction
Family Home
Net Estate
L:Share of surviving spouse
NET TAXABLE ESTATE
Rate [FAQ]
ESTATE TAX DUE
L: Tax credit
Estate Tax Payable
Exclusive
xx
(xx)
x
Common
xx
(xx)
x
½
TOTAL
xxx
(xxx)
xx
(x)
(x)
xx
(xx)
xx
6%
xx
(x)
xx
Funeral, medical, and judicial expenses: NO LONGER DEDUCTIBLE
Notice of Death: NO LONGER NEEDED under TRAIN
Certification from a CPA: when GE exceeds P5,000,000 – includes (1)
Itemized assets, (2) Itemized deductions, (3) Tax due paid and still due
Bank withdrawal: (should be made within 1 year) – subject to 6% FWT
XPN: If already included in the gross estate
P5,000 or less
Simultaneous delivery
More than P5,000
Acceptance is also in writing
2) Real Property
↳ In public instrument
↳ Deed of donation and Deed of acceptance
Void Donations - Taxable if not nullified w/in 30 days
 Officials – his wife of descendant by reason of his office
 Failure to observe formalities
 Future property
 Incapacitated persons (minor, insanity, NRNW deaf-mute)
 Criminal offenses
 Inexistent object
 Adultery (for man) and concubinage (for woman)
 Lack of acceptance
 Spouse
donation between spouse (XPN: moderate gift)
*For corporations: real properties does not include MACHINERIES
Unlisted/Not Traded Shares – the fair market values are:
 Common shares – book value
 Preferred shares – liquidation value (redemption price +
premiums and dividend in arrears) (sa Estate Tax yung par)
Listed or Traded through SEC – Stock Transaction Tax (0.6%)
 Constitutes a final tax; not subject to Income tax and CGT
Not subject to Capital Gains Tax
↳ If made through local stock exchange
↳ Shares are of a foreign corporation
↳ Not a capital asset (seller is a dealer in securities)
↳ The sale resulted to a loss
Sale of Real Property to Government, Political
Subdivisions or Agencies, or GOCCs
↳ CGT or Income tax – at the option of the taxpayer
La
N st
O M
T
i
FO nu
R te
SA by
LE H
e
Inclusions
Capital Gains Tax
Capital Assets – Other than dealers in securities
Shares of a Domestic Corporation
Unlisted
15%
Net Capital Gain
Listed
0.6%
Selling Price
↳ Through SEC (STT)
15%
Net Capital Gain
↳ Directly to the buyer
Real Property (Capital Asset)*
6%
GSP vs. FMV
le
s
Form
1) Personal Property
↳ Orally
↳ Writing
DEALINGS IN PROPERTIES
rc
u
DONOR’S TAX [transfer inter vivos]
6% based on Total Gifts in excess of P250,000
Cumulative over one year
Elements
 Consent, Object, Cause or Consideration
 Donor’s capacity – minors, even unborn child: can be donees
 Donative intent – “animus donandi” and delivery
 Acceptance of the donee and donor’s knowledge of acceptance
 Less than Full and Adequate Consideration
Fair market value
P3,000,000
P1,500,000 donor’s tax
Consideration (SP)
P1,500,000
P 500,000 income tax
Cost/tax basis
P1,000,000
Real
Personal
Ordinary asset
Donor’s tax
Donor’s tax
Capital asset
Donor’s tax
CAPITAL GAINS TAX
 Renunciation of Surviving Spouse – share in ACP/CPG
↳ XPN: Renunciation as an heir: not to donor’s tax
 Incomplete gifts because of reservation: becomes complete
↳ When donor renounces reserved power
↳ Right to exercise ceases – reasons other than death
 Condonation or Forgiveness of Debt
↳ If creditor desires to benefit a debtor
↳ No other consideration is required
↳ If not included in debtor’s gross income
Exclusions/Exemptions
 Gifts to Government, Non-profit agencies, Political subdivision
 Social welfare, charitable, cultural, educational, religious, NGO
↳ 30% rule applies (see in estate tax); paying no dividends
 Campaign contributions to political parties
↳ Must be utilized and spent; reported to CIR
↳ Payments made by political parties - withheld 5% CWT
↳ Declared to Statement of Contributions and Expenditures
 Under special laws (IRRI, IBP, Ramon Magsaysay Award, etc.)
 General renunciation (property not specifically designated)
Deductions
 Encumbrance (ex. mortgage) assumed by the donee
 Diminutions specifically provided by the donor
Husband and Wife
 Husband and wife are separate taxpayers (same in estate)
 Only one donor – when a conjugal/community property is
donated by husband. (Wife can nullify the validity)
Filing
What: BIR Form 1800 (duplicate) under oath
↳ Donation at different dates - separate return each donor
↳ Donation at a same date – only one return each donor
↳ Separate return if involves conjugal/community property
When: 30 days after the gift
Where: Where the donor is registered (AAB, RDO, Treasurer)
↳ PH Embassy, or CIR office (South QC) for non-resident
Sale of Principal Residence - not subject to CGT if:
↳ Proceeds are fully utilized to acquire new principal residence
↳ Within 18 calendar months from date of sale
► Requisites
Exemption can be availed once every 10 years
BIR is notified within 30 days of the intention
Unutilized portion subject to CGT:
Unutilized portion
Taxable Amount =
x FV vs Selling Price
Gross Selling Price
Other Capital Assets Subject to Income Tax
Amounts realized – Tax basis = Gain
 Retirement of Bonds
 Short sales – selling of a security a speculator does not own
 Option gains and losses – exclusive privilege to buy or not
↳ The option money (or privilege) is the capital asset
 Securities becoming worthless – loss from sale of shares
that become worthless. Deductible to gains (not under CGT)
 Liquidating Dividends – Difference between sum of cash and
the surrendered share. If installment, taxable only on final.
 Retirement or Redemption for Cancellation of Preferred
Shares – difference between the value received and cost of
preferred shares. Not applicable when acquired for treasury.
Holding Period Rule – only for INDIVIDUALS
Amount of gain or loss to be recognized:
100%
Capital asset - held for 12 months or less
50%
Capital asset - held for more than 12 months
Capital Loss Limitation Rule – for all taxpayers
↳ Losses from sale of capital asset are allowed only to the
extent of the gains. The excess loss goes to:
Capital Loss Carry-over – only for INDIVIDUALS
↳ Only to succeeding taxable years (1 year only)
Installment Basis
APPLIES TO:
 Regular sales – personal (movable) property by a dealer
who normally sells in installment
 Casual sales
Personal Property
► More than P1,000
► Initial payment does not exceed
25% of selling price
► Not an inventory
Real Property
► Initial payment does not exceed
25% of selling price
Initial Payment – Payments made within the year
Notice of Donation: to be exempt and claim full deduction
↳ Donations are at least P 50,000
↳ Donees are accredited donee institutions (charitable, etc.)
↳ 30 days after receipt of the donee’s Certificate of Donation
Formulas:
 Installment CGT = (Total CGT/Contract Price) x Installment Coll
 Realized GP
= (Gross Profit/Contract Price) x Collection
Certification Authorizing Registration (CAR) – signifies clearance
that taxes have been paid. For transfers requiring CAR, donor’s tax
return must still be filed indicating zero payment.
Selling price = basis for installment compliance
Contract price = basis for income or CGT to be recognized
Casual sales and holding period does not apply to real estate dealers
INCOME TAX
GENERAL PRINCIPLES
(Highlights only)
Installment: May elect when tax due exceeds P2,000
↳ On or before April 15, then on or before October 15
 Lifeblood Theory – to enable government to operate
 Necessity Theory – government cannot fulfill duties w/o tax
 Benefits Received Theory or Symbiotic Relationship –
gov’t would be paralyzed w/o tax. Every person who is able
– must contribute share in running the government.
Principles of a Sound Tax System
 Fiscal Adequacy – requires sources of revenues must be
adequate to meet government expenditures
 Administrative Feasibility – must be effectively enforced and
administered with least inconvenience to taxpayer
 Theoretical Justice – uniform and equitable (progressive)
Taxes are payable in money, but Congress can enact other form
Tax Exemption – Majority of ALL members of Congress
Stage of Taxation
1. Levy – Determination of Congress as to object, subject, rate
2. Assessment and Collection – final stage of tax administration
3. Payment – taxpayers’ compliance including remedies
4. Refund – restitution of tax payment as excessive or erroneous
La
N st
O M
T
i
FO nu
R te
SA by
LE H
e
Fringe Benefits
(Monetary Value ÷ 65%) x 35% [75%-25% for NRA]
Congress: Exercise power to tax; BIR: Implementation
le
s
For non-VAT registered only
Income does not exceed P3,000,000
8% Flat Rate
Should be signified in the first quarter
In lieu of percentage taxes
No need to attach FS with the return
Based on gross sales/receipts (no cost deductions)
 Pure Business or Professional Income
 Including other non-operating income
 First P250,000 is exempt
✖ No other deductions from gross sales/receipts
 Mixed
 Compensation – always graduated tax
✖ Business and Profession – P250,000 deduction not allowed
✖ No other deductions from gross sales/receipts
Inherent Powers
 Police power – for the public welfare
 Eminent Domain – taking properties; “just compensation”
 Power of taxation – collect enforced monetary contribution
SIMILARITIES OF INHERENT POWERS:
↳ Inherent and Indispensable
↳ Legislative in nature; have limitation on rights
↳ Equivalent compensation
rc
u
Non-resident Citizen – at least 183 days (most of the time”)
NRA ETB – more than 180 days
Resident AND Citizen
Within and without
RIT
Others
Within only
RIT
NRA-NETB
Within only
25% on GI
Not Subject to Fringe Benefits Tax
 Given to a rank-and-file employee
 Retirement, insurance, hospitalization benefits for employees
 Benefits necessary for trade; for convenience of employer
 De minimis benefits
De Minimis Benefits
Max value per year
Monetized unused vacation leave credit
10 days VL
Medical cash allowance to dependents
P3,000 (P250/month)
Rice subsidy (P2,000 or 1 sack of 50kg)
P24,000
Uniform and clothing allowance
P6,000
Actual medical allowance
P10,000
Laundry allowance
P3,600 (P300/month)
Employee achievement (non-cash)
P10,000
Christmas gift
P5,000
Daily meal allowance
25% of MW
Benefits through CBA
P10,000
In excess of P90,000 is taxable: Commissions, honoraria, fringe
benefits, in excess of maximum de minimis
HOUSING PRIVILEGE
ER lease for use of EE
ER owns for use of EE
ER transfers ownership to EE
ER transfers with lower price
VEHICLES
ER lease for use of EE
ER owns for use of EE
ER purchase in the name of EE
ER provides cash to purchase
ER shouldered a portion
Monetary Value
Value
Rental
50% of value
5% of FMV
50% of value
FV vs Cost
Entire value
FV less price
Entire value
Rental*
Cost ÷ 5
Acq Cost
Cash given
Shouldered
50% of value
50% of value
Entire value
Entire value
Entire value
*Vehicles not normally used in business
OTHERS
Corporations Not Subject to MCIT
 Non-Profit Proprietary Educational Institution and
Hospitals – reduced to 1% (as per CREATE)
↳ Provided income from unrelated activities shall not
exceed 50%; back to 10% starting June 30, 2023
 Depositary banks under FCDU
↳ Offshore income – EXEMPT
↳ Onshore income – 10% final tax
 Offshore Banking Units – now subject to RIT and MCIT
 Regional Operating Headquarters – now subject to 25%
 Branch Profit Remittance Tax (15%) – PEZA is exempted
Special Foreign Corporations
International Carrier
(Originating from Philippines)
Non-resident cinematographic film
owner, lessor or distributor
Non-resident owner or lessor of
aircraft, machineries, equipment
Non-resident owner or lessor of
vessels chartered by PH nationals
15% on
Gross Philippine Billings
25% on
Gross income
7.5% on
Gross Rentals
4.5% on
Gross Rentals
Quarterly Income Tax: May 15, August 15, November 15
Nature of Power of Taxation
 Comprehensive – covers person, businesses, rights, etc.
 Unlimited – involves power to destroy
 Supreme – insofar as the selection of the subject of taxation
 Plenary – complete, unqualified, absolute
INHERENT LIMITATION OF POWER OF TAXATION
↳ Public Purpose – primarily to raise revenue
► Secondary – non-revenue or sumptuary
 Promote general welfare, regulation, reduction of
social inequity (progressive tax system),
economic growth (ITH and PEZA),
protectionism (duties)
↳ Exemption of Government – GR: GOCCs are subject
↳ Non-delegability of taxing power – exclusively: Congress
► XPN: President – tariffs; LGU – local taxes; Agencies
↳ International Comity – Doctrine of Sovereign Equality
↳ Situs (Territoriality) – act of sovereignty; boundaries
CONSTITUTIONAL LIMITATIONS OF POWER OF TAXATION
↳ Due Process
► Procedural – proper notice (writing), not arbitrary
► Substantive – not harsh, oppressive; must state law
↳ Equal Protection – comes from valid classification
► Apply both to present and future conditions
► Applied equally to all members of the same class
► Must be germane to purposes of the law
► Based on substantial distinction
 Direct double taxation – prohibited (same subject
matter, place, period, purpose, authority, kind)
 Indirect double taxation – allowed (in absence)
↳ Religious freedom – free exercise clause
↳ Exemption of religious, charitable and educational
institution from property taxes
↳ Exemption of non-stock, non-profit educational
institution from all taxes
↳ Uniformity – uniform, equitable, progressive
↳ Non-imprisonment for non-payment of debt or poll tax
↳ Non-impairment of contracts
↳ Freedom of speech and the press
Bureau of Internal Revenue
1 Commissioner and 4 Deputies
(Operations, Legal, Information System, Resource Management)
↳ Power of assessment and collection (not levy)
↳ Interpretation of tax laws (subject to review of SecOfFinance)
↳ Examination of return – assessment of correct amount of tax
↳ Examination of books – that may be relevant or material
↳ Issue summons – produce records or testify under oath
↳ Compromise or abate (non-delegable) – P500,000 or less
Certified Public Accountant 2023