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TAXATION LAW REVIEW: Midterms

1. CRITERIA FOR TAXABILITY OF INCOME

CITIZENSHIP/ NATIONALITY PRINCIPLE- A citizen of PH is subject to income tax
on all sources within and outside. A resident alien only on his PH source income
within.
RESIDENCE/ DOMICILE PRINCIPLE- A resident alien is subject to income tax on all
sources within.
SOURCE PRINCIPLE- An alien is subject to PH to income tax from source within.

*IMPORTANT TO KNOW since PH has adopted semi-global tax system.

2. TAXABLE AND NON-TAXABLE INCOME

TAXABLE INCOME= GI- DEDUCTIONS AND EXEMPTIONS

DIFFERENT TYPES OF INCOME TAX

Personal Income Tax on individuals- graudated rates
Regular Corporate on corporations- 30%
MCIT- 2%
CAPITAL GAINS TAX ON SHARES OF STOCK ON DOMESTIC CORPORATION
PASSIVE INVESTMENT INCOME (such as dividend,interest, royalties)
FRINGE BENEFITS
BPRT
IAET
FWT

GROSS INCOME (GRIP CARD GPP)
Gains from sale of RP
Rents
Interests
Pensions
Compensation
Annuities
Royalties
Gross income from T or B
Pensions
Partners distributive share


EXLUSIONS FROM GI (GIRL CRM)
Gifts, Bequests, Devises
Income exempt under treaty
Return of Premium
Life Insurance
Compensation for injuries/ sickness
Retirement Benefits
Misc. Items

3. DEDUCTIONS FROM GI (BELT DOCI)

Business Expenses
Loses
Taxes
Depreciation
OSD
Charitable Contributions
Interest

4. FILING OF CORPORATE RETURNS

File 4 returns during taxable period
1
st
three, on or before 15
th
day after closing of each quarter
4
th
final adjusted, on or before 15
th
day of ensuring year

5. OSD

Available to citizens or RA
Optional UNLESS TP signifies intention to elect OSD
Irrevocable for the year made
40% gross receipts or gross sales IF individual; 40% GI IF corporation
Proof of actual expenses NOT required

6. DEFINITION OF TERMS (SEC. 22)

Statutory minimum wage earner- shall refer to worker in the PRIVATE sector
paid the SMW or to an employee in PUBLIC sector which compensation
income of not more than the SMW in the non-agricultural sector where
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assigned. Statutory minimum wage earner shall refer to rate fixed by the
Regional Triparte Wage and Productivity Board
CY- accounting period of 12 months ending on the last day of any month
FY- accounting period of 12 months ending on the last day of any month
other than December. *used by CORPORATIONS only

7. SEC. 25

NRA is deemed is to be engaged in trade or business if NRA stays in an
aggregate amount period of more than 180 calendar days or 6 months.
NRANETB subjected to 25% and not allowed to the exemptions

8. IAET. Imporperly Accumulated Earnings Tax. (SEC. 29)
When corporations do not declare dividends are beyond the reasonable
needs of the company. An IAET of 10% as a penalty tax is imposed to
compel corporations to distribute earnings so that SH could in turn be taxed
EXCEPT: Bank, non-bank, financial institutions are authorized by the
Central Bank of PH to hold SOS of banks or insurance companies, GPPs.

9. ACCESS POWERS OF CIR (SEC. 6 & 7)


10. PAN

11. ALL EVENTS TEST- Isabela Cultural

This test requires: (1) fixing of a right to income or liability to pay;
and (2) the availability of the reasonable accurate determination of such income or
liability.
The all-events test requires the right to income or liability be fixed, and the amount of
such income or liability be determined with reasonable accuracy. However, the test does
not demand that the amount of income or liability be known absolutely, only that a
taxpayer has at his disposal the information necessary to compute the amount with
reasonable accuracy. The all-events test is satisfied where computation remains
uncertain, if its basis is unchangeable; the test is satisfied where a computation may be
unknown, but is not as much as unknowable, within the taxable year. The amount of
liability does not have to be determined exactly; it must be determined with
"reasonable accuracy." Accordingly, the term "reasonable accuracy" implies
something less than an exact or completely accurate amount.



Section 7. Authority of the Commissioner to Delegate Power. - The Commissioner may delegate the powers vested in
him under the pertinent provisions of this Code to any or such subordinate officials with the rank equivalent to a division
chief or higher, subject to such limitations and restrictions as may be imposed under rules and regulations to be
promulgated by the Secretary of finance, upon recommendation of the Commissioner: Provided, However, That the
following powers of the Commissioner shall not be delegated:
(a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the
Bureau;
(c) The power to compromise or abate, under Sec. 204 (A) and (B) of this Code, any tax liability: Provided,
however, That assessments issued by the regional offices involving basic deficiency taxes of Five hundred
thousand pesos (P500,000) or less, and minor criminal violations, as may be determined by rules and
regulations to be promulgated by the Secretary of finance, upon recommendation of the Commissioner,
discovered by regional and district officials, may be compromised by a regional evaluation board which shall
be composed of the Regional Director as Chairman, the Assistant Regional Director, the heads of the Legal,
Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer,
as members; and
(d) The power to assign or reassign internal revenue officers to establishments where articles subject to
excise tax are produced or kept.