Beruflich Dokumente
Kultur Dokumente
Bareng
PART I
Income Tax: A tax on all yearly profits arising from property, professions, trades
or offices, or as a tax on a person’s income, emoluments, profits and the like. It is
a direct tax on actual or presumed income of a taxpayer received, accrued or
realized during the taxable year, which the law does not expressly exempt from
taxation.
Note: A taxable transaction shall be subject to only one kind of income tax.
Types of Income Tax:
1. Personal Income Tax
2. Regular Corporate Income Tax
3. MCIT
4. Capital gains tax/CGT
5. Tax on passive investment income
6. Fringe benefit Tax
7. Branch Profit remittance Tax
8. Improperly Accumulated Earnings Tax
9. Final Withholding Tax
1. Direct Tax: It is a tax demanded from the very person who, it is intended or
desired, should pay it. The tax burden is borne by the income recipient
upon whom the tax is imposed.
2. Progressive Tax: Tax base increases as the tax rate increases.
3. Comprehensive: It adopts the citizenship principle, the residence principle
and the source principle.
4. Semi-schedular or semi-global
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
5. American origin
a) The money or property received is income, gain or profit (and not mere
return of capital). There must be a closed and completed transaction.
(Note: any appreciation in the value of the property without sale or
exchange is not taxable)
b) The income, gain or profit is received (actually or constructively), accrued,
or realized during the taxable year. (it must be recognized: remember the
rule on holding period; long—term deposit)
c) The income, gain or profit is not exempt from income tax by law, the
Constitution or treaty.
Income differs from capital in that income is any wealth which flows into the
taxpayer other than a return of capital, while capital constitutes the investments
which is the source of income. Therefore, capital is fund, while income is the flow.
Capital is wealth, while income is the service of wealth. Capital is the tree, while
income is the fruit. Income is liable to income tax while capital or return of capital
is exempt from tax. (Madrigal Vs. Rafferty)
Gross Income: All income from whatever source derived (whether legal or illegal
source), including (but not limited to) compensation for services, including fees,
commissions, and similar items; income from business; gains derived from
dealings in property; interest; rents; royalties; dividends; annuities; prizes and
winnings; pensions; and partner’s distributive share of the gross income of GPP.
However, since the passive incomes are already subject to different rates and
taxed finally at source, they are no longer included in the computation of gross
income, which determines taxable income.
Net Income: means gross income less statutory deductions and exemptions. It is
referred to as “taxable income” under Section 31 of the 1997 Tax Code.
Source Rule: The source rule to determine whether the income shall be treated as
income from within or outside the Philippines can be found in Sec. 42 of the 1997
Tax Code. If a certain type of income is not included in the enumeration of Section
42, the generating source of the income or the place of activity is controlling as to
whether the said income is from sources within the Philippines or not. (Note:
Section 42 only determine the source, not the taxability of the income)
TAXPAYER
TAX ON INDIVIDUALS
Tax Treatment: The general rule is a resident citizen is taxable on all income
derived from all sources within and without the Philippines. His Regular Taxable
Income for each taxable year shall be subject to the scheduler tax rates of 20% to
35% (old law: 5%-32%).
Tax treatment: The income of a non-resident citizen derived from all sources
within the Philippines for each taxable year shall be subject to Income tax.
A.3: RESIDENT ALIENS: An alien actually present in the Philippines who is not a
mere transient or sojourner is a resident of the Philippines. What the law requires
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
for an alien to be considered as a resident of the Philippines is merely physical or
bodily presence in a given place for a period of time, not the intention to make it
a permanent place of abode.
Tax treatment: The income of a resident alien individual derived during the
taxable year from all sources within the Philippines shall be subject to Philippine
Income tax.
a) Passive income subject to final tax- refers to an income which tax due is
fully collected through the withholding tax system in the form of final
withholding tax. The recipient is no longer required to include the item of
income subjected to “final tax” as part of his gross income in his gross
returns.(see page 89 casasola for the rates)
b) Passive income Not subject to the final tax- These are the passive incomes
not subject to the final withholding tax and therefore should be included in
the determination of the gross income which will be subject to regular
income tax rates. Example: Sale to the government of real property which is
considered as capital asset where the seller has opted to subject it either to
the regular income tax based on the FMV or gross selling price of the said
property, whichever is higher, should be subject to tax under section 24 (A)
(2) of the tax code.
A. BASIC TAX: He is taxed on his income from sources within the Philippines
(after deducting personal and additional exemptions, if any) at a graduated
tax rates of 20% to 35%, while his passive income shall be subject to final
tax.
B.1: CGT ON SALE OF SHARES OF STOCK OF A DC: Same with Citizens and
resident alien
B.2: CGT ON SALE OF REAL PROPERTY: Same with Citizens and resident
aliens
B.3: Gross income from all sources within the Philippines derived by the
non-resident cinematographic film owners, lessor or distributors, shall be
subject to 20% final tax.
B.4: Gross income derived from contracts by subcontractors from service
contractors engaged in petroleum operations as defined under PD 87 (also
known as the oil exploration and development act), as imposed under pd
1354: 8% in lieu of all taxes, national and local.
B.5: Interest: See discussion on interest in composition of gross income
B.6: Royalties: See discussion on interest in composition of gross income
B.7: Prizes: See discussion on interest in composition of gross income
B.8: Other Winnings: See discussion on interest in composition of gross
income
B.9: Dividends: See discussion on interest in composition of gross income
Non-resident alien not engaged in trade or business: an alien individual who has
no legitimate business in the Philippines and whose stay thereat does not exceed
180 days during a taxable year.
Tax Treatment: The income derived from all sources within the Philippines shall
be subject to the final withholding tax rates. (See schedule below)
A. There shall be levied, collected, and paid for each taxable year upon the
gross income received by every alien individual employed by RHQs and
ROHQ’s established in the Philippines by multinational companies as
salaries, wages, annuities, compensation, remuneration and other
emoluments, such as honoraria and allowances from such RQQs and
ROHQ’s, a final withholding tax equal to 15% of such gross income. (Same
with employees of OBUs and Petroleum Contractors and Subcontractors)
B. Filipinos working in RHQ/ROHQ may avail the same tax treatment provided
that the following are met:
A) Position and Function Test- The employee must occupy a managerial or
technical position and must actually be exercising such managerial or
technical functions pertaining to the said position.
B) Compensation threshold- The employee must have received, or is due to
receive under a contract of employment, a gross annual taxable
compensation of at least P975,000.
C) Exclusivity test- The Filipino managerial or technical employee must be
exclusively working for the RHQ or ROHQ as a regular employee and not
just a consultant or contractual personnel. Exclusivity means having just
one employer at a time.
Deductions: Since the taxable income is in the hands of the partner, as a rule,
apart from the expenses claimed by the GPP in determining its net income, the
individual partner can still claim deductions incurred or paid by him that
contributed to the earning of the income taxable to him.
VII: JOINT VENTURE: Taxable if the following requisites are met: a) each party to
the joint venture must make a contribution, not necessarily of capital, but by way
of services, skills, knowledge, material or money; (b) There must be an intent to
make profits which must be shared among the parties; (c) There must be a joint
proprietary interest and right of control over the subject matter of the enterprise;
and (d) Usually, there is a single business or transaction.
Rule: As a general rule, a joint venture is not taxed as a corporation and is taxed
just like a GPP which means that the co-venturers are taxed only on their
individual company’s share in the profits. However, the JV should be:
CORPORATIONS
Treatment of interest income from bank deposits and yields from deposit
substitutes by non-stock, non-profit educational institution: There must be a
showing that the incomes are included in the school’s annual information return
and duly audited financial statements together with; (a) certifications from
depository banks as to the amount of interest income earned from passive
investments not subject to the 20% final tax: (b) certification of actual, direct and
exclusive utilization of said income for educational purposes; (c) Board resolution
on proposed project to be funded out of the money deposited in the banks or
placed in money market placements, which must be actually, directly and
exclusively for educational purposes.
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
PASSIVE INCOME OF DOMESTIC CORPORATION WHICH ARE SUBJECT TO FINAL
WITHHOLDING TAX. (See casasola page 133 and TRAIN LAW, almost the same
treatment with passive income of citizens and resident aliens…see previous
discussion)
A MCIT of 2% of the gross income as of the end of the taxable year (whether
calendar or fiscal year, depending on the accounting period employed) is imposed
upon any domestic corporation beginning on the fourth taxable year immediately
following the taxable year in which such corporation commenced its business
operations. The MCIT shall be imposed whenever such corporation has zero or
negative income or whenever the amount of MCIT is greater than the normal
income tax computed due from such corporation.
The MCIT is not tax on the capital as it is imposed on the gross income. It is
neither an additional tax imposition because it is imposed in lieu of the normal
net income tax and only if the normal income tax is suspiciously low.
In the computation of tax due for the taxable quarter, if the computed quarterly
MCIT is higher than the quarterly normal income tax, the tax due to be paid for
such taxable quarter at the time of filing the quarterly corporate income tax
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
return shall be the MCIT which is 2% of the gross income as of the taxable
quarter. Expanded withholding tax, quarterly corporate income tax payments
under the normal income tax, and the MCIT paid in the previous taxable quarter/s
are allowed to be applied against the quarterly MCIT due.
Normal Income Tax is higher than MCIT at the end of the year: Quarterly MCIT
paid and quarterly normal income tax payments in the taxable quarters of the
same taxable year shall be credited against the normal income tax at the end of
the taxable year if in the preparation and filing of the annual income tax due, it
appears that the normal income tax due is higher than the computed annual
MCIT. Moreover, excess MCIT in the prior year/s (subject to the prescriptive
period allowed for its creditability), expanded withholding taxes in the current
year and excess expanded withholding taxes in the prior year shall be allowed to
be credited against the annual income tax computed under the normal income
tax rules. (Note: Any excess of the MCIT over the normal income tax as
computed under sec. 27 (A) of the Tax Code shall be carried forward on an
annual basis and credited against the normal income tax for three (3)
immediately succeeding years.)
MCIT is higher than NCIT at the end of the year: Excess MCIT from the previous
taxable year/s shall not be allowed to be credited against the computed annual
MCIT due as the same can only be applied against normal income tax.
Relief from the MCIT: The secretary of finance , upon recommendation of the
Commissioner, may suspend the imposition of the MCIT upon submission of proof
by the applicant-corporation, duly verified by the Commissioner’s authorized
representative, that the corporation sustained substantial losses on account of
prolonged labor dispute or because of force majeure, or because of legitimate
business reverses.
Tax treatment: The law imposes a 30% normal corporate income tax rate in the
taxable income received by the resident foreign corporations during each taxable
year from all sources derived from within the Philippines.
MCIT: Same treatment with domestic corporations. However, only the gross
income from sources within the Philippines shall be considered for such purposes.
INTERNATIONAL CARRIERS
Gross Philippine Billing: the amount of gross revenue derived from the carriage of
persons, excess baggage, cargo and mail originating from the Philippines in a
Originating Rule: To form part of the GPB, the passenger, excess baggage cargo or
mail must originate in the Philippines.
Note: Off-line air carriers having general sales agents in the Philippines are
engaged in or doing business in the Philippines and that their income from the
sales of passage documents is income from within the Philippines, which income
is similarly subject to tax imposed on resident foreign corporations under the Tax
Code. (South African Airways vs. CIR)
Interest income derived by bank from its FCDU/EFCDU or OBU from foreign
currency loans granted to residents other than OBUs and FCDUs/EFCDUs is
subject to 10% preferential tax.
Requisites:
Tax Treatment: Profits remitted abroad by a branch office to its head office which
are effectively connected with its trade or business in the Philippines are subject
to 15% Branch Profit Remittance Tax. To be effectively connected, it is not
necessary that the income be derived from the actual operation of taxpayer-
corporation’s trade or business; it is sufficient that the income arises from the
business activity in which the corporation is engaged. (Marubeni vs. CIR)
Tax Treatment: The income of non-resident foreign corporation derived from all
sources within the Philippines, such as interests, dividends, rents, royalties,
salaries, premiums, annuities, emoluments or other fixed or determinable
periodic or casual gains, profits and income, and capital gains (except capital gains
from sale of shares of stock not traded in the local stock exchange) shall be
subject to the 30% final withholding tax based on the gross income received
during each taxable year.
a) While the general rule is that a foreign corporation is the same juridical
entity as its branch office in the Philippines, however, when the
corporation transacts business in the Philippines directly and
independently of its branch, the taxpayer would be the foreign
corporation itself and subject to the dividends tax similarly imposed on
nonresident foreign corporation under Sec. 28 of the Tax Code. The
dividends attributable to the head office of the nonresident foreign
corporation would not qualify as dividend earned by its Philippine
Tax Sparing Rule: connotes that the 15% represents the difference between the
regular income tax rate of 30% and the 15% tax on dividends. It is the amount of
tax forgone by the Philippine government in favor of the non-resident foreign
corporation the purpose of which is to encourage foreign investors to conduct
business in the country.
Note: In case of the sale of shares of stock of the non-resident foreign corporation
which it owns in another foreign corporation, the same is not subject to income
tax under our jurisdiction because the income derived therefrom is considered as
a foreign-sourced income which is not subject to the final withholding tax.
Consequence: Once the profit has been subjected IAET, the same shall no longer
be subjected to IAET in later years even if not declared as dividend.
Notwithstanding the imposition of IAET, profits which have been subjected to
IAET, when finally declared as dividends, shall nevertheless be subject to tax on
dividends imposed under the Tax Code.
IMMEDIACY TEST: the “reasonable needs of the business” mean the immediate
needs of the business, and is generally held that if the corporation did not prove
an immediate need for the accumulation of the earnings and profits, the
accumulation was not for reasonable needs of the business and the penalty tax
would apply.
Amount that may be retained: 100% of the paid-up capital or the amount
contributed to the corporation representing the par value of the shares of stock,
hence, any excess capital over and above par shall be excluded.
Construction: Because taxes are the lifeblood of the nation, statutes that allow
exemptions are construed strictly against the grantee and liberally in favor of the
government. Otherwise stated, any exemption from the payment of a tax must be
clearly stated in the language of the law. It cannot be merely implied therefrom.
Note: The income of whatever kind and character of the foregoing organizations
from any of their properties, real or personal, or from any of their activities for
profit regardless of the disposition made of such income shall be subject to tax.
PASSIVE INCOMES
Note: Gross income is broad enough to include all passive income subject to
specific rates or final tax. However, since these passive incomes are already
subject to different rates and taxed finally at source, they are no longer included
in the computation of gross income, which determines taxable income.
*shares of stock which are listed and traded in the local stock exchange,
the transaction is exempted from CGT but subject to (6/10 new) ½ of 1%
stock transaction tax based on the gross selling price or gross value in
money of the shares of stock sold or transferred.
*Sale made by a dealer in securities- Ordinary income subject to basic tax.
*Dealings in the Shares of Stock of a Foreign Corporation: Not subject to
CGT but to the scheduler rates of 20%-35% in the case of individual sellers
and the normal corporate income tax rate of 30% in case of corporate-
seller.
Note: the receipt by a corporation of the subscription price of shares of its
capital stock upon their original issuance gives rise to neither taxable gain
B. CAPITAL GAINS TAX ON SALE OF REAL PROPERTY: The sale of real property
by an individual or domestic corporation will be subject to the Capital
Gains Tax if the said property is considered as his/its capital asset which is
located in the Philippines, including pacto de retro sales and other forms of
conditional sales.
Note: Capital assets vs. Ordinary assets: Capital assets are generally
properties that are not used in trade or business of the taxpayer. On the
other hand, ordinary assets are properties used in trade or business or
primarily held for sale of the taxpayer.
Installment sale:
ii: Cash basis: Deferred-payment sale (that is, payment exceeds 25% of the
gross selling price): The buyer shall withhold the tax based on the gross
selling price or fair market value of the property, whichever is higher, on
the first installment.
ii: Cash basis: The buyer shall withhold the tax based on the gross selling
price or fair market value of the property, whichever is higher, on the first
installment.
Sale of Principal Residence: If the purpose for the sale of principal residence
is to buy a new principal residence within 18 calendar months from the date
of the sale or disposition, the sale, barter or exchange of the said principal
residence shall not be subject to the CGT. (Rule applicable only to individual
taxpayer)
Requisites:
Taxable dividends:
a. Where a corporation distributes all of its assets in complete liquidation
or dissolution, the gain realized or loss sustained by the stockholder,
whether individual or corporate, is a taxable income or a deductible loss, as
the case may be.
b. Any distribution made to the shareholders or members of a corporation
shall be deemed to have been made from the most recently accumulated
profits or surplus, and shall constitute a part of the annual income of the
distribute for the year in which received.
A. Interest income from CURRENCY bank deposit in and yield or any other
monetary benefit from deposit substitutes and trust funds and similar
arrangements derived from sources within the Philippines.
Interest: Compensation allowed by law or fixed by the parties for the use or
forbearance of money or as damage for its detention. In general, interests
received or credited to the account of the depositor or investor are
included in their gross income, unless they are (a) exempt from tax, or (b)
subject to final tax at preferential rate under the 1997 Tax Code or under
the applicable tax treaty.
1. Interest income derived from currency bank deposit and yield or any
other monetary benefit from deposit substitutes and from trust funds and
similar arrangements derived from sources within the Philippines.
*Citizens, resident aliens, non-resident aliens engaged in trade or business
in the Philippines, domestic corporations and resident foreign corporations:
20% FWT.
*Non-resident aliens not engaged in trade or business in the Philippines:
25% FWT.
*Non-resident foreign corporation: 30% FWT (unless it is from foreign loan,
which is subject to 20% FWT)
*Interest income derived from an instrument that does not qualify as a
deposit substitute is subject to 20% creditable withholding tax.
Gross interest income from foreign currency deposits with an OBU or FCDU
in the Philippines is subject to a FWT of 15% (7 ½% old law) if the interest
income is received by a citizens, resident aliens, domestic corporations, and
resident foreign corporation.
Note: If the foreign currency deposit is with a bank located outside the
Philippines, the interest income is subject to the graduated income tax
rates (if the depositor is a resident citizen) or the NCIT rate of 30% (if the
depositor is a domestic corporation). Take note that interest income on
FCD with a bank located outside the Philippines by a non-resident citizen,
alien individual, and foreign corporation is exempt from income tax,
pursuant to the express provisions of the Tax Code.
C. ROYALTY:
Passive Income: when a person pays a royalty to another for the use of its
intellectual property, such as copyrights, patents, trademarks, such royalty
is a passive income of the owner thereof subject to withholding tax.
RULES ON ROYALTY:
Exception:
PART II
TAXABLE INCOME
Methods of determining the net taxable income
GROSS INCOME
Note: The passive income subject to specific rates or final taxes were already
discussed in the prior discussion. They are no longer included in the computation
of gross income, which determines taxable income.
Note: Subject to withholding on wages under section 79, however, the tax
withheld is not final a final tax and is subject to the result of the computation of
tax liability in the Final Adjustment Return.
All remuneration for services performed by an employee for his employer under
an employer-employee relationship, unless specifically excluded by the Code. The
name by which the remuneration for services is designated is immaterial. Further,
the basis upon which the remuneration is paid is immaterial in determining
whether the remuneration constitutes compensation.
Tax treatment of fixed and variable allowances: Any amount paid specifically,
either as advances or reimbursements for travelling, representation and other
bona fide ordinary and necessary expenses incurred or reasonably expected to be
incurred by the employee in the performance of his duties are not compensation
subject to withholding tax on compensation, if the following conditions are
satisfied:
Stock option plans: Any income derived by the employees from their exercise of
stock options is considered as compensation income subject to income tax and
withholding tax. The option has value only if, at the time of the exercise, the stock
is worth more than the price fixed on the grant date.
Business and trade: Gross income derived from doing business shall be equivalent
to gross sales less sales return, discounts and allowances and cost of goods sold.
Cost of goods sold shall include all business expense directly incurred to produce
the merchandise to bring them to their present location and use.
Sale of services: gross income means gross receipts less sales returns, allowances,
discounts and cost of service. Cost of services shall mean all direct costs and
expenses necessarily incurred to provide the services required by the customers
and clients including salaries and cost of facilities and cost of supplies.
Note: CGT on SOS and Stock transaction tax. See discussion on passive
income.
Income on sale of SOS subject to the basic tax: The resulting gain or loss in
the sale of, barter, exchange or other disposition of shares of stock held as
ordinary assets, is considered as ordinary income subject to the scheduler
rates in case of individual or NCIT rate in case of corporation.
Sale of Ordinary Assets: Income realized from the sale of ordinary assets is
subject to the ordinary income tax and the said income shall be declared in
the quarterly/annual income tax return. The income constitutes either
income derived from the conduct of trade or business or a gain from the
dealings in property. Subject to creditable withholding tax.
A) If the seller or transferor is a real estate dealer, the real property sold is
an ordinary asset, and the ordinary gain, if any, is subject to the
graduated tax of 20% to 35% (if an individual who is a citizen, or a
resident or non-resident alien engaged in trade or business in the
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
Philippines, or 25% final tax if a non-resident alien not engaged in trade
or business in the Philippines), or to the 30% normal corporate income
tax (if a domestic corporation or a resident foreign corporation, unless
exempt from tax because it is a socialized housing.)
B) If the seller or transferor is not a real estate dealer, determine whether
the real property sold or transferred is (a) used in the taxpayer’s trade,
business or profession or (b) treated as fixed asset used in his trade, or
business or profession, subject to depreciation. If the answer in either of
the two cases above is in affirmative, the real property shall be treated
as ordinary asset.
Real property located outside the Philippines: The gain from the sale or
other disposition of real property not located in the Philippines, regardless
of classification, by resident citizens and domestic corporations shall be
subject to the graduated income tax (if a resident citizen) or NCIT (if
domestic corporation), since they are taxed on worldwide income.
Generally, income realized from the sale of capital assets are not to be
reported as part of the gross income of an individual in the income tax
return as they are already subject to the final withholding tax. However,
income or capital gains derived from the sale of OTHER CAPITAL ASSETS of
an individual taxpayer, which are not subject to the FWT, should be
declared or reported as part of the gross income in the annual income tax
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
return of the individual taxpayer, wherein the taxable income shall be
subject to the scheduler rates.
IV: INTEREST
Interest income derived from an instrument that does not qualify as a deposit
substitute is subject to 20% creditable withholding tax. (basic tax)
V: RENTAL INCOME
The amount paid for the use or lease or enjoyment of property is rental income to
the owner of the property. Any additional amount paid, directly or indirectly, by
the lessee in consideration for the said lease is considered rental. (Creditable
withholding tax)
Note: if the rented property is being used in business, said rental income shall be
subject to the expanded withholding tax of 5% to be withheld by the lessee.
Failure on the part of the lessee to withhold and remit the said withholding tax
shall not entitle him to claim the rental expense as deduction from his gross
income.
Note: if the improvements are in lieu of rent, the value thereof is income to
the landlord only in the year of termination of the lease.
Prepaid or advance rental: shall only be considered as rental income of the lessor
once the advance rental is utilized by the lessee. Otherwise, it will only be treated
as security deposit which is not considered income. But the entire amount of the
advance rental is considered as taxable income to the lessor in the year received,
if so received under a claim of right and without restriction as to its use, and
regardless of the accounting method employed.
Note: If lodging is furnished in the business premises of the employer and the
employee is required to accept such lodging as a condition of his employment,
then the value of said lodging will not be taxable. It is merely for the convenience,
comfort and pleasure of the employer.
VI: ROYALTY
Active Business Income: royalty is a valuable property that can be developed and
sold on a regular basis for a consideration. Thus, any gain derived therefrom is
considered as an active business income subject to the normal income tax. It is a
special form of rental for the use of intangible property. Creditable withholding
tax?
Passive Income: when a person pays a royalty to another for the use of its
intellectual property, such as copyrights, patents, trademarks, such royalty is a
RULES ON ROYALTY:
Only prizes amounting to P10,000 or less are subject to the normal income tax.
Creditable Withholding Tax?
X: PENSIONS
Retirement benefits and pensions received, other than those received under laws
on pension benefits excluded from gross income, are considered taxable income.
Although the GPP is exempt from income tax as an entity, the partner’s
distributive share in the net income of the GPP is included in the gross income of
the partner.
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
Taxable partnership: In the case, however, of a taxable partnership, the taxable
income declared by a partnership for a taxable year which is subject to tax under
Sec. 27 (A) of the Tax Code, after deducting the Corporate income tax imposed
therein, shall be deemed to have been actually or constructively received by the
partners in the same taxable year and shall be subject to the dividends tax under
Section 24(B) of the Tax Code. Thus, the shares are not included in the taxable
gross income.
The law imposes a tax on income from whatever source which means that “it
includes income whether coming from legal or illegal sources.” The theory
underlying the taxability of income derived from illegal sources is based on the
principle that an unlawful or prohibited business is not exempt from the payment
of taxes that it would have to pay if it were lawful business.
Note: In swindling, the liability of to pay tax is based on the swindler’s having
realized a taxable income from his swindling activities and will not affect his
obligation to make restitution. Payment of the tax is a civil obligation imposed by
law while restitution is a civil liability arising from crime.
Recovery of Bad debts: The general rule is that recovery of amounts deducted in
prior years would result to income. However, where the deduction did not result
in tax benefit, the subsequent recovery is not taxable income. (tax-benefit rule)
Nature of exclusions: Exclusions from gross income are in the nature of tax
exemptions, and it behooves upon the taxpayer to establish them convincingly.
The rationale for the exclusions from gross income are as follows:
1. Exclusions from gross income merely represent return of capital and are
not treated as income, gain or profit.
Exception: If however, the proceeds of the life insurance are held by the insurer
under an agreement to pay interest thereon, the interest payments must be
included in gross income.
Where there was no prior agreement or negotiations between two parties that
one party will be compensated for the services rendered, the transfer having
been made gratuitously should be treated as gift subject to donor’s tax and
should be excluded from the gross income of the recipient.
The provision of a tax treaty must take precedence over and above the provision
of the local taxing statute consonant with the principle of international comity.
Tax treaties are accepted limitations to the power of taxation.
Note: Additional payments in the form of gifts for the loyalty and invaluable
services given by private employers on top of the retirement benefits under a
reasonable private benefit plan should not form part of the retirement benefits
exempt from income tax. Rather, it should be taxed as a taxable gift to the donor
who/which is subject to donor’s tax.
In order to avail of the exemption of the retirement benefits under R.A 7641
from private employers without any retirement plans, the following conditions
must be met:
1. The retirement benefits must be received under the existing CBA or other
agreements;
2. This is given in the absence of retirement plan or agreement providing for
retirement benefits;
3. The retiring employee has served at least 5 years in the establishment;
4. That he is not less than 60 years of age but not more than 65, which is
declared as the compulsory retirement age;
5. He shall be entitled to retirement pay equivalent to at least ½ month salary
for every year of service, a fraction of at least 6 months being considered as
one whole year.
Additional payments in the form of gifts for the loyalty and invaluable services
given by private employers on top of the retirement benefits under a
reasonable private benefit plan: Subject to donor’s tax, hence, not included in
the gross income.
Terminal Leave: not a salary but a retirement gratuity not subject to income tax.
Pension: not a salary nor gratuity, but a vested right. The right to a public pension
is of statutory origin.
Requisites:
a) The employee or official was terminated from service for any cause beyond
his control.
b) The separation from service of the official must not be asked or initiated by
him.
c) The separation was not of his own making
d) Whether or not the separation is beyond the control of the official or
employee, being essentially a question of fact, shall be duly established by
the employer by competent evidence. (employer-withholding agent)
Other excluded payments: Social Security benefits from other country, payment
by US Veterans Administration, SSS, GSIS benefits.
MISCELLENEOUS ITEMS
a) Foreign government
b) Financing institutions owned, controlled, or enjoying refinancing from
foreign government.
c) International or regional financial institutions established by foreign
governments.
13th month pay: The gross benefits received by officials and employees of public
and private entities in the form of 13th month pay and other benefits are excluded
from the gross income for income tax purposes to the extent of P30,000.00.
FRINGE BENEFIT
Economic incidence: Tax incidence falls upon the individual who ultimately bears
the burden or ultimately has to pay the tax.
Who is liable: It is the employer who is legally required to pay the fringe benefit
tax. The fringe benefit tax is imposed as a final withholding tax placing the legal
obligation to the employer to remit the tax, such that, if the tax is not paid, the
legal recourse of the BIR is to go after the employer.
Grossed-up monetary value: The GUMV of the fringe benefit represents the
whole amount of income realized by the employee which includes the net
amount of money or the net monetary value of property which has been received
plus the amount of fringe benefit tax thereon otherwise due from the employee,
but paid by the employer and in behalf of his employee.
Computation of FBT
I: Housing privilege:
EXPENSES
MOTOR VEHICLE:
IV: HOUSEHOLD EXPENSES: expenses of the employee which are borne by the
employer for household personnel, such as salaries of household help, personal
driver of the employee, or other similar expenses shall be subject to FBT.
V: INTEREST ON LOAN AT LESS THAN THE MARKET RATE: If the employer lends
money to his employee free of interest or at a rate of lower than 6%, such
interest foregone by the employer or the difference of the interest assumed by
the employee and the rate of 6% shall be treated as taxable fringe benefit.
VII: EXPENSES FOR FOREIGN TRAVEL: Reasonable business expenses which are
paid by the employer for the foreign travel of his employee for the purpose of
attending business meetings or conventions shall not be treated as taxable fringe
benefit. The cost of economy and business class airplane ticket shall not be
subject to a FBT. However, 30% of the cost of first class airplane ticket shall be
subject to FBT.
___________________________________________________
ALLOWABLE DEDUCTIONS
Allowable deductions: the items of deductions enumerated under Section 34,
including the special deductions allowed to insurance companies under section 34
of the Code. Provided, that in the case of an individual and a corporation entitled
to claim the Optional Standard Deduction (OSD), under Section 34, in lieu of the
deductions enumerated under Sec 34, the tem “allowable deductions” shall mean
the aforesaid OSD.
TAXPAYER DEDUCTIONS
Individual earning pure compensation 1. Personal and additional exemption
income (except non-resident alien not 2. Premium payments on
engaged in trade or business) health/hospitalization insurance.
Individuals deriving income from trade 1. Personal and additional exemption
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
or business, or exercise of profession.
2. Premium payments on
health/hospitalization insurance.
3. Itemized and OSD
Corporations (except non-resident Itemized deductions and OSD
corporation)
Rules on deductibility:
Capital expense: Expenditures that improve or add to the value of the property or
equipment of the business. They are not immediately deductible, but may be
deducted overtime in the form of “Allowance for depreciation.”
Accrual method: expenses not claimed as deduction in the current year when
they are incurred cannot be claimed as deduction from income for the succeeding
year.
Bonuses: Allowed as deductions from the gross income when such payments are
made in good faith and as additional compensation for the services actually
rendered by the employees, provided such payments, when added to the
stipulated salaries, do not exceed a reasonable compensation for the services
rendered.
The company can deduct the amount of the grossed-up monetary value of the
fringe benefit given to the managers or supervisors as a fringe benefit expense
provided that the said fringe benefits given had been subjected to the Final
Withholding Tax on Fringe benefits.
3. TRAVELLING/TRANSPORTATION EXPENSES
Essential Requisites:
4. RENTAL EXPENSE
Note: It must not exceed the ceiling of .50% of net sales for sellers of goods or
properties or 1% of net revenues for sellers of services.
The cost of incidental repairs which neither materially add to the value of the
property nor appreciably prolong its life, but keep it in an ordinarily efficient
operating condition may be deducted as expenses, provided the plant or property
account is not increased by the amount of such expenditure.
9. PROFESSINAL SERVICES
NOTES:
1. Capital expenditures are not deductible during the year but can be
amortized.
2. Pre-operating expenses or organizational expenses of a corporation are
considered as capital expenditure and are therefore, not deductible in the
year they are paid or incurred. But taxpayers who incur these expenses and
subsequently enter the trade or business to which the expenditures relate
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
can elect to amortize these expenditures over a period of not less than 60
months. Organizational expenses are amortized across the life of the firm.
3. Substantiation requirements: No expenses shall be allowed as deduction
from gross income unless the taxpayer shall substantiate with sufficient
evidence, such as official receipts or other adequate record, the amount of
the expenses being deducted and the direct connection or relation of the
expense being deducted to the development, management, operation
and/or conduct of the trade, business or profession of the taxpayer.
4. Bribery and kickback not allowed as deduction: Amount constituting as a
bribe to a government official in order to facilitate the processing of a
transaction from a government office is not allowed as deduction from the
gross income. However, on the part of the subject approving official, who
received the said amount as a bribe, the said amount would constitute as a
taxable income because all income from legal or illegal sources whatsoever
are taxable absent any clear provision of law exempting the same from
income tax.
5. Political campaign expenses or contributions to a candidate in an election
not allowed as deduction.
Interest on unpaid taxes: interest incurred or paid by the taxpayer on all unpaid
business-related taxes shall be fully deductible from the gross income and shall
not be subject to the limitation on deduction heretofore mentioned.
Interest that may be deducted in the taxable year: In general, interest expense
shall be taken for the taxable year in which “paid or incurred” or “paid or accrued)
depending upon the method of accounting upon the basis of which the taxable
income is computed, unless in order to clearly to clearly reflect the income, the
deduction should be taken as of a different period. Thus, a self-employed
individual is allowed to deduct from his gross income the entire amount of
interest expense actually paid during the taxable year. However, if the interest
expense is paid in advance and the accounting method used by the individual is
the cash-basis accounting method, such interest expense paid in advance shall
not be allowed as deduction. However, it shall only be allowed as deduction in the
year when he has fully paid his liability. Note: that in the case of interest
periodically amortized, if the indebtedness is payable in periodic amortization, the
amount of interest which corresponds to the amount of the principal amortized
or paid during the year shall be allowed as deduction in such taxable year.
RELATED TAXPAYERS
Taxes allowed: “Taxes” means tax proper and no deductions should be allowed
for amounts representing interest, surcharge, or penalties incident to the
delinquency. “direct tax only”
Requisites of deductibility
1. Taxes must be paid or incurred in connection with the taxpayer’s trade or
business or exercise of profession;
2. Tax must be imposed by law directly on the taxpayer;
3. Taxes must be paid or incurred during the taxable year;
4. Taxes must be those allowed and not disallowed to be deducted from the
gross income under section 34 (c);
5. Said taxes must be duly substantiated by OR.
Taxes allowed: Indirect taxes, Taxes payable to the bureau of customs, Local
taxes, Automobile registration fee for vehicle being used in business or practice of
profession, any other taxes of every name or nature paid to the directly to the
government or to any political subdivision thereof. The taxes deductible are those
levied for the general public welfare by the proper taxing authorities at a like rate
against all property in the territory over which such authorities have jurisdiction.
Non-deductible: Income tax (except FBT), foreign income tax of any foreign
country, except when a resident citizen, domestic corporation or estate signifies
in his/its return his/its desire to have the benefits of crediting against his taxes
payable in the Philippines the taxes he/it paid in foreign countries, estate tax,
donor’s tax, STT, tax assessed against local benefits of a kind tending to increase
Tax-benefit rule: The general rule is that recovery of amounts deducted in prior
years would result to income. However, where the deduction did not result in tax
benefit, the subsequent recovery is not taxable income.
Tax credit of taxes paid in foreign country: An alien individual and a foreign
corporation shall not be allowed to credit against the taxes paid in the Philippines
the taxes paid in foreign countries because they are subject to Philippine income
tax only on income derived from sources within the Philippines.
Losses which are allowed as deductions from gross income are those actually
sustained during the taxable year and not compensated for by insurance or other
forms of indemnity.
Types:
1. Casualty losses
2. NOLCO
3. Capital Losses and securities becoming worthless
4. Special Losses:
1. Losses from wash sales of stocks or securities;
2. Wagering losses;
3. Abandonment losses;
Value of the casualty loss: Deductible casualty loss shall be the difference
between the value of property immediately preceding casualty and its value
immediately thereafter, but shall not exceed the amount equal to the cost or
other adjusted basis of the property, or depreciated cost in case of property used
in business and reduced by any insurance or other compensation received.
II: Net Operating Loss Carry-over (NOLCO): The excess of allowable deduction
over gross income of the business in a taxable year. The net operating losses
which have not been previously offset as deduction from gross income shall be
carried over as deduction from gross income for the next 3 consecutive taxable
years. (individual engaged in trade, domestic and foreign corporation.)
In relation to OSD: An individual who claims OSD shall not simultaneously claim
deduction of the NOLCO. Provided further that, the 3-year reglementary period
shall continue to run notwithstanding the fact that the aforesaid individual availed
of the OSD during the said period.
In relation to MCIT: Corporation cannot enjoy the benefit of NOLCO for as long as
it is subject to MCIT in any taxable year. The 3-year reglementary period shall
continue to run notwithstanding the fact that the corporation paid its income tax
under the MCIT computation.
A. Capital Losses: Losses from the sales or exchange of capital assets. Capital
losses from sales or exchange of capital assets are deductible only to the
extent of the capital gains from such sales or exchanges of capital assets of
both individuals and corporations. If the dealings of the taxpayer in capital
assets during the year result in a net capital loss, such loss cannot be
deducted from his ordinary income, inasmuch as capital losses are
allowable only to the extent of capital gains. (Note: Gains subject to the
FWT is not includible to the gross income)
a. Losses from wash sales of stocks or securities: The term “wash sale of
stocks or securities” is a sale or other disposition of stock or securities
where the taxpayer has acquired or has entered into a contract or option to
acquire substantially identical stocks or securities within 61-day period,
beginning 30 days before the sale and ending 30 days after the sale. Losses
from wash sale are not deductible from the gross income, except it is a loss
incurred by a dealer in securities in ordinary course of business.
b. Wagering losses: Losses from wagering transactions shall be allowed only
to individuals to the extent of the wagering gains or winnings from such
transactions.
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
c. Abandonment losses: In the event a contract area where petroleum
operations are undertaken is partially or wholly abandoned, all
accumulated exploration and development expenditures pertaining thereto
shall be allowed as deduction.
Requisites of deductibility:
Requisites of deductibility:
1. The allowance for depreciation must be sustained by person who owns or
who has capital investment in the property;
2. The allowance for depreciation must be reasonable in that the amount of
depreciation must be in accordance with the depreciation method adopted
by the company.
3. The property must have a limited useful life.
4. The allowance for depreciation should not exceed the cost of the property.
5. The schedule of the allowance must be attached to the return.
Note: Only one vehicle for land transport is allowed for the use of an official or
employee, the value of which should not exceed P2,400,000.00.
Note: The income tax law does not authorized depreciation of an asset beyond its
acquisition cost. The reason is that deductions from gross income are privileges,
not a matter of right.
a. Straight-line method: The method is to the effect that the rate and the
base are constant. Under this method, the cost or other basis of the
property less its estimated salvage value is deductible in equal annual
amounts over the period of the estimated useful life of the property.
b. Declining-balance method: The fixed percentage of diminishing book value
method is to the effect that the rate of yearly depreciation remains the
same but the base upon which rate is applied diminished form year to year.
c. Sum-of-the-year method: The capital sum to be replaced should be
charged off over the useful life of the property, either in equal annual
installments or in accordance with any other recognized trade practice,
such as an apportionment of the capital sum over units of production.
Requisites of deductibility:
1. The contribution must have been actually made to entities specified by law;
2. The contribution must have been made within the taxable year;
3. It must be evidenced by adequate receipts or records;
4. For contributions other than money, the amount shall be based on the
acquisition cost of the property not the fair market value of the property.
At the time of the contribution.
5. For contributions subject to statutory limitations, the same must not
exceed 10% in the case of individuals (engaged in trade or business) or 5%
in the case of corporations of the said taxpayer’s taxable income before
deducting the charitable contributions.
Requisites:
1. Research or development expenditures were paid or incurred in connection
with the taxpayer’s trade, business or practice of profession.
2. The same had been paid or incurred during the taxable year as ordinary and
necessary expenses.
3. The same had not been charged to the capital account.
Note: The taxpayer must signify in his/its return filed for the first quarter his
intention to elect OSD as deduction, otherwise, he/ it is considered as having
availed of the itemized deduction. The election to avail of the OSD is irrevocable
for the year in which made; however , he/it can change to itemized deduction in
succeeding years if he/it opts it. The OSD allowed shall be a maximum of 40% of
gross sales or receipts during the taxable year.
GPP opting to avail the OSD: For purpose of computing the distributive share of
the partners, the net income of the GPP shall be computed in the same manner as
a corporation. As such, a GPP may claim either the itemized deduction or the in
lieu thereof, it can opt avail of the OSD allowed to corporations in claiming the
deductions in an amount not exceeding 40% of its gross income. The net income
determined by either claiming the itemized deduction or OSD from the GPP’s
gross income is the distributable net income from which the share of each partner
is to be determined. Each partner shall report as gross income his distributive
share, actually or constructively received, in the net income of the partnership.
Partners of GPP may claim deduction: The GPP is not a taxable entity for income
tax purposes since it is only acting as a mere “pass-through” entity where its
income is ultimately taxed to the partners comprising it. Claiming further
deduction shall be guided by the following rules:
1. GPP avails Itemized deductions: Since the taxable income is in the hands of
the partner, as a rule, apart from the expenses claimed by the GPP in
determining its net income, the individual partner can still claim deductions
incurred or paid by him that contributed to the earning of the income
taxable to him. Provided, that in claiming itemized deductions, the partner
is precluded from claiming the same expenses already claimed by the GPP.
2. GPP avails OSD: If GPP avails of OSD in computing its net income, the
partners comprising it can no longer claim further deduction from their
share in the said net income because the OSD will answer for both items of
deduction allowed to GPP and its partners. Further, the partners’
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
distributive share in the GPP is treated as his gross income not his gross
sales/receipts and the 40% OSD allowed to individuals is specifically
mandated to be deducted not from his gross income but from his gross
sales/receipts. Provided, however, that if GPP opts for the OSD, the
individual partner may still claim 40% of its gross income from trade,
business or practice of profession but not to include his share from the net
income of the GPP.
Irrevocability of option: The election to avail of the OSD is irrevocable for the
year in which made. Thus, a taxpayer who avails of the OSD in the first quarter of
its/his taxable year shall have to claim the same OSD in determining its/his
taxable income for the rest of the year.
OTHER DEDUCTION:
Requisites:
a. Hospitalization insurance must actually have been taken by the individual
for himself and/or for the members of his family.
b. The individual availing either earns purely compensation income or earning
business income or engaged in the practice of profession.
c. The gross income of the family of the individual does not exceed P250,000
for the taxable year.
d. The amount of the premium deductible does not exceed P2400 per family
or P200 per month during the taxable year.
e. In case of married individuals, only the spouse claiming additional
exemption shall be entitled to this deduction.
Capital assets: Means property held by the taxpayer (whether or not connected
with his trade or business), but does not include stock in trade of the taxpayer or
other property of a kind which would properly be included in the inventory of the
taxpayer if on hand at the close of the taxable year, or property held by the
taxpayer primarily for sale to customers in the ordinary course of his trade or
business, or property used in the trade or business, of a character which is subject
to the allowance for depreciation provided in section 34(F) or real property used
in trade or business of the taxpayer.
Note: Properties classified as ordinary assets for being used in business by the
taxpayer engaged in business other than real estate business are automatically
converted into capital asset upon showing that the same have not been used in
business for more than 2 years prior to the consummation of the transaction
involving said properties.
Net Capital Gain: Excess of the gains from sales or exchanges of capital assets
over the losses from such sales or exchanges.
Net Capital loss: Excess of the losses from sales or exchanges of capital assets
over the gains from such sales or exchanges.
NOTE: Gains or losses from the sale or exchange of capital assets of INDIVIDUAL
TAXPAYER is subject to the percentage provision of section 39(b): Thus, only the
following percentages of the gain or loss recognized upon the said sale or
exchange shall be taken into account in computing net capital gain, net capital
loss, and net income:
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
1. 100% if the capital asset has been held for not more than twelve months;
2. 50% if the capital asset has been held for more than 12 months.
Capital loss limitation rule: Capital losses from sales or exchanges of capital
assets are allowed only to the extent of the gains from such sales or exchanges. If
the dealings of the taxpayer in capital assets during the taxable year result in a
net capital loss, such loss cannot be deducted from his ordinary income. The
rationale of this rule is to insure that only costs or expenses incurred in earning
the income shall be deductible for income tax purposes consonant with the
requirement of the law that only necessary expenses are allowed as deductions
from the gross income.
Net Capital Loss Carry-over: If any taxpayer, other than a corporation, sustains in
any taxable year a net capital loss, such loss (in an amount not in excess of the net
income for such year) shall be treated in the succeeding taxable year as a loss
from the sale or exchange of a capital asset held for not more than 12 months.
The entire amount of the gain or loss shall be recognized upon the sale or
exchange of property, except as herein provided:
Note: The law merely defers the recognition of the gain or loss insofar as
the transferor and transferee is concerned. Thus, upon the subsequent sale
or disposition of the property covered by the tax-free exchange by the
transferor or the transferee, the historical cost or basis shall be used for
determining gain or loss from the subsequent sale.
____________________________
ACCOUNTING PERIOD
Fiscal accounting period: This is the taxable period adopted by corporations using
the “fiscal year,” which is a period of 12 months ending on the last day of any
month other than December.
ACCOUNTING METHOD: The accounting method for tax purposes must be one
generally employed in keeping the taxpayer’s books, provided that the method
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
clearly reflects the income. In case of conflict between the provisions of the tax
code and that of the generally accepted accounting principles, the provisions of
the tax code and its implementing regulations shall prevail.
A. Cash accounting method: All items of income actually received during the
year shall be accounted for in such taxable year and the corresponding
expenses actually paid shall also be claimed as deductions during the year.
B. Accrual accounting method: Under the accrual method of accounting,
income, gains and profits are included in the gross income when earned
regardless of whether or not actually received, and the expenses are
allowed as deductions from the gross income when actually incurred,
although not yet paid. This is allowed because expenses not being claimed
as deduction by the taxpayer in the current year when they are incurred
cannot be claimed as deduction from the income for the succeeding year.
Note: amounts of income accrue where the right to receive them becomes
fixed, where there is created an enforceable liability.
C. Installment payment basis method: Appropriate when collections extends
over relatively long period of time and there is a strong possibility that full
collection will not be made. As customers make installment payments, the
seller recognizes the gross profit on sale in proportion to the cash collected.
D. Deferred payment basis method: Method being applied by real estate
dealers in their sale of real properties, which although the mode of
payment being employed is on installment basis, the said sale shall be
considered as on a cash basis when the initial payments in the year of sale
of the real properties exceed 25% of the gross selling price.
E. Percentage of completion: Method applicable in the case of a building,
installation or construction contract covering a period in excess of one year
whereby the gross income derived from such contract may be reported
upon the basis of percentage of completion or progress work. Long term
contract are required to be reported using this method only.
All-events-test: The 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. “Reasonable accuracy” implies something less than an exact amount
or completely accurate amount.
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WITHHOLDING: Under the withholding tax system, the payor is the taxpayer upon
whom the tax is imposed, while the withholding agent simply acts as an agent or
collector of the government to ensure the collection of taxes.
Authority of the withholding agent to file a claim for refund: The withholding
agent has the legal right to file a claim for refund for two reasons. First, he is
considered as taxpayer under the NIRC as he is personally liable for the
withholding tax as well as for deficiency assessments, surcharges and penalties,
should the amount of the tax withheld be finally found to be less than the amount
that should have been withheld. Second, as an agent of the taxpayer, his
authority to file the necessary income tax return and to remit the withheld to the
government impliedly includes the authority to file a claim for refund and to bring
an action for recovery of such claim. Note: While the withholding agent has the
right to recover the taxes illegally or erroneously collected, he nevertheless has
the obligation to remit the same to the taxpayer.
The income tax imposable upon individuals shall apply to the income of estates or
of any kind of property held in trust, including:
1. Income accumulated in trust- (a) for the benefit of unborn or unascertained
person or persons with contingent interests; (b) Income accumulated or
held for future distribution under terms of the will or trust;
2. Income which is to be distributed currently by the fiduciary to the
beneficiaries;
3. Income collected by a guardian of an infant which is to be held or
distributed or distributed as the court may direct;
4. Income received by estates of deceased persons during the period of
administration or settlement of the estate;
5. Income which, in the discretion of the fiduciary, may be either distributed
to the beneficiaries or accumulated.
EXEMPT: Employees’ trust which forms part of a pension, stock bonus or profit
sharing plan of the employer for the benefit of some or all of his employees. It is
necessary however that the trust instrument is duly registered with the BIR and
“Whatever you do, do it for God’s glory” 1 Corinthians 10:31
that it is impossible under the said instrument that any part of the corpus or
income to be used for, or diverted to, purposes other than for the exclusive
benefit of his employees.
DISTRIBUTION OF DIVIDENDS:
_________________
FINAL ADJUSTMENT RETURN
Note: If the taxpayer has paid excess quarterly income taxes, it may be entitled
to a tax credit or refund as shown in its FAR which may be carried over and
applied against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable years. But once the taxpayer exercised the
option to carry-over , such option is irrevocable for that taxable period and no
application for cash refund or issuance of a tax credit certificate shall be allowed.
(carry-over, not limited to 1 taxable year)
______________________________________________________