10% - om interest iram depositary bank
££¥6 to 10% - capital gains on sale of shares of stocks
Inter-corporate dividends from domestic corp - exempt
ION-RESIDENT FOREIGN CORPORATION
1% effective January 1, 2099 based on gross income
25% on cinema filin owner, lessor or distributor
4% % on rentals tv awners or lessor of chartered vessel
7% % rentals of aircraft, machineries & other equipment
20% on fareign loans contracted on or after Aug 1, 1988
capital gsins on sale of shares of stocks -5%6 to 10% or % of 1% if sold through stock exchange
Foyaltysubject:> taxtreaty
£4) Most favored nation clause CIR ¥.SC Johnson & Sons 309 SCRA 87 (1999)
15% on cividends from domestic corp provided a tax credit = to 33%6 if granted to non-resident
corp for tax de=med paid
£5) CIR y. Procter & Gamble, 204 SCRA 378, GR No, 66838, 02 Dec 1991, Persons liable to tax v
persons subject co tay rate of tax at 15% v. 35%
to Phil residents
110% IMPROPERLY ACCLMULATED EARNINGS TAX (IAET) See Rev Reg No. 2-2001, 12 Feb 2001
renting See 29 of NIRC)
‘Applies ‘9 domestic corporations; Exemptions
Publicly held corp
Banks & Non-bank Financial Institution
Insusanee Core panies
General Profess onal Partnerships
Non-taxable Joint Venture
PEZA,CDA entities
Prima facie evidence of purpose to avold payment of tax, f personal holding or investment
comsany
Evidence determinative if permitted to accumulate beyond the reasonable needs of the purpose
to avoid tax upon sharenolders unless contrary is proved
Lividens! must be declared and paid within 1 year from close of tax year, otherwise tax shall be
paid within 15 days theveafter
How computed: ‘Taxable Income during the year + Exempt, exclusions, final tax, NOLCO less
dividends & income tax paid, and reasonable needs x 10%
easonable needs include anticipated needs
100% of paid sp capital
Definite expars'on with board resolution
Loan: Agreements
LWC requirements, meet competition, anticipated losses or reverses, hazards and
emergencies
Leg: 1 Prohibition
Sub: diaries of foreiga corp earmarked for investments
Investments if unrelated business, bonds and long term securities are not deemed
reasonable
{i6) Bareahl Formula and Immediacy Test (Cyanamid Phils Inc v. CA 332 SCRA 639, 2000)
IAET is only imposed once on specific earnings but still subject co dividends tax to individuals
EXEMP® CORPORATIONS (Sec 36, NIRC)
Labor, agricultural & horticultural not principally for profit,
an-sto-k, non-profit mutual and coop banks for mutual purpose & without profit
leneficlary sac.ety, order, sssociation, frat benefits of members
Pxclusive cemecery for merabers
16igious, charitable, scientific, cultural no income inures to its members or any
son, (Art VI, Sec 28(3), Constitution) grants exemption to religious, non-profit
cemeteries, charitable, educational covers property tax)
[NGOs engaged in micro financing are subject to income tax regardless of disposition because
thes» are not vie registered activities that are exempt [RR 14-2007, 11 Dec 2007]
Business league, chamber or trade association
Civic leazue, org
Non-stock, non-profit educational institutions [Art XIV, Sec 4(3) of Constitution) are exempt
from duties and taxes, all revenues and assets; substantial evidence to prove that it falls
under classification ane that income is used actually. directly and exclusively for educational
purposes, (See Rev Memorandum Circular No. 76-2003, 14 Nov 2003)
Governrient Educational Institutipns
Fermers or other mutual typhoon or fire insurance co, mutual ditch,
telegraph, only fees, assessments are for meeting expenses
Farmers uit grovzers association for marketing products
Nowwithstanding the foregeing,incomé of whatever kind or nature from properties or activities
con¢ ucted for profit regardless of disposition shal be subject to tax
Interest Income of religious org subject to tax regardless of disposition; bank deposits are
personal property (BIR Ruling 512, 21 Oct 1998, Ruling No 58, 05 Apr 1991); Rental
inco™e is taxabie regardless of disposition (CIR v. CA 298 SCRA 83, 14 Oct 1998)
Gain from sale of land & bldg of religious org used for same purpose is an isolated
transaction, thus exempt from income tax; its vents, dividends, interest, profits from
businesses are taxable. (Manila Polo Club, CTA No. 293, 31 August 1959; BIR Rulings No.
569, 29 Nov 1988; No. 115, 2 Apr 1992)
Application of Sec 30 (H) - YMCA, CIR v. CA 298 SCRA 83 - YMCA's income is not exempt
from income ta. itis not an educational institution referred to in the constitution.
gation or coop
MEANING OF ‘“AXABLE INCOME (Sec 31) - ITEMS OF GROSS INCOME LESS DEDUCTIONS AND
PERSONAL EXEMPTIONS, IF ANY, AUTHORIZED BY NIRC OR SPECIAL LAWS
Sec 32 (A) Definitions of Gross Income, includes compensation for services, conduct of trade
‘or business or profit, gains from dealings in property, interest, rents, royalties, dividends,
annuities, prizes, winnings, pensions, partners’ distributive share in general professional
partnership
1¢ 32 (B) EXCLUSIONS FROM GROSS INCOME ~ Excluded and exempts from taxation
Life insurance proceeds payable to heirs or beneficiaries, but if held by insurer to pay
Interest, the interest is taxable; Question: If beneficiary is the taxpayer itself, are the
sroceeds taxable or not? Justice dimaampao says yes.
Return of premiums or eash surrender value under diff types of life insurance
Gifts, bequests, devices of property, but income from such property & gifts, ete or income
‘rom any property, in case of transfer of divided interests, are taxable
Compensation for injuries or sickness, plus damages whether by suit or agreement
Exernpt by tresty
Reticoment, pensions, gratuities, ete. under RA 7641 and from reasonable private benefit
olan (50 / 10 / once; non-diversion of corpus & profits)
‘Amcunt received as consequence of separation due to sickness / death, other physical
isability, a causes beyond contral
17) PLDT v CIR GA No. 157264, 31 Jan 2008 ~ separation pay due to redundancy. Proof of receipt by
‘employees ofthe pay ané the remittance ofthe withholding tax to the BIR are material to the claim
for refund of sr-oneously paid withholding tax on separation pay. Also, it must be shown that
‘emp oyees declared the income and the tax pad tothe ill through withholding. "Section 10, Claims
for ta creditor refund, ~ Claims for tax eredit or refuns of income tax deducted and yathheld onIncorie payments shall be given due course only when it is shown on the return thatthe income
payment receivec was declared as part ofthe gross income and the fact of withholding i established
bya copy of the statement duly ised by the payer to the payee (BIR Form NO. 1743.1) showing the
amount paid anc! the amount of tax withheld thereon.”
CTA Circular 1-95 states in part:
1. The party who desires to introduce as evidence such voluminous documents must,
after motion and approval by the Court, present (2) a Summary containing, among
others, a chronological listing of the numbers, dates and amounts covered by the
invoices or receipts and the amounts of tax paid; and (b) a Certification of an
indepenclent Certified Public Accountant attesting to the correctness of the contents,
of the summary after making an examiration, evaluation and audit of the
voluminous receipts and invoices 1%
2. The method of individual presentation of each and every receipt, invoice or account
for making, identification and comparison with the originals thereof need not be
done before the Court or Clerk of Court anymore after the introduction of the
summaty and CPA certification. Itis enough that the receipts, invoices, vouchers
or other documents covering the said accounts or payment to be introduced in
evidence must be pre-marked by the party concerned and submitted to the
Court in order to be made accessible to the adverse party who desires to check and
verify the correctness of the summary and CPA certification. Likewise, the originals
of the voluminous receipts, invoices and accounts must be ready for verification and
comparison in case of doubt on the authenticity thereof is raised during the hearing
(or resolution of the formal offer of evidence. (Emphasis and underscoring supplied)
Motion for New Trial & Liberal application of the CTA rules of court discussed.
Petition denied. [See new Rules of Court for CTA issued in 2005]
Social security, retirement, gratuities, pensions received by Filipinos or aliens who reside
permanently in the Philippines from foreign government, other institution, public or
orivate
Received by any person residing in Phil from US Veterans Admin
5, GSIS benerits and gratuities
Income by foreign government, their financing institutions & international finance
institution
Inceme from public utility and essential functions of Phil government and political
uubdivisions
Prizes & awards as recognitions for religious, charitable, scientific, educational, art, literary.
‘vie if selection is without action on his part to enter the contest or proceedings and
Joes not require substantial future service
Prizes and awards to atiletes from local and international competition recognized by local
sports association [cross reference to Other Percentage Tax, Title V, NIRC]
113 Month pay & other benefits under this paragraph, not more P30K such as government
employees under RA 6686, benefits not covered by PD 851 as amended by MO No. 28,
13 Aug 1986, productivity incentives and Christmas bonus. Ceiling increased to P82K
under RA 9504
$85, GSIS, Medicare, Pag-ibig, Union Dues by indivicwals|
Gains from sale of bonis, debentures, certificate of indebtedness with maturity of 5 years
Cains from redemption of mutual funds company shares defined in Sec 22 (BB)
ALLOWABLE DEDUCTIONS
Mtemized Deductions (Sec 34, NIRC)