Q: Who is required to pay the Fringe
Benefit Tax? (2003 Bar)
A: It is the employer who is legally required
to pay an income tax on the fringe benefit.
The fringe benefit tax is imposed as a final
withholding tax placing the legal obligation
to remit the tax on the employer, such that, if
the tax is not paid, the legal recourse of the
BIR is to go after the employer. Any amount
or value received by the employee as a fringe
benefit is considered tax paid hence, net of
the income tax due thereon. The person who
is legally required to pay (same as statutory
incidence as distinguished from economic
incidence) is that person who, in case of non-
payment, can be legally demanded to pay the
tax.
Q: X was hired by Y to watch over Y’s
fishponds with a salary of ₱10,000. To
enable him to perform his duties well, he
was also provided a small hut, which he
could use as his residence in the fishponds.
Is the fair market value of the use of the
small hut by X a “fringe benefit” that is
subject to the 32% tax imposed by Sec. 33
of the NIRC? (2001 Bar)
A: NO. X is neither a managerial nor a
supervisory employee. Only managerial or
supervisory employees are entitled to a fringe
benefit subject to the FBT. Even assuming
that he is a managerial or supervisory
employee, the small hut is provided for the
convenience of the employer, hence does not
constitute a taxable fringe benefit (NIRC,
Sec. 3)
Q: On 17 June 2008, R.A. 9504 was
approved and signed into law. The law
increased the basic personal exemption
from P20,000 for a single individual,
P25,000 for the head of the family, and
P32,000 for a married individual to
P50,000 for each individual. It also
increased the additional exemption for
each dependent not exceeding four from
P8,000 to P25,000. Are the increased
personal and additional exemptions
applicable to the entire taxable year 2008
or prorated, considering that R.A. 9504
took effect only on 6 July 2008?

A: The increased personal and additional
exemptions should be applied to the entire
taxable year 2008.
Nothing expressly provides or even suggests
a prorated application of the exemptions for
taxable year 2008. Thus, there’s no reason to
make any distinction between the income
earned prior to the effectivity of the
amendment (from 1 January 2008 to 5 July
2008) and that earned thereafter (from 6 July
2008 to 31 December 2008) as none is
indicated in the law. The principle that the
courts should not distinguish when the law
itself does not distinguish squarely applies to
this case.
Moreover, the legislative policy of full
taxable year treatment of the personal and
additional exemptions has been in our
jurisdiction as established, not by the
amendments introduced by R.A. 9504, but by
the provisions of Section 35 the 1997 NIRC.
Said provision does not allow the prorating of
the personal and additional exemptions even
in case a status-changing event occurs during
the taxable year. Rather, it allows the
taxpayer the maximum exemptions that can
be availed, notwithstanding the fact that the
latter's actual status would qualify only for a
lower exemption if prorating were employed
(Soriano v. Secretary of Finance, G.R. Nos.
184450, 184508, 184538 & 185234, January
24, 2017).
---
Q: Mr. E and Ms. F are both employees of
AAA Corp. They got married on February
14, 2011. On December 29, 2011, the
couple gave birth to triplets. On June 25,
2013, they had twins. What were the
personal exemptions/deductions which
Mr. E and Ms. F could claim in the
following taxable years (a) 2010, (b) 2011,
and (c) 2013? (2015 Bar)
A:
1. Both Mr. E and Ms. F can claim for
personal exemption up to P50,000.00.


2. Either Mr. E or Ms. F can claim for
additional exemption of P25,000.00
each for their children. This is in
addition to the personal exemption of
P50,000.00 which they can
respectively claim. According to the
NIRC, only one of the spouses can
claim for additional exemption for
every dependent. 

3. Mr. E and Ms. F can claim for personal
exemptions, respectively. In addition,
any one of them, exclusively, can
claim for the additional exemptions in
relation to their four dependents
amounting to P25,000.00 each. Under
the NIRC, an individual may claim up
to four additional exemptions in
connection with his/her dependents.


--- 
 --- 

Q: In case of married individuals who are
both working, who is entitled to additional
exemptions?
A: Additional exemption for dependents
shall only be allowed to one of the spouses.
The husband shall be the proper claimant
unless he explicitly waives his right in favor
of the wife in the Application for Registration
(NIRC, Sec. 35 [B]).
NOTE: Where the spouse is a non-resident
citizen deriving income from foreign sources,
the employed spouse within the Philippines
shall be automatically entitled to claim the
additional exemptions for their children.
--- ---

 Q: In case of legally separated spouses,
who is entitled to additional exemptions?
A: Additional exemptions may be claimed
only by the spouse who has custody of the
child or children (NIRC, Sec. 35 [B]). The
dependents must also be chiefly dependent
upon the claimant.
Q: In January 2012, H and W were legally
separated by court order. H was awarded
the custody of their minor son, Rolly, and
W, the custody of their minor daughter,
Shirley. To preserve somehow the ties
between the parent and the child living
separately, the court ordered H to
shoulder the 60% of the financial support
for Shirley, and W, to shoulder 60% of the
financial support for Rolly.
In their respective tax returns for their
2012 income, how much personal and
additional exemptions would H and W be
separately entitled to, assuming that each
of them earned ₱600,000 in 2012?
A: H and W shall be entitled to only ₱50,000
each, the basic personal exemption granted to
individual taxpayers regardless of their
marital status. Neither H nor W is entitled to
any additional exemption because neither
Rolly nor Shirley is a qualified dependent.
Rolly, while living with H, is not dependent
upon W for his chief support. The same holds
true for W with respect to Shirley
(Domondon, 2009).
Q: May a senior citizen still qualify as a
dependent by a taxpayer/benefactor?
A: NO. A senior citizen even if not gainfully
employed, living with and dependent upon
his benefactor for his chief support, although
treated as a dependent under the Act, will
NOT entitle the benefactor to claim
additional personal exemption of ₱25,000
(R.R. 7-2010, Sec. 11).

 Q: Charlie, a widower, has two sons by
his previous marriage. Charlie lives with
Jane who is legally married to Mario. They
have a child named Jill. The children are
all minors and not gainfully employed.
a. How much personal exemption can
Charlie 
 claim? 
 taxpayer’s status;
b. How much additional exemption can
Charlie 
 claim? (2006 Bar) 
 company will make them liable to the
A:
a. Charlie may claim basic personal
exemption of P50K. Under R.A. 9504, an
individual taxpayer may claim the BPE
irrespective of status.
b. His children from his previous marriage
who are legitimate children and his
illegitimate child with Jane will all entitle
him to additional personal exemption of
₱25,000 for each dependent, if apart from
being minor and not gainfully employed, they
are unmarried, living with and dependent
upon Charlie for their chief support.
Q: Mar and Joy got married in 1990. A
week before their marriage, Joy received,
by way of donation, a condominium unit
worth ₱750,000 from her parents. After
the marriage, some renovations were
made at a cost of ₱150,000. The spouses
were both employed in 1991 by the same
company. On 30 Dec. 1992, their first child
was born, and a second child was born on
November 7, 1993. In 1994, they sold the
condominium unit and bought a new unit.
Under the foregoing facts, what were the
events in the life of the spouses that had
income tax incidence? (1997 Bar)
A: The events in the life of spouses, Mar and
Joy, which had income tax incidence, are:
4. Their marriage in 1990 had no effect on
their entitlement to the basic personal
exemption of ₱50,000 which may be
enjoyed irrespective of the individual


5. Their employment in 1991 by the same
income tax imposed on gross
compensation income; 

6. Birth of their first child in 1992 would give
rise to an additional exemption of
₱25,000 for taxable year 1992; 

7. Birth of their second child in 1993 would
likewise give rise to an additional
exemption of ₱25,000 for 1993. 

NOTE: If the spouses are qualified under
“substituted filing,” they need not file Income
Tax Returns.
In case of married individuals who are still
required to file returns or in those instances
not covered by the substituted filing of
returns, only one return for the taxable year
shall be filed by either spouse to cover the
income of the spouses, which return shall be
signed by the husband and wife, unless it is
physically impossible to do so, in which case,
signature of one of the spouses would suffice.
For individuals receiving purely
compensation income from a single
employer, although the income of which has
been correctly withheld, but whose spouse is
not entitled to substituted filing, the spouses
are required to file income tax returns.
 TAX ON NON-RESIDENT ALIENS
Q: Assuming X, a resident citizen, married
and has 4 qualified dependents. In 2009, he
earned a monthly compensation income of
₱25,000. In addition to his compensation
income, he earned ₱150, 000 as net income
from his retail business. How much is his
taxable income for the year 2009?
 income tax on their minimum wage,
NOTE: Premium payment on health and/or
hospitalization insurance cannot be availed of
since the family gross income is more than
₱250,000 for the taxable year.
Q: How much is his income tax payable?
A: From the taxable income of ₱300,000, the
income tax payable is ₱65,000.
Q: Assume that X is a non-resident alien
not engaged in trade or business. He
earned gross income in the amount of ₱1.5
million from his one-night concert in the
Philippines. How much will he pay for his
income tax?
A: X must pay ₱375,000 as income tax
(₱1,500,000 x 25%). Since X is a non-
resident alien not engaged in trade or
business, his gross income within the
Philippines is subject to 25% final tax and is
not allowed any deductions.
 Individual Taxpayers Exempt from
Income Tax
Q: R.A. 9504 was approved and took
effect on 6 July 2008. The law granted
MWEs exemption from payment of
holiday pay, overtime pay, night shift
differential pay and hazard. On 24
September 2008, the BIR issued RR 10-
2008 implementing the provisions of R.A.
9504. Decide the following:
a) Whether an MWE is exempt for the
entire taxable 
 year 2008 or from 6
July 2008 only; 

b) Whether an MWE who becomes
non-MWE during 
 the year still
qualifies for the exemption; 

c) Whether they are entitled to basic
personal 
 exemption; 

d) Whether Sections 1 and 3 of RR 10-
2008 are 
 consistent with the law in
providing that an MWE who receives
other benefits in excess of the statutory
 limit of P30,000 (Now at P82,000) is no
longer entitled to the exemption
provided by R.A. 9504. 
 period when one is a non-MWE is subject to
A:
a) The MWE is exempt for the entire taxable
year 2008. As it stands, the calendar year
2008 remained as one taxable year for an
individual taxpayer. Therefore, RR 10-2008
cannot declare the income earned by a
minimum wage earner from 1 January 2008
to 5 July 2008 to be taxable and those earned
by him for the rest of that year to be tax-
exempt. To do so would be to contradict the
NIRC and jurisprudence, as taxable income
would then cease to be determined on a
yearly basis.
NOTE: The above ruling that the MWE
exemption is available for the entire taxable
year 2008 is premised on the fact of one's
status as an MWE during the entire year of
2008.
b) When the wages received exceed the
minimum wage anytime during the taxable
year, the employee loses the MWE
qualification. Therefore, wages become
taxable as the employee ceased to be an
MWE. But the exemption of the employee
from tax on the income previously earned
as an MWE remains. The improvement of
one's wage cannot justly operate to make the
employee liable for tax on the income earned
as an MWE. 
 185234, January 24, 2017)
c) One who ceases to be an MWE is still
entitled to the personal and additional
exemptions. The MWE exemption is separate
and distinct from the personal and additional
exemptions. One's status as an MWE does
not preclude enjoyment of the personal and
additional exemptions. 
 Thus, when one is
an MWE during a part of the year and later
earns higher than the minimum wage and
becomes a non-MWE, only earnings for that
tax. It also necessarily follows that such an
employee is entitled to the personal and
additional exemptions that any individual
taxpayer with taxable gross income is
entitled. 

d) Sections 1 and 3 of RR 10-2008 add a
requirement not found in the law by
effectively declaring that an MWE who
receives other benefits in excess of the
statutory limit of P30,000 is no longer
entitled to the exemption provided by R.A.
9504. 
 R.A. 9504 is explicit as to the
coverage of the exemption: the wages that are
not in excess of the minimum wage as
determined by the wage boards, including the
corresponding holiday, overtime, night
differential and hazard pays. The minimum
wage exempted by R.A. 9504 is distinct and
different from other payments including
allowances, honoraria, commissions,
allowances or benefits that an employer may
pay or provide an employee. 
 The treatment
of bonuses and other benefits that an
employee receives from the employer in
excess of the P30,000 (now at 82,000) is
taxable. The treatment of this excess cannot
operate to disenfranchise the MWE from
enjoying the exemption explicitly granted by
R.A. 9504 (Soriano v. Secretary of Finance,
G.R. Nos. 184450, 184508, 184538 &


Q: Weber Realty Company, which owns a
3- hectare land in Antipolo entered into a
JOINT VENTURE AGREEMENT (JVA)
with Prime Development Company for the
development of said parcel of land. Weber
Realty as the owner of the land
contributed the land to the Joint Venture
and Prime Development agreed to develop
the same into a residential subdivision and
construct residential houses thereon. They
agreed that they would divide the lots
between them.
Does the JVA entered into by and between
Weber and Prime create a separate
taxable entity? (2007 Bar)
A: NO. Since the arrangement between
Weber Realty Co. and Prime Development
Co. is for the purpose of undertaking a
construction project, there is no separate
taxable entity pursuant to Sec. 22[B] of the
NIRC.
The term 'corporation' shall include
partnerships, no matter how created or
organized, joint-stock companies, joint
accounts (cuentas en participacion),
association, or insurance companies, but does
not include general professional partnerships
and a joint venture or consortium formed for
the purpose of undertaking construction
projects or engaging in petroleum, coal,
geothermal and other energy operations
pursuant to an operating consortium
agreement under a service contract with the
Government (Sec. 22[B], NIRC).
Q: What are the other conditions for the
availability of Optional Gross Income
Tax? (NIRC, Sec. 27 [A])
A:
2. The optional tax is available only to firms
whose ratio of cost of sales/services to gross
sales/receipt does not exceed 55%
A: The imposition of the MCIT is designed
to forestall the prevailing practice of
corporations of over claiming deductions in
order to reduce their income tax payments. –
--
Nature of MCIT
The MCIT is equal to 2% of the gross
income of the corporation at the end of the
taxable quarter, except income exempt from
income tax and income subject to final
withholding tax.
Being a minimum income tax, a corporation
should pay the MCIT whenever its normal
corporate income tax (NCIT) is lower than
the MCIT, or when the firm reports a net
loss in its tax return. Conversely, the NCIT
is paid when it is higher than the MCIT (J.,
Dimaamapo, 2015).
Therefore, the taxable due for the taxable
year will be NCIT (30% of taxable income)
or MCIT (2% of gross income), whichever
is HIGHER.
Illustration:
1) A domestic corporation in its 4th year of
operations had a gross income of ₱300,000
and net taxable income of ₱100,000. How
much is the income tax due for the year?
The election of the gross income tax option
by the corporation shall be irrevocable for
three (3) consecutive taxable years during
which the corporation is qualified under the
scheme; Recommendation from the
Secretary of Finance; and
Approval of the Office of the President.
---
Q: What is the gross income for purposes
of computing MCIT?
A:
As to sale of goods – it shall mean gross
sales less sales returns, discounts and
allowances and cost of goods sold. 
 violative of due process for the following
As to sale of services – it shall mean gross
receipts less sales returns, allowances,
discounts and cost of services. 
 and not on capital. Thus, it is not
Q: When is MCIT reported and paid?
A: The MCIT shall be paid in the same
manner prescribed for the payment of the
normal corporate income tax which is on a
quarterly and on a yearly basis. The
taxpayer shall pay the MCIT whenever it is
greater than the regular or normal corporate
income tax.
The MCIT shall likewise apply to the
quarterly corporate income tax but the final
comparison between the NCIT payable by
the corporation and the MCIT shall be made
at the end of the taxable year. The payable
or excess payment in the Annual Income
Tax Return shall be computed taking into
consideration corporate income tax payment
made at the time of filing of quarterly
corporate income tax return, whether this be
MCIT or normal income tax (R.R. 12-2007).
Q: Can MCIT be allowed as a deduction
from gross income?
A: No. Since MCIT is an estimate of the
normal income tax, it cannot be claimed as a
deduction.
---

 Q: CREBA assails the constitutionality
of MCIT on the contention that it violates
due process. Is the imposition of MCIT
unconstitutional?

A: No, the imposition of MCIT is not
reasons:
- MCIT is imposed on gross income
arbitrary or confiscatory. 

- It is not an additional tax imposition
but is imposed in lieu of normal net
income tax and only if said tax is
suspiciously low. 

8. There is no legal objection to a broader
tax base or taxable income resulting
from the elimination of all deductible
items and, at the same time,
reduction of the applicable tax rate.
In as much as deductions are a
matter of legislative grace, Congress
has the power to condition, limit or
deny deductions from gross income
in order to arrive at the net that it
chooses to tax (CREBA, Inc. v.
Romulo, G.R. No. 160756, March 9,
2010). 

--- 
 --- 

Q: KKK Corp. secured its Certificate of
Incorporation from the Securities and
Exchange Commission on June 3, 2013. It
commenced business operations on
August 12, 2013. In April 2014, Ms. J, an
employee of KKK Corp. in charge of
preparing the annual income tax return
of the corporation for 2013, got confused
on whether she should prepare payment
for the regular corporate income tax or
the minimum corporate income tax.
As Ms. J's supervisor, what will be your
advice? What are the distinctions between
regular corporate income tax and
minimum corporate income tax? (2015
Bar)
the Philippines in a continuous and
uninterrupted flight, irrespective of the place
of sale or issue and the place of payment of
the ticket or passage document (Dimampao,
J., 2015).

As Ms. J’s supervisor, I will advise that ---

KKK Corp. should prepare payment for the
regular corporate income tax and not the
minimum corporate income tax (MCIT).
Under the NIRC, MCIT is only applicable
beginning the 4th taxable year following the
commencement of business operation (Sec.
27(e)(1), NIRC).
The distinctions between regular corporate
income tax and the minimum corporate
income tax are the following:
Q: What consists of “Improperly
Accumulated Earnings”?
A: These are the profits of a corporation that
are accumulated, instead of distributing
them to its shareholders, for the purpose of
avoiding the income tax with respect to its
shareholders or the shareholders of another
corporation (R.R. 2-2001, Sec. 2).

1. As to taxpayer: Regular corporate

income tax applies to all corporate taxpayers
while minimum corporate income tax
applies to domestic corporations and
resident foreign corporations.

2. As to tax rate: Regular corporate income

tax is 30% while minimum corporate
income tax is 2%.


3. As to tax base: Regular corporate income

tax is based on the net taxable income while
minimum corporate income tax is based on
gross income.
4. As to period of applicability: Regular
corporate income tax is applicable once the
corporation commenced its business
operation, while minimum
Q: What is Gross Philippine Billings?
(2005 Bar)
A: It refers to the amount of gross revenue
realized from carriage of persons, excess
baggage, cargo and mail originating from
Q: How can the “reasonable needs” of the
business be determined in order to justify
an accumulation of earnings? (2010 Bar)
A: IMMEDIACY TEST
To determine the “reasonable needs” of the
business in order to justify an accumulation
of earnings, the Courts of the United States
have invented the so-called “Immediacy
Test” which construed the words
“reasonable needs of the business” to mean
the immediate needs of the business, and it
was 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 the reasonable
needs of the business, and the penalty tax
would apply (Manila Wine Merchants, Inc. v
CIR, G.R. No. 26145, February 20, 1984).
In order to determine whether profits are
accumulated for the reasonable needs, it
must be shown that the controlling intention
of the taxpayer is manifest at the time of
accumulation, not subsequently, which are
mere afterthoughts. Furthermore, the
accumulated profits must be used within a
reasonable time after the close of the taxable
year (Cyanamid Philippines, Inc. v. CA,
G.R. No. 108067, January 20, 2000).
NOTE: Once the profit has been subjected
to IAET, the same shall no longer be
subjected to IAET in later years even if not
declared as dividend. Notwithstanding the
imposition of the IAET, profits which have
been subjected to IAET, when finally
declared as dividends shall nevertheless be
subject to tax on dividends imposed under
the NIRC, except in those instances where
the recipient is not subject thereto (R.R. 2-
2001, Sec. 5).
Q: What constitute accumulation of
earnings for the reasonable needs of the
business?
A:
Allowance for the increase in accumulation
of earnings up to 100% of the paid-up
capital 
 The basis of the 100% threshold of
retention (considered within the reasonable
needs of the business) shall be the paid-up
capital or the amount contributed to the
corporation representing the par value of the
Q: Do co-heirs who own inherited
properties which produce income
automatically be considered as partners
of an unregistered corporation hence
subject to income tax?
A: No, for the following reasons:
9. The sharing of gross returns does not of
itself establish a partnership, whether
or not the persons sharing them have
a joint or common right or interest in
any property from which the returns
are derived. There must be an
unmistakable intention to form a
partnership or joint venture (Obillos,
Jr. v. CIR, 139 SCRA 436). 

10. There is no contribution or
investment of additional capital to
increase or expand the inherited
properties, merely continuing the
dedication of the property to the use
to which it had been put by their
forebears (Ibid.). 

11. Persons who contribute property or
funds to a common enterprise and
agree to share the gross returns of
that enterprise in proportion to their
contribution, but who severally
retain the title to their respective
contribution, are not thereby
rendered partners. They have no
common stock capital, and no
community of interest as principal
proprietors in the business itself from
which the proceeds were derived
(Pascual v. CIR, 166 SCRA 560). 

NOTE: The income from the rental of the
house, bought from the earnings of co-
owned properties, shall be treated as the
income of an unregistered partnership to be
taxable as a corporation because of the clear
intention of the co-owners to join together in
a venture for making money out of rentals.
Q: What is Gross Philippine Billings?
(2005 Bar)
A: It refers to the amount of gross revenue
realized from carriage of persons, excess
baggage, cargo and mail originating from
the Philippines in a continuous and
uninterrupted flight, irrespective of the place
of sale or issue and the place of payment of
the ticket or passage document (Dimampao,
J., 2015).
Q: A, B, and C, all lawyers, formed a
partnership called ABC Law Firm so that
they can practice their profession as
lawyers. For the year 2012, ABC Law
Firm received earnings and paid
expenses, among
which are as follows:
Earnings:
Professional/legal fees from various
clients; 

Cash prize received from a religious
society in 
 recognition of the exemplary
service of ABC Law 
 Firm; 
 of gross income being in the nature of
Gains derived from sale of excess
computers and 
 laptops 
 services is also included there being no law
Payments:
1. Salaries of office staff; 
 hence, should form part of gross income
2. Rentals for office space; 
 sale of excess computers and laptops should
3. Representation expenses incurred in
meetings 
 with clients 
 dealings in property (Section 32(A)(3),
a. What are the items in the above
mentioned earnings which should
be included in the computation of
ABC Law Firm’s gross income?
Explain. 

b. What are the items in the above-
mentioned payments which may be
considered as deductions from the
gross income of ABC Law Firm?
Explain. 

c. If ABC Law Firm earns net income in
2012, what, if any, is the tax
consequence on the part of ABC
Law Firm insofar as the payment
of income tax is concerned? What,
if any, is the tax consequence on
the part of A, B, and C as
individual partners, insofar as the
payment of income tax is
concerned? (2014 Bar) 

A:
a. The three (3) items of earnings should be
included in the computation of ABC Law
Firm’s gross income. The professional/legal
fees from various clients is included as part
compensation for services (Section 32(A)(1),
NIRC). The cash prize from a religious
society in recognition of its exemplary
providing for its exclusion. This is not a
prize in recognition of any of the
achievements enumerated under the law
(Section 32(B)(7)(c), NIRC). The gains from
also be included as part of the firm’s gross
income because the term gross income
specifically includes gains derived from
NIRC).
b. The law firm being formed as general
professional partnership is entitled to the
same deductions allowed to corporation
(Section 26, NIRC). Hence, the three (3)
items of deductions mentioned in the
problem are all deductible, they being in the
nature of ordinary and necessary expenses
incurred in the practice of profession
(Section 34(A), NIRC). However, the amount
deductible for representation expenses
incurred by a taxpayer engaged in sale of
services, including a law firm, is subject to a
ceiling of 1% of net revenue (RR No. 10-
2002). 

c. The net income having been earned by the
law firm which is formed and qualifies as a
general professional partnership, is not
subject to income tax because the earner is
devoid of any income tax personality. Each
partner shall report as gross income his
distributive shares, actuality or
constructively received, in the net income of
the partnership. The partnership is merely
treated for income tax purposes as a pass-
through entity so that its net income is not
taxable at the level of the partnership bur
said net income should be attributed to the
partners, whether or not distributed to them,
and they are liable to pay the income tax
based on their respective taxable income as
individual taxpayers (Section 26, NIRC). 
 in itself establish a partnership whether or
Q: Brothers A, B, and C borrowed a sum
of money from their father which amount
together with their personal monies was
used by them for the purpose of buying
real properties. The real properties they
bought were leased to various tenants.
The BIR demanded the payment of
income tax on corporations, real estate
dealer’s tax, and corporation residence
tax. However, A, B. and C seek to reverse
the letter of demand and be absolved
from the payment of taxes in question.
Are they subject to tax on corporations?
A: YES. As defined in the NIRC, the term
“corporation includes partnership, no matter
how created or organized”. This qualifying
expression clearly indicates that a joint
venture need not be taken in any of the
standard form, or conformity with the usual
requirements of the law on partnerships, in
order that one could be deemed constituted
for the purposes of the tax on corporations
(Evangelista v. Collector of Internal
Revenue, G.R. No. L-9996, October 15,
1957).
Q: Pascual and Dragon bought 2 parcels
of land from Bernardino and 3 from
Roque. Thereafter, the first two were sold
to Meirenir Development Corporation
and the remaining were sold to Reyes and
Samson.
They divided the profits between the two
(2) of them. The Commissioner contended
that they formed an unregistered
partnership or joint venture taxable as a
corporation under the Code and its
income is subject to the NIRC. Is there an
unregistered partnership formed?
A: NONE. The sharing of returns does not
not the sharing therein has a joint or
common right or interest in the property
(NCC, Art. 1769). There is no adequate basis
to support the proposition that they thereby
formed an unregistered partnership. The two
isolated transactions whereby they
purchased properties and sold the same few
years thereafter did not make them partners.
The transactions were isolated. The
character of habituality peculiar to business
transactions for the purpose of gain was not
present (Pascual and Dragon v. CIR, G.R.
No. 78133, October 18, 1988).
---
Q: On March 2, 1973, Joe Obillos Sr.
transferred his rights under contract with
Ortigas Co. to his 4 children to enable
them to build residences on the lots. TCTs
were issued. Instead of building houses,
after a year, Obillos children sold them to
Walled City Securities Corporation and
Olga Cruz Canda. The BIR required the
children to pay corporate income tax
under the theory that they formed an
unregistered partnership or joint venture.
Are they liable for corporate income tax?
A: NO. The Obillos children are co-owners.
It is an isolated act which shows no intention
to form a partnership. It appears that they
decided to sell it after they found it
expensive to build houses. The division of
profits was merely incidental to the
dissolution of the co-ownership, which was
in the nature of things a temporary state
(Obillos, Jr. v. CIR, G.R. No. L-68118,
October 29, 1985).
Q: Indicate whether each of the following
individuals is required or not required to
file an income tax return:
Filipino citizen residing outside the
Philippines on his income from sources
outside the Philippines. 
 public sector shall be exempt from
Resident alien on income derived from
sources within the Philippines. 
 No. 9504).
Resident citizen earning purely
compensation income from two employers
within the Philippines, whose income
taxes have been correctly withheld. 
 tax pursuant to Sec. 57(A), NIRC,
Resident citizen who falls under the
classification of minimum wage earners.
An individual whose sole income has been
subjected to final withholding tax. (2015
Bar) 

A:
a. Not required. The income of a non-
resident Filipino 
 citizen is taxable
only on income sourced within the
Philippines. Accordingly, his income
from sources outside the Philippines
is exempt from income tax (Sec.
51A(1)(b), NIRC). 

b. Required. A resident alien is taxable
only on income derived from sources
within the Philippines (Sec.
51A(1)(c), NIRC). 

c. Required. A resident citizen who is
earning purely compensation income
from two employers should file
income tax return. If the
compensation income is received
concurrently from two employers
during the taxable year, the
employee is not qualified for
substituted filing. 

d. Not required. Under the law, all minimum
wage earners in the private and
payment of income tax (Sec.
51A(2)(d), NIRC in relation to R.A.


e. Not required. Under the law, an
individual whose sole income has
been subjected of final withholding
need not file a return. What he
received is a tax paid income (Sec.
51A(2)(c), NIRC).