- Surprise quizzes every now and then + Recitation - 40%
- If volunteer, mas mataas grade
- Midterms - 30% (income tax + transfer tax)
- Finals - 30% (VAT + Remedies)
- Term paper on any Tax Topic if mababa grade
- Income tax
- Transfer tax
- Remedies
- VAT
- In making TAX REVIEWER for the Bar, use sir's book
- Sir's style in teaching: more on codal and principles vs. Cases
- Income/gain/profit
- Received/ accrued/realized during the taxable year
- NOT exempt from Income tax
- But supposed there is no express provision making VAT an indirect tax. Would it now be a DIRECT tax? NO. It is still an indirect tax, which is supposed to be passed on. So only value added yung definition
- INCOME/GAIN/PROFIT
- ACCRUED...
- NOT EXEMPTED
- Global tax system: uniform tax on income imposed
- Schedular tax system: different kinds of income imposed different rates of tax
- Business and professional income
- Compensation income
- Passive income
- Capital gains
- Other incomes
Updates on the BAR Exam: MCQs
Basis of grades:
TOPICS
NIRC Codal - Atty. Casasola
-but not by section, but by principles
***
INCOME TAX
-Title II: Income Tax
-Title III: Transfer Tax
-Title IV: VAT -Title VIII: Remedies
INCOME TAX
-includes withholding tax
What is INCOME TAX
-tax on income, profits or earnings
...on all profits
...fruits of capital
COMPLETE DEFINITION - 3 essential elements
-a direct tax on income/gain/profit received/accrued/realized during the taxable year which is not exempt from taxation
[DIRECT TAX: imposed upon the person upon whom tax is levied, he is not expected to pass it on to another person]
-not all received are income. It may include not only income, but also a return of capital
e.g. You borrowed money from the bank, w/ interest per annum. You pay what is due by the end of the year. The amount corresponding to the interest is not subject to income tax, because it is a return of capital
- Profit (gain or loss) = selling price - cost (or adjusted basis)
SP
-C/AB
G/(L)
[note: sir said that if symbols in parenthesis, it is in the negative]
[ADJUSTED BASIS: takes note of depreciation]
E.G. We have a delivery truck. Cost you P1M to acquire delivery truck. Can you deduct full amount of P1M from your gross income? NO. Take note of depreciation rate.
DEPRECIATION: amount that the law allows you to recover from your investment, determine useful life of the property.
[note that there is a formula for computing depreciation]
So in the example, what if after 5 years, you sell the truck at P800k. Do you gain or lose?
Let's say P100k is the depreciation per year. So the value of the truck after 5 years is P500k. If you sell the truck at P800k, and its current value is P500k, there is a gain of P300k.
P800k
-P500k
P300k
GR: exemptions are construed strictly against tax payer. He who claims exemption should prove claim (show tax provision providing for the same).
-where do you find exemptions?
Section 29(d)
Section 30
HOW DO WE TAX?
2 types of tax system adopted under tax code
-why one rate? Because you consolidate all the kinds of income, then deduct all the allowable deductions, and on the net taxable income, you apply the rate imposed.
-what are these items you group together?
-when applied in general, as opposed to the global tax system? When the income/gain or profit is subject to the FINAL WITHHOLDING tax
SEC 57(A): if not in Section 57, not subject to final withholding tax
(A) Withholding of Final Tax on Certain Incomes. ‐ Subject to rules and regulations
the Secretary of Finance may promulgate, upon the recommendation of the
Commissioner, requiring the filing of income tax return by certain income payees,
the tax imposed or prescribed by Sections 24(B)(1), 24(B)(2), 24(C), 24(D)(1);
25(A)(2), 25(A)(3), 25(B), 25(C), 25(D), 25(E), 27(D)(!), 27(D)(2), 27(D)(3),
27(D)(5), 28 (A)(4), 28(A)(5), 28(A)(7)(a), 28(A)(7)(b), 28(A)(7)(c), 28(B)(1),
28(B)(2), 28(B)(3), 28(B)(4), 28(B)(5)(a), 28(B)(5)(b), 28(B)(5)(c); 33; and 282 of
this Code on specified items of income shall be withheld by payor‐corporation
and/or person and paid in the same manner and subject to the same conditions as
provided in Section 58 of this Code.
When do you say that an income is the final withholding tax?
-imposed on the payor of the income, not the receiver
-the income/profit...is always subject to income tax when it is subject to withholding tax!
-it is subject to FINAL withholding tax if it is enumerated in Section 57(A)
-it is final as to the amount?
e.g. If i deposited P1k in the bank, the gross interest income (20%) would be P200, so only P800k would be credited to me, the depositor. But you do not receive any document from the bank saying they deducted the P200 from your account. They would remit the interest income tax to BIR. The P200 is the final withholding tax due actually to the depositor, but paid by the bank in behalf of the depositor, and so the depositor no longer needs to declare the interest income in your ITR because the bank paid it for you, the depositor, to the BIR!
CREDITABLE WITHHOLDING TAX: Art. 57(B)
(B) Withholding of Creditable Tax at Source. ‐ The Secretary of Finance may, upon
the recommendation of the Commissioner, require the withholding of a tax on the
items of income payable to natural or juridical persons, residing in the Philippines,
by payor‐corporation/persons as provided for by law, at the rate of not less than
one percent (1%) but not more than thirty‐two percent (32%) thereof, which shall
be credited against the income tax liability of the taxpayer for the taxable year.
*RR 2-98: different items of income subject to the creditable income tax - the tax basis and the creditable income tax applicable
-if CREDITABLE: just follow the RR to determine how much is the tax to be withheld
-the recipient of the income is still required to report the income on his ITR, and the withholding agent still withholds and remits the amounts withheld to BIR.
For purposes of crediting, the withholding agent would give the recipient a CERTIFICATE OF TAX WITHHELD so that the recipient would be able to report it correctly to his ITR, which would be credited (since it was already remitted by the BIR in his behalf by the withholding agent)
-applies GLOBAL tax system
HOW TO COMPUTE INCOME TAX: GLOBAL TAX SYSTEM:
GS (gross sales)
-COS (Cost of sales)
GI (Gross income
-D (deductions)
-PAE (Personal and additional exemptions for individuals)
NTI (Net taxable income)
x rate
IT due
-CWT
BALANCE
SCHEDULAR TAX SYSTEM:
-should first know the natures of income
When subject to final withholding tax: See Section 57A
Nature of income | Subject to FWT |
Compensation income | 57A - creditable wht |
Business/professional income | |
Capital Gains | |
Passive income | |
Other incomes |
Is Pacquio's fight exempted from taxes? NO. He's a professional boxer. Olympic athletes are the ones exempted.
