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TAXATION : the act of

laying tax

Purpose of Taxation :
1. Revenue purposes
2. Regulatory purposes
3. Compensatory purposes
Taxes : are the
enforced
proportional
contributions from
persons and
property levied by
the law making
body of the state by
virtue of its
sovereignty for the
support of the
government and
public needs

Inherent power of
sovereignty
Essentially legislative
in function
For public purposes
The strongest of all the
inherent powers of the
government
Territorial in operation
Subject to
constitutional and
inherent limitation
It is inherent in sovereignty
It is legislative in character
It is subject to Constitutional
and Inherent limitation
NATURE OF THE POWER
OF TAXATION
1. FISCAL ADEQUACY
2. EQUALITY OR THEORITICAL JUSTICE : based
on ability to pay principle
3. ADMINISTRATIVE FEASIBILITY
It is an enforced contribution
It is generally payable in money
It is proportionate in character
It is levied on persons or property
It is levied by the state which has a jurisdiction over the person
or property
It is levied by the law making body of the state
It is levied for public purposes
ESSENTIAL CHARACTERISTIC OF TAX
Strengthen anemic enterprise
Protect local industries
Bargaining tool
Halt inflation
Reduce inequalities in wealth
Promote science
Implement police power


RELIGIOUS PURPOSES
RELIGIOUS,CHARITABLE, AND EDUCATIONAL ENTITIES, NON PROFIT
CEMETERIES AND CHURCES
NON-STOCK, NON-PROFIT EDUCATION INSTITUTION
THOSE WHICH HAD BEEN VETO BY THE PRESIDENT
GOVERNMENT ENTITIES
Business league, chamber of commerce or board of trade not organized for
profit
General professional partnership
Labor. Agricultural, or horticular organization not organized principally for
profit
Gifts made in account of marriage by parents to each of their legitimate.
Recognized natural or adopted children
Gifts for use of the national government
Gifts made in favor of educational institution, social welfare corporation,
research organization
Benefit payment to member made by the GSIS and SSS
Benefits from the US government through US veterans administration
Prize receive by winners in charity horse race
The annual senior citizen income of not more than P60,000 per annum
NON TERRITORIAL JURISDICTION


Due Process of Law
Equal Protection of the Law
Rule of uniformity and equity in taxation
No imprisonment for non payment of poll tax
Non-impairment of the obligations of contracts
Non-infringement of religious freedom
No appropriation for religious purposes
Exemption of religious, charitable, and educational entities, non-profit
cemeteries, and churches from property taxation
Exemption of non-stock, non-profit educational institutions from
taxation
Concurrence by a majority of all members of the Congress for the
passage of a law granting tax exemption
Power of the President to veto any particular item or itens in a revenue
or tariff bill
Non-impairment of jurisdiction of the Supreme Court in tax cases


Requirement that levy must be for a public
purpose
Non-delegation of the legislative power to
tax
Exemption from taxation of government
entities
International Comity
Territorial Jurisdiction
Prohibition against
infringement of religious
freedom
Prohibition against
appropriation for religious
purposes
Basis : No Law shall
be made respecting an
establishment of
religion, or prohibiting
the free exercise
thereof. The free
exercise and
enjoyment of religious
profession and
worship, without
discrimination or
preference, shall
forever be allowed xxx
(Sec. 5, Art. III)
Basis : No public money or
property shall be
appropriated, applied, paid
or employed, directly or
indirectly for use, benefit or
support or any sect, church,
denomination, sectarian or
institution or system of
religion or of any priest,
preacher, minister or other
religious teacher or
dignitary as such, except
when such, except when
such priest, preacher,
minister or dignitary, is
assigned to the armed
forces, or any penal
institutions, or government
orphanage or leprosarium.
(Sec. 29, Art. VI)
Prohibition against taxation of
religious, charitable,
educational entities
Prohibition against taxation of non-
stock, non-profit educational institution
Basis : Charitable
institutions, churches
and parsonages or
convents appurtenant
thereto, mosques, non-
profit cemeteries, and all
lands, buildings and
improvements actually,
directly, and exclusively
used for religious,
charitable or educational
purposes shall be
exempt from taxation
(Sec. 28, Art VI)
Basis : All revenues and
assets of non-stock, non-
profit educational
institutions used actually,
directly, and exclusively for
educational purposes shall
be exempt from taxes and
duties xxx (Sec. 4, Art. XIV)
Subject to conditions
prescribed by law, all
grants, endowments,
donations or contributions
used actually, directly and
exclusively for educational
purposes shall be exempt
from tax (Sec.4, Art. XIV)
No law granting any tax exemption shall be
passed without the concurrence of a majority
of all members of the Congress (Sec. 28 (4)
Art. VI)
For purposes of practicality and expediency,
our Constitution expressly allows Congress
to authorize the President to fix within
specified limits, and subject to such
limitations and restrictions as it may impose,
tariff rates, import or export quotas, tonnage
and wharfage dues and other duties or
imposts.xxx(Sec.28, Art.VI)
Requirement of
Uniformity and Equity







Prohibition against
imprisonment for non-
payment of poll tax
Basis : The rule of
taxation shall be
uniform and equitable
(Sec.28, Art. VI)
Basis : No person
shall be imprisoned for
debt or non payment
of a poll tax (Sec.20,
Art.III)
1. Levy determination of certain amount or of
certain percentage to be imposed on
persons, property or acts
2. Assessment : computation of the sum due,
giving of notice, making of the demand
3. Collection : taking or getting by proper
governmental agencies if taxes imposed
On or before April 15 of the current year
1. As to subject matter or object :
a. Personal, poll or capitation
b. Property
c. Excise
2. As to who bears the burden :
a. direct
b. indirect
3. As to determination of amount
a. specific
b. ad valorem
4. As to purpose :
a. general, fiscal or revenue
b. special or regulatory

5. As to scope
a. National
b. Municipal
6. As to graduation or
rate
a. proportional
b. progressive
c. regressive
1. Income Tax
2. Estate and Donor Tax
3. Value Added Tax
4. Other percentage taxes :
on small business
enterprise, on carriers, on
franchise holders, on
persons paying for
overseas communications,
on banks and non-bank
financial intermediaries,
on life insurance, on
proprietors, lessees or
operators of amusement,
on winners of prizes in
horse races and jai-alai,
on sale, barter or
exchange of stocks

5. Excise tax on
certain goods
6. Documentary stamp
tax
7. Other taxes :
custom duties, sugar
adjustment tax,
narcotic drugs, travel
tax, private motor
vehicle tax, energy
tax, special
education fund tax
Income tax : tax on the
net income or the
entire income realized
in one taxable year
Transfer taxes:
Estate tax :tax on the
right of the deceased
person to transmit his
estate to his lawful
heirs or beneficiaries
Inheritance tax : tax on
the right of the heirs or
beneficiaries to receive
the estate of the
deceased person

Gift taxes :
1. Donors tax : tax
levied on the act of
giving
2. Donees tax :

Value Added tax :
uniform tax imposed
on each sale, barter or
exchange or lease of
goods, properties or
services




A uniform tax (0% or
10%) imposed on each
sale, barter, exchange or
lease of goods,
properties or services in
the course of trade or
business as they pass
along the production and
distribution chain, the
tax being limited only to
the value added to such
goods, properties, or
services by seller,
transferor or lessor
It is levied on every
importation of goods
It is a privilege tax
It is a percentage tax
It is an indirect tax
1. On sale of goods or properties : tax is
equivalent to 10% of the gross selling price or
gross value in money of the goods or properties
sold, bartered or exchanged
2. On imported goods : tax is equivalent to 10%
based in total value used by the Bureau of
Customs
3. On sale of services and use or lease of
properties : tax is equivalent to 10% of gross
receipts derived by any person engaged in the
sale or exchange of services for a fee or
consideration including the use or lease of
properties whether real or personal

Gross
sales/rptsx
1/11
= Output Tax
Less :purchase
of goods x 1/11
= Input Tax
Output Tax
Input Tac
= VAT payable
Sales
(domestic)
P660,000
Brokerage 330,000
Total 990, 000
Output Tax
(1/11)
P90,000
Importation P220,000
Local
purchases:
Raw
Materials
66,000
Supplies 44,000
Capital

Equipment
165,000
Services 55,000 330,000
Total 550,000
Less : Input
Tax
50,000
Persons or enterprise Liable for percentage
taxes
Small business enterprise (<P500,000: 3%)
Domestic carriers (3%)
International carriers (3%)
Franchise grantees (3%)
Overseas Communications (10%)
Banks and Financial Intermediaries
Finance Companies (5%)
Life Insurance companies (5% of the premium)
Amusement
a. Proporietors or lessees or operators of
amusement places (cockpits, cabaret (18%),
boxing exhibition (10%), professional
basketbal games (15%), race tracks and jai
alai (30%)
`b. Winners in horse races (10% of the
dividend)
Goods subject to excise
taxes
Excise Tax :
1. Specific tax : weight
or volume
2. Ad valorem : value
Goods manufactured or
produced in the
Philippines for domestic
sale or consumption
Imported items
Alcohol products
:distilled spirits, wines
and fermented liquor
Tobacco products : scrap
cuttings, tobacco, cigars
and cigarettes
Petroleum products
Misc.goods
Mineral products
Volume
Length
Weight
Number

DOCUMENTARY STAMP
TAX
EFFECTS OF FAILURE TO STAMP
TAXABLE INSTRUMENTS
Tax on documents,
instruments, and
papers evidencing
the acceptance,
assignment, sale or
transfer of an
obligation, rights or
property incident
The document can not be
recorded in the
government registry
Such document,
instrument or paper or
any record or transfer of
the same shall not be
admitted or used in
evidence in any court
No notary public or other
officer authorized to
administer oaths shall
add his jurat
Subject to penalty
violation
Classification
Special Custom Duties
Regular : ad valorem,
specific, alternate,
compound
Special
Dumping duty : imposed on a specific
kind or class of foreign article which is
being imported into, or sold for
exportation to the Philippines at a price
less than the fair value
Countervailing duty : imposed on
articles, upon the production,
manufacture or export of which any
bounty or subsidy is directly or
indirectly granted in the country of
origin and/ or exportation
Marking duty : on articles and
containers which have not been properly
marked in any official language in the
Philippines
Retaliatory or discriminatory duty :
imposed upon articles of a foreign
country which discriminates against
Philippine commerce
Purpose Persons liable
To stabilize the sugar
industry
To obtain readjustment
benefits derived from
sugar industry
To limit the production
of sugar to areas more
economically suited for
the production
To afford labor employed
in the industry a living
wage and to improved
their working condition
Proprietors or
operators of mills in
centrifugal sugar
Owners or persons in
control of sugar lands

Fixed or Annual
Occupation Taxes
Specific Tax
Transfer Tax


A. Citizens of the Philippines;
B. Permanent resident aliens whose immigration status maybe any of the
following:

Sec. 13 Quota or Preference Immigrant Visa
Sec. 13 A Visa issued to an Alien Spouse of Philippine Citizen
Sec. 13 B Child born outside the Philippines by a 13A Mother
Sec. 13 C Child born in the Philippines by a 13A Mother
Sec. 13 D Loss of Citizenship by a Filipino Woman by her Marriage to an
Alien
Sec. 13 E Returning Resident
Sec. 13 G Former Natural-born Citizen of the Philippines who was
Naturalized by a Foreign Country
TRV Temporary Residence Visa
RA 7919 Alien Social Integration Act of 1995
RC /RFC Recognition as Filipino Citizen
RA 7837 Permanent Resident
C. Non-resident aliens who have stayed in the Philippines for more than one(1)
year.

Note: Non-immigrant aliens who have not stayed in the Philippines for more than
a year are not covered by the travel tax. However, PTA F356 need to be prepared
by the ticketing officer for passengers with the following immigration status
except for FGO & their dependents (Sec. 9E) who have stayed for more than a year,
they have to secure Travel Tax Exemption Certificate.

EO 408 / E0 Tourist without visa
- EO 21 Stay valid for 21 days
- 11 Days Stay valid for 11 days
- 7 Days Stay valid for 7 days
BB Balikbayan

Sec. 9A Temporary Visitor coming for business or for pleasure or for reasons of
health
Sec. 9B Transit Passengers
Sec. 9C Foreign Seamen
Sec. 9D Treaty Trader / Investor
Sec. 9E Foreign Government Officials
Sec. 9F Foreign Students
Sec. 9G Pre-arranged Employee
47 A2/PEZA Special Non-immigrant Visa
47B Refugees
PD 1034 Executives of Multinational Companies
EO 63 / EO 226 / RA 8756 Omnibus Investment Act of 1987
- SIRV - Special Investor Resident Visa
RA 7227 Bases Conversion and Development Act of 1992
- SSIV - Subic Special Investor's Visa
- SSRV - Subic Special Retiree Visa
- SSRV - Subic Special Retiree Visa
- SSWV - Subic Special Working Visa
- SCWV - Special Clark Working Visa
EO 1037 / SRRV Special Resident Retiree Visa
EO 191 Granting No-Visa Entry for Initial Stay of 7 Days for
Chinese Nationals who are holders of Macao - Portuguese
Passport
LOI 911 / LOI Granting No-Visa Entry for Initial Stay of 7 Days for
holders of HK-British-HK-SAR Passport

As mandated by the law, the taxes are divided among the
Philippine Tourism Authority (PTA), the National Parks
Development Committee (NPDC), the National Commission for
Culture and the Arts (NCCA), Commission for Higher Education
(CHED), and the General Fund of the National Government for
use in government programs.


First Class
Passage Economy Class
Passage

Full rate PHP 2700 PHP 1620
Standard reduced
rate PHP 1350 PHP 810
Privileged reduced
rate for Overseas Contract Workers'
(OCWs) dependents PHP 400 PHP 300


Foreign diplomatic representatives


Employees of the United Nations (UN)
Organization or its agencies

United States (US) Military Personnel including
dependents and other US nationals with fares
paid for by the US Government or on US
Government-owned/chartered transport
facilities.


Filipino Overseas Contract Worker
International carrier crew
Filipino permanent residents abroad whose stay in the Philippines is less than
one (1) year.
Philippine Foreign Service personnel assigned abroad and their dependents
Philippine government (excluding government-owned and controlled
corporations) employees on official travel

Grantees of foreign government-funded trips
Students with approved scholarships by appropriate government agency
Infants (2 years & below)
Personnel (and their dependents) of Philippine offices of multinational
companies not engaged in business in the Philippines

B. RA 6768 provides for the exemption of the following from payment of the
travel tax:

Balikbayans whose stay in the Philippines is less than one (1) year


Family members of former Filipinos accompanying the latter



C. Section 2-A of PD 1183, as amended, states that the
following are entitled to a standard reduced travel tax
rate:

Minors from 2 to 12 years

D. Section 2-B of PD 1183, as amended, states that the
following are entitled to a privileged reduced travel tax
rate:

Legitimate spouse of overseas contract worker (OCW)


Legitimate unmarried children of OCW below 21 years old


PRIVATE MOTO VEHICLE
TAX
EO 43 (RA 4136) Land
Transportation and
Traffic Code
Purpose :
Nationalization
Discourage the
uneconomic
consumption of fuel
Revenue
SCHEDULE (L,M,H:Age)
RRA 776 (Civil
Aeronautics Act of
the Philippines)
Purpose:
Fuel Conservation
Revenue
Conserving energy
((BP Blg.36)

It shall be paid to and withheld by electric
utilities from their respective residential
customers along with their monthly electric
billings. The owner or proprietor, operator, or
any person in charge of the public utility
shall, within 20 calendar days after the end of
each calendar month in which the tax is
collected file a true and correct return with
the Commissioner of Internal Revenue and
remit within the same period the total
amount of tax collected.
1. Shifting : the transfer
of the burden of a tax
by the original payer or
the one whom the tax
is asses or imposed to
another or someone
else
FORWARD : burden of tax
is transferred from a
factor of production
through factors of
distribution until it
settles finally on the
consumer
BACKWARD : burden of
the tax is transferred by
consumer through
factors of distribution to
the factors of production
Onward Shifting : tax is
shifted two or three
times either forward or
backward
P (t) =100(90+10) ;
110
PR(110)=
(110+10)120(10%)1
32=132
PRB
BR-P
B132(120)120R--
-P(100)
BRP

PR----B
P--RxB
2. TAX CAPITALIZATION :
reduction of the price
of the taxed object
equal to the capitalized
value of future taxes
which the purchaser
expects to be called
upon to pay
3. TRANSFORMATION :
the manufacturer or
producer upon whom
the tax has been
imposed, fearing the
loss of his market if he
should add the tax to
the price, pays the tax
and endeavors to
recoup himself by
improving his process
or production thereby
turning his units of
product at a lower cost
100sqm. : 1M:
P800,000+200,000=
P1M
P700,000/800,000
Capital tax :
S, Bread, drinks
P10,000 ; P10,000, P10,00
1,000; 1,000; 1,000
P11,000,/10, 11,000/10,
11,000/ 10
Per plate P110/30
, P110, P110
3spnful
10combo meal
30+30+30 = 90

4. TAX EVASION :
the use of the tax
payer of illegal and
fraud
5. TAX AVOIDANCE :
use of the tax payer
of legally
permissible
alternative tax rates
or methods inorder
to avoid or reduce
tax liability
100M : 10 M
BB : 10M
GK: 10 M
SSI : 5M
En: 15 M
Total charitable and socio projects :40M
100M-40M = 60 M ; 6M (4M)
1. The end to be achieved
2. An accompanying state of mind which is
described as evil
3. A course of action which is unlawful

Bureau of Internal
Revenue
Bureau of Customs
Court of Tax
Appeals
Ordinary Court
Supreme Court
ADMINISTRATIVE
Distraint of personal
property
Levy of real property
Enforcement of forfeiture
Enforcement of tax lien
Entering into
compromise of tax cases
Requiring the filing of
bonds
Requiring proof of filing
income tax returns

Giving of rewards to
informers
Imposition if surcharge
and interest
Making arrest, search or
seizure
Deportation of aliens
Inspection of books of
accounts
Use of national tax
register
Obtaining information on
tax liability of any person
ADMINISTRATIVE ADMINISTRATIVE
Inventory taking of
stock in trade and
making surveillance
Prescribing gross sales
and receipts
Termination of tax
period

Prescribing real
property value
Inquiring into bank
deposit account
Requiring registration
of taxpayers

JUDICIAL
Ordinary civil action Criminal action
300,000-250,000= 50,000 x .30 = 15,000 (
30% of the excess of 250,000
Tax due : 50,000 + 15,000
Tax due : 65,000/12= 5.400
Income base of tax rate : the amount of
income upon which the tax rate prescribed by
law is applied to get the amount of income
tax payable
Net Income : pertinent items of gross income
specified in the tax code less deductions, if
any, including personal and additional
exemption
Non Exempt Income : all incomes of the tax
payer which are subject to tax or which are
not exempted from taxation
Compensation for services
Gross income derived from conduct of trade or
business
Gains derived from dealings in property
Interests
Rents
Royalties
Dividends
Annuities
Prize and winnings
Pensions
Partners distributive share from the net income
1. There must be gain or profit
2. The gain must be received and realized
3. The gain must be excluded by law or treaty
from taxation
EXCLUSIONS : are
incomes that are
exempt from tax.
They are not
considered in
determining gross
income
DEDUCTIONS : are
items or amounts
which the law
allows to be
deducted under
certain conditions
from the gross
income of taxpayer
in order to arrive at
the taxable income
30,000/ mo x 12 = 360,000
SSS: 1,500x 12= 18,000
PhilH= 100x12= 1,200
PG = 500x 12 = 6,000/ total 25, 200
Single, but has :child 5yrs
Head of the family / dependent 16,500
(37,500+16,500=54,000
360,000-25,200-54,000 =280,800 (taxable
income)
Tax due :( 50,000+30%% of the excess of
250,000
280,800-250,000 =30,800x.3 =9,240
Tax due : 50,000 + 9,240 = 59,240