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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 16 igious, 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 on Incorie 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)

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