Income Taxation
Income Taxation
Income Taxation
1. POLICE POWER - POWER TO PROTECT AND PROVIDE FOR SAFETYND WELFARE OF THE SOCIETY.
2. EMINENT DOMAIN POWER- THE POWER TO TAKE PRIVATE PROPERTY (WITH JUST COMPENSATION FOR PUBLIC U
3. TAXATION POWER- POWER TO ENFORCE CONTRIBUTIONS TO SUPPORT GOVERNMENT; AND OTHER INHERENT P
4.TERRITORIAL IN OPERATION
A. PEOPLE
B.TERRITORY
C.SOVEREIGNTY
D.GOVERNMENT
NOTE: ONLY THE NATIONAL GOVERNMENT EXERCISES THE INHERENT POWER OF TAXATION OF THE STATE.
LOCAL GOVERNMENT UNITS DO NOT POSSESS THE INHERENT POWER.
CONGRESS -HAS THE POWER TO ENACT LAWS AND ORDINANCES , AND TO IMPOSE AND TO COLLECTTAXES.
NON DELEGATION OF LEGISLATIVE POWER TO TAX -THE POWER TO MAKE LAWS CANNOT BE DELEGATED
OF THE GOVERNMENT.
4. TERRITORIAL IN OPERATION
TAX CAN BE EXERCISED WITHIN THE TERRITORIAL JURISDICTION.
PRIVITY OF RELATIONSHIP- STATE CAN STILL EXERCISE ITS TAXING POWERS OVER ITS CITIZEN OUTSIDE ITS TERRITO
FUNDAMENTAL BASIS OF THE RIGHT TO TAX, IS THE CAPACITY OF THE GOVERNMENT TO PROVIDE BENEFITS AND
TO THE OBJECT OF THE TAX.
TAX SITUS- TAX LAWS ARE EFFECTIVE AND ENFORCEABLE ONLY WITHIN ITS TERRITORIAL LIMITS
TAXATION IS BOUND TO OBSERVE INTERNATIONAL COMITY. THE TAX LAWS ARE NOT APPLICABLE
TO THE PROPERTY OF FOREIGN GOVERNMENT.
INTERNATIONAL COMITY -IS THE COURTEOUS RECOGNITION, FRIENDLY AGREEMENT, INTERACTION AND RESPECT
INHERENT LIMITATIONS
ARE THE NATURAL RESTRICTIONS TO SAFEGUARD AND ENSURE THAT THE POWER OF TAXATION SHALL B
OF PEOPLE.
HERE ARE THE INHERENT LIMITATIONS:
1. TAXES MAY BE LEVIED ONLY FOR PUBLIC PURPOSES
2.BEING INHERENTLY LEGISLATIVE, TAXATION MAY NOT BE DELEGATED
3.TAX POWER IS LIMITED TO TERRITORIAL JUSRISDICTION OF THE STATE.
4. TAXATION IS SUBJECT TO INTERNATIONAL COMITY
5. GOVERNMENT ENTITIES ARE GENERALLY TA EXEMPT.
CONSTITUTIONAL LIMITATIONS
ARE PROVISIONS OF THE FUNDAMENTAL LAW OF THE LAND THAT RESTRICT THE SUPREME, PLENARY, U
COMPREHENSIVE EXERCISE BY THE STATE OF ITS INHERENT POWER TO TAX.
IT MUST BE REMEMBERED THAT TAX LAW IS NO LEGAL FORCE WHEN IT VIOLATES THE CONSTITUTION.
VETO POWER- REFERS TO THE XECUTIVE'S POWER TO REFUSE TO SIGN INTO LAW A BILL THAT HAS BEEN
IT CAN BE CLASSIFIED INTO:
A. ITEM VETO- THE POWER TO VETO IN APPROPRIATION BILLS WITHOUT AFFECTING ANY OTHER PROVIS
B. POCKET VETO- THE POWER TO DISAPPROVELEGISLATIVE ACT BY THE PRESIDENT WITH THE RESULT TH
THE PRESIDENT SHALL COMMUNICATE HIS VETO OF ANY BILL TO THE HOUSE WHERE IT ORIGINATED WI
THEREOF; OTHERWISE, IT SHALL BECOME A LAW AS IF HE HAD SIGNED IT.
IF THE PRESIDENT VETOED THE BILL, TWO -THIRDS OR 2/3 OR THE HOUSE ARE REQUIRED TO MAKE SUC
IT SHALL BE OBSERVED THAT THE ABOVE CONSTITUTIONAL PROVISION REQUIRES THE CONCURRENCE O
BUT OF ALL MEMEBERS OF THE CONGRESS.
POLL TAX- MEANS A TAX IMPOSED ON A PERSON AS A RESIDENT WITHIN A TERRITORY OF THE TAXING A
PROPERTY, BUSINESS OR OCCUPATION. A GOOD EXAMPLE IS COMMUNITY TAX.
IMPORTANCE OF TAXATION
WITHOUT REVENUE, THERE CAN BE NO CONTINUING GOVERNMENT, WITHOUT GOVERNMENT THERE C
BASIS OF TAXATION
A.PRINCIPLE OF NECESSITY
B.RECIPROCAL DUTIES OF PROTECTION
A.PRINCIPLE OF NECESSITY
TAXATION -IS THE LIFEBLOOD OR THE BREAD AND BUTTER OF THE GOVERNMENT.
PURPOSES OF TAXATION
1. REVENUE PURPOSE- THE PRIMARY PURPOSE OF TAXATION IS TO RAISE REVENUE
2. REGULATORY PURPOSE- IS ALSO KNOWN AS SUMPTUARY -THE SECONDARY OBJECTIVE OF IMPOSING
THIS IS ACCOMPLISHED TO
A. REGULATE INFLATION
B. ACHIEVE ECONOMIC AND SOCIAL STABILITY
C. SERVE AS KEY INSTRUMENT FOR SOCIAL CONTROL
TAXES MAY BE USED AS A TOOL AND WEAPON IN INTERNATIONAL RELATIONS.
IT IS AN INSTRUMENT TO ENCOURAGE FOREIGN TRADE BY PROVIDING TAX INCENTIVES OR PROTECT LO
IMPOSING ADDITIONAL TAXES ON IMPORTED GOODS.
AS A TOOLS TO PROTECT TRADE RELATION, SPECIAL DUTIES MAYBE CREATED TO PROTECT NEW CONDIT
1.DISCRIMINATORY DUTY - THIS SPECIAL DUTY IS DESIGNED TO OFFSET ANY FOREIGN DISCRIMINATION
2.COUNTERVAILING DUTY -IT MAY BE IMPOSED TO OFFSET ANY FOREIGN SUBSIDY GRANTED TO IMPORT
3. MARKING DUTY - IT IS GENERALLY IMPOSED AS ADDITIONAL DUTY TAX ON IMPORTED ARTICLES AND/
4.DUMPING DUTIES- IT REFERS TO THE ADDITIONAL DUTY TAXES IMPOSED ON IMPORTED GOODS WITH
LOCAL INDUSTRIES.
COMPENSATORY PURPOSE
TAXATION- IS A WAY OF GIVING BACK THE EXPECTED ECONOMIC AND SOCIAL BENEFITS DUE TO THE IN
TAXES MAY BE IMPOSED FOR THE "EQUITABLE DISTRIBUTION OF WEALTH AND INCOME" IN SOCIETY.
IN INCOME TAXATON, THE HIGHER TAXES ARE COLLECTED FROM THOSE WHO EARN MORE AND USE TH
OF THE PEOPLE IN GENERAL.
OBJECTS OF TAXATION
1. PERSONS, WHETHER NATURAL OR JURIDICAL
A.NATURAL PERSON- REFERS TO INDIVIDUAL TAXPAYER
B.JURIDICAL PERSON - INCLUDES CORPORATIONS, PARTNERSHIPS, AND ANY ASSOCIATIONS
C. RIGHT- POWER, FACULTY OR DEMAND INHERENT IN ONE PERSON AND INCIDENTAL IN ONE ANOTHER
2.IMPRESCRIPTIBILITY OF TAXES
TAXES IN GENERAL ARE NOT CANCELABLE.
3.DOUBLE TAXATION
TAXING TWICE
A.THE SAME PURPOSE
B.THE SAME YEAR
C.THE SAME PROPERTY OR THE SAME ACTIVITY OF THE SAME PERSON
EQUITABLE RECOUPMENT
TAX CLAIM FOR REFUNDMAY BE ALLOWED TO BE USED AS PAYMENT FOR UNSETTLED LIABILITIES IF BOT
SAME TRANSACTION IN WHICH OVERPAYMENT IS MADE AND UNDERPAYMENT IS DUE.
SET-OFF TAXES
TAXES ARE NOT SUBJECT TO SET-OFF OR LEGAL COMPESATION BECAUSE THE GOVERNMENT AND TAXPA
AND DEBTOR OF EACH OTHER.
TAXPAYER SUIT
EFFECTED THROUGH COURT PROCEEDINGS AND COULD ONLY BE ALLOWED IF THE ACT INVOLVES A DIR
OF PUBLIC FUNDS DERIVED FROM TAXATION.
COMPROMISES
PERSONS ALLOWED BY LAW TO DO COMPROMISE ON BEHALF OF THE GOVERNMENT ARE THE FF:
1.ONLY THE BIR COMMISSIONER,AS EXPRESSLY AUTHORIZED BY THE TAX CODE
2.COLLECTOR OF CUSTOMS- WITH RESCPECT TO CUSTOM DUTIES
3. CUSTOMS COMMISSIONER- SUBJECT TO THE APPROVAL OF SECRETARY OF FINANCE (INVOLVING IMP
POWER TO DESTROY
IN THE SENSE THAT LAWFUL TAX CANNOT BE DEFEATED JUST BECAUSE ITS EXERCISE WOULD BE DESTRU
POWER TO BUILD
IT IS PRIMARILY A TOOL THAT CREATES, BUILDS, AND SUSTAINS THE UPLIFTMENT OF SOCIAL CONDITION
TO OTHER INHERENT POWERS OF THE STATE THAT PRESERVE THE FUNDAMENTAL RIGHTS OF THE PEOP
SITUS OF TAXATION
REFERS TO THE PLACE OF TAXATION, OR THE STATE OR POLITICAL UNIT WHICH HS JURISDICTION TO IMP
AS A GENERAL RULE, THE STATE HAS THE POWER TO IMPSE TAX ONLY WITHIN ITS TERRITORIAL JURISDIC
COLLECTED
TERRITORIAL LIMITS
EEMENT, INTERACTION AND RESPECT ACCORDED BY ONE NATION AND INSTITUTIONS OF ONE ANOTHER.
EMINENT DOMAIN
POWER TO TAKE PRIVATE PROPERTY
FOR PUBLIC USE WITH JUST COMPENSATION
ERAL WELFARE
NO IMPOSITION
COMMON NECESSITIES AND INTEREST
OF THE COMMUNITY TRANSCEND INDIVIDUAL
TIGHTS IN PROPERTY
HAT THE POWER OF TAXATION SHALL BE EXERCISED BY THE GOVERNMENT ONLY FOR THE BETTERMENT
R TARIFF BILLS
TBLE OR EDUCATIONAL ENTITIES,
AX EXEMPTION
S JURISDICTION IN ALL CASES INVOLVING THE LEGALITY
IMPOSED IN RELATION TO TAX.
FUNDS OF GOVERNMENT.
WITHOUT DUE PROCESS OF LAW
F THE LAWS.
THE HOUSE WHERE IT ORIGINATED WITHIN THIRTY DAYS AFTER THE DATE OF RECEIPT
ISION REQUIRES THE CONCURRENCE OF A MAJORITY NOT OF THE ATTENDEED CONSTITUTING A QUORUM
T OF A POLL TAX"
E GOVERNMENT.
NT COLLECTS TAXES FROM THE SUBJECTS OF TAXATION IN ORDER THAT IT MAY BE ABLE TO PERFORM ITS FUNCTONS.
O RAISE REVENUE
SECONDARY OBJECTIVE OF IMPOSING TAC.
L RELATIONS.
DING TAX INCENTIVES OR PROTECT LOCAL INDUSTRIES AGAINS FOREIGN COMPETITION BY
OREIGN SUBSIDY GRANTED TO IMPORTED GOODS TO THE PREJUDICE OF OUR LOCAL INDUSTRIES.
IMPOSED ON IMPORTED GOODS WITH PRICES LESSER THAN THEIR FAIR MARKET VALUES TO PROTECT
NGIBLE PROPERTIES
OSE AND LOT
H AS CAR AND OTHER PERSONAL BELONGINGS
D AND ARE NECESSARILY CORPOREAL, EITHER REAL OR PERSONAL PROPERTIES
ER THAN PHYSICAL OBJECTS.
ND COPYRIGHTS.
TOCK EXCHANGE (1/2 OF 1%) RATHER THAN SELLING TO DIRECT BUYER (5% TO 10%)
CAUSE ITS EXERCISE WOULD BE DESTRUCTIVE OR WOULD BRING ABOUT INSOLVENCY TO A TAXPAYER.
TAXATION.
BEING TAXED
YES YES
YES YES
YES YES
YES NO
YES NO
TS FUNCTONS.
TAX ADMINISTRATION
IS A SYSTEM INVOLVING ENFORCEMENT OF TAXES THROUGH THE FOLLOWING ASPECTS OF TAXATION.
LEVY
IMPOSITION OF TAXES THE PASSAGE OF TAX LAWS OR ORDINANCES THROUGH THE LEGISLATURE.
ASSESSMENT
INVOLVES THE ACT OF ADMINISTRATION AND IMPLEMENTATION OF THE TAX LAWS BY THE EXECUTIVE THROUGH
GENERALLY TAXES ARE SELF ASSESSING. IT MEANS THAT TAXPAYER CAN COMPUTE HIS TAXES BY HIMSELF.
PYMENT OF TAX
INVOVING THE ACT OF COMPLIANCE BY THE TAXPAYER IN CONTRIBUTING HIS SHARE TO DEFRAY THE EXPENSES OF
ASSESSMENT AND COLLECTION CAN BE DELEGATED BECAUSE THEY ARE ADMINISTRATIVE IN NATURE.
1.FISCAL ADEQUACY
STATES THAT THE SOURCES OF REVENUE OF THE GOVERNMENT SHOULD BE SUFFICIENT TO MEET THE DEMAND O
3.ADMINISTRATIVE FEASIBILITY
TAX LAWS MUST BE CONVENIENT, JUST, UNIFORM AND EFFECTIVE IN THEIR ADMINISTRATION- FREE FROM CONFU
APPLICATIONS OF THESE ARE THE FOLLOWING:
A.COLLECTION OF TAXES AT SOURCE (WITHHOKDING TAX)
B.ASSIGNING OF DULY AUTHORIZED BANKS TO COLLECT TAXES
CQUARTERLY FILING AND PAYMENT OF INCOME TAXES.
TAX ADMINISTRATIVE AGENCIES
DEPARTMENT OF FINANCE (DOF)- IS THE PRINCIPAL ADMINISTRATIVE AGENCY OF THE GOVERNMENT FOR TAX ADM
IT HAS EXECUTIVE SUPERVISION AND CONTROL OVER OTHER AGENCIES SUCH AS:
1.BUREAU OF INTERNAL REVENUE -THE ADMINISTRATIVE AGENCY OF THE GOVERNMENT IN CHARGE OF THE PRIM
THE RXECUTION OF NIRC AND OTHER TAX LAWS AND REGULATIONS.
3.LAND TRANSPORTATION OFFICE (LTO)- THE OFFICE RESPONSIBLE TO COLLECT REGISTRATION FEES AND MOTOR V
REGISTRATION PERIOD
EVERY PERSON SUBJECT TO INTERNAL REVENUE TAX SHALL REGISTER ONCE WITH THE APPROPRIATE REVENUE DIS
1.WITHIN 10 DAYS FROM DATE OF EMPLOYMENT
2.ON OR BEFORE THE COMMENCEMENT OF BUSINESS.
3.BEFORE PAYMENT OF TAX DUE
4.UPON FILING OF A RETURN
BIR FORMS
1. 1901- FOR REGSTRATION OF SELF EMPLOYED, MIXED INCOME INDIVDUALS, ESTATES AND TRUST.
2. OTHER REQUIREMENTS
A.SERIALLY NUMBERED
B.CONTAIN THE NAME , BUSINESS STYLE, TIN AND BUSINESS ADDRESS
TAX ASSESSMENT
BASICALLY REFERS TO THE PROCESS OF DETERMINING THE CORRECT AMOUNT OF TAX DUE IN ACCORDANCE WITH
TAX RETURN -REFERS TO A FORMAL REPORT PREPARED Y THE TAXPAYER OR HIS AGENT IN A PRESCRIBED FORM SH
ASSESSMENT PERIOD
REFERS TO THE PERIOD IN PROCESSING, APPRAISING AND DETERMINING THE VALUE OF THE SUBJECT OF TAXATION
INCLUDING THE COMPUTATION OF TAX PRESCRIPTION, SURCHARGES AND INTERESTS TO ARRIVE AT SPECIFIC SUM
PRE-ASSESSMENT NOTICE
IS A DUE PROCESS REQUIREMENT IN THE ISSUANCE OF DEFICIENCY TAX ASSESSMENT. IT MAY BE CLASSIFIED AS FO
1. PRELIMINARY ASSESSMENT NOTICEC - IF THE RESULT OF THE REVIEW CONDUCTED BY THE ASSESSMENT DIVISIO
SUFFICIENT BASIS TO ASSESS THE TAXPAYER DOR ANY DEFICIENCY TAX.
THE TAXPAYER IS GIVEN 15 DAYS FROM RECEIPT TO CONTEST THE AMOUNT BEING ASSESSED.
FAILURE TO RESPOND WILL WARRANT THE ISSUANCE OF FORMAL LETTER OF DEMAND OF PAYMENT TOGETHER W
THE COMPUTATION INCLUSIVE OF APPLICABLE PENALTIES.
THE REVENUE OFFICER LEVYING THE DISTRAINT SHALL ACCOUNT THE GOODS DISTRAINED WITHIN 10 DAYS FROM
REPORT OF SALE TO BIR- WITHIN 2 DAYS AFTER THE SALE, THE OOFICER MAKING THE SAME SHALL MAKE A REPOR
FURTHER DISTRAINT
THE REMEDY OF DISTRAINT OF PERSONAL PROPERTY AY BE REPEATEDE IF NECESSARY UNTIL THE FULL AMOUNT D
AND ALL EXPENSES ARE COLLECTED.
PROCEDURES OF LEVY
1.SUMMARY REMEDIES
LEVY SHALL BE EFFECTED IN WRITING UPON THE CERTIFICATE DETAILING A DESCRIPTION OF THE PROPERTY UPON
THE COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE SHALL WITHIN 30 DAYS AFTER EXECUTION OF TH
2.ADVERTISEMENT AND SALE- WITHIN 20 DAYS AFTER LEVY, THE OFFICER CONDUCTING THE LEVY SHALL PROCEED
3.REDEMPTION OF PROPERTY SOLD -WITHIN ONE YEAR FROM THE DATE OF SALE, THE DELINQUENT TAXPAYER, OR
RIGHT OF PAYING TO THE RDO THE MOUNT OF PUBLIC TAXES, TOGETHER WITH THE INTEREST AT THE RATE OF 15%
FURTHER LEVY
THE REMEDY OF LEVY OF PERSONAL PROPERTY AY BE REPEATEDE IF NECESSARY UNTIL THE FULL AMOUNT DUE
AND ALL EXPENSES ARE COLLECTED.
TAX LIEN
IS A LEGAL CLAIM GRANTED TO THE GOVERNMENT TO SECURE PROPER PAYMENT OF THE TAX, SURCHARGES, INTE
LEVY OR DISTRAINT.
COMPROMISE
IS A CONTRACT WHEREBY THE PARTIES, BY RECIPROCAL CONCESSIONS, AVOID LITIGATION OR PUT AN END TO ONE
SECTION 204 OF THE TAX CODE PROVIDES THAT THE COMMISSIONER MAY COMPROMISEE THE PAYMENT OF ANY
1. A REASONABLE DOUBT AS TO THE VALIDITY OF THE CLAIM AGAINST TAXPAYER EXIST.
1. THE FINANCIAL POSITION OF THE TAXPAYER DEMONSTRATES A CLEAR INABILITY TO PAY THE ASSESSED TAX.
C.40% OF ASSESSED TAXDUE TO FINANCIAL INCAPABILITY FOR SURPLUS OR EARNINGS DEFICIT RESULTING TO IMPA
ORIGINAL CAPITALBY AT LEAST 50%.
MANUFACTURER'S AND IMPORTERS OF ARTICLES (ALCOHOL AND TOBACCO PRODUCTS) SUBJECT TO EXCISE TAX
1.INITIAL BOND- 100,000.00
IF AFTER 6 MONTHS OF OPERATION THE AMOUNT OF INITIAL BOND IS LESS THAN THE TOTAL EXCISE TAX PAID DUR
SHALL BE ADJUSTED TO TWICE TO TAX PAID DURING THE PERIOD, THE AMOUNT OF THE BOND SHALL BE ADJUSTED
2. BOND OF SUCCEEDING YEARS OF OPERATION- THE BOND FOR SUCCEEDING YEARS OF OPERATION SHALL BE BAS
IMMEDIATELY PRECEDING THE YEAR OF OPERATION.
INFORMER'S REWARD
FOR VOLUNTARY SWORN INFORMATION GIVEN TO THE BIR WHICH LEADS TO THE DISCOVERY OF FRAUDS THEREBY
10% OF SUCH AMOUNT RECOVERED MAY BE REWARDED TO THE INFORMER OR 1,000,000 WHICHEVER IS LOWER.
LETTER OF AUTHORITY
IS A REQUEST TO THE TAXPAYER TO PERMIT THE BEARER THEREOF TO CONDUCT THE NECESSARY EXAMINATION O
AUTHORIZED OFFICER OF BIR.
SURCHARGE
IS A CIVIL PENALTY IMPOSED BY LAW AS ADDITION TO THE MAIN TAX REQUIRED TO BE PAID DUE TO DELINQUENC
1.WILLFULLY OR INTENTIONALLY NEGLECTS TO FILE THE RETURN WITH THE PERIOD PRESCRIBED BY THE TAX CODE
INTEREST
IN GENERAL, RULES AND REGULATIONS REQUIRE THAT FROM THE DATE PRESCRIBED FOR PAYMENT UNTIL THE AM
OF 20% PER ANNUM.
A 20% INTEREST PER ANNUM SHALL BE IMPOSED ON THE BASIC TAX UNPAID AFTER DUE DATE.
ANY PERSON WHO WILLFULLY FAILS TO COMPLY WITH THE REQUIRED RECORDS, ACCURATE INFORMATION REMIT
BE PUNISHED BY A FINE NOT LESS THAN 10,000 AND BE IMPRISONED FOR NOT LESS THAN ONE YEAR BUT NOT MO
ANY CORPORATION, ASSOCIATION, OR GENERAL CO-PARTNERSHIP LIABLE FOR ANY OF ACTS OR OMISSION
FINE OF NOT LESS THAN 50,000 BUT NOT MORE THAN 100,000
VIOLATION OF PRINTING AND ISSUANCE OF RECEIPTS, SALES OR COMMERCIAL INVOICES
UPON CONVICTION, A FINE OF NOT LESS THAN 1,000 AND NOT MORE THAN 50,000 AND SUFFER IMPRISONMENT O
MORE THAN 4 YEARS.
OTHER PENALTIES
1.FAILURE TO FILE CERTAIN INFORMATION RETURN DUE TO SIMPLE NEGLECT.
2. FAILURES OF A WITHHOLDING AGENT TO COLLECT AND REMIT TAXES OR REFUND EXCESS WITHHOLDING TAX
PENALTY: 1,000.00 FOR EACH FAILURE. THE AGGREGATE AMOUNT TO BE IMPOSED FOR ALL SUCH FAILURES DURIN
NOT EXCEED 25,000.00
TAXPAYERS WHO ARE REPORTING NET LOSS OR HAVE A NET OPERATING LOSS CARRIED OVER WITHOUT MCIT DUE
FOR PARTICIPATING IN THE NO AUDIT PROGRAM.
CTS OF TAXATION.
EGISLATURE.
TIVE IN NATURE.
MINISTRATIVE INTERPRETATION
ES AND TRUST.
W COPY OF CERTIFICATE OF REGISTRATION.
X OR WHEN SUBSTANTIALLY LESSER THAN THE ACTUAL MARKET VALUE OF THE ARTICLES OFFERED FOR SALE, THE BIR COMMISSIONER OF
MENT OF TAXES.
THAN 100.00.
E TOTAL EXCISE TAX PAID DURING THE PERIOD, THE AMOUNT OF THE BOND
THE BOND SHALL BE ADJUSTED TO TWICE THE TAX ACTUALLY PAID FOR THE PERIOD.
OF OPERATION SHALL BE BASED ON THE ACTUAL TOTAL EXCISE TAX PAID DURING
SCOVERY OF FRAUDS THEREBY RESULTING IN REVENUE RECOVERIES,
0,000 WHICHEVER IS LOWER.
NECESSARY EXAMINATION OF SAID BOOKS AND RECORDS, SIGNED BY THE BIR COMMISSIONER OR HIS DEPUTY OR
FOR PAYMENT UNTIL THE AMOUNT IS FULLY PAID MAY PRESCRIBE AN INTEREST
OF ACTS OR OMISSION
AND SUFFER IMPRISONMENT OF NOT LESS THAN 2 YEARS BUT NOT
COMPUTATION OF INCOME:
ANOTHER ILLUATRATION
DURING THE YEAR, BANAWE SOLD 1000 SHARES AT 100 TO SEVERAL STOCKHOLDERS AND PAID DIVIDEND
AMOUNTING TO 80000.
EFFECT TO NET ASSET
INCREASE DECREASE
INCREASE IN CASH 20000
DECREASE IN AR 80000
DECREASE IN INVENTORY 150000
DECREASE IN AP 60000
INCREASE IN NOTES PAYABLE 30000
TOTAL 230,000 110000
NET INCREASE OF ASSET 120,000
ADD:DIVIDEND PAID 80000
TOTAL 200,000
LESS: PROCEED FROM SALE OF CAPITAL STOC 100000
NET INCOME-INCREASE IN NET WORTH 100,000
RETURN ON CAPITAL
TO BE CONSIDERED INCOME, THE SALE MUST EXCEED ITS RELATED COST.
CAPITAL
DENOTES THE ORIGINAL INVESTMENT OR FUND USED IN ORDER TO GENERATE EARBIBGS WHICH IS CALLED INC
CAPITAL IS A WEALTH WHILE
INCOME IS THE SERVICE OF WEALTH.
REVENUE- PERTAINS TO ALL FUNDS ACCRUING TO THE TREASURY OF THE GOVERNMENT DERIVED FROM TAX, D
INCOME - REFERS TO EARNINGS OF INDIVIDUAL PERSONS OR JURIDICAL SUBJECT TO TAX.
AS IF THEORY OF CONSTRUCTIVE INCOME IS DESIGNED TO PREVENT A CASH BASIS TAX PAYER TO DELAY REPOR
RC-RESIDENT CITIZEN
DC- DOMESTIC CORPORATION
NRC-NON RESIDENT CITIZEN
FC-FOREIGN CORPORATION
SOURCES OF INCOME
WITHIN OUTSIDE PARTLY WITHIN AND WITHOUT
RC/DC TAXABLE TAXABLE TAXABLE
RC/ALIENS/FC TAXABLE NON TAXABLPARTLY TAXABLE
CLASSIFICATIONS OF INCOME
1.COMPENSATION INCOME- LABOR, ESPECIALLY EMPLOYMENT
2.PROFESSION OR BUSINESS INCOME -EXERCISE OF PROFESSION OR BUSINESS OPERATION
3.PASSIVE INCOME -TAXPAYER MERELY WAITS FOR THE AMOUNT TO COME.
GENERALLY, IT SUBJECT TO FINAL TAX.
4.CAPITAL GAIN- DERIVED FROM SALE OF ASSETS NOT USED IN TRADE OR BUSINESS.
EX. SALE OF FAMILY HOME OR PERSONAL PROPERTY.
SPECIAL METHODS
1.INSTALLMENT
2.DEFERRED PAYMENT
3.LONG TERM CONSTRUCTION CONTRACT CLASSIFIED INTO:
A.COMPLETED CONRACT METHOD
B.PERCENTAGE OF COMPLETION METHOD
4.FARMING CATEGORIZED AS FOLLOWS:
A.CASH BASIS
B.ACCRUAL BASIS
C.CROP BASIS
1.INSTALLMENT
REPORTABLE INCOME = INSTALLMENT COLLECTION X( GROSS PROFIT/CONTRACT PRICE)
A. PERSONAL PEROPERTY IS REGULARLY SOLD ON INSTALLMENT BASIS BY A DEALER
B. CASUAL SALE OF PERSONAL PROPERTY ON INSTALLMENT BASIS WHERE THE SELLING PRICE EXCEEDS 1,000
AND THE INITIAL PAYMENTS DO NOT EXCEED 25% OF THE SELLING PRICE.
AS A RULE IN THE CASUAL SALE OF PERSONAL PROPERTY, IF THE INITIAL PAYMENT EXCEEDS THE 25% OF SELLIN
THE TRANSACTION IS CONSIDERED AS CASH SALES.
B.SALE BY INDIVIDUALS OF REAL PROPERTY CONSIDERED AS CAPITAL ASSET, IF INITIAL PAYMENTS DO NOT EXC
THE SALE IS SUBJECT TO A CAPITAL GAINS TAX OF 6% BASED ON SELLING PRICE OR ZONAL VALUE WHICHEVER I
CROP BASIS - THIOS METHOD IS EMPLOYED BY FARMERS WHOSE CROPS SHALL BE HARVESTED FOR MORE THA
EX. IN YEAR 7 HE SOLD THE TREES FOR 2,000,000
INCURRED THE FF. COST
YEAR:
3 200,000
4 100,000
5 50,000
6 30,000
7 20,000
400,000
ENT DERIVED FROM TAX, DONATION, GRANTS AND ANY OTHER SOURCE, WHILE
CCOUNT OF, OR
IS FINALLY COMPLETED.
ENTS AND WORK ANIMALS.