Documentos de Académico
Documentos de Profesional
Documentos de Cultura
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
I.
1. Income Taxpayers
2. Income Taxes
3. Sources of Income sec. 42 of NIRC
- Income Taxpayers
a) Individuals
b) Corporation
c) Estates and Trusts
-Individuals are classified
Resident Citizens sec. 23 (A), sec
24 (A) (a)
Non-Resident Citizens sec 23 (B),
24 (A) (b) 22 (E)
Overseas Contract Workers Sec.
23 (C), 24 (A) (b)
Resident Aliens Rev. Reg. sec 5,
23 (D), 24 (A) (c)
Non-Resident Aliens Engaged in
trade or business sections 25 (A)
(1)
Non-Resident Aliens Not Engaged
in trade or business sec. 25 (B)
Aliens Employed in MultiNational Corporations sec. 25 (C)
and Rev. Reg. 12-2001
Aliens Employed in Offshore
Banking Units sec 25 (D)
Aliens Employed in petroleum
Service Contractors &
Subcontractors sec. 25 (E)
-Corporate Income Taxpayers
Domestic Corporations sec. 23 (E),
and sec 27 of NIRC
Resident Foreign Corporations sec. 22
(H) and (28)A
Non-Resident Foreign Corporations
sec. 22 (1) and 28 (B)
-Estates and Trusts sec. 60-66 of NIRC
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
4) The distinction
must apply to
persons, things and transactions
belonging to the same class.
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Freedom of Religion
It Involves 3 Things :
1. freedom to choose religion
2. freedom to exercise ones religion
3. prohibition upon the national
government to establish a national religion
Q: Which one limits the power to tax?
A: Prohibition upon the national government
to establish a national religion because this
will require a special appropriation of money
coming from the national treasury which is
funded by the taxes paid by the people.
Non-impairment Clause
Q: What are the sources of obligation in the
Civil Code?
A: Law, Contracts, Quasi-Contracts, Delict,
Quasi-Delict.
Q: What is the obligation contemplated in
this limitation?
A: Those obligations arising from contracts.
General Rule: The power to tax is pursuant
to law, therefore, the obligation to pay taxes
Poll Tax
Q: What is a poll tax?
A: It is a tax of a fixed amount on individuals
residing within a particular territory, whether
citizens or not, without regard to their
property or to the occupation in which they
may be engaged.
It is a tax imposed on persons without
any qualifications. persons may be allowed to
pay even if they are not qualified as to age or
property ownership.
Example of Poll Tax:
Community Tax
Certificate under Section 162 of the Local
Government Code.
Q: Why is it a limitation to the power to tax?
A: It is a limitation to the power to tax
because Congress is prohibited from passing
a law penalizing with imprisonment a person
who does not pay poll tax. (funds for sending
a person to jail is taken from the national
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
(1935 Constitution)
Q: What is involved in this case?
A:
A charitable institution, St.
Catherines Hospital. The hospital was
previously exempt from taxation until it
was reclassified and subsequently
assessed for the payment of real property
tax.
The contention of the respondent is
that the hospital was no longer a
charitable institution because it accepts
pay-patients, it also operates a school for
midwifery and nursing, and a dormitory.
Since it is not exclusively used for
charitable purposes it is not exempt from
taxation.
H:
The Court ruled that petitioner is not
liable for the payment of real estate
taxes. It is a charitable institution, thus
exempt from the payment of such tax.
The hospital, schools and dormitory
are all exempt fro taxation because they
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Important :
1. international double taxation
2. importance of international tax treaty
3. implication of most favored nation
clause
Q: What is the corporation involved in this
case?
A: A domestic corporation (DC).
SC Johnson and Sons, Inc. entered
into a license agreement with SC Johnson
and Sons U.S.A (Non-Resident Foreign
Corp, NRFC) whereby the former was
allowed to use the latters trademark and
facilities to manufacture its products. In
return, the DC will pay the NRFC royalties
as well as payment of withholding tax.
A case for refund of overpaid
withholding tax was filed. Apparently, the
DC should have paid only 10% under the
most favored nation clause.
The Supreme Court coined the term
H:
International
Double Taxation or
International Juridical Double Taxation.
Q:
What prompted the SC to coin such
term?
A:
Because a single income (tax royalties
paid by a DC) was subjected to tax by two
countries, the Philippines income tax and
the U.S. tax.
International Juridical Double
Taxation applies only to countries where
the tax liabilities of its nationals are
imposed on income derived from sources
coming from within and without.
Q:
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Is
there an instance where
international double taxation does not
apply?
A:
Yes. If it involves nationals of
countries wherein the tax liability is
imposed only from income derive from
sources within and not including those
derived from sources without.
(Ex: Switzerland)
! The controversy in the case at bar
involves the income tax paid in the
Philippines.
After paying 25%, the US firm
discovered that they are entitled to 10%
under the most favored nation clause.
The question is: was the tax paid under
similar circumstances with that of the RPWest Germany Treaty?
The CTA and Court of Appeals ruled
that it was paid under similar
circumstances. The phrase referred to the
royalties in payment of income tax. The
Supreme Court ruled that the lower
courts interpretation of the phrase was
erroneous. Rather, the phrase applies to
the application of matching credit.
Q: What is matching tax credit?
A:
RP-Germany Treaty provides for that
20% of the tax paid in the Philippines
shall be credited to their tax due to be
paid in Germany.
The 10% does not apply because there
is no matching credit. Thus, there is no
similarity in the circumstances.
EQUITABLE RECOUPMENT AND DOCTRINE
OF SET-OFF
Equitable Recoupment
This doctrine provides that a claim for
refund barred by prescription may be allowed
to offset unsettled tax liabilities. This is not
allowed in this jurisdiction, because of
common law origin. If allowed, both the
collecting agency and the taxpayer might be
tempted to delay and neglect the pursuit of
their respective claims within the period
prescribed by law.
Q: What
is the doctrine of Equitable
Recoupment?
A: When the claim for refund is barred by
prescription, the same is allowed to be
credited to unsettled tax liabilities.
Set-off
Presupposes mutual obligation between
the parties. In taxation, the concept of setoff arises where a taxpayer is liable to pay
tax but the government, for one reason or
another, is indebted to the said taxpayer.
Q: What do you mean by SET-OFF?
A: This
presupposes mutual obligations
between the parties, and that they are mutual
creditors and debtors of each other. In
taxation, the concept of taxation arises
where a taxpayer is liable to pay taxes but
the government, for one reason or another, is
INDEBTED to said taxpayer.
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
DOMINGO v. GARLITOS
FRANCIA v. IAC
A:
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
is
the
INDIVIDUAL TAXPAYER
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- Atty. Francis J. Sababan -
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Non-Resident Alien
Trade or Business
Not
Engaged
II.
in
CORPORATE TAXPAYER
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
general rule:
a partnership is a
corporation
exception: GPP
exception to the exception: if the GPP
derives income from other sources, it is
considered a corporation, thus liable to pay
corporate income tax.
Rule:
1. if the income is derived from other
sources and such income is subject to NET
INCOME TAX, it is not exempt and it is
considered a corporation.
2. if the income is derived from other
sources and such income is subject to FINAL
INCOME TAX, it is still EXEMPT and it is not
deemed a corporation. ( separate return for
this. It will not reflect in the GPPs ITR)
This is pursuant to the fact that FIT will
not reflect in the ITR of the GPP since the
withholding agent is liable for the payment of
the FIT.
Q: What
is the importance of knowing
whether the corporation is exempt or not?
A: To determine their tax liability. This is
important to determine the tax liability of the
individual partners of the GPP.
" Section 26 (1st paragraph) provides: a
GPP as such shall not be subject to the Net
Income Tax however, persons engaging
in business as partners in a GPP shall be
liable for income tax only in their separate
and individual capacities.
In short, each partner will be paying NIT,
and the distributive shares they will be
receiving from the net income of the GPP will
be included in the gross income of the
partner.
Q: If the GPP is deemed a corporation, will
the partners have to pay for the income tax?
Domestic Corporation
Is one created or organized
Philippines or under its laws.
in
the
in
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Judicial Settlement
1) During the pendency of the
settlement, the estate through the
executor, administrator, or heirs is
liable for the payment of ESTATE
INCOME TAX (Sex, 60 (3)).
2) If upon the termination of the judicial
settlement, when the decision of the
court shall have become final and
executory, the heirs still do not divide
the property, the following
possibilities may arise:
a) If the heirs contribute to the
estate money, property or
industry with the intention to
divide the profits between and
among
themselves,
an
UNREGISTERED PARTNERSHIP is
created and the estate becomes
liable for payment of CIT
Trust
Trusts can be created by will, by contract
or by agreement. The status of a trust
depends upon the status of the grantor or
trustor or creator of the trust. Hence, a trust
can also be a citizen or an alien.
Q: Where the trust earns income and such
income is not passive, who among the parties
mentioned is liable for payment of income
tax thereon?
A: The TRUST itself, through the trustee or
fiduciary but only if the trust is irrevocable.
If it is revocable, or for the benefit of the
grantor, the liability for the payment of
income tax devolves upon the trustor himself
in his capacity as individual taxpayer.
KINDS OF INCOME TAX
Q: How many kinds of income tax?
A: There are Six (6), namely:
1. Net Income Tax (NIT);
2. Gross Income Tax (GIT);
3. Final Income Tax (FIT);
4. Minimum Corporate Income Tax of
2% of the Gross Income (MCIT)
5. Income Tax on Improperly
Accumulated Earnings subject to 10%
of the Taxable Income;
6. Optional Corporate Income Tax of
15% on the Gross Income
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I.
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Characteristics:
Q: Who are not liable to pay NIT?
A: 1. NRANETB (liable for GIT);
2. NRFC (GIT also);
3. With certain modifications, AEMOP, if
they derive income from other
sources;
Q: Is the taxable net income subject to
withholding tax?
A: It is subject to withholding tax if the law
says so.
II.
Characteristics:
" NRANETB and NRFC, though not engaged
in trade or business, are liable to pay by way
of the gross for any income derived in the
Philippines. While not engaged in trade or
business, there is a possibility that they may
earn income in the Philippines.
Q: Is this subject to withholding tax?
A: Yes, it is subject to withholding tax
because the persons liable are foreigners.
This rule is ABSOLUTE
NOTE: there are two (2) ways of paying taxes
depending on which side of the bench you
are.
III.
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Characteristics:
Q: Who are liable to pay FIT?
A: All
taxpayers are liable to pay FIT
provided the requisites for its application are
present.
Q: Do you still have to pay NIT?
A: No. if you are liable for FIT, no need to
pay NIT or else there will be double taxation.
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
H:
"
In the absence of any
or both
requisites, the income will be considered
from sources without, thus exempting the
Indonesian firm from payment of income tax.
Q: Same scenario, but this time the shares of
stock of the two corporations were being
disposed off. What is the tax liability of the
Indonesian firm?
A:
1. sale of shares of stock of DC: the
Indonesian firm will be liable for the
payment of taxes because the income
is from sources within.
2. sale of shares of stock of RFC: the
liability will depend on where the
shares of stock were sold. (mejo
Malabo sa notes, please be guided
accordingly)
Q: Filipino Executive, assigned to Hong
Kong, receiving two salaries, one from the
Philippines, the other from HK. The
performance of the job was in HK. Is he liable
for both salaries?
A: No, he is not liable for the two incomes.
His status is an OCW (note facts: working in
HK under contract). The compensation he
received is not subject to tax pursuant to
Section 42(c). Compensation for labor or
performed
in the
personal services
Philippines is considered an income within.
When it comes to services, it is the place
where the same is rendered which is
controlling. In the case at bar, the services
were rendered abroad, thus it is an income
derived from sources without, irrespective of
the place of payment.
Q: Suppose a DC hired a NRFC to advertise
its products abroad. What is the liability of
the NRFC? Will there be a withholding tax
imposed?
A: The income is derived from sources
without since the services in this case were
performed abroad. As such, the NRFC is not
liable and therefore exempt from the
payment of tax. If the NRFC is not subject to
NIT, then it is not also subject to withholding
tax.
Q: What is the controlling factor?
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
COMMISSIONER v. IAC
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Q: What
is the relevance of making a
distinction?
A: It is relevant because Section 39B,C, and
D apply to capital assets only.
1. time when property was held (39B)
(holding period
applies only to
individuals);
2. limitations on capital losses (39C);
3. Net Capital Carry-Over (39D)
I.
CAPITAL ASSETS
TAKE NOTE:
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
CALAZANS v. CIR
F:
I:
H:
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Passive Income
Interest
Prizes
Requirements:
1. Prizes must be derived from sources
w/in the Phils.
2. it must be more than P 10,000
Q: Who are liable? (FIT)
A:
1. RC
2. NRC
3. OCW
4. RA
5. NRAETB
6. AEMOP (RC, NRAETB)
Not Liable
1. NRANETB- liable for GIT at 25 %
2. AEMPOP (NRANETB- GIT)
3. DC- NIT 27 D is silent
4. RFC NIT law is silent 28A7a
5. NRFC subject to GIT
Q: When can we apply NIT in Prizes?
A: 1. When the taxpayer is RC, RFC and DC
2. For DC and RC it must be derived
from income abroad RFC it must be
derived from income w/in
3. amount is more than P10,000
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Winnings
Q: Do we apply the P10, 000 req.?
A: No, we do not apply it only applies to
prizes. It must not pertain to illegal
gambling.
" Thus, the only requirement is it must be
derived from income w/in.
Royalties
Requirement:
" The income is from w/in
Dividends
" Confined
dividends.
with
cash
and/or
property
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
1.
2.
ANSCOR CASE
!the stockholders
payment of taxes
cannot
escape
Requirement:
Gen Rule- the dividends must be distributed
by a DC.
Except- Regular operating- always a foreign
corp.
" What rate: 10% FIT
Q: Who are liable?
A:
1. RC
2. NRC
3. OCW
4. RA
5. NRAETB
6. AEMOP (RC, NRAETB)
Not liable?
1. NRANETB
2. AEMOP
3. DC
4. RFC
5. NRFC
" Shares of association and partnership is
taxable
Q: Determine the tax
liability of the
following?
A:
1. DC a Stockholder of DC= Exempt
2. RFC stockholder of DC= Exempt also
3. DC stockholder of RF= Liable for NIT.
the
3.
4.
Subj to FIT
Determine whether there is a loss or a
gain because the tax is impose upon
the net capital gains realized from the
sale, barter, or exchange or other
disposition of the shares of stock in a
domestic corp.
It is uniformly
imposed on all
taxpayer
not subj to w/holding tax.
Requirements:
1. Shares of stock of a DC
2. It must be capital asset
3. must not be traded in the stock
market
" 25 R last part: Capital Gains realized by
NRANETB in the Phils. from the sale of shares
of stock in any DC and real prop shall be
subj. to the income tax prescribed under Sub
sec (c) and (d) of Sec. 24.
" SEC. 24 B 1&2: If the elements are
present NRANETB and NRFC are liable to pay
GIT.
Except: under 24 C for NRANETB. What do
you mean by the phrase the provisions of
39 notwithstanding?
" It refers to the holding period. When it
comes to capital gains from sale of shares of
stock not traded and capital gains from the
sale of real prop. The holding period does
not apply because the basis will be those
provided in 24 C & D and not under 39B (GSP
or FMV)
ELEMENT #1 The share is a share in DC
Q: What if the share is from foreign corp?
A: Determine the income considered.
income w/in read Sec. 42 (E)
If
25
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Requirements:
1. The real prop must be sold w/in the
Phils and located in the Phils.
2. It must be a capital asset
3. The seller must be an individual,
estate or trust or a DC
" RFC not liable for FIT but liable to pay NIT
if all the elements are present.
pay
FIT
are
all
26
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Exceptions (24(D2))
Q: What if the prop being sold was a movie
house, can he claim for the exception?
A: the prop covered by the exemption is a
residential lot
Q: Who can claim the exemption?
A: Only the taxpayer mentioned in Sec. 24
Requirements:
1. The purpose of the seller is to acquire
new residential real prop
2. the privilege must be availed of w/in
18 mos. From the sale
3. Comm. must be informed w/in 30
days from the date of sale with the
intention to avail of the exemption
4. the adjusted basis or historical cost of
the residence sold shall be carried
over to the new residence.
5. the privilege must be availed only
once every 10 yrs
6. Certification of the brgy. Capt where
the taxpayer resides that indeed the
prop sold is the principal residence of
the tax payer (RR 13- 99)
Q: What if the property is worth 10 M and it
was sold only for 2M, what will happen to the
unused portion or profit?
applied
27
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Q:
What about exemption from real
property tax?
A:
Art. 6 Sec. 28 of the Constitution:
charitable institution churches, .and all
lands buildings, actually directly and
exclusively used for religious, charitable, and
educational purposes shall be exempt from
taxation.
! Not Sec. 4 of Art. 14 of the
Constitution.
Q: You donated a property to a school will
you be liable for donors tax?
A: not liable if it falls under Sec. 101 (3) of
the NIRC
REQ. FOR EXEMPTION TO DONORS TAX:
1. it must be non-stock,
non-profit
educational inst.
2. not more than 30% of the prop donated
shall be used by such donee for admin
purposes.
3. paying no dividends
4. governed by trustees who dont receive
any compensation
5. devoting all its income to the
accomplishment and promotion of the
purposes stated in its Articles of
Incorporation
Q: What about exemption from VAT?
A: Sec. 109 (m) of R-VAT
Q: What about exemption fro Loc Gov Code?
28
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
H:
SEC. 27 D(1)
Q: How many possible incomes
mentioned?
A: Two (2): bank interest and royalties
were
REQ:
1. Bank interest must be received by a
Domestic Corp
2. Royalties derived from sources within
Q: When it comes to bank interest, what is
the difference if the taxpayer is an individual
or corporation?
A: If individual, they may be exempt from
the payment of interest in case of long term
deposit except NRANETB
If DC, they are not exempt from long tem
deposit.
or
SEC. 27
exempt
D(4)- Inter-corporate
dividends-
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
International Carrier:
REQ:
1. Originating from the Phils.
2. Continuous and uninterrupted flight;
3. Irrespective of the place of sale or
issue and the place of the payment of
tickets or passage document.
Sec 28 A1
Q: What Kinds of taxes are paid by the RFC?
A: NIT
MCIT
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Transshipment
REQ:
flight originates from the Phils
transshipment of passenger takes place
at any port outside the Phils.
the passenger transferred on another
airline
Q: How do you apply GPB?
A: Only the aliquot portion of the cost of the
ticket corresponding to the leg flown from
the Phils to the point of transshipment shall
from part of the GPB.
Q: Is it liable for the whole flight?
A:
From the Phils to the point of
transshipment, it is income w/in
From transshipment to final destination,
its income w/out- EXEMPT
International Shipping
" GPB means gross revenue whether from
passenger, cargo, mail
REQ:
it must originate from the Phils.
up to final destination
- regardless of the place of sale or
payments of passenger or freight documents
from
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
MARUBENI CASE
SEC. 28 A6a
32
e) Other depository
EFCDS
bank
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
under
the
Elements:
1. Chartered to Filipino
Corporations
2. Approved by MARINA
Citizens
or
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
D5
INTERCORPORATE
JHONSONS CASE
2 Kinds of Categories:
1st : Japan, US, Germany, Phils liable for
income within and income without
2nd : countries liable only for income within.
WANDER CASE
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
2.
SEC. 29 IAET
3.
4.
5.
the
Q: Why?
A: because if profits are distributed to the
shareholders, they will be liable for the
payment of Dividends tax. Now, if the profits
are undistributed the shareholders will not
incur liability on taxes with respect to the
undistributed profits of the Corp.
- In a way it is in the form of deterrent to
the avoidance of tax upon shareholders who
are supposed to pay dividends tax on the
earnings distributed to them.
Q: What is taxable income?
A: SEC. 31 defines taxable income as the
pertinent items of gross income specified in
this Code, less the deductions and/or
personal and additional exemptions, if any,
authorized for such types of income by this
Code or other special law
Q: When not liable to pay IAET?
A: There are 2 groups of DC exempt from
payment of IAET (RR2-2001)
6.
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
1.
FROM
TAX
or
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
Q: What is compensation?
A: all remuneration for services performed
by an employee for his employer under an
employer-employee relationship.
TAKE NOTE: compensation is included in the
ITR if the taxpayer is not liable for NIT. Thus,
if subject to NIT, included in the ITR.
Q: Is there an instance where the salaries of
a RC is not included in the ITR?
A: Yes, if the salary is subject to FIT, like
when the RC is employed in Multinational,
offshore banking, and petroleum companies.
2.
Gross Income derived from the
conduct of trade or business or the
exercise of a profession; [Sec. 32 A (2)]
Q: What is the income tax here?
A: NIT, included in the ITR.
37
3.
Gains derived from
property. [Sec. 32 A (3)]
!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
dealings
in
Passive Income
1. Prizes derived from sources within
and over 10,000.00
2. Winnings derived from sources
within.
Exempt:
a. winnings: PCSO and Lotto winnings.
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!"#"$%&'()"*(+,-%,*('&$,.(
- Atty. Francis J. Sababan -
b. prizes:
FROM
2.
Amount received by insured as
return of premium [Sec. 32 B (2)]
Q: if the insurance is payable within a certain
time, say 10 years and thereafter the insured
did not die, how much will be excluded?
A: only the amount received by the insured
as a return of the premiums.
Ex. 1 M 100 thousand = capital
It is exempt (100K)
Q: Why is it excluded?
A: because the amount received
represents a return of capital.
900K is taxable.
SEC 32
INCOME
TAKE NOTE:
Exemptions, exclusions,
deductions, have the same characteristics !
all tax do not apply.
GROSS
merely
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Q: Is it subject to VAT?
A: 1. Non-life insurance yes, subject to
VAT under 108 (A).
2. Life insurance
NO, subject to
percentage tax under Sec. 123 of the Tax
Code.
7. Retirement benefits,
gratuities [Sec. 32 B (6)]
TAKE NOTE:
A. GIFTS are excluded because they are
subject to donors tax.
B. BEQUEST and DEVISE are excluded
because they are subject to ESTATE tax.
Q: what is included in the gross income?
A: income from such property.
" gift, bequest, devise or descent of income
from any property in case of transfers of
divided interest.
5. Compensation for
sickness [Sec. 32 B (4)]
injuries
pensions,
or
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SEC. 32 B(6)(c)
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- Atty. Francis J. Sababan -
Examples:
1. registration CBA provides separation
pay, within the control = included.
2. installation of labor saving devises or
bankruptcy beyond the control =
excluded.
SEC. 32 B(6)(d,e,f)
Case of Zialcita
Borromeo case:
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- Atty. Francis J. Sababan -
COMMISSIONER v. CASTAEDA
EXAMPLES of exclusions
:
a. Brunei Govt earns interest by depositing
money in Makati Bank Exclusion.
b. SMC- Stock dividends to 3. Brunei Govt.
exclusion
c. Income derived by the Govt or its
political subdivisions (Sec. 32 B (7) (b)
a. exercise of public utility
b. exercise of any essential govt
function.
accruing to the govt.
d prizes and awards (Sec. 32 B 7 c)
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- Atty. Francis J. Sababan -
that
is
AGUINLDO Case
F: involves a corporation engaged in selling
fish nets, and the corporation have a land
sold through a broker.
"there was substantial profits gained from
the sale of a land which was sold by a broker.
The profit was in turn given to the workers as
special bonus.
"the corporation claimed the bonus as a
deduction.
ISSUE: Should the deduction be allowed?
H: The SC did not allow the deduction, for
other forms of compensation, it must be
made or given for services actually rendered.
"in this case, it was proven that the sale was
not made by the employees, no effort or
services actually rendered by them because
the sale was made through a broker.
"
Q: Reasonable Travel Expenses, What is the
requirement?
A:
1. Travel must be in pursuit of business,
trade or profession.
2. Travel expense while away from home.
Q: Is there a travel expense which was not in
pursuit of business?
A: yes, those which are considered as fringe
benefits (FB), expenses for foreign travel is
considered a FB only if it is not in pursuit of
the trade or business.
Q: can you claim it under Sec. 34 A (1)(a)(ii)?
A: No, you can claim it under Sec. 34 A
(1)(a)(i) last paragraph.
Q: Reasonable Allowances for rentals for
meralco bills, requirements?
A:
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- Atty. Francis J. Sababan -
PRIVATE
Institution
can
FOR
REDISCOUNTING
OF
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- Atty. Francis J. Sababan -
a. member of a family
b. bet. an individual and a corp., more than
50% in advance of the outstanding stock of
which is owned directly or indirectly by or for
such individual;
c. Bet. 2 corp., more than 50% in value of the
outstanding stock of each of which is owned,
directly or indirectly, by or for the same
individual.
d. bet. the grantor and a fiduciary of any
trust;
e. bet. the fiduciary of a trust and the
fiduciary of another trust if the same person
is a grantor with respect to each trust; or
f. bet. a fiduciary of trust and a beneficiary of
such trust.
Q: Who are not allowed to claim interest
under sec 36 B?
A: interest incurred between related parties.
Q: What if half-brother?
A: not allowed to claim
interest.
deduction
for
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