...kinds of taxes, the nature, scope, basis, theory, purpose, situs, limitations, subject of taxation and escape from taxation, the powers of the sovereign, characteristics of taxes, and the basic principles of a sound tax system, as well as the different taxable income and deductions. Definition of Terms TAXATION – is a power inherent in every sovereign state to impose a charge or burden upon persons, properties or rights to raise revenues for the use and support of the government and to enable it to discharge its appropriate functions. - It is a mode of raising revenue for public purposes. (Cooley) TAX – is a forced burden, charge, imposition or contribution assessed in accordance with some reasonable rule of apportionment by authority of the sovereign state upon person, property, or rights exercised, within its jurisdiction to provide public revenues for the support of the government, administration of the law or payment of public expenses. INCOME TAX SYSTEM OF THE PHILIPPINES • GROSS INCOME TAXATION-where a Final Tax is imposed on the gross amount of specified types of income. Example: Interest, royalty, prize, dividend, capital gain • NET INCOME TAXATION- certain deductions are allowed and subtracted from the aggregates of income not subject ot final tax; the tax is computed based on the resulting net income. THEORY AND BASIS OF TAXATION > necessity to defray the expenses of the government >regulatory >reciprocal duties of protection and support between the State and its inhabitants-benefits...
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...Corporate Taxes Tax Base For Resident and Foreign Companies VAT is applied in the same way to residents and non residents. For additional information, consult the Bureau of Internal Revenue. Tax Rate Income Tax | The rate is 30% on net income but there are some preferential rates and exemptions. Preferential rates vary from 2 to 20%. Regional headquarters are taxed at 10%. | Capital Gains Tax | These are taxed like income, except those from selling shares in companies (5-10% if not exchanged on the Stock Exchange; half of 1% of the selling price otherwise), and those from selling real estate not used for business purposes (6%). | Deductions on dividends | Deduction of 15% on dividends paid by the Philippine company if the non resident's country allows 20% tax credit, otherwise there is a deduction of 35%. | Deductions on interest | Deduction of 20% | Deductions on royalties | Deduction of 20% | Deductions on transfers from subsidiaries | Deduction of 15% of profits after tax paid by the subsidiary to the head office. | Property Tax | Varies according to the location, and does not exceed 3% of the estimated value. | Social contributions | Vary according to wages, maximum 1 090 PHP. | Stamp duties | Vary according to the type of document. | Tax on transfers of property | From 2 to 15%. | Other | Tax of 3 to 7% for certain activities such as banking, insurance, finance and transport. | Tax Rate For Foreign Companies Foreign companies are subject...
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...the real property tax on realty used for personal purposes; 4. the individual residence tax, both basic and additional; 5. the tax on motor vehicle used for personal purposes; 6. the immigration tax; 7. firearms license fee; 8. hunting permits; and 9. social security contributions, both of private and public employees. Arguments for Taxes on Income and Wealth Taxation is a fiscal tool of government for the achievement of economic, sometimes non-economic, goals. GOALS: 1. maximum freedom for choice, consistent with the welfare of others; 2. optimum standards of living, in terms of available resources and techniques; 3. an optimum rate of economic growth; and 4. distribution of income in conformity with the standards of equity currently accepted by society. Characteristics of Tax System Economic effects. – The tax structure must be established in such a way as to avoid interference with the attainment of the optimum allocation and use of resources and where possible, to assist in the attainment of the optimum. Equity. – The distribution of the tax burden must conform to the pattern of income distribution regarded as the optimum by the consensus in contemporary society. Minimum costs of collection and compliance, consistent with effective enforcement. – This rule requires that taxes be established in such a manner as to minimize the real costs of collection, in terms of resources required to collect the taxes and to comply with the tax laws, as well as in...
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...TRANSFER TAX -refers to the burden imposed upon the right to gratuitously transfer or transmit property, tangible or intangible from one person to another. Filing: within 6 months from the date of death 15%-relative 30%-stranger Filing: within 30 days from the date of donation -are taxes imposed upon the gratuitous disposition of private property. ESTATE TAX FORMULA: KINDS OF TRANSFER TAXES: ESTATE TAX NIRC Donation mortis causa Tax levied on the transmission of properties from decedent to his heirs Tax on the privilege to transmit property at death Excise tax or privilege tax Effective upon death Tax base is the net estate Net estate amounting to P200,000 is exempted 20% highest rate DONOR’S TAX NIRC Donation inter vivos Tax levied on the transmission of properties from a living person to another living person. Gross Estate (Sec. 85) TAX ON THE TRANSFER OF REAL PROPERTY LGC Less: Ordinary Deductions (Sec. 86)_____________ Equals: Net Estate before share of surviving spouse Less: Share of surviving spouse________________ Equals: Net estate before special deductions Less: Special deductions______________________ Equals: Net taxable estate Multiply:Tax Rate (Sec 84)______________________ Equals: Estate Tax Payable If there’s tax credit available: Excise tax or privilege tax Effective during the life time of the donor Tax base is the net gift within the calendar year Net gift amounting to P100,000 is exempted highest rates: Estate tax payable Less: Tax credit____________...
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...Subject to constitutional and inherent restrictions, the power of taxation is regarded as comprehensive, unlimited, plenary and supreme. Scope of Legislative Taxing Power 1. Amount or rate of tax 2. Apportionment of the tax 3. Kind of tax 4. Method of collection 5. Purpose/s of its levy, provided it is for public purpose 6. Subject to be taxed, provided it is within its jurisdiction 7. Situs of taxation TAXES – enforced proportional contributions from the persons and property levied by the law-making body of the State by virtue of its sovereignty in support of government and for public needs. Characteristics of Taxes 1. forced charge; 2. pecuniary burden payable in money; 3. levied by the legislature; 4. assessed with some reasonable rule of apportionment; (see theoretical justice) 5. imposed by the State within its jurisdiction; 6. levied for a public purpose. Requisites of A Valid Tax 1. should be for a public purpose 2. the rule of taxation shall be uniform 3. that either the person or property taxed be within the jurisdiction of the taxing authority 4. that the assessment and collection of certain kinds of taxes guarantees against injustice to individuals, especially by way of notice and opportunity for hearing be provided 5. the tax must not impinge on the inherent and Constitutional limitations on the power of taxation Theories and Bases of Taxation 1....
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...REPUBLIC ACT NO. 8424 TAX REFORM ACT OF 1997 AN ACT AMENDING THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: SECTION 1. Short Title - This Act shall be cited as the "Tax Reform Act of 1997". SECTION 2. State Policy. – It is hereby declared the policy of the State to promote sustainable economic growth through the rationalization of the Philippine internal revenue tax system, including tax administration; to provide, as much as possible, an equitable relief to a greater number of taxpayers in order to improve levels of disposable income and increase economic activity; and to create a robust environment for business to enable firms to compete better in the regional as well as the global market, at the same time that the State ensures that Government is able to provide for the needs of those under its jurisdiction and care. SECTION 3. Presidential Decree No. 1158, as amended by, among others, Presidential Decree No. 1994 and Executive Order No. 273, otherwise known as the National Internal Revenue Code, is hereby further amended. NATIONAL INTERNAL REVENUE CODE OF 1997 AND ITS AMENDMENTS R.A. No. | TITLE | Date of Approval | Date of Effectivity | R.A. 8424 | The National Internal Revenue Code of 1997 | December 11, 1997 | January 1, 1998 | R.A. 8761 | An Act Imposing The Value-Added Tax on Certain Services Beginning January 1, 2001, Amending for the...
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...power to tax (a) Inherent Limitations 1. The levy must be for a public purpose; 2. Non-delegation in general of the power to tax – except in matters referring to collection and enforcement; 3. Exemption from taxation of government entities; and 4. The levy of the tax within territorial limits (subject to treaty stipulations) for the exercise of “effective jurisdiction” (the problem of situs in taxation). (b) Constitutional limitations protection of the laws 1. Due process of law and equal and equal protection of the laws 2. No imprisonment for non-payment of a poll tax 3. Non-impairment of contracts 4. Power of the Prime Minister to veto any particular items in a revenue or tariff bill 5. Uniformity in taxation 6. Authority of prime Minister to fix within specified limits, tariff rates 7. Exemption of charitable institutions, churches, etc. 8. Non-impairment of the jurisdiction of Supreme Court on tax cases Classifications of taxes: (a) According to the purposes for which it is applied 1. General – imposed without predetermined purpose and therefore, may be appropriated for general public purposes. 2. Special – imposed under special laws and the tax collected may not be appropriated or diverted to some purposes other than those provided in the special law. (b) According to who bears the burden of taxation 1. Direct – those collected or demanded from subjects desired or intended by law to be liable, like income tax, etc. ...
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...sufficient to defray its budgetary requirements. 7. True 8. True 9. False. Basically, taxes imposed are based on the ability of the taxpayer to pay. 10. False. It is the primary obligation of the state to protect all the constituents regardless of whether they pay or not their tax liabilities. True or False 1-2 1. True 2. True 3. True 4. True 5. True 6. False. The President cannot delegate the power of taxation, since taxation is not vested in the President. Taxation is vested in the legislative body. 7. False. Taxation cannot be separated from the state. The moment a state exists, taxation also exists. 8. False. The making of tax law is undertaken ahead of the collection of taxes. 9. False. Levying refers to the making of tax laws. 10. False. Only the legislative body, the Congress, can grant tax exemptions. True or False 1-3 1. False. It is the legislative branch of the government that is vested with the power of taxation. 2. False. The power of taxation is restricted by inherent and constitutional limitations. 3. False. Tax assessment is the valuation and determination of the amount of tax. The passage of taxation is called levying or imposition of tax. 4. False. The three inherent powers can be and have been delegated by the Legislative to the Executive Branch. 5. True 6. True 7. False....
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...sufficient to defray its budgetary requirements. 7. True 8. True 9. False. Basically, taxes imposed are based on the ability of the taxpayer to pay. 10. False. It is the primary obligation of the state to protect all the constituents regardless of whether they pay or not their tax liabilities. True or False 1-2 1. True 2. True 3. True 4. True 5. True 6. False. The President cannot delegate the power of taxation, since taxation is not vested in the President. Taxation is vested in the legislative body. 7. False. Taxation cannot be separated from the state. The moment a state exists, taxation also exists. 8. False. The making of tax law is undertaken ahead of the collection of taxes. 9. False. Levying refers to the making of tax laws. 10. False. Only the legislative body, the Congress, can grant tax exemptions. True or False 1-3 1. False. It is the legislative branch of the government that is vested with the power of taxation. 2. False. The power of taxation is restricted by inherent and constitutional limitations. 3. False. Tax assessment is the valuation and determination of the amount of tax. The passage of taxation is called levying or imposition of tax. 4. False. The three inherent powers can be and have been delegated by the Legislative to the Executive Branch. 5. True 6. True 7. False....
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...TAXATION – power inherent in every sovereign State to impose a charge or burden upon persons, properties, or rights to raise revenues for the use and support of the government to enable it to discharge its appropriate functions SCOPE OF TAXATION TAXATION IS: Unlimited, Far-reaching, Plenary Comprehensive Supreme STAGES OF TAXATION: (LAP) 1. Levy 2. Assessment 3. Payment Basic Principles of a Sound Tax System 1. Fiscal Adequacy 2. Theoretical Justice 3. Administrative Feasibility INHERENT LIMITATIONS (SPING) 1) Situs or territoriality of taxation 2) Must be for a Public purpose • Test is whether proceeds will be used for something which is the duty of the State to provide. • Legislature is not required to adopt a policy of “all or none.” • Incidental benefit to individual does not defeat exemption 3) International comity • Property of a foreign State of government may not be taxed by another 4) Non-delegability of the taxing power • Contemplates power to QuickTime™ and a TIFF (Uncompressed) decompressor determine kind,thisobject, extent, are needed to see picture. amount, coverage, and situs of tax; • Distinguish from power to assess and collect • Exemptions: (a) presidential taxing powers; (b) local governments 5) Exemptions of Government agencies • Taking money from one pocket • to the other Applies only to entities exercising government functions (acta jure imperii) CONSTITUTIONAL LIMITATIONS A. Direct 1) Due process • Should not be harsh, oppressive, or confiscatory (Substantive)...
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...SUGGESTED ANSWERS Chapter 6: DONOR’S TAX CHAPTER 6 DONOR’S TAX Problem 6-1 1. False – during the lifetime of the donor. 2. True 3. True 4. False – there is no consideration in donation. 5. True 6. False – It is enough that the duly representative of the incapacitated donee to receive the donation. 7. True 8. False – Real property donation must be put in writing regardless of value. 9. True 10. False – The value of donated personal property must exceed P5,000. 11. True 12. True 13. False – not gifts. 14. False – constitutes dividend income. 15. True Problem 6-2 1. False – dowry is not allowed to nonresident alien donor. 2. False – the donee’s identity is not material to make the donation valid. The donor can make donation to an unborn child. 3. True 4. True 5. False – If resident alien donates, he shall be subject to donor’s tax in the Philippines for his properties within and outside the Philippines 6. True 7. True 8. True 9. False – only one-half of the share is donated. 10. False – only if the gift is on account of marriage. 11. False – only the first P100,000 is exempt. 12. False – may be subject to business tax such as VAT, custom duties, or excise tax. 13. False - When the donee is a stranger, the tax rate is 30%. 14. True 15. False - excise tax – the tax is imposed on the act to transfer...
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...within 3) Overseas contract worker – income within 4) Alien – income within 5) Domestic Corporation – within & without 6) Foreign Corporation – within x------------------------------------x 2. IMPORTANT BASIC TERMS IN GENERAL (NIRC §22) 2.1 Taxable Year ( Calendar year 2.2 Fiscal Year ( Accounting period of 12 months ending on the last day of any month other than December 2.3 Securities ( Proof of what Corporation owes, i.e. shares of stock, etc. 2.4 Ordinary Income ( Any gain from sale or exchange of property, not a capital asset or property 2.5 Gross Income - §27(A) & (E)(4) ( Domestic Corporations shall be imposed an income tax of 35% 2.6 Ordinary Loss ( Any loss from the sale or exchange of property which is not a capital asset ( Ordinary losses may only be charged against ordinary gains 2.7 Capital Assets - §39(A)(1) ( That which is NOT an ordinary asset ( Ordinary assets: 1) Stock in trade or inventory for sale 2) Depreciable items 3) Real property used in trade or business 4) Goods or property for the employee’s convenience ( Capital losses may only be charged against capital gains 2.8 Taxable Income - §31...
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...population and the decrease of resources burden government with economic problem which can and shall ultimately pose danger to the peace and order condition of the community, country or nation. In the Philippines the tax department, popularly known as Bureau of Internal Revenue (BIR), is under the support of the Department of Finance. The tax department has enormous and wide ranging administrative and legislative powers when it comes to assessment, enforcing taxes and collection. It is considered to be the main revenue earning agency for the government of Philippines. Annually the bureau collects practically 80 percent of the total generated revenue. The BIR has monthly and annual targets for collection and this is determined by the Development Budget and Coordinating Council, which is an inter-agency council headed by the Department of Budget and Management. Today tax payers can directly pay taxes either to the BIR using channels like RDOs or authorized banks. In the Philippines, individual tax returns have to be filed by April 15 of the following year for the previous calendar year. There is the option of paying and filing taxes electronically using the Internet banking through Electronic Filing and Payment System (EFPS). This system was introduced in 2001. The Philippine Constitution requires the...
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...revenue raised from taxation, the government will not survive, resulting in detriment to society. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it. (CIR vs Algue, Inc., et. al.) Illustrations of Lifeblood Theory: a. Collection of taxes may not be enjoined by injunction. b. Taxes could not be the subject of compensation and set-off. c. A valid tax may result in destruction of the taxpayer's property. 2. Necessity Theory Existence of a government is a necessity and cannot continue without any means to pay for expenses. a. Marshall Dictum “ Power to tax is the power to destroy” – describes the unlimitedness of the power and the degree of vigor with which the taxing power may be employed in order to raise revenue. b. Oliver Wendell Holmes Dictum “Power to tax is not the power to destroy while this court (US Supreme Court) sits” – power to tax knows no limits except those expressly stated in the Constitution. Marshall and Holmes Dictums Reconciled: Although the power to tax is almost...
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...organization, and manages connections to outside stakeholders. This PAYROLL SYSTEM is a part of an ERP. This system involves calculations and registering of cash payment of the company to their employees (which involves Salaries, Incentives, Benefits and Taxation) as stated by the law itself. Even though PAYROLL is normally under Human Resource Department of a company, yet this system makes it much more independent from the core of the said department. A PAYROLL is the sum of all financial records of salaries for an employee, wages, bonuses and deductions. In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time. Payroll is crucial because payroll and payroll taxes considerably affect the net income of most companies and they are subject to laws and regulations 1.1PROJECT OVERVIEW Payslip Generation Salary Computation Payroll Report Generation Payroll System Deductions and Taxation Calculation Financial Reports In and...
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