COURSE SYLLABUS IN

INCOME TAXATION
By: Atty. MARK ANTHONY F. BAGUAL

A. GENERAL CONCEPTS AND PRINCIPLES OF TAXATION

TAXATION vs. TAXES

3 INHERENT POWERS OF THE STATE

1. Police Power-

2. Power of Taxation –
3. Power of Eminent Domain

PURPOSES OF TAXATION
1. Primary: Revenue or Fiscal Purpose
2. Secondary: Regulatory Purpose

THEORIES OF TAXATION
1. Necessity Theory
2. Lifeblood Theory

3. Benefits-Protection / Reciprocity Theories (Doctrine of Symbiotic

Relationship)

MANIFESTATIONS OF LIFEBLOOD THEORY

NATURE, SCOPE AND LIMITATIONS OF TAXATION

ESSENTIAL ELEMENTS OF TAX

ASPECTS OF TAXATION
a) Levying or imposition of tax
b) Assessment or determination of the correct amount
c) Collection of tax
CHARTACTERISTICS OF TAXATION
a) Complete
b) Unlimited
c) Plenary
d) Supreme

NATURE OF THE STATE’S POWER OF TAX

CLASSIFICATION OF TAXES

BASIC PRINCIPLES OF A SOUND TAX SYSTEM

ELEMENTS OF SOUND TAX SYSTEM

LIMITATIONS ON THE STATE’S POWER TO TAX

SITUS OF TAXATION

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 FACTORS IN DETERMINING THE SITUS OF TAXATION

OTHER DOCTRINES IN TAXATION

DIRECT DOUBLE TAXATION

MEANS OF AVOIDING THE BURDEN OF TAXATION

SOURCES OF TAX LAWS

B. CONCEPTS OF INCOME

A. INDIVIDUAL

Income

Sources of Income

Classifications of Income for Individuals

Taxable income

Requisites for Income to be taxable

Gross Income. -

Exclusions from Gross Income.

Special Treatment of Fringe Benefit. -

Fringe Benefit Defined. –

Fringe Benefits Not Taxable. –

Taxable and Non-Taxable Gross Income

B. CORPORATE INCOME
Determination of Taxable Income

Domestic Corporation

Sources of Income:
1. Sale of Goods

2. Sale of Services

Other Income

Dividends and Profit Remittances

Interest and Royalties

Other Passive Income

Other Capital Assets

Deductions from Income

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Withholding of Tax at Source

Final Withholding Tax

What and When to File and Pay Final Withholding Tax?

Income Payments to Individuals that are Subject to Final Withholding Tax (FWT).

Income Payments to Corporations that are Subject to Final Withholding Tax.

Income Payments on Interest Paid to Bank Deposits, Amount withdrawn on Decedent’s

Deposit Account, etc.

Income Payments from the Government that are Subject to Withholding of 5% to 12% VAT
and 3% Percentage Tax.

Creditable Withholding Tax Rates on Certain Payments

C. ALLOWABLE DEDUCTIONS
INDIVIDUAL

Deductions from Gross Income. –

Employment expenses

Personal deductions

Business deductions

Business rentals.

Taxes. Losses.

Bad debts.

Depreciation.

Charitable and other contributions, subject to certain limitations.

Research and development (R&D) expenditures.

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CORPORATION

Corporate – Deductions and Optional Standard Deduction

1. Depreciation and Depletion

2. Goodwill

3. Start-up expenses

4. Interest expenses

5. Bad debts

6. Charitable contributions

7. Entertainment expenses.

Special deductions - Special deductions are allowed for certain businesses (e.g.
insurance, mining, petroleum, and real estate investment trust).

1. Fines and penalties

2. Taxes
3. Net operating losses
4. Loss carrybacks are not allowed.
5. Payments to foreign affiliates
6. Head office expense allocations

Expenses.

Items not Deductible.

D. INCOME TAX ON INDIVIDUALS

Persons Subject to Income Tax

Individual taxpayers - It may be either (a) Citizens or (b) Aliens.

Classification of Individual Taxpayers

1. Citizens
a. Resident Citizen (RC)

b. Nonresident Citizen (NRC)

2. Aliens
a. Resident Alien (RA)
b. Nonresident Alien (NRA)

3. Special Taxpayers
a. NRANETB
b. Special Aliens/Filipino Workers (SAFE)
c. Minimum Wage Earners (MWE)
d.
Special Aliens/Filipino Workers (SAFE)

Regional Area Headquarters (RAH)

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 Regional Operating Headquarters (ROH)

Offshore Banking Unit (OBU)

Minimum Wage Earners (MWE)

Types of Individual Taxpayers

1. Employed
2. Self-employed or Professionals
3. Mixed Income Earners

Fringe benefits tax (FBT)

Tax rates for income subject to final tax

Tax rates for business income

Tax Rates for Self-employed Individuals and Professionals

A. If annual gross sales or income is ₱3 Million or below

B. If annual gross sales or income is above ₱3 Million

E. CORPORATE INCOME TAX

Corporations Subject to Income Tax

Domestic corporation

Types of Corporation:

Stock Corporation

Non-Stock Corporation


Tax Base and Tax Rates of Corporation



Taxability of Corporation


1. NIT – Normal Income Tax – 30% of Net Income

2. MCIT – Minimum Corporate Income Tax - 2% of gross income
3. IAT – Improperly Accumulate Tax – 10% based on improperly accumulated earnings


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Resident foreign corporations

Non-resident foreign corporations

F. TAX RETURN PREPARATION AND TAX PAYMENTS

How to Prepare and Submit Your Income Tax Returns in the Philippines

Who Are Required to File Income Taxes?

Who Are Not Required to File Income Taxes?

Substituted Filing of Income Tax Returns

Methods of Filing

Manual Filing-

Electronic Filing and Payment System (eFPS) –

Electronic BIR Forms (eBIRForms)-

Deadline of Submission

G. PENALTIES AND REMEDIES OF THE TAXPAYER

Penalties for Late Filing of Tax Returns

A. For late filing of Tax Returns with Tax Due to be paid, the following penalties will be
imposed upon filing, in addition to the tax due:

B. Civil Penalties.
1. Surcharge - twenty-five percent (25%) of the amount due
2. Interest- twenty percent (20%) per annum
3. Compromise

REMEDIES OF THE TAXPAYERS

Remedies of the taxpayer

o Prescriptive periods

o Administrative remedies against:

1. Preliminary assessment notice

2. Formal letter of demand
o Reinvestigation
o Reconsideration

3. Final decision on disputed assessment

o Request for refund or credit of taxes

Summary remedies
(collection) o Garnishment

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 o Seizure
o Levy

Compromise and abatement of tax liabilities

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