ACCOUNTING PERIODS (SUMMARY)

Accounting period

 The taxable year or taxable periods.

 It is a fixed period of time, consisting of twelve (12) months, upon the basis of which the taxable
income is computed and the income tax imposed.
 Taxable year means the calendar year, or the fiscal year ending during such calendar year, upon
the basis of which the net income is computed.

Under the Tax Code, there are two kinds of accounting period:

1. Calendar Year
 A period of 12 months beginning January 1 and ending December 31, of every year.
2. Fiscal Year
 A period of 12 months ending on the last day of any month other than December.
The taxable income shall be computed upon the basis of the taxpayer’s annual accounting
period (fiscal year or calendar year, as the case may be) in accordance with the methods of
accounting regularly employed in keeping the books of the taxpayer.

Taxable income could be determined for a taxpayer over the entire lifetime of the taxpayer.
Taxes would not be paid until the taxpayer died (in the case of an individual) or until the
taxpaying entity was dissolved (in the case of a corporation, trust, or estate).

Instances where a return may be made to cover a shorter period:

 accounting period is changed with the permission of the CIR

 taxpayer dies and return is made covering the period beginning of the decedent’s taxable year
to the date of his death
 executor or administrator makes a return for the estate of the deceased taxpayer from the date
of the taxpayer’s death to the end of the estate’s taxable year

Taxable income must be calculated over a smaller unit of time than the entire life of the
taxpayer. The unit of time could be every 10 years, every 5 years, every year or every month.
Congress has elected to use one year as he unit of time over which to measure taxable income.

Required to compute their taxable income on the basis of the calendar year only:
  Individual
 Estates or trusts
 General professional partnerships

In seeking approval for a change in accounting period, a letter request (among other
requirements) addressed to the Revenue District Officer (RDO) or appropriate Large Taxpayers
(LT) Office having jurisdiction over the place of business of the taxpayer should be submitted. It
should indicate the original accounting period and the proposed new accounting period to be
adopted and the reasons for desiring to change the accounting period. (RR 9-2011, July 1, 2011;
RR 3-2011, Mar. 7, 2011).

WITHHOLDING TAX (SUMMARY)

Withholding of taxes

 A systematic way of collecting taxes at source, an indispensable method of collecting

taxes to ensure adequate revenue for the government.
Withholding taxes on income are being deducted from the income tax due and not from gross
income. Generally, income payments are subject to final or creditable withholding taxes at
various rate.

Types of Withholding Taxes

1. Withholding Tax on Compensation

 The tax withheld from individuals receiving purely compensation income.
2. Expanded Withholding Tax
 A kind of withholding tax which is prescribed only for certain payors and is creditable
against the income tax of the payee for the taxable year.
3. Final Withholding Tax
 Income tax withheld constitutes the full and final payment of the Income Tax due from
the payee on the said income.
4. Withholding Tax on Government Money Payments
 The withholding tax withheld by government bureaus, offices and instrumentalities,
including government-owned or –controlled corporations, and local government units,
before making any payments to private individuals, corporations, partnerships and/or
associations.