CHAPTER 1: INTRODUCTION TO TAXATION ASPECTS OF THE ABILITY TO PAY THEORY
Vertical equity (Gross concept) – Extent of one’s
TAXATION
•The term "taxation" applies to all types of involuntary
levies, from income to capital gains to estate taxes.
•It is the most important source of revenues for
government to finance its operation and deliver public
goods and services
•Taxation is a term for when a taxing authority,
usually a government, levies or imposes a financial
obligation on its citizens or residents. Paying taxes to
governments or officials has been a mainstay of
civilization since ancient times.
TAXATION
As a State Power
Inherent power of the state to enforce proportional
contribution from its subject for public purpose.
As a Process
Process of levying taxes by the legislature of state.
As a mode of cost distribution
State allocate its cost to its subjects or burden to its
subject who are benefited by its spending
TAXATION
PEOPLE - TAXES - PUBLIC SERVICES -
GOVERNMENT
THEORIES OF COST ALLOCATION
Benefit Received theory – The more benefit received,
the more taxes he should pay.
Ability to pay theory – Required the contribution on
their capacity to sacrifice for the support of the
Government.
Inherent Limitations
ability to pay is directly proportional to the level of his
tax base.
Horizontal equity (Net concept) – Consideration of the
particular circumstance of the tax payer.
THE LIFEBLOOD DOCTRINE
•Taxes are essential and indispensable to the
continued subsistence of the Government
•Taxes are the lifeblood of the Government, and their
prompt and certain availability are an imperious need.
THE INHERENT POWER OF THE STATE
Taxation – Enforce proportional contribution from its
subject to sustain itself.
Police power – enacts law to protect the well-being of
people.
Eminent domain – take private property for public use
after paying just compensation
CLASSES OF TAXES
DIRECT TAX
-Cannot be shifted by the taxpayer
-Typically based on the taxpayer’s ability to pay as
measured by income, consumption, or net wealth
-Example is Income tax
INDIRECT TAX
-Can be shifted by the taxpayer
-Levied on the production or consumption of goods
and services or on transactions, including imports and
exports.
-Example is Sales Tax (i.e. VAT)
SCOPE OF TAXATION POWER
The scope of Taxation is widely regarded as:
-Comprehensive -Plenary
-Unlimited -Supreme.
LIMITATION OF TAX POWER
-Territoriality of Taxation
-International comity
-Public Purpose
-Exemption of the government
-Non-delegation of the taxing power
Constitutional Limitations
-Observance of due process of Law
-Equal protection of law
-Uniformity rule in taxation
-Progressive system of taxation
-Non-imprisonment for non-payment of debt or poll
tax
-Non-impairment of obligation and contract
-Free worship rule
-Exemption of religious, charitable or educational
entities, non-profit cemeteries, churches and
mosques lands buildings from property taxes
-Non-appropriation of public funds or property for the
benefit of church, sect or system of religion
-Exemption from taxes of the revenues and assets
non-profit, non-stock educational institutions
-Concurrence of a majority of all members of
Congress for the passage of a law granting tax
exemption
-Non-diversification of tax collections
-Non-delegation of the power of taxation
-Non-impairment of the jurisdiction of the Supreme
Court to review cases
-The requirement that appropriations, revenues, or
tariff bills shall originate exclusively in the House of
Representative
-The delegation of taxing power to local government
units
SITUS OF TAXATION
Situs is the place of taxation. It is the tax jurisdiction
that has the power to levy taxes upon the tax object.
Examples of Situs Rules
-Business tax situs
-Income tax situs on services
-Income tax situs on sale of goods
-Property tax situs
-Personal tax situs
FUNDAMENTAL DOCTRINES OF TAXATION
Marshall Doctrine – taxation power carries with it the
power to destroy.
Holme’s Doctrine – taxation power may be used to
build or encourage beneficial activities or industries
by the grant of tax incentives.
Prospectivity of tax laws – An ex post facto law or a
law that retroacts is prohibited by the constitution.
Non-compensation or set-off – Taxes are not subject
to automatic set-off or compensation. Tax is not a
debt.
Non-assignment of taxes – tax obligations cannot be
assigned or transferred to another entity by contract.
Imprescriptibility in taxation – Prescription is lapsing
of a right due to the passage of time.
Doctrine of estoppel – The government is not subject
to estoppel.
Judicial Non-interference – courts are not allowed to
issue injunction in the government’s pursuit to collect
tax.
Strict construction of tax laws – Taxation is the rule,
exemption is the exemption.
DOUBLE TAXATION
Double taxation occurs when the same taxpayer is
taxed twice by the same tax jurisdiction for the same
thing.
Elements of double taxation
•Primary element: Same object
•Secondary element:
-Same type of tax
-Same purpose of tax
-Same taxing jurisdiction
-Same tax period
TYPES OF DOUBLE TAXATION
Direct double taxation – This occurs when all the
element of double taxation exists for both impositions.
Indirect double taxation – This occurs when at least
one of the secondary elements of double taxation is
not common for both impositions.
HOW CAN DOUBLE TAXATION MINIMIZED
Provision of tax exemption – only one tax is allowed
to apply to the tax object while the other tax law
exempts the same tax object.
Allowing foreign tax credit – both tax laws of the
domestic country and foreign country tax the tax
object but the tax payments made in the foreign tax
law is deductible against the tax due of the domestic
tax law.
Allowing reciprocal tax treatment – provision in tax
laws imposing a reduced tax rates or even exemption
if the countries of the foreign tax payers also give the
same treatment to Filipino non-residents therein.
Entering into treaties or bilateral agreements –
countries may stipulate for a lower tax rates for their
residents if they engage in transactions that is taxable
by both of them.
ESCAPES FROM TAXATION
Escapes from taxation are the means available to the
taxpayer to limit or even avoid the impact of taxation.
Categories:
•Those that result to loss of government revenue
•Those that do not result to loss of government
revenue
Those that result to loss of government revenue
Tax evasion – also known as tax dodging, refers to
any trick that tends to illegally reduce or avoid the
payment of tax.
Tax avoidance - also known as tax minimization,
refers to any trick that reduces or totally escapes
taxes by any legally permissible means.
Tax exemption – also known as tax holiday, refers to
the immunity, privilege or freedom from being subject
to a tax which other are subject to. Tax exemptions
may be granted by the Constitution, law, or contract.
Those that do not result to loss of government
revenue
Shifting – This is the process of transferring tax
burden to other taxpayers.
Forms of shifting:
a. Forward shifting – follows the normal flow of
distribution.
b. Backward shifting - reverse of forward shifting
c. Onward shifting – exhibits forward shifting or
backward shifting
Capitalization – This pertains to the adjustment of the
value of an asset caused by changes in tax rates
Transformation – This pertains the elimination of
wastes or losses by the tax payer to form savings to
compensate for the tax imposition or increase in
taxes.
GOODLUCK!
Albert Einstein: "The hardest thing in the world is to
understand the income tax."
 CHAPTER 2 - TAX, TAX LAWS, AND TAX GENERALLY ACCEPTED ACCOUNTING 2. As to subject matter
ADMINISTRATION PRINCIPLES VS. TAX LAWS a. Personal, poll and capitation
GAAP are not laws, they are just standards and b. Property tax
TAXATION LAWS benchmarks for fair and relevant valuation and c. Excise or privilege tax
Taxation Law refers to any law that arises from the recognition for financial reporting. Tax laws are 3. As to incidence
exercise of the power of the State prescribed criteria for tax reporting, a special form of a. Direct tax
financial reporting which is intended to meet specific b. Indirect tax
TYPES OF TAXATION LAW needs of tax authorities. 4. As to amount
Tax laws - these are laws that provide the a. Specific tax
assessment and collection of taxes NATURE OF PHILIPPINE TAX LAWS b. Ad valorem
-Philippine tax laws are civil and not political in nature. 5. As to rate
Tax exemption laws - these are laws that grant -They are effective even during enemy occupation. - a. Proportional tax
certain immunity from taxation They are laws of the occupied territory and not by b. Progressive or graduated tax
occupying enemy. c. Regressive tax
SOURCES OF TAXATION LAW -Internal revenue laws are not penal in nature d. Mixed tax
1. Constitution because they do not define crime. Their penalty 6. As to imposing authority
2. Statutes and Presidential Decrees provisions are merely intended to secure taxpayers’ a. National tax
3. Judicial decisions or case laws compliance. b. Local tax
4. Executive orders and Batas Pambansa
5. Administrative issuances TAX DISTINCTION OF TAXES WITH SIMILAR ITEMS
6. Local ordinances Tax is an enforced proportional contribution levied by Tax vs. Revenue
7. Tax treaties and conventions with foreign countries the lawmaking body of the State to raise revenue for Tax is the amount imposed by the government for
8. Revenue Regulations public purpose public purpose and revenue refers to all income
collections of the government which includes taxes,
TYPES OF ADMINISTRATIVE ISSUANCES ELEMENTS FOR VALID TAX tariffs, licenses, etc.
1. Revenue Regulations 1. Tax must be levied by the taxing power having Tax vs. License Fee
2. Revenue memorandum orders jurisdiction over the object of taxation Tax emanates from taxation power and license
3. Revenue memorandum rulings 2. Tax must not violate Constitutional and Inherent emanates from police power
4. Revenue memorandum circulars limitations Tax vs. Toll
5. Revenue bulletins 3. Tax must be uniform and equitable Tax is a levy of government and toll is a charge for
6. BIR rulings 4. Tax must be for public purpose the use of other’s property
5. Tax must be proportional in character Tax vs. Debt
TYPES OF RULINGS 6. Tax is generally payable in money Tax arises from law and debt arises from contracts
1. Value added Tax (VAT) rulings Tax vs. Special Assessment
2. International Tax Affairs Division (ITAD) rulings CLASSIFICATION OF TAXES Tax is imposed upon persons, properties, or
3. BIR rulings 1. As to purpose privileges while special assessment is levied through
4. Delagated Authority (DA) rulings a. Fiscal or revenue tax lands adjacent to a public improvement
b. Regulatory
c. Sumptuary
Tax vs. Tariff
Tax is the amount imposed upon persons, privilege,
transaction or property and tariff is the amount
imposed on imported or exported commodities
Tax vs. Penalty
Tax is imposed for the support of government while
penalty is imposed to discourage an act.
TAX SYSTEM
Tax system refers to the methods or schemes of
imposing, assessing and collecting of taxes. It
includes all the tax laws and regulations, the means
of their enforcement, the government offices, bureaus
and withholding tax agents. It may be progressive,
proportional or regressive
Types of tax system according to imposition
Progressive
Employed in the taxation of individual, and certain
local business tax
Proportional
Employed in taxation of corporate income and
business
Regressive
Not employed in the Philippines
Progressive system which emphasize direct tax
This system encourages economic efficiency and this
type impacts more upon the rich
Regressive system which emphasize indirect tax
The impact of taxation rest upon the bottom end of
the society and in effect is an anti-poor system
TAX COLLECTION SYSTEMS
•Withholding system on income tax
1. Creditable withholding tax
a. Withholding tax on compensation
b. Expanded withholding tax
2. Final withholding tax
•Withholding system on business tax
When the national government agencies and
instrumentalities purchase goods or services to
private suppliers, the law requires withholding of the
relevant business tax
•Voluntary compliance system
The taxpayers determine his income and reports the
same through ITR
•Assessment or enforcement system
The government identifies the non-compliant
taxpayers, assesses their tax dues including
penalties, demand for taxpayer’s voluntary
compliance or enforces collections by coercive means
such as a summary of the proceeding or judicial
proceeding when necessary.
PRINCIPLES OF A SOUND TAX SYSTEM
Fiscal adequacy - requires that the source of
government must be sufficient to cover government
cost
Theoretical justice - suggest that taxation should
consider the taxpayer ability to pay
Administrative feasibility - the tax law should be
capable of efficient and effective administration to
encourage compliance
TAX ADMINISTRATION
How tax is administered / Power of BIR
Tax administration refers to the management of tax
system. It is entrusted to the Bureau of Internal
Revenue (BIR) which is under the supervision and
administration of the Department of Finance. Chief
officials of BIR - Commissioner and Deputy
Commissioner (operations, legal enforcement,
information system, and resource management)
POWER OF THE BIR
1. Assessment and collection of tax
2. Enforcement of all forfeitures, penalties and fines,
and judgement in all cases decided in its favor by the
court
3. Giving effect to, and administering the supervisory
and police power conferred to it by the NIRC and
other laws
4. Assignment of internal revenue officers and
employees to other duties
5. Provision and distribution of forms, receipts,
certificates, stamps, etc to proper officials
6. Issuance of receipts and clearances
7. Submission of annual report, pertinent information
to Congress and reports to the Congressional
Oversight Committee in matters of taxation
POWER OF THE COMMISSIONER OF INTERNAL
REVENUE
1. To interpret the provision of the NIRC, subject to
review by the Secretary of Finance
2. To decide tax cases
3. To obtain information and to summon, examine
and to take testimony of persons to effect tax
collections
4. To make an assessement and prescribe additional
requirement for tax administration and enforcement
5. To examine tax returns and determine tax due
thereon
6. To conduct inventory taking and surveillance
7. To prescribed presumptive gross sales and
receipts for a taxpayer
8. To terminate tax period
9. To prescribe real property values
10. To compromise tax liabilities
11. To inquire into bank deposits
12. To accredit and register tax agents
13. To refund or credit internal revenue taxes
14. To abate or cancel tax liabilities in certain cases
15. To prescribe additional procedures
16. To delegate his power to any subordinate officer
 NON-DELEGATED POWER OF CIR
1. The power to recommend the promulgation of rules
and regulations to the Secretary of Finance
2. The power to issue rulings of first impression or to
reverse, revoke or modify existing rulings of the
Bureau
3. The power to compromise tax liability
4. The power to assign and re assign internal revenue
officers
RULES IN ASSIGNMENTS OF REVENUE
OFFICERS TO OTHER DUTIES
1. Revenue officers assigned to an establishment
where excisable articles are kept shall in no case stay
there for more than 2 years
2. RO to assigned to perform assessment and
collection function shall not remain in the same
assignment for more than 3 years
3. Assignment of internal revenue officers and
employees to special duties shall not exceed 1 yr
AGENTS AND DEPUTIES FOR COLLECTION OF
NATIONAL INTERNAL REVENUE TAXES
1. The Commissioner of Customs and his
subordinates with respect to collection of NIR taxes
on imported goods
2. The head of appropriate government officers and
his subordinates with respect to the collection of
energy tax
3. Banks duly accredited by the Commissioner with
respect to receipts of payments of internal revenue
taxes
OTHER AGENCIES TASKED WITH TAX
COLLECTIONS OR TAX INCENTIVES RELATED
FUNCTIONS
•BUREAU OF CUSTOMS (BOC)
•BOARD OF INVESTMENTS (BOI)
•PHILIPPINE ECONOMIC ZONE AUTHORITY •Surviving company in case of merger or
(PEZA) consolidation of a large taxpayer
•LOCAL GOVERNMENT TAX COLLECTING UNIT •A corporation that absorbs the operation or business
•FISCAL INCENTIVES REVIEW BOARD (FIRB) in case of spin off of any large taxpayer
•Corporation with an authorized capitalization of at
TAXPAYER CLASSIFICATION FOR PURPOSE OF least P300,000,000 registered with the SEC
TAX ADMINISTRATION •Multinational enterprises with an authorized
Large taxpayer - under the supervision of the Large capitalization or assigned capital of at least
Taxpayer Service (LTS) of the BIR National Office P300,000,000.00
Non-Large taxpayer - under the supervision of •Publicly listed corporation
respective Revenue District Offices (RDO) where the •Universal, commercial, and foreign banks
business, trade or profession of the taxpayer is •Corporate taxpayers with at least P100,000,000
situated authorized capital in banking, insurance,
telecommunication, utilities, petroleum, tobacco and
CRITERIA FOR LARGE TAXPAYER alcohol industries
As to payment •Corporate taxpayers engaged in the production of
VAT – 200,000/qtr for the preceding year metallic minerals
Excise tax – 1,000, 000 tax paid for the preceding
year INCOME TAXATION
Income tax – 1, 000, 000 tax paid for the preceding
year
Withholding tax – 1, 000, 000 tax remittances and
payments for all types of withholding
Percentage tax – 200, 000/qtr for the preceding year
Documentary stamp tax – 1,000,000 aggregate
amount per year
As to financial conditions and results of operation
•Gross receipts or sales – 1B/yr
•Net worth – 300M
•Gross purchases – 800M/yr
•Top corporate taxpayer listed and published by SEC
AUTOMATIC CLASSIFICATION OF TAXPAYERS AS
LARGE TAXPAYER
•All branches of taxpayer under the Large Taxpayer’s
service
•Subsidiaries, affiliates, and entities of conglomerates
or group of companies of a large taxpayer
CHAPTER 3 – INTRODUCTION TO INCOME TAX
CONCEPT OF INCOME
-It is regarded as the best measure to taxpayer’s
ability to pay tax
-It is an excellent object of taxation in the
allocation of government costs
What is income for taxation purposes?
The tax concept of income is simply referred to
as “gross income”. A taxable item of income is
referred as an “item of gross income” or
“inclusion in gross income”
Gross income simply means taxable
income (layman’s term). Under NIRC, the term
“taxable income” refers to certain items in gross
income less deductions and personal
exemptions allowable by law.
GROSS INCOME is defined as any inflow
of wealth to the taxpayer from whatever
source, legal or illegal, that increases net worth.
This includes exercise of profession, trade,
income from properties and other sources such
as dealings in properties
ELEMENTS OF GROSS INCOME
-It is a return on capital that increases net
worth
Capital means any wealth or property.
Gross income is a return on wealth or property
that increases net worth
Selling price P1,500 (Total return)
Cost 1,000 (Return of capital)
Gross Inc 500 (Return on capital)
CAPITAL ITEMS WITH INFINITE VALUE
-Life
-Health
-Human reputation
-Recovery of loss capital vs. recovery of loss
profit
•The recovery of loss capital maintains net
worth while recovery of loss profits increases
net worth
-Realized Benefit
•The term benefit means any form of
advantage derived by the taxpayer
•There is a benefit when there is an increase in
the net worth of the taxpayer
Requisites of a realized benefit
•There must be an exchange transaction
•The transactions involves another entity
•It increases the net worth of the recipient
Benefits in the absence of transfer
•The increase in wealth of the taxpayer in the
form of appreciation of properties or decrease
in the value of obligations.
•These referred to as unrealized gain or holding
gains
Mode of receipt/realization benefit
•Actual receipt
•Constructive receipt
-Not exempted by law, contract or treaty
An item of gross income is not exempted by the
Constitution, law, contract or treaties from
taxation
TYPES OF INCOME TAXPAYERS
•Individual
•Citizen
-Resident Citizen
-Non-Resident Citizen
•Alien
-Resident Alien
-Non-resident Alien
---Engaged in trade or business
---Not engaged in trade or business
TYPES OF INCOME TAXPAYERS
•Individual
-Taxable estate and trusts
•Corporations
-Domestic Corporation
-Foreign Corporation
•Resident foreign corporation
•Non-resident foreign corporation
GENERAL CLASSIFICATION RULE FOR
INDIVIDUAL
Intention
The intention of the taxpayer regarding the
nature of his stay within and outside the
Philippines shall determine his appropriate
residency classification. The taxpayer shall
submit to the CIR of the BIR documentary
proofs indicating such intention
Length of stay
•Citizens staying abroad for a period of at least
183 days are considered non-resident
•Aliens who stayed in the Philippines for more
than 1 year as of the end of the taxable year are
considered resident
•Aliens who are staying in the Philippines for
not more than 1 year but more than 180 days
are deemed non resident citizen engaged in
business
•Aliens who stayed in the Philippines for not Corporation (OPC) owned and registered by Non-resident 
more than 180 days are considered non- resident citizen in the Philippines foreign corporation
resident alien NETB THE RESIDENCY AND CITIZENSHIP RULE
Illustration I Foreign Corporation Taxpayers who are residents and citizens of the
A foreign actor was contracted by the Philippine -It is organized under a foreign law. Philippines such as resident citizen and
television company to do a project in the RFC – a foreign corporation which operates and domestic corporations are taxable on all income
Philippines. He arrived in the country on conducts business in the Philippines through a from all sources within and without the
February 29, 2021 and returned to his country permanent establishment (i.e. branch) Philippines. A corporation is a citizen of the
three weeks later upon completion of the -NRFC is a foreign corporation which does not country of incorporation. A domestic
project. operate or conduct business in the Philippines corporation is a citizen of the Philippines
Special Corporation
Illustration II These are domestic or foreign corporations SITUS OF INCOME VS. SOURCES OF INCOME
A foreigner arrived in the country on November which are subject to special tax rules or A taxpayer had the following income:
4, 2021. He stayed in the Philippines since then preferential tax rates TRANSACTIONS AMOUNT
without any working visa or work permit OTHER CORPORATE TAXPAYERS
•One-person Corporation Interest income from deposits in a P300,000
Illustration III •Partnership foreign bank
A Filipino citizen left the Philippines and stayed •Joint Venture Interest from domestic bonds 50,000
abroad from March 15, 2020 to April 1, 2021 •Co-ownership
even without any definite purpose. GENERAL RULES IN ONCOME TAXATION Royalties from books published in 100,000
the Philippines
WITHIN WITHOUT
TAXABLE ESTATE AND TRUST Rent income from properties 150,000
Estate Individual abroad (the lease contracts
-It is refers to the properties, rights, and Taxpayers executed in the Philippines)
obligation of a deceased person not extinguish Resident Citizen   PF but services rendered in the 400,000
upon his death
Non-resident Philippines to non-resident clients
-Estate under judicial settlement are treated as 
citizen Dividend income:
individual taxpayer
Trust Resident alien  A taxpayer received P400k dividend income
-It is an arrangement whereby one person from X Corp. X Corp reported the following
Non-resident alien 
transfers property to another person, which will gross income:
Corporate
be held under the management of third party Taxpayers
YEAR PHILIPPINES ABROA TOTAL
D
Domestic  
CORPORATE INCOME TAXPAYER Corporation 2018 100,000 200,000 300,000
Domestic Corporation
Resident foreign 
-It is a corporation that is organized with 2019 200,000 100,000 300,000
corporation
Philippine Laws. It also includes One Person
 2020 300,000 100,000 400,000 Scenario 2: P – Abroad
HO – Abroad S – Abroad
TOTA 600,000 400,000 1,000,000 BO – Abroad P2,400,000 (without)
L P2,400,000 (without) Scenario 3:
OTHER SITUS RULES Scenario 3: P – Philippines
Merchandising Income: HO – Philippines S – Abroad
SOURCES OF GROSS INCOME AMOUNT BO – Abroad P1,600,000 (within)
P1,600,000 (within) P800,00 (without)
Goods purchased and sold within P200,000 P800,00 (without) Scenario 4:
Goods purchased within and sold 100,000 Scenario 4: P – Abroad
abroad HO – Abroad S – Philippines
BO – Philippines P800,000 (within)
Goods purchases abroad and sold 150,000 P800,000 (within) P1,600,00 (without)
within
P1,600,00 (without) RETURN OF CAPITAL OR RETURN ON CAPITAL
Goods purchased and sold abroad 350,000 FOR RETURN RETURN
The production is conducted by a parent CONSIDERATION THE OF ON
corporation and the distribution is conducted LOSS CAPITAL CAPITAL
Manufacturing income: OF
by its subsidiary corporation
A corporation manufactures goods and sell he
through its branch. It bills its branch at PARENT SUBSIDIARIE TOTAL P1,000,000.00 Health
S
established market price. P 500,000.00 P400k
HOME BRANCH TOTAL Sales 4,000,00 6,000,000 10,000,00 car
OFFICE 0 0
P 300,000.00 P350k
Cost of 2,400,00 1,200,000 3,600,000 building
Sales 4,000,000 6,000,000 10,000,000
GS 0
P 600,000.00 Income
Cost of 2,400,000 1,200,000 3,600,000
GS Gross 1,600,00 800,000 2.400,000
P1,200,000.00 Life
Incom 0
Gross 1,600,000 800,000 2.400,000 e INCOME TAX OR TRANSFER TAX
Income
TRANSACTION INCOME TRANSFER
The following shows the situs of the gross TAX TAX
The following shows the situs of the gross income of the corporation under each of the Barter of Properties
income of the corporation under each of the following scenarios:
following scenarios: Scenario 1: Sale of goods
Scenario 1: P – Philippines Rendering of Services
HO – Philippines S – Philippines
BO – Philippines Transfer of properties
P2,400,000 (within) from a decedent to the
P2,400,000 (within) Scenario 2:
 heirs upon death
Transfer for less than full
and adequate
consideration
TAXABLE OR EXEMPT
ITEM
Winnings from
gambling
Harvested fruits
from orchard
Gain on sale of
goods from office to
its branch
Cancellation of debt
out of gratuity of
the creditor
Matured interest
from coupon bonds
LOCATION AND SITUS OF INCOME
INCOME
Sam earned P100k
interest income; 40%
from NR debtors
Kate, a RC, wfh online;
Service fee FC – 200k
Service fee RC – 100k
Cheryl received P30k
dividend from a NRFC
Ben received P100k P10k reimbursement for employer’s expenses
dividend from DC paid by James
P15k payment of James’ computer set
purchased by the employer
P25k monthly salary
*James computer set cost him P12k
TAXABLE EXEMPT Compute the total return on capital.
INCOME TAXPAYER CLASSIFICATION
PERSON OR ENTITY CLASSIFICATION
Filipino overseas worker
A Mexican actor who was
contracted to do a project in
the Philippines for 27 weeks
A Libyan who was
contracted to do a project in
the Philippines for 3 weeks
An estate of Filipino citizen
judicially administered in
Japan
A joint venture organized
under foreign law and is not
operating in the Philippines
WITHIN WITHOUT
Illustration 1
Ismael paid P50k annual premium on a life
insurance contract which would pay her P2M in
case of her death. After paying for 5 years,
Ismael re assigned the policy to Gael for P300k.
How much is the return of capital and return on
capital?
Illustration 2
James received a total sum of P50k from his
employer consisting of the following: