SIM - MAC 421 Strategic Tax Management-1

UNIVERSITY OF MINDANAO
College of Accounting Education
Program: BS Management Accounting
Physically Distanced but Academically Engaged
Self-Instructional Manual (SIM) for

Self-Directed Learning (SDL)
Course/Subject: MAC 421 – Strategic Tax Management
Name of Teacher: ____________________
THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY;

NOT FOR REPRODUCTION AND DISTRIBUTION
OUTSIDE OF ITS INTENDED USE. THIS IS INTENDED
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3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)300-5456 Local 137
ONLY FOR THE USE OF THE STUDENTS WHO ARE

OFFICIALLY ENROLLED IN THE COURSE/SUBJECT.
EXPECT REVISIONS OF THE MANUAL.
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TABLE OF CONTENTS
Content Page
No.
Table of Contents
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Course Outline
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Course Outline Policy
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Course Information
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Week 1 to 3 Coverage
Big Picture in Focus: Unit Learning Outcomes
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Big Picture in Focus: Unit Learning Outcome 1
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17
Course Schedule
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53
Course Schedule
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Course Schedule
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Course Schedule
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Online Code of Conduct

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Course Outline: ACP 311 – Accounting for Special

Transactions
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Course Coordinator: Cedric Ian Carlo E. Petalcorin

Email: cic.petalcorin@umindanao.edu.ph
Student Consultation: By appointment through Blackboard LMS
Phone: c/o UM CAE (305-0645 loc. 137)
Effectivity Date: January 4, 2022
Mode of Delivery: Blended (On-Line with face to face or virtual
sessions)
Time Frame: 54 Hours
Student Workload: Expected Self-Directed Learning
Requisites: Pre-Requisite – ACC 321 Business Taxation
Credit: 3 units
Course Outline Policy
Area of Concern Details

Contact and Non- This 3-unit course self-instructional manual is
Contact Hours designed for blended learning mode of instructional
delivery with scheduled face-to-face or virtual
sessions. The expected number of hours will be 54,
including face-to-face or virtual sessions. The face-
to-face sessions shall include the summative
assessment tasks (examinations) since this course
is crucial in the CMA Certification Exam.
Assessment Task Submission of assessment tasks shall be every
Submission week. The assessment paper shall be attached with
a cover page indicating the title of the assessment
task (if the task is a performance), the name of the
course coordinator, date of submission, and the
name of the student. The document should be
submitted in the LMS.
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Turnitin All assessment tasks are required to be submitted

Submission (if through Turnitin with a maximum similarity index of
necessary) 30% to ensure honesty and authenticity. This means
that if your paper goes beyond 30%, the students will
either redo her/his paper or explain in writing
addressed to the course coordinator the reasons for
the similarity. In addition, if the paper has reached
more than 30% similarity index, the student may be
called for disciplinary action in accordance with the
University's OPM on Intellectual and Academic
Honesty.
Please note that academic dishonesty such as

cheating and commissioning other students or
people to complete the task for you have severe
punishments (reprimand, warning, expulsion).
Penalties for Late The score for an assessment item submitted after the
Assignments/Asses designated time on the due date, without an
sments approved extension of time, will be reduced by 5% of
the possible maximum score for that assessment
item for each day or part-day that the assessment
item is late.
However, if the late submission of the assessment

paper has a valid reason, a letter of explanation
should be submitted and approved by the course
coordinator. If necessary, you will also be required to
present/attach evidence.
Return of Assessment tasks will be returned to you two (2)
Assignments/Asses weeks after the submission. This will be returned by
sments email or via the Blackboard portal.
For group assessment tasks, the course coordinator
will require some or few of the students for online or
virtual sessions to ask clarificatory questions to
validate the originality of the assessment task
submitted and to ensure that all the group members
are involved.
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Assignment You should request in writing addressed to the

Resubmission course coordinator his/her intention to resubmit an
assessment task. The resubmission is premised on
the student's failure to comply with the similarity
index and other reasonable grounds such as
academic literacy standards or other reasonable
circumstances, e.g., illness, accident, financial
constraints.
Re-marking of You should request in writing addressed to the
Assessment program coordinator your intention to appeal or
Papers and Appeal contest the score given to an assessment task. The
letter should explicitly explain the reasons/points to
contest the grade. The program coordinator shall
communicate with the students on the approval and
disapproval of the request.
If disapproved by the course coordinator, you can

elevate your case to the program head or the dean
with the original letter of request. The final decision
will come from the dean of the college.
Grading System All culled from BlackBoard sessions and traditional
contact:
Course Discussion/Exercises – 40%
1st formative assessment – 10%
nd
2 formative assessment – 10%
rd
3 formative assessment – 10%
All culled from on-campus/on-site sessions (to be

announced):
Final Exam (summative assessment) – 30%
Submission of the final grades shall follow the usual

University system and procedures.
Preferred Harvard Referencing Style
Referencing Style
Student You are required to create a umindanao email
Communication account, which is required to access the BlackBoard
portal. Then, the course coordinator will enroll the
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students to have access to the materials and

resources of the course. All communication formats:
chat, submission of assessment tasks, requests, etc.
shall be through the portal and other university
recognized platforms.
You can meet the course coordinator in person
through the scheduled face-to-face sessions to raise
your issues and concerns.
For students who have not created their student

email, please contact the course coordinator or
program head.
Contact Details of Lord Eddie I. Aguilar
the Dean Email: aguilar_lordeddie@umindanao.edu.ph
Phone: (082) 305-0645 local 137
Contact Details of Devzon U. Porras
the Assistant Dean Assistant Dean
and the Program Email: dporras@umindanao.edu.ph
Head Phone: (082) 305-0645 local 137
Cedric Ian Carlo E. Petalcorin

Program Head – BSIA, BSMA
Email: cic.petalcorin@umindanao.edu.ph
Phone: (082) 305-0645 local 137
Student with Students with special needs shall communicate with
Special Needs the course coordinator about the nature of their
special needs. Depending on the nature of the need,
the course coordinator, with the program
coordinator's approval, may provide alternative
assessment tasks or extension of the deadline for
submission of assessment tasks. However,
alternative assessment tasks should still help
achieve the desired course learning outcomes.
Online Tutorial Through LMS or private message chat
Library and Brigida E. Bacani
Information Center Email: library@umindanao.edu.ph
(LIC) Resource 09513766681
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Matina, Davao City
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For inquiries, you can email

at umlic.eresources@gmail.com, raphael_digal@u
mindanao.edu.ph or
chat with us here http://library.umindanao.edu.ph/
Facebook page: https://www.facebook.com/UM-
Learning-and-Information-Center-Davao-City-
962331877193048/
Well-Being Welfare Ronadora E. Deala
Support Help Desk Email: Ronadora_deala@umindanao.edu.ph
09212122846
GSTC Facilitator
Zerdszen P. Rañises
Emai: gstcmain@umindanao.edu.ph
09058924090
GSTC Facebook Page:

https://facebook.com/UM-GSTC-Main-CAE-
111901303784349/?modal=admin_todo_tour
Course Information – see/download course syllabus in the

BlackBoard LMS
CC’s Voice: Hello prospective CMA! Welcome to this course MAC 421 –
Strategic Tax Management. By now, I am confident that you
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really want to become a CMA and that you have visualized

yourself already being in the front and center of helping
management of organizations with their financial and
managerial decisions.
CO: Before becoming a Certified Management Accountant, you have

to master all facets and areas of management accounting and this
include the ability to apply aspects of corporate tax laws, rules
and practices for strategic tax planning opportunities and
decisions on business transactions which are the course
outcomes (CO) of this subject.
Let us begin!
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BIG PICTURE
Week 1 – 3 : Unit Learning Outcomes (ULO): At the end of the unit, you
are expected to
Big Picture in Focus:
ULO1. Explain the structure of tax laws and regulations

ULO2. Explain the structure of tax administrative system
ULO3. Explain the current tax structure and types of tax
Essential Knowledge
To perform the aforesaid big picture (unit learning outcomes) for the next
three (3) weeks of the course, you need to fully understand the following
essential knowledge that will be laid down in the succeeding pages. Please
note that you are not limited to exclusively refer to the these resources. Thus,
you are expected to utilize other books, research articles and other
resources that are available in the university’s library e.g. ebrary,
search.proquest.com etc.
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State Power
Legislative Process
Mode of Government Cost Distribution
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Tax is imposed even in the absence of a

Constitutional grant
Claims for tax exemption are construed

against taxpayers
The courts are not allowed to interfere with

the collection of taxes.
Income taxation:
• Income received in advance is taxable upon receipt

• Deduction for capital expenditures and prepayments is
not allowed as it effectively defers the collection of
income tax
• A lower amount of deduction is preferred when a
claimable expense is subject to limit
• A higher tax base is preferred when the tax object has
multiple tax base
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Self-Help: You can also refer to the sources below to help

you further understand the lesson:
INCOME TAXATION: Laws, Principles and Applications, 2016 OBE

Edition, Rex B. Banggawan, CPA, MBA, Real Excellence Publishing,
Baguio City, Philippines.
GENERAL PRINCIPLES OF TAXATION, Dela Cruz/De Vera/Lopez,

CPA Review School of the Philippines, Manila, Philippines
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Let’s Check
1. They exist independent of the constitution being fundamental powers of the state,
except
a. Power of taxation c. Power of eminent domain
b. Police power d. People power
2. The power to acquire private property upon payment of just compensation for public
purpose
b. Police power d. Power of recall
3. The power to regulate liberty and property to promote the general welfare
b. Police power d. Super power
4. The power to demand proportionate contributions from persons and property to defray
the expenses of the government
b. Police power d. Super power
5. Basic Principles of a sound tax system, except

a. Fiscal adequacy c. Administrative feasibility
b. Equality or theoretical justice d. Intellectual sensitivity
6. The tax imposed should be proportionate to the taxpayer’s ability to pay

b. Equality or theoretical justice d. Economic consistency
7. The sources of revenue as a whole, should be sufficient to meet the demands of public
expenditures
b. Equality or theoretical justice d. Economic consistency
8. The tax laws must be capable of convenient, just and effective administration
b. Equality or theoretical justice d. Internal acceptability
9. The principal purpose of taxation is

a. To encourage the growth of home industries through the proper use of tax
exemptions and tax incentives
b. To implement the police power of the state
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c. To reduce excessive inequalities of wealth

d. To raise revenues for governmental needs
10. The aspects of taxation is

a. Legislative in character
b. Shared by the legislative and executive departments
c. Executive in character
d. Judicial in character
11. Taxation as distinguished from police power and power of eminent domain
a. Property is taken to promote the general welfare
b. Maybe exercises only by the government
c. Operates upon the whole citizenry
d. There is generally no limit as to the amount that may be imposed
12. This is an inherent limitation on the power of taxation

a. Rule on uniformity and equity in taxation
b. Due process of law and equal protection of the laws
c. Non-impairment of the jurisdiction of the Supreme Court in tax cases
d. Tax must be for public purpose
13. This is a constitutional limitation on the power of taxation

a. Tax laws must be applied within the territorial jurisdiction of the state
b. Exemption of government agencies and instrumentalities from taxation
c. No appropriation of public money for religious purposes
d. Power to tax cannot be delegated to private persons or entities
14. Which of the following statements is correct?

a. The President is authorized to increase or decrease national internal revenue
tax rates
b. One of the nature of taxation is the reciprocal duties of protection and support
between the state and subjects thereof
c. Every sovereign government has the inherent power to tax
d. Income tax is an indirect tax
15. Persons or things belonging to the same class shall be taxed at the same rate
a. Simplicity in taxation c. Equality in taxation
b. Reciprocity in taxation d. Uniformity in taxation
16. The tax should be proportional to the relative value of the property to be taxed
a. Simplicity in taxation c. Equality in taxation
b. Reciprocity in taxation d. Uniformity in taxation
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17. The following are the nature of taxation, except

a. Inherent in sovereignty
b. Subject to inherent and constitutional limitations
c. Essentially legislative in character
d. Subject to approval by the people
18. It literally means “place of taxation”; the country that has the power and jurisdiction to
levy and collect the tax
a. Basis of taxation c. Scope of taxation
b. Situs of taxation d. Theory of taxation
19. A tax must be imposed for public purpose. Which of the following is not a public
purpose?
a. National defense
b. Improvement of the sugar and coconut industries
c. Public education
d. Improvement of a subdivision road
20. Which is not an essential characteristic of a tax?

a. It is unlimited as to amount c. It is proportionate in character
b. It is payable in money d. It is an enforced contribution
21. Special assessment is an enforced proportional contribution from owners of land

especially benefited by public improvement. Which one of the following is not
considered as one of its characteristics?
a. It is levied on land
b. It is based on the government’s need of money to support its legitimate
objectives
c. It is not a personal liability of the persons assessed
d. It is based solely on the benefit derived by the owners of the land
22. It is the privilege of not being imposed a financial obligation to which others are subject
a. Tax incentive c. Tax amnesty
b. Tax exemption d. Tax credit
23. As to scope of the legislative power to tax, which is not correct?

a. Where there are no constitutional restrictions, and provided the subjects are
within the territorial jurisdiction of the state, Congress has unlimited discretion
as to the persons, property or occupations to be taxed
b. In the absence of any constitutional prohibition, Senate has the right to levy a
tax of any amount it sees fit
c. The discretion of Congress in imposing taxes extends to the mode, method or
kind of tax, unless restricted by the constitution
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d. The sole arbiter of the purpose for which taxes shall be levied is Congress,
provided the purpose is public but the courts may review the levy of the tax to
determine whether or not the purpose is public
24. Which of the following is a nature of taxation?

a. The power is exercised by legislative action
b. It is generally payable in money
c. It is essentially an administrative function
d. Without it the state can continue to exist
25. Which of the following is not a determinant of the place of taxation?

a. Source of the income
b. Residence of the taxpayer
c. Citizenship of the taxpayer
d. Amount of tax to be impose
26. Subject to inherent and constitutional limitations, the power of taxation is regarded as
supreme, plenary, unlimited and comprehensive
a. Basis of taxation c. Scope of taxation
b. Situs of taxation d. Theory of taxation
27. Our National Internal Revenue Laws are

a. Political in nature c. Penal in nature
b. Criminal in nature d. Civil in nature
28. The levying or imposition of tax and the collection of the tax are processes which
constitute the taxation system
a. Basis of taxation c. Aspects of taxation
b. Nature of taxation d. Theory of taxation
29. The process or means by which the sovereign, through its law-making body raises
income to defray the expenses of the government
a. Toll b. License fee c. Taxation d. Assessment
30. Enforced proportional contributions from persons and property levied by the state by
virtue of its sovereignty for the support of the government and for all public needs
a. Toll b. License fee c. Taxes d. Assessment
31. An escape from taxation where the tax burden is transferred by the one on whom the
tax is imposed or assed to another
a. Shifting b. Exemption c. Transformation d. Capitalization
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32. An escape from taxation where the producer or manufacturer pays the tax and
endeavors to recoup himself by improving his process of production thereby turning
out his units of products at a lower cost
33. An escape from taxation where there is a reduction in the price of the taxed object
equal to the capitalized value of future taxes which the taxpayer expects to be called
upon to pay
34. The use of illegal or fraudulent means to avoid or defeat the payment of tax
a. Exemption b. Shifting c. Avoidance d. Evasion
35. The use of legal or permissible means to minimize or avoid taxes

a. Exemption b. Shifting c. Avoidance d. Evasion
36. Synonymous to tax evasion

a. Tax dodging c. Tax minimization
b. Tax exemption d. Tax evasion
37. Synonymous to tax avoidance

a. Tax dodging c. Tax minimization
b. Tax exemption d. Tax evasion
38. In every case of doubt, tax statutes are construed

a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the taxpayer
39. In every case of doubt, tax exemptions are construed

a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the taxpayer
40. In case of conflict between the Tax Code and the Philippine Accounting Standards
(PAS)
a. PAS shall prevail over the tax code
b. PAS and TAX Code shall both be disregarded
c. Tax Code shall prevail over PAS
d. The taxpayer may choose between the PAS or Tax Code
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41. Tax of a fixed amount imposed upon all persons residing within a specified territory
without regard to their property or occupation they may be engaged
a. Personal, poll or capitation c. Property
b. Excise d. Regressive
42. Tax imposed on personal or real property in proportion to its value or on some other
reasonable method of appointment
43. Tax imposed upon the performance of an act, the enjoyment of privilege or the
engaging in an occupation
44. Tax which is demanded from the person whom the law intends or desires to pay it
a. Direct b. Indirect c. Property d. Percentage
45. Tax which is demanded from one person in the expectation and intention that he shall
indemnify himself at the expense of another
a. Direct b. Indirect c. Property d. Income
46. Tax which imposes a specific sum by the head or number or by some standard of
weight or measurement and which requires no assessment other than a listing or
classification of the objects to be taxed
a. Specific b. Ad valorem c. Excise d. Income
47. Tax of a fixed proportion of the amount or value of the property with respect to which
the tax is assessed
a. Specific b. Ad valorem c. Excise d. Percentage
48. Tax based on a fixed percentage of the amount of property, income or other basis to
be taxed
a. Proportional b. Progressive c. Regressive d. Indirect
49. Tax where the rate decreases as the tax base increases
50. Tax where the rate increases as the tax base increases
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51. Which of the following statements is not correct?

a. Tax burdens shall neither be imposed nor presumed to be imposed beyond
what the statute expressly and clearly states because tax statutes should be
construed strictly against the government
b. Tax exemptions, tax amnesty, tax condonations and their equivalent provisions
are not presumed and, when granted, are strictly construed against the
taxpayer because such provisions are highly disfavored by the government
c. Exemptions from taxation are highly disfavored in law and he who claims tax
exemption must be able to justify his claim or right
d. The Bureau of Internal Revenue has the duty and the exclusive power of
enacting tax laws
52. The strongest of all inherent powers of the state because without it, the government
can neither survive nor dispense any of its other powers and functions effectively
a. Police power c. Power of eminent domain
b. Power of taxation d. Power of recall
53. This power is superior to the non-impairment clause and is broader in application
because it is a power to make and implement the laws
a. Power of taxation c. Power of recall
b. Power of eminent domain d. Police power
54. Which of the following statements is not correct?

a. An inherent limitation of taxation may be disregarded by the application of a
constitutional limitation
b. Income tax liabilities shall be paid by the inhabitants even if foreign invaders
occupy our country
c. Taxes may be imposed retroactively by law, but unless so expressed by such
law, these taxes must only be imposed prospectively
d. Tax laws are either political or penal in nature
55. Which of the following is not a constitutional limitation on the Power of Taxation?
a. No person shall be deprived of life, liberty or property without due process of
law
b. No person shall be denied the equal protection of the law
c. No person shall be imprisoned for debt or non-payment of tax
d. No law granting any tax exemption shall be passed without the concurrence of
a majority of all the members of Congress
56. The distinction of a tax from permit or license fee is that a tax is:
a. Imposed for regulation
b. One which involves an exercise of police power
c. One in which there is generally no limit on the amount that maybe imposed
d. Limited to the cost of regulation
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57. Police power as distinguished from the power of eminent domain:

a. Just compensation is received by the owner of the property
b. Maybe exercised by private individuals
c. May regulate both liberty and property
d. Property is taken by the government for public purpose
58. A tax wherein both the incidence of or the liability for the payment of the tax as well
as the burden of the tax falls on the same person
a. Direct tax c. Value added tax
b. Indirect tax d. Percentage tax
59. Which one of the following is not a characteristic or element of a tax?

a. It is an enforced contribution c. it is based on the ability to pay
b. It is legislative in character d. It is payable in money or in kind
60. Tax is distinguished from license fees

a. Limited to cover cost of regulation
b. Non-payment does not necessarily render the business illegal
c. A regulatory measure
d. Imposed in the exercise of police power
61. The power to impose taxes is exercised by

a. The President c. Bureau of Internal Revenue
b. The Supreme Court d. Congress
62. One of the characteristics of internal revenue laws is that they are
a. Criminal in nature c. Political in nature
b. Penal in nature d. Generally prospective in application
63. Which of the following is not an example of excise tax?

a. Transfer tax b. Sales tax c. Real property tax d. Income tax
64. Which of the following is not a scheme of shifting the incidence of taxation?
a. The manufacturer transfers the tax to the consumer by adding the tax to the
selling prince of the goods sold
b. The purchaser asks for a discount to refuse to buy at regular prices unless it is
reduced by the amount equal to the tax he will pay
c. Changing the terms of the sale like FOB shipping point in the Philippines to
FOB destination abroad, so that the title passes abroad instead of in the
Philippines
d. The manufacturer transfers the sales tax to the distributor, then in turn to the
wholesaler, in turn to the retailer and finally to the consumer
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65. License fee as distinguished from tax

a. Non-payment does not necessary render the business illegal
b. Imposed in the exercise of taxing power
c. A revenue raising measure
d. Limited to cover cost of regulation
66. Value added tax is an example of

a. Graduated tax c. Progressive tax
b. Regressive tax d. Proportional tax
67. Which tax principle is described in the statement, “the more income earned by the
taxpayer, the more tax he has to pay.”
b. Theoretical justice d. Inherent in sovereignty
68. One of the characteristics of a tax is that

a. It is generally based on a contract c. It is generally assignable
b. It is generally payable in money d. It is generally subject to compensation
69. The following are the characteristics of our internal revenue laws except
a. Political in nature
b. Generally prospective in application
c. Civil in nature
d. May operate retrospectively if congress so provides
70. Which of the following has no power to impose taxes?

a. Provinces b. Cities c. Barangays d. Barrios
71. Which of the following statements is wrong? A revenue bill:

a. Must originate from the House of Representatives and on which same bill the
Senate may propose amendments
b. May originate from the Senate and on which same bill the House of
Representatives may propose amendments
c. May have a House version and a Senate version approved separately, and
then consolidated, with both houses approving the consolidation version
d. May be recommended by the President to Congress
72. Tax as distinguished from special assessment

a. Not a personal liability of the person assessed
b. Exceptional as to time and place
c. Based wholly on benefits
d. Based on necessity and is to raise revenues
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73. Under this basic principle of a sound tax system, the Government should not incur a
deficit
a. Theoretical justice c. Fiscal adequacy
b. Administrative feasibility d. Uniformity in taxation
74. Which of the following may not raise money for the government?
a. Power of taxation c. Police power
b. Eminent domain d. License fees
75. No person shall be imprisoned for non-payment of this

a. Excise tax b. Value added tax c. Income tax d. Poll tax
76. This is a demand of ownership

a. License fee b. Tax c. Toll d. Customs duties
77. Income tax is generally regarded as

a. An excise tax c. A tax on persons
b. A property tax d. Tax on profits
78. Which of the following is not acceptable for legally refusing to pay the tax?
a. That the right of the state to collect the tax has prescribed
b. That there is no jurisdiction to collect the tax
c. That the tax law was declared as unconstitutional
d. That there is no benefit derived from the tax
79. A law granting tax exemption requires the concurrence of

a. Majority vote of members of Congress
b. 2/3 vote of members of Congress
c. ¾ vote of members of Congress
d. Unanimous vote of members of Congress
80. No person shall be imprisoned for debt or non-payment of poll tax. This is a (an)
a. Inherent limitation c. International limitation
b. Constitutional limitation d. Territorial limitation
81. The Department of Finance thru its officers entered into a contract with foreign
investors granting them exemption from all forms of taxes to encourage investments
in the Philippines. The contract is
a. Void, unless the President ratifies
b. Void, because the power to grant tax exemption is vested in Congress
c. Valid, if the President has authorized the officers to enter into such contract
d. Valid, because the purpose is to promote public welfare
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82. Congress can impose a tax at any amount and at anytime shows that
a. Taxation is an inherent power of the state
b. Taxation is a very broad power of the state
c. Taxation is essentially a legislative power
d. Taxation is based on taxpayers’ ability to pay
83. The amount required is dictated by the needs of the government in

a. License fee b. Tax c. Toll d. Debts
84. A charge imposed on land for special benefits derived resulting from public
improvements
a. Tax b. Toll c. License d. Special assessment
85. The NIRC provides that the Bureau of Internal Revenue shall have a chief and four
(4) assistant chiefs to be known as
a. Secretary and Assistant Secretaries
b. Commissioner and Assistant Commissioners
c. Secretary and Under Secretaries
d. Commissioner and Deputy Commissioners
86. The BIR shall be under the control and supervision of the
a. Court of Tax Appeals c. DILG
b. Supreme Court d. Department of Finance
87. The powers and duties of the BIR, except

a. Assessment and collection of all national internal revenue taxes, fees, and
charges and the enforcement of all forfeitures, penalties and fines connected
therewith
b. Execution of judgment in all cases decided in its favor by the Court of Tax
Appeals and the ordinary courts
c. Give effect to and administer the supervisory and police powers conferred to it
by the NIRC or other laws
d. Enact tax laws to ensure collection of revenues to support the needs of the
government
88. The power to interpret the provisions of NIRC and other tax laws shall be under the
exclusive and original jurisdiction of the
a. CIR, subject to the review by the Secretary of Finance
b. Secretary of Finance, subject to review by the President
c. CIR, subject to the review by Congress
d. Secretary of Finance, subject to review by Congress
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89. The power to decide disputed assessments, refunds of internal revenue taxes, fees
or other charges, penalties imposed in relation thereto, or other matters arising under
the NIRC or other laws or portions thereof administered by the BIR is vested in the
a. CIR, subject to the exclusive appellate jurisdiction of the Secretary of Finance
b. Secretary of Finance, subject to review by Congress
c. CIR, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals
d. Secretary of Finance subject to review by the President
90. The following powers of CIR shall not be delegated, except

a. The power to recommend the promulgation of rules and regulations by the
Secretary of Finance
b. The power to issue rulings of first impressions or to reverse, revoke or modify
any existing ruling of the bureau
c. The power to assign or reassign internal revenue officers to establishment
where articles subject to excise tax are produced or kept
d. The examination of any taxpayer and the assessment of the correct amount of
tax
Q&A LIST
Do you have any questions for clarification?
Questions/Issues Answers
1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
Course Schedule
This section calendars all the activities and exercises, including readings and
lectures, as well as time for making assignments and doing other
requirements.
ACTIVITY DATE WHERE TO SUBMIT
Orientation BlackBoard LMS
Week 1 – 3 Exercises BlackBoard LMS
FIRST EXAM BlackBoard LMS
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Big Picture
are expected to
ULO1. Identify the different assessment and exemptions for

corporations
ULO2. Determine the applicable corporate tax rates
ULO3. Explain the current tax structure and types of tax
ULO4. Identify tax incentives and tax holidays
Essential Knowledge
To perform the aforesaid big picture (unit learning outcomes) for the next two
(2) weeks of the course, you need to fully understand the following essential
knowledge that will be laid down in the succeeding pages. Please note that
you are not limited to exclusively refer to the these resources. Thus, you are
expected to utilize other books, research articles and other resources that
are available in the university’s library e.g. ebrary, search.proquest.com
etc.
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On March 26, 2021, President Rodrigo R. Duterte signed into law

Republic Act No. 11534, otherwise known as the “Corporate
Recovery and Tax Incentives for Enterprises” or CREATE Act.
The CREATE Act is the second package of the Comprehensive Tax

Reform Program that reduces Income Tax rates from 30% to 25%
for corporate taxpayers in general, and to 20% for other corporate
taxpayers, subject to certain qualifications, effective July 1, 2020
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The Act also provides other tax relief measures that will help
businesses recover from the effects of the COVID-19
pandemic as well as measures that will rationalize the grant
of fiscal incentives to targeted investors.
The CREATE Act took effect on April 11, 2021, fifteen (15)
days after its complete publication on March 26, 2021 in the
Official Gazette or in a newspaper of general circulation.
Effective July 1, 2020, Corporate Income Tax rate is reduced from 30%
to 20% for domestic corporations with net taxable income not
exceeding ₱ 5 Million and with total assets not exceeding ₱ 100 Million.
All other domestic corporations and resident foreign corporations will
be subject to 25% Income Tax.
Effective January 1, 2021, Income Tax rate for non-resident foreign
corporation is reduced from 30% to 25%.
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Minimum Corporate Income Tax (MCIT) rate is

reduced from 2% to 1% effective July 1, 2020
to June 30, 2023.
Percentage Tax is reduced from 3% to 1 %
effective July 1, 2020 to June 30, 2023
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• The term “corporation” shall include:

• One person corporations
• Partnerships, no matter how created or organized
• Joint-stock companies
• Joint accounts
• Association
• Insurance companies
• Except general professional partnerships and a joint
venture consortium formed for the purpose of
undertaking construction projects engaging in
petroleum, coal, geothermal, and other energy
operations pursuant to an operating consortium
agreement under a service contract with the
government.
• Hence, the term corporation includes profit-oriented and
non-profit institutions such as charitable institutions,
cooperatives, government agencies and
instrumentalities, associations, leagues, civic or religious
and other organizations.
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Domestic Corporation
• A domestic corporation is a corporation that is organized in accordance with Philippine
laws
Foreign Corporation
• Resident Foreign Corporation (RFC) – a foreign corporation which operates and conducts
business in the Philippines through a permanent (i.e. a branch)
• Non-Resident Foreign Corporation (NRFC) – a foreign corporation which does not operate
or conduct business in the Philippines
Note:
• A corporation that incorporates in the Philippines is a domestic corporation under the
Incorporation Test even if the same is controlled by foreigners
• A foreign corporation that transacts business with residents through a resident branch is
taxable on such transactions as a resident foreign corporation through its branch.
However, if it transacts directly to residents outside its branch, it is taxable as a non-
resident foreign corporation on the direct transactions.
Special Corporations
• Special corporations are domestic or foreign corporations which are subject to special tax
rules or preferential tax rates
Partnership
• A partnership is a business organization owned by two or more persons who contribute
their industry or resources to a common fund for the purpose of dividing the profits from
the venture.
Types of Partnership
1.General Professional Partnership (GPP) – A GPP is a partnership formed for the exercise of
a common profession. All partners must belong to the same profession. A GPP is not
treated as a corporation and is not a taxable entity. It is exempt from income tax, but the
partners are taxable in their individual capacity with respect to their share in the income
of the partnership.
2.Business Partnership – A business partnership is one formed for profit. It is taxable as a
corporation.
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Joint Venture
• A joint venture is a business undertaking for a particular purpose. It may be organized as a partnership
or a corporation.
Types of Joint Ventures

1. Exempt Joint Ventures – exempt joint ventures are those formed for the purpose of undertaking
construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant
to an operating consortium agreement under a service contract with the Government. Similar to GPP,
this type of joint venture is not treated as a corporation and is tax-exempt on its regular income, but
their venturers are taxable to their share in the net income of the joint venture.
2. Taxable Joint Ventures – All other joint ventures are taxable as corporations.
Co-ownership
• A co-ownership is joint ownership of a property formed for the purpose preserving the same and/or
dividing its income.
• A co-ownership that is limited to property preservation or income collection is not a taxable entity and
is exempt but the co-owners are taxable on their share on the income of the co-owned property.
• However, a co-ownership that reinvests the income of the co-owned property to other income-
producing properties or ventures will be considered unregistered partnership taxable as a corporation.
Proprietary Educational Institution and Hospitals
Resident International Carrier
Non-Resident Owner or Lessor of Vessel
Non-Resident Cinematographic Film Owner, Lessor or Distributor
Non-Resident Lessor of Aircraft, Machinery and other Equipment
Regional Operating Headquarters of Multinational Corporation
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Domestic Market Enterprise – refers to any enterprise registered with the

Investment Promotion Agency other than export enterprise
Export Enterprise – refers to any individual, partnership, corporation,

Philippine branch of a foreign corporation, or other entity organized and
existing under Philippine laws and registered with the Investment
Promotion Agency to engage in manufacturing, assembling or processing
activity, and services such as information technology (IT) activities and
business process outsourcing (BPO), and resulting in the direct
exportation, and/or sale of its manufactured, assembled or processed
product or IT/BPO services to another registered export enterprise that
will form part of the final export product or expert service of the latter of
at least 70% of its total production or output
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Freeport Zones – refer to an isolated and policed area adjacent to a port of

entry, which shall be operated and managed as a separate customs territory
to ensure free flow or movement of goods
Investment Promotion Agencies – refer to government entities created by

law, executive order, decree or other issuance, in charge of promoting
investments, granting and administering tax and non-tax incentives, and
overseeing the operations of the different economic zones and freeports in
accordance to their respective special laws
Registered Business Enterprise - refers to any individual, partnership,

corporation, Philippine branch of a foreign corporation, or other entity
organized and existing under Philippine laws and registered with an
Investment Promotion Agency
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Income Tax Holiday (ITH)
Special Corporate Income Tax (SCIT) a tax rate equivalent to five

percent (5%) effective July 1, 2020, based on gross income earned,
in lieu of all national and local taxes
• For export enterprise

• Domestic market enterprise with a minimum investment capital of P 500 million pesos
• Domestic market enterprise under Strategic Investment Priority Plan engaged in
activities that are classified as “critical”
Enhanced Deductions (ED)
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Duty exemption on importation of capital

equipment, raw materials, spare parts, or
accessories
Value-Added Tax (VAT) exemption on

importation and VAT zero-rating on local
purchases
• The income tax holiday shall be followed by the Special Corporate Income Tax or
Enhanced Deductions
• At the option of the export enterprise, the domestic market enterprise with a
minimum investment capital of P 500 million pesos, and the domestic market
enterprise engaged in activities that are classified as “critical”, the Special
Corporate Income Tax rate or enhanced deductions shall be granted: Provided,
that in no case shall the enhanced deductions be granted simultaneously with
the Special Corporate Income Tax
• The duty exemption shall only apply to the importation of capital equipment, raw
materials, spare parts, or accessories directly and exclusively used in the
registered project or activity by registered business enterprise
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• The VAT Exemption on importation and VAT zero-rating on local purchase shall only
apply to goods and services directly and exclusively used in the registered project or
activity by a registered business enterprise
• Notwithstanding any law to the contrary, the importation of COVID-19 vaccine shall be
exempt from import duties, taxes and other fees, subject to the approval or licenses
issued by the Department of Health or the Food and Drug Administration
• Persons who directly import petroleum products defined under RA 8479 - “Downstream
Oil Industry Deregulation Act of 1998”, for resale in the Philippine customs territory
and/or in free zones as defined under RA 10863 – “Customs Modernization and Tariff
Act, shall not be entitled to the foregoing tax and duty incentives, and shall be subject
to appropriate taxes imposed under this Code
• Crude oil that is intended to be refined at a local refinery, including the volumes that
are lost and not converted to petroleum products when the crude oil actually
undergoes the refining process, shall be exempt from payment of applicable duties and
taxes upon importation
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• To attract foreign and domestic investors into the country, the government usually offers
various tax incentives, principally through the Board of Investments (BOI) pursuant to EO 226,
as amended, otherwise known as the Omnibus Investments Code of 1987.
• EO 226 is the overall declaration of government policy on investment initiatives, whether
made by foreign or domestic investors.
• It was enacted on July 17, 1987 with the primary objective of encouraging investments in
desirable areas of activities through the adoption of a cohesive and consolidated investments
incentives law.
• It also aims to develop the country’s industries by establishing and promoting a competitive
investment environment and at the same time discourage monopolies.
• One important facet of the law is the provision of incentives, fiscal and non-fiscal, to preferred
areas of investments, pioneer or non-pioneer, export production as well as rehabilitation or
expansion of existing operation.
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• Pioneer enterprises are registered enterprises engaged in the

manufacture, processing or production of commodities or raw materials
that are not yet being produced in the Philippines on a commercial scale.
• In addition, it also involves the use of a design, formula, method, process
or system of production or transformation of any element, substance or
raw material into another raw material or finished goods which is new and
untried in the Philippines.
• Pioneer enterprises are also engaged in the pursuit of agricultural, forestry
and mining activities and/or services and energy sectors.
• Non-pioneer enterprises refer to all registered producer enterprises not

included in the pioneer enterprise list.
• Incentives granted to registered enterprises, depending on their category,
may include income tax holidays, tax credits on raw materials, supplies
and semi-manufactured products, additional deduction from taxable
income for labor expense, additional deduction from taxable income for
necessary and major infrastructure works, exemption from wharfage dues
and export tax, duty, impost and fees, hiring of foreign laborers, simplified
custom procedures and other tax incentives.
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• To encourage investments in desirable areas of activity, EO 226 provides

incentives to the following:
(a) enterprises registered with the BOI;
(b) enterprises locating in less developed areas (LDAs);
(c) multinational companies (MNCs) establishing their regional or area headquarters
(RHQs) or regional operating headquarters (ROHQs) in the Philippines;
(d) MNCs establishing their regional warehouses in the Philippines for purposes of
supplying spare parts or manufactured components and raw materials to the Asia-
Pacific Region and other foreign markets; and
(e) enterprises locating in export processing zones.
• Further, EO 226 is a relatively focused and systematic grant of incentives

based on an Investments Priorities Plan (IPP).
• The IPP is an annual listing of activities/undertakings considered critical to
the attainment of the country’s overall economic growth and
development.
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Incentives granted to BOI-registered enterprises:

• Tax Exemptions
• Income tax holiday (ITH)
• Exemptions from Taxes and Duties on Imported Spare Parts
• Exemption from Wharfage Dues and Export Tax, Duty, Impost and Fees
• Tax Exemption on Breeding Stocks and Genetic Materials
• Tax Credits
• Tax Credit on Tax and Duty Portion of Domestic Breeding Stocks and Genetic Materials
• Tax Credit on Raw Materials and Supplies
• Additional Deductions from Taxable Income
• Additional Deduction for Labor Expense (ADLE)
Incentives to enterprises located in LDAs

• Six (6) Years ITH for Projects Located in a LDA; and
• Additional Deduction for Necessary and Major Infrastructure Works
Incentives to expatriates working in RHQs or ROHQs of MNCs in the Philippines

• Withholding Tax of 15% on Compensation Income of alien executives occupying managerial
and technical positions
• Tax and duty free importation of personal and household effects of alien executives as
provided for under Section 105 (h) of the Tariff and Customs Code, as amended, and Section
109 (J) of the NIRC. Provided, that the effects arrive in the Philippines within 90 days before or
after conversion of the alien executive’s admission category to multiple entry; and
• Travel tax exemption of alien executives, including their dependents if joining them during
their assignment as certified by the BOI.
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Incentives to RHQs and ROHQs

• Exemption from income tax of RHQs established in the Philippines by MNCs and which
headquarters do not earn or derive income from the Philippines but act as supervisory,
communications and coordinating centers for their affiliates, subsidiaries, or branches in the
Asia-Pacific Region and other foreign markets;
• Entitlement of ROHQs to a preferential income tax rate of 10% as provided for under the NIRC,
as amended by RA 8424. Any income derived from Philippine sources by the ROHQ when
remitted to the parent company shall be subject to the tax on branch profit remittances as
provided in Section 28 (a)(5) of the NIRC, as amended;
• Exemption from value-added tax (VAT) of RHQs established in the Philippines by MNCs. In
addition, the sale or lease of goods and property and the rendition of services to RHQs shall be
subject to 0% VAT rate as provided for in the NIRC. ROHQs are subject to a 12% VAT rate as
provided under the NIRC;
Incentives to RHQs and ROHQs

• Exemption from all kinds of local taxes, fees or charges imposed by a local government
unit except real property tax on land improvements and equipment of RHQs and
ROHQs of MNCs;
• Tax and duty-free importation of equipment and materials for training and conferences
which are needed and used solely for their functions as RHQs and ROHQs and which
are not locally available subject to the prior approval of the BOI; and
• Entitlement of RHQs and ROHQs to the importation of new motor vehicles, subject to
the payment of the corresponding taxes and duties.
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Incentives to enterprises locating in export processing zones

• Foreign merchandise, raw materials, equipment, spare parts, etc. brought
into the zone shall not be subject to customs and internal revenue laws
and regulations nor to local tax ordinances;
• BOI- registered enterprise incentives; and
• Exemption from local taxes and licenses except real estate taxes.
• RA 7916 or the Special Economic Zone Act of 1995 (February 24, 1995)
provides the framework for the transformation, formation and monitoring
of certain designated areas in the country called special economic zones
where companies and industries establishing their operations therein are
given incentives and privileges.
• Enterprises locating or operating within the ecozones shall register with
the Philippine Export Zone Authority (PEZA) and are entitled to similar
incentives granted as provided for under PD 66 or those provided under
Book VI of EO 226.
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These incentives include:

• Exemption from the payment of all national and local taxes, except the real
property tax on land owned by developers. In lieu thereof, they shall pay a tax
equivalent to five percent (5%) of their gross income
• Exemption from taxes and duties on imported equipment, raw materials and
supplies directly needed for its operations
• Additional deduction for training expense
• Incentives under the Build-Operate- Transfer (BOT) Law; and
• Tax Credits for exporters using local materials as inputs shall enjoy the same
benefits provided for in the Export Development Act of 1994
• Aside from the establishment of ecozones and providing for incentives to firms
operating within said areas pursuant to RA 7916, several other special economic zones
were also established under separate laws.
• Foremost of which is RA 7227 which established the Subic Bay Free Port Zone (under
the administration of the Subic Bay Metropolitan Authority) and the Clark Special
Economic Zone (under the management of the Clark Development Corporation).
• Moreover, the creation of several special economic zones in various parts of the
country follow through wherein enterprises located in these special economic zones
are also entitled to the same benefits and privileges extended to PEZA registered firms.
• These ecozones are located in the City of Zamboanga (pursuant to RA 7903) and in the
provinces of Cagayan (pursuant to RA 7922), Aurora (pursuant to RA 9490) and Bataan
(pursuant to RA 9728).
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• RA 9178 which was enacted on November 13, 2012 encourages the formation
and growth of barangay micro-business enterprises by granting them incentives
and other benefits.
• A BMBE is defined as any business enterprises engaged in production,
processing, or manufacturing of products, including agro-processing, as well as
trading and services, with total assets of not more than P 3,000,000.
• Such assets shall include those arising from loans but not the land on which the
plant and equipment are located.
• For the purpose of the Act, “services” shall exclude those rendered by any one,
who is duly licensed by the government after having passed a government
licensure examination, in connection with the exercise of one’s profession (e.g.,
Accountant, Lawyer, Doctor, etc.)
• BMBEs are essential to the country’s economic development since they

effectively serve as seedbeds of Filipino entrepreneurial talent.
• Thus, the act primarily aims to integrate micro enterprises in the informal
sector into the mainstream of the economy.
• Strengthening BMBEs would mean more jobs and livelihood, and a better
quality of life for Filipinos.
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Registered BMBEs can avail of the following incentives:

• Income tax exemption from income arising from the operations of the
enterprise
• Exemption from the coverage of the Minimum Wage Law (BMBE employees will
still receive the same social security and health care benefits as other
employees)
• Priority to a special credit window set up specifically for the financing
requirements of BMBEs; and
• Technology transfer, production and management training, and marketing
assistance programs for BMBE beneficiaries.
The LGUs are also encourage to either reduce the amount of local taxes, fees, and
other charges imposed or exempt the BMBEs from local taxes, fees, and charges.
Q&A LIST
1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
Course Schedule
requirements.
Week 4 – 5 Exercises BlackBoard LMS
SECOND EXAM BlackBoard LMS
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Big Picture
are expected to
ULO1. Explain basic tax planning principles and mitigation

strategies
ULO2. Discuss different tax avoidance strategies
Metalanguage
In this section, the most essential terms relevant to the study and
demonstrate ULO1 will be operationally defined to establish a common
frame of refence as to how the texts work in your chosen field or career. You
will encounter these terms as we go through this unit. Please refer to these
definitions in case you will encounter difficulty in understanding concepts.
Essential Knowledge
etc.
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Basic
Tax Planning
Principles
Tax Planning
• TP is “the taxpayer’s capacity to arrange his financial activities in such a manner as to

suffer a minimum expenditure for taxes” (Hoffman, 1961, p. 274).
• Also, Pniowsky (2010) said TP is “the process of structuring one’s affairs to defer,
reduce or even eliminate the amount of taxes payable to the government”
(Pniowsky, 2010, p. 1).
• Furthermore, TP has been perceived as the best decision, inside legitimate
guidelines, to diminish the taxation rate.
• This is achieved over the contrasting of tax rates between economic exercises and
particular jurisdictions, alongside various of the tax incentives offered
under tax regulations (Fallan et al., 1995).
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Objectives of Tax Planning
• M inimal Litigation –there is always friction between the

collector and the payer of tax. In such a situation, it is
important that the compliance regarding tax payment is
followed and used properly so that friction is minimum
• Productivity –among the most important objectives of tax
planning is channelization of taxable income to various
investment plans
Objectives of Tax Planning
• Reduction of Tax Liability –as a taxpayer, you can save the

maximum amount from payable tax amount by using a proper
arrangement of your enterprise operations as per the required
laws
• Healthy Growth of Economy –the growth in an economy
depends largely upon the growth of its citizens.
• Economic Stability –stability is supplemented when the tax
planning behind a business is proper
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Types of Tax Planning
• Short-range and Long-range Tax Planning –the tax planning

which is done annually to arrive at specific objectives is called
short-range tax planning. Whereas, long-range tax planning
does not include immediate pay-offs of any kind
• Permissive Tax Planning –here, the planning conforms to law
provisions of tax
• Purposive Tax Planning –this is the tax planning method that is
based on loopholes in the laws
Corporate Tax Planning
• A way of lowering the tax liabilities of a corporate taxpayer

• One of the most used methods is by including the deductions
on business transport, health insurance of employees, etc.
• Rising profits of an enterprise means higher future tax liabilities.
In such a situation, it is important that they dedicate enough time
on tax planning that reduces tax liabilities.
• Tax planning means proper planning of: Expenses, Capital
Budget, Sales and Marketing Costs
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Good Tax Planning Results from the Following:
• Claim tax benefits in eligible instruments

• Giving correct information to relevant taxing authorities
• Well-informed of applicable tax laws and court judgments
• Tax planning done completely under the purview of law
• Take into consideration business objectives and flexibility
for the incorporation of future charges
Common M istakes Regarding Income Tax

Planning
• Procrastination
• Investing in insurance products for tax saving
• Power of compounding through tax saving mutual
funds
• Failing to optimize all available options for tax
saving
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• The pursuit of transactions and structures in order to reduce tax

responsibility in a manner that is contrary to the policy or spirit of
government legislation (Prebble and Prebble 2010)
• Despite strong public opinion condemning tax avoidance practices
(Prebble and Prebble 2010; Pew Research Center 2015), tax
avoidance is difficult to deter.
• Tax avoidance remains firmly entrenched amongst the largest of
global firms, with a substantial number of Fortune 500 corporations,
and likely smaller firms, engaging in aggressive tax avoidance
practices (Citizens for Tax Justice 2013)
• Firms may perceive tax evasion as a response to the

limitation of freedom that tax obligations impose
(Kirchler 1999).
• Whereas tax evasion may be viewed as illegal and
immoral, tax avoidance may be viewed as simply clever,
even though the economic result of both practices is
similar (Kirchler et al. 2001)
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• Tax avoidance can be shown to erode vital obvious and

opaque common resources.
• Firms are incented to use tax avoidance mechanisms, such as
inversions, transfer pricing manipulations, and tax havens, to
maximize profits.
• This behavior, similar to that of other sustainability issues,
requires solutions that address transparency, cooperation,
responsibility, as well as enforcement.
• Tax avoidance is not a new problem.

• Historically, governments have addressed tax avoidance
through hard law, but that approach underemphasizes the
important work showing the roles that non-coercive
mechanisms play in compliance.
• While there is a role for hard law, it alone cannot eliminate tax
avoidance behavior. There is a role for soft law in tax
compliance.
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• Hard law are rules that are backed by the power of the state
with concrete dictates and sanctions (Shaffer and Pollack
2010), and hard law is the foundation of any functioning tax
system.
• It compels conformance through sanction, facilitates clarity
and definitiveness of tax obligations, and encourages global
governance where formal and worldwide tax rules may be
necessary to guide a vast range of businesses (Nov 2006).
Without hard law, a tax system cannot perform effectively.
• Soft law, in contrast to hard law, can compensate for the

limitations embedded in a hard law system.
• Soft law consists of norms or practices that may possess many of
the characteristics of legal rules but lack the power to impose
constraining obligations on those who are expected to conform to
them (Park and Berger-Walliser 2015; Sheppard 2014).
• Examples of soft law abound but can include things such as NGO
legislation, governmental policy statements, and private
monitoring mechanisms or agreements that embody norms
(Sheppard 2014).
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• Foreign Subsidiaries
• Depreciation
• Stock Options
• Industry-Specific Options
Foreign Subsidiaries
• Company use tax loopholes to save money
• This include finding ways to shift profits to foreign subsidiaries in countries with
lower tax rates, a practice known as an offshore tax-shelter
• Usually, companies do not have to pay taxes on income earned abroad until
that income is repatriated from abroad
• That tax can be deferred indefinitely if the income is held abroad indefinitely
• This money held abroad can be borrowed against and even used to invest in
domestic assets
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Depreciation
• Another way to avoid taxes is through accelerated depreciation
• The relative degree of freedom in tax laws has allowed companies to
alleviate the cost of their capital equipment (e.g., machines, buildings,
etc.) at a faster pace than it actually wears out
• This allows a company to declare less income and defer paying taxes until
later years, and as long as the company continues to invest, the deferral
of taxes can continue for an indefinite amount of time
Stock Options
• Giving out stock options to employees as a part of their compensation is
another avenue that has helped companies to reduce their total tax bill
• When the options are exercised, the difference between what employees pay
for the stock and its market value can be claimed for a tax deduction
Industry-Specific Options
• Certain industries, such as oil and gas drilling, and alternative energy, are
privileged to receive certain tax breaks
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Let’s Check
Let’s Analyze
In a Nutshell
Q&A LIST
6. 6.
7. 7.
8. 8.
9. 9.
10. 10.
KEYWORDS INDEX
This section lists down the keywords that help you for recall the discussions
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Course Schedule
requirements.
Week 6 – 7 ULO1 BlackBoard LMS
Exercises
Exercises
THIRD EXAM BlackBoard LMS
are expected to
ULO1. Discuss Harmful Tax Practices

ULO2. Explain Common Reporting Standards
Essential Knowledge
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etc.
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• Tax Havens - are jurisdictions that

offers favorable tax conditions and
secrecy to taxpayers as relative to
other jurisdictions. There is no
generally accepted definition of a
tax haven, but commonly
associated with such jurisdictions
are low or no-taxes, no withholding
taxes, and strict laws on secrecy
• Harmful Tax Practices – refers to
countries issuing highly favorable
tax rulings and implementing
preferential tax rules/regimes to
attract foreign income, thereby
eroding the tax bases of other
countries
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• The Organization for Economic Co-

operation and Development (OECD)
released its most recent update on the
peer review of harmful tax practices
around the world
• This effort is undertaken by OECD’s Forum
on Harmful Tax Practices (FHTP)
• The aim of the initiative is to improve
transparency to prevent low-tax
jurisdictions from attracting
geographically mobile income without
corresponding economic activity
• For example, a business could move its
patents and corresponding income to a
low-tax jurisdiction while conducting its
research and development activities in a
high-tax jurisdiction
• The FHTP for the first time reviewed whether

the 12 jurisdictions identified as no-or-only-
nominal-tax jurisdictions meet an economic
substance requirement.
• A jurisdiction is considered a no-or-only-
nominal-tax jurisdiction if it does not impose
a corporate income tax or only a nominal
corporate income tax to avoid the
requirements.
• Jurisdictions that had already been reviewed
were out of scope, unless they subsequently
abolished their corporate income tax.
• The substance requirement aims to ensure
that “mobile business income cannot be
parked in a zero-tax jurisdiction without the
core business functions having been
undertaken by the same business entity, or in
the same location.”
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• The no-or-only-nominal-tax jurisdictions

identified by the FHTP include Anguilla,
the Bahamas, Bahrain, Barbados,
Bermuda, British Virgin Islands, Cayman
Islands, Guernsey, Isle of Man, Jersey,
Turks and Caicos Islands, and the United
Arab Emirates.
• According to the report, 11 of these
jurisdictions’ domestic legal frameworks
now meet the economic substance
requirement and are therefore considered
“not harmful.”
• The United Arab Emirates is required to
make a further legislative change in order
to comply with the standard.
• Including the most recent update, the

FHTP has now reviewed (or is currently
reviewing) a total of 287 preferential tax
regimes around the world that grant
special tax treatment to certain entities,
activities, or structures.
• Of these 287 preferential tax regimes, four
are currently considered “harmful,” seven
are “potentially harmful but not actually
harmful,” 109 are “not harmful,” 15 are in
the process of being eliminated or
amended, three are not operational, and
76 have been abolished.
• Thirty-five are currently under review, 35
are considered out of scope, and three
relate to disadvantaged areas.
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• Examples of preferential tax regimes that

have been reviewed by FHTP
are intellectual property (IP) regimes (also
referred to as patent boxes).
• These regimes provide lower effective tax
rates on income derived from IP assets.
• To prevent patent boxes from being used as
a tool for profit shifting, countries have
agreed on the so-called Modified Nexus
approach for IP Regimes, which limits the
scope of qualifying IP assets and requires a
link among R&D expenditures, IP assets,
and IP income.
• As a result, countries have either abolished
their patent boxes or implemented the
Modified Nexus Approach.
• Tax jurisdictions providing preferential tax

regimes to attract mobile income without
the underlying economic activity can
constitute harmful tax competition.
• FHTP’s substance and transparency
requirements are designed to limit such
tax policy practices.
• However, it is important to keep in mind
that not all tax competition goes hand in
hand with harmful tax practices.
• Tax competition based on sound
economic principles, such as neutrality,
simplicity, transparency, and stability, can
improve a country’s tax code, fostering
investment and economic growth.
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• The Common Reporting Standard (CRS) is an information standard

for the Automatic Exchange of Information (AEOI) regarding
financial accounts on a global level, between tax authorities.
• This was developed by the Organization for Economic Co-operation
and Development (OECD) in 2014
• The purpose of such standard was to combat tax evasion
• The idea was based on the US Foreign Account Tax Compliance Act
(FATCA) implementation agreements and its legal basis is the
Convention on Mutual Administrative Assistance in Tax Matters
• The information and its exchange format are governed by a detailed standard, whose
details are listed in a 44-page long document
• Each participating country will annually automatically exchange with the other country
a reportable account with the below information:
• Name, address, Taxpayer Identification Number (TIN) and date and place of birth
of each Reportable Person
• Account number
• Name and identifying number of the reporting financial institution
• Account balance or value as of the end of the relevant calendar year (or other
appropriate reporting period) or at its closure, if the account was closed
• Capital gains, depending on the type of account (dividends, interest, gross
proceeds/redemptions, other)
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• OECD allows the participating countries to determine what accounts are

reportable
• The term “reportable account” means a [Jurisdiction A] reportable
account or a [Jurisdiction B] reportable account, depending on the
context, provided it has been identified as such pursuant to due diligence
procedures, consistent with the Annex, in place in [Jurisdiction A] or
[Jurisdiction B].
• This means that either jurisdiction may negotiate and determine its own
reportable accounts in its agreement
Private Sector
• In 2016, a legal expert complained that “The CRS has a much
more ambitious scope, however, and modelling the standard of
the FATCA rules has created problems for implementing it in
Europe.”
• A “private sector advocacy group representing financial services
and law firms” went even further seeing a “showdown”
between the two regimes.
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Developing Countries
• Transparency groups have reacted in various ways, some of them
criticizing how developing countries were (not) considered and
involved.
• Collecting and providing information can be so costly and difficult for
developing countries obviating participation in the scheme.
• Instead of offering a period of non-reciprocity, where developing
countries could simply receive financial data, the only mention of
non-reciprocity agreements is catering to tax havens
Loopholes
• While tax havens will have to provide some information, they can
use a number of loopholes (e.g. unequal standards for how
information is share) and also elect not to receive any information in
return
• The Financial Transparency Coalition criticized the access cost of $73
to download OECD’s report itself, being “a perfect illustration of why
this process needs to include low income countries from the start.”
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Loopholes
• The OECD reviews investment mechanisms worldwide to identify risks in
compliance and loopholes.
• It opened a website for whistle-blowers to anonymously report CRS
violations including for pensions, insurance, and citizenship-for-sale tools.
• The OECD has investigated and labeled specifically as “low-risk” an
investment tool in Hong Kong called ORS (Occupational Retirement
Scheme) which is classified as a “non-reporting financial institutions” and
can be used to bypass CRS as it does not need reporting under CRS
guidelines and can be used to effectively be like a shell company

Let’s Check
Let’s Analyze
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In a Nutshell
Q&A LIST
11. 11.
12. 12.
13. 13.
14. 14.
15. 15.
KEYWORDS INDEX
This section lists down the keywords that help you for recall the discussions
Course Schedule
requirements.
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Phone No.: (082)300-5456 Local 137

Exercises
Exercises
FINAL EXAM BlackBoard LMS
Online Code of Conduct
1. Students are expected to abide by and honor code of conduct, and thus
everyone and all are exhorted to exercise self-management and self-
regulation.
2. All students are guided by professional conduct as learners in attending

On-Line Blended Delivery (OBD) course. Any breach and violation shall
be dealt with properly under existing guidelines, specifically in Section 7
(Student Discipline) in the Student Handbook.
3. Professional conduct refers to the embodiment and exercise of the

University’s Core Values, specifically in the adherence to intellectual
honesty and integrity; academic excellence by giving due diligence in
virtual class participation in all lectures and activities, as well as fidelity in
doing and submitting performance tasks and assignments; personal
discipline in complying with all deadlines; and observance of data privacy.
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4. Plagiarism is a serious intellectual crime and shall be dealt with

accordingly. The University shall institute monitoring mechanisms online
to detect and penalize plagiarism.
5. Students shall independently and honestly take examinations and do

assignments, unless collaboration is clearly required or permitted.
Students shall not resort to dishonesty to improve the result of their
assessments (e.g. examinations, assignments).
6. Students shall not allow anyone else to access their personal LMS
account. Students shall not post or share their answers, assignment or
examinations to others to further academic fraudulence online.
7. By enrolling in OBD course, students agree and abide by all the provisions
of the Online Code of Conduct, as well as all the requirements and
protocols in handling online courses.
Prepared by:
Cedric Ian Carlo E. Petalcorin, CPA, MBA

Course Coordinator
Reviewed by:
Cedric Ian Carlo E. Petalcorin, CPA, MBA

Program Head – BS Management Accounting
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Approved by:
Lord Eddie I. Aguilar, CPA, MBA

Dean – College of Accounting Education
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UNIVERSITY OF MINDANAO

College of Accounting Education

Program: BS Management Accounting

Physically Distanced but Academically Engaged

Self-Instructional Manual (SIM) for

Course/Subject: MAC 421 – Strategic Tax Management

Name of Teacher: ____________________

THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY;

ONLY FOR THE USE OF THE STUDENTS WHO ARE

EXPECT REVISIONS OF THE MANUAL.

Big Picture in Focus: Unit Learning Outcomes

Online Code of Conduct

Course Outline: ACP 311 – Accounting for Special

Course Coordinator: Cedric Ian Carlo E. Petalcorin

Course Outline Policy

Area of Concern Details

Turnitin All assessment tasks are required to be submitted

Please note that academic dishonesty such as

However, if the late submission of the assessment

Assignment You should request in writing addressed to the

If disapproved by the course coordinator, you can

All culled from on-campus/on-site sessions (to be

Submission of the final grades shall follow the usual

students to have access to the materials and

For students who have not created their student

Cedric Ian Carlo E. Petalcorin

For inquiries, you can email

GSTC Facebook Page:

Course Information – see/download course syllabus in the

really want to become a CMA and that you have visualized

CO: Before becoming a Certified Management Accountant, you have

Big Picture in Focus:

ULO1. Explain the structure of tax laws and regulations

Mode of Government Cost Distribution

Tax is imposed even in the absence of a

Claims for tax exemption are construed

The courts are not allowed to interfere with

• Income received in advance is taxable upon receipt

Self-Help: You can also refer to the sources below to help

INCOME TAXATION: Laws, Principles and Applications, 2016 OBE

GENERAL PRINCIPLES OF TAXATION, Dela Cruz/De Vera/Lopez,

5. Basic Principles of a sound tax system, except

6. The tax imposed should be proportionate to the taxpayer’s ability to pay

9. The principal purpose of taxation is

c. To reduce excessive inequalities of wealth

10. The aspects of taxation is

12. This is an inherent limitation on the power of taxation

13. This is a constitutional limitation on the power of taxation

14. Which of the following statements is correct?

17. The following are the nature of taxation, except

20. Which is not an essential characteristic of a tax?

21. Special assessment is an enforced proportional contribution from owners of land

23. As to scope of the legislative power to tax, which is not correct?

24. Which of the following is a nature of taxation?

25. Which of the following is not a determinant of the place of taxation?

27. Our National Internal Revenue Laws are

35. The use of legal or permissible means to minimize or avoid taxes

36. Synonymous to tax evasion

37. Synonymous to tax avoidance

38. In every case of doubt, tax statutes are construed

39. In every case of doubt, tax exemptions are construed

51. Which of the following statements is not correct?

54. Which of the following statements is not correct?