1) It is a DIRECT TAX because the tax burden is borne by the INCOME TAXATION income recipient upon whom the tax is imposed. 2) It is PROGRESSIVE TAX, since the tax base increases as the INCOME TAX has been defined as a tax on all yearly profits arising tax rate increases. -> ABILITY TO PAY PRINCIPLE. Consistent from property, profession, trades or offices, or as a tax on a with the Constitutional provision that “Congress shall evolve person’s income, emoluments, profits and the like a progressive system of taxation.” - is a direct tax on actual or presumed income (gross or net) of 3) Phils has adopted the MOST COMPREHENSIVE system of taxpayers on certain one-time transactions like the sale of real imposing income tax by adopting the citizenship principle, property classified as capital asset the residence principle, and the source principle NOTE: The general rule is that income tax applies only when the 4) Phils follow the SEMI-SCHEDULAR or SEMI-GLOBAL SYSTEM income, profit or gain is realized or received, except when real of income taxation property classified as a capital asset is sold by a taxpayer, in which 5) Phil income tax law is of AMERICAN ORIGIN. case, the law presumes that there is a capital gain realized from the sale and the basis for computing the 6% capital gains tax is the CRITERIA in IMPOSING PHIL INCOME TAX: gross selling price or fair market value as determined by the 1) CITIZENSHIP/NATIONALITY PRINCIPLE – A citizen of the Phils Commissioner whichever is higher. is subject to Phil income tax (a) in his worldwide income, if NOTE: The real property classified as capital asset must not be a he resides in the Phils , or (b) only his Phil-source income, if “principal residence” of an individual taxpayer, because it is he qualifies as a non-resident citizen; hence, his foreign- exempt from income tax upon satisfaction of certain conditions. source income shall be exempt from Phil income tax. 2) RESIDENCE/DOMICILE PRINCIPLE – An alien is subject to Phil 3 BASIC TYPES of INCOME TAX SYSTEMS: income tax because of his residence in the Phils. 1) GLOBAL TAX SYSTEM - under this system the total allowable 3) SOURCE of INCOME PRINCIPLE – An alien is subject to Phil deductions as well as the personal additional exemptions, in income tax because he derives income from sources w/in the case of individuals, or the total allowable deductions, in case Phils. of corporations, are deducted from the gross income to arrive at the net taxable income subject to the graduated TYPES of PHIL INCOME TAX (Title II, Tax Code) income tax rates ranging from 3% to 70%, in case of 1) Graduated income tax on individual individuals, or to the 2-tiered income tax rates of 25% and 2) Normal corporate income tax on corporation 35%, in the case of corporations. 3) Minimum corporate income tax on corporation - All items of gross income, deductions and personal and 4) additional exemptions, if any, were declared in one income tax return, and one set of tax rates were applied on the net taxable income. 2) SCHEDULAR TAX SYSTEM – under this system adopted by the Phils by virtue of BP Blg. 135, there are different types o incomes that are subject to different sets of graduated or flat income tax rates. The applicable tax rate(s) will depend on the classification of the taxable income and the basis could be gross income or net income. - Separate income tax return or capital gains return, whichever is applicable, is filed by the recipient of income for the particular types of income received, but no income tax return is filed by the recipient of passive income subject to final withholding tax because the withholding agent is primarily responsible for the filing of the withholding tax return and payment of final tax to the BIR on such income. 3) SEMI-SCHEDULAR or SEMI-GLOBAL TAX SYSTEM – under this system, all compensation income, business or professional income, capital gain, passive income and other income not subject to final tax are added together to arrive at a gross income, and after deducting the sum of allowable deductions from business or professional income, capital gain and passive income, and other income not subject to final tax, in the case of corporation, as well as personal and additional exemptions, in the case of individual taxpayer, the taxable income. - Subjected to one set of graduated tax rates or normal corporate income tax rate.