CHAPTER 13: TAX SYSTEM

CHAPTER 14: TAX ADMINISTRATION

Garcia, Yellociss Levin

Hular, Kay Mart Kier
Ishii, Jumpei
Principal Taxes
• Income tax, applying to both income and gains

• Taxes on transactions:
 Estate and donor’s (gift) taxes
 Value-added tax
 Excise taxes
 Tariff and customs duties
 Percentage taxes
 Documentary stamp tax
 Local business taxes

• Taxes on property
 Real property tax
 Idle land tax
Collection of Government Revenue by
Agency (in PHP B) 2008-2012
Collection of Government Revenue by
Agency (in PHP B) 2014-2016

2,000.00
1,800.00
1,600.00
PHP BILLION

1,400.00
1,200.00
1,000.00
800.00
600.00
2014 2015 2016
Others 14.95 14.64 16.81
BOC 369.28 367.53 396.37
BIR 1,334.76 1,433.30 1,567.21
BIR Collection, by type (in PHP B) ‘12-’13
BIR Collection, by type (in PHP B) ‘12-’13
900.00
800.00
700.00
600.00
PHP BILLION

500.00
400.00
300.00
200.00
100.00
0.00
Income Excise Value- Percen- Other
Taxes taxes Added Tax tage Taxes Taxes
2015 COL'N 841.57 158.24 299.26 58.67 83.83
2014 COL'N 784.86 135.32 278.73 55.88 79.97
Statute law
• Under the Philippine Constitution, all laws, including tax
statutes, must be passed by Congress and approved by the
President. Laws generally take effect 15 days following their
publication in the Official Gazette or in a newspaper of general
circulation, unless otherwise provided in the statute.

NIRC or the Philippine Tax Code

• National Internal Revenue Code of 1997 (NITC) sets out the
general taxation framework for the Philippines.

EO 226 or the Omnibus Investments Code of 1987

• implemented by the Philippine Board of Investments (the
"BOI"), provides a comprehensive set of incentives for local and
foreign enterprises engaged in activities considered by the
Philippine government as high priority for national
development.
Case Law
• Judicial interpretations can generally be used as precedents in
interpreting tax law, although their value will depend on the
issues involved and the authority of the court rendering the
decision. The BIR, in administering the law, will follow
decisions issued by the Supreme Court, and less persuaded by
decisions of the lower courts.
National Internal Revenue Code/
Commonwealth Act 466
• issued in 1939, on which the current Tax Code is based, was
largely adapted from the United States Tax Code of that time.

Anti-avoidance
• The Philippine Tax Code does not contain any significant
anti-avoidance rules. The courts have also recognized the
doctrine from the United States Supreme Court that a
“taxpayer has the legal right to decrease the amount of
what otherwise would be his taxes or altogether avoid
them through means which the law permits.”
Tax Ruling
• Officers of the BIR are generally willing to discuss or comment
on the tax consequences of contemplated transactions. The
officer’s opinion is not binding, however, unless issued in the
form of a ruling. A BIR ruling is issued only when requested by
a specific taxpayer and cannot be issued on a no-name basis and
if based only on hypothetical facts.
The BIR requires taxpayers to obtain advance approval for
the following:
1. Changes in accounting periods or accounting methods;

2. Use of Computerized Accounting Systems, computerized books

of accounts, or loose-leaf records;

3. Application of tax treaty provisions and benefits.

Active Income
• earned by a taxpayer from various sources is generally
aggregated and subjected to tax as a whole.

Passive Income
• earnings derived from a rental property, limited partnership or
other enterprise in which a person is not actively involved.
Active and Passive Income under TRAIN Law
• For corporations, the Philippines has adopted the classical
system of taxation. Profits are taxed once at the corporate level,
and then again in the hands of the shareholder (unless it is a
domestic corporation or a branch of a foreign corporation) once
they are distributed. No credit is given to shareholders to
recognize tax paid by the corporation.
Classes of Tax Payers
• Persons are classified for tax purposes either as individuals or
corporations.
• Trusts are generally subject to tax as if they are individuals.
• Partnerships, joint ventures, and other corporate bodies,
whether incorporated or not, are generally taxed as
corporations; except for general professional partnerships and
certain joint ventures or consortium formed for undertaking
construction projects or engaging in petroleum exploration,
which are taxed as conduit entities.
Investor Considerations
• Domestic corporations and resident citizens are subject to
Philippine tax on worldwide income; foreign corporations,
nonresident citizens, and aliens are subject to Philippine tax
on Philippine-sourced income.
• Corporate profits are subject to classical taxation; income is
taxed when earned by a corporation, and again in the hands
of the shareholders upon distribution.
• Active income is generally aggregated and subjected to ordinary
income tax. Passive income is generally subject to flat tax,
with the rate depending on the type of income realized.
• The taxation of foreign entities engaged in business activities in
the Philippines will be influenced by whether they are licensed to
do business by the Philippine Securities and Exchange
Commission (SEC). Unlicensed foreign entities are generally
taxed on gross income, whereas licensed foreign entities are
taxed on net income.
THANK YOU!
Sources:
https://drive.google.com/file/d/1xbtzGxB_JIFGBxfINbo5GS3
MIIztxhjP/view

http://www.ntrc.gov.ph/images/Publications/philippine-
public-finance-and-related-statistics-2016.pdf

https://www.sunstar.com.ph/article/412159