National Taxes

Kinds of National Taxes

Section 21 of the Tax Reform Act of 1997, or the National

Internal Revenue Code, the following are considered as
national taxes:
1. Income tax
2. Estate and donor’s taxes
3. Value-added tax
4. Other percentage taxes such as:

Hotels, motels, and others

Caterers
Carriers and keepers of garages
Dealers in securities and lending investors
Franchises
Overseas communication
Banks and non-bank financial intermediaries
Finance companies
Insurance companies
Amusements
winnings
5. Excise taxes on certain goods
6. Documentary stamp taxes
7. Other taxes that may be imposed by law and collected
by the Bureau of Internal Revenue
The following are also considered as national
taxes imposed by special law:

Tariffs and customs duties (P.D. No. 1464)

Sugar adjustment taxes (C.A. No. 567)
Taxes on narcotic drugs (R.A. No. 953)
Travel tax (P.D. No. 1183)
Private motor vehicle tax (E.O. No. 43)
Energy taxes (P.D. No. 844 and 845, and B.P. Blg. 36)
Income Taxation

Income is defined as all the wealth that flows into the

taxpayer’s assets other than as a mere return on capital.
Capital applies to investments from which income is
derived.
Income tax is the tax on the net income or the entire income
received in one taxable year.
Classification of Income and Related Concepts

Taxable income refers to the gross income after personal and

additional exemptions have been deducted.
Passive income applies to income from interests on banks,
deposits, dividends, royalty prizes, and other winnings.
Gross income refers to all income, regardless of kind or
form, derived from any source.
 Gross Income includes the following:

Compensation for services including but not limited to fees, salaries, wages, commissions, and similar items
Income derived from the conduct of trade or business or the exercise of a profession
Gains derived from dealings in a property
Interest
Rents
Royalties
Dividends
Annuities
Prizes and winnings
Pensions
 Partner’s distributive share from the net income of the general professional partnership
Net income

 The gross income after the allowable deductions have been subtracted.
 The exclusions from gross income are the following:
1. Life insurance
2. Amount received by the insured as return of premium
3. Gifts, requests, and devises
4. Compensation for injuries or sickness
5. Income exempts under treaty
6. Retirement benefits, pensions, gratuities (for service, tips)
7. Miscellaneous items
 Deductions
 Amounts that the law allows to be subtracted from the gross income.
 Some of these are the following:
 Optional standard deduction, which may be claimed by an individual other than a non-resident alien instead of
itemized deduction
 Itemized deductions
 Business expenses
 Interests
 Taxes
 Losses
 Bad debts
 Depreciation of properties
 Depletion of properties
 Charitable and other contributions
Taxable income

Refers to the gross income minus the deductions allowable

by law and the personal and additional exemptions.
Purpose of Income Tax

The sole purpose of income tax is to generate revenues. The

important functions of income tax are the following:
1. To provide revenues
2. To offset regressive sales and consumption taxes
3. To mitigate the inequalities in the distribution of income and
wealth which are considered deterrents to social progress
Classification of Taxpayers

The tax code of the Philippines classifies taxpayers into the

following:
A. Individuals
1. Citizens
a. Resident
b. Non-resident
2. Aliens
a. Resident aliens
b. Non-resident aliens
i. Those engaged in trade or business within the
Philippines
ii. Those who are not engaged in business or trade
B. Corporations

1. Domestic or those incorporated under the Philippine laws

2. Foreign or those incorporated under the laws of their respective
countries
a. Resident corporations engaged in trade or business within the
Philippines
b. Non-resident corporations which are not engaged in business
C. General Partnerships

1. General professional partnerships formed by persons for the primary

purpose of exercising their common professions (No part of the
income of this kind of partnership must come from engaging in any
trade or business. The partners are liable for income tax based on their
respective shares in the profits of the partnership.)
2. General co-partnerships formed for the sole purpose of engaging in
trade or business (The taxable income declared by the partnership for
a taxable year is subject to corporate income tax.)
Status of Taxpayers

 Married taxpayers are those individuals who are legally and lawfully
married with or without children, or with legally adopted children.
 Head of the family refers to any unmarried or legally separated male or
female with one or both parents; one or more brothers or sisters; and one
or more legitimate, recognized natural, or legally- adopted children living
with and dependent upon him/her for their substantial or primary support.
 Single taxpayer is any unmarried individual. He/she may also be a
widow or widower, or a married person who is legally separated or
annulled with no qualified dependents.
Tax rates

Percentages by which an individual or a corporation is taxed.

These rates depend on the amount of income people or
businesses earn in a year. In the Philippines, the minimum
tax rate is around 32%.
Individuals Required to File Income Tax
returns

Every resident citizen, regardless of the source of his/her

income, within or outside the Philippines
Every non-resident citizens and resident alien, fort their
income from sources within the Philippines; and
Every non-resident alien engaged in trade or business or in
the exercise of his/ her profession in the Philippines, for his/
her income sources within the Philippines