TAXATION

Learning Outcomes
At the end of the lesson, you should be able to:

1. Explain the nature and purpose of taxation

2. Identify the types of national and local taxes

3. Argue for or against a current taxation issue

 Taxation means laying a tax through which the goverment generates
income to defray its expences. It is a way to raise funds for goverment
programs and services that benefit filipino citizens. Economic
investments and businesses in the Philippines have created several
definitions of taxation enforced by national or local laws for income
collection and development of the goverment.

A tax is enforced as a contribution but it is proportionaite to the citizen’s

ability to pay. It is levied on persons ( who actually pay with money) and
property as well as on business transactions, privilegas, and benefits. The
imposition of taxes is done by law through the Bureau of Internal
Revenue.
 There are two types of taxes: National and local,
National taxes are the ones paid to the goverment
through the Bureau of the Internal Revenue. The
national taxation system is based on the National
Internal Revenue Code of 1997 or the Republic
Act No. 8424 otherwise known as the Tax Reform
Act of 1997, as amended.
 THE TYPES OF NATIONAL
TAXES
1. CAPITAL GIANS TAX - is a tax imposed on gians that may have
been realized by a seller from the sale, exchange, or other
disposition of capital assets located in the Philippines,
including pacto de retro sales ( a sale with a condition for
repurchase) and other forms of conditional sale.

2.DOCUMENTARY STAMP TAX - is a tax on documents,

instruments, loan agreemets, and papers evidecing the
acceptance, assignment, sale, or transfer of an obligation ,
rights, or property incident on documents like bank promissory
notes, deed of sale, and deed of assignment on transfer of
DONOR’S TAX - is a tax on donation or gift. It is also a tax imposed on the
gratuitous trasfer of property between two or more persons who are living at
the time of the transfer. It shall apply whether the gifts is direct or indirect, a
wheather the property is real or personal , tangible or intangible.
A donar’s tax is based on graduated schedule of tax rate.

4. ESTATE TAX - is a tax on the rights of the deceased person to transmit

his/her estate to lawful heirs and beneficiaries at the time of death and on
certain transfers which are made by law as equivalent to testamentary
disposition. It is not a tax on privilege of transmitting property upon the death
not with standing the postponement of the actual possession enjoyment of the
estate by the beneficiary.

5. INCOME TAX - is a tax on all annual profits made from propertyownership,

profession, trades or officers, It is also a tax on a person’s income,
emoluments, profits and the like. Self- employed individuals and corporate
taxpayers pay quarterly income taxes from the first quarter to the third quarter.
And instead of filing quarterly income tax on the fourth quarter, they file and pay their
annual income tax is based on graduated schedule of tax rate, while corporate income
tax in based on a fixed rate prescribed by the tax law or speacial law.

6. PERCENTAGE TAX - is a business tax imposed on person or entities who sell or

lease goods, properties, or services in the course of trade or business whose gross
annual sales or receipts do not exceed the amount required to registeras VAT-
registered taxpayers . Percentage82 taxes are usually44 73 They are
based on fixed rate.
usually paid monthly by businesses or professionals,However, some
Enter title Enter special
title industries
and pay percentage tax on a quarterly basic.

7. VALUE-ADDED TAX - is a business tax imposed and collected from the seller in the
course of trade or business on every sale of properties (real or personal) lease of
goods or properties (real or personal), or vendors of services. It is an indirect tax, thus,
it can be passed on to the buyer, causing the increase of prices of most goods and
services bought and paid by consumers. VAT returns are usally filed and paid monthy
and quarterly.
 The lastest law on Taxation is RA 9337 signed on May 24, 2005 by President
Gloria Arroyo is known as the “ expanded value-addede tax” or the “E-VAT”
law.
8. EXCISE TAX - is a tax imposed on goals manufactured or produced in the
Philippines for domestic sale or consumption or any other dispositio. It is also
imposed on things that are imported.

9. WITHHOLDING TAX ON COMPENSATION - is the tax withheld from individuals

receiving purely compernsation income arising from an employers witheld in thir
40% income and remit to the government through the BIR or
employees’ compensation
authorized accrediting agents.

10. EXPANDED WITHHOLDING TAX - is prescribed only for certain payors like those
withheld on rental income and professional income. It is creditable against the income
tax due of the payee for the taxable quarter year.
11. FINAL WITHHOLDING TAX - is a kind of withholding tax which is prescribed only
for certain payors and is not creditable agains the income tax due of the payee for the
taxable year. An example of final withholding tax is the withheld by banks on the
interest income earned on bank deposits.

12. WITHHOLDING TAX ON GOVERMENT MONEY PAYMENTS - is the withholding

tax withheld by goverment offices including goverment owned or controlled
corporations and local government units, before making any payments to private
individuals, corporations, partnership and/or association

Local taxes, on the other hand, is based on the local government

taxation in the Philippines as started in Republic Act 7160 or the
Local Government Code of 1991, as amended. These taxes, fees,
or charges are imposed by the local government units, such as
provinces, cities, municipalities, and barangays.
 TYPES OF LOCAL TAXES
1. TAX ON TRANSFER OF REAL PROPERTY OWNERSHIP - is imposed on the the
sale, donation, barter, or on any other mode of transferring ownership of real property.

2. TAX ON BUSINESS OF PRINTING AND PUBLICATION - is imposed on printing

and publication businesses like that of books, cards, posters, leaflets, handbills,
certificates, receipts, pamphlets, and other of similar nature.

3. FRANCHINE TAX - is a tax on franchised businesses, at the rate not exceeding

fifty percent (50%) of one percent (1%) of the gross annual receipts of the preceding
calendar year based on the incoming receipt ( the annual earning) within the territorial
jurisdiction where the franchise is selling in.
4. TAX ON SAND, GRAVEL, AND OTHER QUARRY RESOURCES - is imposed on
ordinary stones, sand, gravel, earth, and other quarry resources, as defined under the
National Internal Revenue Code, as amended. This refers to the above materials that
are extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks,
and other public waters within its territorial jurisdiction.

5. PROFESSIONAL TAX - is an annual tax on each person engaged in the exercise or

practice of his or her proffesional that requires government examination, like lcensure
examinations.

6. AMUSEMENT TAX - is a tax collected from the proprietors, lessees, or operators of

theaters,cinemas, concert hall, circuse, boxing stadia, and other places of amusement.

7. ANNUAL FIXED TAX FOR EVERY DELIVERY TRUCK OR VAN OF

MANUFACTURERS OR PRODUCERS, WHOLESALERS OF,DEALERS,OR
RETAILERS IN, CERTAIN PRODUCTS - is an annual fixed tax for every truck, van or
any vehicle used by manufacturers, products, wholesalers, dealers, or retailers in the
delivery or distribution of distilled spirits, fermented liquors, soft drinks.
cigars and cigarettes, and other products to sales outlests, or consumers,whether
directly or indirectly, within the province.This type of tax is usually imposed as
determind by the local provincial councils through which the truck or trucks pass
through or deliver their cargo.

8. TAX ON BUSINESS - is imposed by cities or municipalities on businesses before

they will be issued a business license or permit to start operations based on the
schedule of rates prescribed by the local government code, as amended.
Businessmen pay this tax if they apply for a Mayor’s Permit to conduct their business
in the local government unit. Rates of these taxes vary among cities and
municipalities.

9. FEES FOR SEALING AND LICENSING OF WEIGHTS AND MEASURES - are

imposed for the sealing and licensing of weights and measures. This is to impose
regulations with regards to such weights and measures as prescribed by the city,
provincial or municipal council.
10. FISHERY RENTALS, FEES, AND CHARGES - are imposed by the
municipality/city to grantees of fishery privileges in the municipal/city waters especially
the privilege to build fish corrals, oysters, mussels, or other aquatic beds or bangus fry
areas and other as specified in the Local Government Code.

11. COMMUNITY TAX - is the tax levied by cities or municipalities to every Filipino or
alien living in the Philippines, eighteen (18) years of age or over, who has been
regularly employed on a wage or salary basis for at least thirty (30) consecutive
working days during any calendar year, or who is engaged in business or occupation,
or who owns real property with an aggregate assessed value of one thousand pesos
(1,000,00) or more, or who is required by law to file an income tax return. Community
tax is also imposed on every corporation no matter how created or organized,
wheather domestic or resident foreign, engaged in or doing business in th Philippines.

12. TAXES LEVIED BY THE BARANGAYS ON STORES OR RETAILERS WITH

FIXED BUSINESS ESTABLISHMENTS - with gross sales of receipts of the
precending calendar year amounting to fifty thousand pesos (50,000,00) or less, ( for
city barangays) and thirty thousand pesos (30,000,00) or less,(for municipal
or less,(for municipal barangays ), at a rate not exceeding one percent (1%) on such
gross sales or receipts.

13. SERVICE FEES OR CHARGES - are fess or charges collected by the barangays
for services rendered in connection with the regulation or the use of barangay-owned
properties or service facilities, such as palay, copra, or tobacco dryers.

14. BARANGAY CLERANCE - is a fee collected by barangays upon of barangay

clearance, a document required for many government transactions, such as when
getting a business permit from a city or municipal government or applying for a job in
a government office or a private company.
 TH
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