Documente Academic
Documente Profesional
Documente Cultură
A. BASIC TAXATION
Tax
Levied for revenue
Involves
exercise
of
taxing power
Amount is generally not
limited
Imposed on the right to
exercise a privilege as
well as to persons and
property
Enforced
contribution
assessed by sovereign
authority
to
defray
public expenses
Failure to pay does not
necessarily makes the
business illegal
License fee
Imposed for regulations
Involves an exercise of
police power
Amount
is
usually
limited to the necessary
expenses of regulation
Imposed on the right to
exercise a privilege
Legal compensation or
reward of an officer for
specific services
Failure to pay makes the
act or business illegal
What is income?
Income means all the wealth which flows into the
taxpayer other than a mere return on capital. It is gain
derived and severed from capital.
What are the requisites in order that income may be
taxable?
For income to be taxable, the following requisites
must exist:
(a) there must be gain;
(b) the gain must be realized or received and
(c) the gain must not be excluded by law or treaty
fromtaxation. (Commissioner of Internal Revenue v.
Court of Appeals, G.R. No. 108576, 20 January
1999, 301 SCRA 152, 181; BIR vs. CA, G.R. No.
160756, 9 March 2010)
When is income considered realized?
For income tax purposes, income is realized when
the earning process is complete or virtually complete
and an exchange has taken place. (Question No. 32, 2011
Bar)
What are the sources of income?
15Misael
10Ibid.
11MCQ
No. 1, 2012 Bar; MCQ No. 3, 2013 Bar; MCQ No. 22, 2014 Bar.
of Internal Revenue vs. Bank of Commerce, 459 SCRA 638.
13AbakadaGuro Party List vs. Ermita, supra.
14David vs. Macapagal-Arroyo, 489 SCRA 160.
12Commissioner
Suggested Answer:
(a)
(b)
(c)
(d)
(e)
(f)
Interests17
24Subject
FWT
a) The
amount
of incometax withheld
by
the
withholding
agent is constituted as a
full and final payment of
the income tax due from
the payee on the said
income.26
CWT
a) Taxes withheld on
certain
income
payments are intended
to equal or at least
approximate the tax due
of the payee on said
income.
b) Payee of income is
required to report the
income and/or pay the
difference between the
tax withheld and the tax
due on the income. The
payee also has the right
to ask for a refund if the
tax withheld is more
than the tax due.
26
27RCBC
28
31
32
Explanation:
34MCQ
10
Tax Base
Taxable
Income
Gross
Income
Gross
income
Improperly
accumulated
taxable
income
Tax
Rate(s)
30%
2%
Various
10%
SSS
GSIS
PHIC
PCSO
Local water districts (R.A. No. 10026)
11
BAR 2013
A group of philanthropists organized a non-stock,
non-profit hospital for charitable purposes to provide
medical services to the poor. The hospital also accepted
paying patients although none of its income accrued to
any private individual; all income were plowed back for
the hospitals use and not more than 30% of its funds
were used for administrative purposes.
See Sec. 27B, NIRC and CIR vs. St. Lukes Medical Center, Inc., G.R.
Nos. 195909 and 195960, 26 September 2012.
38 CREBA vs. Romulo (2010), supra.
37
39
12
income
earners
claim
business expense;
interest expense;
tax;
loss;
bad debt;
depreciation;
May pure
deductions?
(g)
(h)
(i)
(j)
40
42Question
13
B.5 Exclusions
What is the optional standard deduction (OSD) and
what are its advantages?
The Optional Standard Deduction44 is a privilege
available to a citizen, resident alien or corporation
subject to the normal income tax to deduct, in lieu of
itemized deduction, forty percent (40%) of taxpayers
gross sales or receipts (in the case of individual) or gross
income (in the case of corporation) in the computation of
taxable income.
The OSD has its advantages. As an alternative to
itemized deduction, it provides taxpayers with low
itemizable expenses a higher amount of deduction and,
thus, more tax savings. Also, its computation is
relatively simple and, unlike itemized deduction, the
OSD dispenses with the substantiation requirement.
This relieves taxpayers of the difficulty of computation
usually attendant to itemized deduction as well as the
added burden of record-keeping.
Important concepts relating to the OSD
(a) The OSD is available only to citizens, resident
aliens, and corporations subject to the regular
income tax (DC and RFC). Before the
amendment in RA 9504, corporations were not
entitled to OSD.
(b) The standard deduction is optional. If the
taxpayer does not elect OSD, he is considered as
having availed of the itemized deduction.
(c) The election for OSD shall be irrevocable for the
year in which it is made.
(d) Proof is not required.
(e) The rate has been increased from 10% to 40%
under the amendment in RA 9504.
Personal and Additional Exemptions
43
CIR vs. Isabela Cultural Corp., G.R. No. 172231, February 12, 2007.
34 (L), NIRC.
44Sec.
45
46Mamalateo,
14
b.
See Santos vs. Servier Philippines, Inc., G.R. No. 166377, 28 November
2008.
48Question X, 2014 Bar.
47
Suggested Answer:
a.
b.
15
Suggested Answer:
BAR 2013
16
Suggested Answer:
No. The totality of the circumstances do not
sufficiently show any transfer in contemplation of death.
The fact that at the time of the sale Mr. Agustin was
already old, suffering from incurable disease and that
the sale was so close to his death are not conclusive of
the sale being made in consideration of death. Besides,
the sale was for valuable and sufficient consideration, in
which case, there is no more gratuitous transfer that may
be subject to estate tax. (Sec. 85B, NIRC)
How is the Standard Deduction for estate tax purposes
differentiated from the Optional Standard Deduction for
income tax purposes?
(1) The former is automatic whereas the latter is
optional on the part of the taxpayer. (2) The former is a
fixed amount of Php1 million whereas the latter is fixed
at 40% of the taxpayers gross sales or gross receipts
(individual) or gross income (corporation). (3) The
former is a deduction available to estates of citizens or
residents of the Philippines whereas the latter is a
deduction available to income taxpayers who are
engaged in trade or business or exercise of profession.
52Question
17
BAR 2013
In the settlement of the estate of Mr. Barbera who
died intestate, his wife renounced her inheritance and
her share of the conjugal property in favor of their
children. The BIR determined that there was a taxable
gift and thus assessed Mrs. Barbera as a donor.
Was the BIR correct?
Suggested Answer:
The BIR was only partially correct. By renouncing
her share of the conjugal property, Mrs. Barbera was
deemed to have made a donation of property in favor of
her children and, thus, she is liable for the gift tax.
However, as to her share in the inheritance, Mrs. Barbera
is not deemed to have accepted the same in view of the
general renunciation and, consequently, there cannot be
any donation of property for which she can be made
liable for a gift tax.
Another illustration of an indirect gift that is taxable.
BAR 2013
The spouses Jun and Elvira Sandoval purchased a
piece of land for P5,000,000 and included their two (2)
minor children as co-purchasers in the Deed of Absolute
Sale. The Commissioner of Internal Revenue (CIR) ruled
that there was an implied donation and assessed
donors taxes against the spouses.
2011
2011
2011
2011
18
60
61
19
E. REMEDIES
Meralco Securities Corp. vs. Victorino Savellano, et al., G.R. No. L-36181,
October 23, 1982.
66 see Basilan Estates vs. CIR, G.R. No. L-22492, September 5, 1967.
67 Ferdinand R. Marcos II vs. CA, et al., G.R. No. 120880, June 5, 1997.
68Question No. V, 2014 Bar.
69 CIR vs. Enron Subic Power Corp., G.R. No. 166387, January 19, 2009; In
this case, the Supreme Court considered the alleged factual bases in
the advice, preliminary letter and audit working papers as
insufficient. It explained that there was no going around the mandate
of the law that the legal and factual bases of the assessment be stated in
writing in the formal letter of demand accompanying the assessment
notice.
65
20
Explanation:
From the submission of the supporting documents, a
period of 180-days runs within which the CIR may act
on the protest. In this case, inaction arose on December
30, 2011. The appeal to the CTA may be made within 30
days thereafter, or until January 30, 2012.
Using the same facts in the immediately preceding
number, but assuming that the final decision on the
disputed assessment was received by the taxpayer on
July 30, 2011, when is the last day for filing of the
appeal to the CTA?
a) August 30, 2011;
73
See Lascona Land Co., Inc. vs. CIR, G.R. No. 171251, March 5, 2012.
21
Bonifacia Sy Po vs. CTA, et al., G.R. No. L-81446, August 18, 1988.
vs. CA, G.R. No. 197590, November 24, 2014 citing Collector v.
Jamir, 114 Phil. 650, 651-652 [1962]
76 Capitol Steel Corp. vs. Phividec Industrial Authority, G.R. No. 169453,
December 6, 2006.
77 Secretary of Finance, et al. vs. La Suerte Cigar and Cigarette Factory, et al.,
G.R. No. 166498 , June 11, 2009.
78 Proton Pilipinas Corp. vs. Republic of the Phil., G.R. No. 165027, October
16, 2006.
74
75BIR
22
79
23
Manufacturers
Wholesalers
Exporters
Retailers
Contractors90
Banks and other financial institutions
Peddlers, and
ANY OTHER businesses not specified above
24
96Question
25
98
26
importation
begin
and
when
is
it
See: Papa v. Mago, G.R. No.L-27360, February 28, 1968, 22 SCRA 865;
Viduya v. Berdiago, G.R. No.L-29218, October 29, 1976, 73 SCRA 553.
106Question VI, 2014 Bar.
107 See Rieta v. People, G.R. No. 147817, 12 August 2004.
105
27
1.
2.
3.
4.
Finality of liquidation
Rieta v. People, supra.
Agriex Co., Ltd. vs. Villanueva, G.R. No. 158150, September 10, 2014
citing Subic Bay Metropolitan Authority v. Rodriguez, G.R. No. 160270,
April 23, 2010, 619 SCRA 176.
110 Yaokasin vs. Commissioner of Customs, et. al. G.R. No. 84111,
December 22, 1989.
108
109
6.
7.
28
Suggested Answer:
The petition before the CA should be dismissed as
jurisdiction belongs to the CTA. It is now settled that the
* * * GOOD LUCK! * * *
113See
111