1st

Semester
GROUP PROJECT IN TAXATION I (ATTY. CAÑONEO)
AY 2018-
2019

TABLE OF CONTENTS

Page Number
I. Introduction 2
II. General Principles of Taxation 3
III. Purposes of Taxation 5
IV. Theory and Basis of Taxation 6
V. Nature of the Power of Taxation 7
VI. History of the National Internal Revenue Code 8
VII. Who are required to File Income Tax Return 16
Individuals 16
Non-Individuals 16
VIII. In General: Taxable Income 17
IX. Individual Taxpayers 18
Classification 18
Source of Income and Treatment of Income Sources 19
Classification of Income as to Source 20
Tax Schedule 21
Personal Income Tax Rate 21
Passive Income Tax Rate 22
For Resident Citizen 22
For Non Resident Aliens Engaged in trade or Business 24
For Non Resident Aliens Not Engaged in trade or Business 24
Tax Base 26
Determination of Taxable Income 27
Deduction from Gross Income 28
For Citizen and Alien 28
Special Classes of Individual 29
On the gross income in the Philippines of Aliens Employed by 29
Regional Headquarters (RHQ) or Area Headquarters and
Regional Operating Headquarters (ROH), Offshore Banking Units
(OBUs),
RHQ and ROHQ of Multinational Companies 29
Alien Individual Employed by Offshore and Banking Units 30
Alien Individual Employed by Petroleum Service Contractor and
Subcontractor 31

i ARELLANO LAW FOUNDATION

1st
Semester
GROUP PROJECT IN TAXATION I (ATTY. CAÑONEO)
AY 2018-
2019

X. Partnership 32
Classification 32
Business Partnership 32
General Professional Partnership 32
Tax Treatment 32
Applicable Deduction 33
Optional Standard Deduction 34
Itemized Deduction 34

XI. Corporation 35
Classification 35
Domestic Corporation 35
Foreign Corporation
Resident Foreign Corporation 35
Non- Resident Foreign Corporation 35
Summary of Taxable Income 36
Summary of Withholding Corporation 36
For Domestic Corporation 37
Computation of Gross Income for Corporation 39
Resident Foreign Corporation 40
Special Corporation 40
Passive Income 42
Minimum Corporate Income Tax 44
International Carrier 45
Offshore Banking Units 46
Regional or Area Headquarters 48
Income Tax on Non-Resident Foreign Corporations 48
Special Non-Resident Foreign Corporations 49
Improperly Accumulated Earnings Tax 51
Tax- Exempt Corporations 53
Taxable Income 56
Gross Income 56
Exclusions 62
Fringe Benefits Tax 63
Itemized Deductions 66
Non-Deductible Expenses 71

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1st
Semester
GROUP PROJECT IN TAXATION I (ATTY. CAÑONEO)
AY 2018-
2019

Capital Gains and Losses 72

Losses from Wash Sales of Stocks or Securities 80
Situs of Taxation 80
Gross Income Outside Philippines 83
Income from Sources Partly Within and Partly Without the Philippines 84
Accounting Periods and Methods 85
Returns and Payment of Taxes 89
Where and When to File (Tax Schedule) 90
When to Pay 91
Trust 94

ii ARELLANO LAW FOUNDATION