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Justice Aurelio-Yap
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2 TAXATION 2 – Atty. Justice Aurelio-Yap
If CWT, it can be used to credit from your tax Withholding tax is like an advance payment.
liability. But if you say FWT, it cannot be used Kuhaan na ka daan sa imong income para sure
against your tax liability, and it shall be the final payment gyud sa tax.
tax that you paid. And since the FWT cannot be
credited, you are not anymore required to
declare that since that is already final. CONSEQUENCES IF THE WITHHOLDING
AGENT FAILS TO WITHHOLD TAXES
Example 1: The buyer bought goods from the The bases for those penalties are those
seller. Upon payment for those goods, the buyer withholding taxes which you supposedly
will automatically deduct withholding tax. The withheld.
buyer now becomes the withholding agent. He
As mentioned, not all taxpayers are required to
will pay the tax in behalf of the seller.
withhold taxes.
Example 2: You are a lessee, and you pay rents
There are only a few certain taxpayers who are
for 10, 000/month. The withholding tax on rent
required to withhold taxes, those who are
is 5%. The payment you make to your lessor
included in the top 20, 000 taxpayers. Once you
should have been deducted the WT upon
payment. So instead of paying the whole 10, 000 are included in the top taxpayers, you will be
given a notification by the BIR that you are now
to the lessor, you pay him 9, 500 and you
required to withhold taxes.
withhold the 500 (5% of 10, 000).
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3 TAXATION 2 – Atty. Justice Aurelio-Yap
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4 TAXATION 2 – Atty. Justice Aurelio-Yap
Withholding tax is only a method to ensure the In no instance shall individual taxpayers be
collection of taxes. The burden to collect is given authorized to establish a fiscal year as basis for
to the withholding agent who will collect in filing their returns and computing their income.
behalf of the government.
If the problem says that an individual started his
Withholding tax is not a tax, but manner of operations on February, it may appear that he
collecting. uses fiscal year since he did not start on
January. BUT since the law says that an
individual shall not use fiscal year, he should use
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5 TAXATION 2 – Atty. Justice Aurelio-Yap
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6 TAXATION 2 – Atty. Justice Aurelio-Yap
not exceed Two hundred fifty thousand pesos employers at any time during the
(P250,000) under Section 24(A)(2)(a): taxable year; and
Provided, That a citizen of the Philippines and 3. An individual whose pure compensation
any alien individual engaged in business or
practice of profession within the Philippines
income derived from sources within the
shall file an income tax return, regardless of Philippines exceeds Sixty thousand
the amount of gross income; pesos (P60, 000).
(b) An individual with respect to pure RECALL: If you are a non-resident citizen not
compensation income, as defined in Section 32 engaged in trade or business in the Philippines,
(A)(1), derived from sources within the you are not required to file an ITR, BECAUSE
Philippines, the income tax on which has been you pay 25% as FINAL TAX. So since the tax is
correctly withheld under the provisions of already final, you are not required to declare an
Section 79 of this Code: Provided, That an
individual deriving compensation concurrently ITR.
from two or more employers at any time
That is the concept of “final tax.” Unlike in
during the taxable year shall file an income tax
return: Provided, further, That an individual creditable, wherein you declare all your income,
whose compensation income derived from and deduct those withheld from you or credited.
sources within the Philippines exceeds Sixty If “final”, you are not required to declare and
thousand pesos (P60,000) shall also file an you have nothing to credit.
income tax return;
Example: Taxes on passive income are also final
(c) An individual whose sole income has been taxes. So the income from your bank deposits
subjected to final withholding tax pursuant to need not be declared because they are already
Section 57(A) of this Code; and
subject to final tax.
(d) An individual who is exempt from income
This is also the reason why NRANETB is not
tax pursuant to the provisions of this Code and
other laws, general or special. required to file an ITR, because he is subject to
(NIRC, Sec. 51 as amended) final income tax.
The liability was contracted in good faith for full 1. Property involved must have been
consideration in money or money’s worth. transferred by a prior decedent to a
present decent through donation
So such claim must be proved.
2. Presentpresent decedent must have
Must be a debt valid in law and enforceable in 3. Property can be identified from the one
courts. received by the donor to the present
decedent
The indebtedness must not be condoned and the a. Through technical description
action of the decedent must not have 4. The property must have formed part of
prescribed. the gross estate of the decedent
5. Donors tax on the gift or the inheritance
Requisites for the deductibility:
must have been paid
1. The value of the claims against part of 6. Said property must be situated in the
the gross estate Philippines and now forms part of the
2. And it must be shown that they are gross estate of the decedent
insolvent 7. Amount of the deduction is the full
3. And the value of the claim must have amount and the amount decutible id
been added in the gross estate diminished years upon
8. VD must not ave been claimed by the
Unpaid mortgages and indebtedness previous estate involving the same
1. Where the value should be included in property
the value of the gross estat 9.
2. The value of the property mortgage The earlier the death of the
must be included in the gross estate.
3. Verified that such debt was contracted in Transfers for public use
good faith by the decedent during his
Disposition is in the last will and testament
lifetime.
4. Substantiated by proff that such debt In favour of the government
exists
5. Should have been included as part of Exclusively for public purpose
the gross estate
And value of the property is included in gross
Requisites for the estate
Special Deductions
Vanishing deduction
1. Family home
Pg 703 Revenue Regulation No. 12-2018
Place where family actually resides
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