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STAGES OF TAXATION
1. Levy – enactment of tax laws by the Congress
2. Assessment and Collection – implementation of the tax laws by the administrative branch
DOUBLE TAXATION
Elements:
1. Primary – same object
2. Secondary
a. Same type of tax
b. Same purpose of tax
c. Same taxing jurisdiction
d. Same tax period
Types:
1. Direct – ALL element are present
2. Indirect – one of the secondary elements is not common
Rules of Residency:
1. A Citizen is a resident by default
2. An Alien is a non-resident by default
3. Change in residency should be based from:
a. Intention – for instance, an RC with a working visa and an employment contract abroad that requires the RC to stay in that country
for an extended period, the RC is reclassified to NRC upon departure
b. Length of stay – if there is no definite intention
i. RC changed to NRC – if RC is out of the country for at least 183 days
ii. Alien to RA – if stayed in the Philippines for more than 1 year
iii. Alien to NRAETB – if stayed in the Philippines for not more than 1 year but more than 180 days
iv. Alien to NRANETB – if stayed in the Philippines for not more than 180 days
SITUS RULES
Interest income – debtor’s residence
Royalties – where intangible is employed
Rent income – location of property
ACCOUNTING PERIOD
1. Regular – 1 year
a. Calendar Year – follows the calendar (from Jan. 1 to Dec. 31)
Required if:
1.a.i No annual accounting period
1.a.ii No accounting books
1.a.iii Taxpayer is an individual
b. Fiscal Year – any year ending on any month other than Dec. 31 (for instance, May 1 to April 30)
2. Short – less than 1 year; allowed only for:
a. New businesses
b. Dissolution of business
c. Change of accounting period
d. Death of taxpayer
e. Termination by CIR
FINAL TAX
Final
Withheld at source
Territorial imposition
Imposed on:
o Certain passive income
o Persons not engaged in trade or business – NRANETB and NRFC
INTEREST INCOME
Bank Deposits or Deposit Substitutes
o Types:
Short-term – less than 5 years
Long-term – not less than 5 years
o Final tax rates:
INDIVIDUALS CORPORATIONS
Short-Term 20% 20%
Long-Term Exempt 20%
o Rates for pre-termination of long-term deposits:
<3yrs – 20%
3 - <4yrs – 12%
4 - <5yrs – 5%
Foreign Currency Deposits
o Residents – 15%
o Non-Residents (including NRANETB and NRFC) – exempt
DIVIDENDS
Rates (applies to dividends received from Domestic Corporations; note that Final Tax is territorial)
CLASSIFICATIONS RATES
RC 10%
NRC 10%
INDIVIDUALS RA 10%
NRAETB 20%
NRANETB 25%
DC Exempt
CORPORATIONS RFC Exempt
NRFC 30%
ROYALTIES
INDIVIDUAL CORPORATION
Books, literary works, musical composition 10% 20%
Others 20% 20%
PRIZES
INDIVIDUAL CORPORATION
More than P10,000 20% RIT
Not more than P10,000 RIT RIT
Prizes are exempted if
o Person exerted no effort to join
o There is no future service to be rendered after receiving the prize
WINNINGS
INDIVIDUAL CORPORATION
PCSO/Lotto winnings not more than P10,000 Exempt Exempt
PCSO/Lotto winnings more than P10,000 20% 20%
Other winnings 20% RIT
TAX INFORMER’S REWARD
Given to individuals who would provide information to BIR regarding a violation of the National Internal Revenue Code (NIRC), which would
result to the government recovering lost revenues
Reward given to such person is – 10% of the recovered amount or P1 million, whichever is lower
Example:
o Mr. Cruz informed BIR of the violation of ABC Company of the NIRC. BIR was able to recover P100 million in tax revenues. The
determined reward shall be:
10% of P100 million = P10 million
P1 million
o Since P1 million is the lower amount, Mr. Cruz is only entitle to P1 million reward
Final tax rate = 10%
People exempted from the reward
o Government employees/officials
o Relatives of government employees/officials within the 6th degree of consanguinity