UNIT 12

TAXATION Session 4

Topics
 Review of Last session  Test of baseline knowledge  The National Internal Revenue Code  Tax Procedure in the Philippines

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Review of Last session

Test of baseline knowledge

The National Internal Revenue Code

REPUBLIC ACT NO. 8424 TAX REFORM ACT OF 1997

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ORGANIZATION AND FUNCTION OF THE BUREAU OF INTERNAL REVENUE

Chief Officials of the Bureau of Internal Revenue.
Chief to be known as Commissioner of Internal Revenue, Four (4) assistant chiefs to be known as Deputy Commissioners.

ORGANIZATION AND FUNCTION OF THE BUREAU OF INTERNAL REVENUE

BIR Commissioner
Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take Testimony of Persons. Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax Administration and Enforcement. Authority of the Commissioner to Delegate Power. Duty of the Commissioner to Ensure the Provision and Distribution of forms, Receipts, Certificates, and Appliances, and the Acknowledgment of Payment of Taxes.

Revenue Regional Director

(a) Implement laws, policies, plans, programs, rules and regulations of the department or agencies in the regional area; (b) Administer and enforce internal revenue laws, and rules and regulations, including the assessment and collection of all internal revenue taxes, charges and fees. (c) Issue Letters of authority for the examination of taxpayers within the region; (d) Provide economical, efficient and effective service to the people in the area; (e) Coordinate with regional offices or other departments, bureaus and agencies in the area; (f) Coordinate with local government units in the area; (g) Exercise control and supervision over the officers and employees within the region; and (h) Perform such other functions as may be provided by law and as may be delegated by the Commissioner.

Agents and Deputies for Collection of National Internal Revenue Taxes

(a) The Commissioner of Customs and his subordinates with respect to the collection of national internal revenue taxes on imported goods; (b) The head of the appropriate government office and his subordinates with respect to the collection of energy tax; (c) Banks duly accredited by the Commissioner with respect to receipt of payments internal revenue taxes authorized to be made thru bank. (d) Any officer or employee of an authorized agent bank assigned to receive internal revenue tax payments and transmit tax returns or documents to the Bureau of Internal Revenue shall be subject to the same sanctions and penalties prescribed in Sections 269 and 270 of this Code.

Authority of Officers
Authority of Officers to Administer Oaths and Take Testimony. Authority of Internal Revenue Officers to Make Arrests and Seizures. Assignment of Internal Revenue Officers Involved in Excise Tax Functions to Establishments Where Articles subject to Excise Tax are Produced or Kept. Assignment of Internal Revenue Officers and Other Employees to Other Duties.

Sources of Revenue considered as National

(a) Income tax; (b) Estate and donor's taxes; (c) Value-added tax; (d) Other percentage taxes; (e) Excise taxes; (f) Documentary stamp taxes; and (g) Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue.

TAX ON INCOME
TAX ON INDIVIDUALS TAX ON CORPORATIONS ESTATES AND TRUSTS

Computations
COMPUTATION OF TAXABLE INCOME COMPUTATION OF GROSS INCOME

Allowable Deductions
Expenses Losses Depreciation Other Expenses associated with Business Donations to Government Donations to Charities

Disallowed Expenses
Personal, living or family expenses; Any amount paid out for new buildings or for permanent improvements, or betterments made to increase the value of any property or estate; Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made; or Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, individual or corporate, when the taxpayer is directly or indirectly a beneficiary under such policy. Disallowed Losses from Sale of Capital Assets

Other Topics
ACCOUNTING PERIODS AND METHODS OF ACCOUNTING RETURNS AND PAYMENT OF TAX OTHER INCOME TAX REQUIREMENTS QUARTERLY CORPORATE INCOME TAX ANNUAL DECLARATION AND QUARTERLY PAYMENTS OF INCOME TAXES WITHHOLDING ON WAGES

ESTATE TAXES
Over But Not Over The Tax shall be Plus Of the Excess Over

P 200,000 P 200,000 500,000 2,000,000 5,000,000 10,000,000 550,000 2,000,000 5,000,000 10,000,000 And Over

Exempt 0 P 15,000 135,000 465,000 1,215,000 5% 8% 11% 15% 20% P 200,000 500,000 2,000,000 5,000,000 10,000,000

DONOR S TAX

VALUE- ADDED TAX

Tax Imposition Transactions with 0% rate Transactions computed at 1/11 of total transaction Exempt Transactions Requirements

OTHER PERCENTAGE TAXES

Tax on Persons Exempt from Value-Added Tax (VAT). = 3% Percentage Tax on Domestic Carriers and Keepers of Garages. - =(3%) Percentage Tax on International Carriers. = 3% Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines. - (10%) Tax on Life Insurance Premiums. - = 5% Tax on Agents of Foreign Insurance Companies. - =5% Tax on Winnings. =10% Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the Local Stock Exchange or through Initial Public Offering. Tiered Tax on Franchises.
does not exceed Ten million pesos (P10,000.00),= three percent (3%) on electric, gas and water utilities, a tax of two percent (2%)

Tax on Banks and Non-bank Financial Intermediaries.

On interest
Short-term maturity (non in excess of two (2) years) Medium-term maturity (over two (2) years but not exceeding four (4) years) Long-term maturity (1) Over four (4) years but not exceeding seven (7) years (2) Over seven (7) years 5% 3% 1% 0%

On dividends On royalties, rentals of property,

0% 5%

Tax on Finance Companies

Short-term maturity (non in excess of two (2) years) Medium-term maturity (over two (2) years but not exceeding four (4) years) Long-term maturity (1) Over four (4) years but not exceeding seven (7) years (2) Over seven (7) years 5% 3%

1% 0%

Amusement Taxes
(a) Eighteen percent (18%) in the case of cockpits; (b) Eighteen percent (18%) in the case of cabarets, night or day clubs; (c) Ten percent (10%) in the case of boxing exhibitions (d) Fifteen percent (15%) in the case of professional basketball games as envisioned in (e) Thirty percent (30%) in the case of Jai-Alai and racetracks of their gross receipts, irrespective, of whether or not any amount is charged for admission.

EXCISE TAXES ON CERTAIN GOODS

Excise taxes apply to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the value-added tax imposed

Products subject to special excise Tax

Cigars and cigarettes, Distilled spirits and wines Petroleum Products Mineral Products

DOCUMENTARY STAMP TAX

Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. BIR form 2000 - Documentary Stamp Tax Declaration Return

Documentary stamp tax

Tax Code Section Document Debentures and Certificates of Indebtedness Taxable Tax Due Unit Per Unit % of Unit Taxable Base P200.00 or Face value of fraction thereof P1.50 0.75% Document Par value of shares of stocks actual consideration for the issuance of shares of 1% stocks

174

175 Original Issue of P200.00 or Shares of Stock with fraction par value thereof Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Duebills, Certificate of Obligation, or P200.00 or Shares or fraction Certificates of Stock thereof Bank Checks, Drafts, Certificate of Deposit not bearing On each interest and other Instruments Document

176

1.5

Par value of such due-bills, certificate of obligation or 0.75% stocks

179

1.5

Documentary stamp tax

Tax Code Section Document Bonds, Loan Agreements, Promissory Notes, Bills of Exchange, Drafts, Instruments and Securities Issued by the Government or any of its Instrumentalities, Deposit Substitutes Debt Instrument, Certificates of Deposit bearing interest and others not payable on sight or demand (except loan agreement or promissory notes exceeding P250,000.00 P200.00 or for personal use or fraction family use) thereof P500.00 or fraction Pre-Need Plans thereof Tax Due Taxable Unit Per Unit % of Unit Taxable Base

180

0.3

Face value of the instrument/docu 0.15% ment Value or amount 0.10% of the Plan

186

0.5

REMEDIES
Compromise Arrangement Outright Payment Distraint of Personal Property. Levy on Real Property. Payment within one year

COMPLIANCE REQUIREMENTS
Maintenance and registration of Books of Accounts Registration
Prior to operation
Annual Registration

Official Receipts and Invoices Expense Documents

STATUTORY OFFENSES AND PENALTIES

Civil Penalties Interest Criminal Penalty Other Tax Related Penalty

ALLOTMENT OF INTERNAL REVENUE

Sharing of Taxes
Municipal Local National

OVERSIGHT COMMITTEE
A Congressional Oversight Committee, hereinafter referred to as the Committee, is hereby constituted in accordance with the provisions of this Code. The Committee shall be composed of the Chairmen of the Committee on Ways and Means of the Senate and House Representatives and four (4) additional members from each house, to be designated by the Speaker of the House of Representatives and the Senate President

Functions of the Committee

(1) Monitor and ensure the proper implementation of Republic Act No. 8240; (2) Determine that the power of the Commissioner to compromise and abate is reasonably exercised; (3) Review the collection performance of the Bureau of Internal Revenue; and (4) Review the implementation of the programs of the Bureau of Internal Revenue.

Tax Procedure in the Philippines

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Procedure/ Transactions with BIR

Registration
Initial Annual

Submission of Report
Monthly Quarterly Annual

Assessment
Standard For Computation

Payment of Tax Filing of Tax Forms

For Business registration (RDO) For tax requirement

Topics for Research

Sources of Income of an individual Cash In- kind Trading Investment/ Savings

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Required
Identify the relevant income, expenses, and allowances

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