ACCTAX Reviewer
ACCTAX Reviewer
ACCTAX Reviewer
Concepts of Taxation
Three inherent powers of the sovereign
state
1. Police Power superior to non
impairment, due process clause.
2. Eminent domain just
compensation, take private
property.
3. Taxation inferior to non
impairment.
Taxation defined
1. Power inherent power of a state.
2. Process legislative undertaking,
implemented by the BIR to raise
revenue.
3. Means collecting and
apportioning the cost of the
government.
Nature of tax power
1.
2.
3.
4.
5.
6.
7.
People
Territory
Sovereignty
Government
Purposes of taxation
1. Revenue purpose fiscal policy
2. Regulatory purpose (sumptuary)
discriminatory, countervailing,
marking, dumping
3. Excise objects transaction,
privilege, right, interest.
Inherent Limitations natural restrictions
Constitutional Limitations
1.
2.
3.
4.
5.
6.
7.
Operations Group
Legal and Enforcement
Information Systems group
Resource Management group
Department of Finance
1. Bureau of Internal Revenue
2. Bureau of Customs & Tariff
commission
3. Land transportation office
4. Duly and lawfully authorized
collectors
5. Local offices
Receipts services
Assessment of tax
Compromise
Tax lien
Levy or distraint
Taxpayers remedies
Assessment
Compromise
Tax refund
Amendment of returns
Motion
Motion
Motion
Motion
for
for
for
for
Reconsideration
Reinvestigation
Withdrawal
Cancellation
Seizure (sale)
Forfeiture (government)
Redemption within one year
Imposition of Injunction
Enforcement of tax lien
Enforcement of forfeiture
Entering into compromise of tax
case
5. Requiring the filing of bonds
6. Requiring proof of filing of ITR
7. Giving of rewards to informers
8. Making arrest, search and seizure
9. Deportation of aliens
10.
Inspection of books of
accounts
11.
Use of national tax register
12.
Imposition of civil and
criminal action
All criminal violations may be
compromised except: a. filed in court, b.
involving fraud
Minimum COMPROMISE percentage
A. 10% - individual incapability
B. 20% - corporate incapability
C. 40% - financial incapability
(impairment in the original capital
50%)
D. 40% - doubtful validity of
assessment
Letter of Authority permission of
necessary examination of said books and
records.
Chapter 3: Concept of Income
Income increase in net worth
Dependent child P25,000 Max (4)
Additional investment deduct, included
in assets
Withdrawals added back
Unrealized loss added back
Capital vs. Income
Revenue vs. Income
Receipts vs. Income
Nontaxable vs. taxable
Remuneration pay
Minimum wage earners Not taxable
overtime pay, holiday pay, night shift
differential pay, hazard pay.
CLASSIFICATION OF GROSS COMPENSATION
INCOME
1. Employee, employer relationship
Wages - specific intervals of work
Salary other than manual labor
Classification of Income
1. Compensation Income
2. Profession or Business Income
3. Passive Income
4. Capital Gain
Tax accounting periods
1. Calendar period
2. Fiscal period
3. Short period
4. Variable period
Servicing Business Cash basis
Trading and manufacturing Accrual Basis
Special Methods
1. Instalment
2. Deferred payment
3. Long term construction contract
a. Completed contract method
b. Percentage of completion method
4. Farming
a. Cash basis
b. Accrual basis
c. Crop basis
Instalment do not exceed 25% of initial
payment
MCIT minimum corporate income tax
NCIT normal income tax
Non taxable items
Sweepstakes or lotto
Thirteenth month pay (P30,000)
Causal sale payment exceeds 25%
Selling price vs. zonal value (whichever is
higher)
Reportable Income =
Installment received x (gross profit / contract
price)
Installment tax due =
Total Tax due x (Installment payment
received/contract price)
Chapter 4 Gross Income
Gross income from whatever source
Includes other income not subject
to passive income tax or final
withholding tax.
2.
Honoraria
Manufacturi
ng
Merchandisi
ng
Mining
Service
Banking Institution
NCIT (lending)
Royalty Income
10%
20%
Literary
Others
Dividend Income
Tax Exempt
Dividends are tax exempt if
1. Received from a
domestic corporation
by:
Another domestic
Resident foreign
2. Received form a
cooperative
3. Pure stock dividend
4. Pure liquidating
dividend (return of
capital)
Final
Tax
(FWT)
10%
20%
25%
15%
Normal
tax
Valuations
1. Fringe benefit money, monetary
value
2. Fringe benefit property transferred to
the employee, FMV of property
3. Fringe benefit property not
transferred depreciated value.
HOUSING FRINGE BENEFITS
Zonal value value of the land and
improvement from Real property
declaration form
Fair Market Value BIR commissioner
Housing privilege
Lease
Assignment
Purchase,
instalment
Purchase, no
instalment
50% x rental
payments
5% x (FMV or ZV) x
50%
5% x AC x 50%
(AC , exclusive of
interest)
MV = FMV or ZV
Motor Vehicle
Purchase by
employer
MV = AC
Cash given to
employee
Purchase of car
on instalment
basis
Employer
shoulder a portion
of the purchase
Employer owns,
and maintain a
fleet of motor
vehicles
Employer leases
and maintains a
fleet of motor
vehicles
MV = cash given
MV = AC/5
MV = amount
shouldered
MV = (AC/5) x 50%
MV = 50% x rental
payments
Aircraft No FBT
Yacht estimated useful life of 20 years
Expense account personal expenditures
only
Representation and Transportation
allowances (fixed in amounts) part of
compensation income
Household Expenses
Salaries of household help etc.
Interest on loan at less than market rate
( 12% rule)
Membership Fees, Dues and Other Expenses
Total amount fringe benefit taxable
Expenses for Foreign travel
Lodging cost in a hotel, etc.
Excess of $300 shall be subject to FBT cost
of economy & business class not subject to
FBT
30% of 1st Class subject to FBT
Inland travel not subject to FBT
No supporting documents, all included in FBT
Holiday and Vacation Expenses FBT
Educational assistance (Gen Rule, subject to
FBT)
Exemptions: relation to trade or business
written contract remain employed
General rule, to dependents, NOT taxable,
competitive scheme
Insurance benefits, not taxable (SSS and
GSIS)
Group insurance of his employees
FBT on Aliens
Non resident Alien
(not engage in
business)
Special Economic
zones
Others
Tax Base
75%
Tax Rate
25%
85% or
75%
85%
25% or
75%
15%
Up to P100,000
Excess of
P100,000
Retirement of Bonds
Taxable gain or deductible loss