This document provides an overview of Philippine taxation. It begins with definitions of taxation and discusses principles like the necessity of taxes to fund government. It describes different types of taxes according to criteria like subject, burden, determination of amount, and purpose. Key points include taxes being compulsory, levied by the state for public purposes, and classified as direct or indirect. The document also covers tax system objectives, stages of taxation, laws, and the power and limitations of taxation. It discusses concepts like double taxation, tax exemptions, and interpreting tax laws. The last sections focus on income taxation principles and computing individual income tax.

1. PHILIPPINE
TAXATION
Present by:
Mr. Dolse A. Ramirez

2. BENJAMIN FRANKLIN
WROTE, “IN THIS WORLD,
NOTHING CAN BE SAID TO
BE CERTAIN EXCEPT
DEATH AND TAXES.”

3. Man’s love to his country is
always opposed by his
displeasure to part away with
his treasure or savings to pay
taxes.
Nobody Enjoys
Paying Taxes

4. The Question
About Paying
Taxes

5. WHY SHOULD WE PAY
TAXES?
 Taxes are the lifeblood of
the nation. (Lifeblood theory)
 Without taxes, government
can neither exist nor endure.

6. [] In Luke, 20:22-25, Jesus was
asked by the Pharisees, “Tell us,
is it against our law for us to pay
taxes to the Roman Emperor or
not?”
Taxation is in Accord with
the Bible

7. Jesus said to them, “show me a
silver coin. Whose face and name
are these on it?” “The Emperor’s,”
they answered. So Jesus said,
“well then, pay to the Emperor
what belongs to the Emperor and
pay to God what belongs to God.”

8. Taxation

9. DEFINITION
[] An inherent power of
sovereign
[] Imposes burden upon
persons and property
[] Raises revenues for
public purposes

10. As opined by CJ Marshall of the
US SC, taxation is a destructive
power which interferes with the
personal and property rights of the
people as it takes from them a
portion of their property for the
support of the government.
Power to Tax Includes
the Power to Destroy

11. Justice Holmes of US SC
brushed aside Marshall’s view
by declaring that “the power
to tax is not the power to
destroy while this Court sits.”
Contrary View: Power to Tax
Not Power to Destroy

12. [] A valid tax should not be judicially
restrained merely because it would
prejudice taxpayer’s property.
[] An illegal tax could be judicially
declared invalid.
Reconciliation of
Marshall’s View with
Holmes View

13. THEORY AND BASIS OF
TAXATION
[] Necessity theory
[] Benefits-Protection
theory

14. OBJECTIVES OF
TAXATION
[] Revenue
[] Regulatory
[] Compensatory

15. STAGES OF TAXATION
[] Levy or imposition of tax
[] Collection (including
assessment)

16. [] National Tax Laws
NIRC and Tariff and Customs Code
[] Local Tax Laws
Local Government Code on Local Tax
Ordinances
[] Miscellaneous Tax Laws
Philippine Tax Laws

17. As long as the legislature, in
imposing a tax, does not violate applicable
constitutional limitations or restrictions,
the courts cannot inquire into the wisdom
of a taxing act.
The Court’s power in taxation is
limited only to the application and
interpretation of the law.
Power of Judicial Review in
Taxation

18. DEFINITION OF TAXES
A burden or charge
imposed by legislative
power upon persons or
property to raise money
for public purposes.
TAXES

19. CHARACTERISTICS OF
TAXES
[] An enforced contribution
[] Generally payable in money
[] Proportionate in character
[] Levied on persons, property or exercise
of a right or privilege
[] Levied by state having jurisdiction
[] Levied by legislature
[] Levied for public purpose
[] Paid at regular a periods or intervals

20. BASIC PRINCIPLES OF A
SOUND TAX SYSTEM
[] Fiscal adequacy
[] Administrative feasibility
[] Theoretical justice

21. CLASSIFICATION OF TAXES
 As to subject or object
1. Personal (poll or capitalization)
Imposed on all residents, whether citizens or not
(e.g.,community tax)
2. Property
Imposed on property (e.g.,property tax)
3. Excise
Imposed upon performance of an act, the
enjoyment of a privilege or the engaging in occupation
(e.g.,income tax, estate tax, donor’s tax)

22. WHO BEARS THE BURDEN
1. Direct
 Personal taxes due from natural
persons; non-transferable (e.g.,income
tax, donor’s tax, estate tax)
2. Indirect
 Business taxes due from either natural
or juridical persons; transferable
(e.g.,VAT, documentary stamp tax)

23. DETERMINATION OF AMOUNT
1. Specific
Based on some standard of weight or
measurement (e.g., excise taxes on distilled
spirits and wines, cinematographic films)
2. Ad valorem
Based on the value fixed by law or as
appraised (e.g., real estate tax, custom duties)
3. Mixed or compound
Both specific and ad valorem

24.  PURPOSE
1. General
For purpose of raising public funds
for the government (e.g., income tax,
VAT, transfer taxes)
2. Special
Primarily for the regulation of
useful or non-useful occupation or
enterprises and secondarily only for
raising public funds (e.g.,customs
duties, excise taxes)

25. GRADATION OR RATE
1. Proportional or flat rate
Rate of tax increases or
decreases in relation to bracket.
2. Progressive
Increases as the tax base or bracket
goes higher
3. Regressive
Decreases as the tax base or
bracket goes higher

26. IMPOSING AUTHORITY
National
Taxes imposed by national government
(e.g.,NIRC taxes)
Local
Taxes imposed by local government units
(e.g., community taxes, business licenses
and permits, professional tax, real estate
tax)

27. Sources
[] Philippine Constitution
[] Existing tax laws of the Philippines
(National, Local and Miscellaneous
tax laws)
Tax Laws, In
General

28. NATURE
[] Not political in character
[] Civil in nature and not subject
to
ex post facto law prohibition
[] Not penal in character

29. [] Tax evasion
[] Tax avoidance
Escape from
Taxation

30. A tax evader breaks
the law (tax
evasion), the tax
avoider sidesteps it
(tax avoidance).

31. As a general rule,
there are no limitations
upon the power to tax.
LIMITATIONS ON THE
POWER OF TAXATION

32. RATIONALE FOR
LIMITATIONS
 To prevent abuse on the exercise of
the otherwise unlimited power of
taxation.
To serve as a standard for
determining whether a tax law or an
act of the taxing authorities in the
implementation of tax laws is valid or
not.

33. LIMITATIONS ON THE POWER OF
TAXATION
 Inherent limitations
These are part and parcel of the power
of taxation and originate from the very
nature of taxation.
 Constitutional limitations
These are the restrictions imposed by
the constitution.

34. oPublic purpose of taxes
oNon-delegability of the taxing power
oTerritoriality or the situs of taxation
oExemption of the government from
taxes
o International comity
INHERENT
LIMITATIONS

35. Due process of the law
Equal protection of the law
Freedom of speech and of the press
Non-infringement of religious
freedom
CONSTITUTIONAL
LIMITATIONS

36.  Non-impairment of contracts
Non-imprisonment for debt or
non-payment of poll tax
 Origin of appropriation, revenue and
tariff bills
 Uniformity, equitability and
progressivity of taxation
 Delegation of legislative authority to
fix tariff rates, import and export quotas

37.  Tax exemption of properties actually, directly
and exclusively used for religious, charitable and
educational purposes.
 Voting requirements in connection.
with the legislative grant of tax exemption.
 Non-impairment of the Supreme .
 Court’s jurisdiction in tax cases.
 Tax exemption of revenues and assets,
including grants
endowments, donations or contributions to
educational institutions.
.

38. Double taxation, in its
general sense, means
taxing the same subject or
object twice during the same
taxing period.
DOUBLE TAXATION

39. There is no constitutional
prohibition against double taxation in
the Philippines.
It is something not favored, but is
nevertheless permissible.
Double taxation is not prohibited by our
constitution.
No prohibition
against double
Taxation

40. 1. Direct double taxation
Taxing the same object or property twice,
by the same taxing authority, for the same
taxing purpose, within the
same tax period.
2. Indirect double taxation
Not repugnant to the constitution.
Kinds of Double
Taxation

41. An exemption from taxation may be
defined as a grant of immunity, express
or implied, to particular persons or
corporations from the obligation to pay
taxes.
TAX EXEMPTIONS

42. Immunities from taxation which
originate from the Constitution are
known as constitutional
exemptions; those which emanate
from legislation are statutory
exemptions.
Kinds of Tax Exemptions

43. Exemptions from taxation are highly
disfavored in law.
 He who claims exemption should prove
by convincing proof that he is
exempted.
Selected Principles
Governing Tax Exemptions

44. Tax exemptions must be
strictly construed.
 Tax exemptions are not
presumed.
Constitutional grants of tax
exemption are self-executing.
 Tax exemptions are personal.

45.  No statutory construction needed if law is
clear.
 Statutes granting tax exemptions are
construed stricissimi juris against the
taxpayer and liberally in favor of the
taxing authority.
Interpretation of Tax
Laws

46. Income Taxation-
Individuals

47. GENERAL PRINCIPLES OF INCOME TAXATION IN THE
PHILIPPINES OR THE SOURCE RULE OF INCOME
TAXATION FOR AS PROVIDED IN THE NIRC OF 1997.
a. A citizen of the Philippines residing
therein is taxable on all income derived
from sources within and without the
Philippines.
b. A nonresident citizen is taxable only
on income derived from sources within
the Philippines.

48. c. An individual citizen of the Philippines
who is working and deriving income abroad
as an overseas contract worker is taxable
on income from sources within the
Philippines. Provided, That a seaman who
is a citizen of the Philippines and who
receives compensation for services
rendered abroad as a member of the
complement of a vessel engaged
exclusively in international trade shall be
treated as an overseas contract worker.

49. d. An alien individual, whether a
resident or not of the Philippines,
is taxable only on income
derived from sources within the
Philippines.

50. INCOME TAXATION
2
Basic formula for the computation of
income tax of a resident citizen from
income derived solely from
compensation.

51. Gross compensation income
derived from all sources from within
and without the Philippines
LESS: Personal and additional
exemptions (1)
Insurance premium for health
and hospitalization (2)

52. -------------------------------------------------------
Taxable Income
MULTIPLIED BY: The schedular tax rate
-------------------------------------------------------
Income Tax due
LESS: Taxes withheld on the compensation
income
Tax credits
-------------------------------------------------------
Net Income Tax payable
================================

53.  Income Taxation 3
 Personal exemption (regardless of status)
P50,000
 Additional exemption (whether
single or married) P25,000
for each qualified dependent child not to
exceed four (4) dependents
 Insurance premium for health
and hospitalization (family has
gross income of not more than
P250,000 for taxable year P2,400

54. Income Taxation
4
Basic formula for the
computation of income tax of a
resident citizen from mixed income
derived both from compensation and
from exercise of a profession or from
engaging in trade or business.

55. Gross compensation income derived
from all sources from within and
without the Philippines
LESS: Personal and additional
exemptions (1)
Insurance premium for health
and
hospitalization (2)

56. --------------------------------------------------------------
Taxable Compensation Income
PLUS: Net income derived from exercise of a
profession or engaging in trade or business
(see page 6 for formula) ***
--------------------------------------------------------------
Total mixed taxable income
MULTIPLIED BY: The schedular tax rate
--------------------------------------------------------------
Income Tax due
(Forward)

57. Income Taxation 5
Income Tax due
LESS: Taxes withheld on the
compensation income
Quarterly income taxes paid
Tax credits
-------------------------------------------------
Net Income Tax payable on mixed income
==============================

58. Income Taxation
6
*** Computation of net income derived from
exercise of a profession or engaging in trade or
business under the optional standard
deduction.
Total receipts from all sources from
within and without the Philippines
LESS: Exclusions from gross income
Income subject to final taxes

59. --------------------------------------------------------------
Gross receipts derived from all sources from within
and without the Philippines*
LESS: Excess personal and additional
exemptions (1)
Insurance premium for health and
hospitalization (2)
Optional standard deduction (40% of
gross receipts derived from all sources within
and without the Philippines*)
--------------------------------------------------------------
Net income derived from exercise of a profession
or engaging in trade or business

60. Income Taxation
7
*** Computation of net income derived from
exercise of a profession or engaging in trade or
business using itemized deduction.
Total sales from all sources from
within and without the Philippines
LESS: Exclusions from gross income
Income subject to final taxes

61. ---------------------------------------------------------
Gross sales derived from all sources from
within and without the Philippines
LESS: Excess personal and additional
exemptions (1)
Insurance premium for health and
hospitalization (2)
Itemized deductions
---------------------------------------------------------
Net income derived from exercise of a
profession or engaging in trade or business

62. Income Taxation
8
NOTES AND COMMENTS ON MIXED
INCOME.
An individual receiving a combination of
compensation, business and professional
income shall first deduct the allowable
personal and additional exemptions from
compensation income, only the excess there
from can be deducted from business or
professional income.

63. In the case of husband and wife, the
husband shall be the proper claimant for
the exemptions unless he waives it in favor
of his wife.
================================

64. CONTENTS OF THIS MATERIAL WAS SOURCED FROM
THE FOLLOWING REFERENCE TEXTBOOKS:
TAXATION, VOLUME 1, GENERAL PRINCIPLES BY ABELARDO T.
DOMONDON, 2009 9TH ED
PHILIPPINE TAXATION HANDBOOK, A SIMPLIFIED COURSE BY
DANILO A. DUNCANO, CPA, 2009 ED
LAW OF BASIC TAXATION IN THE PHILIPPINES BY BENJAMIN B.
ABAN, REVISED EDITION

65. ******THE END********