Lecture Given On The 14 Day of June, 2020: Income Tax

Lecture given on the 14th day of June, 2020
Note: Questions which cover more than one topic appear under all such topics for easier flow.
INCOME TAX
Income Tax Holiday
What and how does an entity avail of an income tax holiday?
Ang income tax holiday binibigay yan sa mga qualified kaya nga mayroon tayong tinatawag na mago-organize na pioneer
registered business, yan 'yung mga BOI. Binibigyan sila ng holiday depende kung yan ay nasa pioneer or non-pioneer, may mga
period, provided the requisites are met. Kahit nga 'yung ating Barangay Micro-Business, basta na-meet mo 'yung requirement
sa capitalization, hindi ka isa-subject. Kaya kay may holiday, may special law granting you income tax holiday. Without a special
law, you tax it. Anyone claiming an exemption must be able to provide for the law that grants exemption or allowing tax holiday.
Section 22(B); Section 27(D)(4)

How do we tax a corporation who entered into a partnership?
Sa ngayon, pwede siya mag-partnership basta wag lang sa GPP. Kasi kapag nag-joint venture siya, 'yung joint venture na 'yun
iba ang treatment natin. Ita-tax 'yung joint venture tapos 'yung matatanggap nilang share will not be considered taxable because
that will be considered distribution of dividend. Kasi ang business [partnership] is being taxed as a corporation. So dalawang
corporation ‘to na nag-joint venture. Dahil nag-joint venture kayo, isa kayong business ngayon. 'yung inalis na tax ngayon, 'yung
matitira paghahatian nila, hindi na 'yun ita-tax kasi that would be [treated as] dividend from a domestic [corporation] to another
domestic [corporation].
Section 24
Under our current laws, rules and regulations, how are online sellers taxed on their income?
Bago lang, so intayin natin ang regulation tungkol sa online seller. Kasi how will you monitor that? ['yung] actual sales niyan?
Pero naglabas na ng guidelines ang BIR. Yan yata 'yung latest, 14-20? Hintayin muna natin ang gagamiting procedures dyan kasi
nagi-issue yan ng IRR. Kailangan nating ma-clarify 'yung sinasabi [doon sa guidelines]. Yan uso ngayon lalo na may pandemic.
Halos lahat ngayon, through online selling. I may be wrong sa number pero may in-issue 'yung BIR, 14-20 yata. Bago siya, mainit
pa parang pandesal.
Section 24(A)(2)
When will a taxpayer effect his choice as regards the 8% or the graduated tax rates?
Una, titignan mo kung VAT-registered siya. Kung oo, ‘di na siya pwede ng 8%. Or hindi naman man siya VAT-registered, pero
'yung gross naman niya ay lumagpas ng 3M. So ‘di na rin pwede. At kung compensation income hindi rin pwede. So dapat
business income lang sya. Hindi ka makakagamit ng 8% kapag compensation income. ‘Pag nag-mixed income ka magagamit mo
lang 'yun sa business income mo. Pero ‘yung exempt na 250K gagamitin mo sa compensation income. ‘Wag kang mag-dededuct
ng 250K sa business income kapag may compensation income kasi ung first 250K exempt eh. So ‘yung 250K na i-dededuct mo
bago ka mag-8%, kung wala kang compensation income, kasi may mga individuals na may mixed income eh. Sila ‘yung tinatawag
na may trabaho na, nag-nenegosyo pa. May mixed income ‘yon. Applicable lang ‘yung first 250K sa compensation income. At ke
magamit o hindi, halimbawa compensation income mo lang 200K eh ‘di ba first 250K dapat exempt, tama? Oh ‘yung first 250K
exempt, hindi mo nagamit kasi halimbawa 200K lang income mo 100K lang, ‘di mo na siya pwede gamitin sa business income.
Nagagamit mo lang 'yun wala kang compensation. Pero pwede kaparin mag-8% ‘di ka na nga lang magdedeuct ng 250K.
Section 24(A)(2)
What if the taxpayer chose 8% option for income tax and na-breach 'yung P3M threshold by the middle of the year,
what will be the effect on income tax and VAT due?
Iko-correct na, magkakaroon ka na ng adjustment kasi masa-subject ka na. Kaya 'yung total income mo, 'yun na 'yung isa-subject
natin kasi pinili mo 'yung 8% so nagre-remit ka quarterly kasi may business ka eh. Later, ito-total natin, isa-subject ka sa
graduated, ibawas mo 'yung binayad mo na 8%. Kasi akala mo hindi ka lalagpas eh, eh biglang business becomes active kaya
lumagpas ka.
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Cash and Property Dividend (to Individuals) – Section 24(B)(2), Section 25(A)(2) & Section 25(B);
Intercorporate Dividends (to DC, RFC) – Section 27(D)(4) & Section 28(A)(7)(d);
Tax Sparing Rule (to NRFC) - Section 28(B)(5)(b);
Dividend from FC - Section 42
What is the implication to tax when a corporation declares dividends to shareholders? And if a shareholder dies, who
will be the taxable person? Also, what is the implication to watered stocks?
Domestic Corporation. Pag nagdeclare ng dividend, other than stock, like cash and property dividend, subject to final
withholding tax, depende sino ang recipient ang iisipin mo either taxable yan or exempt. If the recipient stockholder, other than
stock dividend ah, is resident citizen, non-resident citizen, resident alien, subject yan sa 10% final tax. That dividend is no longer
included in the gross income of the recipient because that 10% is already the final tax. Pag ang tatanggap (pertaining to dividend)
NRA ETB, babawasan ng corporation ng 20% final tax. If NRA-NETB, 25% ang final tax. If the recipient is DC or RFC, so
corporation to corporation, exempt sa tax yan. Hindi babawasan ng corporation paying the dividend. If NRFC, ang matatanggap
niya, as a rule, ay babawasan ng 15% final tax under the tax deemed paid principle. Kasi ang tax ng corporation ay 30% - we will
presume that the 15% difference ay savings na binibigay ng country where the NRFC is registered. So ang may final tax,
individuals (iba-iba lang ang rate) at NRFC. Ang exempt ay DC and RFC.
Foreign corporation. If FC naman ang mag-dedeclare. If the RFC inaalam ang sources of income, kapag ang gross income ay at
least 50% from the PH, we allocate. Example, the gross income from PH is 6 million tapos from foreign country is 4 million, so
10 million ang total, so 60% will be income derived from PH. Assuming ang halagang matatanggap is 100k, 60% is considered
income earned within PH nung recipient, so 'yung amount na 'yun, idedeclare 'yun as part of taxable income niya (recepient’s
taxable income). Kung ang lumabas na gross income from the PH ay 4 million, 40% lang or less than 50% (pertaining to
percentage of income derived from PH) - lahat ng dividends na matatanggap ay income from outside the PH (recipient’s income).
At dahil income from without, dalawa lang itatax natin dyan, RC and DC. So kung 'yung dalawang 'yun ang reciepient hey will
include it as part of their taxable income. All others dahil income outside 'yun hindi mo ittax.
Section 105;
Section 25(B)(2) & Section 25(A)(2) (Business Partnership) and Section 26 (GPP)
What if it’s a General Professional Partnership (GPP) — who is subject to VAT, the partnership or [for example] the
lawyers?
Yang General Professional Partnership, exempt yan sa tax. ‘yung share ng partner is an income. Kaya binabawasan ‘yung share
niya ng creditable withholding tax, depending on the amount that you will be receiving. Yan ‘yung more than Php720,000.00
tsaka not more than Php720,000.00, kasi ang GPP is not engaged in business. Para sabihing subject ka [to VAT dahil engaged ka]
sa business, [dapat] ikaw ay business or ordinary partnership. Kaya nga sa GPP, partners belong to the same profession.
Unlike in business partnership, even if different profession o walang profession, pwede, kasi business yon. Kaya kung tayo,
magtatayo ng GPP, at ang itatayo natin ay law firm, puro tayo lawyers. Hindi pwedeng magkasama sa GPP ang CPA tsaka doctor,
lawyer at doctor. Hindi pwede, pero pwede sila magtayo ng business partnership.
Kapag business partnership, ayan, may business yan. Transaction nila ang may VAT. ‘yung share ng partner sa business
partnership, binabawasan ng 10% final tax. Meaning ‘yung share na yon, hindi na idadagdag as part of taxable income ng partner
nung firm.
However, if it is a GPP, ‘yung matatanggap ng partner, babawasan ng 10% or 15% as the case may be, at yon ay creditable
withholding tax. Meaning, ‘yung gross na matatanggap niya, halimbawa, makakatanggap siya ng Php1Million, idadagdag yon ng
partner concerned sa taxable income [niya]. Kapag na-compute na ‘yung tax due niya, ‘yung binawas na creditable withholding
tax, ibabawas [sa tax due from him or her] kasi creditable ‘yun. [Walang tax ‘yung GPP] pero mata-tax ‘yung income niya. Kasi
the income or the share of a partner in a GPP is part of [his or her] taxable income but the 10% or 15% previously withheld will
be used as tax credit.
Unlike in a business partnership, the partnership itself is taxed, and the share of a partner in the income after tax in the business
partnership is to be taxed at 10%. ‘yung 10% na ibabawas sa share ni partner, ito na ‘yung final tax. Kaya dapat madistinguish
mo kung ang partnership, GPP or ordinary partnership.
Kagaya ng law firm, yan ay partnership. Kaya nga ang tawag sa mga boss dyan, partners. Unlike corporation, ang tawag sa mga
boss, board of directors or trustees as the case may be. Kapag ikaw later, sasali ka sa isang law firm, associate ka. Pwede ka later
maging senior. Junior ka muna. Then later, baka maging partner ng GPP. O magtayo kayo ng sarili ninyo na law firm. Partners
agad kayo.
VAT;
Section 27
What is the income and business tax implication of a sale made by a PEZA registered entity to a domestic corporation.
Or from domestic corporation to PEZA entity?

Mayroon silang special rate na subject sila sa 5% gross receipts tax, in lieu of all taxes. Special rate ‘yan. Provided na-meet nila
‘yung requirements. Mayroon pa nga tayo tungkol sa mga pioneer business enterprise, non-pioneer. Basta na-meet mo na ‘yung
requirement at ‘yun ‘yung category mo, mayroon kang special rate.
Sa sale from domestic to PEZA registered entity, iba naman ‘yan. Iba ang treatment diyan. Di mo pwedeng sabihin na ang tax ni
Juan ay dapat tax ni Pedro. Hindi kayo similarly situated. So a domestic corporation making a sale will be taxed as a domestic
corporation and the other one is taxed as a PEZA registered entity. Magkaiba ‘yun eh. Dalawang magkaibang corporation ‘to.
Mayroong transaction pero magkaiba sila. These are two different taxable entities.
Section 28(A)(3)(a) vis-à-vis R.R. No. 15-2013;

Section 108;
Section 117 & Section 118
When are common carriers subject to OPT, VAT, Gross Philippine Billings and Corporate Income Tax? What if a common
carrier whose line of business is both cargo and passenger flies outside of the Philippines?
Domestic common carriers. For domestic, land, water or air. If by land and transports passengers, subject to OPT of 3%. Kukunin
ang gross receipts, compared sa provided by law na minimum gross receipts, whichever is higher, subject yan sa 3% common
carriers tax. Tapos subject yang common carrier to income tax dahil different yan from business tax. If by land and transports
cargoes, subject to VAT. In the event na by air or water, whether passenger or cargoes, determine san pupunta si common carrier.
From PH to foreign port, VAT at 0%. Pag within PH, such as from Manila to Cebu, VAT of 12%. If by air or water, VAT. Lahat yan
subject sa income tax. Tandaan, iba ang income at transfer and business taxes.
Resident International Carrier. Meron syang income tax na babayaran, kasi may income siya dito,, 2.5% tapos subject siya sa
OPT na 3% doon sa byahe niya originating from PH. Example: Saudia Airlines. Transport passengers from Saudi to PH, incoming
siya so wala (tax). Outgoing flight, kung aalis si Saudia Airline from PH, outgoing flight, isusubject siya sa 3%. Pano naman
interconnecting? From foreign country, stopover PH tapos to other country - connecting flight. If connecting flight dito aalis kasi
baka mag rrefuel or baka mag emergency landing siya, pag siya ay tumigil sa PH and will resume the flight at may passenger,
basta sasakay sa same airline, not necessarily same airplane basta same airline, at aalis within 48 hours, hindi mo siya itatax. If
madedelay, para wag matax, dapat justifiable 'yung delay halimbawa may typhoon kaya hindi makaka alis withing 48 hours -
justifiable. If lilipat siya ng new airline yang another airline na yan magiging outgoing na yan,, meron na siyang babayaran na
OPT. Now, if the counrty where registered has reciprocity with our PH government 'yung bang Tax Treaty Agreement, hindi
isususbject to income tax at hindi rin sila issubject sa 3% OPT on transport of passengers, pero meron sila on transport of
cargoes. Wala ang incoming, except connecting flight.
Section 32(B);
Section 85(E)
If there will be proceeds of life insurance and property insurance, what will be the tax paid?
Okay, proceeds ng property insurance, remember it is only a contract of indemnity. You will be indemnified by the insurance
company for what is lost. Hindi ka pwedeng mag-profit kaya kung 'yung halaga ng property na nawala 10M, ang ibabayad sayo
ng insurance company ay 10M din. Kahit naka-insure pa ‘yan for 12M, hindi pwede kasi 'yung lang ung FMV na mawawala sayo.
At dahil yan ay replacement cost lang, walang income diyan. Pinalitan lang 'yung nawala eh. So value ng property lost 10M,
proceeds 10M, wala kang makukuha, wala kang i-tatax kasi 'yun bayad lang sa nawala.
Iba kung ‘yan ay life insurance. ‘Pag life insurance tandaan mo you lost a life and life is more valuable. Kung ang tanong mo ay
tungkol sa income tax, you will never profit out of the loss of a person you love. Kaya kahit 100M ang proceeds niyan hindi ‘yan
taxable income. Bayad ‘yan pampalubag loob sa nawalang buhay. However, kung ang tinatanong mo will the proceeds of the life
insurance be part of the gross estate of the decedent? Yes ang sagot kung ang beneficiary ay estate, administrator, executor
regardless whether the designation is revocable or irrevocable ng beneficiary. However, if the beneficiary is not the estate, nor
the executor nor the administrator, meaning a person other than these three mentioned, magiging part ng gross estate kung
ilalagay mong beneficiary ay revocable. Tandaan mo revocable. Kung ayaw mong ma-subject sa income tax or estate tax, gawin
mo siyang irrevocable na hindi estate, executor, or administrator. At bear in mind, pag silent, hindi ka nagbanggit ang
presumption ang beneficiary mo estate at kapag walang nakalagay kung revocable or irrevocable, automatically revocable ‘yan
‘pag silent.
Okay, ‘yan ang proceeds of life insurance. At proceeds ng property insurance. Kung sakaling property insurance yan, nawala ang
iyong property papalitan ng insurance, walang nawala so there is no deductible loss at wala ring taxable receipt of proceeds of
property insurance.
Section 32(B)(7)(c) & (d);

Section 126
Are prizes and awards subject to donor’s tax, estate tax, or VAT?
Kapag ‘yan galing sa, meron tayong tinatawag na in recognition of your exemplary performance in the field of charitable, artistic,
religious, civil, educational, literary, ‘yan ay walang tax, provided two conditions are met. First, you did not take an active part
to join the contest, and second, you're not required to render future service as a condition for receiving the award. And by special
law, prizes na na-rereceive ng ating mga athletes kapag international competitions are, by special law, hindi i-tatax kasi sa sports
siya. Kaya dapat alam mo lang ‘yung category ng iyong natanggap na awards and prizes, bakit ka binigyan, anong requirements
para ma-exempt. ‘Pag ‘di mo na-meet ‘yung requirement, halimbawa, ikaw ay naging recipient ng Carlos Palanca Award for
Literature, Ramon Magsaysay awardee ka, ‘yan ay mga na-memeet ‘yung requirements. Kung ikaw naman ay naging Binibining
Pilipinas, tignan mo dapat ba natin i-exempt ang prizes at awards na na-receive ng ating nanalong Binibining Pilipinas? Na-
memeet ba niya ‘yung requisites? ‘Pag na-meet niya eh ‘di wala. Pero ‘pag ‘di niya na-meet, eh ‘di meron. So ang issue dito ay do
you satisfy the requisites. Kung na-satisfy mo eh ‘di dun ka applicable, kung ‘di mo na-satisfy, doon ka naman sa isa applicable.
Kasi sa tax, pwedeng taxable pwedeng hindi depending on the attending circumstances. Kaya lang siya rin daw, just taxing. Kasi
if you're claiming exemption, point to the law that grants you exemption. If you cannot point to the law granting exemption, then
taxation is the rule. Exemption is the exception.
Section 32
What is the tax implication of separation from employment?
Okay. Maraming klase ng separation. Kung ‘yan ay separation due to death, sickness, physical disability, causes beyond the
control of the employee, so ‘yan ay, bakit ka naman i-tatax diyan eh tinanggal ka eh. Pero kung wala naman diyan sa issue na
yan, voluntary resignation ka, aba ay tignan naman natin kung voluntary, na-memeet ba requisites para ma-exempt. Oh dapat
alam mo 'yung at least 10 years of service, at least 50 years old, ‘di pa na-avail before ‘yung exemption, eh hindi ka ma-tatax.
Kasi kung hindi mo na-aavail, hindi mo na-memeet requisites i-tatax ka. Kung ‘yan naman ay compulsory retirement, so the law
is telling you to retire, na-meet mo na 'yung compulsory retirement age, na-meet mo requirements, hindi ka i-tatax. Kasi ang
sabi ko nga sa’yo ‘yang mga separation pay, retirement benefit, kapag na-meet mo ‘yung requirements for exemption, hindi ka
dapat ma-tax. Pero kung ‘di mo na-meet, ma-tatax ka. 50 years old ka nga at naka-10 years ka nga, pero previously na-avail mo
na ‘yung exemption on that basis, ay ‘di ka na papayagan. Kasi ang sabi once mo lang i-aavail ‘yung exemption na ganoon. Kasi
may tinatawag tayo na voluntary retirement at compulsory retirement. Meron din tayong separation pay dahil nagresign ka
meron din tayong separation pay dahil tinanggal ka o dahil ni-retrench ka. Natutunan mo naman siguro sa labor may tinatawag
tayo na redundancy, pwede kang tanggalin kasi labor saving devices ang kanilang papalit sa’yo. So basta ma-meet requirements
hindi ka dapat ma-tax.
So ang gist niya - do you meet the requirements for exemption? If yes, wag mo i-tax. If no, i-tax natin.
Section 33
What will be the tax treatment of the benefits received by an employee?
Ah okay. Benefits received by employee. Alamin muna natin [kung] rank and file. Oh ‘di ba 'yan ang mga gusto ko dapat marunong
ka muna mag-distinguish. ‘Pag rank and file syempre wala siyang FBT. Iba pag managerial. Kapag ‘yan rank and file hindi ‘yan i-
tatax kung una de minimis benfits at nag-provide ang law ng ceiling. Kapag nag-exceed sa ceiling, 'yung excess titignan mo kung
kayang i-absorb nung bonuses up to 90K. Halimbawa ang iyong bonus lang ay 40K, eh ang exempt 90K, so kung meron kang
excess de minimis benefits, kakainin pa niya, kaya kung 'yung excess de minimis mo ay let's say ah 55K eh meron ka pang
bakanteng 50K so 'yung 5K lang matatax kasi it is de minimis plus ung 90k so pwede niya kainin kung maliit lang ang iyong 13th
month pay o bonus. Kasi ‘di ba may rice subsidy ka, eh ang rice subsidy mo nag-exceed, meron kang clothing allowance nag-
exceed, so kaya siya dapat makain nung 90K.
Next number 2, kung ‘yang benefits binibigay sa’yo for the convenience of the employer, kaya ka pala binibigyan ng benefit para
lalong mapaganda ‘yung trabaho mo para sa employer, hindi ‘yan itatax. Or yan ay nevessary consequece ng employment. Hindi
naman makakaila sa’tin na may mga trabaho na pwede tayong bigyan ng transportation allowance, gasoline allowance, meron
pa ngang representation allowance, meron pa ngang car allowance, kasi kailangan sa trabaho, pero rank and file. Let’s say I am
a sales agent, I am a medical representative, so I go to doctors, I go to clients. So dapat bigyan ako ng pamasahe o bigyan akong
kotse, fuel, so that is what we call necessary consequence of employment. Hindi siya i-tatax.
Kung ang tatanggap ng benefit ay managerial employee o supervisory employee, para ‘wag siyang matax, kagaya din nung una
sinabi ko kanina - necessary consequence of employment, for the convenience of employer - ‘yan ay hindi matatax. Pero ‘pag
wala diyan, magkakaron yan ng FBT na ang amount ay depende sa formula na gagamitin kung ano ang binigay. Housing, car,
loan, educational benefit, ‘yan ay masusubject sa FBT. ‘Yun nga lang ang pagcocompute niyan ay may formula, depende sa benefit
na binigay. Kailangan ma-compute mo muna ang kanyang monetary value, tapos ‘pag nakuha mo na ‘yung monetary value na
may formula, kukunin mo ang grossed-up monetary value na may formula din. ‘Pag nakuha mo na ‘yung grossed-up monetary
value i-sasubject mo na siya sa FBT na depende ‘yung rate na gagamitin sa kung sino ‘yung empleyado na tumatanggap na
managerial employee. Kasi may mga managerial employee na RC, meron namang mga RA na ang residence andito. So 'yun ang
gagamitin mong rate depende ngayon sa kanila. ‘Yan ang FBT. ‘Yan naman ay expense ng employer kaya deductible niya.

Alam mo naman siguro pagkakaiba ng rank and file sa managerial no? Tama? Halimbawa para ‘di ka na mahirapan, sa Beda,
tama? Sa Beda ako rank and file, ako ay tagasunod. Syempre ang mga managerial sila dean kasi meron silang power of control.
Oh ‘yan ang managerial kami rank and file. Sa kompanya, ‘yung mga sales manager, chief accountant, personnel manager, ‘yan
ang mga managerial. ‘Yung mga nasa accounting staff, sales personnel, sales agent ‘yan ang nasa rank and file. Sa isang
organization kasi may boss at may taga-sunod. So dapat ma-distinguish mo ‘yung employee concerned.
Section 34(A);
Section 99(B)
Will contributions or donations to political parties and candidates be considered for donor’s tax purposes and for
income tax purposes?
‘Yan ay governed ng OEC. Kapag nagbibigay ka ng contribution sa political organization, sa OEC ‘yan. Ang mangyayari niyan
dapat ‘yung recipient na kandidato gamitin ‘yan sa kanyang campaign. ‘Pag ‘di niya ginamit sa campaign, i-coconsider na
nagkaroon siya ng income kaya siya ay dapat ma-tax diyan kasi nagkaron siya ng income. Pero 'yung nagbigay hindi niya expense
‘yan so ‘di nya pwedeng i-deduct. Okay? ‘Yan ang campaign contribution. Eh syempre naman kung ikaw ‘yung kandidato dapat
mo siyang gastusin pero delikado naman baka lumagpas ka sa limit ng election spending. Doon ka naman makakasuhan sa
overspending so mamimili ka kung okay ba na gagastusin ko para wag ako ma-tax or overspending ako. Kaya minsan ang
nangyayari ‘di nila ginagamit kasi baka lumagpas na sila sa limit provided by law, doon sa maximum amount na pwede nilang
gastusin kasi minsan marami silang natatanggap na contributions sa kanilang campaign. So ‘di mo gagamitin ang NIRC, ang
gagamitin mo ay OEC.
Section 34(F);
Section 110
What are the tax implications on sale of fully depreciated assets—income or VAT?
‘Yung fully depreciated asset, pinayagan ka na ba ng BIR magdeduct? So kung pinabayaan ka na ng BIR na magdeduct, ordinary
asset yan. Pag nagbenta ka ng ordinary asset, may VAT yan. Kung yan naman ay capital asset, so hindi mo siya used in business.
Hanggang di mo siya used in business, hindi ka i-su-subject sa VAT.
Tatandaan, ang VAT is on sale of goods or services in connection with business. Kaya kailangan mo ma-distinguish, am I selling
an ordinary asset? Am I selling a capital asset? Kapag di mo yan na-distinguish, may problema. Kapag nasabi mong capital, apply
the rules on capital asset. Kapag nasabing ordinary, apply the rules on ordinary asset.
Section 34(H)
Section 101
If a taxpayer contributes money or property to a government institution, charitable organization, or religious
institution, how are these contributions considered for income tax purposes and for donor’s tax purposes?
Talking of income tax, if you make contributions to the government for priority activity as certified by the NEDA, deductible ‘yan.
If it is ordinary deduction for the government, religious institutions, accredited religious organization, we will compare the
amount of actual contribution with the net income before contribution multiplied by 5% if corporation, 10% if individual. You
deduct whichever is lower. Okay. Inaalam mo muna sino 'yung nagbigay at para saan. So kung halimbawa nagbigay ka sa DepEd
that is certified by the NEDA as priority activity, deduct it in full. At ‘yan ay kung hindi naman diyan, ordinary deduction, deduct
it with limit.
Tungkol naman sa donor’s tax of course ‘pag dinonate mo sa government, hindi ka i-sasubject sa donor’s tax. Ngayon ‘pag
dinonate mo sa mga religious organization andun ‘yung threshold na 30% so aalamin mo muna if the donation you give to this
charitable organizations they are using for administrative purposes. The donation dapat not more than 30% will be used for
administrative purposes for you to be exempt. Okay. Gaya ng mga Hospicio de San Jose, ng mga home for the age., So basta
itatanong mo lang ilang percent po ng amount you received by way of donation ay ginagamit for administrative purposes. Dapat
‘wag lalagpas ng 30%.
Capital Gains and Losses - Section 39;

Capital Gains from Sale of Real Property - Section 24D;
Capital Gains from Sale of Shares of Stock not traded in the Stock Exchange - Section 24(C) and Section 27(D)(2)
Stock Transaction Tax - Section 127
Tax consequence of sale of ordinary and capital assets and what if the seller is engaged in stock trading
Meron tayong enumeration of capital assets, if not included in the enumeration it will be considered as ordinary asset. Kung
capital asset, identify mo. Sino ang nagbenta? If ang nag benta ay individual at ang ibinenta ay personal property, gagamitan mo
siya ng holding period. If more than 12 months ang holding period, it is long term, get 50% of the gain or loss as the case may

be. Makukuha ang gain or loss by looking at the selling price and comparing it with the acquisition cost. So kung may capital gain
or capital loss 50% yan icconsider mo. If not more than 12 months short-term yan, get 100% (pertains to percentage of capital
gain/loss to be considered). Matapos mo makuha compare mo lahat ng capital gain and loss during the year. Kapag mas malaki
ang gain, Net Capital Gain ang tawag. Ang net capital gain ay added as part of the taxable income of the individual for that year.
If mas malaki ang Net Capital Loss, you do not deduct that from ordinary income. Yang Net Capital Loss na yan mag-hihiintay ka
ng susunod na taon. Sa susunod na taon if magkaroon ng Net Capital Gain, ideduct ang Net Capital Loss from previous year,
provided you are limited only to whatever is your Net Income from the previous year. Kapag ang nagbenta ay corporation at
personal property, forget holding period ke more than 12 months or hindi, laging 100%. Add capital gain to taxable income.
Forget capital loss, hindi pwede ideduct sa other income of the corporation. Wala ring capital loss carry over. So 'yun 'yung 2
distinguishing features ng corporation at individual selling personal property held as capital assets, walang holding period at
walang net capital loss carry over (pertains to corporation)
If real property naman and ibinenta ng individual, kunin mo ang selling price or FMV, whichever is higher, may 6% CGT. If hindi
binigay ang FMV, (pertains to basis of 6% CGT) may zonal or assessed value. If lahat meron (pertains to basis), whichever is
highest, 'yun ang basis ng 6%. If real property held as capital asset ay ibebenta sa government, pipili si seller. Gusto niya ba
subject to 6% CGT or gusto ba niya ito iadd as taxable income (pertains to capital gain from the transaction) at isubject to
graduated income tax rates sa tax table. Yan ay tax avoidance. 'yun nga lang baka hindi nyo ma estimate properly since payment
niyan ay 30 days from date of sale (pertains to sale of RP to government), dapat mag-isip kung iadd mo kasi hindi ka na pwede
magavail nung 6% CGT later if malaki pala babayaran mo.
If shares of stock issued by domestic corporation, don’t look at holding period dahil issued by DC yan. Tignan mo if listed or not
listed sa stock exchange. If listed sa stock exchange, 6/10 of 1% CGT. If not listed on the stock exchange or traded sa stock
exchange, 15%.
If individual gusto makatipid, if binebenta mo na real property ay principal residence, avail exemption basta proceeds is fully
utilized for acquiring new principal residence within 18 months, at with notice within 30 days to the BIR provided the benefit
availed is only once every 10 years. Hindi mo ma utilize meaning mas malaki ang proceeds sa pagbenta ng ang principal
residence kesa sa nagastos mo to acquire a new residence - may excess, 'yung di mo nagamit sa pag acquire ng bagong bahay,
itatax na 'yun. Ang formula unutilized proceeds from the selling price, whichever is higher between selling price or FMV multiply
ng 6%.

In a taxpayer’s shares of stock, will the resulting gain or loss be part of the income tax return or be subject to fixed rate
or be deductible?
Kanina sabi ko kapag ‘yan ay shares of stock (SOS) held as capital asset. So kapag capital asset ‘yan, kukunin mo lang at aalamin
mo lang kung ‘yan ba ay issued by a DC or a FC.
Kapag DC, ‘wag kang magholding period. Ang gagawin mo lang aalamin mo kung yan ay listed or not listed in the stock exchange.
‘Pag listed, meaning traded in the stock exchange, magkakaroon siya ng final tax on the selling price. So ke may gain, ke may loss,
it is of no significance kasi ang basis is selling price multiplied by the applicable rate na ngayon nalaman mo na na 6/10 of 1%.
Final tax ‘yan. Selling price ang basis. Kaya nga siya tinatawag na stock transaction tax. Kung sakali namang hindi siya listed,
meaning directly binebenta sa public, hindi dumadaan sa stock exchange. ‘Yan po ay i-tatax natin ‘yung capital gain. Kaya dapat
may gain. Kung walang gain walang tax. Siya ay magiging ano? Kasi kukunin mo ‘yung capital gain eh, so kailangan tumubo siya,
unlike ‘yung listed na kahit na lugi ay may tax.
Kapag ‘yan naman ay in-issue ng FC, halimbawa bumili ka ng SOS ng Apple o ng Microsoft, so FC. Basta FC, bumili ka kasi pwede
ka naman bumili niyan eh. So ayan ay kukunin mo ‘yung holding period kung ibebenta mo.
Kung halimbawa ‘yung SOS natin na in-issue ng DC hindi mo ibinenta. Nakatanggap ka ng liquidating dividend, yung corporation
na nag-issue ay nagsara kaya nag-declare ng liquidating dividend. Doon ka mag-hoholding period kahit DC ‘yan kasi ‘di mo
binenta. Nakatanggap ka ng liquidating dividend or ‘yung corporation na-bankrupt or SOS naging worthless, so ‘dun ka
maghoholding period. Halimbawa, liquidating dividend mo 1M investment cost mo 800K. So may capital gain ka na 200K, so
‘dun ka maghoholding period kasi di siya binenta. So i-aadd mo ‘yung capital gain dun sa iyong other income. Kung sakali naman
‘yung shares naging worthless lang, wala na-bankrupt ung corporation, nalugi ka, ‘yung investment cost mo let's say 10K, you
lost 10k, gamitin mo ung holding period. I-dededuct mo sa capital gain, kung may capital gain. Kung walang capital gain, hindi
ka pwede mag-deduct. ‘Yan ang significance.
So kapag SOS issued by DC, kapag binenta no holding period. Alamin mo lang listed or not listed. Kapag hindi binenta mag-
hoholding period ka, nagkaron ng liquidating dividend naging worthless ‘yung shares, dun ka mag-hoholding period.
Okay? ‘Yan ang tatandaan mo. Kaya ‘yan ang gusto kong makitang answer kung sakaling ‘yan ang tinanong ko.

In case sales of SOS will be brought from DC and later binenta or later hindi siya binenta at nagkaroon ng ganito so sasabihin mo
lang sakin. Halimbawa may follow up question ako what if ang ginawa ay FC shares binenta pero ang tanong ko meron bang
holding period? Ay 'yun dapat liwanagin mo. Domestic eh. Tinanong ko sa’yo ‘pag ang domestic shares ba ay ibinenta may
holding period ba? O dapat malinaw sagot mo. Sasabihin mo sa’kin binenta, ganito. What if tinanong ko FC, shares ng foreign,
binenta may holding period ba? Kasi my dear ang kailangan niyo kasing alamin kung ang pinaguusapan natin ay SOS ang pwede
mong bilhan ng SOS ay DC or FC. Hindi pwedeng ang alam mo lang domestic dapat alam mo pati foreign. At kung sakaling sinabi
mo ay domestic, dapat alam mo rin kung ibinenta ba o nagkaron lang ng transaction. At kung binenta ba dapat ba ‘ko maglisted
or not listed. Ganoon kalalim ang dapat na answers niyo. 'Yun bang you will let me know that you know.
Section 40;
Section 100
Will dacion en pago result in donor’s tax? Income tax?
Dacion en pago is governed by the law on sales. May existing na utang, babayaran by goods at kailangan pumayag si creditor na
tanggapin. As if the goods were sold, ang binayad 'yung utang. So the obligation to pay in money is paid in kind.
Section 40
If a corporation gives shares of stock to an individual in exchange of property given by the individual, will there be tax
consequences?
Okay we will check, if by reason of the exchange, that individual receiving shares of stock will gain control of the corporation -
meaning siya ang magiging majority stockholder - no gain or loss to be recognized. Wala kasi parang lumipat lang from one
pocket to another pocket.
Pero kung dati na siyang may control or hindi niya ma-cocontrol 'yung corporation, ayon magkakaroon siya ng i-rerecord na
gain or loss. ‘Pag purely shares of stock ha. So, property to purely shares of stock. 'yun ang rule.
Pero kapag in addition to shares of stock, ay may ibibigay na cash or other property. Assuming ang FMV ng ibibigay ni individual
ay 10M, at ang ibibigay sa kanya ng corporation ay shares of stock worth 8M and cash na let’s say ay 2M, so 10M din ‘yon, bayad
doon sa property, edi may natanggap na cash. I-cocompare natin magkano 'yung acquisition cost nung property na binigay ni
individual kay corporation. Kung 'yung acquisition cost niya doon sa property ay 9M, nakatanggap siya ng 2M cash. So ang
puhunan mo 9M, at ang FMV 10M, may profit ka na 1M. So i-tatax 'yung 1M. In the event na ‘yan ay 10M pero 'yung cost mo 7M.
So 3M dapat 'yung profit. Pero ang cash lang 2M. 2M lang ang ipa-profit mo, kasi 'yung natanggap na shares of stock hindi pa
pera ‘yon. We will wait until later the recipient stockholder or the owner of the property who received cash will sell the shares.
Doon pa lang natin malalaman kung talagang mag-gegain o mag-loloss, kasi ang valuation ng shares, ‘di pa ‘yan profit until
maging pera ‘yan. So, kaya bumibili ka ng shares for investment. So, wala pang profit. 'yung temporary appreciation in the value
of the shares will not be profit, temporary deduction in the value is not a loss, until an actual transaction occurs, and that will be
when the shares so acquired will be later on sold.
Ganoon lang. Basta ‘pag mag-gain control o hindi mag-gain control. ‘Pag purely shares of stock o ‘pag may kasamang cash and
other property.
Section 73
Assuming there was an exchange of common shares to preferred shares where the stockholder had an increase of
interest, assuming from 500 common shares to 1000 preferred shares, will it still be tax-free?
Pag nag-exchange ng shares, walang nangyayari diyan kasi hindi pa natin binebenta ang shares. Increase in the value is not
income, decrease in the value is not loss. So exchange ng shares, hindi yan income UNLESS magkaroon ‘yan ng transaction where
we will realize gain. Kunyari acquisiton cost ng shares ganito, ito ngayon naging benta, dun mo iko-compare kasi naging pera.
Hangga’t hindi siya pera, tumaas ang value, dumami ang shares. Kaya nga stock dividend is not taxable, Kasi in stock dividends
kasi you merely increase your shares but you are not getting any tangible benefit unless maibenta natin 'yung shares para
magkaroon tayo ng transaction effecting sale.
Halimbawa kasi acquisition mo ng shares ten pesos. Nagkaroon ng stock dividends, dumami 'yung shares. Lumalabas, bababa
lang 'yung acquisition cost mo per share kasi dumami ang shares pero wala kang income hanggang hindi mo siya binebenta. You
must sell the shares. Ibenta mo 'yung stock dividend mo, magiging cash. Yun [ang taxable].
TRANSFER TAXES

Section 84
Assuming a person died leaving a Net Estate of P10,000,000. Since there are no claims against the estate, two of the
three heirs decided to have an extrajudicial settlement of the estate. The third heir was stranded in Japan so they were
not able to get his consent to the EJS. The question is, is it required to have first the EJS among the heirs before they can
pay the estate tax with the BIR, OR the two heirs (if there was no appointed Administrator) can already pay the estate
tax since the Net Estate was already determined/computed?
Regardless, whether there is settlement or no settlement of the estate, the liability to pay the estate tax is there, they must pay
the estate tax. It is not a tax on the property that the decedent left. It is tax on the privilege to transfer ownership by way of
succession. Ke-ma determine kung sino ang lawful heirs or sino ang entitled heirs, will be of no significance. Kasi ang inaalam
how much is the taxable estate at hindi kung sino ang entitled sa estate. Kung may mga heirs na wala pa hindi pwede idahilan
ng heirs sa BIR na “nag-aaway pa po kami, nagtatalo pa po kame, may mga heirs pa po kame na hindi magka intindihan.” Hindi
siya icoconsider (pertaining to the dispute between heirs). Ang icoconsider, magkano 'yung estate na dapat i-subject to estate
tax. For computation, kunin ang estate, alamin ang allowable deductions and exemptions. Ang important, we get the net taxable
estate, apply the 6% rate, pay the tax, and must be done within 1 year from the time the decedent died, not from the time of
agreement between the heirs. Ang importante ay kumpyutin ang net taxable estate, walang significance kung sino ang mga heirs.
Ang importante ay magkano ang dpat itax sa naiwan ng namatay.
Section 32(B);
Section 85(E)
If there will be proceeds of life insurance and property insurance, what will be the tax paid?
Okay, proceeds ng property insurance, remember it is only a contract of indemnity. You will be indemnified by the insurance
company for what is lost. Hindi ka pwedeng mag-profit kaya kung 'yung halaga ng property na nawala 10M, ang ibabayad sayo
ng insurance company ay 10M din. Kahit naka-insure pa ‘yan for 12M, hindi pwede kasi 'yung lang ung FMV na mawawala sayo.
At dahil yan ay replacement cost lang, walang income diyan. Pinalitan lang 'yung nawala eh. So value ng property lost 10M,
proceeds 10M, wala kang makukuha, wala kang i-tatax kasi 'yun bayad lang sa nawala.
Iba kung ‘yan ay life insurance. ‘Pag life insurance tandaan mo you lost a life and life is more valuable. Kung ang tanong mo ay
tungkol sa income tax, you will never profit out of the loss of a person you love. Kaya kahit 100M ang proceeds niyan hindi ‘yan
taxable income. Bayad ‘yan pampalubag loob sa nawalang buhay. However, kung ang tinatanong mo will the proceeds of the life
insurance be part of the gross estate of the decedent? Yes ang sagot kung ang beneficiary ay estate, administrator, executor
regardless whether the designation is revocable or irrevocable ng beneficiary. However, if the beneficiary is not the estate, nor
the executor nor the administrator, meaning a person other than these three mentioned, magiging part ng gross estate kung
ilalagay mong beneficiary ay revocable. Tandaan mo revocable. Kung ayaw mong ma-subject sa income tax or estate tax, gawin
mo siyang irrevocable na hindi estate, executor, or administrator. At bear in mind, pag silent, hindi ka nagbanggit ang
presumption ang beneficiary mo estate at kapag walang nakalagay kung revocable or irrevocable, automatically revocable ‘yan
‘pag silent.
Okay, ‘yan ang proceeds of life insurance. At proceeds ng property insurance. Kung sakaling property insurance yan, nawala ang
iyong property papalitan ng insurance, walang nawala so there is no deductible loss at wala ring taxable receipt of proceeds of
property insurance.
Section 85(G)
What are the tax implications on transfers for insufficient consideration?
Okay, transfer for insufficient consideration. Kunin muna ang FMV at the time of transfer vs. the consideration received.
Kailangan mas mataas 'yung FMV at the time of transfer kaysa sa consideration, kasi kung mas mataas o equal 'yung
consideration, forget the provision. The provision applies only if the FMV of the property so transferred during lifetime of the
decedent ay mas mataas sa consideration na natanggap niya. Now, ‘pag nakita mong mas mataas 'yung FMV at the time of
transfer, nakuha na natin 'yung rule number 1. Rule number 2, compare the FMV at the time of death with the consideration that
was received.
To illustrate, if the FMV at the time the transfer was made during the lifetime was 8M and the consideration received was only
7M, so siya ay insufficient. Na-meet natin 'yung rule 1. Ngayon naman, ikukumpara na natin 'yung FMV at the time of death. Kung
'yung property tumaas pa ang halaga, let’s say 'yung halaga naging 10M. I-compare mo ngayon sa 7M. 7M, i-minus mo sa 10M.
3M 'yung idadagdag mo sa estate nung namatay. Now, if the FMV was 8M sa una nating example. Pero sa paglipas ng panahon,
bumaba 'yung halaga, naging 6M. So if i-susubtract mo 'yung consideration received from the 6M, mas malaki pa 'yung
consideration. Wala kang idadagdag sa gross estate ng namatay.

So two things must be considered here: first, the FMV at the time of transfer is greater than the consideration, and ‘pag na-satisfy,
then the FMV at the time of death must be more than the consideration. Get the difference. Kaya kung 'yung FMV at the time of
death is less than the consideration previously received, wala kang idadagdag sa gross estate ng namatay.
Thus, not because mayroong transfer for insufficient consideration automatically isipin mong magiging part ng gross estate.
Hindi. Dalawa ang requirements. ‘Pag isa lang ang present, hindi siya pasok.
Dapat, ganoon kaliwanag ang pag-eexplain niyo sa inyong departmental exams. If there is a need to distinguish, kasi kung a-
answer ka lang ng, “just add the difference between consideration received...” Eh kasi, kung 'yung consideration received mas
mataas na, kahit na later mag-iba 'yung nangyari, wala kang i-coconsider kasi hindi na-meet 'yung dalawang requirements. So
dito ang talagang istorya alam mo 'yung mga requirements. Dahil ‘pag di mo alam 'yung requirements, kumbaga sa bayabas,
pinitas ka nang bubot, ‘di ka masarap. Kaya kailangan, kumpleto. As I check your answers, dapat makita kong pwede ka nang
isabak sa bar. ‘Pag ‘di ka pwedeng isabak sa bar, may problema tayo, kasi 'yung 30% ng grade, na-compute ko na ‘yon kasi
nagkaron tayo ng midterm meetings. 'yung 30% 'yun ata 'yung inyong i-susubmit na i-coconvince niyo ‘ko. 'yung grade non
depende sa output. 'yung 40% departmental. So fair and square. Kailangan satisfy me that you will take the bar exam this 2021.
Pero gagraduate eh. Ang gagraduate, dapat 'yun dapat lang grumaduate. Gusto ko rin makagraduate 'yung mga dapat
grumaduate. Nararamdaman mo naman 'yung midterm class performance mo. Alam mo 'yung midterm class performance mo.
Kaya may idea na ‘ko kung sino ka. Kaya ‘pag binasa ko 'yung exam mo sa finals, baka ma-confirm 'yung pagkakakilala ko sa’yo.
Eh 70% na ‘yon ‘di ba? Kaya nga payag ako sa ganito para ma-clarify ko sa’yo.
'Yun bang narinig mo, “common carrier.” Aba, aalamin ko pa pala kung domestic o foreign. At ‘pag inalam ko pa pala, aalamin ko
pa by air, by land, water. At aalamin ko pa pala ‘pag foreign, siya ba ay mayroong reciprocity.
‘Pag dividend, aalamin ko pa pala anong klaseng dividend, aalamin ko pa pala sinong nagbigay, aalamin ko pa pala sinong
bibigyan. ‘Pag sinabi mo lang dividend, may final tax, kawawa ‘tong batang ‘to. Kukuha ng bar ganito sumagot. Sabihin mo subject
sa final tax. Tanong mo kaagad paano kung domestic to domestic, o paano kung foreign to domestic, paano kung domestic to
foreign. So 'yung sagot ay malayo. Kaya sa first few statements, makikita ko na kung may alam ka, or you’re just making a guess,
or may alam ka na kumbaga sa 10 points, pang-1 point lang.
Kagaya nung output, input. Saan siya pwedeng i-deduct, kailan siya pwedeng i-refund. Halimbawa sinabi kong may excess input,
anong gagawin sa excess input, saan siya gagamitin. Baka sinabi mo lang na i-cecredit or sinabi mo lang pwede siya na ipa-
refund, ay baka mali kasi depende saan 'yung source eh. So I want to read answers na magsasabi sino ka.
Section 86
Clarification on concept of Vanishing Deduction and how to compute?
Vanishing deduction is property previously taxed. Make sure the previous tax is either donor’s tax or estate tax. So this is the
second tax on a previous gratuitous transfer. If 'yung previous gratuitous transfer hindi siya nasubject before sa estate tax or
donor’s tax, forget vanishing deduction. Assuming 'yung property naging part ng taxable estate ng previous decedent or donor
na within 5 years matatax ulit, magdadag dag tayo ng deduction na tinawag na Deduction for Property Previously Taxed. Ang
gagamitin na formula: get whichever is lower between the value at the time it was given gratuitously and value at time of death
of present decedent, get whichever is lower.. If nang idonate or mamana, may unpaid mortgage yan na inassume at binayaran
ng nakatanggap na decedent, ideduct mo yan. ‘Pag dineduct mo 'yun magkakaron ng initial basis, tapos mula sa initial basis na
yan bawasan mo yan. Initial basis over gross estate multiply by the claims, losses, interest taxes, and transfer for public purpose.
Compute mo. Ang makukuha mong amount, bawas mo sa initial basis. Ang tawag sa lalabas ay final basis, yang final basis
multiply by applicable rate (20, 40, 60, 80 or 100 percent) depends upon interval from the time of gratuitous transfer up to time
of death of present decedent. Kaya vanishing, bumababa. If namatay within 1 year, 100% etc. Kaya dapat magawa within 5 years,
other than that forget it. Note that the property must be situated in PH and provided further donors and estate before is
previously paid, at present sa estate ng namatay.
Section 34(A);
Section 99(B)
Will contributions or donations to political parties and candidates be considered for donor’s tax purposes and for
income tax purposes?
‘Yan ay governed ng OEC. Kapag nagbibigay ka ng contribution sa political organization, sa OEC ‘yan. Ang mangyayari niyan
dapat ‘yung recipient na kandidato gamitin ‘yan sa kanyang campaign. ‘Pag ‘di niya ginamit sa campaign, i-coconsider na
nagkaroon siya ng income kaya siya ay dapat ma-tax diyan kasi nagkaron siya ng income. Pero 'yung nagbigay hindi niya expense
‘yan so ‘di nya pwedeng i-deduct. Okay? ‘Yan ang campaign contribution. Eh syempre naman kung ikaw ‘yung kandidato dapat
mo siyang gastusin pero delikado naman baka lumagpas ka sa limit ng election spending. Doon ka naman makakasuhan sa
overspending so mamimili ka kung okay ba na gagastusin ko para wag ako ma-tax or overspending ako. Kaya minsan ang
nangyayari ‘di nila ginagamit kasi baka lumagpas na sila sa limit provided by law, doon sa maximum amount na pwede nilang

gastusin kasi minsan marami silang natatanggap na contributions sa kanilang campaign. So ‘di mo gagamitin ang NIRC, ang
gagamitin mo ay OEC.
Section 40;
Section 100
Will dacion en pago result in donor’s tax? Income tax?
Dacion en pago is governed by the law on sales. May existing na utang, babayaran by goods at kailangan pumayag si creditor na
tanggapin. As if the goods were sold, ang binayad 'yung utang. So the obligation to pay in money is paid in kind.
Section 34(H);
Section 101
If a taxpayer contributes money or property to a government institution, charitable organization, or religious
institution, how are these contributions considered for income tax purposes and for donor’s tax purposes?
Talking of income tax, if you make contributions to the government for priority activity as certified by the NEDA, deductible ‘yan.
If it is ordinary deduction for the government, religious institutions, accredited religious organization, we will compare the
amount of actual contribution with the net income before contribution multiplied by 5% if corporation, 10% if individual. You
deduct whichever is lower. Okay. Inaalam mo muna sino 'yung nagbigay at para saan. So kung halimbawa nagbigay ka sa DepEd
that is certified by the NEDA as priority activity, deduct it in full. At ‘yan ay kung hindi naman diyan, ordinary deduction, deduct
it with limit.
Tungkol naman sa donor’s tax of course ‘pag dinonate mo sa government, hindi ka i-sasubject sa donor’s tax. Ngayon ‘pag
dinonate mo sa mga religious organization andun ‘yung threshold na 30% so aalamin mo muna if the donation you give to this
charitable organizations they are using for administrative purposes. The donation dapat not more than 30% will be used for
administrative purposes for you to be exempt. Okay. Gaya ng mga Hospicio de San Jose, ng mga home for the age., So basta
itatanong mo lang ilang percent po ng amount you received by way of donation ay ginagamit for administrative purposes. Dapat
‘wag lalagpas ng 30%.
VALUE-ADDED TAX
VAT
Significant effect of TRAIN Law to VAT System?
Hindi naman binago ng TRAIN Law ‘yung aspeto ng VAT. Ang binago lang ‘yung threshold. Pero ‘yung sistema - ganoon pa din
ang exempt transactions, ganoon pa din ang treatment sa output, ganoon pa din ang treatment sa input.
Sa VAT Refund, same pa rin naman. Ganun pa din ang rules sa VAT. Pili ka lang, kung available ang option ha. Kung hindi available,
hindi ka makakapag-refund ng Excess VAT.
VAT;
Section 27
What is the income and business tax implication of a sale made by a PEZA registered entity to a domestic corporation.
Or from domestic corporation to PEZA entity?
Mayroon silang special rate na subject sila sa 5% gross receipts tax, in lieu of all taxes. Special rate ‘yan. Provided na-meet nila
‘yung requirements. Mayroon pa nga tayo tungkol sa mga pioneer business enterprise, non-pioneer. Basta na-meet mo na ‘yung
requirement at ‘yun ‘yung category mo, mayroon kang special rate.
Sa sale from domestic to PEZA registered entity, iba naman ‘yan. Iba ang treatment diyan. Di mo pwedeng sabihin na ang tax ni
Juan ay dapat tax ni Pedro. Hindi kayo similarly situated. So a domestic corporation making a sale will be taxed as a domestic
corporation and the other one is taxed as a PEZA registered entity. Magkaiba ‘yun eh. Dalawang magkaibang corporation ‘to.
Mayroong transaction pero magkaiba sila. These are two different taxable entities.
VAT
What are the rules on VAT for Senior Citizens and PWDs?
Exempt sila. Halimbawa, ako senior citizen, pag kumain ako sa Jollibee, aalisin ‘yung 12%. Kasi under BIR Ruling, pag restaurant
‘yan, the menu price should include the VAT. So kung ako ang kakain wala akong VAT, tatanggalin nila ang 12%. So kung selling

price 112, inclusive of the VAT, 112 multiplied by 12%, aalisin nila ‘yun. And then in addition pa, benefit ko na naman, mayroon
akong 20% discount kapag restaurant.
Section 105 & Section 109(BB)

Are doctors, lawyers, and their offices subject to VAT?
If more than Php3Million ang gross receipts nila, during the year. Or kahit hindi siya more than Php3Million, kung siya ay nagpa-
optional registration, why not? Required siya kapag more than Php3Million.
Note: Kahit lagpas ka ng Php3Million, kung yan naman ay compensation income, bakit ka naman i-va-VAT? Marami kasing nag-
aakala na the moment na lumagpas na sila ng Php3Million, [subject na sila sa VAT pero] compensation income eh. Employer-
employee relationship. So kapag employer-employee, tandaan mo hah, na ang sweldo mo pa ay Php4Million a year, pero yan ay
galing sa employer-employee relationship, hindi ka subject sa VAT.
Oh di ba kagaya mo, empleyado ka, may sweldo ka, kahit na napakalaki ng sweldo mo, kahit more than Php3Million, wala kang
VAT liability. Kasi hindi ka naman engaged in business. Ang VAT will be on sale of goods and services in connection with business.
Kaya kahit na ikaw ay lawyer, doctor ka, lumagpas ka ng Php3Million, pero empleyado ka, wala kang VAT. Kasi may mga doctor,
company doctor. So they are using their services, but there is employer-employee relationship. Eh bakit ka naman i-va-VAT?
Para ma-VAT, you are selling services or goods in connection with business. At kapag ikaw ay empleyado, hindi ka engaged in
business. That is employer-employee relationship. Kaya income pa more, basta ikaw ay empleyado.
Section 105;
Section 25(B)(2) & Section 25(A)(2) (Business Partnership) and Section 26 (GPP)
What if it’s a General Professional Partnership (GPP) — who is subject to VAT, the partnership or [for example] the
lawyers?
Yang General Professional Partnership, exempt yan sa tax. ‘yung share ng partner is an income. Kaya binabawasan ‘yung share
niya ng creditable withholding tax, depending on the amount that you will be receiving. Yan ‘yung more than Php720,000.00
tsaka not more than Php720,000.00, kasi ang GPP is not engaged in business. Para sabihing subject ka [to VAT dahil engaged ka]
sa business, [dapat] ikaw ay business or ordinary partnership. Kaya nga sa GPP, partners belong to the same profession.
Unlike in business partnership, even if different profession o walang profession, pwede, kasi business yon. Kaya kung tayo,
magtatayo ng GPP, at ang itatayo natin ay law firm, puro tayo lawyers. Hindi pwedeng magkasama sa GPP ang CPA tsaka doctor,
lawyer at doctor. Hindi pwede, pero pwede sila magtayo ng business partnership.
Kapag business partnership, ayan, may business yan. Transaction nila ang may VAT. ‘yung share ng partner sa business
partnership, binabawasan ng 10% final tax. Meaning ‘yung share na yon, hindi na idadagdag as part of taxable income ng partner
nung firm.
However, if it is a GPP, ‘yung matatanggap ng partner, babawasan ng 10% or 15% as the case may be, at yon ay creditable
withholding tax. Meaning, ‘yung gross na matatanggap niya, halimbawa, makakatanggap siya ng Php1Million, idadagdag yon ng
partner concerned sa taxable income [niya]. Kapag na-compute na ‘yung tax due niya, ‘yung binawas na creditable withholding
tax, ibabawas [sa tax due from him or her] kasi creditable ‘yun. [Walang tax ‘yung GPP] pero mata-tax ‘yung income niya. Kasi
the income or the share of a partner in a GPP is part of [his or her] taxable income but the 10% or 15% previously withheld will
be used as tax credit.
Unlike in a business partnership, the partnership itself is taxed, and the share of a partner in the income after tax in the business
partnership is to be taxed at 10%. ‘yung 10% na ibabawas sa share ni partner, ito na ‘yung final tax. Kaya dapat madistinguish
mo kung ang partnership, GPP or ordinary partnership.
Kagaya ng law firm, yan ay partnership. Kaya nga ang tawag sa mga boss dyan, partners. Unlike corporation, ang tawag sa mga
boss, board of directors or trustees as the case may be. Kapag ikaw later, sasali ka sa isang law firm, associate ka. Pwede ka later
maging senior. Junior ka muna. Then later, baka maging partner ng GPP. O magtayo kayo ng sarili ninyo na law firm. Partners
agad kayo.
Section 106(A)(2)(a)
Difference between export sales and foreign currency denominated sales?
Export sales, out of the country. Foreign currency denominated sale, goods are delivered within the country, pero parehong
foreign currency ang gamit pang-bayad.

Section 106(A)(2)(a) & Section 107
What are the tax implications on export and import sales?
Pag ikaw ay magi-import, importation of goods whether engaged in business or not, unless ikaw ay nasa listahan ng exempt. Pag
wala ka sa exempt, kunin mo ang landed cost. At alam mo naman ang elements ng landed cost - dutiable value, other charges,
customs duties, brokerage, arrastre, wharfage and others plus other charges pag mayroon pa yang excise tax at docstamp. Pag
nakuha mo na ‘yung landed cost, dun ka magi-impose ng VAT.
Kapag ikaw naman mage-export, at ikaw ay VAT-registered, iyan ay imumultiply ng 0%. Kapag hindi ka VAT-registered, exempt
‘yung export. In both cases, wala kang babayaran. Ang pagkakaiba lang, hindi ka makaka-claim ng input pag exempt ka. Pag
subject ka sa 0% mayroon kang input na pwede mong piliin: i-refund or ipa-credit mo kasi galing sa zero-rated.
Section 106(B)
What is the reason for transactions deemed sales?
Pag reason, Congress ‘yan. Lahat ng taxes ay to raise revenue, to defray the expenses of the government. Kasi lifeblood theory
eh.
There is no sale pero ‘yung ginawa ay iko-consider for VAT purposes na binenta. Diyan, wala kang binenta, pero sabi ng law,
parang binenta, magkaka-VAT. Kaya kung ayaw mong tamaan nung 60 day consignment, bago lumagpas ng 60 days bawiin mo
sa consignee. Sa consignment kasi ownership over the goods is not transferred to the consignee. Galing sa manufacturer, si
consignor. Si consignor minsan pinapadala niya sa mga tindahan, sa mga department store, ‘yung produkto niya not by way of
sale but by way of consignment. Pag nasa consignee, wag mong papalagpasin ng 60 days. Halimbawa 60 days bukas, bawiin mo
para wag ma-subject sa VAT.
Section 106(B)
With respect to transactions deemed sales, is there a need to be engaged in business?
Of course, tandaan mo ang definition ng VAT. It is imposed on sellers of goods and services in connection with business. Pag
wala kang business, wala kang VAT kahit nagbenta ka.
Halimbawa, mayroon kang gamit sa bahay, gusto mo ibenta, hindi ka naman engaged in business. Halimbawa, singsing, hindi ka
naman engaged sa jewelry business. ‘Yung boyfriend mo gipit sa pera, ang sabi sayo “pautangin mo ako, kung hindi
makikipagbreak na ako sa’yo.” Anong papautangin mo eh wala ka ngang pera. Sabi niya “ibenta mo ‘yung singsing mo.” Binenta
mo. At dahil singsing ‘yun tumataas ang halaga, nabili mo ang singsing mo P10K, nabenta mo ng P30K, nagbenta ka, pero hindi
ka naman engaged in selling kaya wala kang VAT. Kahit nagbenta ka ng singising ng 10Mphp, ang puhunan mo ay 8Mphp, lagpas
ng 3M yun pero walang VAT.
Kasi hindi mo business magbenta, nagkaroon ka ng transaction incidental lang. Tandaan mo VAT applies - dalawang transaction
lang ha - (1) seller of goods and services in connection with business; and (2) importation of goods. At syempre alam mong may
exemption pa ‘yan kasi hindi porke’t nagbenta, hindi porke nag-import, agad-agad may VAT, baka exempt siya sa VAT.
So don’t get a wrong impression na every time you make a sale or an importation, may VAT. Baka nasa listahan ng exempt
transaction ng sale or importation. Di ba may 22, sabi ko sa inyo i-memorize niyo. ‘Yan ang makakatulong sa inyo sagutin ‘yung
tanong kasi kung hindi, magkaka-problema naman tayo. Samantalang alphabet, 26, memorize mo. Kung kaya mo ang 26, kaya
mo ang 22.
Section 106(B)
If a stockholder received property dividend from a corporation, will there be VAT?
Kapag yan ay dividend received na property, hindi naman yan ibinenta. Depende anong property yan. Let’s say, ‘yun ay inventory
niya. Di ba nakalagay dun sa transaction niya, deemed sale. Distribution, transfer, use not in the ordinary course of business.
Ang distribution ng goods to shareholders to creditors will be deemed sale. At dahil deemed sale yan, i-VA-VAT yan.
Iba ‘yung VAT, iba ‘yung income tax. Iba ang income, iba ang business, iba ang transfer taxes. Hindi mo pwedeng sabihin na, ano
ba yan. Parang may double taxation. Hindi bawal ang double taxation, and strictly speaking, hindi yan double taxation kasi
magkaiba ng tax being imposed. Yan ay tax on your inventory you are using to distribute dividend. Kaya yan ay deemed sale. At
dahil deemed sale, may VAT yan. Kapag nakakareceive ng cash, property dividend, depende yan kung sino ang nakakareceive
ng dividend para malaman kung paano siya isusubject sa income tax.
Dapat memorized niyo rin ang mga transactions deemed sale. Lima yon. Walang actual sale na nangyare, pero parang may sale,
kaya may VAT.

Section 106(B)
If a stockholder receives property dividends from a corporation, will there be a VAT?
Yes, kung yan ay inventory, paninda, deemed sale. Distribution of goods or inventory to shareholders or even to creditors by
way of effecting payment. Yan ay masa-subject kasi distribution of goods ‘yan kasi property dividend eh. So kung ang negosyo
natin ay hotdog, pero wala tayong available na cash, ayaw naman natin magbigay ng stock dividends, so ang ibibigay natin ‘yung
paninda nating hotdog, may VAT ‘yun. Kasi distribution of inventory ‘yun eh. The moment you distribute your inventory, as if
you’re selling inventory, kaya magkaka-VAT ‘yun.
Section 106(B)
If goods are delivered on consignment, is it subject to VAT?
Pag lumagpas ng 60 days. Consignment of goods if there is no actual sale and it exceeded 60 days following the date of
consignment, deemed sale. Hindi siya actually sold pero deemed sold.
Section 107
On the tax implications on imported goods, can there be a situation where we have a tax on tax?
Yes. ‘Pag imported goods, tignan mo. ‘Di ba magkakaroon tayo ng landed cost. Ang landed cost, kunin mo ‘yung dutiable value,
cost insurance, freight, tapos idadagdag na natin charges. Sa charges may DST, may excise tax. Tapos, ‘pag na-total natin ‘yung
other charges, na may taxes na ah, excise tax, customs duty, DST, magiging landed cost. ‘yung landed cost, ‘yun ang magiging
basis ng VAT. So there is a VAT on the tax added to the landed cost, in effect. Kasi magkakaiba naman siya. ‘Di ba may customs
duties, ‘di ba may excise tax?
Sa excise tax natutunan mo naman, ito ay imposed on goods imported to the Philippines and goods manufactured for domestic
consumption. Tignan mo ah, excise tax will be imposed on goods imported to the Philippines and goods manufactured in the
Philippines for domestic consumption. Kung ayaw mong ma-VAT, ayaw mong ma-excise tax. Ay hindi ‘yung VAT meron eh. Kung
ayaw mong ma-excise tax, goods manufactured in the Philippines should be exported. So if you will export, the goods, wala kang
excise tax. Pero pwede kang may VAT na 0%, kung VAT-registered ka.
Dalawa naman ang manufacturer in the Philippines eh: manufacturer for export at manufacturer for domestic consumption, or
both. Pero definitely, kapag ikaw ay nag-import, may excise tax ka, except on those importations na exempt. Kasi may mga
makikita ka na exempt transactions. ‘Di ba may 22 tayo na exempt transactions at meron doong mga import na exempt.

Section 108;
Section 109
The difference between VAT-exempt entities and VAT-exempt transactions?

‘Yung entity mismo, siya mismo ang exempt. ‘Yung transaction kasi pwedeng nagbenta ka - tignan mo ah: if I sell feeds for animals
primarily for human consumption like poultry chicken, at nagbebenta din ako ng feeds for specialty animals like fighting cocks.
So ako ay may dalawang transaction, magkaiba ng treatent, kasi ang transaction ko na pagbebenta ng patuka sa animals for
human consumption, walang VAT ‘yun, exempt ‘yun eh. Pero ‘yung binenta ko na patuka para sa fighting cocks, may VAT. So ‘yun
ang transaction. One taxpayer may have transactions exempt from VAT, [while the other is] subject to VAT.
Section 109
Are returning citizens or balikbayan boxes subject to VAT?
Nasa enumeration siya ng exempt sa VAT. ‘yung mga personal and household effects, professional instruments and implements;
provided, the conditions are met. Kapag na-meet mo ‘yung condition para ma-exempt, hindi ka i-va-VAT, kasi balikbayan yan
eh. Dala-dala na nila yan. Di man nila dala, within the period provided by law, dapat dumating yan. Kung sakali namang lumagpas,
ina-allow. Justified ba ‘yung delay ng pagdating ng cargo? Kasi kung minsan, may mga bagay na pwedeng ma-delay, pero justified.
Di naman strict ‘yung law na ganito dapat dumating, eh hindi dumating, i-va-VAT mo na. Eh baka nadelay lang sa byahe.
Ikaw minsan nade-delay ka sa pagdating sa klase, pero sabi mo justified. Oh di ba? Madalas na dahilan ma-trapik.
Section 109(P)
For VAT-exempt sale of residential property, what is the applicable threshold: the 1.5 and 2.5M per TRAIN law or the
1.9 and 3.1M per the Revenue Regulation?
‘Yung bago na. Naglabas ng ruling ang BIR. Bear in mind, rulings issued by the BIR are presumed correct unless challenged and
superseded. Kapag hindi binago ‘yan, presumed correct. Kasi the power to interpret ay nasa BIR. Hanggang di nire-reverse o
binabago, pine-presume natin na correct.
Section 109(Q) & Section 109(BB)

What is the tax implication on rentals in excess of Php15,000 per month and what if gross receipts are in excess of Php3
Million, and if gross receipts are less than Php3 Million?
Situation #1: If less than Php3Million, there will be no VAT unless you make VAT registration optional.
Situation #2: In the event that it (gross receipts) is more than Php3Million, but the rental is not more than 15K, no VAT.
Situation #3: If it is more than 15K, but the aggregate will not exceed Php3Million, no VAT (unless nga nag optional).
Para masubject ka sa VAT, ke registered ka o hindi, ‘yung dalawang requisites (dapat) present:
(1) the aggregate (gross receipts) is more then Php3Million; and
(2) the rent is more than 15K a month.
If that is residential hah. Kasi kung yan ay hotel, at ang rent ay di lagpas 15K, subject pa rin (sa VAT) dahil hindi siya residential.
Siya ay business.
Residential kasi nakatira dyan gagamitin bilang tahanan nila. Kaya dapat pag residential, mag exceed ng 15K per month at ang
aggregate na nakokolekta ng lessor lumalagpas ng Php3Million. Yan ang dalawang requisites.
What are the tax implications on cockpits, and what if inside the cockpit there is also a restaurant run by a lessee?
Di ba ang cockpit, may OPT yan na 18%. Kung ‘yung may restaurant dyan is the operator of the cockpit, kasama yan sa gross
receipts niya. Pero kung may lessee siya, another business ‘yun at ang restaurant doon, although inside the cockpit but not
operated by the cockpit operator, treated as separate entity, VAT.

If a non-VAT person’s sales breaches the P3M ceiling by the middle of the year, how is the transition to VAT done? What
returns are required for the year of transition and how is the tax due for the returns computed?
Alamin muna natin kasi baka ang transaction mo ay exempt transaction. Kahit lumagpas ka sa 3M, kung exempt transaction yon,
wala pa ring VAT. Pero kung wala sa listahan ng exempt transaction eh magva-VAT na siya. Magkakaroon ng transitional input
tax credit yan kasi may shifting from non-VAT to VAT. Required ka na ma-subject sa VAT ke mag-register ka o hindi in the month
you exceed the limit of 3M, iva-VAT ka na, provided nga ‘yung transaction mo ay hindi exempt transaction.
From the month you become subject to VAT. Dati ang old ruling, complete first the period. Halimbawa na-subject ka sa
September, masa-subject ka sa following year pa. Ngayon hindi na, in that month you exceeded, kasi magpapa-register ka na in
that month eh, masa-subject ka na. Kaya mayroong transitional input tax. Kaya di na babaguhin ‘yung mga binayaran mong 3%

OPT kasi hindi ka pa subject sa VAT nung nagawa mo ‘yun. Pero kung na-subject ka na sa VAT ke magpa-register ka or hindi, isa-
subject ka na sa VAT. Pag di ka nagparegister, wala kang input tax.
Section 110(A)
If capital goods are purchased, how would it affect the input tax?
Capital goods and their acquisition cost for the VAT aggregate (kasi baka dalawang beses binili o tatlo—if the aggregate will be
more than Php1 Million, you cannot immediately deduct input tax you paid to the seller. You will compare the life of the asset
or 5 years or in 60 months, whichever is shorter.
Kaya kung 4 years ‘yung life, spread the input tax over 48 months. Kung ang life ay 8 years, spread it over 5 years.
Kung hindi lalagpas ng Php1 Million ang aggregate acquisition cost for 1 month, immediately deduct the input tax against output
tax. Ang importante dito, ‘yung aggregate acquisition cost, exclusive of the VAT. Spread it over the life of the capital goods or 5
years, whichever is shorter.
Section 34(F);
Section 110
What are the tax implications on sale of fully depreciated assets—income or VAT?
‘Yung fully depreciated asset, pinayagan ka na ba ng BIR magdeduct? So kung pinabayaan ka na ng BIR na magdeduct, ordinary
asset yan. Pag nagbenta ka ng ordinary asset, may VAT yan. Kung yan naman ay capital asset, so hindi mo siya used in business.
Hanggang di mo siya used in business, hindi ka i-su-subject sa VAT.
Tatandaan, ang VAT is on sale of goods or services in connection with business. Kaya kailangan mo ma-distinguish, am I selling
an ordinary asset? Am I selling a capital asset? Kapag di mo yan na-distinguish, may problema. Kapag nasabi mong capital, apply
the rules on capital asset. Kapag nasabing ordinary, apply the rules on ordinary asset.
Section 110
Example of a scenario of an input tax that cannot be directly attributable to either VAT taxable, zero-rated or VAT-
exempt.
Halimbawa, may input tax ako. Bumili ako ng aircon, nilagay ko sa store ko, sa business ko. So may input tax ako. Halimbawa,
ang halaga ng input tax ko ay P100K, ‘yun ang input tax ko dahil bumili ako [ng aircon] pero ang binebenta ko na transaction,
may VAT at may walang VAT. So ‘yung P100k hindi ko made-deduct lahat as input tax, ia-allocate ko. Magkano ang binenta ko
na transaction na subject sa VAT at hindi subject sa VAT? Assuming na ang binenta ko na transaction na subject sa VAT ay P500K
at nagbenta ako ng hindi subject sa VAT na P300K so ⅝ ay VAT-connected, ⅜ hindi VAT-connected. So ‘yung P100K, ⅝ nun ay
input tax, ang ⅜ ay cost or expense, so ide-deduct ‘yung cost or expense sa gross income. ‘Yun namang ⅝ idededuct ko sa output
tax. Allocate gross input tax between or among transactions which are VATable and transactions which are non-VATable
depending on the ratio to the total sales.
Section 110(B)
What happens if input tax is greater than output tax?
Magkakaroon ka ng excess input tax, gagamitin mo ‘yun sa susunod na period. Magagamit mo pa siya. Magfa-file ka ng VAT
return, wala kang babayaran. Sa susunod na magfa-file ka, gagamitin mo ‘yung excess input. Hindi nawawala ang input mo,
gagamitin at gagamitin mo ‘yan.

Clarifications on: (1) Input and Output tax; and (2) Zero-rated and effectively zero-rated transactions.
Ang output tax ay galing sa actual sales. Meron ding transactions kahit walang actual sales ay deemed sales, ‘yung hindi actually
binenta pero parang binenta kaya it falls under the five transactions deemed sales. Merong output tax. From that output tax,
deduct input tax. ‘yung input tax galing sa actual input tax. Kung may purchases ka, may input tax, except purchases from capital
goods.
Purchase from Capital Goods. If capital goods, nagagamit mo agad ‘yung input tax kung ang total acquisition ay hindi lalagpas ng
1 Million, exclusive of VAT. Claim that immediately as input tax. If total acquisition cost is more than 1 Million, not allowed to
immediately deduct. I-allocate mo siya. Kunin mo ang input tax, corresponding to the purchase of capital goods, spread mo over
the life of 5 years or for 60 months, or its estimated life of the capital goods purchased, whichever is shorter. For example, bumili
ka ng capital goods for 2 million, so lagpas siya ng 1 million exclusive of the VAT. Kukunin natin ang estimated life, say 4 years,

so 48 months. Spread mo for 48 months, assuming that the life is 6 years, you cannot spread it for 72 months. Spread mo lang
siya for 5 years or 60 months. The estimated life and the life of the capital goods, whichever is shorter, will be the basis for
allowable deduction for input tax.
Presumptive Input Tax and Transitional Input Tax. Kung wala ka talagang binayad na input tax, pwedeng Presumptive Input
Tax. Presumed yang binili mo ay may kasamang input tax to encourage ‘yung 6 na businesses na binibigyan ng presumptive
input tax. Meron rin, transitional input tax, subject to vat for the first time. At dahil for the first time, may transition. From the
time na subject ka sa VAT, magkakaron ka na ng presumptive input tax depende sa inventory you bring to that period na
masusubject ka sa VAT, iccocompare ‘yung presumed transitional na 2% of the value of the inventory or the actual VAT paid,
whichever is higher. Tapos compare na natin ano mas malaki. Output or input.
Section 111
Difference between presumptive and transitional input tax?
‘Yung presumptive, wala ka talagang naging input tax diyan pero andun ka sa anim na transactions na ine-encourage kaya
bibigyan ka. Andiyan ‘yung processors and manufacturers, di ba anim ‘yan - sardines, milk, mackerel, refined sugar, cooking oil,
packed noodles. Pag ganun ginawa mo, mayroon kang presumptive.
‘Yung transitional, ‘yung pag-shift mo from non-VAT to VAT. Nung nag-shift ka, magiging inventory at the beginning. ‘yung value
ng inventory na dala mo nung non-VAT to VAT eh pwede mo i-multiply ng 2%. Iko-compare mo sa actual VAT paid nung binili
mo ‘yun, whichever is higher. ‘Yan ang transitional.
Section 112
When can a taxpayer ask for refund if: (a) The transaction is zero-rated; (b) There is input tax; and (c) There is output
tax?
Kung yan ay tungkol sa VAT:
(1) Zero-rated (like export sales), either claim for refund or use it as tax credit. (As a tax credit) use input tax to reduce your
liability in other national internal revenue taxes, except withholding taxes of employees. Pero kung inavail na niya ang pag
rerefund, kahit hindi pa niya nakukuha ang refund, hindi na niya pwede credit. The option can be exercised once.
(2) Not zero-rated. No option to refund. Ang gagamitin mo lang, ipapacredit mo. Ibabawas sa other national internal
revenue taxes. Pag ipinacredit, compute tayo ng VAT liability. Pag nakuha ang VAT liability which is output tax less input, if mas
mataas ang output, may liability. Saka mo ideduct ang excess input tax mo kahit galing pa sa zero-rated transaction kasi inavail
mo ‘yung credit. Kung meron kang excess input tax na HINDI galing sa zero-rated transaction, hindi mo siya ipaparefund.
Section 112(C)
What is the effect of the TRAIN Law’s amendment of Sec. 112(c) regarding the refunds or tax credits of input tax, which
deleted the clause, “deemed denied”? Does this mean that we cannot file a judicial application for refund of excess input
VAT until the CIR renders a decision on an administrative application for the same?
Magkakaroon ka lang muna ng claim, pero it will be entertained after ma-determine. Kasi nga naka-hold siya. Kasi ‘pag nag-
apply ka ng refund, hihintayin natin ‘yung decision kung pwede kang makapag-refund. Kasi baka i-clinaim mo siya previously
as credit eh. Tandaan mo once you effect a choice, hindi ka papayagan mag-claim. Kasi halimbawa sasabihin mo, “ipapa-refund
ko po” tapos bigla ‘yung sumunod na buwan, sumunod na period, biglang may malaki kang babayarang VAT. Sabi mo “ang tagal
naman ng refund ko; i-claim ko na lang as credit, i-deduct ko.” Hindi pwede, kasi ang possibility, what if na-approve na ‘yung
claim mo for refund tapos pina-process na ‘yung papers mo para ma-refund, tapos dineduct mo sa payable mo, edi lugi ang BIR.
Nai-refund sa’yo eh nai-deduct mo. Kaya kailangan ‘pag pumili ka, ingatan mo ‘yung pagpili. Kasi baka meron ka rin namang mga
output na iba eh.
It’s possible na kaya ka pwedeng mag-refund ‘di ba nag-export ka, pero meron ka ring domestic sales. Meron kang domestic
sales, tiyak meron kang output tax. Kasi kapag ‘yan domestic sales, 12%, kapag ‘yan export at VAT-registered ka, 0%, but in both
cases, parehong may VAT, magkaiba lang ‘yung rate, because 0% is a VAT rate. ‘Di siya exempt. Iba ang exempt. Ang exempt,
wala kang VAT. ‘yung zero-rated is a VAT imposed on your transaction. Nag-export ka eh. Nag-export ka ng 10M, times 0, edi 0
output. Eh meron kang domestic, so times 12, tapos total non. Tapos mag-keclaim ka na ng input mo. ‘Pag nag-claim ka ng refund,
wag kang mag-dededuct ng input. Kaya iingatan ‘yung pagpili.
Section 114
For Calendar Year 2019, how many VAT returns will the taxpayer file and what is the composition of each?

Ang VAT return fina-file mo monthly at nagfa-file ka quarterly. So halimbawa, first quarter starts January. Sa January, magfa-file
ka February 20. ‘yung February ifa-file mo ng March 20. ‘yung March iko-consolidate mo ‘yung January, February at March, ifa-
file mo ng April 25 kasi quarterly na. So lumalabas, in one year, labing-dalawa kasi mayroon kang 8 months at 4 na quarterly.
Section 114(C)
If the sale is made to the government, will the government pay VAT?
Yes, because VAT is imposed on the seller, not to the buyer. It is just that being an indirect tax, the seller has the luxury of shifting
the burden to the buyer. ‘yun nga lang, may special rule ‘pag government. ‘Di ba ‘pag nagbenta ka to hindi government, sisingil
ka ng 12% tapos ‘yung 12% ipapadala mo sa BIR less your income tax. Kapag government ang bumili, sisingilin mo ‘yung
government ng 12%. ‘Pag bayad ng government sa’yo, ibabawas ng government ‘yung 5%. Hindi ka na mag-reremit sa
government nung 12%. Babawasan na niya ng 5% FWT. So ‘yung difference na 7% para kang nagka-income. Naningil ka sa
government ng 12%, hindi mo naman i-reremit ‘yung 12%, ‘yung 5% lang. Actually hindi mo na i-reremit kasi i-wiwithhold ng
government as your final VAT. The 7% difference, ‘yung input tax mo na sana i-dededuct mo sa output tax, hindi mo mai-
dededuct lahat kasi babawasan mo ‘yan nung 7% na nasingil mo sa government.
To simplify, may dalawa kang binentahan, parehong tig-1M, isa government, isa hindi. And assuming, meron kang input tax na
90K. Kapag nagbenta ka sa hindi government ng 1M, sisingilin mo ‘yung bumili sa’yo ng 12% VAT. 12% is 120K. Ibabayad sa’yo
‘yun ng buyer. ‘yung 120K, output tax mo. Eh dahil may input tax ka na 90K, ang ipapadala mo na lang sa BIR ay 30K. So may
30K ka pang ipapadala kasi 120K ‘yung output at 90K ‘yung input. To be remitted to the BIR ay 30K.
Pangalawang sales ay sa government. Ang government binentahan mo rin ng 1M. Sisingilin mo ‘yung government ng 120K na
VAT. Pero ‘yang 120K na VAT, hindi lahat ibibigay sa’yo ng government. Babawasan ng government ng 5%. 5% ng 1M is 50K. So
ang ibibigay na lang sa’yo ng government ay ‘yung 70K. So magkaka-70K ka. At dahil binenta mo sa government, hindi ka
papayagang mag-deduct ng input na 90K. ‘yung 90K na input ibabawas mo ‘yung 70K na ibinigay sa’yo ng government bilang
VAT. Magdededuct ka lang ng expense na 20K, kasi 90K minus 70K. Kasi ‘yung input tax, ‘pag nagbenta ka sa government, hindi
mo na siya na-keclaim as input, i-keclaim mo na siya as cost. Ibabawas mo siya as part of the cost. Kaya imbis na may 90K na
input ka, meron ka na lang deductible expense na 20K. Wala ka na kasing output tax. Eh dahil may input kang 90K, claim that as
expense, less the 7% you received from the government.
Ganoon ang pag-compute. Kasi para kang nagka-income eh. Kaya to simplify, para ‘di ka malito, assuming wala kang input,
assuming 0 and input mo. ‘Pag nagbenta ka sa non-government ng 1M, sisingilin mo siya ng 120K VAT, ‘yung 120K ipapadala
mo ‘yan sa BIR. So, 1M lang talaga ang pera mo sa bulsa. Kasi 1M ‘yung selling price eh. The 120K you collect from the buyer, you
remit to the government kasi wala kang input. Kapag ikaw naman ay nagbenta sa government, siningil mo ‘yung government ng
70K, kasi ‘yung 5%, or 50K out of 120K, winithhold niya. Wala kang input, kaya itong 70K mo kung meron kang ibang cost and
expense, babawasan mo ng 70K, kasi tatanggap ka sa government ng 70K eh. Hindi mo na kailangang i-remit kasi ang rule, as if
‘yang 5% na binawas ng government, ‘yun ang equivalent tax mo. Kumita ka pa ng 7%, which is better ‘di ba?
OTHER PERCENTAGE TAXES

Section 108;

Franchise
How are POGOs taxed?
Meron kasing binigay sa kanila na special franchise. Ang franchises, taxed yan at 2%, 3%, may 5%. Hindi ako sure kung pano
kinlassify ang ating mga POGOs—kung anong binigay na rate. Kasi subject yan sa franchise. Special 'yung franchise na binigay
dyan. Meron kasi tayong tinatawag na franchise na binibigay sa mga gaming operations. Gambling yang nandyan eh. Kaya iba
'yung binigay sa kanila na authority to operate.
Section 32(B)(7)(c) & (d);

Section 126
Are prizes and awards subject to donor’s tax, estate tax, or VAT?
Kapag ‘yan galing sa, meron tayong tinatawag na in recognition of your exemplary performance in the field of charitable, artistic,
religious, civil, educational, literary, ‘yan ay walang tax, provided two conditions are met. First, you did not take an active part
to join the contest, and second, you're not required to render future service as a condition for receiving the award. And by special
law, prizes na na-rereceive ng ating mga athletes kapag international competitions are, by special law, hindi i-tatax kasi sa sports
siya. Kaya dapat alam mo lang ‘yung category ng iyong natanggap na awards and prizes, bakit ka binigyan, anong requirements
para ma-exempt. ‘Pag ‘di mo na-meet ‘yung requirement, halimbawa, ikaw ay naging recipient ng Carlos Palanca Award for
Literature, Ramon Magsaysay awardee ka, ‘yan ay mga na-memeet ‘yung requirements. Kung ikaw naman ay naging Binibining
Pilipinas, tignan mo dapat ba natin i-exempt ang prizes at awards na na-receive ng ating nanalong Binibining Pilipinas? Na-
memeet ba niya ‘yung requisites? ‘Pag na-meet niya eh ‘di wala. Pero ‘pag ‘di niya na-meet, eh ‘di meron. So ang issue dito ay do
you satisfy the requisites. Kung na-satisfy mo eh ‘di dun ka applicable, kung ‘di mo na-satisfy, doon ka naman sa isa applicable.
Kasi sa tax, pwedeng taxable pwedeng hindi depending on the attending circumstances. Kaya lang siya rin daw, just taxing. Kasi
if you're claiming exemption, point to the law that grants you exemption. If you cannot point to the law granting exemption, then
taxation is the rule. Exemption is the exception.

Capital Gains from Sale of Real Property - Section 24D;
Tax consequence of sale of ordinary and capital assets and what if the seller is engaged in stock trading
Meron tayong enumeration of capital assets, if not included in the enumeration it will be considered as ordinary asset. Kung
capital asset, identify mo. Sino ang nagbenta? If ang nag benta ay individual at ang ibinenta ay personal property, gagamitan mo
siya ng holding period. If more than 12 months ang holding period, it is long term, get 50% of the gain or loss as the case may
be. Makukuha ang gain or loss by looking at the selling price and comparing it with the acquisition cost. So kung may capital gain
or capital loss 50% yan icconsider mo. If not more than 12 months short-term yan, get 100% (pertains to percentage of capital
gain/loss to be considered). Matapos mo makuha compare mo lahat ng capital gain and loss during the year. Kapag mas malaki
ang gain, Net Capital Gain ang tawag. Ang net capital gain ay added as part of the taxable income of the individual for that year.
If mas malaki ang Net Capital Loss, you do not deduct that from ordinary income. Yang Net Capital Loss na yan mag-hihiintay ka
ng susunod na taon. Sa susunod na taon if magkaroon ng Net Capital Gain, ideduct ang Net Capital Loss from previous year,
provided you are limited only to whatever is your Net Income from the previous year. Kapag ang nagbenta ay corporation at
personal property, forget holding period ke more than 12 months or hindi, laging 100%. Add capital gain to taxable income.
Forget capital loss, hindi pwede ideduct sa other income of the corporation. Wala ring capital loss carry over. So 'yun 'yung 2
distinguishing features ng corporation at individual selling personal property held as capital assets, walang holding period at
walang net capital loss carry over (pertains to corporation)
If real property naman and ibinenta ng individual, kunin mo ang selling price or FMV, whichever is higher, may 6% CGT. If hindi
binigay ang FMV, (pertains to basis of 6% CGT) may zonal or assessed value. If lahat meron (pertains to basis), whichever is
highest, 'yun ang basis ng 6%. If real property held as capital asset ay ibebenta sa government, pipili si seller. Gusto niya ba
subject to 6% CGT or gusto ba niya ito iadd as taxable income (pertains to capital gain from the transaction) at isubject to
graduated income tax rates sa tax table. Yan ay tax avoidance. 'yun nga lang baka hindi nyo ma estimate properly since payment
niyan ay 30 days from date of sale (pertains to sale of RP to government), dapat mag-isip kung iadd mo kasi hindi ka na pwede
magavail nung 6% CGT later if malaki pala babayaran mo.

If shares of stock issued by domestic corporation, don’t look at holding period dahil issued by DC yan. Tignan mo if listed or not
listed sa stock exchange. If listed sa stock exchange, 6/10 of 1% CGT. If not listed on the stock exchange or traded sa stock
exchange, 15%.
If individual gusto makatipid, if binebenta mo na real property ay principal residence, avail exemption basta proceeds is fully
utilized for acquiring new principal residence within 18 months, at with notice within 30 days to the BIR provided the benefit
availed is only once every 10 years. Hindi mo ma utilize meaning mas malaki ang proceeds sa pagbenta ng ang principal
residence kesa sa nagastos mo to acquire a new residence - may excess, 'yung di mo nagamit sa pag acquire ng bagong bahay,
itatax na 'yun. Ang formula unutilized proceeds from the selling price, whichever is higher between selling price or FMV multiply
ng 6%.

In a taxpayer’s shares of stock, will the resulting gain or loss be part of the income tax return or be subject to fixed rate
or be deductible?
Kanina sabi ko kapag ‘yan ay shares of stock (SOS) held as capital asset. So kapag capital asset ‘yan, kukunin mo lang at aalamin
mo lang kung ‘yan ba ay issued by a DC or a FC.
Kapag DC, ‘wag kang magholding period. Ang gagawin mo lang aalamin mo kung yan ay listed or not listed in the stock exchange.
‘Pag listed, meaning traded in the stock exchange, magkakaroon siya ng final tax on the selling price. So ke may gain, ke may loss,
it is of no significance kasi ang basis is selling price multiplied by the applicable rate na ngayon nalaman mo na na 6/10 of 1%.
Final tax ‘yan. Selling price ang basis. Kaya nga siya tinatawag na stock transaction tax. Kung sakali namang hindi siya listed,
meaning directly binebenta sa public, hindi dumadaan sa stock exchange. ‘Yan po ay i-tatax natin ‘yung capital gain. Kaya dapat
may gain. Kung walang gain walang tax. Siya ay magiging ano? Kasi kukunin mo ‘yung capital gain eh, so kailangan tumubo siya,
unlike ‘yung listed na kahit na lugi ay may tax.
Kapag ‘yan naman ay in-issue ng FC, halimbawa bumili ka ng SOS ng Apple o ng Microsoft, so FC. Basta FC, bumili ka kasi pwede
ka naman bumili niyan eh. So ayan ay kukunin mo ‘yung holding period kung ibebenta mo.
Kung halimbawa ‘yung SOS natin na in-issue ng DC hindi mo ibinenta. Nakatanggap ka ng liquidating dividend, yung corporation
na nag-issue ay nagsara kaya nag-declare ng liquidating dividend. Doon ka mag-hoholding period kahit DC ‘yan kasi ‘di mo
binenta. Nakatanggap ka ng liquidating dividend or ‘yung corporation na-bankrupt or SOS naging worthless, so ‘dun ka
maghoholding period. Halimbawa, liquidating dividend mo 1M investment cost mo 800K. So may capital gain ka na 200K, so
‘dun ka maghoholding period kasi di siya binenta. So i-aadd mo ‘yung capital gain dun sa iyong other income. Kung sakali naman
‘yung shares naging worthless lang, wala na-bankrupt ung corporation, nalugi ka, ‘yung investment cost mo let's say 10K, you
lost 10k, gamitin mo ung holding period. I-dededuct mo sa capital gain, kung may capital gain. Kung walang capital gain, hindi
ka pwede mag-deduct. ‘Yan ang significance.
So kapag SOS issued by DC, kapag binenta no holding period. Alamin mo lang listed or not listed. Kapag hindi binenta mag-
hoholding period ka, nagkaron ng liquidating dividend naging worthless ‘yung shares, dun ka mag-hoholding period.
Okay? ‘Yan ang tatandaan mo. Kaya ‘yan ang gusto kong makitang answer kung sakaling ‘yan ang tinanong ko.
In case sales of SOS will be brought from DC and later binenta or later hindi siya binenta at nagkaroon ng ganito so sasabihin mo
lang sakin. Halimbawa may follow up question ako what if ang ginawa ay FC shares binenta pero ang tanong ko meron bang
holding period? Ay 'yun dapat liwanagin mo. Domestic eh. Tinanong ko sa’yo ‘pag ang domestic shares ba ay ibinenta may
holding period ba? O dapat malinaw sagot mo. Sasabihin mo sa’kin binenta, ganito. What if tinanong ko FC, shares ng foreign,
binenta may holding period ba? Kasi my dear ang kailangan niyo kasing alamin kung ang pinaguusapan natin ay SOS ang pwede
mong bilhan ng SOS ay DC or FC. Hindi pwedeng ang alam mo lang domestic dapat alam mo pati foreign. At kung sakaling sinabi
mo ay domestic, dapat alam mo rin kung ibinenta ba o nagkaron lang ng transaction. At kung binenta ba dapat ba ‘ko maglisted
or not listed. Ganoon kalalim ang dapat na answers niyo. 'Yun bang you will let me know that you know.

Lecture Given On The 14 Day of June, 2020: Income Tax

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Lecture Given On The 14 Day of June, 2020: Income Tax

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Lecture given on the 14th day of June, 2020

Section 22(B); Section 27(D)(4)

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 1 of 19

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 2 of 19

Section 28(A)(3)(a) vis-à-vis R.R. No. 15-2013;

Section 32(B)(7)(c) & (d);

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 4 of 19

Capital Gains and Losses - Section 39;

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 5 of 19

Capital Gains and Losses - Section 39;

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 6 of 19

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 7 of 19

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 8 of 19

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 9 of 19

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 10 of 19

Section 105 & Section 109(BB)

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 11 of 19

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 12 of 19

Section 28(A)(3)(a) vis-à-vis R.R. No. 15-2013;

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 13 of 19

Section 109(Q) & Section 109(BB)

Section 109 & Section 111

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 14 of 19

Section 110 & Section 111

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 15 of 19

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 16 of 19

OTHER PERCENTAGE TAXES

Section 28(A)(3)(a) vis-à-vis R.R. No. 15-2013;

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 17 of 19

Section 32(B)(7)(c) & (d);

Capital Gains and Losses - Section 39;

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 18 of 19

Capital Gains and Losses - Section 39;

APOSTOLES ⋅ CRISOSTOMO ⋅ DELA ROSA ⋅ FERNANDEZ ⋅ GUMELA ⋅ MONES ⋅ SOBERANO Page 19 of 19

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