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    Philippine Taxation 101

    Uploaded by

    Allan Santos
    ITL

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    © All Rights Reserved
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    Philippine Taxation 101

    Uploaded by

    Allan Santos
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    ITL

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    ITL

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    11 views2 pages

    Philippine Taxation 101

    Uploaded by

    Allan Santos
    ITL

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    You are on page 1of 2

    Taxation 1 Income ABSantos, CPA

    INCOME

    1. WHAT IS INCOME?
    Income is fruit. By analogy, the tree represents capital.
    2. HOW DOES THE PHILIPPINES TAX INCOME?
    Two ways, (i) partly Global system of income taxation and (ii) partly, scheduler
    system of income taxation.
    3. WHAT IS GLOBAL SYSTEM OF TAXATION?
    All types of income except those subject to scheduler system (passive income and
    capital gains) are aggregated to arrive at gross income. The gross income will be reduced
    by allowable deductions to arrive at the taxable income.
    4. WHAT IS SCHEDULAR SYSTEM OF TAXATION?
    Separate and specific graduated rates are imposed on different types of income.
    5. WHAT ARE DIFFERENT TYPES/KINDS OF INCOME?
    Generally, there are two (2) kinds of income, namely: taxable income and exempt
    income. Taxable income is further divided into:
    a. Ordinary Income
    b. Passive Income
    c. Capital Gains
    Net Income Tax imposed upon ordinary Income (b) Final Tax imposed upon
    Passive Income and (c) Capital Gains tax imposed upon capital gains, however, there are
    other several income taxes like fringe benefit tax, minimum corporate income tax, gross
    income tax, profit remittance tax that will be discussed separately.

    Ordinary Income Net Income Tax


    Passive Income Final Tax
    Capital Gains Capital Gains Tax

    6. WHAT ARE DIFFERENT SOURCES OF INCOME?


    a. Income within the Philippines
    b. Income without the Philippines

    Page 1 of 2
    Taxation 1 Income ABSantos, CPA

    c. Income, Partly within and partly without the Philippines


    7. HOW TO DETERMINE WHETHER INCOME IS EARN WITHIN OR
    WITHOUT (OUTSIDE) THE PHILIPPINES?

    INCOME TEST SOURCE OF INCOME


    Income from loans Residence of debtor
    Income from services Place of performance
    Rent Location of property
    Royalty Place use of intangible
    Sale of real property Location of property
    Sale of personal property Place of sale
    Dividend
    1. From domestic corporation Income within Phils.
    2. From foreign corporation Predominance Test
    3. Sale of Domestic Share of stock Incorporation Test
    N.B.
    A. Predominance test
    Dividends from Foreign Corporation are income within the Philippines, if 50% or
    more of gross income of the foreign Corporation for the past (3) years prior to the
    declaration of dividend was derive from sources within the Philippines. Such dividends
    shall be proportionally distributed in accordance with its source.
    (Dividend Phil. Gross Income / Total Gross income)

    B. Incorporation test
    Where the shares of stock may be sold it will always be situated where the
    corporation was incorporated.

    8. WHY IS IT IMPORTANT TO KNOW THE SOURCE OF INCOME?


    Some individuals and corporate taxpayers are taxed on their worldwide income
    while others are taxable only upon income from source within the Philippines.

    Page 2 of 2

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