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• Taxation


  The process by which a government, through its lawmaking body, imposes charges on its inhabitants to raise money for public use
• Purpose of Taxation


  • Revenue purpose - to raise revenue that will be used to defray government expenses
  • Non-revenue purposes - to achieve certain social and economic objectives (regulate inflation, minimize adverse effects of certain activities, equitable distribution of wealth)
• Nature of Taxation


  • Inherent power of a sovereign state
  • Legislative - tax laws must first be enacted before taxes can be imposed
  • Subject to constitutional and inherent limitations - the government can tax anything or anyone within its jurisdiction
• Inherent limitations on the power of taxation

  • Taxes can only be levied for public purposes
  • The government may levy taxes only on person and properties within its jurisdiction
  • The power to create tax laws rests with the Congress and cannot be delegated
  • Tax exemption of government entities
  • The government may not tax the property belonging to a foreign government
• Constitutional limitations on the power of taxation

  • Due process and equal protection of the laws
  • Rule of uniformity and equity in taxation
  • President's power to veto tax bills
  • Concurrence of majority of Congress for tax exemption laws
  • Supreme Court's power to make final judgment on tax cases
  • Non-imprisonment for non-payment of poll tax
  • Exemption of religious, charitable, educational, non-profit entities from property taxation
  • Exemption of revenues and assets of non-stock, non-profit educational institution from taxation
• Theory and basis of Taxation


  • Reciprocal duties of protection and support - the government protects the welfare of its people, in return, the people support the government
  • Benefits received principle - taxes are used for the benefit of the public
• Aspects of Taxation


  • Levy - tax laws are enacted
  • Collection - tax laws are implemented and administered
• Principles of a sound tax system

  • Fiscal Adequacy - revenues should be sufficient to defray expenditures
  • Theoretical Justice - taxes are proportionate to the taxpayer's ability to pay
  • Administrative Feasibility - tax laws can be implemented efficiently and effectively
• Taxes


  Mandatory contributions imposed upon persons and property for the support of the government
• Characteristics of Tax


  • It is mandatory
  • It is levied by the lawmaking body
  • It is imposed primarily to raise revenues for the government
  • It is generally payable in money
  • It is proportionate in character
  • It is levied on persons and property over which the taxing authority has jurisdiction
  • It is levied for public purposes
• Classification of taxes (as to subject matter)

  • Personal, capitation or poll tax
  • Property tax
  • Excise tax
• Classification of taxes (as to who bears the burden)

  • Direct tax
  • Indirect tax
• Classification of taxes (as to determination of the amount)

  • Ad Valorem
  • Specific
• Classification of taxes (as to scope)

  • National tax
  • Local tax
• Classification of taxes (as to rate or graduation)

  • Proportional
  • Progressive
  • Regressive
• Income Tax


  Tax on a person's income derived from employment, business, trade, practice of profession, or from property, after excluding the deductions allowed under the law
• Business Tax


  Tax on the production, sale, or consumption of goods and services, leasing of property, or other business activities
• Classification of Individual Income Taxpayers

  • Resident citizen
  • Non-resident citizen
  • Resident alien
  • Non-resident alien
• Resident citizens


  Taxed on ALL income they derive from sources within and outside the Philippines
• Nonresident citizens and aliens

  Taxed only on income they derive within the Philippines
• Gross Income


  All income derived from whatever source, including compensation income, business income, and passive income
• Compensation Income


  Income that is typically derived from employment, such as salaries and wages
• The personal exemption, additional exemption per dependent child, and premium for health and hospitalization insurance had been removed under the TRAIN Law
• Income Tax Table (2018-2022)

  • P250,000 and below - None
  • More than P250,000 to P400,000 - 20% of excess over P250,000
  • More than P400,000 to P800,000 - P30,000 + 25% of excess over P400,000
  • More than P800,000 to P2,000,000 - P130,000 + 30% of excess over P800,000
  • More than P2,000,000 to P8,000,000 - P490,000 + 32% of excess over P2,000,000
  • More than P8,000,000 - P2.41 million + 35% of excess over P8,000,000
• Income Tax Table (2023 onwards)


  • P250,000 and below - None
  • More than P250,000 to P400,000 - 15% of excess over P250,000
  • More than P400,000 to P800,000 - P22,500 + 20% of excess over P400,000
  • More than P800,000 to P2,000,000 - P102,500 + 25% of excess over P800,000
  • More than P2,000,000 to P8,000,000 - P402,500 + 30% of excess over P2,000,000
  • More than P8,000,000 - P2,202,500 + 35% of excess over P8,000,000
• Other Forms of Compensation

  • Fixed or Variable Allowances (representation, transportation, COLA, etc.)
  • Rules for taxation of allowances for government and non-government employees
• RATA

  Reimbursements for expenses incurred while performing government duties
• PERA

  Reimbursements for expenses incurred while performing government duties
• RATA and PERA are considered reimbursements for expenses incurred while performing government duties and therefore EXEMPT from taxation
• ACA


  Additional compensation allowance received by a government employee
• ACA is included in "Other Benefits" and is TAXABLE but subject to a limit
• Allowances for non-government employees

  Typically TAXABLE, except when: the allowance represents reimbursement for necessary expenses incurred in the pursuit of trade, business, or profession; and the allowance is subject to liquidation
• Allowances and other privileges given to the employee for the benefit of the employer are typically EXEMPT from taxation
• Benefits given to managerial or supervisory employees on account of their position are subject to fringe benefits tax (e.g., house/housing assistance, car, maid, driver and the like)
• 13th month pay


  Additional compensation mandated by law to be given to rank-and-file employees (i.e., non-managers), equal to an employee's one (1) month basic salary
• If the employee has not worked for the entire year, the 13th month pay amount is prorated
• 13th month pay under TRAIN Law

  Not taxable up to P90,000, any excess is TAXABLE
• Christmas Bonus


  Additional compensation provided to the employee at the discretion of the employer
• Christmas Bonus


  • Non-performance based bonus (known as "Other benefits")
  • Performance based bonus
• The non-performance based ("Other Benefits") portion of the Christmas Bonus is COMBINED with the 13th month pay and subjected to the total limit of P90,000, any excess over this amount is taxable