TAX

• Partnership


  A contract whereby two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing profits among themselves
• Classification of partnership for income tax purposes


  • Ordinary partnership (General Partnership or Commercial Partnership)
  • General professional partnership (GPP)
• Ordinary partnership


  Taxed in the same manner as corporation, partners are considered shareholders and profits distributed to them are considered as dividends subject to final tax
• General professional partnership (GPP)


  Exempt from income tax, provided that it is engaged exclusively for exercise of profession, persons engaging in business as partners in a GPP shall be liable for income tax only in their separate and individual capacities
• Determining taxable income of GPP

  1. Net income of the partnership shall be computed in the same manner as a corporation

  2. Each partner shall report as gross income his distributive share, actually or constructively received, in the net income of the partnership
• GPP


  • Required to file a return of its income, setting forth the items of gross income and of deductions allowed
  • Tax exemption of GPPs shall pertain only to its ordinary income, hence, subject to final withholding taxes on its passive incomes as well as capital gains tax
• Allowable deductions to General Professional Partnership


  GPP may claim either the itemized deductions or in lieu thereof, it can opt to avail of the optional standard deduction (OSD)
• Allowable deductions to the partners comprising GPP


  Partners can no longer claim further deductions from their distributive share in the net income of a GPP and are not allowed to avail the 8% income tax rate option since their distributive share from the GPP is already net of costs and expenses
• Co-ownership


  When two or more trust heirs or beneficiaries inherit an undivided property from a decedent, or when a donor makes a gift of an undivided property in favor of two or more donees, co-owners are taxed individually on their distributive share in the income of the co-ownership
• Estate


  A mass of all the property, rights, and obligations of a deceased person which are not extinguished by his death, including those which have accrued thereto since the opening of succession, income tax of an estate refers to the tax on income received by the estate during the period of administration or settlement
• Classifications of Trusts


  • Ordinary Trusts
  • Revocable Trusts
  • Employee's Trusts
• Ordinary Trusts


  Income and the corpus of the trust do not revert to the grantor, the income is accumulated and held for the distribution to the beneficiaries
• Revocable Trust


  A trust in which the power to revert title to any part of the corpus of the trust is vested in the grantor himself or any person not having any substantial adverse interest in the trust corpus or in its income, the income shall be included in computing the taxable income of the grantor
• Employee's Trust


  Income tax shall not apply to employee's trust which forms part of a pension, stock bonus, or profit-sharing plan of an employer for the benefit of some or all of his employees, must meet certain requisites or conditions for exemption
• Gross income


  Total income of the taxpayer subject to tax. Income means all wealth which flows into the taxpayer other than return of capital.
• Items included in gross income


  • Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions, and similar items
  • Gross income derived from the conduct of trade or business or the exercise of a profession
  • Gains derived from dealings in property
  • Interests
  • Rents
  • Royalties
  • Dividends
  • Annuities
  • Prizes and winnings
  • Pensions
  • Partner's distributive share from the net income of the general professional partnership
• Items excluded from gross income


  • Life insurance proceeds
  • Amount received by insured as return of premium
  • Gifts, bequests, and devises
  • Compensation for injuries or sickness
  • Income exempt under treaty
  • Retirement benefits, pensions, gratuities
  • Income derived by foreign government
  • Income derived by the government or its political subdivisions
  • Prizes and awards
  • Prizes and awards in sports competition
  • Thirteenth month pay and other benefits
  • GSIS, SSS, Medicare and other contributions
  • Gains from the sale of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years
  • Gains from redemption of shares in mutual fund
• The total exclusion for thirteenth month pay and other benefits shall not exceed ninety thousand (P90,000.00)
• Benefits received by officials and employees of the national and local government pursuant to Republic Act No. 6686 are excluded from gross income
• Benefits received by employees pursuant to Presidential Decree No. 851, as amended by Memorandum Order No. 28 dated August 13, 1986 are excluded from gross income
• Benefits received by officials and employees not covered by Presidential Decree No. 851, as amended by Memorandum Order No. 28 dated August 13, 1986 are excluded from gross income
• Other benefits such as productivity incentives and Christmas bonus are excluded from gross income
• Partnership


  A contract whereby two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing profits among themselves
• Classification of partnership for income tax purposes


  • Ordinary partnership (General Partnership or Commercial Partnership)
  • General professional partnership (GPP)
• Ordinary partnership


  Taxed in the same manner as corporation, partners are considered shareholders and profits distributed to them are considered as dividends subject to final tax
• General professional partnership (GPP)

  Exempt from income tax, provided that it is engaged exclusively for exercise of profession, persons engaging in business as partners in a GPP shall be liable for income tax only in their separate and individual capacities
• Determining the taxable income of a GPP

  1. Net income of the partnership shall be computed in the same manner as a corporation

  2. Each partner shall report as gross income his distributive share, actually or constructively received, in the net income of the partnership
• GPP


  • Required to file a return of its income, setting forth the items of gross income and of deductions allowed
  • Tax exemption of GPPs shall pertain only to its ordinary income, hence, subject to final withholding taxes on its passive incomes as well as capital gains tax
• Allowable deductions to General Professional Partnership


  GPP may claim either the itemized deductions or in lieu thereof, it can opt to avail of the optional standard deduction (OSD)
• Allowable deductions to the partners comprising GPP


  Partners can no longer claim further deductions from their distributive share in the net income of a GPP and are not allowed to avail the 8% income tax rate option since their distributive share from the GPP is already net of costs and expenses
• Co-ownership


  When two or more trust heirs or beneficiaries inherit an undivided property from a decedent, or when a donor makes a gift of an undivided property in favor of two or more donees, co-owners are taxed individually on their distributive share in the income of the co-ownership
• Estate


  A mass of all the property, rights, and obligations of a deceased person which are not extinguished by his death, including those which have accrued thereto since the opening of succession, income tax of an estate refers to the tax on income received by the estate during the period of administration or settlement
• Classifications of Trusts


  • Ordinary Trusts
  • Revocable Trusts
  • Employee's Trusts
• Ordinary Trusts


  Income and the corpus of the trust do not revert to the grantor, the income is accumulated and held for the distribution to the beneficiaries
• Revocable Trust


  The power to revert the title to any part of the corpus of the trust is vested in the grantor himself or any person not having any substantial adverse interest in the trust corpus or in its income, the income of such part of the trust estate title to which may be revested in the grantor, or held or distributed for the benefit of the grantor shall be included in computing the taxable income of the grantor
• Employee's Trust


  Income tax shall not apply to employee's trust which forms part of a pension, stock bonus, or profit-sharing plan of an employer for the benefit of some or all of his employees, with certain requisites or conditions for exemption
• Gross income


  Total income of the taxpayer subject to tax. Income means all wealth which flows into the taxpayer other than return of capital.
• Items included in gross income


  • Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions, and similar items
  • Gross income derived from the conduct of trade or business or the exercise of a profession
  • Gains derived from dealings in property
  • Interests
  • Rents
  • Royalties
  • Dividends
  • Annuities
  • Prizes and winnings
  • Pensions
  • Partner's distributive share from the net income of the general professional partnership
• Items excluded from gross income

  • Life insurance proceeds
  • Amount received by insured as return of premium
  • Gifts, bequests, and devises
  • Compensation for injuries or sickness
  • Income exempt under treaty
  • Retirement benefits, pensions, gratuities
  • Income derived by foreign government
  • Income derived by the government or its political subdivisions
  • Prizes and awards
  • Prizes and awards in sports competition
  • Thirteenth month pay and other benefits
  • GSIS, SSS, Medicare and other contributions
  • Gains from the sale of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years
  • Gains from redemption of shares in mutual fund
• The total exclusion for thirteenth month pay and other benefits shall not exceed ninety thousand (P90,000.00)