INCOME TAXATION CHAPTER 2 (1ST SEM_2ND YEAR)

• Refers to any law that arises from the exercise of the taxation power of the State.

  Taxation law
• Types of Taxation Law | HINT: TT (2)

  Tax laws & Tax exemption law
• Laws that provide for the assessment and collection of taxes.

  Tax laws
• The NIRC, The Tariff and Customs Code, The Local Tax Code, & The Real Property Tax Code are examples of:

  Tax Laws
• The Minimum Wage Law, The Omnibus Investment Code of 1987 (E.O. 226), Barangay Micro-Business Enterprise (BMBE) Law, and Cooperative Development Act are examples of:

  Tax exemption laws
• Sources of Taxation Laws | HINT: CSJEALTR (8)

  • Constitution

  • Statutes and Presidential Decrees

  • Judicial Decisions or Case Laws

  • Executive Orders and Batas Pambansa

  • Administrative Issuances

  • Local Ordinances

  • Tax Treaties and Conventions with foreign countries

  • Revenue Regulations
• Types of Administrative Issuances | HINT: RRRRRB (starts on income)

  • Revenue regulations

  • Revenue memorandum orders

  • Revenue memorandum rulings

  • Revenue memorandum circulars

  • Revenue bulletins

  • BIR rulings
• Issuances signed by the Secretary of Finance upon recommendation of the Commissioner of Internal Revenue (CIR) that specify, prescribe, or define rules and regulations for the effective enforcement of the provisions of the NIRC and related statutes.

  Revenue regulations
• For

  mal pronouncements intended to clarify or explain the tax law and carry into effect its general provisions by providing details of administration and procedure. Has the force and effect of a law, but is not intended to expand or limit the application of the law; otherwise, it is void.

  Revenue regulations
• Issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods, and procedures necessary in the implementation of stated policies, goals, objectives, plans, and programs of the Bureau in all areas of operations except auditing.

  Revenue memorandum orders (RMOs)
• Rulings, opinions and interpretations of the CIR with respect to the provisions of the Tax Code and other tax laws as applied to a specific set of facts, with or without established precedents, and which the CIR may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, there cannot be contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio.

  Revenue Memorandum Rulings (RMRs)
• Issuances that publish pertinent and applicable portions as well as amplifications of laws, rules, regulations, and precedents issued by the BIR and other agencies/officies.

  Revenue Memorandum Circulars (RMCs)
• Refer to periodic issuances, notices, and official announcements of the CIR that consolidate the BIRs position on certain specific issues of law or administration in relation to the provisions of the Tax Code, relevant tax laws, and other issuances for the guidance of the public.

  Revenue Bulletins (RB)
• Official positions of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.

  BIR Rulings
• Merely advisory or a sort of information service to the taxpayer such that none of them is binding except to the addressee and may be reversed by the BIR at anytime.

  Rulings
• Types of rulings | HINT: VIBD

  • Value added tax (VAT) rulings

  • International Tax Affairs Division (ITAD) rulings

  • BIR rulings

  • Delegated Authority (DA) rulings
• Are not laws, but are mere conventions of financial reporting. They are benchmark for the fair and relevant valuation and recognition of income, expense, assets, liabilities, and equity of a reporting entity for general purpose financial reporting. This accounting reports are intended to meet the common needs of a vast number of users in the general public.c

  Generally Accepted Accounting Principles (GAAP)
• Include rules, regulations, and rulings prescribe the criteria for tax reporting, a special form of financial reporting which is intended to meet specific needs of tax authorities.

  Tax laws
• Taxpayers normally follow ___ in recording transactions in their books. However, in the preparation and filling of tax returns, taxpayers are mandated to follow the ___ in cases of conflict with GAAP.

  GAAP, Tax Laws
• Philippine tax laws are civil and not ___ in nature.

  Political
• They are laws of the occupied territory and not by the occupying enemy. Tax payments made during occupations of foreign enemies are valid.

  Nature of Philippine Tax Laws
• Our internal revenue laws are not ___ in nature because they do not define crime. Their penalty provisions are merely intended to secure taxpayers' crime.

  Penal
• An enforced proportional contribution levied by the lawmaking body of the State to raise revenue for public purpose.

  Tax
• Tax must be levied by the taxing power having jurisdiction over the object of taxation; Tax must not violate Constitutional and inherent limitations; Tax must be uniform and equitable; Tax must be for public purpose; Tax must be proportional in character; and Tax is generally payable in money.

  The information above are the:

  Elements of a Valid Tax
• Classification of Taxes

  (a) As to Purpose | HINT: F/RT, R, & S

  ___ - a tax imposed for general purpose

  ___ - a tax imposed to regulate business, conduct, acts or transactions

  ___ - a tax levied to achieve some social or economic objectives

  Fiscal or revenue tax, Regulatory, & Sumptuary
• Classification of Taxes

  (b) As to subject matter | HINT: P/P/C, PT, E/PT

  ___ - a tax on persons who are residents or a particular territory

  ___ - a tax on properties, real or personal

  ___ - a tax imposed upon the performance of an act, enjoyment of a privilege or engagement in an occupation

  Personal/Poll/Capitation, Property Tax, & Excise/Privilege Tax
• Classification of Taxes (c) As to incidence | HINT: DT & IT

  ___ - Tax is paid by any person other than the one who is intended to pay the same. This occurs in the case of business taxes where the statutory taxpayer is not the economic taxpayer.

  ___ - Both impact and incidence of taxation rest upon the same taxpayer. The tax is collected from the person who is intended to pay the same. The statutory taxpayer is the economic taxpayer.

  Direct Tax, Indirect Tax
• Classification of Taxes

  (d) As to amount | HINT: ST, AV ___ - a tax of a fixed amount imposed on a per unit basis such as per kilo, liter or meter, etc. ___ - a tax of a fixed proportion imposed upon the value of the tax object.

  Specific Tax, Ad Valorem
• Progressive or Graduated Tax


  Tax which imposes increasing rates as the tax base increase. It results in equitable taxation because it gets more tax to those who are more capable
• Regressive Tax


  Imposes decreasing the tax rates as the tax base increase. It is regarded as anti-poor and it directly violates the Constitutional guarantee of progressive taxation
• Mixed Tax


  It manifests tax rates which is a combination of any of the above types of tax
• Classification of Taxes (e) As to rate | HINT: PT, P/GT, RT,

  • Proportional Tax
  • Progressive or Graduated Tax
  • Regressive Tax
  • Mixed Tax
• Classification of Taxes (f) As to imposing authority | HINT: NT/LT

  ___ - tax imposed by the national government ___ - tax imposed by the municipal or local government

  National tax, Local tax
• Income Tax


  Tax on annual income, gains or profits
• Estate Tax


  Tax on gratuitous transfer or properties by a decedent upon death
• Donor's Tax


  Tax on gratuitous transfer of properties by living a donor
• Value Added Tax


  Consumption tax collected by VAT business taxpayers
• Other Percentage Tax


  Consumption tax collected by non-VAT business taxpayers
• Excise Tax


  Tax on sin products and non-essential commodities such as alcohol, cigarettes and metallic minerals
• Privilege Tax


  Also called Excise Tax