National Internal Revenue Code of 1997, as amended (NIRC) (Revenue Regulations 02-98)

Income Taxation

1. Income tax systems a) Global tax system b) Schedular tax system c) Semi-schedular or semi-global tax system

2. Features of the Philippine income tax law3. Criteria in imposing Philippine income tax4. Taxable period

5. Kinds of Income taxpayers a) Individual taxpayers (i) Citizens (a) Resident citizens (b) Non-resident citizens- Sec.22 (E); Sec. 23 C (ii) Aliens (a) Resident aliens- Sec. 22 (F) (b) Non-resident aliens Sec. 22 (G) (1) Engaged in trade or business- (2) Not engaged in trade or business (iii) Special class of individual employees

(a) minimum wage earners- RA 9504

(iv) Members of general professional partnership (GPP)- Sec. 26

b) Corporations - Sec. 22 (B) (i) Domestic corporations – Sec. 22 (C) (ii) Foreign corporations- Sec. 22 (D) (a) Resident foreign corporations – Sec. 22 (H) (b) Non-resident foreign corporations- Sec. 22 (I) c) Partnerships d) Estates and trusts Section 60-66

6. Income taxation/ Tax a) Definition b) Basis, Nature, function c) General principles/ Situs- Sec. 23 d) Kinds of Income Taxes under RA 8424

Net Income Tax – Secs. 24(A), 26, 27 (A-C), 28(A), 31 and 32(A) Gross Income Tax-Secs. 25(B) and 28(B)(1) Final Income Tax- Sec. 57(A) Minimum Corporate Income Tax- Secs. 27(E), 28(A)(2)

Improperly Accumulated Earnings Tax- Sec. 29; Rev.Reg. 2-2001 Optional Corporate Income Tax- Sec. 27 (A) 4th to 10th par. And 28 (A)(1) 4th par. Fringe Benefits Tax Sec. 33 and RR 3-98, RR 5-2011; RR 8-2012

7. Income a) Definition/Concept/ Nature

Capital vs. IncomeCases: Madrigal vs. Rafferty 38 Phil 414Fisher vs. Trinidad 43 Phil 973

b) Sources of Income c) Tests in determining income

Realization test Claim of Right Doctrine Economic Benefit Test Severance Test All events test

Cases: NDC vs. CIR 151 SCRA 472Comm. vs. IAC 127 SCRA 9

Filipinas Synthetic Fiber Corporation vs. CA , G.R. No. 17667 , November 22, 2007 CIR vs. Isabela Cultural Corporation GR No. 172231 February 12, 2007

8. Taxable Income Defined -Sec. 31

When income is taxable Case:

CIR vs. PAL G.R. No 160538 October 9, 2006

9.) Gross income 1.) Definition - Sec. 32 (A) 2.) Concept of income from whatever source derived (Other sources of Income) 3.) Gross income vis-à-vis net income vis-à-vis taxable income 4.) Classification of Income as to source-Sec.42 5) Sources of Income subject to tax

10.) Exclusions from gross income

Sec. 32 B RA 7641 RA 4917

Tax exempt under special laws RA 1169 Prizes from PCSO PD 81 income from bonds for sale in international market PD 66 Income from bonds issued by PEZA

PD 745 and 1217, income from installment sales of houses to their employees and workers or to low-income groups in housing projects or income derived from rentals thereof.

Case: Intercontinental Broadcasting Corp. vs. Amarilla GR. No 162775 October 27, 2006

11). Deductions from Gross Income

a. Allowable Deductions – Sec 34i. Expenses

Sec. 34A1a and RR 10-2002ii. Interests

Sec. 34 B; RR 13-2000iii. Taxes

Sec. 34C; RA 7432CIR vs. Central Drug Luzon Corporation GR No. 159647 April 15, 2005

iv. Losses Sec. 34 D RR 14-2001 Losses from wash sales sec. 38

v. Bad Debts Sec. 34-E

Philex Mining vs. CIR GR No. 148187 April 16, 2008 CIR vs. Isabela Cultural Corporation GR No. 172231 February 12, 2007

vi. Depreciation

Sec. 34 F RR 12-2012

vii. Sec. 34 G- Sec.34 Mviii. Items not deductible

Sec. 36ix. Special provisions on deductions

Sec. 37

b. Personal and Additional Exemptions Sec. 35; RA 9504

Case: Pansacola vs .CIR G.R. No. 159991, November 26, 2006

12). Individual Income Taxation

Taxation of resident citizens, non-resident citizens, and resident aliens Secs. 23 (A-D), 24, and 25;

Tax on Passive Income Interests, Royalties, Prizes and other Winnings

Sec. 24 (B)(1), 25(A)(2), 25(B), (C), (D), (E) Dividends

Sec. 24 (B)(2), Sec 73B, 25 (A)(2), 25(B), (C), (D), (E), Cases:

Commissioner vs. Manning 66 SCRA 14Anscor vs. CIR 301 SCRA 152Procter & Gamble vs. Commissioner 160 SCRA 560Procter & Gamble vs. Commissioner (MR) 201 SCRA 377Wander vs. Commissioner 160 SCRA 573

Sale of Shares of Stock Sec. 24C, 25(A)(3), 25(B), (C), (D), (E)

Sale of Real Property Sec. 24(D)(1), 25(A)(3), 25(B) last part, Sec. 24(D)(2), RR 13-99

Fringe BenefitsSec.33; RR 3-98RR 5-2001; RR 8-2012

13). Corporate Income Taxation Secs. 23 (E), 22(H-l), 27 and 28 Sec. 27(A), Sec. 22B

Cases:Batangas vs. Collector 102 Phil. 822Evangelista vs. Collector 102 Phil. 140Reyes vs. commissioner 139 SCRA 436Ona vs. Bautista 45 SCRA 74Obillos vs. Commisioner 139 SCRA 436Pascual vs. Commissioner 166 SCRA 560Alisco vs. Commissioner 302 SCRA l

Taxation of domestic corporations, resident foreign corporations and non-resident foreign corporations

Tax on Educational Institutions Sec. 27B, Article XIV Sec. 4 par. 3 and Article VI Sec. 28 par 3 of the 1987

Constitution, Sec. 234(B) of the LGC, Sec. 30 (H) and (I) of the NIRC, Sec. 109(H) of LGC, Sec. 133 of LGC.

Tax on GOCCs Sec. 27 (c), 32(B)(7)(b), Sec. 133(o) and 154 LGC

R.A. 10026Cases:

Pagcor vs. Basco 197 SCRA 52Mactan Cebu vs. Marcos 261 SCRA 667LRT vs. City of Manila 342 SCRA 692

Tax on Passive Income of Domestic Corporations Interest and Royalties

27 (D)(1),28 (A)(7)(a)

Gains from Sale of Shares of Stock

27(D)(2), 28(A)(7)(c), 28(B)(5)(c), RA 7717Sec. 127 NIRC

Income derived under the Expanded Foreign Currency Deposit System

(27D3), ref. to 28A7b and 28B5c

Intercorporate Dividends (27D4) in relation to 28A7d and 28B5b

Cases:Procter & Gamble vs. Commissioner 160 SCRA 560Procter & Gamble vs. Commissioner (MR) 201 SCRA 377Wander vs. Commissioner 160 SCRA 573

Gains from Sale of Lands and/or Buildings 27(D)(5), RR 4-99

Minimum Corporate Income Tax (MCIT) Sec. 27E and 28A2Cases:The Manila Banking Corporation vs. CIR GR No. 168118 Aug. 28, 2006CIR vs. PAL GR. No.180066, July 7, 2009

Tax on Resident Foreign Corporations (Sec. 28A1) Tax on Gross Philippine Billings

Sec. 28A3 and RR 15-2002 RA 10378

Offshore Banking Units (Sec. 28A4) Branch Profit Remittances (Sec. 28A5)

Case: Marubeni vs.CIR 177 SCRA 500 Tax on Non-Resident Foreign Corporations

Sec. 28B2, 28B3, 28B4, 28B5a and Sec. 32B7a

Case: Mitsubishi vs. CIR 181 SCRA 214

Improperly Accumulated Earnings Tax (IAET) Sec. 29, RR 2-2001, RMC 035-11

Case: CIR vs . Ayala Securities Corp. et al

Exempt Corporations Sec. 30, Sec 27C and 22B

Case:CIR vs. CA and YMCA G.R. No. 124043 October 14, 1998 CIR vs. St. Lukes Medical Center GR Nos. 195909 & 195960 September 26, 2012

14. Capital Gains and Losses Sec .39; RR 7-2003; RR 6-2008Calasanz vs. CIR 144 SCRA 664

Determination of Gain and LossSecs. 40-41

15. Taxation on estates and trusts Estates and Trust

Secs. 60 to 66

16. Accounting Periods and Method of AccountingSecs. 43 to 50, Case: Banas vs. CIR325 SCRA 259Section 49Improvements by lessees

RR 2-1940

17. Returns and Payment of TaxSec. 51 to 59Pay as you file System vs. Pay as you earn SystemFinal Withholding Tax System vs. Creditable Withholding Tax SystemCorporate Income Tax Sec. 74 to 77

Case:Chamber of Real Estate and Builder’s Association, Inc. vs. The Executive Secretary, G.R. No. 160756 March 9, 2010