Introduction to Income Taxation
Income Tax
– is a tax on a person’s income, emoluments, profits
arising from property, practice of profession, conduct of trade
or business or on the pertinent items of gross income specified
in the Tax Code of 1997 (Tax Code), as amended, less the
deductions and/or personal and additional exemptions, if any,
authorized for such types of income, by the Tax Code, as
amended, or other special laws.
A person means an individual, a trust, estate or corporation.
Income Tax Systems:
1. Global
– all income received by the taxpayer are grouped
together, without any distinction as to the type or nature
of the income, and after deducting therefrom expenses
and other allowable deductions, are subjected to a tax at a
fixed rate.
2. Schedular
– the various types/items of income are classified
accordingly and are accorded different tax treatments in
accordance with schedules characterized by graduated tax
rates.
3. Semi-schedular or semi-global
– partly global or partly schedular in features.
, Characteristics of Philippine Income Tax:
National Tax as to taxing authority
General tax as to purpose
Excise as to subject matter
Progressive as to rate (except for Corporations –
proportionate)
Direct tax as to incidence (who bears the burden)
A taxable item of income is referred to as an “item of
gross income” or “inclusion in gross income”
Gross Income - ANY INFLOW OF WEALTH to the taxpayer
from whatever source, legal or illegal, that increases net
worth.
Elements of Gross Income:
1. It is a return on capital that increases net worth.
2. It is a realized benefit.
3. It is not exempted by law, contract, or treaty.
Requisites of Realized Benefit:
1. There must be an exchange transaction.
2. The transaction involves another entity.
3. It increases the net worth of the recipient.
Types of Transfers:
1. Bilateral transfers or exchanges – subject to income tax
a.) Sale
b.)Barter
2. Unilateral transfers
a.) Succession
b.) Donation
Income Tax
– is a tax on a person’s income, emoluments, profits
arising from property, practice of profession, conduct of trade
or business or on the pertinent items of gross income specified
in the Tax Code of 1997 (Tax Code), as amended, less the
deductions and/or personal and additional exemptions, if any,
authorized for such types of income, by the Tax Code, as
amended, or other special laws.
A person means an individual, a trust, estate or corporation.
Income Tax Systems:
1. Global
– all income received by the taxpayer are grouped
together, without any distinction as to the type or nature
of the income, and after deducting therefrom expenses
and other allowable deductions, are subjected to a tax at a
fixed rate.
2. Schedular
– the various types/items of income are classified
accordingly and are accorded different tax treatments in
accordance with schedules characterized by graduated tax
rates.
3. Semi-schedular or semi-global
– partly global or partly schedular in features.
, Characteristics of Philippine Income Tax:
National Tax as to taxing authority
General tax as to purpose
Excise as to subject matter
Progressive as to rate (except for Corporations –
proportionate)
Direct tax as to incidence (who bears the burden)
A taxable item of income is referred to as an “item of
gross income” or “inclusion in gross income”
Gross Income - ANY INFLOW OF WEALTH to the taxpayer
from whatever source, legal or illegal, that increases net
worth.
Elements of Gross Income:
1. It is a return on capital that increases net worth.
2. It is a realized benefit.
3. It is not exempted by law, contract, or treaty.
Requisites of Realized Benefit:
1. There must be an exchange transaction.
2. The transaction involves another entity.
3. It increases the net worth of the recipient.
Types of Transfers:
1. Bilateral transfers or exchanges – subject to income tax
a.) Sale
b.)Barter
2. Unilateral transfers
a.) Succession
b.) Donation
