Intro to General Principles in Taxation

7/28/2019 Intro to General Principles in Taxation

1/18


2/18

TAXATION- a process or act of imposing acharge by government authority on property,individuals or transactions to raise money forpublic purposes.POWER OF TAXATION- as one of the inherentpowers of the government it is the power totake property for the support of thegovernment and for public purpose.


3/18

FUNDAMENTAL PRINCIPLES OF TAXATIONA. Ability-to-Pay Principle-each subject of every state ought to contribute to

the support of the government as nearly as possible in proportion to therevenue which they respectively enjoy under its protection

B. Uniform and Equitable-the tax measure ought to be so construed as bothto take out and keep out of the pockets of the people as little as possible,over and above what it brings into the public treasury

C. Just- the taxes which each person has to pay ought, as respect to the timeand manner of payment and the sum to be paid, to be certain and notarbitrary

D. Convenient-the tax measure ought to be levied at the time and in the

manner in which it is most likely to be convenient to the taxpayer who paysit.


4/18

SCOPE OF THE POWER OFTAXATION1.Supreme

2.Comprehensive3.Unlimited

4.plenary


5/18

OBJECTS OF TAXATION1. Businesses2. Interests

3. Transactions

4. Rights5. Acts

6. Persons(natural or juridical)

7. Properties(real or personal, tangible or

intangible)8. Privileges


6/18

Income-the amount of moneyor property received by a

person or corporation within aspecified time whether aspayment for services, interests

or profits from investment.


7/18

1. Taxable- the amount of the income uponwhich the tax rate prescribed by law isapplied to obtain the amount of incometaxable

2. Non-taxable-those excluded by law ortreaty from taxation.


8/18

COMPENSATION INCOME- all remunerationsfor services performed by an employee for his

employer under an employer-employeerelationship, unless specifically excluded bythe Tax Code

GROSS INCOME-means Gross Sales less SalesReturns, discounts and allowances and cost ofgoods sold, plus any income from investmentand other incidental or outside operations orsources.


9/18

Juan, a single and official of a private corporation, received the following compensation fromher employee:

Salaries 240,000.00

13th month pay 20,000.00

Productivity pay 10,000.00

Loyalty Award 5,000.00

To compute the taxable compensation income:

Salaries 240,000.00

Gross benefits:

13th month pay 20,000.00

Productivity pay 10,000.00

Loyalty Award 5,000.00

Gross Benefits 35,000.00

Add: Gross Benefits (35,000.00-30,000.00) 5,000.00

Gross Compensation Income 245,000.00

Less: Personal Exemption 50,000.00

Taxable Compensation Income 195,000.00----------


10/18

The first year of business operation of Mr. Juan Dela Cruz revealed he summary of its income andexpenses in 2011:

Sales 850,000.00

Sales returns and alowances 35,000.00Cost of sales 350,000.00

Rent income (net of 5% witholding tax) 79,800.00

Income on sale of capital asset 20,000.00

To compute gross income:

Sales 850,000.00

Less: Sales Returns and Allowances 35,000.00

Net Sales 815,000.00

Less: Cost of Sales 350,000.00

Gross Profit 465,000.00

Add:Other Income

Rent (79800*95%) 84,000.00

Income on sale of capital asset 20,000.00 104,000.00

Gross Income 569,000.00----------


11/18

2 Kinds of Exemption:

Personal Exemption-pertains to the taxpayer

himself and is based on his status;

Additional Exemption-pertains to his qualifieddependent children


12/18

Personal Exemptions under RA 9504: (June17,2008)A. Personal Exemption

Married individuals

Head of the family

Single

Legally separated individuals

Provided, no qualified dependents is uniformlypegged at 50,000.00 each per annum


13/18

B. Additional Exemption

From children (legitimate, legally adopted,

illegitimate): Below 21 years old

Unemployed

Unmarried

Living with the taxpayer

Fully dependent upon him for chief support

--now pegged at P25,000.00 each maximumof four children


14/18

NORMAL TAX RATE ON INDIVIDUAL TAXPAYERS

Not over P10,000 5%Over P10,000 but not over P30,000 P500+10% of the excess over P10,000Over P30,000 but not over P70,000 P2,500+15% of the excess over P30,000Over P70,000 but not over P140,000.. P8,500+20% of the excess over P70,000Over P140,000 but not over P250,000 P22,500+25% of the excess over P140,000Over P250,000 but not over P500,000 P50,000+30% of the excess over P250,000Over P500,000 P125,000+32% of the excess over P500,000


15/18

Juan, a single with two qualified dependent children and an official of a privatecorporation, received the following compensation from her employee:

Salaries 240,000.00

13

th

month pay 20,000.00Productivity pay 10,000.00Loyalty Award 5,000.00

To compute the taxable compensation income:

Salaries 240,000.00

Gross benefits:13th month pay 20,000.00Productivity pay 10,000.00Loyalty Award 5,000.00

Gross Benefits 35,000.00Add: Gross Benefits (35,000.00-30,000.00) 5,000.00Gross Compensation Income 245,000.00

Less: Personal Exemption 50,000.00Additional Exemption 50,000.00 100,000.00Taxable Compensation Income 145,000.00

----------


16/18

And to compute the pertinent tax due wouldbe:

Over P140,000 but not over P250,000 P22,500+25% of the excess over P140,000

The tax on 140,000.00 22,500.00

Tax on Excess (145k-140k) * 25% 1,250.00

Income Tax Due 23,750.00---------


17/18

In the first year of business operation of Mr. Juan Dela Cruz, single, revealed thesummary of its income and expenses in 2011:

Sales 850,000.00Sales returns and alowances 35,000.00Cost of sales 350,000.00

Rent income (net of 5% witholding tax) 79,800.00Income on sale of capital asset 20,000.00Deductible expenses 230,000.00

To compute gross income and taxable income

Sales 850,000.00Less: Sales Returns and Allowances 35,000.00Net Sales 815,000.00Less: Cost of Sales 350,000.00Gross Profit 465,000.00Add:Other IncomeRent (79800*95%) 84,000.00Income on sale of capital asset 20,000.00 104,000.00

Gross Income 569,000.00Less: Deductible Expenses 230,000.00Income from business 339,000.00Less: Basic personal exemption 50,000.00Taxable Income 289,000.00

----------


18/18

The pertinent income tax due would be:

Over P250,000 but not over P500,000 P50,000+30% of the excess over

P250,000

The tax on 250,000.00 50,000.00

Tax on Excess (289k-250k) * 30% 11,700.00

Income Tax Due 61,700.00---------

Documents

Intro to General Principles in Taxation