Philippine Tax Law

• Tax law sources include the 1987 Philippine Constitution which establishes the legal basis for taxation.
• The National Internal Revenue Code (NIRC) of 1997 is the primary law governing taxation in the Philippines.
• The Local Government Code (LGU) grants local government units the authority to impose local taxes and fees.
• Bureau of Internal Revenue (BIR) issuances, administrative regulations, revenue regulations, and circulars implement tax laws.
• Judicial decisions are tax-related rulings by courts that serve as legal precedents.

Types of Taxes

• Income tax is levied on individuals, corporations, and estates based on income earned within a taxable year.
• Individual income tax and corporate income tax exist.
• A minimum corporate income tax and special tax rates apply.
• Value-Added Tax (VAT) is a 12% tax imposed on the sale of goods, services, or properties.
• Percentage tax is a business tax imposed on entities exempt from VAT or whose gross annual sales exceed P3,000,000.
• Excise tax is levied on specific goods manufactured or produced in the Philippines or imported.
• Estate tax is a tax on the transfer of a deceased person's estate to their heirs.
• Donor's tax is a tax on the donation or gift of properties.
• Documentary Stamp Tax (DST) is imposed on legal documents, instruments, and loan agreements.
• Capital Gains Tax is levied on the sales of capital assets not used in business/trade.
• Withholding taxes are taxes withheld by employers and remitted to the government on behalf of the recipient.
• Expanded withholding tax, final withholding tax and withholding tax on compensation are specific types of withholding taxes.

Powers and Duties of the BIR

• Assess and collect all internal revenue taxes.
• Enforce forfeitures, penalties, and fines related to the assessment and collection of taxes.
• Execute judgments in cases where the BIR has prevailed in the Court of Tax Appeals (CTA).
• Implement and manage supervisory and enforcement powers granted to it.

Powers of the Commissioner of Internal Revenue

• Review any document related to an investigation.
• Gather information from external sources, including governmental bodies and taxpayers' transactions.
• Call upon individuals to assess tax obligations.
• Take statements from individuals concerning a tax investigation.
• Direct revenue officers to assess tax liabilities through canvassing.

Tax Classifications

• Taxes are classified based on subject matter/object, burden incidence, rate, purpose, and authority/scope.

Subject Matter/Object

• Personal/Poll/Capitation tax: A fixed tax on people in an area, regardless of property.
• Property tax is levied on taxable items proportionate to their worth.
• Excise tax is a fee for activities such as carrying out a trade, enjoying benefits, or a profession.

Burden Incidence

• Direct tax cannot be transferred to another individual or entity, and the taxpayer is responsible.
• Indirect tax can be transferred to another party.

Rate

• Specific tax is a fixed amount based on numbers, weight, or other criteria.
• Ad Valorem is according to value like real property tax.

Graduation

• Proportional tax is a fixed percentage of property income or another taxable base (real estate tax).
• Progressive tax increases as the rate increases.
• Regressive tax declines as the rate base increases.

Purpose

• General/Fiscal/Revenue tax is used to collect funds for government services.
• Special/Regulatory tax is used to regulate beneficial and non-beneficial activities such as businesses.

Authority/Scope

• National tax is enforced by the national government.
• Local tax is established by municipal corporations/LGUs.

Individual Taxpayers

• Individual taxpayers are natural persons with income from within the territorial jurisdiction.

Resident Citizens (RC)

• Resident citizens live within the Philippines

Non-Resident Citizen (NRC)

• Non-resident citizens stay outside the Philippines for 183 days or more by year's end.

Resident Aliens (RA)

• Resident aliens reside within the Philippines, but are not citizens.

Non-Resident Aliens (NRA)

• Non-resident aliens do not reside within Philippines, and are not citizens.
• Engaged in Trade (NRAET): Aliens who stayed in the Philippines longer than 180 days and/or have business income.
• Not engaged in trade (NRANET): Aliens who stay in the Philippines for 180 days or less and no businesses.

Fringe Benefit Tax

• Fringe benefits are benefits provided to employees.
• Housing, expense accounts, vehicles, and household personnel are fringe benefits.
• Interest on loans, membership fees, holiday expenses, educational assistance, and life/health insurance are also fringe benefits.
• Expenses for foreign travel are fringe benefits.
• Fringe benefits authorized and exempted from income tax under special laws are not subject to tax.
• Fringe benefits granted to employees required by the nature of the job are not subject to tax.

De Minimis Benefits

• De minimis benefits are not subject to tax
• Monetized unused vacation leave of up to 10 days.
• Monetized value of vacation and sick leave credits paid to private officials or employees.
• Medical cash allowance of P1,500 per semester/P1,250 a month.
• Rice subsidy of up to P2,000 per month/1 sack (50 kg) per month.
• Uniforms given to employees by the employer not exceeding P6,000 per year.
• Actual medical assistance not exceeding P10,000 per annum.
• Laundry allowance not exceeding P300 per month.
• Employee achievement awards
• Gifts given (small/major anniversaries), not exceeding P5,00 per employee per year.
• Daily meal allowances for graveyard shifts not exceeding 25% of the basic minimum wage per region.