Philippine Taxation System

What is the primary function of the Bureau of Internal Revenue (BIR) with regards to national internal revenue taxes, fees, and charges?

The assessment and collection of all national internal revenue taxes, fees, and charges.

What is the scope of the BIR Commissioner's power to interpret tax laws?

Subject to review by the Secretary of Finance.

What is the exclusive appellate jurisdiction of the Court of Tax Appeals (CTA)?

Refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the Code or other laws or portions thereof administered by the BIR.

What is the purpose of the BIR's power to make assessments and prescribe additional requirements?

For tax administration and enforcement. Signup and view all the answers

What is the classification of taxes based on the manner of collection?

National Taxes and Local Taxes. Signup and view all the answers

What is the scope of the BIR's supervisory and police powers?

To give effect to and administer the powers conferred to it by the Code or other laws. Signup and view all the answers

What is the primary factor that contributes to the gradual diminution in the useful value of tangible property, resulting in depreciation?

wear and tear and normal obsolescence Signup and view all the answers

Which method of computing depreciation allows for a fixed rate of depreciation over the useful life of an asset?

Straight-line method Signup and view all the answers

What is the requirement for deducting intangible exploration and development drilling costs in the year incurred?

The expenditures must be incurred for non-producing wells and/or mines Signup and view all the answers

What is the maximum percentage of net income that can inure to the benefit of any private stockholder in a domestic corporation operated exclusively for religious, charitable, scientific, youth, and sports development purposes?

10% if individual and 5% if corporation Signup and view all the answers

What is the requirement for deducting charitable and other contributions, in terms of when they must be made?

Contributions or gifts must be actually paid or made within the taxable year Signup and view all the answers

What is the purpose of the cost-depletion method of computing depreciation?

To ensure that the allowance for depletion does not exceed the capital invested Signup and view all the answers

What is the primary purpose of allocation in taxation, as stated in Section 50 of the NIRC?

To place a controlled taxpayer on a tax parity with an uncontrolled taxpayer by determining the true net income from the property and business of a controlled taxpayer. Signup and view all the answers

What are the two key steps in properly explaining gross income?

First, classifying the type of taxpayer involved in arriving at the taxable income, and second, proper identification of whether the items are income from sources within or sources without. Signup and view all the answers

What is the tax treatment of special stipends to augment the income of employees?

They are included in taxable income as they form part of compensation income. Signup and view all the answers

What is the definition of compensation income?

All remuneration for services performed by an employee for his employer under an employer-employee relationship. Signup and view all the answers

What is the tax treatment of every form of compensation for services, whether paid in cash or in kind?

It is generally subject to income tax and consequently to withholding tax. Signup and view all the answers

What may be included in compensation income?

Every form of compensation for services, whether paid in cash or in kind. Signup and view all the answers

What is the formula to compute for the Grossed-up Monetary Value (GUMV) of fringe benefits?

GUMV = Value of Benefits / 0.65 Signup and view all the answers

What is the FBT rate used in computing the fringe benefit tax liability?

35% Signup and view all the answers

What type of benefits are exempt from fringe benefit tax under special laws?

FB authorized and exempted from tax under special laws Signup and view all the answers

What is an example of a de minimis benefit?

Monetized unused VL credits of private employees Signup and view all the answers

What is the purpose of fringe benefit tax?

To tax the value of benefits received by employees that are not in the form of cash Signup and view all the answers

What is the term for the value of benefits received by employees that are subject to fringe benefit tax?

Grossed-up Monetary Value (GUMV) Signup and view all the answers

What is the condition for research and development expenditures to be treated as expenses chargeable to the capital account?

The taxpayer must have paid or incurred the expenditures in connection with his trade or business, and they must not be treated as expenses under Par. 1, and must be chargeable to the capital account, but not chargeable to property of a character which is subject to depreciation or depletion. Signup and view all the answers

What is the purpose of the pension trust, and how does it relate to the allowed deduction?

The purpose of the pension trust is to provide reasonable pensions to employees, and the employer is allowed a deduction for the contributions made to this trust. Signup and view all the answers

Who is entitled to avail of the Optional Standard Deduction (OSD)?

Individual taxpayers, except those under the Non-Resident Alien Engaged in Trade or Business (NRAETB) and Non-Resident Alien Not Engaged in Trade or Business (NRANETB), and corporations, except non-resident foreign corporations (NRFC). Signup and view all the answers

What is the deductible amount under the Optional Standard Deduction (OSD)?

The deductible amount is 40% of gross sales or gross receipts for individuals, and 40% of gross income for corporations. Signup and view all the answers

What type of income is not included in the computation of the 40% OSD?

Passive income that has been subjected to final tax is not included in the computation of the 40% OSD. Signup and view all the answers

What is tax exemption, and how does it relate to taxation?

Tax exemption is a freedom or immunity from a charge or burden to which others are subjected, and it means that the taxpayer is not required to pay tax on a particular type of income. Signup and view all the answers