Taxation Basics

What is Taxation?

• Taxation is a system where the government generates income to defray its expenses through taxes, which are proportionate to the citizen's ability to pay.
• Taxes are enforced by law through the Bureau of Internal Revenue.

Types of Taxes

National Taxes

• Paid to the government through the Bureau of Internal Revenue.
• Examples:
  • Capital Gains Tax: imposed on gains from selling, exchanging, or disposing of capital assets in the Philippines.
  • Documentary Stamp: a tax on documents, instruments, and papers evidencing transactions.
  • Donor's Tax: a tax on donations or gifts.
  • Estate Tax: a tax on the right of the deceased to transmit their estate to heirs.
  • Income Tax: a tax on all yearly profits arising from property, profession, trades, or offices.
  • Percentage Tax: usually based on a fixed rate.
  • Value Added Tax (VAT): a business tax on sales of properties, leases, or services.
  • Excise Tax: a tax on goods manufactured or produced in the Philippines.
  • Withholding Tax: a tax withheld from individuals receiving compensation income.

Local Taxes

• Imposed by local government units such as provinces, cities, municipalities, and barangays.
• Examples:
  • Tax on Transfer of Real Property Ownership: a tax on the sale, donation, or transfer of real property ownership.
  • Tax on Business of Printing and Publication: a tax on the business of printing and publishing.
  • Franchise Tax: a tax on businesses enjoying a franchise.
  • Tax on Sand, Gravel and Other Quarry Resources: a tax on quarry resources.
  • Professional Tax: an annual professional tax on individuals engaged in a profession requiring government examination.
  • Amusement Tax: a tax collected from proprietors of theaters, cinemas, and other places of amusement.
  • Annual Fixed Tax: an annual fixed tax on delivery trucks or vans used by manufacturers, producers, wholesalers, dealers, or retailers.
  • Tax on Business: a tax imposed by cities and municipalities on businesses before issuing a business license or permit.
  • Fees for Sealing and Licensing of Weights and Measures: fees for the sealing and licensing of weights and measures.
  • Fishery Rentals, Fees, and Charges: rentals, fees, or charges imposed by the municipality/city on grantees of fishery privileges.
  • Community Tax: a tax levied by cities or municipalities on inhabitants who meet certain conditions.
  • Taxes that may be levied by the barangays on stores or retailers with fixed business establishments.
  • Service Fees or Charges: fees or charges collected by barangays for services rendered in connection with regulations or use of barangay-owned properties.
  • Barangay Clearance: a reasonable fee collected by barangays upon issuance of barangay clearance.