Test Your Knowledge on Philippine Tax Laws and Regulations with This Informative...

National Internal Revenue Code of 1997: Powers and Duties of the Bureau of Internal Revenue

• The National Internal Revenue Code of 1997 is the official name of the code.

• The Bureau of Internal Revenue is responsible for assessing and collecting all national internal revenue taxes, fees, and charges, as well as enforcing all forfeitures, penalties, and fines connected with them.

• The Bureau is under the control of the Department of Finance and has supervisory and police powers conferred by the Code and other laws.

• The Bureau has a Commissioner of Internal Revenue and four Deputy Commissioners as its chief officials.

• The Commissioner has the power to interpret tax laws and decide tax cases, subject to review by the Secretary of Finance.

• The Commissioner is authorized to obtain relevant information, summon, examine, and take testimony from persons in ascertaining the correctness of returns and determining tax liabilities.

• The Commissioner may authorize the examination of any taxpayer and assess the correct amount of tax due, even without prior authorization from any government agency or instrumentality.

• The Commissioner may assess the proper tax on the best evidence obtainable when a required report is not forthcoming or is believed to be false, incomplete, or erroneous.

• The Commissioner may order inventory-taking, surveillance, and prescribe presumptive gross sales and receipts to determine a taxpayer's internal revenue tax liabilities.

• The Commissioner may declare a taxpayer's tax period terminated and demand immediate payment of taxes if the taxpayer is retiring from business, leaving the country, hiding or concealing property, or obstructing tax collection proceedings.

• The Commissioner is authorized to determine the fair market value of real properties located in different zones or areas of the Philippines, subject to mandatory consultation with competent appraisers and notice to affected taxpayers.

• The Commissioner may inquire into bank deposit accounts and other related information held by financial institutions of a decedent, taxpayer, or specific taxpayers subject to a request for tax information from a foreign tax authority, subject to certain conditions and guidelines.Provisions on the Powers and Duties of the Commissioner of Internal Revenue

• The Commissioner of Internal Revenue has the power to administer and enforce internal revenue laws and regulations.

• The Commissioner may delegate certain powers to subordinate officials, with limitations and restrictions.

• The Commissioner is responsible for providing and distributing necessary forms, receipts, certificates, and appliances, and acknowledging tax payments.

• The Philippines is divided into revenue districts, each supervised by a Revenue District Officer.

• Revenue Regional Directors are responsible for implementing laws and regulations within their region and district offices.

• Internal revenue officers must ensure compliance with tax laws and aid in the prevention and punishment of fraud or delinquency.

• The Commissioner may assign or reassign officers and employees to other duties within the Bureau of Internal Revenue.

• Internal revenue officers may make arrests and seizures for violations of penal law, rules, or regulations.

• The Commissioner may employ, assign, or reassign officers involved in excise tax functions to establishments producing or keeping excise tax articles.

• The Commissioner may furnish pertinent information to Congress and the Department of Finance upon request.

• Certain taxes, fees, and charges are considered national internal revenue taxes, and definitions are provided for terms such as "person," "corporation," "resident," and "nonresident."

• The taxpayer must provide proof of intention to leave or return to the Philippines for tax purposes.Definitions and Rates of Taxation in the Philippines

• The term 'taxpayer' refers to any person subject to tax under the Philippine Tax Code.

• The term 'taxable year' refers to the calendar or fiscal year upon which net income is computed for tax purposes.

• The term 'trade or business' includes the functions of a public office.

• The term 'ordinary income' includes any gain from the sale or exchange of property that is not a capital asset or property described in Section 39(A)(1).

• The tax rates for individual taxpayers are based on a graduated scale ranging from 0% to 35%, depending on the taxable income.

• Married individuals must compute their individual income tax separately based on their respective total taxable income.

• Minimum wage earners are exempt from paying income tax on their taxable income, including holiday pay, overtime pay, night shift differential pay, and hazard pay.

• Self-employed individuals and/or professionals may opt to pay an 8% tax on gross sales or gross receipts and other non-operating income in excess of PHP 250,000 instead of the graduated income tax rates.

• Taxpayers earning both compensation income and income from business or practice of profession are subject to different tax rates depending on their total gross sales and/or gross receipts and other non-operating income.

• A final tax of 20% is imposed on interest income, yield, or any other monetary benefit from deposit substitutes, trust funds, and similar arrangements, and a final tax of 10% on royalties and other winnings derived from sources within the Philippines.

• Interest income received from a depository bank under the expanded foreign currency deposit system is subject to a final income tax of 15% for individual taxpayers (except nonresident individuals).

• Long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts, and other investments are exempt from the tax imposed under the previous bullet point, but pre-termination of the deposit or investment before the fifth year will result in a final tax imposed on the entire income.Taxation of Foreign Individuals in the Philippines

• Nonresident alien individuals engaged in trade or business in the Philippines are subject to income tax on taxable income received from all sources within the Philippines.

• Cash and/or property dividends from domestic corporations, joint stock companies, insurance or mutual fund companies, and regional operating headquarters of multinational companies are subject to a final tax of 20% for nonresident alien individuals.

• Capital gains from the sale of shares of stock in a domestic corporation, except those sold through the stock exchange, are subject to a final tax of 15% for both resident and nonresident alien individuals.

• Capital gains from the sale of real property located in the Philippines, classified as capital assets, are subject to a final tax of 6% for both resident and nonresident alien individuals.

• Nonresident alien individuals not engaged in trade or business in the Philippines are subject to a tax of 25% on income received from all sources within the Philippines.

• Alien individuals employed by regional or area headquarters and regional operating headquarters of multinational companies are subject to a tax of 15% on gross income received from such companies.

• Alien individuals employed by offshore banking units established in the Philippines are subject to a tax of 15% on gross income received from such units.

• Alien individuals who are permanent residents of a foreign country but are employed and assigned in the Philippines by a foreign service contractor or subcontractor engaged in petroleum operations in the Philippines are subject to a tax of 15% on salaries, wages, and other emoluments received from such contractor or subcontractor.

• The preferential tax treatment provided to alien individuals employed by regional or area headquarters, regional operating headquarters, offshore banking units, or petroleum service contractors and subcontractors shall not be applicable to those registering with the Securities and Exchange Commission after January 1, 2018.

• Alien individuals employed and assigned in the Philippines by an offshore gaming licensee or its service provider are subject to a final withholding tax of 25% on gross income received, with a minimum final withholding tax of PHP 12,500.

• All foreign employees of offshore gaming licensees and their service providers must have a tax identification number, and the failure to comply may result in fines and penalties for the employer.

• Any income earned from all other sources within the Philippines by the alien employees referred to in the previous bullet points shall be subject to the pertinent income tax imposed under this Code.