Taxation

Taxes are revenue of the government that funds government expenditures and programs.

Taxation is the imposition of a mandatory levy on the citizens and/or the businesses of a country by their government.

The Bureau of Internal Revenue (BIR) is the primary implementing agency of this law.

Income tax is defined as the tax on the net income or the entire income realized in one taxable year.

a. Natural person - refers to individual taxpayers.

b. Juridical person – includes corporations, partnership, and any association

1. National taxes - Those imposed by the National government under the National Internal Revenue Code and other laws particularly the Tariff and Customs Code; and

2. Local taxes - those imposed by the local governments to meet particular needs under the Local government Code, such as real property tax and the community tax (formerly residence tax).

Situs is the place of taxation.

Double taxation means a sovereign act of taxing twice for the same purpose in the same year upon the same property or activity of the same person, when it should be taxed once for the same purpose and same character of tax.

Direct double taxation - this occurs when all the elements of double taxation exist for both impositions.

Indirect double taxation - this occurs when at least one of the secondary elements of double taxation is not common for both impositions.

1. Tax evasion. Also known as tax dodging refers to any act or trick that tends to illegally reduce or avoid the payment of tax. In income taxation, this can be done by undue understatement of income, overstatement of expenses or non-declaration of income.

2. Tax avoidance. Also known as tax minimization refers to any act or trick that reduces or totally escapes taxes by any legally permissible means. This may be done by selecting tax options allowed by law which minimizes tax liability.

3. Tax exemption. also known as tax holiday refers to the immunity privilege or freedom from being subject to tax which others are subject to. Tax exemption may be granted by the Constitution, and those granted under contracts.

Tax Amnesty

Tax Amnesty is a general pardon granted by government to erring tax payer to give them a chance to reform. It is an absolute forgiveness by the government on its right to collect and its retrospective in application.

Tax Condonation

Tax condonation is forgiveness of the tax obligation of a certain taxpayer under certain condition. This is also referred to as tax remission.

Internal Revenue refers to taxes imposed by the legislature to duties on imports and exports.

Taxable income is gross income as defined above, less the deductions allowed by law, including in the case of individuals, the allowable personal and additional exemptions.

“Gross receipts” is equal to net sales plus other taxable income.