BAC 3(Taxation)
Characteristics of the Regular Income Tax
🎀 General in coverage
🎀 Net income taxation
🎀 An annual tax
🎀 Creditable withholding tax
🎀 Progressive or proportional tax
covers income that are either exclusion or inclusion depending on certain circumstances,
Special topics
This comprises all items of income that are neither excluded in gross income nor subjected to final tax or capital gains tax.
Gross Income
Expenses of the conduct of business or exercise of profession.
Allowable deductions/deductions/ business expense
Those that an individual spends that are not connected to furtherance, maintenance or development of his trade, business or profession are non-deductible against gross income.
Personal expenses
Individuals are classified as follows:
🎀Pure compensation income earner
🎀Pure business or professional income earner
🎀Mixed income earner – for individuals earning both compensation and business or professional income.
Arises from employer-employee relationship.
Compensation income
arises from selling of goods or rendering of services for a profit.
Business income
characterized by a power to retrench giving the employer the power to terminate the arrangement when he is losing in business.
employer-employee relationship
Income that are neither compensation nor business income such as those passive income are simply classified as
other taxable income
This includes legally mandated salary deductions and items of compensation income that are exempted by law, contracts, or treaty from income taxation. T
Non-taxable compensation
refers to the cost for acquiring of the goods that are sold for merchandising business or the manufacturing
Cost of sales
pertains to all direct costs of rendering the services such as cost of labor, materials, and overhead costs.
Cost of services
a general term which refers to gross inflow of benefits (total returns) arising from the primary operations of the business.
Revenue
pertain to revenue from the sale of goods
sales
pertain to revenue from the sale of service.
fees
pertain to cash collections from sale of goods or services.
Receipts
a gross concept pertaining to the total return in a transaction which includes the return of capital and the return on capital.
Revenue
is a concept pertaining to the return on capital in a transaction.
Gross income
net of the cost of sales or cost of services.
Gross income
This includes active income from isolated or one-time transactions such as casual carpentry income of a person not
engaged in carpentry business.
Casual active income
This includes passive income not connected with the business of the taxpayer and is not subjected to final tax such
as interest on advances to employees and dividends from foreign corporations.
Passive income not subject to final tax
The difference in presentation and corporations necessitated by ?
Optional Standard Deduction (OSD).
Types of Regular Income Tax
🎀 Individual income tax
🎀 Corporate income tax
covers all individuals including taxable estates and trusts except NRA-NETB as they are subject to 25%
progressive tax
What is the minimum corporate income tax?
2%
They are corporations that enjoy lower rates but not 0%.
Special Corporations
Tax return form of Purely employed taxpayer.
Form 1700
Purely in business or profession, using itemized, OSD or opting to the 8% optional income tax
Form 1701A
Mixed income earners, estates and trusts
Form 1701
Corporations subject only to 30% regular income tax
Form 1702-RT
Corporations subject to special or a combination of tax rates
Form 1702-MX
Corporations that is exempt with no tax due
Form 1702-EX