ASSOCIATION OF TAXATION AND LAW STUDENTS ACADEMICS DEPARTMENT http://www.facebook.com/atlas.ue 0915-1049090 & 0905-2101285

Note: No Copyright IntentedSources: Income Taxation, Omar Erasmo G. Ampongan; Transfer and Business Taxation, Edwin Valencia: Review School of Accountancy notes

Topic: GENERAL PRINCIPLES OF TAXATIONTax it is an enforced contribution levied by the State by virtue of the sovereignty on persons and property within its jurisdiction for the support of the government and all public needs.Primary Purpose: To raise revenue to finance government expenditures.Scope: Unlimited Comprehensive Plenary SupremePrinciples of Sound Tax System: Fiscal Adequacy revenue must be sufficient to meet the demands of public expenditures. Equality or Theoretical Justice based on ability to pay. Administrative Feasibility capable of convenient, just and effective administration.Essential Characteristics of Tax: It is an enforced contribution; It is levied pursuant to legislative authority; It is proportionate in character; It is payable in money It is levied on persons and property within the jurisdiction of the State; It is levied and collected for the purpose of raising revenue to be used for public purpose; It is commonly required to be paid at regular intervals (not all taxes).

Limitations on Power of Taxation: Constitutional Limitations Due process of law Equal protection of the laws Non-impairment of obligation of contracts Non-imprisonment for non-payment of poll tax Rule of Taxation should be uniform and equitable Exemption from Real Property Tax of charitable institutions, churches, parsonages or convents, mosques and non-profit cemeteries, and all lands, buildings and improvements actually, directly and exclusively used for religious or charitable purposes. Exemption from Income Taxes, Real Estate Taxes and Custom Duties of non-stock, non-profit educational institutions used actually, directly, and exclusively used for educational purposes.

Inherent Limitations Levied for public purpose Exemption from taxation of government entities Non-delegation of legislative power to tax TerritorialClassification of Taxes:1) As to scope National imposed by National government (ex. Income Tax, Estate Tax, Donors Tax, Value Added Tax, Other Percentage Taxes, and Documentary Stamp Tax). Local or Municipal imposed by municipal corporations (ex. Real Estate Tax and Community Tax).2) As to who bears the burden Direct tax which is demanded from the person who also shoulders the burden of tax or tax which the taxpayer cannot shift to another (ex. Income Tax, Estate Tax and Donors Tax). Indirect tax which is demanded from one in the expectation and intention that he shall indemnify himself at the expense of another or tax which can be shifted to another person (ex. Value Added Tax and Other Percentage Taxes).3) As to the determination of the amount Specific tax of fixed amount imposed by the head or number, or by some standard of weight or measurement. It requires no assessment other than a listing or classification of the subjects to be taxed (ex. Excise Tax on cigarettes and liquors). Ad Valorem Tax of fixed proportion of the value of the property with respect to which the tax is assessed. It requires the intervention of assessors or appraisers to estimate the value of such property before the amount due from each taxpayer can be determined (ex. Value Added Tax, Income Tax, Donors Tax and Estate Tax).

4) As to purpose General/Fiscal tax imposed solely for the general purpose of the government, to raise revenue for government expenditures (ex. Income Tax, Donors Tax and Estate Tax). Special/Regulatory tax imposed for a specific purpose, to achieve some social or economic ends irrespective of whether revenue is actually raised or not (ex. Tariff and Certain duties on Imports).5) As to object or subject matter Personal/Poll/Capitation tax of fixed amount imposed on individual, whether citizens or not, residing within a specified territory without regard to their property or the occupation in which he may be engaged (ex. Community Tax). Property tax imposed on property, whether real or personal, in proportion either to its value, or in accordance with some other reasonable method of apportionment (ex. Real Estate Tax). Excise any tax which does not fall within the classification of a poll tax or a property tax. This is a tax on the exercise of certain rights or privileges (ex. Income Tax, Estate Tax, Donors Tax, Value Added Tax and Other Percentage Taxes).6) As to rates or gradation Proportional tax based on a fixed percentage of amounts of the property, receipts, or other basis to be taxed (ex. Value Added Tax and Other Percentage Taxes). Progressive tax the rate of which increases as the tax base or bracket increases (ex. Income Tax, Estate Tax and Donors Tax). Regressive tax the rate of which decreases as the tax base or bracket increases.Distinction of Tax from other Charges1) Distinction of Tax from Toll Toll is a sum of money collected for the use of something, generally applied to the consideration which is paid for the use of road, bridge or the like, of a public nature.

TollTax

Whose demandDemand of proprietorshipDemand of sovereignty

Paid for whatPaid for use of another persons propertyPaid for the support of the Government

BasisAmount is based on the cost of construction or maintenance of the public improvements usedAmount is based on the necessities of the State

Authority that imposesImposes by the Government or by Private EntitiesImposed by Government only

2) Distinction of Tax from Special Assessment Special Assessment is an enforced proportional contribution from owners of lands for special benefits resulting from public improvements.

Special AssessmentTax

Levied on whatOn land onlyOn persons, property, or the exercise of privilege

Whose personal liabilityNot a personal liability of the person assessedPersonal liability of the person taxed

BasisBased wholly on the special benefits to the property assessedBased on the necessities of the government without any special benefit directly accruing to the taxpayer

ApplicationExceptional both as to time and placeHas general application

3) Distinction of Tax from License Fee License Fee or Permit is a charge imposed under the police power for the purpose of regulations.

License FeeTax

Imposed for whatFor regulationFor revenue

Exercise of what powerInvolves an exercise of police powerInvolves exercise of taxing power

Amount of impositionAmount is limited to the necessary expenses of regulationsAmount is generally not limited

Subject of impositionImposed on the right to exercise a privilegeImposed on persons, property and the right to exercise a privilege

PurposeLegal compensation or reward of an officer for specific servicesEnforced contribution assessed by sovereign authority to defray public expenses

Consequence for failure to payMakes the act or business illegalDoes not necessarily make the business illegal

4) Distinction of Tax from Debt

DebtTax

BasisBased on contractBased on law

AssignabilityAssignableGenerally not assignable

Payment modeMay be paid in kindGenerally payable in money

Consequence for failure to payNo imprisonment for non-paymentImprisonment for non-payment except poll tax

Prescriptive periodGoverned by ordinary prescriptive periodGoverned by special prescriptive period

InterestDraws interest when stipulated or when there is defaultDoes not draw interest except when default

5) Distinction of Tax from Penalty Penalty Tax

PurposeDesigned to regulate conductAimed at raising revenue

Authority that imposesImposed by Government or Private entitiesImposed by Government only

Sources of Tax Laws: The Constitution Statutory Enactments Administrative Rulings and Regulations Judicial DecisionsTax Situs: Business, Occupation or Transaction place where the business is conducted, place where the occupation is practiced, or the place where the transaction took place. Real and Tangible Personal Property location of property. Income place where the same is earned, or citizenship or domicile of the owner. Gratuitous transfer of Property residence or citizenship of the taxpayer, or location of property.

Other Charges or Related Terms: Subsidy is pecuniary aid directly granted by the government to an individual or private commercial enterprise deemed beneficial to the public. Revenue refers to all funds or income derived by the government, whether from tax or any other sources. Internal Revenue refers to taxes imposed by the legislature other than duties on imports and exports. Customs Duties (or simply Duties) are taxes imposed on goods exported to or imported from a country. Custom duties are really taxes but the latter is broader. Tariff may be used in following three senses: A book of rates drawn usually in alphabetical order containing the names of several kinds of merchandise with the corresponding duties to be paid for the same. The duties payable on goods imported or exported. The system or principles of imposing duties on the importation or exportation of goods.Tax Avoidance vs. Tax Evasion: Tax Avoidance also known as Tax minimization. It is the use by the taxpayer or legally permissible methods in order to reduce tax liability. Tax Evasion also known as Tax dodging. It is the use by the taxpayer of illegal means to defeat or lessen the payment of tax.Other Forms of Escape from Taxation: Shifting transfer of burden of tax by the original payor to another or someone else. Capitalization reduction in the price of the taxed object equal to the capitalized value of future taxes which the purchaser expect to be called upon to pay. Transformation the manufacturer or producer upon whom the tax has been imposed, fearing the loss of his market if he should add the tax to the price, pays the tax and endeavors to recoup himself by improving his process of production thereby turning out his units of production at a lower cost.

Topic: ITEMS AND CONCEPT OF INCOMEIncome it means all wealth which flows into taxpayer other than the mere return of the capital. It includes the forms of income specifically described as gains derived from the sale or other disposition of capital.Gross income is the income reduced by exclusions. In other words, it is income from taxable sources.Taxable income means the pertinent items of income specified in the code, less the deductions and/or personal and additional exemption, if any, authorized for such types of income by the code or other special laws.Income tax is referred to as tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a persons income, emolument, profits and the like.Income tax classified:Classification of Income Taxpayers:a. National taxa. Individualsb. An Excise taxb. Partnership and Corporationc. Direct taxc. Estate and Trustd. General tax

Inclusion in income tax:

1. Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions and similar items.2. Gross income derived from conduct if trade or business or the exercise of a profession.3. Gains derived from dealings in property.4. Interests5. Rents6. Royalties7. Dividends8. Annuities9. Prizes and winnings10. Pension11. Partners distributive share from the net income of the general profession partnership.

Receipt of dividends:

1. Cash dividends it is a form of dividend which is paid in cash to shareholder.2. Stock dividend it is a distribution by a corporation to its shareholder of the corporations own stock.3. Property dividend it is a dividend paid in shares of stock of another corporation or other property of the corporation.Refund of tax is taxable if the tax was previously deducted as an expense in computing the tax during the previous year.

Topic: FRINGE BENEFITS & FRINGE BENEFITS TAXFringe Benefit-is any good, service, or other benefit furnished or granted by an employer, in cash or in kind, in addition to basic salaries.Fringe Benefit Tax-it is a tax on fringe benefits granted by the employer for the employee.- paid by the employee within 30 days after the end of the month.- is a final tax on the grossed-up monetary value of the fringe benefit being given to a managerial or supervisory employee. It is considered a final income tax on the employee. Regardless of whether the employer is an individual, partnership, or corporation, this tax applies.1. Housing2. Expense Account3. Vehicle4. Household Personnel5. Interest on loan6. Membership fees7. Foreign travel8. Holidays and Vacation expense9. Educational Assistance10. Life or Health Insurance

Two Kinds of Fringe Benefita.) De Minimis Fringe Benefit- It is a not taxable fringe benefit but taxable to the receiver in excess of the law requires. b.) Taxable Fringe Benefit- It is subject to fringe benefit tax paid by the employer. Two kinds of Employeea.) Rank and File - it does not require managerial decision (Clerk/Bookkeeper/Accountant). - They are not subject to fringe benefit tax but they are subject to De Minimis Benefit.b.) Supervisory or Managerial - it requires managerial decision (President/CEO/Manager). - They are subject to fringe benefit tax.

De Minimis BenefitMedical Cash Allowance..P750 per semester or P125 per monthRice Subsidy..P1500 per month or 50kg per monthUniform AllowanceP4000 per annumLaundry Allowance...P300 per monthGift...P5000 per annum

How do you compute for fringe benefits tax? Housing

Lease Monthly Rental xxMultiply by Taxable Portion50% Monetary ValuexxDivide by68%Grossed-up Monetary ValuexxMultiply Rate of Tax32%Fringe Benefit Taxxx

Own And InstallmentFMV of Land/ Acquisition cost xxMultiply by5%Value of the Benefit xxMultiply by Taxable Portion50% Monetary ValuexxDivide by68%Grossed-up Monetary ValuexxMultiply Rate of Tax32%Fringe Benefit Taxxx

Transfer of ownershipFMV of CIR and FMV Assessor(whichever is higher, minus thecost to the employee)xxDivide by68%Grossed up monetary ValuexxMultiply by Rate of Tax32%Fringe Benefit Taxxx

Vehicle

Purchase or Cash paidMonetary ValuexxDivide by68%Grossed-up Monetary ValuexxMultiply Rate of Tax32%Fringe Benefit Taxxx InstallmentValue of the BenefitxxDivide by5 yrs.Monetary ValuexxDivide by68%Grossed-up Monetary ValuexxMultiply Rate of Tax32%Fringe Benefit Taxxx OwnValue of the BenefitxxDivide by5 yrs.Value of the BenefitxxMultiply by Taxable Portion50% Monetary ValuexxDivide by68%Grossed-up Monetary ValuexxMultiply Rate of Tax32%Fringe Benefit Taxxx RentalValue of the BenefitxxMultiply by Taxable Portion50% Monetary ValuexxDivide by68%Grossed-up Monetary ValuexxMultiply Rate of Tax32%Fringe Benefit Taxxx

Topic: EXCLUSIONS FROM GROSS INCOMEExclusions - income or receipts which are excluded from gross income and are not subject to income tax. They do not part from the gross income.The following items that are not included in the gross income are:

A.) Proceeds of life insurance

1.) Proceeds of life insurance policies excluded from gross income Proceeds life insurance policies paid to the heirs or beneficiaries upon the death of the insured, whether in a single sum or otherwise are excluded from the gross income.

2.) Interest on proceeds is included in the gross income If such proceeds are held by the insurer under an agreement to pay interest thereon, the interest payment shall be included in the gross income.

B.) Amount received by insured as return of premium

1.) Excluded return of premium The amount received by the insured, as a return of premium paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract.

2.) Excess of premium returned shall be included in gross income If the amount, when added to amount received before the taxable year under such contract, exceed the aggregate premium paid, whether or not paid during the taxable year, then the excess shall be included from the gross income. 3.) Excluded amount from in case of a transfer for a valuable consideration by assignment or otherwise, of life insurance In the case of a transfer of a valuable consideration by assignment or otherwise, of a life insurance, endowment or annuity contract or any interest therein, only the actual value such consideration and the amount of the premiums and the sums subsequently paid by the transferee are exempt from the taxation.

4.) Participating dividend Participating dividends are not income to be insured, they are treated as return of capital.

C.) Gifts, bequest and devises

1.) Subject to transfer taxes Gift,bequest and devises are subject to transfer taxes (estate tax or donors tax.)

2.) Income from devise or descent of income included in gross income Income from property dividend from the investment, sale or otherwise shall be included in the gross income

3.) Gift, bequest, devises or descent of income included in gross income Gift, bequest, devises or descent of income from any property, in cases of transfer of dividend interest, shall be included in the gross income.

4.) Alimony or an allowance based on a separation agreement Neither alimony nor allowance based on separation agreement is taxable income.

D.) Compensation for injuries or sickness

1.) Excluded compensation for injuries or sickness Amount received through accident or health insurance or under worksmens compensation act. Amount of any damages received, whether by suit or agreement on account of such injuries or sickness.

2.) Recoveries of certain damages Recoveries of damages representing compensation for personal injuries arising from libel, defamation, slander, breach of promise to marry, alienation of affection are not subject to income tax shall not be included in gross income.

E.) Income exempt under treaty

1.) Excluded income Income of any kind to the extent required by any treaty obligation binding upon the government of the Philippines is exempt from taxation.2.) Examples of income exempt under treaty Salaries of officials of the United Nations assigned in the Philippines if paid by the united nation and certified by the secretary general of the united nation. Salaries, allowances, fees, or wages received by the citizens of the United States of America working in consular offices in the Philippines are exempt from all taxes. Salaries of diplomatic officials and agent.

F.) Retirement Benefits

1.) Retirement received under R.A. No.7641and those received by officials and employees of private firms The retiring officials or employee has been in the service of the same employer for at least 10 years and is not less than 50 yrs of age at the time of his retirement. The benefits granted shall be availed of by an official or employee only once

2.) Any amount received by an official or employee as a consequence of separation Any amount received by an official or employee of his heir from the employer as a consequence of separation of such official or employee from the service of the employer because of death, sickness or physical disability or for any cause beyond the control of the said official or employee is not included in the gross income.

3.) Social Security benefits, retirement gratuities, pensions and other similar benefits received from foreign government agencies and other institutions, private or public. The provisions of any law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received from foreign government agencies and other institutions, private or public by resident or non-resident citizen of the Philippines or aliens who come to reside permanently in the Philippines are not included in the gross income.

4.) United States veterans administration benefits Payments of benefits due or to become due under United States veterans administration are not included in the gross income.

5.) Social Security System(SSS) Benefits received from or enjoyed under the SSS are not included in the gross income.

6.) Government Service Insurance System (GSIS) Benefits received from the GSIS including retirement gratuity received by government officials and employees are not included in the gross income.

G.) Miscellaneous items

1.) Income derived by governments Income derived by foreign governments, financing institutions owned, controlled or enjoying refinancing from foreign governments and international or regional financial institution established by foreign governments from investment in loans, stocks, bonds or other domestics securities, or from interest on deposits in bank in the Philippines. Income accruing to the government of the Philippines derived from any public utility from the exercise of any essential government functions.

2.) Prizes and awards Recognition of achievements made primarily in the following field are religious, charitable, scientific, educational, artistic, literary, civic. All prizes and awards granted to athletes to local and international sports competition and tournaments whether held in the Philippines or abroad and sanctioned by their national sports association.

3.) 13th month and other benefits Gross benefits received by officials and employees of public and private entities provided that the total exemption shall not exceed P30, 000.

4.) GSIS, SSS, Medicare, & Pag Ibig contribution, and union dues GSIS, SSS, Medicare, & Pag Ibig contribution and union dues of individual shall not be included in the gross income.5.) Gain realized Gain realized from the sale or exchange or retirement of bonds debentures or other certificate of indebtedness with a maturity of more than 5 years shall not be included in the gross income. Gains realized by the investor upon redemption of shares of stock in a mutual fund company (mutual fund is an open-end and close investment company.)

Topic: TAXATION OF INDIVIDUALS Classification of Individuals

a. Citizens 1. Those who are citizens of the Philippines at the time of the adoption of the Constitution (on February 2, 1987). 2. Those whose fathers or mothers are citizens of the Philippines3. Those born before Jan. 17, 1973 of Filipino mothers who elect Philippine citizenship upon reaching the age of majority.4. Those who are naturalized in accordance with law.

Resident Citizen- a citizen of Philippines residing therein. A person who is born within the country or state is called Resident Citizen.

Non-resident Citizen-1. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein;2. A citizen of the Philippines who leaves the phil. During the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis;3. A citizen of the Phil. Who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year. 4. A citizen who has been previously considered as non-resident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a non-resident citizen for the taxable year in which he arrives in the phil. With respect to his income derived from sources abroad until the date of his arrival in the Philippines;5. The taxpayer shall submit proof to the Commisioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be. b. Aliens- Individuals who are not Filipinos1. Resident Alien2. Non-resident alien doing business in the Philipines.3. Non-resident alien not doing business in the Philippines.

Resident Alien- an individual whose residence is within the Philippines and who is not a citizen thereof.1. An alien who lives in the Philippines with no definite intention as to his stay;2. One who comes to the philippines for a definite purpose which in its nature would require an extended stay and to that end makes his home temporarily in the philippines, although it may be his intention at all times to return to his domicile abroad;3. An alien who has acquired residence in the Philippines retains his status as such until he abandons the same and actually departs from the Philippines.

Non-resident Alien- an individual whose residence is not within the Philippines and who is not a citizen thereon.1. One who comes to the Philippines for a definite purpose which in its nature may be promptly accomplished.2. A non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during any calendar year shall be deemed a non-resident alien doing business in the Philippines.

Personal ExemptionsPersonal Exemptions- are arbitrary amount allowed in the nature of a deduction from gross or net income for personal, living or family expenses of the taxpayer. These have been calculated to be roughly equivalent to the minimum of subsistence.

Basic Personal Exemptiona. Taxpayers allowed to claim basic personal exemption:1. Resident Citizens;2. Non-resident Citizens;3. Resident Aliens;4. Non-resident aliens doing business in the Philippines (subject to reciprocity);5. Estates and trusts.b. Amount of basic personal exemption1.Single(including married but legally separated ,widow or widower), estates and trusts. Old- 20,000phpNew-50,000php2.Head of family Old-25,000phpNew-50,000php3.Married (for each working spouse). Old-32,000phpNew- 50,000phpc. Amount of personal exemption allowed to non-resident alien doing business in the Philippines (non-resident alien engaged in trade or business.) Conditions for allowance:1. The foreign country of which the NRA-ETB is a subject or citizen has an income tax law;2. The income tax law of the NRA-ETBs country allows personal exemptions to citizens of the Philippines not residing therein.3. The NRA-ETB files a true and accurate return of his income from all sources within the Philippines. Amount allowed: the lower between what is allowed in the NRA-ETBs country and what is alowed in the Philippines.

Additional Exemptionsa. Taxpayers allowed additional exemptions.1. Resident Citizens;2. Non-resident Citizens;3. Resident Aliens;4. NRA-ETB (subject to reciprocity)5. b. Amount of additional exemption-25,000 (old 8,000) per dependent child.

c. Maximum number of dependent children - four (4) dependent children.

d. Dependents for additional exemption. 1.Legitimate child; 2. illegitimate child; 3. Adopted child.

e. Requisites or qualifications of a dependent child. 1. Chiefly dependent upon the taxpayer; 2. Living with the taxpayer; 3. Not more than 21 years old; 4. unmarried; 5. Not gainfully employed.

f. Proper claimant of additional exemption- the additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals. The HUSBAND is the proper claimant.

g. Instances when the wife can claim the additional exemption.1. When the husband explicitly waives his right to the additional exemption in favor of his wife; (both must be employed)2. When the husband is unemployed;3. When the husband is a non-resident citizen deriving income from foreign sources.

h. Claimant of additional exemption in case of legally separated spouses.1. The additional exemption may be claimed only by the spouse who has custody of the Child or children;2. The total amount of additional exemption that may be claimed by both shall not exceed the maximum additional exemption allowed.

i.Computation of married individuals income tax1. For married individuals, the husband and wife, shall compute separately their individual income tax based on their respective total taxable income.2.If any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of the spouses for the purpose of determining their respective taxable income.

Situs of Taxable income and allow. Of personal exemptions to individual taxpayers (Table 1)Individual taxpayerIncome withinIncome withoutBasic personal exemptionAdditional exemption

1.Resident CitizenTaxableTaxableAllowedAllowed

2.Resident AlienTaxableNot TaxableAllowedAllowed

3.Non-resident alienTaxableNot TaxableAllowedAllowed

4.Nonresident alien (ETB)TaxableNot TaxableAllowed(reciprocity)Not allowed

5.Nonresident alien (NETB)TaxableNot TaxableNot allowedNot allowed

Income Tax Rates(Table 2)OverNot overTaxPlusOf excess over

10,0005%

10,00030,00050010%10,000

30,00070,0002,50015%30,000

70,000140,0008,50020%70,000

140,000250,00022,50025%140,000

250,000500,00050,00030%250,000

500,000-125,00032%500,000

Kinds of income of individual taxpayer1. Compensation income income arising from personal services under an employer-employee relationship.Examples: Salaries, Wages, Fees Commission on paid on salesman Compensation for service Tips

2. Business or professional income- income earned by an individual from the sole proprietorship business or from the practice of the profession.Examples: CPAs Doctors

3. Passive income- income earned which are subject to different final withholding tax rates.

Tax on Nonresident Alien engaged in trade or business (NRA ETB)A nonresident alien individual who shall come to the Philippines and stay therein for an aggregate period of morethan 180 days during any calendar year. If exact 180 days = Not engaged

Personal Exemptions of NRA ETBNRA ETB shall entitled to a personal exemption, provided the following conditions must be satisfied:

a. The country of which the NRA is a subject or citizen has an income tax law.b. His country grants personal exemptions to Filipinos who derive income in such country but who are not residing therein (reciprocity).c. He files a true and accurate statement of his income from an sources within the Philippines.

*The amount of exemption shall be equal to the exemptions allowed in the income tax law in the country of which he is a citizen, to citizens of the Philippines not residing in such country, not to exceed the amount fixed as exemption for citizens or residents of the Philippines.

Tax on Nonresident Alien not engaged in trade or business (NRA NETB)-are not entitled to claim additional exemptions.-are subject to final withholding tax of 25% from all sources within the Philippines only.

a. Subject to 25% withholdng tax: Interest Cash/Property Dividends Rents Salaries, wages Premiums Annuities Compensation,remuneration,emoluments Capital gains Other fixed or determinable annual or periodic or casual gains,profits and income.

b. 6% in capital gains presumed to have been ralized from the sale, exchange or other disposition of real property located in the Philippines, classified as Capital assets, including pacto de recto sales and other forms of conditional sales.Tax base shall be whichever is higher between: Gross selling price The higher between the FMV as determined by the CIR and the FMV as determined by the Provincial or City Assessors.

c. In case of dispositions of real property classified as capital assets to government or any of its political subdivisions or agencies or to government-owned or controlled corporations, the tax to be imposed shall be determined in either of the following, at the option of the taxpayer: In accordance with the rates established in Table 2. 6% final tax based on the gross selling price or FMV, whichever is higher.

ATLAS 2012-2013 TAXATION