FINALE EXAM POINTERS IN TAXATION REVIEW

1. POWERS OF THE CIR

a. Interpret tax laws;
b. Decide tax cases;
c. Obtain information and to summon, examine and take testimony of persons;
d. Make assessments and prescribe additional requirements for tax administration and
enforcement;
e. Authority to delegate;
f. Make arrests and seizures;
g. Assign internal revenue officers;
h. Impose duties on certain officers; and
i. Suspend business operations of a taxpayer.

The Commissioner or his duly authorized representative is (5) Authority to prescribe real property values;
authorized representative to use the following powers to
make Assessments and Prescribe Additional requirements (6)Authority to inquire into bank deposit accounts in the
for Tax Administration and Enforcement. following instances:

(1) Examination of return and determination of tax due; a. A decedent to determine his gross estate;

(2) Use of Best evidence obtainable
a. When a report or return required to be filed shall
not be forthcoming within the time the time fixed by
laws, rules and regulations;
b. When there is a reason to believe that any such
report or return is false, incomplete or return is false,
incomplete or erroneous.
b. Any taxpayer who has filed an application for
compromise of his tax liability by reason of financial
incapability to pay his tax liability;
c. A specific taxpayer/s subject of a request for the
supply of tax information from the foreign tax
authority pursuant to an international convention or
agreement on matters to which the Philippines is a
signatory or party of it;

(3) Authority to conduct inventory taking, surveillance and CONDITION: The requesting foreign tax authority
prescribe gross sales and receipts if there is reason to is able to demonstrate the foreseeable relevance of certain
believe that the taxpayer is not declaring his correct income, information required to be given to the request (R.A. No.
sales, or receipts for internal revenue purposes; 10021, Exchange of Information on Tax Matters Act 2009)

(4) Authority to terminate taxable period in the following d. Written authority from taxpayer;
instances:
(7) Authority to accredit and register tax agents; and
a. Taxpayer is retiring from business subject to
tax; (8) Authority to prescribe additional procedural or
documentary requirements.
b. Taxpayer is intending to leave the Philippines or
to remove his property therefrom or to hide or
conceal his property; and Almadin. 10. Capital Gains Tax vis-a-vis Ordinary/capital
assets
c. Taxpayer is performing any act tending to
obstruct the proceedings for the collection of taxes.
 2. VAT

3. NIRC PROVISION (EDUCATIONAL INSTITUTION)

Sec.27 (b)

(B) Proprietary Educational Institutions and Hospitals. - Proprietary educational institutions and hospitals which are nonprofit shall pay a tax of
ten percent (10%) on their taxable income except those covered by Subsection (D) hereof: Provided, that if the gross income from unrelated
trade, business or other activity exceeds fifty percent (50%) of the total gross income derived by such educational institutions or hospitals from
all sources, the tax prescribed in Subsection (A) hereof shall be imposed on the entire taxable income. For purposes of this Subsection, the term
'unrelated trade, business or other activity' means any trade, business or other activity, the conduct of which is not substantially related to the
exercise or performance by such educational institution or hospital of its primary purpose or function. A "Proprietary educational institution" is
any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of
Education, Culture and Sports (DECS), or the Commission on Higher Education (CHED), or the Technical Education and Skills Development
Authority (TESDA), as the case may be, in accordance with existing laws and regulations.

Proprietary educational institution is:

o Any private school maintained & administered by private individuals or groups
o With an issued permit to operate from the DECS or CHED or TESDA

Tax rate of proprietary educational institutions and hospitals 10% on their taxable income (except for passive income), or

30% on their entire taxable income if the gross income from unrelated trade,
business or other activity exceeds 50% of the total gross income of the
institution

Unrelated trade, business or other activity means

o Any trade, business or other activity
o The conduct of which is not substantially related to the exercise or performance by such its institution of its primary purpose or
function.
For non-stock, non-profit educational institutions, all revenues use actually, directly and exclusively for educational purposes are exempt.
o Their exemption refers only to revenues derived from assets used actually, directly and exclusively for educational purposes.
o Income from cafeterias, canteens & bookstores are also exempt if they are owned & operated by the educational institution
and are located within the school premises.
o However, they shall be subject to internal revenue taxes on income from trade, business or other activity, the conduct of which
is not related to the exercise or performance by such educational institutions of their educational purposes or functions, i. e.
rental payment from their building/premises. (RR 76-2003)
For non-stock, non-profit corporations who are exempt, they are still liable for taxes on:
o Income derived from any of their real properties (rental payment form their building premises)
o Any activity conducted from profit regardless of disposition thereof
o Interest income from any bank deposits or yield on deposit substitutes (final tax of 20%)
o If its foreign currency deposit, final tax of 7.5% (Dep Order 149-95, 1995)
o They shall also be withholding agents for their employees compensation income subject to withholding tax (RR 76-2003)
For private educational institutions, they are exempt from VAT, but they must be accredited with either DECS or CHED.
o However, income derived from trade, business or other activity is still taxable.
o Their bank deposits and foreign currency deposits are exempt from withholding taxes but they must show proof that such
income is used to fund proposed projects for their institutions improvement.
o They shall also be the withholding agents for their employees compensation income subject to withholding tax.

4. REMEDIES OF THE BIR IN TAX COLLECTION

a. Assessment
b. Collection
i. Tax lien;
ii. Distraint of personal property or garnishment of bank deposits;
iii. Levy of real property;
iv. Compromise and abatement;
 v.
Penalties and fines;
vi.
Non-availability of injunction to restrain collection of tax;
vii.
Forfeiture;
viii.
Other remedies
Forfeiture; and
Suspension of business operations.

5. SECTION 24(1)

SEC. 24. Income Tax Rates. -

(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the Philippines.

(1) An income tax is hereby imposed:

(a) On the taxable income defined in Section 31 of this Code, other than income subject to tax under Subsections (B), (C) and (D) of this
Section, derived for each taxable year from all sources within and without the Philippines be every individual citizen of the Philippines
residing therein;

(b) On the taxable income defined in Section 31 of this Code, other than income subject to tax under Subsections (B), (C) and (D) of this
Section, derived for each taxable year from all sources within the Philippines by an individual citizen of the Philippines who is residing
outside of the Philippines including overseas contract workers referred to in Subsection(C) of Section 23 hereof; and

(c) On the taxable income defined in Section 31 of this Code, other than income subject to tax under Subsections (b), (C) and (D) of this
Section, derived for each taxable year from all sources within the Philippines by an individual alien who is a resident of the Philippines.

Not over P10,000 5%

Over P10,000 but not over P30,000 P500 + 10% of the excess over P10,000
Over P30,000 but not over P70,000 P2,500 + 15% of the excess over P30,000
Over P70,000 but not over P140,000 P8,500 + 20% of the excess over P70,000
Over P140,000 but not over P250,000 P22,500 + 25% of the excess over P140,000
Over P250,000 but not over P500,000 P50,000 + 30% of the excess over P250,000
Over P500,000 P125,000 + 32% of the excess over P500,000

27 (1)

SEC. 27. Rates of Income tax on Domestic Corporations. -

(A) In General. - Except as otherwise provided in this Code, an income tax of thirty-five percent (35%) is hereby imposed upon the taxable
income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22(B) of
this Code and taxable under this Title as a corporation, organized in, or existing under the laws of the Philippines: Provided, That effective
January 1, 2009, the rate of income tax shall be thirty percent (30%).

In the case of corporations adopting the fiscal-year accounting period, the taxable income shall be computed without regard to the specific date
when specific sales, purchases and other transactions occur. Their income and expenses for the fiscal year shall be deemed to have been
earned and spent equally for each month of the period.

The corporate income tax rates shall be applied on the amount computed by multiplying the number of months covered by the new rates
within the fiscal year by the taxable income of the corporation for the period, divided by twelve.

Provided, further, That the President, upon the recommendation of the Secretary of Finance, may effective January 1, 2000, allow corporations
the option to be taxed at fifteen percent (15%) of gross income as defined herein, after the following conditions have been satisfied:

(1) A tax effort ratio of twenty percent (20%) of Gross National Product (GNP);

(2) A ratio of forty percent (40%) of income tax collection to total tax revenues;
(3) A VAT tax effort of four percent (4%) of GNP; and

(4) A 0.9 percent (0.9%) ratio of the Consolidated Public Sector Financial Position (CPSFP) to GNP.

The option to be taxed based on gross income shall be available only to firms whose ratio of cost of sales to gross sales or receipts
from all sources does not exceed fifty-five percent (55%).

The election of the gross income tax option by the corporation shall be irrevocable for three (3) consecutive taxable years during
which the corporation is qualified under the scheme.

For purposes of this Section, the term 'gross income' derived from business shall be equivalent to gross sales less sales returns,
discounts and allowances and cost of goods sold. "Cost of goods sold" shall include all business expenses directly incurred to produce the
merchandise to bring them to their present location and use.

For a trading or merchandising concern, "cost of goods" sold shall include the invoice cost of the goods sold, plus import duties,
freight in transporting the goods to the place where the goods are actually sold, including insurance while the goods are in transit.

For a manufacturing concern, "cost of goods manufactured and sold" shall include all costs of production of finished goods, such as
raw materials used, direct labor and manufacturing overhead, freight cost, insurance premiums and other costs incurred to bring the raw
materials to the factory or warehouse.

In the case of taxpayers engaged in the sale of service, 'gross income' means gross receipts less sales returns, allowances and
discounts.

Tax rate of Domestic Corporations 30% of taxable income from all sources within and outside the Philippines, or

2% of gross income if MCIT applies, or

15% of gross income if the following conditions are met:

1. tax effort ratio of 20% of GNP

2. ratio of 40% of income tax collection to total tax revenues
3. VAT tax effort of 4% of GNP; and
4. .9% ratio of the Consolidated Public Sector Financial Position
(CPSFP) to GNP (this last one has yet to be implemented)
Option to be taxed based on gross income shall be available only to firms whose ratio of cost of sales to gross sales or receipts from all
sources does not exceed 55%
Election of the gross income tax option by the corporation shall be irrevocable for 3 consecutive taxable years
Domestic corporations are subject to any or some of the following:
Capital gains tax
Final tax on passive income
Normal tax
Minimum corporate income tax (MCIT)
Gross income tax (GIT)
Improperly accumulated earnings tax (IAET)
Gross Income Computation
Gross Sales
Less: Sales Returns
Discounts
Allowances
CoGS (all business expenses directly incurred to produce the merchandise and bring them to their present location or use)
Total Gross Income

CoGS for a Trading or Merchandise Concern

Invoice cost of goods sold
Import duties
Freight in transporting the goods to the place where the goods are actually sold
Insurance while the goods are in transit

CoGS for a Manufacturing Concern

All costs of production of finished goods such as raw materials, direct labor & manufacturing overhead
Freight cost
Insurance premiums
Other costs incurred to bring the raw materials to the factory or warehouse
Gross Income Computation for a Service Concern
Gross Sales
Less: Sales Returns
Discounts
Allowances
Cost of Services (all direct costs & expenses necessarily incurred to provide the services required by the customers & clients including:
Salaries & employee benefits of personnel, consultants & specialists directly rendering the service
Cost of facilities directly utilized in providing the service such as depreciation or rental of equipment use &
cost of supplies
If its a bank, interest expense is included
Total Gross income of a service concern
6. EVERYTHING ABOUT COMPROMISE
7. SEC. 131 (LGC)
SEC. 131. Definition of Terms. - When used in this Title, the term:
(a) "Agricultural Product" includes the yield of the soil, such
as corn, rice, wheat, rye, hay, coconuts, sugarcane, tobacco,
root crops, vegetables, fruits, flowers, and their by-products;
ordinary salt; all kinds of fish; poultry; and livestock and
animal products, whether in their original form or not. The
phrase "whether in their original form or not" refers to the
transformation of said products by the farmer, fisherman,
producer or owner through the application of processes to
preserve or otherwise to prepare said products for the
market such as freezing, drying, salting, smoking, or
stripping for purposes of preserving or otherwise preparing
said products for the market;
(b) "Amusement" is a pleasurable diversion and
entertainment. It is synonymous to relaxation, avocation,
pastime, or fun;
(c) "Amusement Places" include theaters, cinemas, concert
halls, circuses and other places of amusement where one
seeks admission to entertain oneself by seeing or viewing
the show or performances;
(d) "Business" means trade or commercial activity regularly
engaged in as a means of livelihood or with a view to profit;
(e) "Banks and other financial institutions" include non-bank
financial intermediaries, lending investors, finance and
investment companies, pawnshops, money shops, insurance
companies, stock markets, stock brokers and dealers in
securities and foreign exchange, as defined under applicable
laws, or rules and regulations thereunder;
(f) "Capital Investment" is the capital which a person
employs in any undertaking, or which he contributes to the
capital of a partnership, corporation, or any other juridical
entity or association in a particular taxing jurisdiction;
(g) "Charges" refer to pecuniary liability, as rents or fees
against persons or property; (h) "Contractor" includes
persons, natural or juridical, not subject to professional tax
under Section 139 of this Code, whose activity consists
essentially of the sale of all kinds of services for a fee,
regardless of whether or not the performance of the service
calls for the exercise or use of the physical or mental
faculties of such contractor or his employees.cralaw
As used in this Section, the term "contractor" shall include
general engineering, general building and specialty
contractors as defined under applicable laws; filling,
demolition and salvage works contractors; proprietors or
operators of mine drilling apparatus; proprietors or
operators of dockyards; persons engaged in the installation
of water system, and gas or electric light, heat, or power;
proprietors or operators of smelting plants; engraving,
plating, and plastic lamination establishments; proprietors
or operators of establishments for repairing, repainting,
upholstering, washing or greasing of vehicles, heavy
equipment, vulcanizing, recapping and battery charging;
proprietors or operators of furniture shops and
establishments for planing or surfacing and recutting of
lumber, and sawmills under contract to saw or cut logs
belonging to others; proprietors or operators of dry-
cleaning or dyeing establishments, steam laundries, and
laundries using washing machines; proprietors or owners of
shops for the repair of any kind of mechanical and electrical
devices, instruments, apparatus, or furniture and shoe
repairing by machine or any mechanical contrivance;
proprietors or operators of establishments or lots for
parking purposes; proprietors or operators of tailor shops,
dress shops, milliners and hatters, beauty parlors,
barbershops, massage clinics, sauna, Turkish and Swedish
baths, slenderizing and building saloons and similar
establishments; photographic studios; funeral parlors;
proprietors or operators of hotels, motels, and lodging
houses; proprietors or operators of arrastre and
stevedoring, warehousing, or forwarding establishments;
master plumbers, smiths, and house or sign painters;
printers, bookbinders, lithographers; publishers except
those engaged in the publication or printing of any
newspaper, magazine, review or bulletin which appears at
regular intervals with fixed prices for subscription and sale
and which is not devoted principally to the publication of
advertisements; business agents, private detective or
watchman agencies, commercial and immigration brokers,
and cinematographic film owners, lessors and
distributors.cralaw
(i) "Corporation" includes partnerships, no matter how
created or organized, joint-stock companies, joint accounts
(cuentas en participacion), associations or insurance
companies but does not include general professional
partnerships and a joint venture or consortium formed for
the purpose of undertaking construction projects or
engaging in petroleum, coal, geothermal, and other energy
operations pursuant to an operating or consortium
agreement under a service contract with the government.
General professional partnerships are partnerships formed
by persons for the sole purpose of exercising their common
profession, no part of the income of which is derived from
engaging in any trade or business. The term "resident
foreign" when applied to a corporation means a foreign
corporation not otherwise organized under the laws of the
Philippines but engaged in trade or business within the
Philippines;
(j) "Countryside and Barangay Business Enterprise" refers to
any business entity, association, or cooperative registered
under the provisions of Republic Act Numbered Sixty-eight
hundred ten (R.A. No. 6810), otherwise known as "Magna
Carta For Countryside And Barangay Business Enterprises
(Kalakalan 20)";
(k) "Dealer" means one whose business is to buy and sell
merchandise, goods, and chattels as a merchant. He stands
immediately between the producer or manufacturer and the
consumer and depends for his profit not upon the labor he
bestows upon his commodities but upon the skill and
foresight with which he watches the market;
(l) "Fee" means a charge fixed by law or ordinance for the
regulation or inspection of a business or activity;
(m) "Franchise" is a right or privilege, affected with public
interest which is conferred upon private persons or
corporations, under such terms and conditions as the
government and its political subdivisions may impose in the
interest of public welfare, security, and safety;
(n) "Gross Sales or Receipts" include the total amount of
money or its equivalent representing the contract price,
compensation or service fee, including the amount charged
or materials supplied with the services and deposits or
advance payments actually or constructively received during
the taxable quarter for the services performed or to be
performed for another person excluding discounts if
determinable at the time of sales, sales return, excise tax,
and value-added tax (VAT);
(o) "Manufacturer" includes every person who, by physical
or chemical process, alters the exterior texture or form or
inner substance of any raw material or manufactured or
partially manufactured product in such manner as to
prepare it for special use or uses to which it could not have
been put in its original condition, or who by any such
process alters the quality of any such raw material or
manufactured or partially manufactured products so as to
reduce it to marketable shape or prepare it for any of the
use of industry, or who by any such process combines any
such raw material or manufactured or partially
manufactured products with other materials or products of
the same or of different kinds and in such manner that the
finished products of such process or manufacture can be put
to a special use or uses to which such raw material or
manufactured or partially manufactured products in their
original condition could not have been put, and who in
addition alters such raw material or manufactured or
partially manufactured products, or combines the same to
produce such finished products for the purpose of their sale
or distribution to others and not for his own use or
consumption;
(p) "Marginal Farmer or Fisherman" refers to an individual
engaged in subsistence farming or fishing which shall be
limited to the sale, barter or exchange of agricultural or
marine products produced by himself and his immediate
family;
(q) "Motor Vehicle" means any vehicle propelled by any
power other than muscular power using the public roads,
but excluding road rollers, trolley cars, street-sweepers,
sprinklers, lawn mowers, bulldozers, graders, fork-lifts,
amphibian trucks, and cranes if not used on public roads,
vehicles which run only on rails or tracks, and tractors,
trailers, and traction engines of all kinds used exclusively for
agricultural purposes;
(r) "Municipal Waters" includes not only streams, lakes, and
tidal waters within the municipality, not being the subject of
private ownership and not comprised within the national
parks, public forest, timber lands, forest reserves or fishery
reserves, but also marine waters included between two lines
drawn perpendicularly to the general coastline from points
where the boundary lines of the municipality or city touch
the sea at low tide and a third line parallel with the general
coastline and fifteen (15) kilometers from it. Where two (2)
municipalities are so situated on the opposite shores that
there is less than fifteen (15) kilometers of marine waters
between them, the third line shall be equally distant from
opposite shores of the respective municipalities;
(s) "Operator" includes the owner, manager, administrator,
or any other person who operates or is responsible for the
operation of a business establishment or undertaking;
(t) "Peddler" means any person who, either for himself or on
commission, travels from place to place and sells his goods
or offers to sell and deliver the same. Whether a peddler is a
wholesale peddler or a retail peddler of a particular
commodity shall be determined from the definition of
wholesale dealer or retail dealer as provided in this Title;
(u) "Persons" means every natural or juridical being,
susceptible of rights and obligations or of being the subject
of legal relations;
 (v) "Residents" refer to natural persons who have their quantity of the commodity sold; (x) "Vessel" includes every
habitual residence in the province, city, or municipality type of boat, craft, or other artificial contrivance used, or
where they exercise their civil rights and fulfill their civil capable of being used, as a means of transportation on
obligations, and to juridical persons for which the law or any water;
other provision creating or recognizing them fixes their
residence in a particular province, city, or municipality. In
(y) "Wharfage" means a fee assessed against the cargo of a
the absence of such law, juridical persons are residents of
vessel engaged in foreign or domestic trade based on
the province, city, or municipality where they have their
quantity, weight, or measure received and/or discharged by
legal residence or principal place of business or where they
vessel; and
conduct their principal business or occupation;

(z) "Wholesale" means a sale where the purchaser buys or

(w) "Retail" means a sale where the purchaser buys the
imports the commodities for resale to persons other than
commodity for his own consumption, irrespective of the
the end user regardless of the quantity of the transaction.

8. WHAT IS THE DIFFERENCE BETWEEN MOTION FOR RECONSIDERATION AND MOTION FOR
REINVESTIGATION?

Reconsideration
Involves re-evaluation of assessment based on existing records.
It does not toll the Statute of Limitations
Reinvestigation
Involves presentation of newly-discovered or additional evidence.
It tolls the Statute of Limitations, because a reinvestigation, which
entails reception and evaluation of additional evidence will take
more time than reconsideration which will be limited to the
evidence already at hand.

9. JEOPARDY ASSESSMENT
- A tax assessment made by an authorized Revenue officer without the benefit of complete or
partial audit, in light of the officers belief that the assessment and collection of a deficiency
tax will be jeopardized by delay caused by the taxpayers failure to:

a. comply with audit and investigation requirements to present his books of accounts
and/or pertinent records, or
b. substantiate all or any of the deductions, exemptions or credits claimed in his
return.
-
10. AMENDMENT OF IPR

11. SEC. 33 (FRINGE BENEFITS)

. Fringe Benefits Tax (FBT! Whut up!)

SEC. 33. Special Treatment of Fringe Benefit.-

(A) Imposition of Tax.- A final tax of thirty-four percent (34%) effective January 1, 1998; thirty-three percent (33%) effective January 1, 1999;
and thirty-two percent (32%) effective January 1, 2000 and thereafter, is hereby imposed on the grossed-up monetary value of fringe benefit
furnished or granted to the employee (except rank and file employees as defined herein) by the employer, whether an individual or a
corporation (unless the fringe benefit is required by the nature of, or necessary to the trade, business or profession of the employer, or when
the fringe benefit is for the convenience or advantage of the employer). The tax herein imposed is payable by the employer which tax shall be
paid in the same manner as provided for under Section 57 (A) of this Code. The grossed-up monetary value of the fringe benefit shall be
determined by dividing the actual monetary value of the fringe benefit by sixty-six percent (66%) effective January 1, 1998; sixty-seven percent
(67%) effective January 1, 1999; and sixty-eight percent (68%) effective January 1, 2000 and thereafter: Provided, however, That fringe benefit
furnished to employees and taxable under Subsections (B), (C), (D) and (E) of Section 25 shall be taxed at the applicable rates imposed thereat:
Provided, further, That the grossed -Up value of the fringe benefit shall be determined by dividing the actual monetary value of the fringe
benefit by the difference between one hundred percent (100%) and the applicable rates of income tax under Subsections (B), (C), (D), and (E) of
Section 25.

(B) Fringe Benefit defined.- For purposes of this Section, the term "fringe benefit" means any good, service or other benefit furnished or
granted in cash or in kind by an employer to an individual employee (except rank and file employees as defined herein) such as, but not limited
to, the following:

(1) Housing;

(2) Expense account;

(3) Vehicle of any kind;

(4) Household personnel, such as maid, driver and others;

(5) Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted;

(6) Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar
organizations;

(7) Expenses for foreign travel;

(8) Holiday and vacation expenses;

(9) Educational assistance to the employee or his dependents; and

(10) Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows.

(C) Fringe Benefits Not Taxable. - The following fringe benefits are not taxable under this Section:

(1) fringe benefits which are authorized and exempted from tax under special laws;

(2) Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans;

(3) Benefits given to the rank and file employees, whether granted under a collective bargaining agreement or not; and

(4) De minimis benefits as defined in the rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the
Commissioner.

The Secretary of Finance is hereby authorized to promulgate, upon recommendation of the Commissioner, such rules and regulations as are
necessary to carry out efficiently and fairly the provisions of this Section, taking into account the peculiar nature and special need of the trade,
business or profession of the employer.

Note: the FBT is paid by the employer.

Fringe benefit is any good, service, or other benefit granted in cash or in kind by an employer to an employee
(except rank & file) such as:
1. Housing
2. Expense account
3. Vehicle of any kind
4. Household personnel, like maids and drivers
5. Interest on loan at less than market rate, to the extent of the difference between the market rate and the
actual rate granted
6. Membership fees, dues & other expenses in social & athletic clubs or similar orgs
7. Expenses for foreign travel
8. Holiday and vacation expenses
9. Educational assistance to the employee or his dependents
10. Life or health insurance & other non-life premiums
This list is not exclusive.
Fringe benefit tax? A final tax of 32% on the grossed up monetary value of fringe benefits will be imposed.
o The fringe benefit tax on the taxable fringe benefit is computed as follows:
 i.Determine the grossed-up monetary value of the fringe benefit. This is the monetary value
of the benefit divided by 68%
ii. Compute the fringe benefit tax by multiplying the grossed-up monetary value of the fringe
benefit by 32%
Actual Monetary Value/68% = Grossed-up Monetary Value

Grossed-up Monetary Value x 32% = FBT

Special Cases for FBT FBT

Received by non-resident alien not engaged in trade or 25%

business

Received by alien or Filipino employed by a ROHQ or 15%

RAHQ

Received by employees in a special economic zone 25 % or 15% (depends)

The FBT is also an expense which is deductible from the employers gross income.
o The deduction for the employer is the grossed-up monetary value of the fringe benefit.
The following fringe benefits are not subject to the FBT:
1. Those that are necessary or required by the trade & business of the employer
2. Those for the convenience or advantage of the employer
3. Those exempt under special laws
4. Contributions to retirement, insurance and hospitalization benefit plans
5. De minimis benefits (these are of relatively small value & are furnished merely as a means of promoting
the health, goodwill of the employees. See RR 8-00 for examples)
6. Those given to rank & file employees (those who are holding neither managerial nor supervisory
positions)

Clarifications from RR 3-98 (a bit malabo, so check the Reyes book and that excel reviewer thing)
On housing privileges Monetary Value

If employer leases a residential property for the use of the employee and the property is 50% of the monthly
the usual place of residence of the employee rental paid

If the employer purchases a residential property on installment basis and allows the See page 316 of Reyes
employee to use it as his usual place of residence

If the employer purchases a residential property and transfers ownership to the See page 316 of Reyes
employee

Housing of military officials Exempt

Housing which is situated inside or adjacent to the premises of a business or factory Exempt
(within 50 meters)

Temporary housing for employee who stays for not more than 3 months Exempt
Expense Account Subject to FBT or not?

If the expense was duly receipted for and in the name of the employer, and the expense Nope.
is not in the nature of a personal expense attributable to the employee

If these are personal expenses such as groceries, paid for or reimbursed by the Yup.
employer, even if these are duly receipted for in the name of the employer

RATA which are fixed in amount & regularly given as part of monthly compensation Nope, but to be treated
as income of the
employee.

Motor Vehicles Monetary Value

If employer purchases vehicle in the name of the employee, regardless of usage of the 100% of the value
vehicle (acquisition cost)

If employer shoulders a portion of the amount of the purchase price of a vehicle owned Amount shouldered by
by the employee the employer

If employer owns & maintains a fleet of vehicles for the use of the business and the 50% of the value
employees

Use of aircraft owned & maintained by the employer Exempt

Use of yacht Value based on

depreciation

Expenses for Foreign Travel Monetary Value

If it is reasonable for the purpose of attending business meetings or conventions Exempt

If its for local travel expenses not more than US$300 per day (not including lodging) Exempt

Cost of plane ticket if economy or business class Exempt

Cost of plane ticket if first class 30% of the value

Travel expense of family members of the employee 100% of the value

Educational Assistance Monetary Value

IF the employee was granted a scholarship by the employer and the education or study Exempt
is directly connected to the trade or business of the employer, and there is a written
contract that the employee must remain in employ for a period of time

If the assistance was extended to the employees dependents and was provided Exempt
through a scholarship program of the company
Life or Health Insurance, etc Premiums in Excess of What the Law Allows Monetary Value

If the contribution is pursuant to existing law such as to the GSIS or SSS Exempt

If it is for the group insurance of the employees Exempt

For the others (household expenses, membership fees & other expenses in social & athletic clubs, holiday &
vacation expenses), these monetary value will be 100% of the value of the benefit received.
The following are considered de minimis benefits of ALL types of employees. These are exempt from tax. (RR
8-00)
1. Monetized unused vaction leave, not exceeding 10 days per year
2. Medical cash allowance to dependents of employees not exceeding P750/employee per sem or
P125/month
3. Rice subsidy of P1500 or 1 sack of 50 kg rice per month (sarap!) (RR 5-2008)
4. Uniforms and clothing allowance not exceeding P4,000/month (ubos sa Zara!) (RR 5-2011)
5. Actual yearly medical benefits not exceeding P10,000/month
6. Laundry allowance not exceeding P300/month
7. Employee achievement awards for length of service or safety achievement in the form of tangible
property with value not exceeding P10,000
8. Flowers, fruits, books given under special circumstances like illness, marriage, birth of baby
9. Gifts given during Christmas & major anniversaries not exceeding P5,000/year
10. Daily meal allowance for overtime work, not exceeding 25% of the basic minimum wage
The amount of de minimis benefits is not computed in determining the P30,000 ceiling of other benefits
provided in Sec 32(b) of the Tax Code (see exclusions),
o but if the employer pays MORE than the ceilings prescribed above, the excess is taxable to the
employee ONLY if it is beyond the P30,000 ceiling.
o In other words, when a benefit is de minimis with a ceiling, the benefit exempt from the fringe
benefit tax is up to the ceiling. Any excess over the ceiling shall be part of the benefits which are
exempt (exclusions from gross income) up to P30,000.
Any amount given by the employer as benefits, whether de minimis or others, shall be deductible as business
expense. Remember this! (RR 10-00)
To recap:
o Fringe benefit given to rank and file employee is not subject to the fringe benefit tax.
o Fringe benefit given to a supervisory or managerial employee is subject to the fringe benefit tax.
o De minimis benefit, whether given to rank and file employee or to supervisory or managerial
employee, is not subject to the fringe benefit tax.

12. SEC. 60 (b) ESTATES AND TRUSTS

IMPOSITION OF TAX

(B) Exception. - The tax imposed by this Title shall not apply to employee's trust which forms part of a
pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees
(1) if contributions are made to the trust by such employer, or employees, or both for the purpose of
distributing to such employees the earnings and principal of the fund accumulated by the trust in
accordance with such plan, and (2) if under the trust instrument it is impossible, at any time prior to the
satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income
to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive
benefit of his employees: Provided, That any amount actually distributed to any employee or distributee
shall be taxable to him in the year in which so distributed to the extent that it exceeds the amount
contributed by such employee or distributee.
 13. EXCLUSIONS (GROSS INCOME)
(B) Exclusions from Gross Income. - The following items shall
not be included in gross income and shall be exempt from
taxation under this title:
(1) Life Insurance. - The proceeds of life insurance
policies paid to the heirs or beneficiaries upon the
death of the insured, whether in a single sum or
otherwise, but if such amounts are held by the insurer
under an agreement to pay interest thereon, the
interest payments shall be included in gross income.
(2) Amount Received by Insured as Return of
Premium. - The amount received by the insured, as a
return of premiums 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.
(3) Gifts, Bequests, and Devises. _ The value of
property acquired by gift, bequest, devise, or descent:
Provided, however, That income from such property,
as well as gift, bequest, devise or descent of income
from any property, in cases of transfers of divided
interest, shall be included in gross income.
(4) Compensation for Injuries or Sickness. - amounts
received, through Accident or Health Insurance or
under Workmen's Compensation Acts, as
compensation for personal injuries or sickness, plus
the amounts of any damages received, whether by
suit or agreement, on account of such injuries or
sickness.
(5) Income Exempt under Treaty. - Income of any
kind, to the extent required by any treaty obligation
binding upon the Government of the Philippines.
(6) Retirement Benefits, Pensions, Gratuities, etc.-
(a) Retirement benefits received under Republic Act
No. 7641 and those received by officials and
employees of private firms, whether individual or
corporate, in accordance with a reasonable private
benefit plan maintained by the employer: Provided,
That the retiring official or employee has been in the
service of the same employer for at least ten (10)
years and is not less than fifty (50) years of age at the
time of his retirement: Provided, further, That the
benefits granted under this subparagraph shall be
availed of by an official or employee only once. For
purposes of this Subsection, the term 'reasonable
private benefit plan' means a pension, gratuity, stock
bonus or profit-sharing plan maintained by an
employer for the benefit of some or all of his officials
or employees, wherein contributions are made by
such employer for the officials or employees, or both,
for the purpose of distributing to such officials and
employees the earnings and principal of the fund thus
accumulated, and wherein its is provided in said plan
that at no time shall any part of the corpus or income
of the fund be used for, or be diverted to, any purpose
other than for the exclusive benefit of the said officials
and employees.
(b) Any amount received by an official or employee or
by his heirs from the employer as a consequence of
separation of such official or employee from the
service of the employer because of death sickness or
other physical disability or for any cause beyond the
control of the said official or employee.
(c) The provisions of any existing law to the contrary
notwithstanding, social security benefits, retirement
gratuities, pensions and other similar benefits received
by resident or nonresident citizens of the Philippines
or aliens who come to reside permanently in the
Philippines from foreign government agencies and
other institutions, private or public.
(d) Payments of benefits due or to become due to any
person residing in the Philippines under the laws of
the United States administered by the United States
Veterans Administration.
(e) Benefits received from or enjoyed under the Social
Security System in accordance with the provisions of
Republic Act No. 8282.
(f) Benefits received from the GSIS under Republic
Act No. 8291, including retirement gratuity received by
government officials and employees.
(7) Miscellaneous Items. -
(a) Income Derived by Foreign Government. - Income
derived from investments in the Philippines in loans,
stocks, bonds or other domestic securities, or from
interest on deposits in banks in the Philippines by (i)
foreign governments, (ii) financing institutions owned,
controlled, or enjoying refinancing from foreign
governments, and (iii) international or regional
financial institutions established by foreign
governments.
(b) Income Derived by the Government or its Political
Subdivisions. - Income derived from any public utility
or from the exercise of any essential governmental
function accruing to the Government of the Philippines
or to any political subdivision thereof.
(c) Prizes and Awards. - Prizes and awards made
primarily in recognition of religious, charitable,
scientific, educational, artistic, literary, or civic
achievement but only if:
(i) The recipient was selected without any action on
his part to enter the contest or proceeding; and
(ii) The recipient is not required to render substantial
future services as a condition to receiving the prize or
award.
 (d) Prizes and Awards in sports Competition. - All
prizes and awards granted to athletes in local and (iv) Other benefits such as productivity incentives and
international sports competitions and tournaments Christmas bonus: Provided, further, That the ceiling of
whether held in the Philippines or abroad and Thirty thousand pesos (P30,000) may be increased
sanctioned by their national sports associations. through rules and regulations issued by the Secretary
of Finance, upon recommendation of the
Commissioner, after considering among others, the
(e) 13th Month Pay and Other Benefits. - Gross
effect on the same of the inflation rate at the end of
benefits received by officials and employees of public
the taxable year.
and private entities: Provided, however, That the total
exclusion under this subparagraph shall not exceed
Thirty thousand pesos (P30,000) which shall cover: (f) GSIS, SSS, Medicare and Other Contributions. -
GSIS, SSS, Medicare and Pag-ibig contributions, and
union dues of individuals.
(i) Benefits received by officials and employees of the
national and local government pursuant to Republic
Act No. 6686; (g) Gains from the Sale of Bonds, Debentures or other
Certificate of Indebtedness. - Gains realized from the
same or exchange or retirement of bonds, debentures
or other certificate of indebtedness with a maturity of
(ii) Benefits received by employees pursuant to
more than five (5) years.
Presidential Decree No. 851, as amended by
Memorandum Order No. 28, dated August 13, 1986;
(h) Gains from Redemption of Shares in Mutual Fund.
- Gains realized by the investor upon redemption of
shares of stock in a mutual fund company as defined
(iii) Benefits received by officials and employees not
in Section 22 (BB) of this Code.
covered by Presidential decree No. 851, as amended
by Memorandum Order No. 28, dated August 13,
1986; and

14. PERIODS INVOLVED IN ASSESSMENT (ETC.)

PAN
*15 days from receipt of PAN

File a Reply

a. Failed to file a Reply b. Declare in Default

Repeat PAN Declare in Default
Send FAN

*within 30 days from receipt of FAN

Motion for Reconsideration

FILE A PROTEST
Motion for Reinvestigation

Submit Complete Set of Relevant Documents

within 60 days from Filing of Protest

CIR is given 180 days to decide

If Protest is DENIED or 180-day period lapsed

Within 30 days from Denial or lapse of 180 period

APPEAL to CTA Division

En Banc

Supreme Court.