Tax Deduction in the Philippines

In: Business and Management

Submitted By DeceChristine
Words 304
Pages 2
Tax Deduction
Definition:
Tax deductions pertain to taxes proper which do not include surcharges, penalties, or fines incident to delinquency. These are taxes which have been previously deducted from gross income and a refund of the same was received.
Nature:
According to NIRC Sec 34 C., taxes are deductible with the exception of those with respect to which the law does not permit deduction.
(1) In General. - Taxes paid or incurred within the taxable year in connection with the taxpayer's profession, trade or business, shall be allowed as deduction, except
(a) The income tax provided for under this Title;
(b) Income taxes imposed by authority of any foreign country; but this deduction shall be allowed in the case of a taxpayer who does not signify in his return his desire to have to any extent the benefits of paragraph (3) of this subsection (relating to credits for taxes of foreign countries);
(c) Estate and donor's taxes; and
(d) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed. Provided, That taxes allowed under this Subsection, when refunded or credited, shall be included as part of gross income in the year of receipt to the extent of the income tax benefit of said deduction. (2) Limitations on Deductions. - In the case of a nonresident alien individual engaged in trade or business in the Philippines and a resident foreign corporation, the deductions for taxes provided in paragraph (1) of this Subsection (C) shall be allowed only if and to the extent that they are connected with income from sources within the Philippines.
Also, if you availed of the tax amnesty under RA 9480 in 2008, you should not claim any deduction for your tax amnesty payments, since these are not allowed as deductible expenses under RMC…...

Similar Documents

Income Tax: Small Family and Minimal Deductions

...Income Tax: Small Family and Minimal Deductions ACC 401 July 23, 2012 Instructor Income Tax: Small Family and Minimal Deductions One of the jobs of tax consultants is to determine the types of forms to complete when assisting a person in completing his or her income tax forms. The number and types of forms used is determined based-on the person’s income, if the person is having his personal or business tax forms completed, the deductions the person is taking, and the proof of deductions that a person has saved. The family chosen for this paper is a small one-child family completing their personal income tax, filing jointly, and using minimal deductions. Based on the couple’s income, a recent home purchase, attendance in college, dependent child, and deductions, the most appropriate forms to complete are the 1040 U.S. Individual Income Tax Return, earned income credit form, form 8812-Additional child tax credit, form 8863 education credits and form 5405 (First Time Homebuyer Credit and Repayment of the Credit) (Internal Revenue Service, 2012). Scenario: The couple is Jackson R. Parker and his wife Elizabeth Parker. They have a healthy non-disabled three-year-old son named Colton. Mr. Parker is in the United States Army. Mrs. Parker is unemployed and does not work, but attends college full-time. The couple purchased their first home on February 23, 2011. They paid $300,000 for their home. They had few receipts with the exception of the husband’s W-2......

Words: 1560 - Pages: 7

Deductions

...Ken and Mary Jane Blough have failed to keep records of their itemized deductions. The IRS now is asking for verification of these deductions. The standard deduction for the Blough’s is $11,900. If the amount of their itemized deductions is less than the standard deduction than they should have just taken the standard deduction and this audit would not be necessary. In the Blough’s case the total of their itemized deductions is much more than the standard deduction and therefore they must show verification if they want to itemize. The first deduction they took was in regards to medical expenses of $7,102 which only $1,477 was deductible because of the 7.5% floor of AGI from the taxpayer (Internal Revenue Code Sec. 213). The second deduction they took was taxes of $6,050 which are fully deductible as long as none of them are fees (Internal Revenue Code Sec 164). The third deduction they took was interest of $10,659 which is fully deductible depending on the type of interest that is involved (Internal Revenue Code 163). The last deduction they took was charitable contributions of $2,693 which are fully deductible as long they are donated to a 50% organization (Internal Revenue Code 170). No deduction is allowed for a charitable contribution unless the taxpayer gathers the appropriate documentation and substantiation. Therefore the $1,477 is not deductible. The total amount of their itemized deductions is $19,402. This is an estimate because the research problem does......

Words: 326 - Pages: 2

Income Tax Deductions

...The American Revolution American History 2010 March 5,2013 Mr. Miller By Veronica Martinez In regards to the numerous successful Revolutions that have occurred, they all share in common a broad general pattern, causes and characteristics. The American Revolution to a certain extent aligned with this broad pattern and had some identical causes and characteristics. In regards to the preliminary and advanced symptoms of revolutions, the American Revolution exhibited characteristics of discontent and the creation of mobs that was in response to taxes imposed upon them by the British government. The steps that followed although displaying characteristics and causes that identify with revolutions, digresses from the general pattern. The Declaration of Independence, Battle of Saratoga and Siege of Yorktown though somewhat associating themselves with their respective step within the broad pattern, for best part does not fit in with the overall pathology. The American Revolution displayed that certain stages matched with the broad general pattern and throughout its duration exhibited characteristics and causes normally attributed to revolutions. Other parts of the Revolution however tended to deviate from the generally accepted pattern. As a prelude before the Revolution itself, there were already preliminary symptoms of unrest within America that followed the first step in the general pattern of......

Words: 1730 - Pages: 7

Deduction

...LESSON 12 DEDUCTIONS Dr Vandana Bansal STRUCTURE 12.0 Objectives 12.1 Introduction 12.2 Deductions from gross total income 12.3 Basic rules governing deductions under sections 80C to 80U 12.4 Deductions 12.5 Deductions to encourage savings 12.5.1 Deduction in respect of life insurance premium, etc.80C 12.5.2 Deduction in respect of pension fund 80CCC 12.5.3 Deduction in respect of contribution to pension scheme of central government 80CCD 12.6 Deductions for certain personal expenditure 12.6.1 Deduction in respect of medical insurance premium 80D 12.6.2 Deduction in respect of maintenance including medical treatment of dependent who is a person with disability - section 80DD 12.6.3 Deduction in respect of medical treatment - section 80DDB 12.6.4 Deduction in respect of repayment of loan taken for higher education - section 80E. 12.6.5 Amount of rent paid - section 80GG 12.7 Deductions for socially desirable activities 12.7.1 Donation to certain funds, charitable institution etc. (section 80G) 12.8 Deductions for persons with disability 12.8.1 Deduction allowed to a person with disability - section 80U __________________________________________________________________ 12.0 OBJECTIVES After studying the Unit you should be able to: • List the deductions available from gross total income • Know who is eligible for deduction • List the conditions for claiming deduction • Calculate the amount of each deduction......

Words: 4690 - Pages: 19

Itemized Deductions

...Itemized Tax Deductions for Individuals: Data Analysis Sean Lowry Analyst in Public Finance February 12, 2014 Congressional Research Service 7-5700 www.crs.gov R43012 CRS Report for Congress Prepared for Members and Committees of Congress Itemized Tax Deductions for Individuals: Data Analysis Summary Reforming or limiting itemized tax deductions for individuals has gained the interest of policymakers as one way to increase federal tax revenue, increase the share of taxes paid by higher-income tax filers, simplify the tax code, or reduce incentives that might lead to inefficient economic behavior. However, limits on deductions could cause adverse economic effects or changes in the distributional burden of the federal income tax code. This report is intended to identify who claims itemized deductions, for how much, and for which provisions? This report analyzes data to inform the policy debate about reforming itemized tax deductions for individuals. In 2011, 32% of all tax filers chose to itemize their deductions rather than claim the standard deduction. In addition, the data indicate that both the share of tax filers who itemize their deductions and the amount claimed by each tax filer as adjusted gross income (AGI) increases. AGI is the basic measure of income under the federal income tax and is the income measurement before itemized deductions and personal exemptions are taken into account. Although higherincome tax filers are more likely to itemize their......

Words: 3452 - Pages: 14

Philippines Taxation System

...Subject to constitutional and inherent restrictions, the power of taxation is regarded as comprehensive, unlimited, plenary and supreme. Scope of Legislative Taxing Power 1. Amount or rate of tax 2. Apportionment of the tax 3. Kind of tax 4. Method of collection 5. Purpose/s of its levy, provided it is for public purpose 6. Subject to be taxed, provided it is within its jurisdiction 7. Situs of taxation TAXES – enforced proportional contributions from the persons and property levied by the law-making body of the State by virtue of its sovereignty in support of government and for public needs. Characteristics of Taxes 1. forced charge; 2. pecuniary burden payable in money; 3. levied by the legislature; 4. assessed with some reasonable rule of apportionment; (see theoretical justice) 5. imposed by the State within its jurisdiction; 6. levied for a public purpose. Requisites of A Valid Tax 1. should be for a public purpose 2. the rule of taxation shall be uniform 3. that either the person or property taxed be within the jurisdiction of the taxing authority 4. that the assessment and collection of certain kinds of taxes guarantees against injustice to individuals, especially by way of notice and opportunity for hearing be provided 5. the tax must not impinge on the inherent and Constitutional limitations on the power of taxation Theories and Bases of Taxation 1. Lifeblood Theory Taxes are what we pay for civilized society.......

Words: 20938 - Pages: 84

Case Study Analysis (General Deductions U/S 37-Income Tax Act, 1961)

...Corporate Taxation | Case Study Analysis | Section 37: General Deductions | By | K Srilekha MBA | | I. FACTS: The assessee company who carried on the business of manufacture of silk was a member of Indian Silk Mills Association. The members entered into a working time agreement to restrict the working hours of the looms to 42 hours per week, so that over-production could be avoided. But, the members could transfer these loom hours amongst themselves. The assessee purchased loom hours from two members for a consideration of Rs 20 lakhs for a period of 6 months. The assessee claimed deduction of Rs. 20 lakhs as business expenditure, under section 37(1) of Income Tax Act. Is the claim justified? II. ANALYSIS OF FACTS: Each member of the association was manufacturing less than what it could have, if it was working full time. The members agreed to such an agreement as otherwise there would have been over-production of silk. The loom hours could be traded for, if you had an excess of them. Loom hours are the number of hours that you work your looms (mills) for. Section 37 speaks about ‘General Deductions’: Any expenditure not specifically covered by sections 30 to 36 is deductible under section 37, if the following conditions are satisfied: a) It should be in respect of business carried on by the assessee b) It should have been laid out or expended wholly or exclusively for the purpose of business c) It must have been incurred in the......

Words: 1476 - Pages: 6

Tax Issues

...Corporate Taxes Tax Base For Resident and Foreign Companies VAT is applied in the same way to residents and non residents. For additional information, consult the Bureau of Internal Revenue.   Tax Rate Income Tax | The rate is 30% on net income but there are some preferential rates and exemptions. Preferential rates vary from 2 to 20%. Regional headquarters are taxed at 10%. | Capital Gains Tax | These are taxed like income, except those from selling shares in companies (5-10% if not exchanged on the Stock Exchange; half of 1% of the selling price otherwise), and those from selling real estate not used for business purposes (6%). | Deductions on dividends | Deduction of 15% on dividends paid by the Philippine company if the non resident's country  allows 20% tax credit, otherwise there is a deduction of 35%. | Deductions on interest | Deduction of 20% | Deductions on royalties | Deduction of 20% | Deductions on transfers from subsidiaries | Deduction of 15% of profits after tax paid by the subsidiary to the head office. | Property Tax | Varies according to the location, and does not exceed 3% of the estimated value. | Social contributions | Vary according to wages, maximum 1 090 PHP. | Stamp duties | Vary according to the type of document. | Tax on transfers of property | From 2 to 15%. | Other | Tax of 3 to 7% for certain activities such as banking, insurance, finance and transport. |   Tax Rate For Foreign Companies Foreign companies are......

Words: 668 - Pages: 3

Bill Robinson - Tax File Deductions

...commissions earned by the down line distributors Joy has signed up as a upline distributor. Joy has been deducting $20,000 as business losses from five years since she started business. IRS audited Mr. and Mrs. Robinson tax filings and disallowed deductions for business losses stating them under Hobby losses. --------------------------------- Johnson and Jason, CPAs 100 Dorsett Boulevard St.Louis, MO 63043 October 18, 2010 Mr. and Ms. Robinson 120 Boulevard Richmond Hill, Georgia 31324 Dear Mr. and Ms. Robinson This letter is in response for your request of our advice and review of your recent filed tax returns. Our conclusions are based upon the tax laws and research of different cases we have studied. After review of your tax situation, we came to conclusion that we do not have enough significant reasons to support deduction of Marketing Business losses. We can deduct losses only if we satisfy certain factors according to Regulation 1.183-2(b). There are nine factors under Regs. § 1.183-2(b) used to evaluate whether an activity is engaged in for profit. And the way the Marketing Business has been conducted Merely satisfy few of them. Please see brief explanation of the factors to understand why the direct marketing business deduction have been disallowed. (1) Manner in which taxpayer carries the activity: Even though the activity is conducted business like manner by keeping track of expenses, by preparing sales reports and by preparing......

Words: 1739 - Pages: 7

Tax Deduction on Moving Expense

...Tax Deduction on Moving Expense Table of Contents Executive Summary 3 Moving Expenses 4 What is a Moving Expense? 4 Conditions Needed to Deduct Moving Expenses 5-6 What can we Deduct? 6 Reimbursement and Withholdings 7 How to Report Moving Expenses 8 Works Cited 10 Executive Summary The process of deducting moving expenses is long and contains many conditions such as the time test, the distance test, and closely related to work condition. Therefore, some mistakes may easily be made along the way, such as deciding whether or not to include reimbursement as income or as an expense, and if it is counted as income. The employer has the responsibility to withhold tax from the reimbursement, unless the move was solely for the benefit of the employer, not as compensation for the employee, only the personal expenses such as meals and lodging is counted in income. Also expenses must be deemed reasonable so one must watch out account for expenses only related to the trip, not sightseeing detours. Therefore, one must take great care when handling moving expenses, because it might become a deduction, or a determination of income. Tax Deduction: Moving Expense When we graduate from xxxx, we will get a new job in another city or state. The good news is that we may be able to list our moving expenses tax deductable on our itemized tax forms if we meet certain qualifications. Although there are many expenses we can deduct, there are even......

Words: 1928 - Pages: 8

How to Dig Up a Tax Deduction

...How Your Pet Can Dig Up a Tax Deduction Dan Caplinger Feb 6th 2015 6:00AM Americans love their pets, and they aren't afraid to open up their wallets to take care of them. Americans spent close to $60 billion on pet expenses during 2014, according to estimates from the American Pet Products Association. Between food, veterinary care and other supplies, it's easy for costs to add up. As the dog days of tax season approach, one question that many people have is whether there's any way they can get any sort of tax break for their pet expenses. As outlandish as it might sound, there actually are some perfectly legal tax deductions you can claim from what you spend on your pets. Before turning to those deductions, let's first take a look at what you can't do with pet expenses. Pet Dependent? Forget About It The most obvious tax break that might tempt you is the personal exemption for dependents, which on your 2014 return will give you a reduction of $3,950 on your taxable income. Certainly, your dogs, cats or other pets rely on you for their survival. But the Internal Revenue Service takes the view that only human dependents can qualify for the valuable personal exemption. Several other similarly enticing deductions also don't work. Veterinary care might cost you as much as a doctor's visit for yourself, but you're not allowed to deduct those vet charges as medical expenses on your tax return. Similarly, if you're traveling on business, you can't write off the......

Words: 869 - Pages: 4

Business Tax

...the primary obligation of the state to protect all the constituents regardless of whether they pay or not their tax liabilities. True or False 1-2 1. True 2. True 3. True 4. True 5. True 6. False. The President cannot delegate the power of taxation, since taxation is not vested in the President. Taxation is vested in the legislative body. 7. False. Taxation cannot be separated from the state. The moment a state exists, taxation also exists. 8. False. The making of tax law is undertaken ahead of the collection of taxes. 9. False. Levying refers to the making of tax laws. 10. False. Only the legislative body, the Congress, can grant tax exemptions. True or False 1-3 1. False. It is the legislative branch of the government that is vested with the power of taxation. 2. False. The power of taxation is restricted by inherent and constitutional limitations. 3. False. Tax assessment is the valuation and determination of the amount of tax. The passage of taxation is called levying or imposition of tax. 4. False. The three inherent powers can be and have been delegated by the Legislative to the Executive Branch. 5. True 6. True 7. False. The two kinds of double taxation are called indirect double taxation and direct double taxation. 8. False. Tax avoidance is a legal way of avoiding payment of taxes. 9. False. Income tax cannot be classified as ad valorem, since the amount is not fixed and does not rely upon an independent......

Words: 18322 - Pages: 74

Reviewer Tax

...TRANSFER TAX -refers to the burden imposed upon the right to gratuitously transfer or transmit property, tangible or intangible from one person to another. Filing: within 6 months from the date of death 15%-relative 30%-stranger Filing: within 30 days from the date of donation -are taxes imposed upon the gratuitous disposition of private property. ESTATE TAX FORMULA: KINDS OF TRANSFER TAXES: ESTATE TAX NIRC Donation mortis causa Tax levied on the transmission of properties from decedent to his heirs Tax on the privilege to transmit property at death Excise tax or privilege tax Effective upon death Tax base is the net estate Net estate amounting to P200,000 is exempted 20% highest rate DONOR’S TAX NIRC Donation inter vivos Tax levied on the transmission of properties from a living person to another living person. Gross Estate (Sec. 85) TAX ON THE TRANSFER OF REAL PROPERTY LGC Less: Ordinary Deductions (Sec. 86)_____________ Equals: Net Estate before share of surviving spouse Less: Share of surviving spouse________________ Equals: Net estate before special deductions Less: Special deductions______________________ Equals: Net taxable estate Multiply:Tax Rate (Sec 84)______________________ Equals: Estate Tax Payable If there’s tax credit available: Excise tax or privilege tax Effective during the life time of the donor Tax base is the net gift within the calendar year Net gift amounting to P100,000 is exempted highest rates: Estate tax payable Less: Tax......

Words: 4504 - Pages: 19

Tax Federal Itemized Deduction

...and Mary Jane Blough have failed to keep records of their itemized deductions. The IRS now is asking for verification of these deductions. The standard deduction for the Blough’s is $11,900. If the amount of their itemized deductions is less than the standard deduction than they should have just taken the standard deduction and this audit would not be necessary. In the Blough’s case the total of their itemized deductions is much more than the standard deduction and therefore they must show verification if they want to itemize. The first deduction they took was in regards to medical expenses of $7,102 which only $1,477 was deductible because of the 7.5% floor of AGI from the taxpayer (Internal Revenue Code Sec. 213). The second deduction they took was taxes of $6,050 which are fully deductible as long as none of them are fees (Internal Revenue Code Sec 164). The third deduction they took was interest of $10,659 which is fully deductible depending on the type of interest that is involved (Internal Revenue Code 163). The last deduction they took was charitable contributions of $2,693 which are fully deductible as long they are donated to a 50% organization (Internal Revenue Code 170). No deduction is allowed for a charitable contribution unless the taxpayer gathers the appropriate documentation and substantiation. Therefore the $1,477 is not deductible. The total amount of their itemized deductions is $19,402. This is an estimate because the research problem......

Words: 326 - Pages: 2

Miscellaneous Tax Deductions

...If you have expenses that qualify as miscellaneous itemized deductions, you can deduct the total amount of those expenses only to the extent that they exceed 2% of your adjusted gross income. There are three types of expenses that are subject to the 2% limit. They are unreimbursed employee expenses, tax preparation fees and other expenses. For an explanation of deductible and nondeductible expenses refer to Publication 529, Miscellaneous Deductions. Certain unreimbursed employee expenses are deductible as miscellaneous itemized deductions on Form 1040, Schedule A. To be deductible, the expense must be: * Paid or incurred in the tax year * For carrying on your trade or business of being an employee, and * Ordinary and necessary You can deduct other expenses subject to the 2% limit that you pay to: * Produce or collect taxable income * Manage, conserve, or maintain property held for producing such income, or * Determine, contest, pay, or claim a refund of any tax http://www.irs.gov/taxtopics/tc508.html For example, you can donate a car to a homeless shelter and receive a miscellaneous itemized tax deduction. Congress enacted Title 26, Section 170 of the US Code which allows taxpayers to deduct the fair market value of property contributions or value of cash gifts to qualified, tax-exempt charities. The government does put a limit on the ceiling amount for a charitable donation to 50% of the taxpayer's AGI. Also, if the fair market value......

Words: 309 - Pages: 2