INTRODUCTION TO
TAX AND TAX LAWS
Week 9 – Income Tax Schemes, Accounting Periods, Methods,
and Reporting
1st Semester , A.Y. 2024-2025
PRAYER
Lord, thank you for this
precious time that you
have given us. Send us
your Holy Spirit to be
our guide and give us
the wisdom to
understand every topic
that we are going to
discuss. Enlighten our
minds and let your love
be upon us.
Amen.
At the end of this week,
students should be able to
comprehend and demonstrated
knowledge on the following:
Types of taxation schemes
Learning and their scope
Objectives
Concept of accounting
period, methods, &
procedures
Types of tax returns, their
deadline, and place of
filing
What are Income
Taxation Schemes?
Under the NIRC, the three
income tax schemes are:
1. Final income taxation
2. Capital gains taxation
3. Regular income taxation
Item of gross income
Taxable to any
one of
Mutually
Exclusive
Final Capital Regular
income Gains Income
Taxation Taxation Taxation
1 Final Income
Taxation
It is characterized by final taxes
wherein full taxes are withheld
by the income payor at source.
The recipient income taxpayer
receives the income net of
taxes.
➢The income payor is the one
required by law to remit the tax to
the government.
➢Income taxpayer does not need to
file income tax returns because the
withheld tax constitute full tax due
and deemed final payments.
➢Final taxation is only applicable to
certain passive income.
Passive vs Active Income
P
PASSIVE
1.
Examples
Compensation
Income
2. Business
Income
Examples 3. Professional
1. Interest income Income
from banks
A
2. Dividends from
domestic
corporation
3. Royalties
ACTIVE
DYCBATax213 - 1ST SEM A.Y. 2022 - 2023
BIR FORM 1601-FQ
P
PASSIVE
1.
Examples
Compensation
Income
2. Business
Income
Examples 3. Professional
1. Interest income Income
from banks
A
2. Dividends from
domestic
corporation
3. Royalties
ACTIVE
DYCBATax213 - 1ST SEM A.Y. 2022 - 2023
2 Capital Gains
Taxation
It is imposed on the gain realized
on the sale, exchange, and other
disposition of certain capital
assets.
• HOW ARE CAPITAL GAINS TAX RATES
CALCULATED?
• Capital gains tax rates = Property value/current
fair market value (whichever is higher) x 6%
2 Classification of
taxpayer’s property
• A. Ordinary Assets- Assets in business
• a.1 Assets held for sale – such as inventory
• a.2 Assets held for use – such as supplies and items of property,
plant and equipment like buildings, property improvements and
equipment
• B. Capital Assets- any asset other than ordinary assets
b.1 Personal (non-business) assets of individual taxpayers
b.2 Business assets of any taxpayers which are:
-Financial assets- such as cash, receivable, investments
-Intangible assets – such as patent, copyrights, leasehold
rights, franchise rights
Types of Assets
CAPITAL ORDINARY
1 2
It is not used in It is used in the
business, trade, or business, trade, or
profession. profession.
Types of Assets
CAPITAL ORDINARY
1 2
It is not used in It is used in the
business, trade, or business, trade, or
profession. profession.
3 Regular Income
Taxation
➢1. It covers all other income
not subject to final taxation and
capital gains taxation
➢Reported to the government
through an income tax return
➢It make use of self-assessment
method.
3 Regular IT -Individual
Income Tax
Individual-Annual Income
Tax For Individuals Earning
Purely Compensation
Income
3 Regular IT -Individual
Income Tax
3 Regular Income
Taxation
3 Regular IT -Corporate
Income Tax
Accounting Periods
01 02
SHORT REGULAR
ACCOUNTING ACCOUNTING
PERIOD PERIOD
A period that has A period that has
less than twelve twelve (12)
(12) months months in length
a. Calendar
b. Fiscal
Calendar Periods
01 calendar period starts
➢A
from January 1 and ends
December 31.
➢This is available to both
corporate and individual
taxpayers
Fiscal Periods
01
➢A fiscal accounting period is
any 12-month period that ends
on any day other than
December 31.
➢This is only available to
corporate income taxpayers.
DYCBATax213 - 1ST SEM A.Y. 2022 - 2023
Knowledge Check
01
1/1/2024 12/31/2024 7/1/2024 3/31/2024
7/1/2024 6/30/2025
1. Identify what period is illustrated in BLUE font.
2. Identify what period is illustrated in PINK font.
3. Identify what period is illustrated in GREEN font.
Deadline of Filing the
Income Tax Return
01
➢Under the NIRC, the
return is due for filing on
the 15th day of the fourth
month following the close
of the taxable year of the
taxpayer.
➢The regular income tax
due is payable upon filing
of the income tax return.
Instances of
Short Accounting Period
01
1 Newly Commenced business
An accounting period covers the date of the start of the
business until the designated year-end of the business.
Illustration:
Maricar started business operation on June 30, 2024 and
opted to use the calendar year accounting period
DYCBATax213 - 1ST SEM A.Y. 2022 - 2023
Instances of
Short Accounting Period
01
2 Dissolution of business
An accounting period covers the start of the current year
to the date dissolution of the business.
Illustration:
Chris is on fiscal accounting period ending every March
31. It ceased business operation on August 15, 2024.
Instances of
Short Accounting Period
01
3 Change of accounting period
by corporate taxpayers
An accounting period covers the start of the previous
accounting period up to the designated year-end of
the new accounting period.
Note taxpayer should express his/her intention and
that BIR approval is needed in changing the
accounting period. It is not automatic.
Instances of
Short Accounting Period
01
4 Death of the taxpayers
The accounting period covers that start of the
calendar year until the death of the taxpayer.
Instances of
Short Accounting Period
01
5 Termination of the accounting
period of the taxpayer by the
Commissioner
The accounting period covers that start of the
calendar year until the death of the taxpayer.
ACCOUNTING
GENERAL METHODS
Two types of general
CROP YEAR
method: Add brief details here to
1. Accrual basis give you more
2. Cash basis information about the bar
diagram parameter.
INSTALLMENT/ OUTRIGHT AND
DEFERRED SPREAD-OUT
Add brief details here to
PAYMENT PERCENTAGE OF give you more
Add brief details here to information about the bar
give you more COMPLETION diagram parameter.
information about the bar Add brief details here to
diagram parameter. give you more
information about the bar
diagram parameter.
1
The General
Method
01
A. Accrual basis - Income is recognized
when earned regardless of when
received. Expenses is recognized when
incurred regardless of when is paid
B. Cash Basis – Income is recognized
when received and Expense is
recognized when paid.
Computation of Income
01
Accrual basis Cash basis
Computation of Expenses
01
Accrual basis Cash basis
2
The Installment/
Deferred Method
01
Under this method, gross income is
recognized and reported in
proportion to the collection from the
installment sales.
Applicable to :
1.01 Dealers of personal property on the sale of
properties they regularly sell
2. Dealer of real properties, only if their initial
payment does not exceed 25% of the selling
price
3. Casual sale of non-dealers in property, real or
personal, when their selling price exceeds
P1,000 and their initial payments does not
exceed 25% of the selling price.
The Percentage
3
of Completion
01
Under this method, the estimated
gross income from construction is
reported based on the percentage of
completion of the construction
project.
Outright and
4
Spread-out Method
01
Under outright method, report as
income the FMV of such buildings or
improvements subject to the lease at
the time when such buildings
improvements are completed
54 Crop year basis
01 this method, farming income is
Under
recognized as the difference between
the proceeds of harvest and expenses
of the particular crop harvested. The
expenses of each crop are accumulated
and deducted upon the harvest of the
crop.
Tax
Reporting
Types of Return to the
Government
01 02 03
INCOME WITHHOLDING INFORMATIoN
TAX RETURN TAX RETURNS RETURNS
Provide information of Report filed and pay by No payment involved, just
taxpayers income, taxpayer-withholding to provide information for
agent tax mapping purposes.
expenses, tax due , tax
credit, and tax still due
eFPS Form
1. Electronic data entry
2. Electronic
filing/submission
3. Electronic tax payment
MODE OF FILING
INCOME TAX
RETURNS
E-BIR Forms
1. Electronic data entry
2. Electronic filing/submission
3. Manual tax payment
Manual 1. Manual data entry
2. Manual filing/submission
3. Manual tax payment
Who are mandated
to use the eFPS
1. 01
Large taxpayers duly notified by the BIR
2. Top 20,000 private corporation duly notified by the
BIR
3. Top 5,000 individual taxpayers duly notified by the
BIR
4. Taxpayers who wish to enter into contracts with
government offices
5. Corporation with paid-up capital of P10,000,000.00
6. PEZA-registered entities and those located within
the Special Economic Zones
1. Large taxpayers duly notified by the BIR
2. Top 20,000 private corporation duly notified by the BIR
3. Top 5,000 individual taxpayers duly notified by the BIR
4. Taxpayers who wish to enter into contracts with government offices
5. Corporation with paid-up capital of P10,000,000.00
6. PEZA-registered entities and those located within the Special Economic Zones
7. Government offices, in so far as remittance of
withheld VAT and business tax are concerned.
01
8. Taxpayers included in the Taxpayers Account
Management Program (TAMP)
9. Accredited importers, including prospective importers
required to secure the Importers Clearance Certificate
(ICC) and Custom Brokers Clearance Certificate(BCC).
*In case of unavailability of the eFPS during the maintenance or
instances of technical errors, eFPS enrolled taxpayers may file
manually.
GROUPINGS OF TAXPAYERS UNDER
EFPS
GROUP A
GROUP B 01 Banking, Insurance, Non-bank financial
institution, Hotels, and Restaurant,
02
Manufacturers, Metallic & Non- Water & Land Transport, and
Metallic Mining and Quarrying Construction.
GROUP C
GROUP D 03
Wholesale & Retail,
Real Estate, Water
Distribution/Purificatio
04
Air Transport, Telecommunication, Printing, n, & Computer Related
Electric, Gas & Hot Water Supply Activities
GROUP E
Health & Social Work, Educational, Public
05
EdUcation & Administration, Farming, Fishing,
Other Service Activities
DYCBATax213 - 1ST SEM A.Y. 2022 - 2023
Payment of Income
Taxes
01
1. “Pay as you file” general rule
2. Installment payment is allowed
in certain condition
Penalties for Late
Filing/Payment
01Surcharge – applied to basic tax
1 due
➢ 25% - failure to file or pay deficiency tax
on time
➢ 50% - for willful neglect to file and pay
taxes
2 Interest – applied to basic tax
01 due.
➢ 12% rate → double of the legal
interest rate, effective January 1,
2018
➢ 20% - previously charged rate until
December 31, 2017
➢ Use of actual days/365 days
3 Compromise Penalty
➢ applied to basic tax due
01
➢ Depending on the nature of violation,
the compromise penalty is based on
a table:
You are the only one who can decide how to
end your story. Endings aren’t written by
circumstances. They are written by people like
you.
Thank You!
