TAXATION - TAXATION REGULAR INCOME TAXATION ITEMS OF GROSS...

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TAXATION REGULAR INCOME TAXATION: ITEMS OF GROSS INCOME Regular Income Tax applies to all other items of gross income that are not subjected to final tax or capital gains tax on certain passive income. Most of these items of gross income are derived in the regular conduct of business, trade, profession or employment. Nature of Regular Income Tax 1. It applies on net income (taxable income). “Taxable income means” the pertinent items of gross income subject to regular tax less the deductions and/or personal and additional exemptions, if any, authorized for such types of income under the NIRC or other special laws. 2. Reported quarterly with an annual consolidated return rather than on a per transaction basis. Regular Income Tax has two forms: 1. Progressive Income Tax This is applicable to individuals and estates and trusts. Over But Not Over P0.00 P 10,000.00 5% 10,000.0 0 30,000.00 P500 plus 10% of excess over P 10,000.0 0 30,000.0 0 70,000.00 P2,500 plus 15% of excess over 30,000.0 0 70,000.0 0 140,000.00 P8,500 plus 20% of excess over 70,000.0 0 140,000. 00 250,000.00 P22,500 plus 25% of excess over 140,000. 00 250,000. 00 500,000.00 P50,000 plus 30% of excess over 250,000. 00 500,000. 00 Infinite P125,000 plus 32% of excess over 500,000. 00 2. Corporate Income Tax This is applicable to corporations and business partnership. Effectivity Corpora te Tax Rate Prior to 1998 35% January 1, 1998 34% January 1, 1999 33% January 1, 2000 32% November 1, 2005 35% January 1, 2010 30% Whereas the following entities may be covered by regular income tax rules, they are not taxable as a separate entity but are treated as an extension of the personality of the individuals composing/owning them: 1. General Professional Partnership
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2. Co-ownership 3. Tax exempt estates and trusts 4. Exempt Joint Ventures or Consortium– those that are: a. Formed for the purpose of undertaking construction projects, b. Petroleum, coal, geothermal and other energy operations - in pursuant to an operating consortium agreement under a service contract with the government. GROSS INCOME Gross income includes gains, profits, and income derived from whatever sources, whether legal or illegal not covered by either final taxation or capital gains taxation. EXCLUSIONS FROM GROSS INCOME: 1. Proceed of a Life Insurance policy - received, whether in lump sum or otherwise, by the heirs or beneficiary upon the death of the insured is tax exempt. However, if the proceed are retained by the insurer under an agreement to pay interest, the interest is included in gross income. 2. Amount received by the insured as a return of premium under a life insurance, endowment, or annuity contracts paid 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 or Descent – the value of property acquired by way of these are taxable under Donor’s Taxation. However, incomes from such property, as well as, gift, bequest, devise, or descent of income from any property, in case of transfer of a divided interest , are included in gross income.
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