2. Habilidades de emprendimiento
2.2. Emprendimiento con enfoque de género
2.2.2 Necesidades de formación para la mujer emprendedora
1. Residents or Citizens – Resident citizen (RC), Non-resident citizen (NRC) and Resident Alien (RA)
Properties donated within & without
2. Non-resident and non-citizen – Non-resident alien (NRA), whether engaged in trade or business is immaterial
Tangible Properties donated within, Intangible Properties within subject to rule on reciprocity B. JURIDICAL PERSONS:
(Corporation or Partnership)
Note: Unlike in estate taxation wherein juridical persons cannot be the transferor of property 1. Domestic Corporation or Resident Foreign Corporation
Properties donated within & without 2. Non-Resident Foreign Corporation
Tangible Properties donated within, Intangible Properties within subject to rule on reciprocity
University of San Carlos – School of Law and Governance | Based on the outlined discussion of BA Page 34
ELEMENTS FOR THERE TO BE A TAXABLE DONATION: (AFRAID-C)
1. A – Actual or Constructive Delivery2. F – Form to Effect Donation
3. R – Reduce the Assets or Patrimony of the Donor
4. A – Acceptance of the Donee During the lifetime of the Donor 5. I – Increase in the Assets or Patrimony of the Donee
6. D – Donative Intent 7. C- Capacity of the Donor
DONATIVE INTENT
Intent of the donor to DONATE without consideration since it’s a gratuitous transfer (act of liberality).
As a RULE there must be an intent to donate these are the DIRECT DONATIONS such as those expressly made and follow the requirements of the law.
As an EXCEPTION, there are instances though that donations are made but are done INDIRECTLY. These are those donations by OPERATION OF LAW. Such as:
1. Transfer of Insufficient/Inadequate consideration
this is the same as that in estate tax. To determine which should be taxed either donor’s tax or estate tax, we base it on the POINT OF DISCOVERY by the BIR whether during the lifetime of the transferring/giver/donor (donor’s tax) or after (estate tax).
As a rule all properties transferred for inadequate consideration is subject to donor’s tax.
As an exception, The ONLY transfer for inadequate consideration that may NOT be taxed with donor’s tax are transfers involving REAL PROPERTIES subjected to CAPITAL GAINS TAX.
o SEC. 100. Transfer for Less Than Adequate and Full Consideration. - Where property, other than real property referred to in Section 24(D), is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the fair market value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year.
o SEC. 24. (D) Capital Gains from Sale of Real Property. - (1) In General. - The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets…
Reason: real property that are capital assets that are sold are taxed with a capital gains tax of 6% based on gross selling price or current fair market value, whichever is higher. So even if the sale was transferred for inadequate consideration the government does not lose any taxes because it taxed the transfer based on whichever is higher of the selling price or the market value.
On the other hand, in the case of shares of stocks subject to capital gains tax, which are transferred for inadequate consideration, are still subject to donor’s tax.
o Sec. 24 (C) Capital Gains from Sale of Shares of Stock not Traded in the Stock
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Exchange. - The provisions of Section 39(B) notwithstanding, a final tax at the rates prescribed below is hereby imposed upon the net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the stock exchange.
Not over P100,000... 5%
On any amount in excess of P100,000... 10%
the LEGAL REASON is that law is clear that the only property exempted under sec.
100 of the NIRC are properties subject to CGT under par. D of sec. 24 which are real properties subject to CGT.
The logic for this is because capital gains on shares of stocks are based on capital gains realized which is the difference of the selling price and the cost of the shares. Here if there is an inadequate consideration the government stands to lose taxes from the transaction therefore to supplement the loss it is subject to donor’s tax.
2. Condonation of a Debt
this is the gratuitous cancellation of a debt which is free from any material consideration. Its should not be predicated on a past or future service.
REVIEW: when there is a condonation of debt it could be subject to 3 types of taxes:
o INCOME TAX – if it pertains to past service rendered
o DONORS TAX – no material consideration either past or future service.
o DIVIDEND TAX – if it pertains to a condonation of a debt of a stockholder(debtor); it could also be seen as an additional investment if the stockholder condones the corporation where the creditor is the stockholder.
CAPACITY OF THE DONOR
As a rule, we look only at the capacity of the Donor however there are exceptions where the capacity of the donee is material such as those that are not able to receive as provided for by the civil code.
Donors are capacitated if they are capacitated to enter into contracts.
o Incapacitated donors:
a. Insane persons b. Minors
C. Spouses (to each other)
Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing.
o The prohibition shall also apply to persons living together as husband and wife without a valid marriage. Moderate gifts depend on the financial capacity of the donor
o If donation was void because it is not a moderate gift, then such transfer will be considered as income tax (all income from whatever source is subject to income tax) on part of the donee.
University of San Carlos – School of Law and Governance | Based on the outlined discussion of BA Page 36
Again as a rule, The donee need not be capacitated to receive the gift. It can be received by his guardian or legal representative.
o Exception – Incapacitated donees:
a. Those under civil interdiction
b. Spouses and man and woman living together without the benefit of marriage c. Lawyers who notarized the will is incapacitated to receive donation or inherit d. Gifts to public officers or their spouses or relatives by reason of public office
e. Those incapacitated to receive in succession due to undue influence (i.e. priests, doctors, one who accuses the donor on an attempt on his life etc...)
o Gift received by a disinherited heir is subject to donor’s tax.
ACTUAL OR CONSTRUCTIVE DELIVERY
Actual Delivery – delivery by physically placing the thing sold in the hands or in the physically placing it in the donee’s possession
Constructive Delivery – by operation law or legal delivery
o Traditio symbolica – symbolic delivery of a thing part of the thing to be delivered such as a key to the property
o Traditio longa manu – delivery of a movable by long hand, usually by pointing at the thing o Traditio brevi manu – delivery by short hand, takes place when the donee is already in the
possession of the thing to be donated before the donation and continues to be the owner thereof
o By legal formalities – sale made through a public instrument, the execution is equivalent to the delivery of the thing donated.
ACCEPTANCE OF THE DONEE DURING THE LIFETIME OF THE DONOR
Must be made known to donor during his lifetime
As a rule, Acceptance must generally be made personally
As an exception, can be made through another as long as authorized to accept such SPECIFIC donation (authorized person with a special power for that purpose or with a general and sufficient power)
Such as when the donee is not capacitated to receive the gift. It can be received by his guardian or legal representative.
University of San Carlos – School of Law and Governance | Based on the outlined discussion of BA Page 37
VALUE ADDED TAX
DEFINITION OF VAT:
Value Added Tax is:
a consumption tax on every stage of the distribution process on the sale, barter, exchange, lease of goods or properties, rendition of services and the importation of goods in the ordinary course of trade and business.
The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. The burden can be shifted from the seller to the buyer. The incidence of the taxation can be transferred from the seller to the buyer. BUT TAKE NOTE, the statutory taxpayer is always the SELLER. What is merely shifted is the incidence of taxation.
So what is transferred to the buyer is no longer technically a value added tax but an additional cost on the part of the buyer.
A privilege tax. Not attach to a particular good or a person. It is attach to the privilege of transferring certain ownership over goods or properties or rendition of services including importation itself.
Therefore it is considered as an EXCISE TAX under classification based on nature.
An ad valorem tax, meaning it is based on a fixed value. It is imposed either on the GROSS SELLING PRICE (GSP) or GROSS RECEIPTS (GR).
RULE OF REGULARITY
NIRC SEC. 105. Persons Liable. - Any person who, in the course of trade or business, sells barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT)
In the same section in the third paragraph it states that:
The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.
Take note of the word regular, this is referred to as the RULE OF REGULARITY. This rule is generally applied to all taxpayers. EXCEPT, non-resident foreign entity.
GR: we subject a particular transaction to rule of regularity.
o EXC: Non-resident foreign person or entity. Therefore, when a NR foreign individual or entity engages in an activity here in the Philippines it is automatically subject to VAT provided all other requisites are complied with or it is not a vat exempt transaction.
WHY IS IT CALLED VALUE ADDED TAX:
It is the tax in the value added.
For example:
o A to B: A sells a piece of wood. Sold it to B for 100. As a rule 12% will be VAT on the GSP. So total amount that will be paid by B is 112.
o Now be wants to use the wood to make a chair and then sell it. So B sold it for 200 to C. so plus the vat of 12% the total price paid by C is 224. Notice that the difference of the value from a piece of wood @ 100 to a chair @ 200 there is an increase of value of 100 (200-100=100). TAKE NOTE: B here at first is liable for the vat of 24(12% of 200) upon sale to C which he then shifted.
University of San Carlos – School of Law and Governance | Based on the outlined discussion of BA Page 38
But B here already paid 12(12% of 100) which was passed by A to B. in effect the tax actually shouldered by B is 12. (24-12=12).
o Later on you will see that B here made an Output Vat from his sale of 24 less the Input VAT from his purchase of 12 giving him a Vat due of 12.
GUIDE: “PISO” P-urchase I-nput; S-ales O-utput
o So as you see, B added a value of 100 to the wood therefore ultimately his shoulders the tax of 12 from the 100 value he added to his piece of wood.
o B to C: So let say C bought from B the chair and added designs to the chair and sold it for 300.
The vat of this is 36(12% of 300). Total is 336. The difference of the value from B to C is 100 (300-200=100). The vat actually shouldered by C is 12 (36-24=12) which is still equivalent to the vat on the value added which is 100 pesos.
o So the tax shouldered by the people in the process is only the tax on the value added in each stage of the process. That is why its called value added tax.
o Take note, it its only called value added tax before it reaches the end user. This is because if you are the end user and you cannot make use of the property anymore or rather you did not add value to the property anymore you ultimately shoulder the full amount of the VAT.
o C to D: Lets say from C it was sold to D, the end user. D will shoulder the entire 36 from the GSP of 300.
STEPS in VAT problems/cases:
1. look at the taxpayer involved. Whether he is a VAT registered or NON-VAT registered.
a. If he is a VAT registered then initially you may say this is subject to vat BUT it does not stop there.
2. Look at the TRANSACTION where the taxpayer is involved in.
WHO ARE VAT TAXABLE:
1. those whose annual gross sales EXCEED 1,919,500.00 (memory tip: 19-19-500); these taxpayers MUST register itself as a VAT REGISTERED TAXPAYER.
2. Those who do not exceed but who OPT to register as a VAT REGISTERED TAXPAYER.
o What if you were non-vat registered and your sales for the year exceeded 1,919,500. Are you subject to vat?
YES. More reason for you to pay in addition to other percentage tax you are liable for.
So before you start a business you must project your sales in order to estimate if you will be subject to vat or not.
VAT IN TERMS OF TRANSCATIONS:
it is imposed on the:
1. Sale goods or properties, 2. Rendition of services 3. Importation of Goods
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SALE OF GOODS OR PROPERTIES
TAX RATE & TAX BASE
GR: 12% on Gross Selling Price; EXC: 0% rated transactions
GROSS SELLING PRICE
Gross selling price means the total amount of money or its equivalent, which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax.
The phrase “obligated to pay” is relevant because this means that even if you did not pay it because it was already incurred you have to automatically subject it to VAT. So when you are talking about SALE OF GOODS AND PROPERTIES, it does not depend on the payment it depends on the incurrence. When you are already allowed to record the transaction you are already liable to pay VAT regardless when the payment is made.
o TAKE NOTE: that this is the DIFFERENCE BETWEEN GROSS SELLING PRICE & GROSS RECEIPTS because:
GROSS SELLING PRICE taxable upon incurrence of the obligation
GROSS RECEIPT taxable only when there is actual or constructive payment of goods.
GOODS OR PROPERTIES
The term "goods" or "properties" shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include:
(a) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
(b) The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right;
(c) The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment;
(d) The right or the privilege to use motion picture films, tapes and discs; and (e) Radio, television, satellite transmission and cable television time.
as stated in the cases, the enumeration of goods and services stated in the NIRC are not exclusive.
Moreover, from the use of the phrase “shall include” the enumeration is not exclusive therefore there may be other properties taxable.
As to what are properties, this was discussed in property law. These maybe real or personal.
As to what are goods this was covered in your sales law. These maybe fungible or non-fungible and others.
This also includes the right and privilege to use intellectual properties.
University of San Carlos – School of Law and Governance | Based on the outlined discussion of BA Page 40
ZERO RATED TRANSACTIONS OF SALE OF GOODS:
1. EXPORT SALES
2. FOREIGN CURRENCY DENOMINATED SALES (FCDS)
3. EXEMPT UNDER SPECIAL LAWS or EFFECTIVELY ZERO RATED TRANSCATIONS
I. EXPORT SALES: (sec. 106) 1) Direct Export (1st paragraph)
a) Sale and there must be an actual shipments of goods FROM the PHIL to FOREIGN COUNTRY b) must involve payment of ACCEPTABEL FOREIGN CURRENCY
c) accounted for under the rules and regulations of the Bangko Sentral (BSP)
Example 1:
A(Phil) exports chairs to B(US)
B pays 1000USD through BPI to A o This is a direct export sale.
o 1st there is a shipment of goods from Phil to foreign country. Take note it will not matter if FOB shipping point or destination as long it is exported.
o 2nd paid under an acceptable foreign country. Acceptable currencies are generally those currency of countries not at war with the Philippines. To be exact there is a complete list in the BSP website.
o 3rd paid for accordance with the rules of the BSP. If you pay with a banking facility then it is covered by the rules of the BSP.
o Therefore, this is a zero rated sale under category no.1 as a direct export sale.
Example 2:
A(Phil) exports chairs to B(US)
B pays 1000USD directly to A o This is a direct export sale.
o 1st there is a shipment of goods from Phil to foreign country. Take note it will not matter if FOB shipping point or destination as long it is exported.
o 2nd paid under an acceptable foreign country. Acceptable currencies are generally those currency of countries not at war with the Philippines. To be exact there is a complete list in the BSP website.
o 3rd BUT NOT accounted for accordance with the rules of the BSP. Because no bank was involve therefore BSP was not involve in the sale.
o Therefore, not an export sale.
2) Indirect Export (2nd paragraph)
a) Sale of RAW materials or PACKAGING materials b) Sold to a NON RESIDENT BUYER
c) DELIVERED to a RESIDENT LOCAL EXPORT ORIENTED enterprise
d) For the purpose of MANUFACTURING, PROCESSING or PACKING of the said goods in the Philippines e) Paid for in acceptable foreign currency
f) Accounted for under the rules of the BSP Example 1:
C(supplier) is selling rattan. B(US buyer) wanted to buy a chair from A(exporter).
University of San Carlos – School of Law and Governance | Based on the outlined discussion of BA Page 41
B was so picky with the quality of the materials. So he bought from C the raw materials in the amount of 1000USD through BPI.
B also believes in the skills of A in manufacturing the furniture. So B here instructs C to deliver the rattan to A for the latter to manufacture it and then ship it to B for 2000USD through BPI.
This problem shows to kinds of transactions:
This problem shows to kinds of transactions: