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 T axation law --Atty. Vic C. Mamalateo-- INCOME TAX Tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a person’s income, emoluments, profits and the like (Fisher v. Trinidad) . Income tax is a direct tax on actual or presumed income (gross or net) of a taxpayer received, accrued or realized during the taxable year. IT!!"#$I%& T' It is not an internal revenue tax but a mode of collecting income tax in advance on income of the recipient of income thru the payor of income. %"T*+ ec. -, %I/0 enumerates various internal revenue taxes.1 There are - types of 2ithholding taxes, namely+ () f inal 2ithholding tax3 and (-) creditable 2ithholding tax. 4I%'# IT!!"#$I%& I%0"5* T' 4T 2ithheld by the payor of income (e.g., -67 4T on interest income on bank deposits) represents 48## payment of income tax due on such income of the recipient. Income payee (or recipient of income) does not report income sub9ected to 4T in his income tax return, although income is reflected in his audited financial statements for the y ear. !o2ever, he is not allo2ed to claim any tax credit on income sub9ected to 4T. ithh olding agent files the 2ithholding tax return, 2hich includes the 4T deducted from the income payee, and pays the tax to the :I/. There is no 0ertificat e of Tax ithheld issued to income  payee.  %o 0ertificate of T ax ithheld (:I/ 4orm -;6<) is attached to the income tax return of recipient of income because he does not claim any tax credit in his tax return. I%0"5* T' =T*5 GLOBAL TAX SYSTEM 0ompensation income not sub9ect to 4T :usiness and>or professional income 0apital gains not sub9ect to 4T ?assive investment income not sub9ect to 4T "ther income not sub9ect to 4T SCHEDULAR TAX SYSTEM 0ompensation income sub9ect to 4T (salary of ":8 expat) 0apital gains sub9ect to 4T (real  property in the ?hil an d shares of domestic corporation) ?assive investment income sub9ect to 4T (interest on bank deposit) "ther income sub9ect to 4T (auto 2on on ’mas raffle) The ?hilippines adopted the semi@global or semi@schedular t ax system. *ither the g lobal or schedular system, or both systems may apply to a taxpayer. Updated/09-09-2010

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