What is a dependent?A legitimate, illegitimate or legally adopted child

chiefly dependent upon and living with the taxpayer; not more than 21 years old, unmarried, not gainfully employed, incapable of self-support (due to mental/physical defect regardless of age)

Sangalang, Santiano, Santos, Say 3MB

RA 9504: Sec 4RA 8424: Sec 35 C-D & Sec 36

RA 9504 Sec 4

Also known as Sec 35 A & B of Republic Act 8424

Republic Act 8424: “Tax Reform Act of 1997”

Sec 35: ”Allowance of Personal Exemption for Individual Taxpayer”

A. In General1. For purposes of determining the tax

provided in Section 24(A) of this title, there shall be allowed a basic personal exemption amounting to Fifty thousand pesos (P50,000) for each individual taxpayer.

2. In the case of married individual where only one of the spouses is deriving gross income, only such spouse shall be allowed the personal exemption.

B. Additional Exemption for Dependents1. There shall be allowed an additional

exemption of twenty-five thousand pesos (25,000) for each dependent not exceeding four (4)

2. In the case of married individual where only one of the spouses is deriving gross income, only such spouse shall be allowed the personal exemption.

3. In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children

the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed

C. Change of Status1. If the taxpayer marries or should have

additional dependent(s) as defined above during the taxable year, the

taxpayer may claim the corresponding additional exemption, as the case may be, in full for such year.

2. If the taxpayer dies during the taxable year, his estate may still claim the personal and additional exemptions for himself and his dependent(s) as if he died at the close of such year.

3. If the spouse or any of the dependents dies or if any of such dependents marries, becomes twenty-one (21) years old or becomes gainfully employed during the taxable year, the taxpayer may still claim the same exemptions as if the spouse or any of the dependents died, or as if such dependents married, became twenty-one (21) years old or became gainfully employed at the close of such year.

D. Personal Exemption Allowable to Nonresident Alien Individual1. A nonresident alien individual engaged in

trade, business or in the exercise of a profession in the Philippines shall be entitled to a personal exemption in the amount equal to the exemptions allowed in the income tax law in the country of which he is a subject - or citizen, to citizens of the Philippines not residing in such country, not to exceed the amount fixed in this Section as exemption for citizens or resident of the Philippines

2. Should file a true and accurate return of the total income received by him from all sources in the Philippines, as required by this Title

3. In the case of married individuals where only one of the spouses is deriving gross

income, only such spouse shall be allowed the personal exemption.

Sec 36: “Items Not Deductible”

A. General Rule: In computing net income, no deduction shall in any case be allowed in respect to:

1. Personal, living or family expenses2. Any amount paid out for new buildings or

for permanent improvements, or betterments made to increase the value of any property or estate

This Subsection shall not apply to intangible drilling and development costs incurred in petroleum operations which are deductible under Subsection (G) (1) of Section 34 of this Code.

3. Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made

4. Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, individual or corporate, when the taxpayer is directly or indirectly a beneficiary under such policy

B. Losses from Sales or Exchanges of PropertyIn computing net income, no deductions shall in any case be allowed in respect of losses from sales or exchanges of property directly or indirectly:

1. Between members of a family. For purposes of this paragraph, the family of an individual shall include only his brothers and sisters (whether by the whole or half-blood), spouse, ancestors, and lineal descendants

2. Except in the case of distributions in liquidation, between an individual and corporation more than fifty percent (50%) in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual

3. Except in the case of distributions in liquidation, between two corporations more than fifty percent (50%) in value of the outstanding stock of which is owned, directly or indirectly, by or for the same individual if either one of such corporations, with respect to the taxable year of the corporation preceding the date of the sale of exchange was under the law applicable to such taxable year, a personal holding company or a foreign personal holding company

4. Between the grantor and a fiduciary of any trust

5. Between the fiduciary of and the fiduciary of a trust and the fiduciary of another trust if the same person is a grantor with respect to each trust

6. Between a fiduciary of a trust and beneficiary of such trust