INCOME TAX

SCHEMES,
ACCOUNTING
PERIODS/METHODS
AND REPORTING
CHAPTER 4
 OBJECTIVES
01 02 03
Types of Concept of Concept of
taxation accounting accounting
schemes & scope period and type methods

04 05 06
Accounting Types of tax Deadline and
procedures returns place of filing
 Income
Taxation
scheme
- Mutually exclusive
01
Final Income
Taxation
Full taxes are withheld by the income payor
at source.
Passive Income vs
Active Income
Active Income examples:
1. Compensation Income
Passive Income examples:
2. Business Income
1. Interest income from banks
3. Professional Income
2. Dividends from domestic
corporations
3. royalties
02
Capital Gains
Taxation
Gains realized on the sale, exchange and
other dispositions of certain capital assets.
03
Regular Income
Taxation
General rule in income taxation and covers
all other income.
Accounting
Period
 REGULAR ACCOUNTING PERIOD
CALENDAR YEAR FISCAL YEAR

Under NIRC: Under NIRC:

1. Taxpayer’s annual acctg. 1. The return is due for filing on
Period is other than a fiscal the 15th day of the fourth
year (more than 12 months) month following the close of
2. Taxpayer has no accounting the taxable year of the
period (less than 12 months) taxpayer
3. Taxpayer does not keep books
4. Taxpayer is an individual
SHORT ACCOUNTING PERIOD

Newly Change of
Dissolution of
Commenced accounting
business
Business period

Death of the
taxpayer Termination of the accounting
period of the taxpayer by the CIR
 ACCOUNTING METHODS

1. The general methods

a. Accrual basis
b. Cash basis
2. Installment and deferred
payment method
3. Percentage of completion
method
4. Outright and spread-out
method
5. Crop year basis
General Methods for income from sale
of goods or service
 Tax and Accounting Concepts of
accrual and cash basis

Advanced Special tax

Prepaid expense
Income is accounting
is
taxable upon requirement
non-deductible
receipt must be followed
 HYBRID
BASIS
Combination of accrual
basis, cash basis and/or
other methods of
accounting.
 Sale of goods with extended payment
terms

Installment Deferred
Method Method
1. Dealers of personal A variant of the accrual basis and
property is used in reporting income when a
2. Dealers of real properties non-interest bearing note is
3. Casual sale of non-dealers received as consideration in a sale.
 REMEMBER:
Initial
Payment Selling Price
Total payments by the Entire amount of he
buyer in the taxable buyer’s obligation to
year the seller
Contract
Price
Amount receivable in
cash or other property
from the buyer
 The estimated gross income from
construction is reported based on
the percentage of completion of the
construction project.

THE PERCENTAGE OF
COMPLETION METHOD
FOR CONSTRUCTION
CONTRACTS
 Income from Leased Improvement

Outright Spread-out
Method Method

May report as income the fair May spread over the life of the
market value of the buildings or lease the estimated depreciated
improvements subject to lease value of such bldgs. Or
at the time that it is completed. improvements at the termination
of the lease.
AGRICULTURAL
OR FARMING
INCOME
- Commonly measured using the cash
basis or accrual basis
- Animal husbandry
- Short-term crops
LONG-TERM CROPS
Depends on the harvesting frequency

PERENNIAL Harvest through the years

ONE-TIMEOnce after several years

CROP-YEAR
BASIS
 CHANGE IN
1. LETTER OF REQUEST TO
RDO
a. Original & Proposed
Accounting Period

ACCOUNTING 2.
3.
b. Reason for changes
CTC OF SEC
SWORN STATEMENT of

PERIOD
“Non-Forum Shopping”
4. BIR FORM 1905
5. SWORN UNDERTAKING
 INCOME TAX RETURNS

INCOME WITHHOLDING
TAX INFORMATION
TAX

RETURNS RETURNS RETURNS

Details of taxpayer’s Reports of income Does not involve any
income, expense, tax payments subjected to payment or withholding
due, tax credit and tax withholding tax by the of tax; it is essential to
still due taxpayer - withholding the government tax
agent mapping efforts and
evaluation of tax
compliance
MODE OF FILING INCOME TAX RETURNS

Manual Filing
- Traditional way Introduced by BIR,
(paper fill-up of forms with an
document) offline and online
version.

Electronic Filing & Payment System

Is a paperless tax filing system developed
and maintained by BIR.
Taxpayers mandated
to use eFPS
 Businesses included within this group focuses on financial
institutions, construction, water, hotel, and land transportation.

● Banking Institutions
● Insurance and Pension Funding

GROUP ●
●
Non-Bank Financial Intermediation
Activities Auxiliary To Financial Intermediation

A ● Construction
● Water transport
● Hotels and Restaurants
● Land Transport
 This group focuses mostly on the manufacturing section as well as mining.

● Manufacture & Repair of Furniture

● Manufacture of Basic Metals
● Manufacture of Chemicals and Chemical Products
● Manufacture of Coke, Refined Petroleum & Fuel Products
● Manufacture of Electrical Machinery & Apparatus N.E.C.
● Manufacture of Fabricated Metal Products
● Manufacture of Food, Products & Beverages
● Manufacture of Machinery & Equipment NEC

GROUP
● Manufacture of Medical, Precision, Optical Instruments
● Manufacture of Motor Vehicles, Trailers & Semi-Trailers
● Manufacture of Office, Accounting & Computing Machinery

B
● Manufacture of Other Non-Metallic Mineral Products
● Manufacture of Other Transport Equipment
● Manufacture of Other Wearing Apparel
● Manufacture of Paper and Paper Products
● Manufacture of Radio, TV & Communication Equipment/Apparatus
● Manufacture of Rubber & Plastic Products
● Manufacture of Textiles
● Manufacture of Tobacco Products
● Manufacture of Wood & Wood Products
● Manufacturing N.E.C.
● Metallic Ore Mining
● Non-Metallic Mining & Quarrying
 The third group consists of businesses that involve trade,
retail, maintenance, supply distribution, and real estate.

● Retail Sale
Wholesale Trade and Commission Trade
GROUP
●
● Sale, Maintenance, Repair of Motor Vehicle, Sale of

C Automotive Fuel
● Collection, Purification, and Distribution of Water
● Computer and Related Activities
● Real Estate Activities
 Group D focuses when it comes to businesses that involve
utilities such as transport, rent, electricity, as well as
multimedia and recreational activities.

● Air Transport
● Electricity, Gas, Steam, & Hot Water Supply

GROUP ● Postal & Telecommunications

Publishing, Printing & Reproduction of Recorded
D
●
Media
● Recreational, Cultural & Sporting Activities
● Recycling
● Renting of Goods & Equipment
● Supporting & Aux Transport Activities
 The last group focuses on health, education, security, R&D,
agricultural, aquatic, and other forms of business activities.

● Activities of Membership Organizations Inc.

● Health and Social Work
● Private Educational Services
● Public Admin & Defense Compulsory Social Security
GROUP ● Public Educational Services

E ●
●
Research and Development
Agricultural, Hunting, and Forestry
● Farming of Animals
● Fishing
● Other Service Activities
● Miscellaneous Business Activities
● Unclassified
 Payment of
Income
Taxes
MANUAL e-BIR FORMS eFPS

Data Entry Manual Electronic Electronic

Filing / Manual Electronic Electronic

Submission

Tax Payment Manual Manual Electronic

 PENALTIES for Late Filing
or Payment of Tax
Surcharge Interest Compromise Penalty
a. 25% of the 12% per annum Amount in lieu of
basic tax criminal
b. 50% for prosecution over
willful a tax violation
neglect
 THANKS!

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