1.
Tax Deferral through Tax-Free Charges
Tax- Free Exchanges refer to those enumerated in Sec. 40 (c) (2) of the NIRC that are not subject to
Income tax, CPT, Documentary Tax and/or VAT, as the case may be.
2. Types/Kinds of Tax-Free Charges
Tax- Free Exchange of Property Exchange not Solely in Kind
(a) A corporation, which is a party to a merger or [Link] an individual, a shareholder, a security holder
consolidation, exchanges property solely for stock or a corporation receives not only stock or
in a corporation, which is a party to the merger or securities, but also money and/or property:
consolidation; (Property for Stock) or
a. Gain: recognized [in excess= sum of
money +FMV of the property]
b. Loss: not recognized
(b) A shareholder exchanges stock in a 2. If the transferor corporation receives not only
corporation, which is a party to the merger or stock permitted to be received without the
consolidation, solely for the stock of another recognition of gain or loss but also money and/or
corporation also a party to the merger or other property:
consolidation; (stock for stock) or
(c) A security holder of a corporation, which is a a. No Gain: if the corporation receiving
party to the merger or consolidation, exchanges such money and/or other property
his securities in such corporation, solely for stock distributes it in pursuance of the plan of
or securities in such corporation, a party to the merger or consolidation
merger or consolidation (Security for Stock) b. Gain is recognized: does not distribute it
(d) transfer of property of a corporation by a in pursuance of the plan of merger or
person in exchange for stock or unit of consolidation [in excess= sum of money
participation in such a corporation of which as a +FMV of the property]
result of such exchange said person, alone or
together with others, not exceeding four (4)
persons, gains control of said corporation:
Provided, That stocks issued for services shall
not be considered as issued in return for
property.
*** no gain or loss is recognized in this case.
3. Situs of Taxation- It is the place or authority that has the right to impose and collect taxes
(Commissioner of lritemal Revenue v. Marubeni · Corp., G.R. No. 137377, December 18, 2001).
Subject of Taxation Situs of Taxation
Interests derived from sources within the PH
Philippines, and interests on bonds, notes or
other interest-bearing obligation of residents,
corporate or otherwise
Interest earned from deposits on banks located Outside PH
outside the Philippines, and interest on loans
where the debtor is not a resident of the
Philippines
Dividends from: Domestic/ Foreign Corporation PH
Dividends from: Outside PH
a. Foreign corporation less than 50% of the
gross income for the 3-year period ending
with the close of its taxable year
preceding the declaration of such
dividends or for such part of such period
as the corporation has been in existence
was derived from sources within the
Philippines
b. Non-resident Foreign Corporation
Services performed in the PH PH
Rentals and royalties from property located in PH
the Philippines
Sale of real/ personal property PH
located/performed in the PH
4. Difference between Gross Income vs. Net Income vs. Taxable Income
GROSS INCOME NET INCOME TAXABLE INCOME
ALL income/gain/profit subject Pertinent i
to income under s32(a) of NIRC
5. Tax Deductions vs. Tax Credits
6. Amount of Optional Standard Deduction
7. Creditable vs. Withholding Taxes
8. Duties of a Withholding Tax Agent
Withholding agents= any person required to deduct and withhold any tax under the provisions of Section
57.