INTRODUCTION
TO BUSINESS
TAXATION

BUSINESS TAXES
Are those imposed upon onerous transfers
(transfers with consideration) such as sale, barter,
exchange and importation.

ONEROUS TRANSFERS
1. In the ordinary course of trade or business
2. Not in the ordinary course of trade or business
 May result to imposition of income tax only. Business tax
is not applicable if the onerous transfer was made not in
the ordinary course of trade or business (except in case
of importation).
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APPLICABLE TAX
a. Business Tax • On the sale itself, regardless of the result of the
transaction
b. Income Tax • On income derived from the sale, barter or exchange

BUSINESS TAXES
VS
TRANSFER TAXES
Transfer Taxes
• Taxes on Gratuitous Transfer (transfer
without consideration; donation)
Types of Donation Effectivity Tax
a. Donation inter-vivos During the lifetime of the donor and the
done
Donor’s Tax
b. Donation Mortis
Causa
Upon death of the donor Estate Tax

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“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 non-stock, non-profit private
organization or government entity (Section 105 NIRC; Section 4,105-3,
RR 16-2005).
Exception: Sale of service by a nonresident foreign person

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“Isolated transactions” are generally not considered in the
ordinary course of trade or business, hence, not subject to business tax.
However, as provided under RR 16-2005, services rendered in the
Philippines by a non-resident foreign person shall be considered as
being rendered in the course of trade or business even if the
performance is not regular.

ILLUSTRATION #1 7
Statement 1: For a person to be subjected to any business tax, it is necessary that he is
regularly engaged in the conduct or pursuit of an economic activity.
Statement 2: A non-resident foreign person performing isolated transaction in the Philippines
shall be liable to VAT.
A B C D
Statement 1 True True False False
Statement 2 True False True False

ILLUSTRATION #2 8
Statement 1: Nonstock and nonprofit private organizations which sell exclusively to their
members in the regular conduct or pursuit of commercial or economic activity are exempt from
value-added tax.
Statement 2: Government entities engaged in commercial or economic activity are generally
exempt from value-added tax.
A B C D
Statement 1 True True False False
Statement 2 True False True False

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