Individuals or corporations do build an income-generating building or real property for an obvious reason; to build wealth. Income from the said real property must be disclosed when filing and corresponding computed tax will be paid. Other people do not take taxes seriously unless they are involved in paying taxes.
Fundamentally, taxation principles and practices is derived from constitution; statutory enactments; administrative rules and regulations; judicial decisions; provincial, city, municipal and barangay ordinances; opinions of legal luminaries; and treaties or international agreements.
The enforced contributions from persons and property levied by the law-making body of the State is called taxes, which contains the following essential elements: It is an enforced contribution; it is generally payable in money; it is based on the “ability-to-pay principle”, it is imposed on persons, property or the exercise of a right or privilege; it is levied by the State within its jurisdiction; it is levied by the Legislative arm of the government; collection is undertaken by a special agency tasked under the Executive Branch of government; it is levied for public purpose or purposes; and it is paid at regular periods or intervals.
For what purpose are they collecting taxes? Well, the primary objective of taxation is to raise revenues to enable government discharge its appropriate functions so that persons may be able to live in a civilized society. Others are for sumptuary and compensatory purposes. The sumptuary purpose has reference to regulation or control and refers to all extra-revenue objectives of taxation. For example, imposition of protective tariff on imported goods. The compensatory objective is an extension of the second government’s objective in using its taxing powers. Government, in using this measure, may be the regulation of the level of income and not the production of treasury revenue.
There are different sources of revenues such as income tax; estate and donor’s tax; value-added tax; other percentages taxes; excise taxes; documentary stamp taxes; or such other taxes to be imposed and collected by the BIR.
Real Estate Taxation says that “income tax on the gain from the sale of real property is the ordinary income tax on individuals which may be classified into two: (a) classified as an ordinary asset located in the Philippines by a citizen, or by a resident alien or by a non-resident alien who is engaged in trade or business in the Philippines; or (b) classified as a capital asset or ordinary asset located abroad by a resident citizen. The tax rate ranges from 5% to 32% and the tax base is the net taxable income of the individual (gross income less allowable deductions and personal and additional exemptions). Transactions involving real property classified as ordinary assets are subject to the expanded withholding tax rates ranging from 1.5% to 5%, if made by persons habitually engaged in real estate business, or at 6%, if done by a person not habitually engaged in real estate business, based on the gross selling price or the fair market value, whichever is higher.”
Overall, taxation can mobilize capital to poured into capital deficient fields of business and strengthen anemic enterprises through loans or tax incentives. Ultimately, taxation is a tool of government to ensure the continued growth and economic life and progress of the country.
In building one’s assets or wealth, it includes paying of taxes.
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(The writers are both Investment Adviser and Advocate of Personal Finance. They are engaged in Stock Market Investing. Also, they are active Licensed Real Estate Practitioners. For financial planning and speaking engagements, you may contact them with CP # 0919-376-2922 or Tel. No. (074) 244-4026)
