43. General Rule.
- The taxable income shall be computed upon the basis of the taxpayer's
annual accounting period (fiscal year or calendar year, as the case may
be) in accordance with the method of accounting regularly employed in
the books of such taxpayer, but if no such method of accounting has
so employed, or if the method employed does not clearly reflect the
the computation shall be made in accordance with such method as in the
opinion of the Commissioner clearly reflects the income. If the
annual accounting period is other than a fiscal year, as defined in
22(Q), or if the taxpayer has no annual accounting period, or does not
keep books, or if the taxpayer is an individual, the taxable income
be computed on the basis of the calendar year.cralaw
44. Period in which Items of Gross Income Included.
- The amount of all items of gross income shall be included in the
income for the taxable year in which received by the taxpayer, unless,
under methods of accounting permitted under Section 43, any such
are to be properly accounted for as of a different period. In the case
of the death of a taxpayer, there shall be included in computing
income for the taxable period in which falls the date of his death,
accrued up to the date of his death if not otherwise properly
in respect of such period or a prior period.cralaw
45. Period for which Deductions and Credits Taken.
- The deductions provided for in this Title shall be taken for the
year in which "paid or accrued" or "paid or incurred",
upon the method of accounting the basis of which the net income is
unless in order to clearly reflect the income, the deductions should be
taken as of a different period. In the case of the death of a taxpayer,
there shall be allowed as deductions for the taxable period in which
the date of his death, amounts accrued up to the date of his death if
otherwise properly allowable in respect of such period or a prior
46. Change of Accounting Period.
If a taxpayer, other than an individual, changes his accounting period
from fiscal year to calendar year, from calendar year to fiscal year,
from one fiscal year to another, the net income shall, with the
of the Commissioner, be computed on the basis of such new accounting
subject to the provisions of Section 47.cralaw
47. Final or Adjustment Returns for a Period of Less than Twelve
(A) Returns for
Short Period Resulting from Change of Accounting Period.
- If a taxpayer, other than an individual, with the approval of
Commissioner, changes the basis of computing net income from fiscal
to calendar year, a separate final or adjustment return shall be made
the period between the close of the last fiscal year for which return
made and the following December 31. If the change is from calendar year
to fiscal year, a separate final or adjustment return shall be made for
the period between the close of the last calendar year for which return
was made and the date designated as the close of the fiscal year. If
change is from one fiscal year to another fiscal year, a separate final
or adjustment return shall be made for the period between the close of
the former fiscal year and the date designated as the close of the new
(B) Income Computed
on Basis of Short Period.
- Where a separate final or adjustment return is made under Subsection
(A) on account of a change in the accounting period, and in all other
where a separate final or adjustment return is required or permitted by
rules and regulations prescribed by the Secretary of Finance, upon
of the Commissioner, to be made for a fractional part of a year, then
income shall be computed on the basis of the period for which separate
final or adjustment return is made.cralaw
48. Accounting for Long-Term Contracts.
- Income from long-term contracts shall be reported for tax purposes in
the manner as provided in this Section. As used herein, the term
contracts' means building, installation or construction contracts
a period in excess of one (1) year. Persons whose gross income is
in whole or in part from such contracts shall report such income upon
basis of percentage of completion. The return should be accompanied by
a return certificate of architects or engineers showing the percentage
of completion during the taxable year of the entire work performed
contract. There should be deducted from such gross income all
made during the taxable year on account of the contract, account being
taken of the material and supplies on hand at the beginning and end of
the taxable period for use in connection with the work under the
but not yet so applied. If upon completion of a contract, it is found
the taxable net income arising thereunder has not been clearly
for any year or years, the Commissioner may permit or require an
49. Installment Basis.
(A) Sales of Dealers
in Personal Property.
- Under rules and regulations prescribed by the Secretary of Finance,
recommendation of the Commissioner, a person who regularly sells or
disposes of personal property on the installment plan may return as
therefrom in any taxable year that proportion of the installment
actually received in that year, which the gross profit realized or to
realized when payment is completed, bears to the total contract price.cralaw
(B) Sales of Realty
and Casual Sales of Personality.
- In the case (1) of a casual sale or other casual disposition of
property (other than property of a kind which would properly be
in the inventory of the taxpayer if on hand at the close of the taxable
year), for a price exceeding One thousand pesos (P1,000), or (2) of a
or other disposition of real property, if in either case the initial
do not exceed twenty-five percent (25%) of the selling price, the
may, under the rules and regulations prescribed by the Secretary of
upon recommendation of the Commissioner, be returned on the basis and
the manner above prescribed in this Section. As used in this Section,
term "initial payments" means the payments received in cash or
other than evidences of indebtedness of the purchaser during the
period in which the sale or other disposition is made.cralaw
(C) Sales of Real
Property Considered as Capital Asset by Individuals.
- An individual who sells or disposes of real property, considered as
asset, and is otherwise qualified to report the gain therefrom under
(B) may pay the capital gains tax in installments under rules and
to be promulgated by the Secretary of Finance, upon recommendation of
(D) Change from
Accrual to Installment Basis.
- If a taxpayer entitled to the benefits of Subsection (A) elects for
taxable year to report his taxable income on the installment basis,
in computing his income for the year of change or any subsequent year,
amounts actually received during any such year on account of sales or
dispositions of property made in any prior year shall not be excluded.
50. Allocation of Income and Deductions.
- In the case of two or more organizations, trades or businesses
or not incorporated and whether or not organized in the Philippines)
or controlled directly or indirectly by the same interests, the
is authorized to distribute, apportion or allocate gross income or
between or among such organization, trade or business, if he determined
that such distribution, apportionment or allocation is necessary in
to prevent evasion of taxes or clearly to reflect the income of any
organization, trade or business.