Professional Documents
Culture Documents
Graduated - Tax Base Is Net Income 8% - Tax Base Is Gross Income
Graduated - Tax Base Is Net Income 8% - Tax Base Is Gross Income
Note:
1. Provided: Minimum wage earners and their holiday pay shall be exempt
2. Self-employed individuals have the option to avail of an 8% tax on gross sales in excess of
250,000 and percentage tax under 116 (maam: the 8% kicks in after reducing the 250K)
3. For mixed earners:
a. Income from Compensation- Rates in 24-A-2-a
b. Income from business:
i. Not exceed the VAT Threshold- A-2-a OR 8% and percentage tax under 116
ii. If exceeds the VAT threshold- 24-A-2-a
RULES FOR INCOME TAX:
(Sec. 109[BB]) VAT THRESHOLD – 3M
P Compensational – Graduated
P SEP – if under VAT THRESHOLD + Opts for 8% (reduce the 250K THEN apply the 8%)
If EXCEEDS VAT – graduated
Mixed Income – Split into Comp and SEP apply rules above
o 250k doesn’t exist here because its assumed nandun na sa Graduated portion
o SEP portion here is always full 8%
Minimum wage earners Worker in the private sector paid the statutory
minimum wage or to an employee in the public
sector with compensation income on not more
than the statutory minimum wage
Non-resident engaged in trade or business A nonresident alien individual who shall come to
the Philippines and stay therein for an aggregate
period of more than one hundred eighty (180)
days during any calendar year shall be deemed a
'nonresident alien doing business in the
Philippines'
Non-resident citizen including OFWs An individual citizen of the Philippines who is
working and deriving income from abroad as an
overseas contract worker is taxable only on
income derived from sources within the
Philippines: Provided, That a seaman who is a
citizen of the Philippines and who receives
compensation for services rendered abroad as a
member of the complement of a vessel engaged
exclusively in international trade shall be treated
as an overseas contract worker
Mixed income earners Taxpayers earning both compensation income and
income from business or practice of profession
PASSIVE INCOME
Non-resident citizens taxed CITIZEN/RESIDENT ALIEN NON RESIDENT ALIEN NRA NOT
same as Citizen EXC: for ENGAGED IN TRADE ENGAGED IN
income outside PH (SAME 20% BASE AS 1ST TRADE (25% when
COLUMN WHEN NOT nothing provided)
[FCD/OBUs] STATED)
Interest from bank deposits; 20% 20% 25%
trust funds; royalties; prizes
exceeding 10,000; other
winnings
Books, other literary works 10% 10% 25%
and musical compositions
Royalties on 20% (Royalties in 25% (Sec. 28B2) 25%
cinematographic films and General)
similar works
Winnings amounting to Exempt Exempt Exempt
10,000 or less from PCSO
Winnings amounting to Graduated 24 (A) Graduated 24 (A) 25%
10,000 or less (Prizes
amounting to 10,000 or less)
Interest income received 15% Exempt Exempt
from depository bank under
the expanded foreign
currency deposit system
Interest income from long Exempt Exempt 25%
term deposit or investment
in the form of savings,
common, or individual trust Except: If preterminated Except: If
funds, deposit substitutes, before the 5th year tax preterminated before
investment management will be imposed based on the 5th year tax will be
accounts, and other the remaining maturity: imposed based on the
investemnets evidenced by remaining maturity:
certificates 4-5 years 5%
3-4 years 12% 4-5 years 5%
Less than 3 years 20% 3-4 years 12%
Less than 3 years 20%
Cash/property dividends 10% 20% 25%
received from domestic
corporation or from a joint
stock company, insurance,
MF, or shares in net income
after tax of a partnership,
association, joint account,
joint venture, consortium
Cash/property dividends Graduated
received from foreign
corporation IN PH
Cash/property dividends Exempt Exempt Exempt
received from foreign
corporation NOT IN PH
Alien individuals employed N/A 15% gross
by regional or area HQ and
Regional Operating HQs of AFTER JAN. 1 2018 =
MN companies (except GRADUATED SCALE
those registered in SEC after
January 1, 2018)
Alien individual employed N/A 15% gross
by offshore banking units
(except those registered in AFTER JAN. 1 2018 =
SEC after January 1, 2018) GRADUATED SCALE
Alien individual employed 15% gross
by Petroleum Contractor
and Subcontractor (except AFTER JAN. 1 2018 =
those registered in SEC after GRADUATED SCALE
January 1, 2018)
CAPITAL GAINS
From stocks not listed in stock 15% on net capital gains 15% on net capital gains 15% on net capital gains
exchange not listed in stock
exchange
From stocks listed in stock
exchange?
Capital gains from sale, 6% (Gross selling price 6% (Gross selling price 6% (Gross selling price
exchange, disposition of real OR FMV; whichever is OR FMV; whichever is OR FMV; whichever is
property in the ph higher) higher) higher)
EXEMPTION: sale of principal EXEMPTION: Sale of EXEMPTION: N/A (Di na EXEMPTION: N/A (Di na
residence principal residence, sila Resident if that were sila Resident if that were
Requirements: proceeds to be utilized the case) the case)
1. Historical cost adjusted w/in 18 months from
basis of old property be sale (needs proof)
carried over to new >ONLY USED ONCE
property EVERY 10 YEARS
2. Commissioner is duly
notified within 30 days
from date of sale IF NOT FULLY UTILIZED:
3. Once only ever 10 years >portion not utilized is
subject to CGT
FMV/Gross selling x
unutilized/Price it was
sold
(ex. 100k but 20k
unused: 100 x 20/100?)
25 C/D/E (Aliens employed by RHQ, ROHQ, OBU, Petroleum Contractors) = 15% preferential tax
same tax treatment shall apply to Filipinos employed and occupying the same position as those of
aliens employed by these multinational companies. (PH citizens taxed this way rin kahit under
NRA yung section na to)
F: Preferential tax won’t apply for such applying w/ SEC AFTER Jan. 1, 2018
o MAAM: Veto only took out the freeze provision (Jan. 1, 2018) BUT!! C/D/E still exists so
pointless
Walang Jurisprudence BUT they’re just using the “intent of the President” SO
GRADUATED RATE
CORPORATIONS
MCIT applies
Proprietary educational institutions and hospitals 10%
which are nonprofit (27b)
30% if more than 50% of gross income from
unrelated trade
GSIS, SSS, PHIC, local water districts Exempt
Educational
o 60% profit 40% tuition = 30% ENTIRE INCOME
o 40% profit 60% tuition = 10% ENTIRE INCOME
Resident
MCIT applies
Proprietary educational institutions and hospitals 10%
which are nonprofit (27b)
SPECIAL CORPORATIONS
2.5% on Gross Philippine Billings
OPTION: preferential tax rate based
on applicable tax treaty (1.5% daw
accdg. To maam)
‘Gross Philippine Billings’
refers to the amount of gross
revenue derived from carriage
International Carriers (Air or Sea) of persons, excess baggage,
1) Air Carrier cargo, and mail originating
2) Shipping from the Philippines in a
continuous and uninterrupted
flight, irrespective of the place
Maam: Important is 1) originating from PH 2) continuous and
of sale or issue and the place
uninterrupted flight
of payment of the ticket or
RR: Stopover is an acceptable break for transhipment
passage document
> Change in airline will break this chain
OR gross revenue whether for
passenger, cargo or mail
originating from the
Philippines up to final
destination, regardless of the
place of sale or payments of
the passage or freight
documents.
Non-Resident
IN GENERAL 30% FT
Gross income includes all of the income a person receives during a year that is not explicitly exempt
from taxation, whereas taxable income is the amount of income that is actually subject to taxation,
after all allowable deductions or exemptions have been subtracted from the gross income.
Sec. 27 E4 - 'gross income' shall mean gross sales less sales returns, discounts and allowances and cost
of goods sold. ‘Cost of goods sold' shall include all business expenses directly incurred to produce the
merchandise to bring them to their present location and use
MCIT – DOMESTIC/FOREIGN RESIDENT
2% on Gross income; 4th taxable year after corp. commences operations IF greater than 30% FT
on Taxable income (SO WHICHEVER IS GREATER)
o Ex. Start 2014 Start on 2018
Excess of MCIT over the normal income tax shall be carried forward and credited against normal
income tax for the 3 immediately succeeding years.
o Only applies if Regular Income Tax is greater than the MCIT carry over