Types of Income Subject to Tax

(a) Ordinary Income/Net Income- refer to “Ordinary Income” table

(b) Passive Income – refer to “Passive Income” and “Intercorporate Dividend” tables
(c) “Capital Gains”

General Rule:
ORDINARY INCOME

Corporate Taxpayer Source of Taxable Income Tax Base Tax Rates

Within and without the

1. Domestic Net Income 30%
Philippines

2. RFC Within the Philippines only Net Income 30%

Gross Income enumerated Final withholding tax of

3. NRFC Within the Philippines only
by law 30%

PASSIVE INCOME

Passive Income DOMESTIC and RFC NRFC

Interest on currency bank deposit 20% 30%

Yield or any other monetary benefit from:

(1) Deposit substitutes 20% 30%

(2) Trust funds, and similar arrangements 20% 30%

Royalties 20% 30%

Interest from a depositary bank under the expanded

7.5%(RFC) 15%(DC) Exempt
foreign currency deposit system

Incorporated Dividend
Payor Recipient Tax
1. Domestic Corporation Domestic corporation Not taxable

2. Domestic Corporation RFC Not taxable

3. Domestic Corporation NRFC 15% final WT

Capital Gains Tax on Capital Gains
1. Sale, exchange, or other disposition of domestic shares of stocks:
(a) Not traded at the stock exchange:
By Domestic Corporation:
Net capital gain

By Foreign Corporation:
Net gain not over P100,000
Amount if excess of P100,000
(b) Shares listed and traded at the stock exchange:
6/10 of 1% based in the gross selling price.
Notes:
(1) Final tax on capital gains on the sale of shares of stock applies to all corporate taxpayers.
(2) The exceptions for individual taxpayers also apply for corporate taxpayers.

2. Sale of Real Property Classified as Capital Asset

(a) Transaction subject – the sale, exchange, or other disposition of lands and buildings which are not
actually used in the business of the corporation and treated as “capital assets”.
(b) Tax rate and base –
(1) Seller is Domestic Corporation – Final tax of 6% based on the gross selling price or FMV, whichever
is higher. The FMV is the higher between the Commissioner’s value and the Assessor’s value.
(2) Seller is RFC – Gain on sale is returnable, and subject to normal tax rate (30%).
(3) Seller is NRFC – Final tax of 30% of the capital gain realized on the sale.
(c) Exemptions from the CGT –
(1) Sale of raw lands to be used for “socialized housing” projects, or sold under the Community Mortgage
Program under R.A. No. 7279 (Urban Development and housing Act of 1992).
(2) Land transfers under the Comprehensive Agrarian Reform Law of 1988.