1 Non-resident alien not engaged in business in the PH

Salary and allowances 100,000

Dividend income 90,000
Total 190,000
190,000 x .25 47,500
Royalty Income
(50,000 x .25) 12,500
Income tax due 60,000

2 AND 3 Resident alien Within PH Tax due

Salary and allowances 300,000
Business Income 200,000
Taxable net income 500,000
(500,000-400,000) * 25% + 30,000 55,000
Dividend Income 90,000 9,000
Royalty Income 50,000 10,000
Interest income - bank 30,000 6,000
Total final tax 25,000
Basic Income tax due 55,000

4 Non-resident citizen Within the PH Tax due

Interest income from depository 70,000 Exempt
Dividend Income 90,000 9,000
Royalty Income 50,000 10,000
Interest Income-bank deposits 30,000 6,000
Total final income tax due 25,000

5 Within the PH Tax due

Interest Income from depository bank 70,000 exempt
under expanded foreign current deposit system
Dividend Income 90,000 18,000
Royalty income-other 50,000 10,000
Interest income - bank deposits 30,000 6,000
Prizes/Winnings 9,000 0 (exempt)
Total final income tax due 34,000

6 A is a minimum age earner, he is exempted from tax

Basic income tax due of A 0

7 His proceeds of 1.8M is fully utilized which occurred within 18 months then he is exempted from the payment of
Capital gain tax 0

8 Since Z is a minimum wage earner, therefore,

he is not subject to basic income tax. However, his 13th month
pay exceeds 90,000. Therefore,
Taxable net Income of Z is 10,000
mpted from the payment of capital gain tax
1 Income tax credits are directly deducted from the income tax due to arrive at Income tax payable.
Individual taxpayers who are required to file income tax return can claim as tax credits against their basic income ta
The following are the tax credits available to all classes of taxpayers under the Tax Code are:
·       Withholding taxes on wages
·       Withholding tax at source.
·       Prior Quarter Payments
·       Income tax paid in original return
·       Excess tax credit
·       Income tax paid abroad

Example: A resident taxpayer provided the following information for

2020
Compensation Income 1,000,000
Gross business income, Philippines 2,000,000
Gross business income, Japan 3,000,000
Business expenses, Philippines 1,400,000
Business expenses, Japan 2,050,000
Income tax withheld by the individual taxpayer’s
190,000
employer on his compensation income
Income tax withheld by certain payors on business
119,000
income in the Philippines
Income tax payments to the BIR for the first three
quarters of the year 120,000

Compensation Income 1,000,000

Gross business income, Philippines 2,000,000
Gross business income, Japan 3,000,000
Business expenses, Philippines -1,400,000
Business expenses, Japan -2,050,000
Taxable Income 2,550,000

Tax due
Tax on 1st P2,000,000 490,000
176,000
On excess over 2M (550,000 x 32%)
666,000

Less: Creditable Withholding Tax

Tax withheld by the employer 190,000
Taxes by certain payors 119,000
120,000
Income tax paid
(429,000)

Income tax payable

P291,000

2 The two types of Withholding Taxes are Final Withholding tax and Creditable Withholding tax.
 Final withholding tax or Non Creditable withholding tax refers to income tax withheld on specific or certain income
Creditable Withholding taxes are advanced taxes that must be deducted against regular tax due in computing the t

Example of Final Withholding Tax: A resident citizen employee

provided the following information for 2020

Compensation Income 1,000,000

Deduction made by the employer
SSS Premiums Contribution 6,000
Philhealth Contributions 8,400
Pag-ibig Contributions 2,400

Union dues 1,200

Income tax withheld 35,000

How much is the income tax payable?

Compensation Income 1,000,000

Less: Income exempt
SSS Premiums Contribution -6,000
Philhealth Contributions -8,400
Pag-ibig Contributions -2,400
Union dues -1,200
Taxable Income 432,000

Tax due

Tax on 1st P400,000 30,000

On excess over (32,000 x 25%) 8,000

Total Tax Due 38,000
Less: Tax withheld by the employer -35,000
Income tax payable 3,000

3 No, income tax computed using the graduated tax rate table is not similar to the computed income tax on th
because graduated income tax follows a set of tax rates which increases as taxable income rises.
However, withholding tax table applies to income earned through wages, pensions, bonuses, commissions and gam
Gross Profit from Sales of Goods Phil. 850,000

Gross Profit from Sales of Goods USA 650,000

Business Expenses Phil. -400,000
Business Expenses USA -300,000
Interest income from Bank Deposits USA 5,000
Interest Income from Trade Receivables USA 20,000
Dividend from Foreign Corp. USA 10,000
Dividend from Foreign Corp. Phil 5,000
Prizes USA 25,000
Taxable Income 865,000

Income tax due: 149,500

Less: Excess tax credit -15,600
Income tax payable 133,900

Passive Income
Interest income from Bank Deposits Phil. (7,500 x
1,500
20%)
Prizes Phil (65,000 x20%) 13,000
Interest Income from Trade Receivables Phil
3,000
(15,000 x 20%)
Total Final tax on passive income 17,500

Total Income Tax Payable (133,900+17,500) 151,400

ue to arrive at Income tax payable.
m as tax credits against their basic income tax due.
der the Tax Code are:

nd Creditable Withholding tax.

me tax withheld on specific or certain income type subject to final taxes and not creditable against the income tax due of the payee on othe
d against regular tax due in computing the tax still due to the government.

Example of Creditable Withholding Tax: A resident taxpayer

provided the following information for 2020

Compensation Income 1,000,000

Gross business income, Philippines 2,000,000
Gross business income, Japan 3,000,000
Business expenses, Philippines 1,400,000
Business expenses, Japan 2,050,000
Income tax withheld by the individual
taxpayer’s employer on his 190,000
compensation income
Income tax withheld by certain payors
119,000
on business income in the Philippines
Income tax payments to the BIR for the
first three quarters of the year 120,000

Compensation Income 1,000,000

Gross business income, Philippines 2,000,000
Gross business income, Japan 3,000,000
Business expenses, Philippines -1,400,000
Business expenses, Japan -2,050,000
Taxable Income 2,550,000

Tax due
Tax on 1st P2,000,000 490,000
176,000
On excess over 2M (550,000 x 32%)
666,000

Less: Creditable Withholding Tax

Tax withheld by the employer 190,000
Taxes by certain payors 119,000
120,000
Income tax paid
(429,000)

Income tax payable

P291,000

not similar to the computed income tax on the withholding tax table on wages
s as taxable income rises.
es, pensions, bonuses, commissions and gambling winning.
Quarterly Income Tax Due( not
Q1 Q2 Q3 Q4
cumulative)
Business Income GP 450,000 565,000 630,000 892,000
Business Expenses -203,000 -275,000 -310,000 -280,000

Compensation Income 165,000 142,000 168,000 207,000

Dividend from RFC 5,800

Taxable Income 412,000 437,800 488,000 819,000

Basic Income Tax Due 33,000 39,450 52,000 135,700

Less: Excess Credit -12,000
Withholding taxes in Sales -2,500 -2,600 -1,800 -2,300
Withholding taxes on Wages -19,000 -16,000 -13,000 -27,000
Income Tax Payable 0 20,850 37,200 106,400
x due of the payee on other income subject to regular rates of the tax for taxable year.
1
Sales 1,485,000, Net of CWT 1,000,000, gross
Gross profit from sales of goods 850,000 650,000
Business expenses 400,000 300,000
Interest income from trade receivabl 15,000 20,000
Interest income from bank deposits- 7,500 5,000
Prizes in the 4th Q 65,000 25,000
Dividend from Foreign C. in the 4th 5,000 10,000
Foreign tax payments 0 45,000
Excess tax credit in prior year 15,600 0

Income tax credits - Individual

Taxable Net Income:
Philippines 470,000
USA 410,000
Total Taxable Net Income 880,000

Under the graduated tax rate table:

Income tax due 154,000
Tax Credit limit
Limit A: 410,000/880,000*154,000 71750
Actual credits 45,000

Income tax due 154,000

Less: Tax credits
Quarterly payments - PH 0
Creditable withholding tax 15,000
(1,485,000 /.99) - 1,485,000
Foreign Tax credits 45,000
Prior excess of tax credits 15,600
Income tax due payable 78,400

2 Q1 Q2 Q3
Business income - gross profit 450,000 565,000 630,000
Business expenses 203,000 275,000 310,000
Compensation income - NET 165,000 142,000 168,000
Divided Income from RFC 5,800
Dividend from DC 6,100
Interest income banks 2,500
Rental income, net
Excess tax credit 12,000
WHT on sales 2,500 2,600 1,800
WHT on wages 19,000 16,000 13,000
Business income - gross profit 450,000 565,000 630,000
Business expenses 203,000 275,000 310,000
Compensation income - gross
Divided Income from RFC 5,800
Rental income, net
Previous quarter taxable income 0 247,000 542,800
Taxable net income 247,000 542,800 862,800
Income tax due 0 (exempt) 65,700 148,840
Less: Tax credits
Withholding tax on wages 0 0 0
WHT on sales 2,500 5,100 6,900
Excess tax credit 12,000 12,000 12,000
Quartely payments 0 0 48,600
Income tax still due (14,500) 48,600 81,340
Q4
892,000
280,000
207,000

34,200

2,300
27,000
 892,000
280,000
757,000

36,000
862,800
2,267,800
575,696

75,000
11,000
12,000
129,940
347,756
1 Expanded withholding tax = Income payments x tax rate
Expanded withholding tax = 80,000 x 1%
Expanded withholding tax = 800

2 Household personal benefit 16,154

Rental payments for the apartment 26,923
Fringe benefit Tax 43,077

3 Q1 Q2 Q3
Gross income per quarter 600,000 740,000 980,000
Compensation Income
(Deductions ) 280,000 430,000 610,000
Taxable Net Income 320,000 310,000 370,000

Income Tax Due 14,000 12,000 24,000

Less: Income Tax Credits 2000 17,000 5,000
Income Tax Payable 12,000 -5,000 19,000
 Q4
1,450,000
800,000
850,000
1,400,000

310,000
50,000
260,000