INSTRUCTION

1. Please ignore any mentioned reference to page numbers if they conflict with your hard copy
handouts.
2. Please edit your hard copy handouts data as follows before watching the videos:

(TAX 03 – FUNDAMENTALS OF INCOME TAX)

Note: Drill C-2, C3 and C4 revision videos is underway.

(TAX 04 – FINAL INCOME TAX)

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Note: The final tax on non-resident foreign corporation is now 25% not 30%. All concept structure
remains the same. NRA-NETB and NRFCs are subject to a final tax of 25% now. A bubble text
corrective note in the video is being edited.

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(TAX 05 – CAPITAL GAINS TAX)
Note: An short video on the expanded definition of “Tax-free exchange” is underway. All concept

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structure remains the same.

(TAX 06 – GROSS INCOME)

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Note: Conditional exemption of foreign-source dividends

Foreign sourced dividends received by domestic corporations are exempt upon receipt of the
corporation if:
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1.) It owns at least 20% of the share capital of the foreign corporation
2.) It held such investment in the foreign corporation for at least 2 years

Caveat: The domestic corporation must use or spend such dividends in the Philippines before the end
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of the following year. Any unutilized portion shall be considered as undeclared profit in the year of
receipt and shall be subjected to penalties such as surcharge and interest.

This rule applies only to domestic corporate recipient of foreign dividends. It does not apply to
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resident foreign corporations and individual taxpayers.

(TAX 06.1 – COMPENSATION INCOME)

Note: Errata in handouts or discussions

1.) The amount of exclusion for employee contribution for GSIS, SSS, PhilHealth is the mandatory
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or required contribution. There is an inadvertence in the illustration where the actual

contribution was excluded in the solution. The right procedure is to add back the actual
contribution then exclude the mandatory or required contribution.
2.) The exclusion for 13th month pay and other benefit is P90,000 NOT P92,000 as written in the
handouts. Please correct this typographical error.

(TAX 06.3 – DEALINGS IN PROPERTIES)

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(TAX 07 - ITEMIZED DEDUCTION)

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(TAX 07.1 - ITEMIZED DEDUCTION)

Illustration 5: AB Company –

(Please adjust the year setting to 2 years back as follows:)

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Illustrative 11: DL, Inc.

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Illustrative 12: Mr. Paco – (Please change year to 2020)

Illustrative 16: A certain taxpayer…

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Illustrative 17: The following…

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Illustrative 18, 19 and 20 videos are under processing.

Note on deductions:
 1.) Interest arbitrage is changed from 33% to 20% for corporations (domestic or resident foreign)
with the exception of domestic corporation which are subject to 20% corporate tax rate where
the arbitrage rate shall be 0%. Individual taxpayers are subject to 20% arbitrage limit.
Video discussion on the arbitrage is being updated to reflect 20% arbitrage.
2.) NOLCO incurred in year 2020 and 2021 shall be carried over to an exceptional 5-year carry-
over period. Before and after 2020 and 2021, NOLCO shall be carried over to the original 3-
year carry-over period.
3.) Donation of COVID19 supplies and equipment is a fully deductible contribution.
4.) A new special deduction incentive for 50% of training and apprenticeship expense is allowed
when taxpayer enters into an apprenticeship agreement to sponsor students of public schools

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for in-house training. CHED, TESDA or Dep-Ed certification is required. The claimable amount
of expense must not exceed 10% of direct labor wages.

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(TAX 08 – INDIVIDUAL INCOME TAX)

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Illustrative 5: Mr. X, a bachelor…

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(TAX 09 – CORPORATE INCOME TAX)

Note on corporate income tax: All concept structures as discussed in the pre-recorded videos
remained the same with the exception of the following:
1.) The general corporate income tax rate was changed from 30% to 25%. Note the same concept
arrangement except that the 30% rate in the video is now 25% starting July 1, 2020. (This rate
change is permanent in the meantime.)
- Domestic corporations: 25% of global taxable income
- Resident foreign corporation: 25% of Philippine taxable income
- Non-resident foreign corporation: 25% of Philippine gross income
2.) The corporate income tax rate for domestic corporation is 25% but it can be 20% of global
taxable income if they are MSME with not more than P5M taxable income:

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3.) The 15% gross income tax on corporations is already repealed. Corporations are now subject
to the 25% corporate income tax subject to MCIT. There is no more legal option between 15%
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gross income tax and 25% corporate income tax. (This rate change is permanent.)
4.) On exempt corporations: The Home Development Mutual Fund (HDMF) is now an exempt
corporation. The new list of exempt corporation includes: SSS, GSIS, PhilHealth, local water
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districts and HDMF.

5.) On special corporations
a. Proprietary educational institutions and non-profit hospitals have a reduced income tax
rate to 1% of taxable income from 10% but only effective between July 1, 2020 up to July
1, 2023 (3 years only).
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b. Offshore banking units (OBU) are no longer a special corporation. They will be treated as
regular corporations subject to 25% corporate tax on taxable income from within. Only
FCDUs and EFCDUs remained as special corporations subject to the 10% final tax. (This
rate change is permanent in the meantime.)
c. Regional Operating Headquarters (ROHQs) are no longer special corporation. They will be
subject to 25% corporate income tax (not 10% corporate income tax).
6.) The minimum corporate income tax (MCIT) was momentarily reduced to 1% from 2% between
July 1, 2020 to July 1, 2023.
 7.) The improperly accumulated earnings tax (IAET) was repealed. Domestic corporations can
now hoard profits without being subjected to the penalty tax. (This is permanent.)

If you want to go advance, you can view the videos in the meantime with the following changes in
mind. Except for those changes indicated above, follow the videos unless adjustment is needed as
follows:

Illustration 1: Change to 2016 and 2020. Follow lecture.

Illustration 3: 2020 in some handouts. Year has no effect. Follow lecture.

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Illustration 6 and 7 will be revised to follow the prorate treatment. Tax rates on transition year shall
be pro-rated based on number of months covered by new rates and the old rates divided by 12.

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Illustrative 10: Year has no bearing but insertion videos on the query question for Year 2020 and Year
2023 will be uploaded.

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Illustrative 13: OBU is no longer subject to final tax but to a regular tax. Discussion video will be
uploaded for OBU. The video discussion in the app is now relevant only to FCDU.

Illustrative 17: Change years to 2014 to 2019 if your handout shows 2018 to 2023. Follow videos.

Illustrative 19: Ignore discussion on the IAET. R

Reshooting of videos on the substantially affected topics is underway. Thank you for your
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understanding!

(TAX 10 – ESTATE TAX)

Illustrative 4: Mr. and Mrs. Boromeo (Adjust year by 2 years back)

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Illustrative 6: Identify whether… (Adjust year by 2 years back)

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Illustrative 8: Identify whether… (Adjust year by 3 years back)

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Illustrative 9: Identify whether… (Adjust year by 4 years back)

Illustrative 10: Identify whether… (Adjust year by 2 years back)

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(TAX 10 – DONOR’S TAX)

Illustrative 2: The following donations… (Adjust year by 2 years back)

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Illustrative 4: Mr. and Mrs. Rolando (Adjust year)

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Illustrative 6: A transferred shares to B… (Adjust year)
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Illustrative 9: ABC Corporation… (Adjust year)

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AFTER THE VIDEO UPLOADS, A SECOND HANDOUTS UPDATE FOR BUSINESS TAX AND PREFERENTIAL
TAX WILL BE GIVEN. I will conduct two tax wrap-ups to fix everything. One in the middle of the
semester and another one before the board exams to make sure everything is clear. Thank you guys
for your understanding! I love you all above my stress and depression. God bless you! You will make it
no matter what.