Passive Income – Final Withholding tax

So, in this tutorial we're going to be talking about your final taxes so we're going to be defining what
final taxes are the general features of what we know taxes and then differentiate between and passive
income versus your active income.

We're going to enumerate the kinds of income subject to final taxes and then eventually give you the
deadline of filing and then the BIR forms needed in filing your final taxes. So, what exactly are final taxes
so these are taxes imposed on taxpayers’ income but compared to regular income taxes, these are
withheld by the payer more specifically the one paying for the goods and/or services. now the proceeds
received by the taxpayer is already net of the final tax. So according to the website of the BIR, final
withholding taxes a kind of withholding tax which is prescribed on certain income payments and is not
creditable against the income tax due of the pay on other income subject to regular rates of tax for the
taxable year moreover, the income tax withheld constitutes the full and final payment of the income tax
due from the payee on the particular income subject to final withholding tax. so based on that definition
it's already full payment so meaning the taxpayer isn’t really required anymore to file for that as regular
income and it's already the responsibility of the withholding agent to repeat that particular withholding
tax so who is a withholding agent is any person or entity who is in control of the payment subject to
withholding tax and therefore is required to deduct and remit taxes withheld to the government.
Conversely the payee is not required to file an income tax return for the particular income.

So, it's important also for us to distinguish between active income versus passive income.

Active income - these are income earned through rendering of services or delivery of goods conversely
Passive income - are those income earned with very minimal effort or no effort at all so we can say that
these are income even if we are sleeping, we're still earning, most of the passive income are subject to
final taxes.

these are the passive income subject to final taxes:

1. interest income on bank deposits

2. cash and property dividends
3. profit sharing or partnership (except GPP) now accept general professional partnerships
4. royalty income on books literary works and musical compositions
5. prizes or winnings exceeding ten thousand
6. rentals of real and personal properties
7. payment for cinematic films
8. informers reward

the deadline for filing for manual filers would be on the tenth day following month from the month of
withholding and then on the EF PS filers it would be not on the tenth day but it would be on the
fifteenth day so using the problem that we just saw a while ago so the data is February so the deadline
for filing will be on March 10.
BIR FORMS FOR MANUAL FILERS

0619-F – Monthly Remittance Form for Final Income Taxes Withheld

1601-FQ – Quarterly Remittance Return of Final Income Taxes Withheld

1602Q – Quarterly Remittance Return of Final income Taxes Withheld On interest paid on Deposits and
yield on Deposits Substitutes/trusts/etc.

1604-F – Annual Information Return of Income Payments Subjected to Final Withholding taxes.
CAPITAL GAINS
So, on this video we're going to be talking about capital gains tax so we're going to distinguish between
capital assets and then ordinary assets and then give you examples of what capital assets are subject to
capital gains tax and then give you a sample computation of capital gains tax then we will enumerate the
list of BIR forms needed in your capital gains tax and the deadline for filing your capital gains tax.

Capital gains tax - these are taxes imposed on gains from our dealings of capital assets. now as defined
by your BIR our capital gains tax is a tax imposed on the gains presumed to have been realized by the
seller from the sale, exchange, or other disposition of capital assets located in the Philippines including
pacto de retro sales and other forms of conditional sale.

ordinary assets - these are assets that are as the term suggests ordinarily, ordinarily used in the business
or ordinarily sold now what are these particular assets:

1. merchandise inventories
2. property plant and equipment

now conversely for your capital assets these are assets that are not used in the business operations or
those that are not sold in the ordinary course of business so what particular assets are subject to capital
gains tax. actually, we only have two:

1. real or immovable property such as your land and your building

2. shares of stock

now it's important to take note that these shares of stocks must be directly sold to the buyer now share
some stock that are traded in the local stock exchange such as your Philippine Stock Exchange are not
subject to capital gains tax, they are subject to stop transaction taxes so it's important also to take note
that capital gains tax is final tax now. I have a separate video talking about final taxes and you can find
that up here so our tax rate for real properties is 6% CGT Rate but for your shares of stock we have to
identify first who our tax payer is, for shares directly traded to the buyer for individuals we have 15% and
then for corporation for domestic corporation in particular it's the same with the individual, 15%. now for
foreign corporation you have there if the consideration is not over one hundred thousand that would be
5% and then if it would be over one hundred thousand and excess thereof shall be subject to 10%. so,
the deadline for filing your capital gains tax for real property dealings using your 1706 will be on or at least
within 30 days from the day of exchange sale or disposition of the real property and then for shares of
stock will be using the bir form 1707 and the deadline also for filing is within 30 days from the date of sale
disposition or barter exchange for those particular shares of stock.

BIR FORMS FOR MANUAL FILERS

BIR Form 1706 – Final Capital Gains Tax Return

For Onerous Transfer of Real Property Classified as Capital Assets -Taxable and exempt

BIR Form 1707A – Annual capital gains tax return

For Onerous Transfer of Shares of stocks not traded through the local stock exchange

BIR Form 1707 – Capital gains tax Return

For Onerous Transfer of Shares of stocks not traded through the local stock exchange