Final Tax Reviewer

Features of Final Income Taxation Interest Income or Yield
1. Final Tax
2. Tax withholding at source
3. Territorial imposition
4. Imposed on certain passive income and
persons not engaged in business in the
Philippines
NRA-NETB and NRFC

 No office or place of business in the
Philippines
 High risk of non-compliance
 BIR cannot impose upon them the obligation
to file a return due to territorial
consideration FCDUs and Joint Accounts on Forex Deposit
 In conclusion, the law subjects them to final  If the account is jointly in the name of a
income tax non-resident and a resident taxpayer, 50% of
the interest shall be exempt while the other
 General final tax rate: 25% 50% shall be subject to the 15% final tax.
 Reduced final tax rates on interest income
on foreign currency deposit and the
Passive Income Subject to Final Tax exemption of non-resident depositors are
intended to encourage the deposit of foreign
1. Interest or yield from bank deposits or currencies in our banks which will be used
deposit substitute in the financing of our international trades.
2. Domestic dividends, in general
3. Dividend Income from Real Estate Illustration 1
Investment Trust
A taxpayer earned the following interest income
4. Share in the net income of a business from various time deposits:
partnership, taxable associations, joint
ventures, joint accounts, or co-ownership – 6-month time deposit P 8,000
10%
2-year time deposit 12,000
5. Royalties, in general
5-year time deposit 40,000
6. Prizes exceeding P 10,000
Total interest income P 60,000
7. Winnings
8. Informer’s Tax Reward
9. Interest income on tax-free corporate
covenant bonds – 30% individuals
Required:
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a. Compute the final tax if the taxpayer is an Depositors Amount
individual
Resident individuals P 600,000
b. Compute the final tax if the taxpayer is a
Resident and dom. Corp. 800,000
corporation
NRA-NETB 200,000
c. How much is the income subject to RIT if
individual? if Corporation? NRC 100,000
Solution: a/b. (8,000+12,000)x20%= 4,000 c. Total acc. interest exp. P1,700,000
40,000
Required: Compute the total final income tax to

be withheld by Banco de Papa.
Illustration 2 20-20-25-25
Mr. Dexter, a resident taxpayer received a P
32,000 interest income from a bank. Determine
the final tax withheld at source. Illustration 4
Solution: Mr. Lari Gadot is an OFW. He deposits all his

savings in a savings account under the foreign
Net interest income 32,000 currency deposit unit (FCDU) of a domestic
bank. During the month, the savings deposit
Divide by: Gross up rate 80%
account earned $1,000 interest equivalent to
Gross interest income 40,000 P41,500.
Multiply by: Final tax rate 20%
Final tax withheld P 8,000 Compute for the final tax for each scenario.
 Scenario 1: Mr. Gadot deposited his savings
through the account of his resident wife, Ms.
 What if he also received $ 170 interest
Poca.
income with a $1=P50 forex rate? How
much was the total final tax withheld at
source?
Final Tax: P 41,500 x 15%= P 6,225
Solution: (170x50/85%x15%)+8,000= 9,500
 Scenario 2: Mr. Gadot deposited his savings
through a joint account with his resident
wife, Ms. Poca.
Illustration 3
Final Tax: P 41,500 x 50% = P 20,750 x 15% =
Banco de Papa incurs the following interest in
P 3,112.5
its savings and time deposit accounts from the
following depositors:  Scenario 3: Mr. Gadot deposited his savings
through his own account.
Interest income shall be exempt from final tax
Dividends Marites Company declared a total of P 2,000,000
dividends. P 800,00 is due to corporate
GR: Dividends are income subject to tax.
shareholders while P 1,200,000 is due to
XPN: individual shareholders.
1. Stock dividends The final tax to be withheld by Marites company

shall be:
 Distribution of own shares (distribution of
shares of other corporation is a taxable Answer:
property dividend
To individual shareholders only: P 1,200,000 x
2. Liquidating dividends 10% = P120,000
3. Dividends from cooperatives – exempt from

final tax
Illustration 2
4. Inter-corporate dividends from domestic
Bato Ding Company declared a total of P
corporations – exempt from final tax
1,000,000 dividends in March 2021. An analysis
5. Qualified foreign-sourced dividends – exempt of the recipient shareholders is as follows:
from regular tax
Shareholders Amount
Residents P 500,000
XPN to the XPN:
NRA-ETB 100,000
1. Subsequent cancellation and redemption of NRA-NETB 50,000
stock dividends
NRFC 100,000
2. If it leads to substantial alteration in
Total dividends P 750,000
ownership in the corporation
a. stock dividends are given in lieu of
cash dividends The total final tax to be withheld by Bato
Ding Company shall be:
b. declaration of optional stock or cash
dividend 10.20.25.25
Dividend Tax Rules Royalties
Illustration 1
Illustration
Ube-soft Inc. develops application programs for Winnings
establishments. These programs were
individually tailored to meet specific
requirements of the establishments and required
upgrades, troubleshooting, and adjustments. The
developer receives 1% of the sales of the
establishments as royalty.
Ube-soft also developed a utility program and
assigned it to an e-marketer which sells the
program through the internet. Ube-soft receives Illustrations for Prizes and Winnings
30% royalty on each copy sold.
Illustration 1
a. Which program is subject to final tax?
Apo Two-hud won P 10,000 first place in the
b. Assuming the e-marketer is located singing contest sponsored by Sud Company
abroad, which program is subject to during their company anniversary.
final tax?
Since the results of the singing contest is based
on effort rather than chance, the P 10,000
Prizes payment is subject to regular income tax.
Moreover, it didn’t exceed the P 10,000
Exempt prizes threshold.
1. Prizes received by a recipient without any
effort on his part to join a contest.
Illustration 2
Examples: Nobel Prize, Most Outstanding
Citizen, and similar awards Ash’s raffle ticket was selected as the second
winning ticket in the raffle draw of PIKA Mall
for P10,000 dubbed as “2nd prize”.
2. Prizes from sports competition that are Since raffle draw is not based on effort but on
sanctioned by their respective national sports chance, the P10,000 payment is a winning
organization which is subject to 20% final tax. The same shall
be withheld by PIKA Mall. Note that the P
Requisites:
10,000 threshold applies only to prizes, not on
1. Recipient was selected without any action on winnings.
his part
2. Recipient is not required to render substantial
Things to take note on Prizes, Winnings, &
future services as a condition to receiving the
Royalties
prize or reward
1. Whether passive or active, if earned from
sources abroad, subject to regular income
tax
2. There is no final tax imposed on corporate
prizes and winnings under the NIRC and
Taxable Prizes therefore should be subject to regular
income tax.
3. Tax rules on PCSO winnings shall be Net amount P 900,000
applied on a per ticket basis. to be released to tax informer
Tax Informer’s Reward

Exceptions to the General Final Tax on NRP-
 Any person instrumental in the discovery of
NETB
violations of the NIRC or discovery and
seizure of smuggled goods may be given a
cash reward.
 Tax informer’s reward is subject to 10%
final tax.
Amount of cash reward – whichever is lower of

the following per case
1. 10% of revenues, surcharges, or fess
recovered and or fine or penalty
imposed and collected or
2. P 1,000,000
Monthly Final Withholding Tax Return
The amount of cash reward is subject to 10%
(Manual)
final withholding tax which shall be withheld by
the government.  BIR Form 0619-F, Monthly Remittance
Return of Final Income Taxes Withheld
 Shall be filed in triplicate by every
Illustration
withholding agent or payor for the first two
Mr. Quickie provided information to the BIR months of the quarter
leading to the recovery of P 12,000,000 unpaid
 Shall be filed and paid on or before the 10th
taxes. The cash reward shall be computed as
day of the month following the month in
follows.
which withholding was made
 Place of filing shall be with:
10% cash reward (P12Mx10%) P 1,200,000
o The authorized agent bank of the
Cash reward limit P 1,000,000 revenue district having jurisdiction
o Revenue collection officer
 Authorized city or municipality treasurer

within the revenue district having
jurisdiction
Cash reward P 1,000,000
Monthly deadline for e-FPS filing
(whichever is lower)
Less: 10% Final with. tax 100,000
 In accordance with the schedule set forth in
RR No. 26-2002, the deadline for e-filing of
return is as follows:
Group A – 15 days following the end of the
month
Group B – 14 days following the end of the
month
Group C – 13 days following the end of the
month
Group D – 12 days following the end of the
month
Group E – 11 days following the end of the
month
Quarterly Filing of Final Withholding Tax

 BIR Form 1601-FQ, Quarterly Remittance
Return of Final Income Taxes Withheld
 Shall be filed and paid on or before the last
day of the month after each quarter
BIR FORM 2306, Certificate of Final Tax

Withheld at Source
 Proof of withholding of final tax
 A certificate accomplished and issued by a
payor to each recipient of income subjected
to final tax
 The column amount of payment should
indicate the total amount paid and the total
taxes withheld and remitted during the
period.
 To be issued to payee on or before January
31 of the year following the year in which
income payment was made. However, upon
request of payee, the payor must furnish
such statement to the payee simultaneously
with the income payment.
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Final Tax Reviewer

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Features of Final Income Taxation Interest Income or Yield

NRA-NETB and NRFC

Required: Compute the total final income tax to

Solution: Mr. Lari Gadot is an OFW. He deposits all his

1. Stock dividends The final tax to be withheld by Marites company

3. Dividends from cooperatives – exempt from

Dividend Tax Rules Royalties

Tax Informer’s Reward

Amount of cash reward – whichever is lower of

 Authorized city or municipality treasurer

Less: 10% Final with. tax 100,000

Quarterly Filing of Final Withholding Tax

BIR FORM 2306, Certificate of Final Tax

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