Republic of the Philippines

City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

MODULE 2:

Income Tax – Individual Income Tax

Overview: The Philippines taxes its resident citizens on their worldwide income. Non-resident citizens and aliens,
whether or not resident in the Philippines, are taxed only on income from sources within the Philippines.

Rates of tax on income of aliens, resident or not, depend on the nature of their income (i.e. compensation income,
income subject to final tax, or other income).

Learning Objectives:

I. Categories Of Income Of Individual / Income Subject To Tax

II. Persons Subject To The Individual Income Tax / Classification Of Individual Taxpayers
III. Determination Of Taxable Income
IV. Exclusions From Gross Income
V. Deductions From Gross Income
VI. Items Not Deductible From Gross Income
VII. Tax Rates
VIII. Tax Filling / BIR Form / Deadline / Payments

General Rule:

Gross Income XXXXX

Less: Allowable Deductions
/ Optional Standard Deductions (OSD) (XXXXX)

Taxable Income (Tax Base) XXXXX

SOURCES OF GROSS INCOME

 Means all income derived from whatever source.

I. CATEGORIES OF INCOME OF INDIVIDUAL

Incomes of individuals are grouped as follows:

1. Compensation income- those arising from employer-employee relationship.

Compensation income includes Salaries, wages, honoraria, commissions, taxable bonuses and fringe benefits,
taxable allowances (such as transportation, representation, entertainment, and the like), non-monetary
compensation, director’s fees and the like, taxable pensions and retirement pay, amounts drawn as salaries by
partners of a partnership and other incomes of a similar nature unless specifically exempted by the Tax Code.

2. Business income and income from practice of profession,-these are incomes from business. such as
incomes from manufacturing and selling goods, incomes from buying and selling goods, incomes, fees from
the exercise of profession, gains from sale or exchange of assets other than inventories, commissions, rental
income, and other incomes not covered by compensation income.

3. Passive income- consist of interest from currency deposits, yields and other monetary benefits from
deposit substitutes, trust fund and similar arrangements, royalties, prizes, winnings, interest from foreign
currency deposits, share in a business partnership income, dividends in a domestic corporation, interest on
long term deposits.

4. Capital gains- include capital gains from sales of shares of stock and sales of real property

5. Other sources of income-this includes income such as informer’s rewards

II. CLASSIFICATION OF INDIVIDUAL TAXPAYERS

Classification Income within Income without
(Philippines) (Foreign Country)
Resident Citizen √ √
Non-Resident Citizen √
Resident Alien √
Non-Resident Alien ETB √
Non- Resident Alien NETB √

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

1. Citizens

Under the Philippine Constitution, citizens are:

a. Those who are citizens of the Philippines at the time of adoption of the constitution (on Feb. 2, 1987).
b. Those whose fathers or mothers are citizens of the Philippines.

c. Those born before January 17, 1973 of Filipino mothers who elect Philippine citizenship upon reaching the age
of majority.
d. Those who are naturalized in accordance law.

1.1. Resident Citizen

Resident citizen - is a citizen of the Philippines who has a permanent or perpetual home in the Philippines to
which he plans or intends to return whenever he is away or out of the country.

1.2. Nonresident Citizen

Nonresident citizen
a. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical
presence abroad with a definite intention to reside therein. (Sec 22(E)(1), NIRC)
b. A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an
immigrant or for employment on a permanent basis. (Sec 22, (E)(2), NIRC)
c. A citizen of the Philippines who works and derives income from abroad and whose employment thereat
requires him to be physically present abroad most of the time during the taxable year. (Sec 22 (E)(3), NIRC)

The phrase "most of the time" shall mean that the said citizen shall have stayed abroad for at least 183 days in
a taxable year. (Sec. (2)(c), Revenue Regulations No. 1-79)

d. A citizen who has been previously considered as nonresident citizen and who arrives in the Philippines at
any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a
nonresident citizen for the taxable year in which he arrives in the Philippines with respect to his income
derived from sources abroad until the date of his arrival in the Philippines. (Sec 22(E)(4), NIRC)

The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside
permanently abroad or to return to and reside in the Philippines as the case may be for purpose of this Section.
(Sec 22(E)(5), NIRC)

Overseas Contract Worker (OCW)/Overseas Filipino Workers (OFW)

 RR 1-2011, defines OCWs as Filipino citizens employed in foreign countries, commonly referred to as OFWs,
who are physically present in a foreign country as a consequence of their employment thereat.
 Their salaries and wages are paid by an employer abroad and are not borne by entities or persons in the
Philippines. Hence OFWs are classified as non-resident citizens for tax purposes.
 To be considered as an OCW or OFW, they must be duly registered as such with the Philippine Overseas
Employment Administration (POEA) with a valid Overseas Employment Certificate (OEC).
 Seafarers or seamen are Filipino citizens who receive compensation for services rendered abroad as a
member of the complement of a vessel engaged exclusively for international trade. To be considered as an
OCW or OFW, they must be duly registered as such with the Philippine Overseas Employment
Administration (POEA) with a valid Overseas Employment Certificate (OEC) with Seafarers Identification
Record Book (SIRB) or Seaman’s Book issued by the Maritime Industry Authority(MARINA).

2. Aliens

a. Resident alien - is an individual whose residence is within the Philippines and who is not a citizen thereof.
(Sec. 22 (F), NIRC)

An expatriate may be considered a resident alien if:

1. he or she is not a mere transient or sojourner***

2. he or she has no definite intention to leave, or
3. his or her purpose is of such a nature that an extended stay may be necessary for its accomplishment, and
to that end the alien makes his or her home temporarily in the Philippines.
4. An alien who has acquired residence in the Philippines retains his status as such until he abandons the same
and actually departs from the Philippines.

An intention to change his residence does not change his status as a resident alien to that of a nonresident
alien. Thus an alien who has acquired a residence in the Philippines is taxable as a resident for the remainder
of his stay in the Philippines. (Sec 6, Revenue Regulation 2-40)

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Notes:
***(Resident Alien - An alien actually present in the Philippines who is not a mere transient or sojourner is a resident of
the Philippines for purposes of income tax. Whether he is a transient (non-resident) or not is determined by his intentions
with regards to the length and nature of his stay. One who comes to the Philippines for a definite purpose, which is promptly
accomplished, is a transient (non-resident). But if his purpose is of such a nature that an extended stay may be necessary
for its accomplishment, and to that end the alien makes his home temporarily in the Philippines, he becomes resident, though it may be his
intention at all times to return to his home abroad when the purpose for which he became has been consummated or abandoned
(Sec. 5, Rev. Reg. No. 2))

***(Resident Alien – Means an individual whose residence is within the Philippines and who is not a citizen thereof. He is one who is
actually present in the Philippines and who is not a mere transient or sojourner. But residence does not mean mere physical presence. An
alien is considered a resident or a non-resident depending on his intention with regard to the length and nature of is stay.)

b. Nonresident Alien - is an individual who is not a citizen of the Philippines and whose residence is not
within the Philippines. (Sec. 22 (G), NIRC)

One who comes to the Philippines for a definite purpose which in its nature may be promptly accomplished is
a transient (non-resident).

 Nonresident alien-Engaged in trade or business- a nonresident alien who has stayed in the Philippines
for an aggregate period of more than 180 days during any calendar year.

Engaged in trade or business- includes the performance of personal services on regular basis and does not include
casual or incidental transactions.

Trade or business includes the performance of the functions of a public office. (Sec. 22 (S), NIRC)

 Nonresident alien-not engaged in trade or business- a nonresident alien who has stayed in the
Philippines for an aggregate period of not more than 180 days (180 days or less) during any calendar year.

The following table summarizes the situs of taxable income to individual taxpayers:
Taxpayer Length of Stay Tax Base
Resident Citizen Taxable income – World
Non-resident citizen A citizen staying abroad for at least 183 Taxable income –
days(365days/2) Philippines
Resident alien An alien staying in the Philippines for more than Taxable income –
one year Philippines
Non-resident alien engaged in An alien who stays in the Philippines for more Taxable income –
trade or than 180 days in any Philippines
business calendar year.
Non-resident alien not engaged in An alien who stays in the Philippines for an Gross income –
trade or aggregate period at least Philippines
business 180 days in any calendar year. (360 days /2)
Taxable estate – estate under judicial settlement. Taxable income – World
Taxable trust – trust irrevocably designated by the grantor.

III. Determination of Taxable Income

a. Citizen
(1) Resident citizen - on incomes derived from sources within and without the Philippines, as
follows:
a. On compensation income - on modified gross income basis i.e., gross compensation income less
deductions and/ or personal and additional exemptions;
b. On income from profession, business and/or trade - on net income basis i.e., gross income from
profession, business and/or trade less the itemized deductions or optional standard deduction
equivalent to 40% of gross sales or gross receipts and personal and additional exemptions; and
c. On passive income - on the gross amount thereof.

(2) Nonresident citizen - taxed similarly as a resident citizen on incomes from sources within the
Philippines.

b. Alien

(1) Resident alien - taxed similarly as a resident citizen on incomes received from sources within the
Philippines.

(2) Nonresident alien:

a. Engaged in trade or business in the Philippines - taxed similarly as a resident citizen on incomes
from sources within the Philippines.
b. Not engaged in trade or business in the Philippines - taxed on gross income from sources within
the Philippines.
c. Employed by regional or area headquarters and regional operating headquarters of multinational

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

corporations, offshore banking units, or service contractors or subcontractors engaged in

petroleum operations in the Philippines - taxed on gross income derived from such employment.

IV. Exclusions from Gross Income

The following are not included in the computation of the gross income of taxpayers:
a. Proceeds of life insurance policies but not the interest paid to the heirs or beneficiaries;
b. Amount received by the insured as return of premium;
c. Value of property acquired by gratuitous transfer but not the income from such property;
d. Compensation for injuries or sickness including damages received;
e. Income exempt under treaty;
f. Retirement benefits, pensions, gratuities, etc. under certain conditions;
g. Income derived by foreign governments, financing institutions owned, controlled or enjoying financing
from foreign governments, and international or regional financing institutions established by foreign
governments, from their investments in loans, stocks, bonds or other domestic securities or from
interest on their deposits in banks in the Philippines;
h. Income derived from any public utility or from the exercise of any essential government function
accruing to the Philippine government or to any political subdivision;
i. Prizes and awards made primarily in recognition of religious, charitable, scientific, educational,
artistic, literary, or civic achievement but only if the recipient was selected without any action on his
part to enter the contest or proceeding, and is not required to render substantial future services as a
condition to receiving the prize or award;
j. Prizes and awards granted to athletes in local and international sports competitions and tournaments
held in the Philippines or abroad and sanctioned by their respective national sports associations;
k. 13th month pay mandated by RA 6686 and Presidential Decree (PD) No. 851, as amended and other
benefits not covered by PD 851 and benefits such as productivity incentives and Christmas bonus
which should not exceed PhP90,000.00;
l. GSIS, SSS, Medicare and Pag-IBIG contributions, and union dues of individuals;
m. Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of
indebtedness, with a maturity of more than five (5) years; and
n. Gains realized by the investor upon redemption of the shares of stocks in a mutual fund company.

V. DEDUCTIONS FROM GROSS INCOME

A. CITIZEN

(1) Resident Citizen

a. Compensation Income
Only premium payments on health and/or hospitalization not exceeding PhP2,400 a year are
deductible from gross compensation income provided that the taxpayer availing of said deduction
has a family income of not more than PhP250,000 for the taxable year.

Aliens, whether residents or not, who are receiving only salary or compensation income are not
allowed any deduction against such income.

b. Business and/or Professional Income

The following payments incurred in connection with the taxpayer’s profession, trade or business are
deductible from gross income

1) Ordinary and necessary trade, business or professional expenses paid or incurred during the
taxable year (such as salaries, wages, grossed-up monetary value of fringe benefits granted to
employees, travel, rental, entertainment, amusement and recreation).

2) Interest
Interest paid or incurred within the taxable year on indebtedness in connection with
the taxpayer’s profession, trade or business which shall be reduced by 33% of the
grossed-up value of the interest income subjected to final tax.

3) Taxes
Taxes paid or incurred within the taxable year in connection with the taxpayer’s
profession, trade or business, except the income tax imposed under the Code, foreign
income tax paid by a taxpayer who did not signify in his/her return his/her desire to
have any refund or credit, estate and donor’s taxes, and taxes assessed against local
benefits of a kind tending to increase the value of the property assessed.

4) Losses
 Losses actually sustained by the taxpayer in connection with the taxpayer’s trade,
profession, or business which are charged off within the taxable year and not
compensated for by insurance or other forms of indemnity.

TAX101 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

 Losses from sale or exchanges of capital assets are deductible only to the extent of the
gains from such sales or exchanges.
 Losses from wash sales of stock or securities are allowed when the claim is made by a
dealer in stock or securities, and with respect to a transaction made in the ordinary
course of business of such dealer under certain conditions.
 Losses from wagering (Gambling) transactions are deductible to the extent of the
gains from such transactions.

5) Net Operating Loss Carry-over

 The amount of net operating loss sustained by an individual taxpayer engaged in
business or practice of profession who does not enjoy an income tax exemption under
the Tax Code or special laws at the time such loss was incurred is allowed to be
carried over as a deduction from gross income for three (3) consecutive taxable years
immediately following the year of the loss.
 In the case of businesses or enterprises engaged in mining operations other than oil
and gas wells which are not enjoying the benefit of incentives granted under EO 226,
as amended, the net operating loss incurred in the first ten (10) years of the operation
of their business may be carried over as deduction from taxable income for five (5)
years immediately following the year of the loss.

6) Bad Debts
 Bad debts actually ascertained to be worthless and charged off during the taxable
year.
 Bad debts arising from loss on securities held as capital assets which are ascertained
to be worthless and charged off within the taxable year by a taxpayer, except domestic
banks or trust companies the substantial part of whose business is the receipt of
deposits.

7) Depreciation
 A reasonable allowance for the exhaustion, wear and tear (including reasonable
allowance for obsolescence) of property used in trade or business computed using the
straight-line method, declining-balance method or sum-of-the-yearsdigit method.
 An allowance for depreciation of properties directly related to production of petroleum
initially placed in service in a taxable year using the straight-line or declining-balance
method of depreciation, at the option of the taxpayer. The useful life of properties
used in or related to the production of petroleum shall be ten (10) years or such
shorter life as may be permitted by the Commissioner, and five (5) years for those
properties not used directly in the production of petroleum.
 An allowance for depreciation in respect of all properties used in mining operations
which shall be computed at the normal rate of depreciation if the expected life is ten
(10) years or less, or depreciated over any number of years between five (5) years and
the expected life if the latter is more than ten (10) years, and the depreciation thereon
allowed as deduction from taxable income.

8) Depletion of Oil and Gas Wells and Mines

 A reasonable allowance for the extraction of mineral deposits of the oil and gas wells
or mines computed using the cost-depletion method which, however, should not
exceed the amount of capital invested therein.
After commencement of production in commercial quantities, the amount of
intangible exploration and development drilling costs incurred by a taxpayer in
petroleum and mining operations for non-producing wells and/or mines shall be
deductible in full in the year paid or incurred. On the other hand, the same costs
incurred for producing wells and/or mines in the same contract area are allowed to
be deducted in full in the year paid or incurred or capitalized and amortized, at the
option of the taxpayer.
 At the option of the taxpayer, the exploration and development expenditures
accumulated as cost or adjusted basis for cost depletion as of the date of prospecting,
as well as exploration and development expenditures paid or incurred during the
taxable year may be deducted in an amount not to exceed twenty-five percent (25%) of
the net income from mining operations computed without the benefit of any tax
incentives under existing laws. The actual exploration and development expenditures
minus twenty-five percent (25%) of the net income from mining is allowed to be
carried forward to the succeeding years until fully deducted.

9) Charitable and Other Contributions (Subject to certain Limitaions)

Charitable contributions actually paid or made within the taxable year to or for the
use of the government of the Philippines or any of its agencies or any political
subdivision thereof for exclusive public purposes, or to accredited domestic
corporations or associations organized and operated exclusively for religious,
charitable, scientific, youth and sports development, cultural or educational purposes
or for the rehabilitation of veterans or to social welfare institutions, or to

TAX101 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

nongovernment organizations, no part of the net income of which inures to the benefit
of any private stockholder or individual in an amount not in excess of ten percent
(10%) of the taxpayer’s taxable income as computed without the benefit of said
deduction.

However, donations made to the Government of the Philippines or to any of its

agencies or political subdivisions, including fully-owned government corporations,
exclusively to finance priority activities in education, health, youth and sports
development, human settlements, science and culture, and in economic development
according to a national priority plan shall be deductible in full. Also deductible in full
are donations made to certain private entities which qualify as donee-institutions as
provided for under the Tax Code

10) Research and Development

Amount of research and development expenditures paid or incurred during the
taxable year in connection with the taxpayer’s trade, business or profession which are
not chargeable to capital account. At the option of the taxpayer, the same
expenditures may be treated as a deferred expense if the expenditure is not ordinary
and necessary current expense and chargeable to capital account but not chargeable
to property of a character which is subject to depreciation or depletion.

11) Pension Trusts

Amount transferred or paid by an employer establishing or maintaining a pension
trust, but only if such amount has not been allowed as a deduction and is
apportioned in equal parts over a period of ten (10) consecutive years beginning with
the year in which the transfer or payment is made

12) Premium Payments on Health and/or Hospitalization Insurance

The amount of premiums not to exceed PhP2,400 or PhP200 a month paid during the
taxable year for health and/ or hospitalization insurance taken by the taxpayer for
himself/herself, including his/her family provided that the taxpayer availing of said
deduction has a family income of not more than PhP250,000 for the taxable year and
is the one claiming the additional exemptions for dependents.

13) Free Legal Services

A lawyer or professional partnership rendering actual free legal services, as defined by
the Supreme Court, shall be entitled to an allowable deduction from the gross income,
the amount that could have been collected for the actual free legal services rendered
or up to ten percent (10%) of the gross income derived from the actual performance of
the legal profession, whichever is lower: Provided, That the actual free legal services
herein contemplated shall be exclusive of the minimum sixty (60)-hour mandatory
legal aid services rendered to indigent litigants as required under the Rule on
Mandatory Legal Aid Services for Practicing Lawyers, under BAR Matter No. 2012,
issued by the Supreme Court.

14) Entertainment, amusement, and recreation expenses, not to exceed the following ceilings:

 0.50% of net sales for taxpayers engaged in sale of goods or properties.

 1% of net revenue for taxpayers engaged in sale of services, including professionals
and lessors of properties.

15) In lieu of these allowable deductions, an individual, other than a non-resident alien, may
elect an optional standard deduction (OSD) not exceeding 40% of gross business or
professional income.

Note: 3 Tax Deductible Expenses with Limitations in Philippines

https://taxacctgcenter.ph/3-tax-deductible-expenses-with-limitations-in-philippines/

c. Passive Income

No deductions are allowed.

(2) Non - Resident Citizen

Same deductions as allowed to resident citizens.

B. ALIEN

(1) Resident alien

Same deductions as allowed to resident citizens.

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

(2) Nonresident Alien

(a) Engaged in trade or business in the Philippines

Nonresident aliens engaged in trade or business in the Philippines are entitled to the same
deductions allowed to resident citizens and subject to the same conditions and limitations, except on
the following items of deductions:
 Taxes - the deductions for taxes shall be allowed only if and to the extent that they
are connected with income from sources within the Philippines.
 Losses - losses deductible shall be those actually sustained during the year incurred
in business, trade or exercise of a profession conducted within the Philippines and
not compensated for by insurance or other forms of indemnity.
 Depreciation - a reasonable allowance for the deterioration of property arising out of
its use or employment or its non-use in the business, trade or profession on
properties located in the Philippines.
 Depletion of oil and gas wells and mines - the allowance for depletion of oil and gas
wells or mines is authorized only with respect to oil and gas wells or mines located
within the Philippines.
(b) Not engaged in trade or business in the Philippines
- no deductions are allowed.

(c) Employed by regional or area headquarters and regional operating headquarters of multinational
corporations, offshore banking units, or service contractors or subcontractors engaged in
petroleum operations in the Philippines
- no deductions are allowed.

VI. ITEMS NOT DEDUCTIBLE FROM GROSS INCOME

The following items are not allowed to be deducted from the gross income of taxpayers:

a) Personal, living, or family expenses;

b) Amounts paid out for new buildings or for permanent improvements, or betterments made
which tend to increase the value of any property or estate;
c) Amounts spent for restoring property or in making good the exhaustion thereof for which an
allowance is or has been made;
d) Premiums paid on any life insurance policy covering the life of any officer or employee, or of
any person financially interested in any trade or business carried on by the taxpayer, where
the taxpayer is directly or indirectly a beneficiary under such policy; and
e) Losses from sales or exchanges of property under certain conditions.

VII. TAX RATES

SEC. 24(2) Rates of Tax on Taxable Income of Individuals.

The tax shall be computed in accordance with and at the rates established in the following schedule:

Effective January 1, 2018 until December 31, 2022:

Effective January 1, 2023 and onwards

TAX101 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Tax rates for income subject to final tax

For resident and non-resident aliens engaged in trade or business in the Philippines, the maximum rate on
income subject to final tax (usually passive investment income) is 20%. For non-resident aliens not engaged
in trade or business in the Philippines, the rate is a flat 25%.
Tax rates for business income
An individual, whether citizen or resident alien, who is self-employed or practices a profession, is also subject
to the graduated income tax rates above.

However, an individual who has gross sales/receipts and other non-operating income not exceeding the
value-added tax (VAT) threshold (which is currently pegged at PHP 3,000,000) may opt to be taxed either at:

 8% tax on gross sales/receipts and other non-operating income in excess of PHP 250,000 in lieu of
the graduated income tax rates and percentage tax (business tax), or

 The graduated tax rates.

Business income subjected to graduated tax rates shall also be subject to business tax (i.e. 12% VAT or 3%
percentage tax, as applicable).

VIII. TAX FILLING / BIR FORM / DEADLINE / PAYMENTS

The following persons are required to file income tax returns

1. Every Filipino citizen residing in the Philippines (except persons not required to file income tax returns and
those who are subject to substituted filing of income tax return
2. Every Filipino citizen residing outside the Philippines, on income from sources within the Philippines;
3. Every alien residing in the Philippines, on income derived from sources within the Philippines;
4. Every nonresident alien engaged in trade or business, or in the exercise of profession in the Philippines;
and
5. Estates and trusts engaged in trade or business.

Substituted Filing of Income Tax Returns

An individual taxpayer receiving purely compensation income from only one employer is no longer required to
file the Annual Income Tax Return (Form No. 1700) if the income tax has been correctly withheld by the
employer. The Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding
Taxes (BIR Form No. 1604-CF) filed by employers shall be equivalent to the substituted filing of income tax
returns by said employees. The following taxpayers, however, are not qualified to avail of the substituted filing.

a. Individuals deriving compensation from two or more employers concurrently or successively at

anytime during the taxable year.
b. Individuals deriving compensation income, regardless of the amount, whether from a single or
several employers during the calendar year, the income tax of which has not been withheld correctly
(i.e. tax due is not equal to the tax withheld) resulting to collectible or refundable return.
c. Minimum wage earners including employees of the government of the Philippines, or any political
subdivisions, agencies or instrumentalities, with Salary Grades 1 to 3 whose income were not
subjected to withholding tax.
d. Individuals deriving other non-business, non-profession related income in addition to compensation
not otherwise subject to a final tax.
e. Individuals receiving purely compensation income from a single employer, although the income tax
of which has been correctly withheld, but whose spouse falls under Section 2.83.4(A), (B), (C) and
(D) of RR 2-98, as amended. (6) Nonresident aliens engaged in trade or business in the Philippines
deriving purely compensation income, or compensation income and other non-business,
nonprofession-related income.

Electronic Filing and Payment System (EFPS) / EBIR

EFPS
Both large and non-large individual taxpayers filing BIR Form 1700 who are required to file an income tax
return have the option to avail of the EFPS in filing their annual income tax returns and paying the taxes due
thereon. All taxpayers who intend to e-file their income tax return and pay electronically their income tax
liability must register with the BIR - Integrated Tax System (ITS) and must have an e-mail account and
Internet access. Taxpayers who e-file their returns may pay their tax liabilities either electronically (e-pay) or
manually. Large taxpayers who opt to e-pay their tax due must do so through any Authorized Agent Bank
(AAB) accredited by the BIR which is e-payment capable. On the other hand, non-large taxpayers can pay

TAX101 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

through the internet banking facilities of any AAB, regardless of whether such AAB is within the territorial
jurisdiction or not of the RDO where the taxpayer is registered.

The mandate of BIR is to assess and to collect all national internal revenue taxes, fees, and charges.
Unfortunately, taxpayer service is not explicitly provided in our tax code. And that's probably the reason why
the Commissioner reiterated their primary nature as a collection agency and not customer care.

EBIR
The eBIR form was developed to provide taxpayers particularly the non-eFPS (electronic filers and payment
system) filers with accessible and convenient service through easy preparation of tax returns. The use of eBIR
forms will improve the BIR's tax return data capture and storage thereby enhancing efficiency and accuracy in
the filing of tax returns.

Per Revenue Regulation 06-2014, eBIR forms shall be available to all non-eFPS filers with or without Internet
access.

Basic forms used in filing an income tax return:

BIR Form No. 1700 - Annual Income Tax Return for Individuals Earning Purely Compensation Income
(Including Non-Business/Non-Profession Income)

Filing Date - This return is filed on or before April 15 of each year covering income for the preceding taxable
year

BIR Form No. 1701 - Annual Income Tax Return For Individuals (including MIXED Income Earner), Estates
and Trusts

Filing Date - This return is filed on or before April 15 of each year covering income for the preceding taxable
year.

BIR Form No. 1701A - Annual Income Tax Return for Individuals Earning Income PURELY from
Business/Profession (Those under the graduated income tax rates with OSD as mode of deduction OR those
who opted to avail of the 8% flat income tax rate)

The return shall be filed by individuals earning income PURELY from trade/business or from the practice of
profession, to wit:

1. A resident citizen (within and without the Philippines);

2. A resident alien, non-resident citizen or non-resident alien (within the Philippines).

a. The return shall only be used by said individuals as follows:

Those subject to graduated income tax rates and availed of the optional standard deduction as method
of deduction, regardless of the amount of sales/receipts and other non-operating income; OR

b. Those who availed of the 8% flat income tax rate whose sales/receipts and other non-operating income
do not exceed P3M

Filing Date - This return is filed on or before April 15 of each year covering income for the preceding taxable
year.

TAX101 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

BIR Form No. 1701Q - Quarterly Income Tax Return For Individuals, Estates and Trusts Description
Filing Date
1st qtr On or before May 15 of the current taxable year
2nd qtr On or before August 15 of the current taxable year
3 qtr
rd On or before November 15 of the current taxable year
Place of Filing

The return shall be filed with an Authorized Agent Bank, Revenue District Officer, Collection Agent, or duly
authorized Treasurer of the city or municipality in which such person has a legal residence or principal place
of business in the Philippines, or if there is no legal residence or place of business in the Philippines, with the
Office of the Commissioner.

Payment of Tax

The income tax is payable at the time the return is filed. When the income tax due exceeds PhP2,000, it may
be paid in two equal installments: the first, at the time the return is filed; and second, on or before the 15th
day of July following the close of the calendar year.

PENALTIES

In general, the non-filing of income tax returns and/or nonpayment of income tax shall result in the following
a. imposition of fine and/or imprisonment;
b. imposition of surcharge of -
1. 50% of the tax or deficiency tax, in case of willful neglect to file the return within the period
prescribed by the Code, or in case of false or fraudulent return willfully made, to be added to
the tax or deficiency61 tax; and

2. 25% of the amount due, to be imposed in any of the following cases: (a) failure to file the
income tax return and pay the tax due thereon on the date prescribed by law; or (b) filing a
return with an internal revenue officer other than those with whom the return is required to
be filed; or (c) failure to pay the deficiency tax within the time prescribed for its payment; or
(d) failure to pay full or part of the amount of tax shown in the return required to be filed, or
full amount of tax due for which no return is required to be filed, on or before the date
prescribed for its payment.
c. Imposition of interest on any unpaid amount of tax at 12% annually or such higher rate of interest as
may be required.
1. In case of a tax shown in the return as due but unpaid, the interest shall be 12% a
year from due date until paid.
2. If the period for filing return is extended, there is also a 20% a year interest to be paid
from due date up to the date of payment.

d. Compromised Penalty (http://www.picpa.org.ph/attachment/7222019145551613.pdf)

e. Deportation of the taxpayer

TAX101 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY

TAX101 NOT FOR SALE. EXCLUSIVE FOR
GORDON COLLEGE ONLY