FILING OF

INCOME TAX-
INDIVIDUAL
TAX PAYER
 The following 1. Resident Filipino citizen on his
individual tax payers
are required to file income from all sources:
income tax return
that should be filed in
triplicate: a. Individuals deriving
compensation income from
2 or more employers, concurrently
or successively
at anytime during the taxable year.
 The following 1. Resident Filipino citizen on his
individual tax payers
are required to file
income from all sources:
income tax return b. Employees deriving compensation
that should be filed in regardless of the amount, whether
triplicate: from a single or several employers
during the calendar year, the income
of which has not been withheld
correctly resulting to collectible or
refundable.
Tax due is not equal to the tax
withheld
 The following 1. Resident Filipino citizen on his
individual tax payers
are required to file income from all sources:
income tax return c. Employees whose monthly
that should be filed in
triplicate: gross compensation income
does not exceed statutory
minimum wage and opted for
non-withholding of tax on
said income.
 The following 1. Resident Filipino citizen on his
individual tax payers
are required to file income from all sources:
income tax return d. Individuals deriving other
that should be filed in
triplicate: non-business, non-
professional related income in
addition to compensation
income not otherwise subject
to final tax.
 The following 1. Resident Filipino citizen on his
individual tax payers
are required to file income from all sources:
income tax return e. Individuals receiving purely
that should be filed in
triplicate: compensation income not
otherwise subject to a final tax.
However, in lieu of BIR 1700,
Substituted Filing of ITR is applied.
 The following 1. Resident Filipino citizen on his
individual tax payers
are required to file income from all sources:
income tax return f. Individuals receiving purely
that should be filed in
triplicate: compensation income from a single
employer, although the income of
which has been correctly withheld,
but whose spouse is not entitled to
substituted filing.
 The following 2. Non-resident Filipino Citizen on his
individual tax payers
are required to file income derived within the Philippines.
income tax return 3. Resident alien on his income derived
that should be filed in
triplicate: within the Philippines.
4. Every non-resident alien engaged in
trade or business or profession in the
Philippines.
 Exempt 1. An individual
individual to file whose gross income does not exceed
Income Tax P250,000 under the new Tax Train Law.
Returns
 Exempt 2. An individual with respect to pure
individual to file compensation income, [35] as defined in
Income Tax Section 32 (A)(1),
Returns derived from sources within the
Philippines, the income tax on which has
been correctly withheld under the
provisions of Section 79 of this Code:
 Exempt 3. An individual whose sole income
individual to file has been subjected to final withholding
Income Tax tax pursuant to Section 57(A) of this
Returns Code;
 Exempt
individual to file 4. A minimum wage earner
Income Tax as defined in section 22 (HH) of this Code
Returns or an individual who is exempt from
income tax pursuant to the provisions of
this Code and other laws, general or
special.
 What shall be • Statement of Net Worth and Operations
attached to the
ITR? This statement is to be attached with the
income tax return of individuals taxpayers
if the gross sales, receipts, or output
from business do not exceed P50,000 in
any quarter.
 What shall be • Balance Sheet and Profit and Loss
attached to the Statements
ITR?
These statements are to be attached with
the income tax return of individual
taxpayers
if the gross sales, earnings, receipts, or
output from business in any one quarter
exceed P50,000 but do not exceed
P150,000.
 What shall be Other statements

attached to the The following statements are to be attached

with the income tax returns
ITR? if the gross sales, earnings, receipts or
output from business in any quarter exceeds
P150,000.
a. Balance Sheet and Profit and Loss
Statement certified by independent CPA
b. Comparative Profit and Loss Statements
for the current and preceding taxable
year
c. Schedule of income producing properties
and corresponding income therefrom.
 Annual 1. For Annual
On or before (April 15) May 15 of the
declaration following year for the taxable income of the
and Quarterly previous year.
2. For Quarter
Payments of Quarters Specific Dates
Income Taxes First May 15 of the current taxable year
Quarter
Second September 15 of the current
Quarter taxable year
Third December 15 of the current
Quarter taxable year
Fourth May 15 of the following calendar
Quarter year when final adjusted income
tax return is due for filing.
 TAX • Compensation
• Gross Income derived from the conduct
INCLUSIONS of business
• Gains derived from dealings
• Interest
• Rents
• Royalties
• Dividends
• Annuities
• Prize and winnings
• Pensions
• Partner’s distributive share in the profit
 1. Gain from dealing in property
What are These refers to the income derived
inclusions other from the sale and or exchange of assets,
than which results in gain because of the
compensation, excess of the amount or value received
business and by the taxpayer over the determined
professional fees? value of the property ha has disposed of.

GENERAL RULE
Gain or Loss arising from disposal of
asset is a taxable gain or deductible
loss.
 Ordinary Asset Illustrative Case
1. Stock in trade intended for sale Cacho Enterprises is engaged in book printing
a. Merchandise services. Its assets are presented as follows:
b. Securities held or being sold by dealers Raw materials P 500,000
in securities Book inventories of clients
stocked in the warehouse 3,000,000
2. Real properties acquired by real estate Office Equipment & Printing
dealers or developers supplies 5,000,000
Warehouse used for printing 1,000,000
3. Properties used in business subject to Land where the warehouse is
depreciation provided in Sec 34 constructed 400,000
Properties held for investments 2,000,000
4. Real properties used in trade or business Investments in equity shares 100,000
including real property held for rent.
How much is the amount of the ordinary shares?
500,000+5,000,000+1,000,000+400,000=6,900,000
Seatwork 1
The following real Real property inventories P 10,000,000
estate assets are Land and building 3,000,000
taken from the Vacation house of the executives 1,500,000
records of Buenas Acquired underdeveloped
Realty Corporation, properties 500,000
a real estate dealer Abandoned properties 600,000
& developer.
The amount of ordinary assets would be?
 Classify the following as ordinary or capital assets:

1. Stock and securities held by taxpayers as

investment CA
2. Stock and securities held by dealers in securities OA
GAINS DERIVED
3. Interest in partnership and joint venture. NA
FROM
4. Goodwill CA
DEALINGS IN
5. Real property not used in trade or business. CA
PROPERTY 6. House and lot CA
7. Real property held for sale in the ordinary course
of trade or business by a real estate company. OA
8. Real property used as a warehouse. OA
9. Real property held as investment by a real estate
company. CA
10. Parking space for lease. OA
 2. Rent Income
What are
-earnings derived from leasing real
inclusions other
estate as well as personal asset.
than
compensation, -includes obligations assumed to
business and be paid by the lessee to the third party in
professional fees? behalf of the lessor.
-other expenses considered as
income to the lessor are: interest, taxes,
loans, insurance premiums and others.
 Bendong leases a portion of its
Illustrative Case commercial space to Terry Yaki with the
agreement that Terry Yaki should be
responsible for the following:
• Advance rental of P100,000
• Monthly rental of P25,000
• Annual insurance premium of P5,000
• Annual interest expense of P3,000
• Real estate tax, P2,000
 3. Passive Income
What are a. Passive income generated outside
inclusions other the Philippines.
than b. Passive income not subject to final
compensation, tax.
business and
professional fees? -Example:
• Yield from deposit substitutes and trust
funds
• Interest Income
• Royalty Income
• Dividend Income
• Prize and winnings
 4. Interest Income
What are
is an earning derived from
inclusions other
depositing or lending of money, goods or
than
credits.
compensation,
business and GENERAL RULE
professional fees? Unless exempted by law, interest
income received by the taxpayer,
weather or not usurious, is subject to
income tax.
 Classification of Interest Income
1. Exempt from income tax
Interest income from long-term deposit or
investment (Ex: savings, common or individual
trust funds, deposit substitutes, investment
management accounts and other investment)
shall be exempt from income tax, provided the
following conditions are met:
a. evidenced by BSP Certificate
b. maturity period of not less than 5 year
c. must be in denominations of P10,000
2. Subject to Final withholding tax
a. Bank deposits subject to 20%
3. Subject to Normal or Basic Tax
a. Earned in normal conduct of business
b. Earned as an incident of installment of any
business transactions
Illustrative Case
The following are the income of a resident
citizen for the period:
Interest income from an investment
in a 10-year bond P 40,000
Interest income from a 5-year
time deposit in PNB 50,000
Interest income from expanded
foreign currency deposit 60,000
His taxable interest income is? 0
Baguio Lending Corporation lends P1,000,000
during the taxable year. The average interest
per year is 18%.
How much is the taxable income?
P1,000,000 x 18% = P180,000
 Interest Income-Lending business P 500,000
Seatwork 2 Interest Income-Expanded Foreign
In 200A. Myu Tah Currency Deposit-BDO 200,000
reported the Interest Income-Time Deposit
following interest -BPI 100,000
income: Interest Income from 5-year bonds 50,000

500,000 – 200,000(OSD) = 300,000 1. If Myu Tah is a resident citizen, how much

300,000 – 50,000 = 250,000 50,000
Interest from TD (100,000 x 20%) 20,000 is the total taxes paid (applies OSD)?
Interest from EFCD (200,000 x7.5) 15,000 P85,000
Total Taxes paid 85,000 2. If My Tah is a non-resident alien not
engage in business, how much is his taxable
income? P850,000
 5. Royalty Income
What are
inclusions other is a payment of portion of proceed
than paid to the owner of a right, such as an oil
compensation, right or patent for the use of it (20%) or a
business and portion of the proceeds from the work of
professional fees? an author or composer(10%).

Included in the Gross Receipts are

Royalty income from outside the
Philippines
 Mrs. Gremlin received the following
Illustrative Case royalties:
On sale of Goods Hamburger P200,000
On sale of books authored by
Mrs. Gremlin 300,000
Total P500,000

How much is the tax due on royalties?

 6. Bad Debts Recovery
What are
7. Taxable Damages
inclusions other
than 8. Interest from Insurance Proceeds,
compensation, Pension and Retirement
business and 9. Distributable share from General
professional fees? Professional Partnership
1. Amount received by the insured as a return of capital
2. Bad debts
3. Bad Debts Recovery
4. Charitable institution
5. Compensation for injuries
6. Dealings with Properties
7. Depreciation
8. Gifts, bequest and devices
9. Interest from Insurance Proceeds, Pension and Retirement
10.Interest Income
11.Losses
12.Pension trusts
13.Transportation
14.Proceeds of life insurance
15.Rent Income
 6. Dividend Income
What are
TAX EXEMPT:
inclusions other
than • Received from a domestic corporation
compensation, by another domestic corporation or
business and resident foreign corporation.
professional fees? • Received from cooperative
• Pure stock dividend
• Pure liquidating dividend (return of
capital)
6. Dividend Income 6. Dividend Income
SUBJECT TO FINAL TAX: SUBJECT TO NORMAL TAX:
• Domestic Corp Citizen of • Dividends are subject to year-end
Resident Alien FT=10% normal tax of individuals or
• Domestic Corp Non-Res not corporation if such dividends are:
engage in business FT=25% • Not-included as tax-exempt

• Domestic Corp Non-Res • Not subject to final tax

Foreign corp FT=15% • Distributive shares or partner in a
professional partnership
 A tax exclusion reduces the amount
that a tax filer reports as their total,
or gross, income.
What is the Tax Exemption is an amount of
difference money you can subtract from your
between Tax Adjusted Gross Income, the amount
of income on which you will be taxed.
Exclusion, Tax
A tax deduction is an expense that
exemption and is subtracted from total income when
Tax deduction? calculating taxable income. It
reduces tax liability in proportion to
an individual's tax bracket.
 • Proceeds of life insurance
TAX
EXCLUSIONS
-flow of wealth to the taxpayers
which are not considered part of
gross income for purposes of
computing the taxpayer’s taxable
income due to the following:
• Exempted by the fundamental
law or by statute
• Does not come within the
definition of income
-In 2011, Bruno obtained a life
insurance policies paid to the heirs or
beneficiaries upon the death of the
insured in the amount of P2,000,000,
with wife Perla as irrevocable
beneficiary and child, Rino as
revocable beneficiary.
a. Upon death of Bruno, Perla and
Rino received the proceeds on a
single sum.
b. Perla agreed to receive the
proceeds on installment with 10%
interest per annum.

TAX
EXCLUSIONS
-flow of wealth to the taxpayers
which are not considered part of
gross income for purposes of
computing the taxpayer’s taxable
income due to the following:
• Exempted by the fundamental
law or by satute
• Does not come within the
definition of income
• Proceeds of life insurance
• Amount received by the insured as a return
of capital
Juan took a 15-year insurance policy naming his son,
Peter, as his beneficiary. Under the terms of the
policy, the insurance company will pay Juan
P1,000,000 should he outlived the policy, or
P1,000,000 to Peter should he died on or before the
expiration of the policy.
• Juan outlived the policy. Total premiums paid for
after 15 years was P650,000. How much should
Juan report as part of his taxable income?
• Juan died before the expiration of the policy.
Consequently, Peter received the P1,000,000
from the insurance company. How much should
Peter report as taxable income?

TAX
EXCLUSIONS
-flow of wealth to the taxpayers
which are not considered part of
gross income for purposes of
computing the taxpayer’s taxable
income due to the following:
• Exempted by the fundamental
law or by satute
• Does not come within the
definition of income
• Proceeds of life insurance
• Amount received by the insured as a return
of capital
• Gifts, bequest and devices
Yanna received the flower shop business of
her mother upon her death with a FMV of
P3,500,000. The flower shop earns P25,000
per month.
• How much should Yanna report as taxable
income?
• Supposing the flower shop business earns
monthly income of P25,000, how much
should Yanna report as taxable income?
Taxable Damages: • Proceeds of life insurance
• Amount received by the insured as a return
TAX
Representing recovery of lost income
Compensation for unrealized of capital
EXCLUSIONS
earnings
Interest on non-taxable damages
• Gifts, bequest and devices
• Compensation for damages
Interest for non-taxable damages
Joseph filed a libel case against LJ for putting so
Non-Taxable Damages: much shame on him thru unfounded and
• Representing recovery of lost defamatory remarks. Joseph was hospitalized due
capital to the incident. As a result, LJ was ordered by a
• Actual damages for injuries court to pay the following:
suffered • Hospital dues P100,000
• Moral damages for grief or anxiety • Actual damages 50,000
• Exemplary damages • Exemplary damages 50,000
• Damages for loss of earning • Loss of income 100,000
capacity • Moral damages 100,000
• Damages for loss of goods and • How much should be reported by Joseph as
other belongings taxable income from the incident?
 • Proceeds of life insurance
TAX • Amount received by the insured as a return
of capital
EXCLUSIONS • Gifts, bequest and devices
• Compensation for injuries
• Income exempt under treaty
-flow of wealth to the taxpayers
which are not considered part of
gross income for purposes of
computing the taxpayer’s taxable
income due to the following:
• Exempted by the fundamental
law or by satute
• Does not come within the
definition of income
 • Proceeds of life insurance
TAX • Amount received by the insured as a return
of capital
EXCLUSIONS • Gifts, bequest and devices
• Compensation for injuries
• Income exempt under treaty
-flow of wealth to the taxpayers
which are not considered part of
• Retirement benefits
gross income for purposes of
computing the taxpayer’s taxable
income due to the following:
• Exempted by the fundamental
law or by satute
• Does not come within the
definition of income
 • Proceeds of life insurance
TAX • Amount received by the insured as a return
of capital
EXCLUSIONS • Gifts, bequest and devices
• Compensation for injuries
• Income exempt under treaty
-flow of wealth to the taxpayers
which are not considered part of
• Retirement benefits
gross income for purposes of • Incomes and gains subject to final tax
computing the taxpayer’s taxable
income due to the following:
• Exempted by the fundamental
law or by satute
• Does not come within the
definition of income

TAX
EXCLUSIONS
-flow of wealth to the taxpayers
which are not considered part of
gross income for purposes of
computing the taxpayer’s taxable
income due to the following:
• Exempted by the fundamental
law or by satute
• Does not come within the
definition of income
• Proceeds of life insurance
• Amount received by the insured as a return
of capital
• Gifts, bequest and devices
• Compensation for injuries
• Income exempt under treaty
• Retirement benefits
• Incomes and gains subject to final tax
• Miscellaneous items
• Income from foreign governments
• Prizes and awards
• 13th month pay
• GSIS,SSS, medical and other benefits
• Gains from sale of bonds debentures
• Gains from redemption of shares in the
mutual fund
 • Ordinary and necessary trade,
ALLOWABLE business & professional expenses
• Taxes
DEDUCTIONS • Interest
• Losses
• Bad debts
• Depreciation
• Depletion of oil & gas wells and mine
• Charitable institution
• Research and development
• Pension trusts
• Optional Standard Deduction
• Premium payments of
health/hospitalization
• Fringe Benefits
 • Paid or incurred during the
Ordinary and taxable year.
necessary trade,
business or • Directly attributable to the
development, management,
professional operation and/or conduct of
expenses the trade, business exercise of
a profession.

• Paid or incurred as part of the

profession, trade or business
operations of the tax payer.
 -maybe an offset against all income and
• Losses capital gains in the same tax year. Losses are
deductible from gross income if:

• Ordinary losses arising from losses incurred in

trade, business or profession including net
operating loss carry over (NOLCO)
• Casualty losses (fire, storm, shipwreck, robbery,
theft, embezzlement)

• Total loss = Actual Loss is the book value of the asset

• Partial Loss = book value or cost to recover, whichever is lower

 • Salaries and wages, Allowances and Other forms
of compensation
ORDINARY AND (EER, R, PSAR, WTpd)
• Travel Expenses in the pursuit of trade, business
NECESSARY or profession
(R, I/P afh, I/P tbp)
EXPENSES • Rentals and other payments
(R, TBP, No other property other than that of
the lessee, user or possessor)
• Lease Agreements
• Entertainment, amusement and recreation
expenses (.5% of net sales for seller of goods; 1%
of net revenue for seller or provider of services).
• Taxes Expense paid or incurred within the
taxable year-tbp.
(I/P –yr, I/P-tbp, Imposed directly upon the
tax payer
• Taxes Expense DEDUCTIBLE
Documentary
Maritime Corporation incurred the Stamp
following taxes during the taxable year
Occupational Taxes
are as follows:
Import duties
Documentary stamp taxesLocal business Taxes (VAT,PT,ET) P 2,000
Local business taxes Automobile registration fees 18,200
Community taxes
Philippine Income Tax NOT DEDUCTIBLE 125,000
Estate and Donor’s tax Philippine income tax (ITR) 11,000
Automobile registrationEstate
fees and donor’s taxes 7,500
Foreign income taxes if claimed as a
Value Added Taxes tax credit 12,000
Community Taxes Percentage tax on stock transactions 3,200
Tax not related to business, trade or
profession
Compute for the Taxes deductible as expenses to gross income.
Compute for the allowable deductions from the gross income of Maritime Company:

Sales P 1,200,000
Cost of Sales 850,000
Salaries and Wages 250,000
Interest expense 7,500
Rent Expense (per month) 5,000
Advertising Expenses 3,500
Community/Poll taxes 1,500
Rental paid in advance 15,000
Depreciation (Equipment, P350,000, 10 yrs estimated life)

1. Compute for Gross Income.

2. Compute for Total Allowable Deductions
3. Compute for Taxable Income
Compute for the allowable deductions from the gross income of Maritime Company:

1. Compute for Gross Income.

2. Compute for Total Allowable Deductions
3. Compute for Taxable Income
• BAD DEBT EXPENSE
• worthless and charged off within the taxable year.

• DEPRECIATION/AMORTIZATION/DEPLETION

• CHARITABLE CONTRIBUTIONS

• RESEARCH AND DEVELOPMENT EXPENSE

• PENSION TRUST CONTRIBUTION

• SPECIAL DEDUCTIONS
 • Is any goods, services or other benefits
furnished or granted by an employer in cash
WHAT IS or in kind, in addition to basic salaries to
FRINGE individual employee EXCEPT RANK AND
BENEFIT? FILE EMPLOYEE.
• It is a form of pay which may be in the form
of property, services, cash or cash
equivalents to supplement a stated pay for
the performance of services.
• FRINGE BENEFIT TAX (FBT) is a
monetary burden imposed by the
sovereignty on any good, services or other
benefit furnished or granted by an
employer, in cash or in kind, in addition to
basic salaries to an individual other than a
rank and file employee.
HOW TO
COMPUTE FOR • FBT is a final tax imposed on the
employee withheld by the employer,
FBT? computed at 35% on the GROSSED
UP MONETARY VALUE (GUMV).

• FBT shall be withheld and paid by

the employer thus, the employer is
the one liable to pay the FBT on or
before the 10th day of the month
following the calendar quarter.
 ITEMS OF FRINGE BENEFITS
SUBJECT TO TAX
1. Housing
2. Vehicle of any kind
etc)
3. Interest on loan at less than
Market rate to the extent of the
difference and between the
market rate and the actual rate
granted.
4. Expenses for foreign travel
5. Educational assistance to the
employee or his dependents
similar the law allows
6. Expense Account
7. Household personnel (maid, driver
8. Membership Fees, dues and others
expenses(social and athletic clubs,
other similar organizations)
9. Holiday and vacation expenses
10. Life or health insurance and other
non-life insurance premiums or
amounts in excess of what
ILLUSTRATION
Determine the grossed-up monetary value and the fringe benefits tax (if
applicable ) to the following cases:
1. P40,800 grocery allowance for the personal consumption of an executive
of ABC Corporation.
2. P34,000 expenses paid by an executive of ABC Corporation duly
receipted for in the name of ABC Corporation and is not in the nature of
personal expense.
3. P54,400 expenses incurred by an executive of ABC Corporation in
connection with attending business meeting or convention.
4. P16,320 grocery allowance for the personal consumption of one of ABC’s
rank and file employees.
The following income and expenses are reported by Shalala Corporation as of December 31, 2017.
Net Sales P 2,000,000
Cost of Sales 1,200,000
Gain on sale of a warehouse (FMV 2,500,000, cost of property, 1,800,000) 700,000
Gain on sale of a vacation house (SP 3,500,000; FMV 4,000,000) 1,000,000
Interest Income from Notes Receivable (200,000 at 10%, issued June, 1, 2017) 20,000
Royalty Income from books 10,000
Dividend from a domestic corporation 15,000
Dividend from Cooperative 5,000
Prize winnings 8,000
Bad debt recovery (not written off from the receivable) 20,000
Rental Income (3 months security deposit, P75,000; repair and other expenses paid
by the lessee, P25,000) 25,000/month
Prepaid rent income 50,000
Household expenses 500,000
Travel expenses (family vacation) 150,000
Travel expenses (business trip) 50,000
Rent of satellite office 100,000
Representation expense 75,000
Compute for the tax due of Shalala Corporation.