INDIVIDUAL
INCOME
TAXATION
RECAP (1/2)
Ø Inherent Powers of the State
Ø Nature, Characteristic and Purposes of Taxation
Limitations on the Power of Taxation
Ø Theory of Taxation
Ø Basis of Taxation
Ø Phases of Taxation
RECAP (2/2)
Ø Basic Principles of a Sound Tax System
Ø Classification of Taxes
Ø Tax distinguished from License Fee, Toll, Assessment
Custom Duties and Debt
Ø Double Taxation
Ø Situs of Taxation
Ø Tax Remedies
POP QUIZ
One of the characteristic of a tax is that it is generally:
a. Based on contract
b. Payable in money
c. Assignable
d. Payable in kind
POP QUIZ
One of the characteristic of a tax is that it is generally:
a. Based on contract
b. Payable in money
c. Assignable
d. Payable in kind
POP QUIZ
Which one is not among the basic principles of a sound
tax system?
a. Theoretical Justice
b. Fiscal Adequacy
c. Administrative Feasibility
d. Lifeblood Doctrine
POP QUIZ
Which one is not among the basic principles of a sound
tax system?
a. Theoretical Justice
b. Fiscal Adequacy
c. Administrative Feasibility
d. Lifeblood Doctrine
POP QUIZ
A tax wherein both the incidence of or the liability for
the payment of the tax as well as the burden of the tax
falls on the same person
a. Direct Tax
b. Indirect Tax
c. Property Tax
d. Poll Tax
POP QUIZ
A tax wherein both the incidence of or the liability for the
payment of the tax as well as the burden of the tax falls on the
same person
a. Direct Tax – Cannot be shifted or passed on to others
(Individual Income Tax)
b. Indirect Tax – Permitted by law to be shifted (VAT)
c. Property Tax – Imposed on property (Real Property Tax)
d. Poll Tax – a.k.a. Personal Tax (Community Tax)
POP QUIZ
If there is a conflict between the tax laws (NIRC) and the
generally accepted accounting principle (GAAP):
a. Both tax laws and GAAP shall be enforced
b. The shall be resolved by the courts
c. GAAP shall prevail over the tax law
d. Tax law shall prevail over the GAAP
POP QUIZ
If there is a conflict between the tax laws (NIRC) and the generally
accepted accounting principle (GAAP):
a. Both tax laws and GAAP shall be enforced
b. The shall be resolved by the courts
c. GAAP shall prevail over the tax law
d. Tax law shall prevail over the GAAP. One of the Powers of
Taxation is that it is the inherent power of the state to
exact an enforced contribution. The Code is above any
other accounting principle.
NATIONAL INTERNAL REVENUE
CODE
• The National Internal Revenue Code of 1997 also known
as the Tax Code has been effective since January 1, 1998.
• The Tax Code’s latest amendment was RA 10963 also
known as the Tax Reform for Acceleration and Inclusion
(TRAIN) Act which was signed into law by President
Rodrigo Duterte last December 19, 2017 effective
January 1,2018.
https://www.bir.gov.ph/index.php/tax-code.html
INCOME TAX
• Income Tax - refers to the tax imposed by the government on
the taxable income earned by taxable persons.
• Sec 22 (A) The term 'person’ means an individual, a trust, estate
or corporation (juridical person).
• A juridical person is a non-human legal entity, in other words
any organization that is not a single natural person but is
authorized by law with duties and rights and is recognized as a
legal person and as having a distinct identity.
INCOME
• Profit, gain, fruit, wealth or fortune derived from labor, capital,
or both from labor and capital, exchange of assets as well as
those derived from other sources whether legal or illegal.
Examples are:
• Salaries for services rendered,
• Gross profit from sale of merchandise
• Gain from sale of property
• Interest income on receivables.
TAXABLE INCOME
Profit, gain, fruit, wealth or fortune derived from labor, capital, or
both from labor and capital, exchange of assets as well as those
derived from other sources whether legal or illegal which are
subjected from income tax (basic or final).
CORPORATION
GROSS INCOME = GROSS SALES – COST OF SALES + OTHER INCOME
TAXABLE INCOME = GROSS INCOME – DEDUCTIBLE EXPENSES
INDIVIDUAL
TAXABLE INCOME = GROSS INCOME – DEDUCTIBLE EXPENSES
INCOME AS TO TAXABILITY
Non-taxable income or income exempt from income tax
- Examples are: (Winning, Prized from PSCO sweepstakes, Income
of a General Professional Partnership)
Taxable income (Basic or Final)
- Income subjected to final tax (i.e. Interest Income subject to the
20% final income tax)
- Income subjected to basic income tax (i.e. gross profit from sale
of merchandise, salaries from employment)
EXPENSES AS TO DEDUCTIBILITY
Non-deductible business expenses
- Expenses not connected in the business such as personal,
family or living expense
- Business expense specifically disallowed by law
Deductible business expenses
- Business expenses which are permitted by law as deduction
(Itemized Deduction and Optional Standard Deduction)
CLASSIFICATION OF INDIVIDUAL
TAXPAYERS
1. Resident Citizen (RC)
2. Nonresident Citizen ( NRC )
3. Resident Alien ( RA )
4. Non-resident Alien ( NRA)
a. Engaged in trade or business (ETB)
b. Not engaged in trade or business (NETB)
GENERAL PRINCIPLES OF INCOME
TAXATION IN THE PHILIPPINES
(A) A citizen of the Philippines residing therein is taxable on all income
derived from sources within and without the Philippines;
(B) A nonresident citizen is taxable only on income derived from sources
within the Philippines;
(C) An individual citizen of the Philippines who is working and deriving
income from abroad as an overseas contract worker is taxable only on
income derived from sources within the Philippines: Provided, That a seaman
who is a citizen of the Philippines and who receives compensation for services
rendered abroad as a member of the complement of a vessel engaged
exclusively in international trade shall be treated as an overseas contract
worker;
GENERAL PRINCIPLES OF INCOME
TAXATION IN THE PHILIPPINES
(D) An alien individual, whether a resident or not of the Philippines, is taxable
only on income derived from sources within the Philippines;
(E) A domestic corporation is taxable on all income derived from sources
within and without the Philippines; and
(F) A foreign corporation, whether engaged or not in trade or business in the
Philippines, is taxable only on income derived from sources within the
Philippines.
NONRESIDENT CITIZEN
Nonresident citizens as provided by
Section 22 (E) of the Tax Code:
1. A citizen of the Philippines who establishes to
the satisfaction of the Commissioner of the fact
of his physical presence abroad with a definite
intention to reside therein.
2. 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;
3. 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 [for
one hundred eighty-three days [(183) or more]
during the taxable year;
NONRESIDENT CITIZEN
4. A citizen who has been previously considered
as nonresident citizen who arrives in the
Philippines at any time during the taxable year
to reside permanently in the Philippines shall be
considered a nonresident citizen for the taxable
year in which he arrives in the Philippines with
respect to income derived from sources abroad
until the date of his arrival in the Philippines.
RESIDENT CITIZEN
Citizens not classified under the
category listed earlier are Resident
Citizens.
RESIDENT CITIZEN
Considered Citizens of the Philippines:
a. Natural born citizens
b. Naturalized citizens
c. Citizen of the Philippines at the time of the
adoption of the Philippine Constitution
d. Persons who elected Philippine Citizenship
pursuant to the provisions of the Constitution.
OVERSEAS CONTRACT WORKERS
• Overseas Contract Workers (OCWs) refer to Filipino citizens
employed in foreign countries, commonly referred to as
Overseas Filipino Workers (OFW), 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 is
not borne by any entity or person in the Philippines.
• 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).
(RR No. 1-2011)
• A seaman who is a citizen of the Philippines and who
receives compensation for services rendered abroad
as a member of the complement of a vessel engaged
exclusively in international trade shall be treated as an
overseas contract worker. (Section 23 (C), RA 8424)
• In order for seafarers or seamen to be considered as
OCW’s or OFW’s they must duly registered as such
with the Philippine Overseas Employment
Administration (POEA) with a valid Overseas
Employment Certificate (OEC) with a valid Seafarer’s
Identification Record Book (SIRB) or Seaman’s Book
issued by the Maritime Industry Authority (MARINA).
v For taxation purposes, OCW’s are
classified as nonresident citizens.
RESIDENT ALIEN
• Resident Alien means an individual whose
residence is within the Philippines and
who is not a citizen thereof (Section 22
(F), RA 8424)
The following are considered as resident alien:
1. An alien actually present in the Philippines
who is not a mere transient or sojourner.
A person who comes to the Philippines for a
definite purpose which in its nature may be
promptly accomplished is a transient.
• An alien, who comes to the Philippines for a definite
purpose, which, by its nature, would require an
extended stay making his home temporarily in the
Philippines;
• An alien who shall come to the Philippines with no
definite intention as to his stay.
• An alien who has acquired residence in the
Philippines retains his status as a resident until he
abandons the same and actually depart from the
Philippines.
NON-RESIDENT ALIEN
1. Engaged in trade or business (Section 25 (A), RA 8424)
• An alien individual actually engaged in trade or
business in the Philippines; and
• An alien who comes in the Philippines for an
aggregate period of more than 180 days during the
calendar year during any calendar year shall be
deemed a non-resident alien doing business in the
Philippines.
2. Not engaged in trade or business – those NRAs not
included above.
SOURCES OF TAXABLE INCOME
Source of RC NRC RA NRA
Income
Income
ü
from within ü ü ü
PH
Income
from ü û û û
without PH
POP QUIZ
Sam Smith, a British Singer, was engaged to sing for one
week at the Western Philippine Plaza, after which he
returned to London. For income tax purposes he shall
be classified as:
a. Resident Alien
b. Nonresident alien engaged in trade or business
c. Nonresident alien not engaged in trade or business
POP QUIZ
Sam Smith, a British Singer, was engaged to sing for one week at
the Western Philippine Plaza, after which he returned to London.
For income tax purposes he shall be classified as:
a. Resident Alien
b. Nonresident alien engaged in trade or business
c. Nonresident alien not engaged in trade or business
Alien + Definite stay + promptly accomplished =
NRANETB
POP QUIZ
Lisa Manoban came to the Philippines for a BlackPink
Concert. Her income will be:
a. Taxable from all sources within the Philippines
b. Taxable from all sources without the Philippines
c. Taxable from all sources within and without the
Philippines
POP QUIZ
Lisa Manoban came to the Philippines for a BlackPink
one week concert. Her income will be:
a. Taxable from all sources within the
Philippines
b. Taxable from all sources without the Philippines
c. Taxable from all sources within and without the
Philippines
POP QUIZ
A Filipino Citizen is a natural person who is/has:
I. Born by birth with father and/or mother as Filipino Citizens.
II. Born before January 17, 1973 of Filipino mother who elects
Philippine citizenship upon age of maturity.
III. Acquired Philippine citizenship after birth (naturalized) in
accordance with Philippine laws.
a. I only c. I and II only
b. I and II only d. I, II and III
POP QUIZ
A Filipino Citizen is a natural person who is/has:
I. Born by birth with father and/or mother as Filipino Citizens.
II. Born before January 17, 1973 of Filipino mother who elects
Philippine citizenship upon age of maturity.
III. Acquired Philippine citizenship after birth (naturalized) in
accordance with Philippine laws.
a. I only c. I and II only
b. I and II only d. I, II and III
POP QUIZ
On October 2018, Steve Kerr, was hired as a team consultant by one of the teams
in PBA for one conference which will last for a period of not more than three (3)
months from October to December 2018. His coming to the Philippines was for a
definite purpose. However, he was subsequently chosen to coach the Philippine
men’s basketball team for a period of two (2) years. The American mentor intends
to leave the Philippines as soon as hi job is finished. For 2018 taxable year, the
American coach shall be classified as:
a. Resident alien
b. Nonresident alien engaged in trade or business
c. Nonresident alien not engaged in trade or business
POP QUIZ
On October 2018, Steve Kerr, an American coach was hired as a team consultant
by one of the teams in PBA for one conference which will last for a period of not
more than three (3) months from October to December 2018. His coming to the
Philippines was for a definite purpose. However, he was subsequently chosen to
coach the Philippine men’s basketball team for a period of two (2) years. The
American mentor intends to leave the Philippines as soon as hi job is finished. For
2018 taxable year, the American coach shall be classified as:
a. Resident Alien
• An alien who comes to the Philippines for the purpose that requires extended stay
for its accomplishment so he makes his home temporarily in the Philippines is a
resident regardless of his intention to return to his residence abroad.
POP QUIZ
Pedro Dela Cruz, nonresident citizen, arrived in the Philippines on July 1, 2018 to
reside here permanently after working as a nurse in the United States for many years.
Which of the following statements is correct with respect to his classification for
income tax purposes.
a. He shall be classified as nonresident citizen for the year 2018 with respect to the
income derived from sources abroad from January 1, 2018 until the date of his
arrival in the Philippines.
b. He shall be classified as nonresident citizen for the whole year of 2018.
c. He shall be classified as resident citizen for the whole year of 2018.
d. He shall be classified as neither resident nor nonresident citizen for the year
2018.
POP QUIZ
Pedro Dela Cruz, nonresident citizen, arrived in the Philippines on July 1, 2018 to
reside here permanently after working as a nurse in the United States for many years.
Which of the following statements is correct with respect to his classification for
income tax purposes.
a. He shall be classified as nonresident citizen for the year 2018 with
respect to the income derived from sources abroad from
January 1, 2018 until the date of his arrival in the Philippines.
A Filipino citizen may be classified both as RC and NRC for one (1) taxable year.
Ultimately, his sources of income from within the Philippines will be subjected to basic
income tax.
TYPES OF INCOME TAXES
1. Basic Income Tax on regular or ordinary income.
2. Capital Gains Tax on Sale of Shares of Stock of unlisted
domestic corporations.
3. Capital Gains Tax on Sale of Real Properties located in the
Philippines.
4. Final Withholding Tax on Passive income derived from
Philippine sources.
q The total amount of the taxes above is known as “Total
Income Tax Expense”
BASIC INCOME TAXES
• Use the graduated tax rate or tax table, as amended by RA
10963 or TRAIN Law.
• Income subject to basic tax are:
Ordinary income (i.e., compensation income, business income)
Passive income derived abroad by RCs
Capital gains not subject to CGTs special rates.
BASIC INCOME TAXES
BASIC INCOME TAXES
BASIC INCOME TAXES
• Income subject to basic tax is reflected in the income tax
return of the taxpayer.
• Generally, subject to CWTs which may be deducted from the
basic income tax due.
• It is the payee (income earner) who has the responsibility to
file the return and pay the applicable tax unless the income
earner has constituted with the substituted filing under
employee-employer relationship.
BASIC INCOME TAXES FOR
MARRIED INDIVIDUALS
• Married individuals(i.e., husband & wife) are required by
law to file a consolidated income tax return, but they shall
compute separately their individual income tax.
• Income which cannot be definitely attributed to or
identified as income exclusively earned or realized by
either of the spouses, the same shall be equally divided
between the spouses for purposes determining their
taxable income.
BASIC INCOME TAXES FOR
MARRIED INDIVIDUALS
• If the spouses are only physically separated and there
is no legal separation, they are still required by law to
file a consolidated or joint returns for which they are
considered as jointly and severally liable to the tax.
INCOME TAXES OF SENIOR CITIZEN (SC)
AND PERSONS WITH DISABILITY (PWD)
• SCs and PWDs deriving returnable income are required to file
their income tax returns and pay the tax as they file the return.
• SCs/PWDs as MWE- Exempt from income tax on the said
compensation income
• Aggregate gross income (prior to TRAIN law) does not exceed
the amount of his personal exemptions(BPE and APE), he shall
be exempt from income tax and shall not be required to file
income tax return.
MINIMUM WAGE EARNER (MWE)
• The term ‘statutory minimum wage’ shall refer to the rate fixed by
the Regional Tripartite Wage and Productivity Board, as defined by
the Bureau of Labor and Employment Statistics (BLES) of the
Department of Labor and Employment (DOLE).
• The term “minimum wage earner” (MWE) earner shall refer to a
worker in the private sector paid the statutory minimum wage, or to
an employee in the public sector with compensation income of not
more than the statutory minimum wage in the non-agricultural
sector where he/she is assigned (RR 10-2008). The current SMW is
P500-P537 across different sectors in NCR.
MINIMUM WAGE EARNER (MWE)
• Statutory minimum wage earners as defined in
Section 22(HH) of this Code shall be exempt from
the payment of income tax on their taxable income:
Provided, further, That the holiday pay, overtime
pay, night shift differential pay and hazard pay
received by such minimum wage earners shall likewise
be exempt from income tax.
APPLICABLE TAXES OF MWES (RR 10-2008);
SORIANO VS. SEC. OF FINANCE WITH
G.R. NO. 184450
Exempt from income tax
MWE with additional “compensation” Still considered MWE (Soriano vs.
income exceeding Secretary of Finance with GR No.
Prior to 2018. P82,000 184450 dated Jan. 24, 2017)
Beginning 2018 (TRAIN LAW)
P90,000
MWE with additional “business” Income as MWE = Exempt
income Business Income = Taxable
ORDINARY VS CAPITAL
Ordinary Gain/Loss
includes any gain or loss from the sale or exchange of property
which is not a capital asset or property.
Capital Gain/Loss
includes any gain or loss from the sale or exchange of property
which is a capital asset or property.
CAPITAL GAINS TAX ON SALE OF SHARES OF
STOCK OF UNLISTED DOMESTIC
CORPORATIONS.
• The provisions of Section 39(B) notwithstanding, a
final tax at the rate of fifteen percent (15%) is hereby
imposed upon the net capital gains realized during the
taxable year from the sale, barter, exchange or other
disposition of shares of stock in a domestic
corporation, except shares sold, or disposed of
through the stock exchange.
CAPITAL GAINS TAX ON SALE OF SHARES OF
STOCK OF UNLISTED DOMESTIC
CORPORATIONS.
CAPITAL GAINS TAX ON SALE OF REAL
PROPERTIES LOCATED IN THE PHILIPPINES.
(1) In General. - The provisions of Section 39(B)
notwithstanding, a final tax of six percent (6%) based on the
gross selling price (GSP) or current fair market value
(FMV) as determined in accordance with Section 6(E) of this
Code, whichever is higher, is hereby imposed upon capital
gains presumed to have been realized from the sale, exchange, or
other disposition of real property located in the Philippines,
classified as capital assets.
CAPITAL GAINS TAX ON SALE OF REAL
PROPERTIES LOCATED IN THE PHILIPPINES.
Provided, That the tax liability, if any, on gains from sales or other
dispositions of real property to the government or any of its
political subdivisions or agencies or to government-owned or
controlled corporations shall be determined, at the option of the
taxpayer, at either:
a. Under Basic Income Tax – subject to graduated basic income
tax
b. Under Final Income Tax – subject to 6%
CAPITAL GAINS TAX ON SALE OF REAL
PROPERTIES LOCATED IN THE PHILIPPINES.
(2) Exception. - Sale of real property located in the Philippines, if capital asset and is a
principal residence. The capital gains presumed to have been realized from the sale or
disposition of their principal residence by natural persons, shall be exempt from the
final capital gains tax, if the following requisites or conditions for tax exemption
concur:
a. That the sales proceeds of which is fully utilized in acquiring or constructing a
new principal residence within eighteen (18) calendar months from the date of
sale or disposition;
b. That the Commissioner shall have been duly notified by the taxpayer within
thirty (30) days from the date of sale or disposition through a prescribed return
of his intention to avail of the tax exemption herein mentioned;
c. That the said tax exemption can only be availed of once every ten (10) years:
CAPITAL GAINS TAX ON SALE OF REAL
PROPERTIES LOCATED IN THE PHILIPPINES.
Provided, finally, That if there is no full utilization of the proceeds of sale or
disposition, the portion of the gain presumed to have been realized from the sale or
disposition shall be subject to capital gains tax.
For this purpose, the gross selling price or fair market value at the time of sale,
whichever is higher, shall be multiplied by a fraction which the unutilized amount bears
to the gross selling price in order to determine the taxable portion.
Formula 1:
(Unutilized sales proceeds / Gross Selling Price) x GSP or FMV w/ever is higher =
Taxable Unutilized Portion x final income tax rate of 6% = Final Income Tax
FINAL WITHHOLDING TAX (FWT) ON
PASSIVE INCOME
• Passive Income – income derived in which a
person is not actively involved.
• Applicable only to passive income from sources
within the Philippines. Passive incomes derived
from outside of the Philippines are subject to basic
income tax under section 24(A) of the tax code.
FINAL WITHHOLDING TAX (FWT) ON
PASSIVE INCOME
• It is a tax deducted from the income to be paid to
the payee or seller.
• It is constituted as full and final payment of the
income tax liability. Hence, the income subjected
to this tax is no longer included in the income tax
return of the individual taxpayer subject to basic
income tax under Section 24A of the tax code.
FINAL WITHHOLDING TAX (FWT) ON
PASSIVE INCOME
• It cannot be credited/deducted against
the basic income tax due.
• The liability for the payment of the tax is
primarily on the payor as the with holding
agent.
FINAL WITHHOLDING TAX (FWT) ON
PASSIVE INCOME
Final Income Tax on Passive Investment Income RC, RA, NRAETB NRANE
NRC TB
a) Interest from any currency bank deposit; and 20% 20%
Yield or any other monetary benefit from:
i. Deposit substitutes
ii. Trust Funds
iii. Similar arrangements as above
b) Royalty Income on Books, Literary, Musical 10% 10% 25%
Works, in Philippines
c) Other Royalty Income, in Philippines 20% 20%
d) Prizes earned in the Philippines 20% 20%
If P10,000 or less part gross income subject to Basic Tax Basic Tax
basic income tax)
FINAL WITHHOLDING TAX (FWT) ON
PASSIVE INCOME
Final Income Tax on Passive Investment Income RC, RA, NRAETB NRANE
NRC TB
e) Other Winnings, in Philippines 20% 20%
e) Income Tax if from PCSO and Lotto Draws
• Prior to 2018 Exempt Exempt 25%
• TRAIN Law (beg. January 1, 2018)
Not more than P10k Exempt Exempt
More than P10k 20% Exempt
FINAL WITHHOLDING TAX (FWT) ON
PASSIVE INCOME
Final Income Tax on Passive Investment Income RC, RA, NRAETB NRANE
NRC TB
Interest from a depositary bank under the
expanded foreign currency deposit system
- Prior to 2018 7.5% Exempt Exempt
- Under TRAIN Law (beginning Jan. 1, 2018) 15%
Interest income from LONG TERM bank deposit or
Exempt Exempt 25%
bank investment (at least 5-year maturity)
In case of pre-termination of the long-term deposit or
investment, Depending on the holding period:
• 5 years or more Exempt Exempt
• 4 years to less than 5 years 5% 5% 25%
• 3 years to less than 4 years 12% 12%
• Less than 3 years 20% 20%
FINAL WITHHOLDING TAX (FWT) ON
PASSIVE INCOME
Final Income Tax on Passive Investment Income RC, RA, NRAETB NRANE
NRC TB
a) Dividends actually or constructively received from:
i. Domestic Corporation
ii. Joint Stock Company
10% 20% 25%
iii. Insurance or mutual fund company; and
iv. Regional operating headquarters of a multinational
company
b) Share in the distribute net income after tax of a
10% 20% 25%
partnership (except GPP)**
c) Share in the net income after tax of:
1. Association
10% 20% 25%
2. Joint Account
3. Taxable Joint Venture or Consortium***
SHARE IN THE NET INCOME OF A
PARTNERSHIP
General Partnership General
“Professional”
Partnership
Treated as dividend Not treated as dividend
income, generally subject income. Subject to basic
to 10% withholding tax. tax under section 24(A).
SHARE IN THE NET INCOME OF A JOINT
VENTURE
CO-VENTURER TAXABLE JV ****NON-
TAXABLE JV
Treated as dividend Not treated as
Individual income, generally dividend income.
subject to 10% final Subject to basic tax
withholding tax. under section 24(A).
Treated as inter-
Corporation corporate dividend Subject to basic
income, hence, tax- corporate tax (not as
exempt. dividend income)
NON-TAXABLE JOINT VENTURE
Joint ventures or consortium organized for the following
purposes:
1. Construction projects;
2. Engaged in petroleum, coal, geothermal and other
energy operations pursuant to an operating or
consortium agreement under a service contract with
the Government.
TAXATION OF NRANETB
NRA-NETB is subject to:
1. 25% FWT on ALL
A. Ordinary income
B. Passive income derived from sources within the
Philippines (including interest income from long-term
bank deposit or investment and PCSO/Lotto winnings
except interest income on bank deposit under FCDU.)
TAXATION OF NRANETB
2. CGT on sale of shares of a domestic
corporation directly to a buyer.
3. CGT on sale of a real property classified as
capital asset located in the Philippines.
POP QUIZ
Ackir, married, with two dependent children, received the following income:
Business income, Philippines P1,000,000
Business income, Hongkong 200,000
Interest, peso deposit, MBTC 100,000
Interest, US deposit, BDO ($10,000 x P42) 420,000
Interest, Hongkong deposit (HK$10,000 x P5) 50,000
Prize (TV) won in a local lottery 50,000
PCSO/Lotto Winnings 2,000,000
Prize won in contest in US 300,000
Lotto Winning in US 100,000
Dividend Income 600,000
RC NRC RA NRAETB
A 80,000 180,000 830,000 180,000
B 180,000 80,000 1,000,000 1,000,000
C 1,558,000 908,000 908,000 908,000
D 1,650,000 1,000,000 1,000,000 1,000,000
RC NRC, RA,
NRAETB
Business income, Philippines P1,000,000 P1,000,000
Business income, Hongkong 200,000 −
Interest, peso deposit, MBTC 20% FWT 20% FWT
100,000
Interest, US deposit, BDO ($10,000 x P42) 15% FWT 15%FWT
420,000 Exempt for
NRC&NRAETB
Interest, Hongkong deposit (HK$10,000x5) 50,000 −
Prize (TV) won in a local lottery 20%FWT 20%FWT
50,000
PCSO/Lotto Winnings 20%FWT Exempt
2,000,000
Prize won in contest in US 300,000 −
Lotto Winning in US 100,000 −
Dividend Income 10% FWT 10% for RC and RA
600,000 20% for NRAETB
Taxable net income P1,650,000 P1,000,000
