TAX ON INDIVIDUAL NRAETB 8% (GS/R) or GTR (TNI) allowed ID

2 MAIN CATEGORIES OF TAXPAYER NRANETB 25% Final Tax (GI) no AD

1. Individual CLASSIFICATION OF INCOME

2. Corporate 1. Active/Ordinary

CLASSIFICATION OF INDIVIDUAL TAXPAYER *Compensation Income – purely: Grad. Income Tax

1. Resident Citizen *Business Income – purely: Grad. Income Tax or 8% (GI)

*default/silent *Professional Fee- purely: Grad. Income Tax or 8% (GI)

2. Non-resident Citizen 2. Passive

*working abroad for long period of time/physical *within the PH

appearance in abroad is needed
PIRDO: Prizes
*residing abroad as immigrant
Interests
*183 days or more in abroad (50%+1)
Royalties Final Income Tax
*went back to PH for good after residing abroad (taxed as
Dividends
NRC for taxable yr)
Other Winnings
3. Resident Alien
If not PIRDO: Regular Income Tax (e.g. rent income)
*default/silent
*without the PH – subject to Regular Income Tax
*stayed in PH for definite purpose, completed for long
period of time (e.g. to study in PH) PASSIVE INCOMES
4. Nonresident Alien 1. Prizes
*stayed in PH for definite purpose, completed for a short If > 10000
period of time
RC, NRC, RA, NRAETB 20%
 Nonresident Alien Engaged in T/B
NRANETB 25%
*not physically present but has busn in PH
If < 10000
*stayed in PH for more than 180 days
RC, NRC, RA, NRAETB RIT
 Nonresident Alien Not Engaged in T&B
NRANETB 25%
*not physically present and has no busn in PH

*stayed in PH for less than 180 days

2. Royalties
TAXATION ON INDIVIDUALS
Artistic (books, lit, musical comp)
*within and without
RC, NRC, RA, NRAETB 10%
RC 8% (GS/R) or GTR (TNI) allowed ID/OSD , can
NRANETB 25%
claim Foreign Tax Credit (to avoid double taxation, tax
paid in abroad can be deducted in income tax liability in General
PH)
RC, NRC, RA, NRAETB 20%
*within
NRANETB 25%
NRC 8% (GS/R) or GTR (TNI) allowed ID/OSD

RA 8% (GS/R) or GTR (TNI) allowed ID/OSD

3. Interest (default/silent: SHORT TERM) NRANETB 25%

Short Term From FC-without PH

RC, NRC, RA, NRAETB 20% RC RIT

NRANETB 25% NRC, RA, NRAETB, NRANETB Exempt

Long Term (at least 5 yrs)

RC, NRC, RA, NRAETB Exempt 7. Other Winnings

NRANETB 25% PCSO Winnings > 10000

RC, NRC, RA, NRAETB 20%

4. Pre-terminated LT Deposit NRANETB 25%

4 to less than 5 yrs PCSO Winnings < 10000

RC, NRC, RA, NRAETB 5% RC, NRC, RA, NRAETB Exempt

NRANETB 25% NRANETB 25%

3 to less than 4 yrs Other than PCSO

RC, NRC, RA, NRAETB 12% RC, NRC, RA, NRAETB 20%

NRANETB 25% NRANETB 25%

Less than 3 yrs WINNINGS EXEMPT FROM INCOME TAX

RC, NRC, RA, NRAETB 20% *winnings from horse racing subj to OPT (4%/10%)

NRANETB 25% *prizes/awards in recognition of religious, charitable,

scientific, educational, artistic, literary or civic
achievement received without any action on recipient
5. Interest Income EFCU part to enter contest; recipient is not required to render
substantial future services as condition of receiving the
*dollar deposit in PH, if resident subject sa tax prize/award
*if non-resident ka, assumed necessity yung foreign *prizes/awards granted to athletes in local and
currency deposit mo dahil need mo ng foreign currency international sports competitions and tournaments
RC, RA 15% whether held in PH or abroad

NRC, NRAETB, NRANETB Exempt CAPITAL GAIN TAX

1. Shares of Stock of a domestic corporation

6. Dividends *through local stock exchange

From DC (share in NI of taxable partnership, JV, co- Stock Transaction Tax (Business Tax)
ownership) 6/10 of 1% of Gross Selling Price 15% of capital gain (RC,
RC, NRC, RA 10% NRC, RA, NRAETB, NRANETB)

NRAETB 20% *not through local stock exchange (directly to buyer)

NRANETB 25% 15% of capital gain (RC, NRC, RA, NRAETB, NRANETB)

From FC-within PH Selling price-Acquisition Cost=Net Capital Gain*%=CGT

RC, NRC, RA, NRAETB RIT

2. Shares of Stock of Foreign Corporation

Subject to Regular Income Tax

3. Real Property

Requisites:

*must be capital asset

*located in PH

Tax base: highest in SP, FMV, Zonal Value (Section 6 E)

Capital Gain Tax=tax base*6%

Option of seller in case of sale to gov’t or political

subdivision

*pay 6% CGT or pay RIT

TO ALLOW EXEMPTION:

-property sold must be the principal residence of the

seller

-proceed is used for acquiring/constructing new principal

residence

-utilization must be made within 18 calendar months from

the date of sale

-notify BIR Commissioner within 30 days from date of sale

-exemption can only be availed once every 10 years

Partial Exemption

Taxable Amount = (Unutilized Portion/Gross Selling

Price)*(tax base=highest in SP,FMV,ZV)*6%

TAXATION SCHEMES IN PH

1. Basic Income Tax/Regular Income Tax

2. Final Income Tax on Certain Passive Income within the

PH

3. Capital Gains Tax on Shares of Stocks and Real Property

TYPES OF ASSET

1. Ordinary Asset – used in business

- gain from sale subject to Regular Income Tax

2. Capital Asset – personal assets/not used in business

*gain from sale of shares of stock or real property (w/in

the PH)- subject to Capital Gain Tax

*otherwise - gain from sale subject to Regular Income Tax

BASIC INCOME TAX COMPENSATION INCOME

Default: Graduated Income Tax based on TNI 1. Subject to Basic Income Tax

1701 Annual Tax Report  Basic Salary including OT Pay, Holiday Pay, Night
Shift Differential and Hazard Pay
1701Q Quarterly Tax Report
 13th month pay, Productivity Incentives, Christmas
Payee (income earner) prepares income tax return. Bonus (in excess of 90000: only the excess is
taxable)
 Retirement Pay and Separation Pay
CREDITABLE WITHHOLDING TAX  Fringe benefits – Rank and File Employee
*Employer withheld tax, deducted in advance in our (provided by employer for employee’s benefit)
income. Employer will pay tax to BIR.

*Withheld amount may not be the exact amount of tax 2. Exempt

liability that is why income subject to CWT is included in
 Basic Salary including OT Pay, Holiday Pay, Night
computation of basic income tax.
Shift Differential, Hazard Pay of MINIMUM WAGE
EARNER
FINAL WITHHOLDING TAX  13th month pay, Productivity Incentives, Christmas
Bonus (not in excess of 90000: exempt)
*Not included in computation of basic income tax
 Retirement Pay and Separation Pay under RA
because the amount withheld is the full amount of tax
4917 (sickness, disabilities, death, other beyond
liability.
employee’s control)
Ex. Interest earned in bank deposit, withheld by the bank. -at least 50 years old retirement age
Credited in bank account is not the entire amount of - tenure: 10 years (pwedeng hindi continuous)
income, certain income is deducted to be withheld. Bank -availment: once
will remit it to BIR. -approved by BIR

WHO CAN CLAIM 8%? 3. Subject to Final Tax

Requisites:  NRANETB’s compensation – 25% Final Tax

 Fringe benefits – Managerial and Supervisory
*non-vat Registered Personnel (provided by employer for employee’s
*not subject to vat exempt transaction benefit) – 35% Final Tax
*if received by NRANETB 25% Final Tax
*not subject to OPT other than section 116  All income received by NRANETB 25% Final Tax
*GS/R not greater than 3000000 VAT threshold
FUNCTIONS OF EMPLOYEES

MIXED INCOME EARNER 1. Managerial Employees

*If intention to be taxed by 8% is signified: 2. Supervisory Employees

Separate computation for Compensation (GTR) and 3. Rank and File Employees
Business Income (8%)

250000 deduction is not allowed in computation of

business income

*If intention to be taxed by 8% is not signified:

Combine compensation and business income, use GTR

FRINGE BENEFITS FORMULA OF FBT

* provided by employer for employee’s benefit in cash or Monetary Value

in kind
Divide by Gross Up Monetary Value (65% or 75%
*if received by RF - excess will be part of other benefits: NRANETB)
th
13 month pay and other benefits (90000 maximum amt)
Multiply by FBT rate (35% or 25% NRANETB)
*if received by MS - excess will be part of fringe benefits
Fringe Benefit Tax
subj to Final Tax

1. Housing
DE MINIMIS BENEFITS
2. Expense Account
*small amount of benefits
3. Vehicle
*included in list and within threshold(TH)– EXEMPT
4. Household Personnel
(regardless if RF or MS)
5. Interest on loan at less than market rate
*if received by RF –excess will be part of other benefits:
6. Membership Fees in social and athletic clubs 13th month pay and other benefits (90000 maximum amt)

7. Holiday and Vacation Expenses *if received by MS – excess will be part of fringe benefits
subj to Final Tax
8. Educational Assistance to employee or his dependents
should not be for the benefit of the employer

9. Expenses for foreign travel DMB Exempt:

Not subject to FBT 1. Rice Allowance – TH: 2000/ month, 1 sack .

1. FB to rank and file 2. Meal Allowance (during OT/NS) – 25% of MW

2. Housing benefits/privilege of military officials, situated 3. Uniform Allowance – 6000/yr

or adjacent to busn, temporary housing unit for 3 months
4. Laundry Allowance – 300/month
or less
5. Medical Allowance (employees) – 10000/yr (actual:
3. Expenses incurred by employee paid by employer,
cash, medicines, cert, etc…)
expenses reimbursed by employer
6. Medical Allowance (dependents) – 1500/semester
4. Allowances subj to liquidation
(cash) (250 per month)
5. Reasonable busn travel expenses (inland travel exp,
7. Monetized Leave Credit (Private) – monetized: VL , 10
lodging cost $300 or less, cost of economy and busn class
days’ worth of compensation
airplane, 70% of cost of first class airplane ticket)
8. Monetized Leave Credit (Gov’t) – mon: VL & SL , unli.
6. Educational assistance to employee (connected with
employer’s trade, busn, profession) to dependents of 9. Gifts and Awards (Christmas/anniv) – 5000/yr (cash or
employee (under scholarship program of the comp) noncash)
7. Contributions of employer for the benefit of the 10. Gifts and Awards (loyalty, safety achievement) –
employee on SSS, GSIS, others… 10000/yr (noncash)
8. The cost of premiums borne by the employer for group 11. Collective Bargaining Agreement – if nagexceed sa
insurance of employees target income and actual income, magkakaron ng bonus
yung employees. If actual received is 10000/yr exempted
9. FB authorized and exempted from income tax, required
by nature of busn, for convenience of employer
COMPENSATION INCOME CO-OWNERSHIP

Gross Income -inheritance of undivided property from a decedent or

donor who makes a gift of an undivided property in favor
Less: Non-taxable Compensation Income
of 2 or more donees
Gross Taxable Compensation Income
Situation: Pinamana ni A yung property (bldg. with tenant)
kay B and C (mga anak), walang stated na hatian

BUSINESS INCOME Naging co-owner si B and C dahil sa transaction after

death ni A
Gross Income
Earned rental income 1m every year if 50% hatian, 500k
Less: Allowed Deductions sa taxable income ni B and C and then dun magkakaron ng
Taxable Net Income computation ng income tax (separate)

NON TAXABLE ANG CO-OWNERSHIP

FILING OF INCOME TAX RETURNS THEY DID NOT AGREE TO BE CO-OWNER, IT JUST
HAPPENS BECAUSE OF THE CIRCUMSTANCE
1. FWT on Passive Income
If nagbound naman to be co-owner, TAXED AS
Manual Filing PARTNERSHIP
January-November *Co-ownership is for preservation and mere
10th day of the month ff the month the administration of property and collection of income
withholding was made therein

December

Jan. 15th of succeeding yr ESTATE AND TRUST

2. Capital Gain Tax Taxed as individual: Graduated IT or 8%

Shares of Stock – 30 days after each trans ESTATE - property of deceased person

RP – 30 days ff each sale/disposition Property: bldg. with tenant.

3. Fringe Benefit Tax How to account if not yet transferred to heirs?

10th day of the month ff the end of the calendar -taxed as an individual
quarter in which the fringe benefits were granted Taxation for estate:
4. Basic Income Tax Gross income
1st Q – May 15 Less: allowable deductions
2nd Q – Aug 15 Special deduction: distribution of year’s income
rd
3 Q – Nov 15 to the beneficiaries

Annual Return – April 15 of succeeding yr Taxable income of estate

Taxation for beneficiaries:

Compensation

Gross income from busn/practice of profession

Amt received from estate

Taxable income of beneficiaries

Judicial transfer of estate:

Taxed as separate entity, fiduciary files ITR and pays tax

Extrajudicial transfer of estate:

Not taxable as separate entity, the income of the estate is

to be declared by beneficiaries, heirs and beneficiaries file
ITR and pay tax

TRUST - sum of properties

Situation: if incapacitated pa si heirs, ikikeep muna ng

grantor yung mga property or yung inheritance ng heir.
(iaaccumulate)

Three types of trust

1. Irrevocable - taxable as separate entity

2. Revocable - title can revert back to grantor, not taxable

as separate entity

3. Trust in which income is for the benefit of the grantor

(di pa ibibigay ang property until mamatay si grantor),
income of the trust is to be declared and taxed on the
grantor

Taxation of trust:

Gross income

Less: allowable deduction

Special deduction: distribution of year’s income

to the beneficiaries

Taxable income of trust

Taxation of beneficiaries:

Compensation income

Gross income from busn/practice of prof

Amt received from distribution of income

Taxable income of beneficiaries

Consolidation of 2 or more trusts

Requisites

-2 or more trust which derive income

-same person(creator of trust)