Taxation of Individuals

Tax Table for Individual Taxpayers (Year 2018 – Year 2022)

Taxable Income per Year Income Tax Rate
P250,000 and below 0%
Above P250,000 to P400,000 20% of the excess over P250,000
Above P400,000 to P800,000 P30,000 + 25% of the excess over P400,000
Above P800,000 to P2,000,000 P130,000 + 30% of the excess over P800,000
Above P2,000,000 to P8,000,000 P490,000 + 32% of the excess over P2,000,000
Above P8,000,000 P2,410,000 + 35% of the excess over P8,000,000

Year 2023 Onwards

Taxable income Tax due
P250,000 and below None (0%)
Above P250,000 to P400,000 15% of excess above P250,000
0Above P400,000 to P800,000 P22,500 + 20% of excess over P400,000
Above P800,000 to P2,000,000 P102,500 + 25% of excess over P800,000
Above P2,000,000 to P8,000,000 P402,500 + 30% of excess over P2,000,000
Above P8,000,000 P2,205,500 + 35% of excess over P8,000,000

Illustration: Mr. CSO, a minimum wage earner, works for JMV, Inc. He is not engaged in business
nor any other sources of income other than his employment. For 2018, Mr. CSO earned a total
income of P135,000.
a. the taxpayer contributed to the SSS, Philhealth, and HDMF amounting to P5,000 and has
received 13th month pay of P11,000. His income tax liability will be computed as follows:
total compensation income P135,000
less: Mandatory contributions 5,000
non-taxable benefits 11,000 16,000
taxable income P119,000

b. the following year, Mr. CSO earned, aside from his basic wage, additional pay of P140,000 which
consists of the overtime pay – P80,000, night differential – P30,000, hazard pay – P15,000, and
holiday pay – P15,000. He has the same benefits and contributions as above.

Total compensation income P135,000

Add: overtime, night shift, hazard and holiday pay 140,000
Total income P275,000
Less: Mandatory contributions 5,000
non-taxable benefits 11,000 16,000
Taxable income P259,000

Self-employed Individuals earning income purely form self-employment and/or practice

of profession.

Illustration: Mr. EBQ operates a convenience store while she offers bookkeeping services to her
clients. In 2018, her gross sales amounted to P800,000, in addition to her gross receipts from
bookkeeping services of P300,000. She already signified her intention to be taxed at 8% income
tax rate in her 1st quarter return. Her income tax liability for the year will be computed as follows:

Gross sales – convenience store P800,000

Gross receipts – bookkeeping 300,000
Total sales/receipts P1,100,000
Less: amount allowed as deduction 250,000
Taxable income P850,000

Tax due:
P850,000 x 8% P68,000

Illustration: Ms. EBQ above, failed to signify her intention to be taxed at 8% income tax rate on
gross sales in her initial quarterly income tax return, and she incurred cost of sale and operating
expenses amounting to P600,000 and P200,000, respectively, or a total of P800,000; the income
tax shall be computed as follows:

Gross sales/receipts P1,100,000

Less: cost of sales 600,000
Gross income P 500,000
Less: operating expenses 200,000
Taxable income P 300,000

Tax due:
(P300,000-250,000) x 20% P 10,000

Illustration: Mr. JMLH signified his intention to be taxed at 8% income tax rate on gross sales in
his 1st quarter income tax return. He has no other source of income. His gross sales for the first
three (3) quarters amounted to P3,000,000 with 4 th quarter sales of P3,500,000.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

(8% rate) (8% rate) (8% rate)
Gross sales/receipts P500,000 P500,000 P2,000,000
P3,500,000
Less: cost of sales 300,000 300,000 1,200,000 1,200,000
Gross income 200,000 200,000 800,000
2,300,000
Less: operating expenses 120,000 120,000 480,000 720,000
Taxable income P 80,000 P 80,000 P 320,000 P1,580,000

Tax due shall be computed as follows:

Total sales P6,500,000

Less: cost of sales 3,000,000
Gross income 3,500,000
Less: operating expenses 1,440,000
Taxable income P2,060,000

Tax due under graduated rates

[P490,000 + (P60,000 x 32%)] P509,200
Less: 8% income tax previously paid
(P3,000,000 – P250,000) x 8% 220,000
Annual income tax payable P289,200

Illustration: Ms. RPSV is a prominent independent contractor who offers architectural and
engineering services. Since her career flourished, her total gross receipts amounted to P4,250,000
for taxable year 2018. Her recorded cost of service and operating expenses were P2,150,000 and
P1,000,000, respectively. Her income tax liability will be computed as follows:

Gross receipts P4,250,000

Less: cost of service 2,150,000
Gross income 2,100,000
Less: operating expenses 1,000,000
Taxable income P1,100,000

Tax due:
On P800,000 P 130,000
On excess (300,000 x 30%) 90,000
Income tax due P 220,000

Illustration: in 2018, Mr. GCC owns a nightclub and videoke bar, with gross sales/receipts of
P2,500,000. His cost of sales and operating expenses are P1,000,000 and P600,000, respectively,
and with non-operating income of P100,000. His tax due for 2018 shall be computed as follows:

Gross sales P2,500,000

Less: cost of sales 1,000,000
Gross income 1,500,000
Less: operating expenses 600,000
Net income from operation 900,000
Add: non-operating income 100,000
Taxable income P1,000,000

Tax due:
On P800,000 P 130,000
On excess (P200,000 x 30%) 60,000
Total income tax P 190,000

Illustration: Mr. MAG, a financial comptroller of JMV Company, earned annual compensation in
2018 of P1,500,000, inclusive of 13th month and other benefits in the amount of P120,0000 but net
of mandatory contributions to SSS and Philhealth. Aside from employment income, he owns
convenience store, with gross sales of P2,400,000. His cost of sales and operating expenses are
P1,000,000 and P600,000, respectively, and with non-operating income of P100,000.

a. his tax due for 2018 shall be computed as follows if he opted to be taxed at 8% income tax rate
on his gross sales for his income from business:

Total compensation income P1,500,000

th
Less: non-taxable 13 month pay and other benefits (max/limit) 90,000
Taxable compensation income P1,410,000

tax due:
ON COMPENSATION
On P800,000 P 130,000
On excess (1,410,000-800,000) x 30% 183,000
Tax due on compensation income P 313,000

ON BUSINESS INCOME
Gross sales P2,400,000
Add: non-operating income 100,000
Taxable business income P2,500,000
Multiplied by income tax rate 8%
Tax due on business income P 200,000

Total income tax due P 513,000

b. his tax due on 2018 shall be computed as follows if he did not opted for the 8% income tax
based on gross sales/receipts and other non-operating income:

Total compensation income P1,500,000

th
Less: non-taxable 13 month pay and other benefits (max/limit) 90,000
Taxable compensation income P1,410,000
Add: taxable income from business
Gross sales P2,400,000
Less: cost of sales 1,000,000
Gross income P1,400,000
Less: operating expenses 600,000
Net income from operations P 800,000
Add: non-operating income 100,000 900,000
Total taxable income P2,310,000
Tax due:
on P2,000,000 P490,000
on excess (2,310,000 – 2,000,000) x 32% 99,200
Total income tax due P589,200

c. on February 2019, taxpayer tendered his resignation to concentrate on his business. His total
compensation income amounted to P150,000, inclusive of benefits of P20,000. His business
operations for taxable year 2019 remains the same, he opted for the 8% income tax rate.

Total compensation income P150,000

Less: non-taxable benefits 20,000
Taxable compensation income P130,000

Tax due:
ON COMPENSATION
On P130,0000 (not over P250,000) 0

ON BUSINESS INCOME
Gross sales P2,400,000
Add: non-operating income 100,000
Taxable business income P2,500,000
Multiply by income tax rate 8%
Tax due on business income P 200,000
Total income tax due P 200,000

Illustration: Mr. WBV, an officer of AMBS international Corp., earned in 2018 an annual
compensation of P1,200,000, inclusive of 13th month and other benefits in the amount of P120,000.
Aside from his employment income, he owns a farm, with gross sales of P3,500,000. His cost of
sales and operating expenses are P1,000,000 and P600,000, respectively, and with non-operating
income of P100,000. His tax liability for 2018 shall be computed as follows:

Total compensation income P1,200,000

Less: non-taxable 13th month pay and other benefits 90,000
Taxable compensation income P1,110,000
Add: taxable income from business
Gross sales P3,500,000
Less: cost of sales 1,000,000
Gross income 2,500,000
Less: operating expenses 600,000
Net income from operations P1,900,000
Add: non-operating income 100,000 2,000,000
Total taxable income P3,110,000

Tax due:
On P2,000,000 P 490,000
On excess (3,110,000-2,000,000) x 32% 355,200
Total income tax due P 845,200