● National Internal Revenue Code (NIRC)- 1977 1.

Basic income tax or graduated tax- for regular

● Tax Reform for Acceleration and Inclusion income.
(TRAIN)- signed on December 19, 2017,
implemented on January 1, 2018 Self-Employed and Professionals (SEP)
● Corporate Recovery and Tax Incentives for Self Employed- sole proprietor or independent contractor who
Enterprises Act (CREATE)- April 2021 reports income earned from self-employment, they control who
● Bayanihan to Recover as One (Bayanihan 2) they work for, how and when it is done.
Professionals- having a complete required course of studies
Chapter 2: Income Tax for Individuals and/or practice, whose competence can usually be measured
Individual Taxpayers- natural persons with income derived against an established set of standards.
from within the territorial jurisdiction of a taxing authority.
- SEP is classified as regular income.
Classification of Individual Taxpayers: - Subject to 2 types of taxes (income and business tax).
1. Nonresident citizen - Option to avail 8% preferential tax became effective
- Physical presence abroad with the intention to reside. upon effectivity of TRAIN or beginning 2018.
- Leaves PH during taxable year to reside abroad
● As immigrant; or Business tax can be:
● For permanent employment; or - Percentage tax
● Work requires him physically abroad most of ● July 1, 2020 to June 30, 2023: 1%
the time. ● July 1, 2023: 3%
- Stayed outside the PH for 183 days or more (aggregate). - Preferential tax
2. Resident citizen- a PH citizen taxpayer who does not - VAT
classify as NRC.
3. Resident alien- residence is within the PH but is not a Requisites to Avail 8% Preferential Tax:
citizen. 1. Gross sales is not more than 3,000,000;
NOTE: An alien who comes to the PH for the purpose that 2. SEP is non-vat registered;
requires extended stay for accomplishment, is considered RA, 3. Gross sales or receipts are not from vat-exempt sales
and his home is temporarily in the PH. and transactions;
4. Nonresident alien- residence is not within the PH and 4. SEP is not subject to percentage tax;
not a citizen. 5. SEP signifies his or her intention to elect 8% income
● Engaged in trade or business- stayed in the PH tax.
for more than 180 days and who have business
income in the PH. In purely SEP:
● Not engaged in trade or business- not deriving Less than 3,000,000
business income in the PH. ● First option: graduated tax for income and percentage
tax for business.
● Second option: (gross sales - 250,000) × 8%
More than 3,000,000
Taxpayer Tax base Sources of taxable
● Only option: graduated tax for income and 12% VAT on
income
business.
RC Net income Within and
In mixed income SEP:
without
Less than 3,000,000
● First option: graduated tax for SEP and compensation
NRC, RA, Net income Within
and percentage tax for SEP only.
NRA-ETB
● Second option: gross sales × 8%
More than 3,000,000
NRA-NETB Gross income Within
● Only option: graduated tax for SEP and compensation
and 12% VAT for SEP only.

Citizens of the Philippines If the SEP’s Gross Sales Exceeded VAT Threshold During the
1. Citizen of the PH at the adoption of 1987 constitution. Year: (income taxes are filed quarterly)
2. Whose mothers and fathers are citizens of the PH. - Taxpayer will be liable for business plus income tax.
3. Those born before January 17, 1973, of Filipino - Taxpayer is required to update his registration from
mothers, who elect PH citizenship upon reaching age of non-vat to vat taxpayer (within 30 days from the close
majority. of the month the threshold was breached).
4. Naturalized in accordance with law. - Percentage tax imposed from the beginning until
taxpayer is liable to VAT.
Types of Income Tax ● Percentage tax: imposed on the first 3,000,000.
● VAT: excess of the threshold.
 - Percentage tax shall be collected without penalty if b. Sale of properties (6%), requisites: (regardless of
timely paid. gain or loss)
- Capital asset.
2. Final withholding tax- - Located in the PH.
- for passive income from sources within the PH (if NOTE: Sale of real property to the government gives the
passive income is derived abroad, then it is subject to individual taxpayer an option to be taxed at 6% CGT or
basic tax). basic income tax.
- It is not creditable on income tax due.
- It is prescribed on certain incomes like interest, 2. Percentage tax- share of stock sold or disposed
royalties, dividends, prizes, and other winnings. through local stock exchange is subject to percentage
- Taxpayer is not required to file an income tax return. tax of 6/10 of 1% of gross selling price (aka. Stock
Transaction Tax).
Deposit substitutes- alternative form of obtaining funds from the
public, other than deposits. 3. Basic income tax:
- Gain on sale of vehicle for personal use.
Public- borrowing from 20 or more individual or corporate - Gain on sale of jewelry for personal use.
lenders at any one time.
Sale of Principal Residence- family home of the individual
- Government debt instruments despite the number of taxpayer. It is where an individual and his family resides as a
lenders deemed as deposit substitutes (if traded or permanent dwelling, or whenever absent, wherein the individual
exchanged in the secondary market) shall be subject to intends to return. It is the address indicated in the latest tax
FWT. return, certified by the barangay chairman or building
administrator if the residence is a condominium.
Deposit substitutes shall be tax exempt when: Compliance with the preliminary conditions for 6%
1. Depositor: individuals except NRA-NETB. exemption will be sufficient basis to approve and issue
2. Deposit is under the name of the individual. Certificate Authorizing Registration (CAR) or Tax Clearance
3. In the form prescribed by BSP. Certificate (TCC) of the principal residence disposed.
4. Issued by banks licensed by BSP.
5. Maturity period is 5 or more years. Requisites for Tax Exemption:
6. Denominations of 10,000. 1. Proceeds are fully utilized 18 months after sale of
7. Should not be terminated before the 5th year. principal residence with the intention of using proceeds
to new principal residence.
Income tax exemption on interest income derived by - If not fully utilized: the gain is subject to CGT.
individuals investing in common or individual trust funds or - Computation: Unutilized portion ÷ Gross selling price ×
investment management account, conditions: GSP or FMC (whichever is higher).
1. Must be managed by banks licensed by BSP. 2. BIR is notified by the taxpayer within 30 days from sale
2. Must comply with the requirements of Sec. 22 of NIRC. of his intention to avail tax exemption.
3. Must hold on to the investment for at least 5 years, 3. Historical cost is the basis of a new principal residence.
uninterrupted and continuous. 4. This kind of exemption is availed once every 10 years.

Pre-termination of long-term deposit, if they held it for: Creditable Withholding Tax- method of collecting income tax
- 4 to less than 5 years, then it is subject to 5% tax. in advance from the recipient of income through the payor
- 3 to less than 4 years, then it is subject to 12% tax. (withholding agent of the government).
- less than 3 years, then it is subject to 20% tax.
Income Tax Due of Married Taxpayers- husband and wife
3. Capital gains tax- sale of capital assets. shall compute their separate income tax, but if any income cannot
Ordinary asset- assets used or held for sale in the ordinary be determined as income exclusively earned or realized by either
course of business. of the spouses, the same is divided equally between them.
Capital asset- assets used or held for sale in the ordinary course
of business. Minimum Wage Earners (MWE)- worker in the private sector
paid the statutory minimum wage or an employee in the public
Capital gains and what kind of tax to be imposed: sector with compensation income not more than statutory
1. CGT minimum wage in a non-agricultural sector. MWE are exempt
a. Capital gain on shares of stock (15%), requisites: from income tax on:
- From a DC. 1. Minimum wage
- Must not be through (listed or traded) local stock 2. Holiday pay
exchange. Hence, sale is made directly through the 3. Overtime pay
buyer. 4. Night shift differential
- Seller should not be a dealer in securities. 5. Hazard pay
- Transaction should result in a capital gain.
Prior 2018: 13th month pay and other benefits are exempt from 2. Final Withholding Tax
income and creditable withholding tax. - Prior 2018:
Beginning January 1, 2018: The exclusion shall not exceed ● Jan-Nov: 10th day of the month following the
90,000. Otherwise, the excess would be subject to income and month where withholding was made.
creditable withholding tax. ● Dec: Jan. 15 of the succeeding year.
- Beginning 2018: shall be filed not later than the last day
Hazard Pay Given to MWE- dangerous workplaces which of the month ff. the close if taxable quarter
affects the entire population in a locality as air, land, and water 3. Capital Gains Tax
borne and noise hazards are compensable. - Shares of stock
● Ordinary return- within 30 days after each
Senior Citizen (SC) and Persons with Disabilities (PWD)- transaction.
subject to income tax in the same manner as ordinary individual ● Final consolidated return-on or before April 15
taxpayers. However, if they are a MWE, rules under MWE are of the ff. year.
applicable. If the gross income earned is not more than 250,000 - Real property: within 30 days ff. each sale or other
he shall be exempt from income tax but can still be liable for disposition.
other taxes.
Manner of Filing
Benefits for SC and PWD a. Manual filing
1. 20% discount and exemption from VAT on purchased b. Electronic Filing and Payment System (EFPS)
goods and services. c. eBIR Forms
2. 5% discount on basic and prime commodities.
3. 500 pesos monthly social pension, for indigent senior Payment
citizens. - Generally, pay as you file system.
4. Death benefit assistance. - If tax due is more than 2,000 the individual may pay in
5. 5% discount on utilities. two installments
6. Income tax exemption for MWE whose annual income ● First installment: at the time of filing the
does not exceed 250,000. annual ITR.
● Second installment: on or before October 15 ff.
Taxation of Alien Individuals Employed by Philippine the close of the calendar year.
Offshore Gaming Operation (POGO) or Offshore Gaming
Licensee (OGL) Chapter 5: Income Tax on Corporation
Corporation- an artificial being created by operation of law,
POGO- operation by an OGL of online game or sporting event having rights of succession and the powers, attributes, and
using a software program, exclusively for non-Filipinos. properties expressly authorized by law or incidental to its
existence.
OGL- also referred to as Interactive Gaming Licensee. Offshore
gaming operator, whether PH-based or foreign-based, duly Corporation includes:
authorized and licensed by Philippine Amusement and Gaming 1. One Person Corporation
Corporation. 2. Partnership
3. Joint stock companies- when a group of individuals
OGL-Gaming Agent- representative in the PH of a acting jointly. Has corporate characteristics, but
foreign-based OGL. operating without formal government authority.
4. Joint accounts (cuentas en participacion)- when one
Applicable Income Tax interests himself in the business of another by
1. Gross income from OGL: 25% FWT or 12,500 per contributing capital, not subject to any formality and
month (whichever is higher) may be privately contracted (orally or in writing).
2. Other income within the PH: subject to pertinent income 5. Associations- all organizations which have substantial
tax. salient features of a corporation.
6. Insurance companies
OGL shall have Tax Identification Number (TIN). Without this,
they are liable for a fine of 20,000 pesos and revocation of their Corporation does not include:
licenses or temporary ban in employing foreign nationals for 1. General Professional Partnership
their operations. - formed by persons for the sole purpose of exercising a
common profession.
Filing of Income Tax Return - No part of income is from trade or business.
1. Basic Tax 2. Joint venture or Consortium- commercial undertaking
- Purely compensation: once a year (an or before April 15 by two or more persons. Generally taxable as a
the ff. year). corporation.
- Business income earners including income from practice
of profession: quarterly (45 days after end of quarter). Two Types of Tax Exempt Joint Venture:
 1. Undertaking construction projects pursuant to and turning back the proceeds of sales less selling on the
Presidential Decree No. 929, to assist local contractors basis of quantity produced finished by them.
in achieving competitiveness with foreign contractors.
Requisites of corporate tax exemption for joint venture NOTE: Income mentioned in the preceding paragraph
undertaking construction projects not considered a conducted for profit shall be subject to tax.
corporation:
a. Formed for the purpose of undertaking a construction Taxation of Organization And Corporation of NIRC
project; - requirements for the grant of tax exemption is strictly
b. Involve joining or pooling resources that is licensed as construed, corporation claiming tax exemption must
general contractor by the Philippine Contractors show that it is organized and operated for the purpose
Accreditation Board (PCAB) of the Department of under Sec. 30:
Trade and Industry (DTI); 1. Income tax exemption, not absolute- only covers
c. Contractors are engaged in construction business; and income derived in furtherance of the purpose for which
d. Joint venture must be licensed as such by PCAB of DTI. it was organized.
2. Engaging in petroleum, coal, geothermal, and other 2. Obligations as withholding agent for the
energy operations pursuant to an operating consortium government- tax exemption granted does not cover
agreement under a service contract with the government. withholding taxes (on compensation income of
employees of the corporation and income payments to
Requisites of non-taxable corporation of joint venture persons). Corporation or association is constituted as a
involving foreign contractors: withholding agent for the government.
1. Special license as contractor by PCAB. 3. Liability for VAT
2. Construction project certified by appropriate Tendering - Purchase of goods, properties or services and
Agency (government office) that the project is: importation of goods by a corporation under Sec. 30 is
- Foreign financed or internationally funded; and subject to 12% VAT.
- International bidding is allowed under Bilateral - Corporation engaged in sale of goods or services, if:
Agreement (Philippine government and Foreign or ● > 3 million- 12% VAT
international financing institution) pursuant to ● < 3 million- Percentage tax
implementing rules and regulations of RA No. 4566
(Contractor’s License Law). Operational and Organizational Tests in Determining
Entitlement to Exemption under Sec 30 of NIRC
NOTE: Joint ventures not taxable as corporation shall be 1. Organizational test-requires the corporation or
responsible in reporting income taxes on their share to the association’s constitutive documents (SEC registration,
joint venture profit. AOI, and Bylaws). and the organization must serve a
public rather than a private purpose.
Tax Exempt Corporations: 2. Operational test- requires that the regular activities are
1. Labor, agricultural, or horticultural organization not exclusively devoted to accomplishment if the purposes
organized principally for profits. specified in Sec. 30. A corporation fails to meet this test
2. Mutual savings banks not having capital stock if their activities are conducted for profit, it must be
represented by shares, and cooperative banks without nonprofit.
capital stock, for mutual purposes and without profit. - Nonprofit- no net income or asset accrues to or benefit
3. A beneficiary, society, order or association operating for members or specific persons, with all the net income or
the exclusive benefit of the members, or mutual aid profit devoted to the institution’s purpose and conducted
association or nonstock corporation . not for profit.
4. Cemetery company (for the benefit of the members).
5. Nonstock corporation or association for religious, Types of Corporations (for taxation purposes)
charitable, scientific, athletic, or cultural purposes, or 1. Domestic Corporation- created under PH law.
rehabilitation of veterans. 2. Resident Foreign Corporation- not created under PH law
6. Business league, chamber of commerce, or board of but secures a license to operate in the PH from the
trade (nonprofit). Securities and Exchange Commission (SEC).
7. Civic league or organization exclusively operated for 3. Nonresident Foreign Corporation- not created under PH
promotion of social welfare. law and does not have license to operate in the PH.
8. Nonstock nonprofit educational institution.
9. Government education institution.
Types of Sources of Income Tax Base
10. Farmers, mutual typhoon, fire insurance company,
Corporation
mutual ditch or irrigation company, mutual or
cooperative telephone company, and organizations of
DC Within and Net income
pure local character (income is for the sole purpose of
without
meeting its expenses).
11. Farmers, fruit growers, or like organizations organized
RFC Within Net income
ss s sales agent for marketing the product of its members
 2. Force majeure (unforeseeable events or acts of God)
NRFC Within Gross income
3. Legitimate business reverses

Income Taxes on Corporations Corporations Exempt from MCIT:

1. Regular Corporate Income Tax (RCIT) or basic 1. DC
income tax- also referred to as normal corporate tax, - Proprietary Educational Institutions
derived from regular conduct of trade and business, - Non-profit hospitals
including incidental income. Prior to CREATE, the rate - If engaged in depository banks under the expanded
is 30%. foreign currency deposit unit (FCDUs) on income from
foreign currency transactions with local commercial
Effectivity of revised RCIT under CREATE: banks and other depository banks under FCDUs.
- DC and RFC- July 1, 2020 2. Resident Foreign Corporations
- NRFC- January 1, 2021 - International carriers
- Regional Operating Headquarters (ROHQs) up to 2021
Generally, RCIT rate for DC under CREATE is 25%. However, if taxable year.
the DC is classified as MSME (Micro Small and Medium 3. Corporations registered under Philippine Economic
Enterprises), 20% rate shall be applied. It is classified as MSME Zone Authority (PEZA) and Bases Conversion
if: Development Authority (BCDA)
1. Net taxable income is not more than 5M; and
2. Assets are not more than 100M (excluding land of the Under CREATE, NRFC not engaged in trade or business in the
business entity’s office). PH shall pay 25% (previously 30%) of gross income beginning
NOTE: Prior to CREATE, rate for MSME is not applicable January 1, 2021 from all sources within the PH except
reinsurance premiums and income tax subject to CGT.
Minimum Corporate Income Tax (MCIT)- imposed upon DC
and RFC beginning in the 4th year of operation following the Government Owned and Controlled Corporations (GOCCs)
taxable year in which the corporation commenced its business shall pay tax upon their taxable income except:
and computed quarterly on the gross income. MCIT shall be 1. Government Service Insurance System (GSIS)
compared to RCIT, whichever is higher shall be applied as the 2. Social Security System (SSS)
tax due. 3. Philippine Health Insurance Corporation (PHIC)
MCIT rate: 4. Local Water Districts under RA10026
- TRAIN, beginning January 1, 2018: 2% 5. Home Development Mutual Fund (HDMF) also known
- CREATE as Pag- Ibig Fund (exempt upon effectivity of CREATE)
● From July 1, 2020- June 30, 2023: 1%
● Beginning July 1, 2023: 2% - Income of a government agency arising from
NOTE: The transition period is 2020 and 2023, a rate of governmental functions: exempt
1.5% shall be used for MCIT and 27.5 for RCIT. - Income of a government agency arising from
proprietary functions: taxable
MCIT shall be imposed whenever:
1. Zero taxable income NOTE: Corporations created by special laws or charters
2. Negative taxable income shall be taxed based on the provisions of the special law or
3. Amount of MCIT is greater than RCIT in the 4th year of charter creating them.
operation.
2. Final Withholding Tax (FWT)- on certain passive
Carry forward of excess MCIT- excess of MCIT over RCIT incomes derived from sources within the PH and shall
shall be carried forward and credited against RCIT for the 3 pertain only to interest income, royalties, and dividends
succeeding taxable years.
Interest DC RFC NRFC
Net Operating Loss Carry-Over (NOLCO)- during the year,
Income
net operating loss may be carried over as part of deductible
expenses of a corporation for the next 3 succeeding years.
All 20% 20% 25%
However, under Bayanihan Act II, loss shall be carried over as a
deductible from gross income for the next 5 consecutive years From 15% 15% Exempt
following the loss. depository
bank under
Secretary of Finance is authorized to suspend imposition of expanded
MCIT due to: FCDS/FCDU
1. Losses on account of prolonged labor disputes- arises
from a strike staged by employees that lasted for more - Income derived by depository bank under FCDS from
than 6 months which resulted in a temporary shutdown foreign currency transaction with nonresidents, OBUs in
of business operations.
 the PH, and local commercial bank (includes foreign for a maximum of 2 years at the time of the dividends
bank branches): Exempt distribution.
- Interest income by a depository bank under expanded - Foreign corporation has been in existence for less than 2
FCDS:10% FWT years at the time of the dividend distribution, then DC
- Any income of nonresidents from transactions under must have held 20% in value of the foreign
expanded system: Exempt corporation’s outstanding shares during the entire
NOTE: existence of the corporation.
- Prior CREATE NRFCs are generally subject to 30% NOTE: Dividend income received from NRFC are treated as
FWT and FWT rate was 7.5% foreign-sourced dividend.
- FWT on interest income derived from FCDS/FCDU
deposit is not applicable to NRFC and NR Share in income received from joint venture is treated as
individuals. dividend income
- FWT are excluded in taxable income or returnable - Dividend income received by DC from DC shall be
income (subject to RCIT) considered as inter-corporate dividend which is tax
exempt.
- JV profit shall be included in the computation of
Royalties DC RFC NRFC
corporate co-venturer’s taxable income subject to RCIT.
TRAIN 20% 20% 30%
3. Capital Gains Tax (CGT) imposed on the sale of the
types of capital asset
CREATE 20% 20% 25%
a. Sale of shares of stock, requisites:
NOTE: If the royalty was generated in the active pursuit and 1. Must be from DC;
performance of the corporation's primary purpose, then it is 2. Must not be through local stock exchange, sale
subject to basic tax rather than FWT. is directly to the buyer (if through local stock
exchange, it is subject to Stock Transaction
Dividends Tax)
- From DC to DC and RFC: Exempt 3. Seller should not be a dealer in securities held
- From DC to NRFC: 25% or 15% as capital asset or for investment purposes;
● Generally, 25%. However, the rate is reduced to 15% 4. Should result to a gain.
because of the Tax Sparing Rule.
Tax Sparing Rule- one country will generally reduce the tax it
Formula: Domestic Foreign (CREATE)
imposes on income derived from the other country if the income
(TRAIN)
is already taxed in the other country at a specified rate.
Selling xxx xxx xxx
- From Foreign Corporation, PH-sourced dividend to DC:
price
Exempt
- From Foreign Corporation, PH-sourced dividend to
Cost (xxx) (xxx) (xxx)
RFC: RCIT
- From Foreign Corporation, PH-sourced dividend to
Capital xxx xxx xxx
NRFC: FWT
Gain
- From Foreign Corporation, Foreign-sourced dividend to Rate ×15% ×5% and ×15%
DC: Exempt 10%
- From Foreign Corporation, Foreign-sourced dividend to
RFC and NRFC: Non-taxable CGT xxx xxx xxx
● At least 50%, the entire dividend is considered derived
from within the PH and is exempt. Foreign Corporation under TRAIN, computation:
● Less than 50%, the entire dividend is considered derived - 5% on the first 100k capital gains; and
abroad and is exempt under certain conditions, which - 10% in excess of 100k capital gains.
are:
1. Dividends received and remitted into the PH are b. Sale of real properties, requisites:
reinvested within the next taxable year; 1. Must be a capital asset; and
2. Dividends received shall only be used to fund the 2. Located in the PH
working capital requirements, capital expenditures,
dividend payments, investment in domestic subsidiaries, Tax base: Selling, FMV, and Zonal value- whichever is higher
and infrastructure projects; and
3.
- DC holds at least 20% in value of the outstanding shares
Formula:
of the foreign corporation and has held shareholdings
 Tax base xxx
Exemption from Real Property Tax
- Charitable institutions, churches, parsonages or
Rate 6%
covenants appurtenant, mosques, nonprofit or religious
cemeteries, and those which are used for religious,
CGR xxx
charitable, and educational purposes.

Branch Profit Remittance Tax (BPRT)- profit connected with Proprietary (private) Hospitals must satisfy the following
or arises from the conduct of trade and business in the PH requisites in order to be entitled to exemption from income
remitted by a branch to its head office shall be subject to 15% tax tax:
and is applicable only to a RFC which is a branch of a NRFC. 1. It is a nonstock corporation;
2. Operated exclusively for charitable purposes; and
Special Corporation- DC: 3. No net income or asset accrues to or benefit members or
Proprietary Educational Institutions and Nonprofit Hospitals specific persons.
Special Corporation Tax rates:
- TRAIN: 10% NOTE:
- CREATE - Nonprofit does not necessarily mean charitable.
● From July 1, 2020 to June 30, 2023: 1% - Proprietary educational institutions and hospitals
● Beginning July 1, 2023: 10% are not subject to MCIT.

- If the unrelated income is less than 50% of the related Special Corporation- RFC:
income, use special corporation tax rates. International Carriers:
- If the unrelated income is greater than 50% of the - International Air Carrier- foreign airline corporation
related income, use RCIT. having landing rights and doing business in PH to
- Computed at gross profit. perform international air transportation services
anywhere in the world.
NOTE: Capital expenditures for expansion of school facilities ● On-line carriers- international air carriers
may not be capitalized and claimed as outright expense (shall having or maintaining flight operations to and
not apply to nonprofit hospitals). from the PH.
● Off-line carriers- international air carriers
Proprietary educational institution, may, at its option, elect having no flight operations to and from the PH.
either: - International Sea Carrier- foreign shipping corporation
1. Deduct expenditures considered as capital outlays of doing business and having touched or intention of
depreciable assets for expansion of school facilities touching any PH port to perform international sea
[gross profit- (amount÷useful life)]; or transportation services anywhere in the world.
2. Capitalize expenditure and claim deduction from gross ● On-line carriers- having maintained business
income for an allowance for depreciation (gross profit - establishment in the PH for sale of ticket or
amount). passage documents.
Preferential Corporate Income Tax Rate, if related income > ● Off-line carriers- shipping companies operate
unrelated income: without touching PH port.
- TRAIN: 10% Income Tax:
- CREATE International carriers originating from any port or point in the PH
● From July 1, 2020 to June 30, 2023: 1% are subject to Gross Philippine Billings Tax of 2.5%.
● Beginning July 1, 2023: 10%
If related income < unrelated income: RCIT Classification:
Coverage: - per point of destination;
1. Proprietary Educational Institutions- private schools - per class of passage (first, business, economy); and
with an issued permit to operate from DepEd, CHED, or - classification of passenger (adult, child or infant)
TESDA.
2. Nonstock, Non-profit Educational Institutions- net Gross Philippine Billings (GPB)
income or assets accrue or inure to or benefit any 1. International Air Carrier- amount of gross revenue
member of specific persons, if not, the portion not used derived from carriage of persons, excess baggage, cargo
for educational purposes is subject to RCIT. and mail originating from the PH in a continuous and
3. Nonprofit Hospitals uninterrupted flight, regardless of the place of sale and
and payment of ticket.
Government Educational Institutions (GEI)- public university - Gross revenue whose tickets are sold in the PH- actual
or college fully owned and subsidized by the government. It is amount derived as reflected in the remittance area of the
created by charter or law passed by the Congress, not subject to tax coupon. GPB is determined by monthly average net
preferential rate. GEI are exempt unless there is income from fare of tax coupon issued per classification, multiplied
activity conducted for profit, which is subject to RCIT.
 by the total number of passengers flown as declared in - Beginning January 1, 2022, ROHQs are no longer
the flight manifest. special corporations and shall be subject to RCIT.
- Gross revenue whose tickets are sold outside the PH-
gross revenue is determined using the locally available Regional Headquarters (RHQ)- office whose purpose is to act
net fares applicable to such flights considering the as an administrative branch of a multinational company engaged
seasonal fare rate, classifications, date of embarkation, in the international trade which principally serves as a
and place of final destination. GPB is determined by supervision, communications, and coordination and other foreign
monthly average net fare of tax coupon issued per markets and which does not earn or derive income in the PH, and
classification, multiplied by the total number of is therefore, tax exempt but constituted as withholding agent if:
passengers flown as declared in the flight manifest. 1. It acts as an employer; and
NOTE: Nonrevenue passengers and refunded tickets are not 2. If its employees receive compensation income subject to
included in the computation of GPB. withholding tax; or
3. It makes income payments to individuals or
2. International shipping- gross revenue originating from corporations subject to expanded withholding tax
the PH up to final destination, regardless of place or (EWT)
payment of passage of freight documents. The
computation shall be the total amount of gross revenue Special Corporation- NRFC
from the PH up to the final destination, regardless of the - Cinematic film owner, lessor, or distributor (Gross
place of sale or payment of the ticket. income): 25%
- Owner or lessor of vessels chartered by PH Nationals
NOTE: (Gross rentals, lease or charter fees): 4.5%
- Tickets revalidated, exchanged or endorsed to - Owner or lessor of aircraft, machineries, and other
another international airline form part of the GPB if equipment (Gross rentals, charter or other fees): 7.5%
a passenger boards in the PH.
- Flight which originates from the PH, but Offshore Banking Units (OBUs)- branch, subsidiary, or affiliate
transshipment takes place outside PH, only a portion of a foreign banking corporation located in an Offshore Financial
of the cost shall form part of the GPB. Center (OFC) which is duly authorized by the BSP to transact
offshore business in the PH in accordance with the provision of
Exemption: P.D. 1034.
1. Tax treaty - Under TRAIN, subject to 10% FWT
2. International agreement - Under CREATE, OBUs are now taxable as ordinary
3. Reciprocity- an international carrier whose home RFC subject to RCIT.
country grants income tax exemption of PH carriers,
shall likewise be exempt from income tax. Filing of Income Tax Returns- made by the President, Vice, or
other principal officers on behalf of the company. It shall be
- Return trip- not included as part of the GPB. sworn to by the above officers and by the Treasurer or its
- Transshipment (flight interrupted by force majeure)- assistant.
GPB shall be determined based on the portion of flight
from the PH to the point of transshipment. It shall contain:
1. Corporate profile and information;
Regional Operating Headquarters (ROHQs)- branch 2. Gross sales, receipts, income (except income subject to
established in the PH by multinational companies, allowed to final tax);
derive income in the PH by performing qualifying services to its 3. Allowable deductions;
affiliates, subsidiaries, or branches in the PH or in other foreign 4. Taxable income
markets and which are engaged in the following services: 5. Income tax due and payable
1. General administration and planning;
2. Business planning and coordination; Types of Filing:
3. Corporate finance advisory services; 1. Manual Filing
4. Marketing control and sales promotion; - Quarterly: on or before 60th dat following the close of
5. Training personnel management; the taxable quarter
6. Logistic services; - Annual: on or before the 15th day of the 4th month
7. Research and development services and product following the end of the taxable year (April 15, for
development; corporations using calendar year period)
8. Technical support and maintenance; - Place of filing: Authorized Agent Banks (AAB) or
9. Data processing and communications; Revenue District Office (RDO), collection agent, or
10. Business development. duly authorized treasurer of the city or municipality of
the principal location of the business.
- July 1, 2020- December 2021, ROHQs are subject to 2. Electronic Filing and Payment System (EFPS)-
10% preferential tax. system developed and maintained by the BIR for
 electronically filing tax returns and paying taxes due 6. LGU, except barangays.
through the internet 7. Cooperatives registered with National Electrification
- Filing reference number: to acknowledge that a tax Administration (NEA) and Local Water Utilities
return has been successfully filed. Administration (LWUA)
- Acknowledgement number: control number to BIR to NOTE: Taxpayers who are not covered may opt to file
confirm that tax payment has been credited to the returns using the manual filing and eBIR forms.
account of the government.
- Confirmation number: to acknowledge that the Chapter 6: Income Tax on Partnership
taxpayer’s account has been successfully debited Partnership- contract whereby 2 or more persons bind
themselves to contribute money, property, or industry to a
Persons Required to File and Pay Under EFPS: common fund, with the intention of dividing the profits among
1. Large taxpayers notified by BIR themselves.
2. Top 20,000 private corporations notified by BIR
3. Top 5,000 individual taxpayers notified by BIR Kinds of Partnership for Tax Purposes
4. Corporations with paid-up capital stock of 10,000,000 1. General Professional Partnership (GPP)- partnership
and above formed by persons for the purpose of exercising their
5. Procuring government agencies (withholding of VAT common profession and no part of income is derived
and percentage taxes) from engaging in trade and business.
6. Taxpayer Account Management Program (TAMP) - Generally, GPP is not subject to income and creditable
taxpayers withholding tax, however, GPP is required to file
7. Accredited Importer and Prospective Importer required income tax return for the purpose of furnishing
to secure BIR-ICC and BIR-BCC information as to the share of each partner to which each
8. National government agencies of the partners shall include his individual tax return.
9. Insurance companies and stock brokers GPP shall be computed in the same manner as
10. All licensed local contractors corporation.
11. Enterprises enjoying fiscal incentives: - Each partner shall report as gross income of his or her
- PEZA distributive share in the net income of the partnership.
- Board of Investments
- Various zone activities Income payments made periodically by GPP to the partners is
- Cagayan Special Economic Zone Authority subject to:
- Export Development Council - If more than 720k, 15% CWT
- Tourism Infrastructure and Enterprise Zone - If less than 720k, 10% CWT
Authority
- PHIVIDEC Industrial Authority NOTE: Tax exemption of GPP shall only pertain to ordinary
3. Use of Electronic BIR Forms- to provide taxpayers income.
particularly the non-eFPS filers with accessible and convenient
service through easy preparation of tax returns. 2. General Partnership (Commercial Partnership)- for
income tax purposes, it is considered a corporation.
2 Types of Electronic Services Provided by BIR Partners are considered shareholders, therefore, profits
1. eBIR Forms System for Online Filing- accepts tax distributed are considered as dividends subject to FWT.
returns submitted online and automatically computes Distributive share is equal to each partner’s distributive
penalties for tax returns submitted beyond due date. share of the net income declared by the partnership for a
2. eBIR Forms Package- tax preparation software that taxable year.
allows taxpayer and Accredited Tax Agent to
accomplish or fill up tax forms online. Allowable Deductions to GPP- for purposes of computing
distributive share of the partners, net income shall be computer in
Top Withholding Agents (TWAs)- taxpayers whose sales or the same manner as a corporation. The ff. may be allowed as
receipt, gross purchases, or claimed deductible expenses deductions from the gross income:
amounted to 12 million during the preceding year. TWAs will 1. Itemized deductions- ordinary and necessary, incurred
remain as such until they fail to satisfy the 12 million criterion. or paid for the practice of profession.
2. Optional Standard Deduction (OSD)- 40% of gross
Mandatory eBIR Forms and Mandatory e-Filing (non-EFPS income in lieu of itemized expenses.
filers are covered by this)
1. Accredited Tax Agents or practitioners and all its Allowable Deductions to the Partners Comprising GPP- the
client-taxpayers. sahere of the partners can no longer claim deductions from their
2. Accredited printer of principal and supplementary distributive share and are not allowed to avail 8% income tax rate
receipts or invoices. option since their distributive share from GPP is already net of
3. One-time transaction (ONETT) taxpayers. costs and expenses.
4. Those who shall file a no payment return.
5. GOCCs