INCOME TAX TABLES

TAX RATES FOR INDIVIDUALS:

GENERAL CATEGORIES

PERIOD OF STAY

SOURCES OF INCOME
NATURE OF INCOME
Compensation,
Business,
Trade,
Profession (including casual gains,
profits, income, and capital gains, prizes
of P10,000 or less). Not included are
items of income subject to final tax and
or special tax treatment
Interest from any currency bank deposit
and yield or any other monetary benefit
from deposit substitute and from trust
funds and similar arrangements,
royalties, prizes (except amounting to
P10,000 or less) and other winnings
except PCSO and lotto winnings)
Royalties on books, as well as either
literary works and musical composition

CITIZENS
RESIDENTS
NON-RESIDENTS
PERMANENTLY STAYED STAYED OUTSIDE THE
IN THE PHIL OR MAY PHIL. 183 DAYS
OR
HAVE STAYED OUTSIDE MORE
THE PHIL. LESS THAN 183
DAYS

RESIDENTS
STAYED WITHIN THE
PHIL. FOR MORE THAN
12 MONTHS FROM
DATE OF ARRIVAL

ALL SOURCES

WITHIN THE PHIL.

WITHIN THE PHIL.

ALIENS
NRAEBT
STAYED
WITHIN
THE
PHIL. MORE THAN 180
DAYS

NRANEBT
STAYED IN THE PHIL. 180
DAYS OR LESS

WITHIN THE PHIL.

WITHIN THE PHIL.

TAXABLE BASE/ TAX RATE

Taxable Income
5% - 34%(1998)
- 33%(1999)
- 32%(2000)
(Normal Tax Rate)
Gross income
(within) 25%
Gross income (within) 20% Final Withholding tax (FWT)

Gross income (within) 10% FWT

GENERAL CATEGORIES
Interest income from depository bank
under the expanded foreign currency
deposit system (FCDS)

Interest income from long-term deposit

or deposit in the form of savings,
common or individual trust funds,
deposit
substitute
investment
management accounts in denomination
of P10,000 or as prescribed by the BSP.
Cash and/or property dividends actually
or constructively received from a
domestic corp. or from a joint stock
company, insurance or mutual fund
companies, or on the share of an
individual in the distributable net income
after tax of a taxable partnership, or on
the share on the net income after tax of
an association, joint account, or a joint
venture or consortium taxable as a
corporation.
Capital gains from shares of stock not
traded in the local stock exchange
Capital gains from sale or other
disposition of real property located in
the Phils.

CITIZENS
RESIDENTS

NON-RESIDENTS

Gross income (within) 7.5%

FWT (Exchange Rate to be
used shall be the opening
rate on remittance day)

Any
income
from
transaction with depositary
banks under the expanded
FCDS
or
OBU
-Exempt
[Sec27(D)(3)]
[Sec.28(A)(4)]

Gross income(within)
7.5% FWT

Interest on long term deposit

In case of Pretermination:
Remaining maturity of
4 yrs. to less than 5 yrs
3 yrs. to less than 4 yrs.
less than 3 yrs.
Gross income (within) FWT
6%
8%
10%
-

ALIENS
NRAEBT

RESIDENTS

Exempt

5%
12%
20%

NRANEBT

Any income from transactions with depository bank under

the expanded FCDS or ODU Exempt [Sec.(27)D(3)]
[Sec.28(A)(4)]

Gross income (within) 25%

Year
1998
1999
2000
Gross Income (within) 20%
FWT

(Tax on dividends shall apply on income earned on or after Jan. 1, 1998.

Sec. 73(c) provides that dividends distributed are deemed made from
most recently accumulated profits)

Net capital gains (within)

Not over P100,000
5%
In excess of P100,000 10%
1. Gross Selling Price or FMV whichever is higher 6% Final Tax
2. If sold to the government or any of its political subdivision or agencies or to GOCC, 6% Final Tax or Normal Tax Rate, at the option of taxpayer.
3. If proceeds is from disposition of principal residence and is fully utilized in acquiring or constructing a new principal residence within 18 months
from the date of disposition, (date of notarization) the capital gain is exempt from the capital gains tax subject to the following conditions.
a. Historical cost or adjusted basis of property sold is carried over to the new principal residence.

GENERAL CATEGORIES

CITIZENS
ALIENS
RESIDENTS
NON-RESIDENTS
RESIDENTS
NRAEBT
NRANEBT
b. The commissioner is notified within 30 days from the date of disposition of the taxpayers intention to avail of the tax exemption.
c. Tax exemption can only be availed of once every 10 years.
d. Unutilized portions of the proceeds is subject to capital gains tax to be computed proportionately. The tax on the unutilized portion shall be
paid within 30 days after the expiration of the 18-month period.

Cinematographic film and similar works

Proprietary
Hospital

educational

Individual Normal tax Rate shall apply

institution/

Fringe Benefit except on the following:

Individual Normal tax Rate shall apply

A. Grossed up monetary value of fringe benefit furnished

or granted to the employee (except rank and file)

A. Not considered as gross income

1. if required or necessary to the
business of employer
2. if for the convenience or
advantage of employer
B. Fringe Benefit that is not taxable
under Sec. 32 (B) Exclusions from
Gross Income

Tax Rate

Grossed Up Divisor

34% FWT
33% FWT
32% FWT

66%
67%
68%

Year
1998
1999
2000

B. Fringe Benefit include, but not be limited to the

following:
1. Housing
2. Expense Account
3. Vehicle of any kind
4. Household personnel, such as maid, driver and others
5. Interest on loan at less than market rate to the extent of
the difference between the market rate and actual rate
granted.
6. Membership fees, dues and other expenses borne by
the employer for the employee in social and athletic
clubs and similar organizations
7. Expenses for foreign travel
8. Holiday and vacation expenses
9. Educational assistance to the employee or his

Gross Income (within) 25%

Gross Income (within) 25%

N.A.

In the case of aliens, the tax rates to be applied on fringe benefit shall be as follows:
1. NRANEBT 25%
2. Aliens employed by regional HO 15 %
3. Aliens employed by OBU 15%
4. Aliens employed by Petroleum Service
5. Contractors and Subcontractors
Gross up divisor is the difference between 100% and the applicable rates.

GENERAL CATEGORIES

CITIZENS
RESIDENTS
NON-RESIDENTS
dependents; and
10. Life or health insurance and other non-lire insurance
premiums or similar amounts on excess of what the
law allows.
C. The following fringe benefits are not taxable under Sec.
33 Fringe Benefit Tax:
1. Fringe Benefits which are authorized and exempted
under special laws. The 13th month Pay and Other
Benefits with the ceiling of P30,000 may be increased
through rules and regulations issued by the Secretary
of Finance considering the effect on the same of the
inflation rate at the end of the taxable year;
2. Contributions of the lawyer for the benefit of the
employee to retirement, insurance and hospitalization
benefit plans;
3. Benefits given to the Rank and File Employees,
whether granted under a collective bargaining
agreement or not; and
4. The De minimis benefits benefits which are relatively
small in value offered by the employer as a means of
promoting goodwill, contentment, efficiency of
Employees
D. The term Rank and File Employees shall mean all
employees who are holding neither managerial nor
supervisory position as defined in the Labor Code
E.

In the case of rank and file employees, fringe benefits

other than those excluded from gross income under
the Tax Code and other special laws, are taxable
under the individual normal tax rate.

RESIDENTS

ALIENS
NRAEBT

NRANEBT

PREFERENTIAL TAX TREATMENT ON CERTAIN INDIVIDUALS:

GENERAL
CATEGORIES
SOURCE OF INCOME
A.

15%
Final
Withholding Income
Tax (FWIT)

CITIZENS
RESIDENTS
ALL SOURCES

NON-RESIDENTS
WITHIN THE PHIL.

A1. A tax rate of 15% is imposed on gross income(salaries,

wages, etc. received by every Filipino employee occupying the
same position as an alien employed by any of the following:
a. Multinational company which is foreign firm or entity
engaged in international trade with an established branch
in the Phils. as follows:

RESIDENTS
WITHIN THE PHIL.

ALIENS
NRAEBT
WITHIN THE PHIL.

A1. A tax rate is imposed on gross income (salaries, wages, annuition, compensation ,remuneration,
other emoluments such as honoraria and allowances)
a. Regional or area Headquarters
b. Regional Operating Headquarters
c. Offshore Banking Units (OBUs) established in the Phil.
d. Foreign petroleum service contractor or subcontractor engaged in Petroleum Operations in the Phil.

i) Regional or Area Headquarters

ii) Regional Operating Headquarters
b. Offshore Banking Units
c. Foreign petroleum service contractor or sub-contractor
B. Partners in a general
professional
partnership

B.1. A general professional partnership is not subject to

income tax. A partner in a general professional partnership is
liable to income tax only in his separate and individual
capacity
2. For purposes of computing the distributive share of the
partners, the net income of the partnership is computed in the
same manner as a corporation.
3. Each partner shall report as gross income his distributive
share actually or constructively received in the net income of
the partnership.

C. Foreign
Source
Compensation.
Income
is
not
subject to income
tax

C.1. Regardless of the period of stay in the Phil., foreign

source (compensation income) is not taxable if received by
any of the following non-resident citizen.
a) Immigrant
b) Foreign-based employee on a permanent basis
c) Overseas Contract Worker, including overseas seaman
2. A Filipino employed as a Philippine Embassy/Consultant
service personnel of the Phil. Embassy/consulate is not to be
treated as a non-resident citizen, hence, his income is taxable.

NRANEBT
WITHIN THE PHIL.

NOT TAXABLE

TAX RATES FOR CORPORATIONS:

GENERAL CATEGOTIES

SOURCES OF INCOME
NATURE OF INCOME
In General

Interest on currency bank

deposit and yield or any
other monetary benefit
from deposit substitutes
and from trust funds and
similar arrangements
royalties

DOMESTIC CORPORATIONS
IN GENERAL, INCLUDING GOCCs, AGENCIES OR
INSTRUMENTALITIES (EXCEPT GSIS, SSS, PHIC, PCSO AND
PAGCOR) ENGAGED IN A SIMILAR BUSINESS INDUSTRY OR
ACTIVITIES
ALL SOURCES

FOREIGN CORPORATIONS
RESIDENT
FOREIGN
CORPORATIONS NON-RESIDENT CORPORATIONS (NOT
(EXISTING UNDER THE LAWS OF FOREIGN ENGAGED IN TRADE OR BUSINESS IN THE
COUNTRY, ENGAGED IN TRADE OR PHIL.)
BUSINESS WITHIN THE PHIL.)
WITHIN THE PHIL.
WITHIN THE PHIL.
TAXABLE BASE/RATE

TAX INCOME
35%(Normal Domestic Rate)
34% - 1998
33% - 1999
32% - 2000
A. Transition Period
1. For Corp. Adopting fiscal year accounting period, income and
expenses shall be deemed to have been earned and spent
equally for each month of the period.
2. Taxable Income x No. of Mos. Covered x Tax Rate
12 Mos.
by the tax rate
B. Optional Corporate Tax Rate of 15% of Gross Income
1. The President upon recommendation of the Secretary of
Finance, may, effective January 1, 2000 allow corporations
the option to be taxed at 15% of the gross income subject to
certain conditions.
C. Government or its Political Subdivision.
1. Income derived from any public utility or from the exercise of
any essential government function accruing to the
Government of the Phil. Or to any political subdivision thereof
is excluded from gross income[Sec. 32(B)(7)(b)]

TAXABLE INCOME
Same as Normal Domestic Rate and with the
same option of 15% tax on gross income
effective Jan. 1,2000.

GROSS INCOME
Same as Normal Domestic Rate but without
option to pay the 15% tax on gross income.

Interest Income on foreign loans contracted on

or after Aug. 1, 1986(20%fwt)
Gross Income ( within ) 20% FWT

GENERAL CATEGOTIES

Income derived under the

expanded FCDS
Inter-corporate dividends
and income from a
taxable partnership
Capital Gains from the
sale of shares of stocks
not traded in the local
stock exchange.
Capital Gains Realized
from the Disposition of
Land and/or Buildings
Minimum Corporate
Income Tax (MCIT)

DOMESTIC CORPORATIONS
FOREIGN CORPORATIONS
IN GENERAL, INCLUDING GOCCs, AGENCIES OR
RESIDENT
FOREIGN
CORPORATIONS NON-RESIDENT CORPORATIONS (NOT
INSTRUMENTALITIES (EXCEPT GSIS, SSS, PHIC, PCSO AND (EXISTING UNDER THE LAWS OF FOREIGN ENGAGED IN TRADE OR BUSINESS IN THE
PAGCOR) ENGAGED IN A SIMILAR BUSINESS INDUSTRY OR COUNTRY, ENGAGED IN TRADE OR PHIL.)
ACTIVITIES
BUSINESS WITHIN THE PHIL.)
1. Gross interest income derived by a domestic corporation and a resident foreign corporation from a depositary
1. Any income from transaction with
bank 7.5% FWT.
depository banks under FCDS shall be exempt
2. Income derived by a depository bank from foreign currency transactions with local commercial banks including
from income tax
branches of foreign banks, other depositary banks, and residents 10% Final Tax.
Dividends received by a domestic corporation from another
Dividends received from a domestic corporation Dividend received from a domestic corp.
domestic corporation shall not be subject to tax.
not subject to tax.
15% FWT, Provided foreign law allows
taxpayer clause, otherwise it will be subject to
the normal domestic rate
Net Capital Gain
Not over P100,000 5%
Excess of P100,000 10%
Gross Selling Price or FMV whatever is higher 6% Final Tax
1. Gross Income
2% MCIT beginning on the fourth taxable year immediately following the year in which such corporation
commenced its business operation.
2. Carry Forward of Excess MCIT- to be carried forward and provided against the normal income tax [as computed
under Sec. 27(A) for the (three(3) succeeding taxable years
3. The Secretary of Finance is authorized to suspend MCIT on a corporation which suffers losses on account ofA. Prolonged dispute; or
B. Force majeure
C. Legitimate business reverses; or
4. A Gross Income = Gross Sales Sales Returns, Discounts, and allowances Cost of Goods
(Trading or Manufacturing Concern)
- Cost of Goods and shall include all business expenses directly incurred to produce the merchandise to bring
them to their present location and use.
- For trading or merchandising , cost of goods sold shall include
a. Invoice cost
b. Import duties
c. Freight
d. Assurance while goods are in transit

N.A.

GENERAL CATEGOTIES

DOMESTIC CORPORATIONS
FOREIGN CORPORATIONS
IN GENERAL, INCLUDING GOCCs, AGENCIES OR
RESIDENT
FOREIGN
CORPORATIONS NON-RESIDENT CORPORATIONS (NOT
INSTRUMENTALITIES (EXCEPT GSIS, SSS, PHIC, PCSO AND (EXISTING UNDER THE LAWS OF FOREIGN ENGAGED IN TRADE OR BUSINESS IN THE
PAGCOR) ENGAGED IN A SIMILAR BUSINESS INDUSTRY OR COUNTRY, ENGAGED IN TRADE OR PHIL.)
ACTIVITIES
BUSINESS WITHIN THE PHIL.)
For manufacturing: cost of goods manufactured and sold shall include all cost of production of farmer goods
such as
a. Raw materials used
b. Direct labor
c. Manufacturing overhead
d. Freight cost
e. Insurance premium
f. other cost to bring the raw materials to the factory or warehouse
B. Gross Income = Gross Receipt Sales Return; allowances, discount cost of Service(Service)
1. Cost of service shall mean all direct cost and expenses necessarily incurred to provide the service including
a. Salaries and employee benefits of personnel, consultants and specials directly utilized in providing the
service such as depreciation or rental of equipment used and cost of supplies.
2. In the case of banks, cost of service shall include interest expense

Improperly Accumulated
Taxable Income means
taxable income adjusted
by:
1. Income exempt from
tax
2. Income excluded
from gross income
3. Income subject to
final tax
4. The amount of net
operating loss carryover deducted.
And reduced by the sum
of:
1. Dividends actually or
constructively paid;
and
2. Income tax paid for
the taxable year

1. Improperly Accumulated Taxable Income 10% tax in addition to other income taxes
2. The improperly accumulated earnings tax shall not apply to:
a. Publicly held corporations
b. Banks and other non-banks Financial intermediaries
c. Insurance companies
3. The fact that any corporation is a mere holding company or investment company shall be prima facie evidence
of a purpose to avoid the tax upon its shareholders or members
4. The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs
of the business shall be determinative of the purpose to avoid the tax upon its shareholders or members unless
the corporation, by the clear preponderance of evidence, shall prove the contrary.
5. For corporations using the calendar basis the accumulated earnings tax shall not apply on improperly
accumulated income as of Dec. 31,1997. For fiscal year basis, the tax shall not apply to the 12 month period of
fiscal year 1997-1998. Improperly accumulated earnings as of the end of a calendar or fiscal year period on or
after Dec. 31, 1998 shall be subject to the 10% tax on such improperly accumulated earnings.

N.A.

PREFERENTIAL TAX TREATMENT ON CERTAIN CORPORATION:

DOMESTIC CORPORATION
1. Educational Institution
2. Hospital
1. A NON-STOCK, Non-Profit Educational Institution is exempt from
Income Tax on its Revenue as educational institution and from
the operation of ancillary activities located within the school
premises
a.
b.
c.
d.
e.
f.
2.

Cafeteria/canteen
Dormitories
Bookstores
School Bus
Hospitals
Pharmacies or Drugstores and from banks deposits subject to
certain condition.

If gross income from unrelated trade business or other activity

does not exceed 50% of the total gross income derived from all
sources 10% of the Taxable Income will be imposed on the
following:
a. Proprietary/ profit oriented educational institution
b. Non-stock, non-profit hospital

3.

If gross income from unrelated trade business or other activity

exceeds 50% of the total gross income derived from all sources,
the Regular Domestic Rate will be imposed to the following:
a. Proprietary/ profit oriented educational institution
b. Non-stock, non-profit hospital

4.

Regardless of the proportion explained in item No. 2 and 3 a

profit oriented hospital will be treated as an ordinary domestic
corporation , hence subject to the Normal Domestic rate.

FOREIGN CORPORATIONS
RESIDENT FOREIGN CORPORATION
NON-RESIDENT FOREIGN CORP.
International Carrier (within) Gross Phil. Billings

Non-Resident Owner or Lessor of Sea Vessel Chartered by

Philippine National Gross rental lease charter

Offshore Banking Unit (OBU) Income derived by OBU

from foreign currency transaction with local commercial
bankers, including branches of foreign bank, including
any interest income derived from foreign currency loans
granted to residents.
10% - Final Tax

Any income from transaction with OBU shall be exempt from

income tax

Branches (Except those registered with PEZA). Any

profit remitted to the head office (total profit applied or
earmarked for remittance without any deduction for the
tax component thereof).
15% - FWT

Non-resident owner or lessor of aircraft machinery and other

equipment
Gross Rental or fees
7.5%

Regional or Area Headquarters not subject to Income

Tax

N.A.

Regional Operating Headquarters

N.A.