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Exempted from tax:

1. min wage earners in private sector and others earning statutory min wage
2. Compensation income of employees in public sector not exceeding statutory min wage in non agri priv sector
Included in gross compensation income:
1. Salary, wage, fee
2. Commission (taxable even if min wage earner)
3. Honoraria (taxable even if min wage earner)
4. Allowance (allow rcvd by prv employees are subj to w/holding tax in general UNLESS ordinary and necessary
RATA and if liquidated. Personnel economic relief allow is non taxable)
5. 13th month and other benefits eg. xmas bonus, loyalty awards, gifts in cash or in kind (amount exceeding 82k only
is taxable)
6. Holiday pay, overtime, night shift, hazard/emergency pay (min wage earners are exempted unless they receive
other income or receives addtl compensation such as honraria, fringe, commission, benefits in excess of 82k, and
other taxable income) NOTE: hazard pay not qualified to be classified as one is TAXABLE even if given to min wage
earners
7. Separation pay (taxable if voluntarily done. Nontaxable if INVOLUNTARILY done)
8. Retirement pay (NONTAXABLE if: from ss or gsis, and if ALL of the ff. are complied: A) Retirement has been
approved by BIR

Been connected to the company for at least 10 yrs C) Retiree shud be at least 50yo D) Availed

retirement for the first time E) Retirement plan is fair to all employees REGARDLESS OF POSITION)
9. Sick leave/vacation leave (if unused vaca leave is 10days or less, it is not subj to tax or w/hold tax, see letter A of
de minimis)
10. Tips and gratuities paid directly to an employee
* Taxable
* Not subject to witholding
11. Fringe benefits
* If rank-and-file, subject to basic tax
* If managerial or supervisory, subj to final tax
Retirement benefits exempt from taxation:
1. If the conditions above were satisfied
2. Received due to sickness, death, physical/mental disability beyond control of employee
3. SSS
4. GSIS
5. Prems borne by employer for GROUP insurance of employees
6. Retirement benefits and etc received from foreign govt agencies
Fringe benefits include:
1. Living quarters and meals (see deminimis)
* Living qrts and meals exclusive for the convenience of EMPLOYER - nontaxable
* Living qrts and meals provided w/in the business premises - taxable
* Living qrts and meals provided to military offcls of AFP - nontaxable
2. Expenses incurred by employee (personal expenses)

3. Vehicle
4. Insurance premium
* Company is the beneficiary - nontaxable
* Beneficiary is the family - taxable if rank and file, subj to fringe tax if manager or supervisor
5. Payment of income tax
* rank and file - added to compensation income
* Manager or supervisor - subject to fringe tax
6. Those exceeding de minimis benefits
De minimis benefits:
A. Monetized unused vaca leave credits of private employees not exceeding 10 days
B. Monetized val of vaca and sick leave credits to gov offcls and employees
C. Med cash allow to dependents of employees not excding 750/employee per sem or 125/month (1500 yr)
D. Rice subsidy of 1500/mo
E. Uniform and clothing allow not exceeding 5k per annum
F. Med asstnce, med allow, annual med checkup not more than 10k
G. Laundry allow not more than 300/mo
H. Employee achvmnt award of tangible personal prop valued not more than 10k
I. Gifts during xmas and major anniv celebs not more than 5k per employee per annum
J. Daily meal allow not more than 25% of basic min wage on a per region basis
If mulapas ang deminimis sa ceiling, maadto sya sa 13th month tas katong 82k iminus IN TOTAL NA AS PART NA
SYA SA BONUS AND OTHER CHUCHU. Fringe benefits also forms part of the 82k ceiling.

Valuation of non-cash payment of salaries:


1. Property - FMV at the time of payment
2. Services - FV of services rendered
3. Debt cancelation
* In consideration of svc rendered - amount of canceled debt
* If without consideration for anything - no tax on employee part, but subj to donor's tax on employer's part
* Stockholder cancels his own debt to company - treated as income on DIVIDENDS
4. Issuance of shares - FV of shares at the time SVC WERE RENDERED
5. Issuance of notes - FV of notes, therefore:
* Interest bearing - Face value
* Noninterest bearing - Discounted value
Other taxable income:
1. Interest income
* Earned outside the Phil - part of gross income subj to BASIC tax
* Earned inside the Phil - 20%
* Int income from loans rcv, etc - subj to BASIC tax
2. Rent income (the amount of taxable rent income is the sum of the ff:)

* Current rent/lease payment


* Advance rent/security deposit W/O RESTRICTION (when actually rcvd)
* Payment of lessee to 3rd parties (interest, taxes, etc) in behalf of lessor
* Accrued rent income
* Income from leasehold improvements
3. Dividend income
DIVIDEND RECEIVED FROM DOMESTIC CORP (IF RECIPIENT IS:)
* Domestic/resident corp - tax exempt
* Resident foreign corp - tax exempt
* Non resident foreign corp - generally 30%, but under the rule of reciprocity, subj to final tax of 15%
* RC, NRC, RA - 10%
* NRAETB - 20%
* NRANETB - 25%
DIVIDEND EARNED FROM A RESIDENT FOREIGN CORP AND NONRESIDENT FOREIGN CORP (IF RECIPIENT
IS:)
* Individual taxpayer - subj to schedular tax rate
* Corporate entity - included in gross taxable income subj to 30% rate
<<Side note: Resident foreign corp is taxable on its income in the Phil, but in case it is derived for 3 yr period blabla,
see page 251 nick aduana.
Stock dividends are also NONTAXABLE unless it is cash or noncash received in lieu of stock.
Liquidating div is nontaxable.
Scrip dividend is TAXABLE.>>
4. Annuities representing INTEREST - subj to normal tax rate
5. Prizes and winnings - in general 20%, less than 10k 5%
6. Recovery of BD written off - 30%
7. Tax refund p. 262
Gifts - subj to donor's tax
Devices and bequests - subj to estate tax
Injuries are generally nontaxable but TAXABLE if:
* Damages for loss on earnings in property
* Compensatory damages
* Payment of interest on nontaxable damage