Northern CPAR: Taxation – Final Income Taxation: Final Withholding Tax Table

FINAL TAX RATES ON CERTAIN PASSIVE INCOME (Sec. 24 B, 25 A (2), 27 D, 28 A (7); 28 B (5), NIRC)
Individual
PASSIVE INCOME Alien Corporations
Citizen Non-resident
Non- Resident Not Domesti Residen Non-
Resident resident Engage engage c t resident
d d
INTEREST:
Interest or yield on local currency deposit:
1. Bank deposit (savings, time)
2. Deposit substitute 20% 20% 20% 20% 25% 20% 20% 30%
3. Money market placements
4. Trusts funds (CTF, UITF, IMA)
Interest income from long term:
1. Deposit
2. Investments in the form of savings
3. Common or Individual Trust Funds
4. Investment Management Accounts Exempt Exempt Exempt Exempt 25% 20% 20% 30%
5. Deposit substitute
6. Other investments evidenced by certificates
prescribed by the BSP
Pre-termination of long-term deposit or investment:
1. Less than 3 years held 20% 20% 20% 20% 25%
2. 3 years to less than 4 years held 12% 12% 12% 12% 20% 20% 30%
3. 4 years to less than 5 years held 5% 5% 5% 5%
Interest Income on FCDU Deposit from a 7 ½% Exempt 7 ½% Exempt Exempt 7 ½% 7 ½% Exempt
depositary bank
Interest Income by FCDU Depositary banks N/A 10% 10% N/A
Interest Income on foreign loans N/A 20%

DIVIDENDS (Cash or Property):

1. From a Domestic Corporation
- January 1, 1998 earnings 6% 6% 6%
- January 1, 1999 earnings 8% 8% 8% 20% 25% Exempt Exempt 15%*
- January 1, 2000 earnings 10% 10% 10%
2. From a Foreign Corporation (resident and Regular Income Tax rules apply.
non-resident)

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NCPAR…driven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX – 5 th
Batch –
H004
 Northern CPAR: Taxation – Final Income Taxation: Final Withholding Tax Table
Note: Business partnerships are taxable similar to corporations. Partners share in the net income of business partnership is subject to
10% final withholding tax.

Individual
PASSIVE INCOME Alien Corporations
Citizen Non-resident
NOTE SECTION 42 A(2) on Dividends Non- Resident Not Domesti Residen Non-
Resident resident Engage engage c t resident
d d
ROYALTIES:
1. In general 20% 20% 20% 20% 25%
2. From books, literary works and musical 10% 10% 10% 10% 25% 20% 20% 30%
compositions
PRIZES (Taxable):
1. P10,000 and below Regular (Progressive) Income Tax rules apply.
2. Above P10,000 20% 20% 20% 20% 25% N/A**
WINNINGS
1. In general 20% 20% 20% 20% 25% N/A**
2. PCSO and Lotto winnings Exempt
INFORMER’S TAX REWARD 10%
* subject to condition that the country where the foreign corporation is domiciled shall allow a credit against the tax due from the non-resident
corporation taxes deemed to have been paid in the Philippines equivalent to 20% effective 1997, 19% January 1, 1998, 18% for 1999 and 17%,
Nov. 1, 2005 20%, January 1, 2009 15% (R.A. 9337) [Statutory formula: Philippine Regular Corporate Income Tax – Dividend Tax (15%)].
** If a corporation derives prizes or winnings, regular income taxation (the general rule) would apply since there is no similar provision imposing
final tax.
Note on Prizes:
The following prizes are exempt:
1. The recipient is selected without active effort on his part to join the contest such as Nobel Prize, Most Outstanding Citizen Award and similar
awards.
2. Prizes earned with active participation are generally subject to tax except in cases of sports competitions that are sanctioned by a national sport
organization (such as Philippine Olympic Committee).
A cash reward may be given to any person instrumental in the a. ) discovery of violations of the National Internal Revenue Code or b. ) discovery
and seizure of smuggled goods
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NCPAR…driven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX – 5 th
Batch –
H004
 Northern CPAR: Taxation – Final Income Taxation: Final Withholding Tax Table
Requisites:
1. Definite sworn information which is not yet in the possession of the BIR.
2. The same lead to the discovery of fraud upon internal revenue laws or provisions thereof.
3. Enforcement results in recovery of revenues, surcharges and fees and or conviction of the guilty party or imposition of any fine or penalty
4. The informer is other than a/an:
a. Internal Revenue officials or employees
b. Other public officials or employees
c. Relatives of those in a. and b. within the 6 degree of consanguinity
Cash Reward – Whichever is the lower of the following per case:
1. 10% of revenues, surcharges or fees recovered and or fine or penalty imposed and collected or
2. P1,000,000
**It should be noted that the maximum net cash reward of the informer is P900,000 per case due to the 10% withholding final tax. Even if a case is
filed if there is no recovery, there is no cash award.

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NCPAR…driven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX – 5 th
Batch –
H004