SANTILLAN, POLL ANTHONY R.

2016-0472

DOMESTIC RESIDENT FOREIGN NON-RESIDENT

CORPORATION (DC) CORPORATION (RFC) CORPORATION (NRFC)
SHARES FT 15%  FT 5% (not  FT 5% (not over
over P100,000)
-Capital Gains from P100,000)  FT 10%
the Sale of Shares of  FT 10% (amount in
Stock (amount in excess of
excess of P100,000)
P100,000)
REALTY FT 6% Foreign corporations cannot acquire real
properties. Nevertheless, a FT of 30% will be
-Capital Gains Realized imposed on condos acquired by foreigners.
from the Sale,
Exchange or
Disposition of Lands
and/or Buildings
ROYALTY FT 20%

INTEREST FT 7 ½ % FT 7 ½ % Exempt

DIVIDEND DC STOCKHOLDER RFC STOCKHOLDER NRFC STOCKHOLDER

DC Exempt Exempt  General Rule:
FT 30%
 Exception: Tax
Sparing Rule
(15%)
RFC 1. Pro rata Gross 1. Pro rata Gross
1. 50% or more 100% Income Income
2. Less than 50% 2. Exempt 2. Exempt
NRFC 30% Exempt Exempt

Note:
 20% Final Tax on prizes (except prizes amounting to P10,000 or less which shall be subject to
regular income tax rate of 5 -32%).

GROSS INCOME (Sec. 32)

GR: All income derived from whatever source is gross income

Exceptions:

1. Life insurance;
2. Amount received by Insured as Return of Premium;
3. Gifts, Bequests, Devises;
4. Compensation for Injuries and Sickness;
5. Income Exempt under Treaty;
6. Retirement Benefits, Pensions, Gratuities; and
SANTILLAN, POLL ANTHONY R.
2016-0472

7. Miscellaneous items
a. Income Derives by Foreign Government;
b. Income Derived by the Government or its Political Subdivisions;
c. Prizes and Awards;
d. Prizes and Awards in sports Competition;
e. 13th Month Pay and Other Benefits;
f. GSIS, SSS, Medicare and Other Contributions;
g. Gains from the Sale of Bonds, Debentures or other Certificate of Indebtedness; and
h. Gains from Redemption of Shares in Mutual Fund.

Note:
 Gross Income (Sec. 32) - Deductions (Sec.34)= Tax Income

GROSS INCOME
EMPLOYER-EMPLOYEE RELATIONSHIP
(Yes) (No)
compensation Income from business or
profession

Professionals. These are

individuals who passed the
government licensure
examinations regulated by the
Supreme Court and the
Professional Regulations
Commission.
ALLOWABLE DEDUCTION Share in the:  ID
 ITEMIZED DEDUCTION 1. SSS/GSIS;  OSD- not exceeding
(ID) 2. PHILHEALTH; 40% of its gross sales
 OPTIONAL STANDARD 3. Pag-Ibig contributions, (GS) or gross receipts
DEDUCTION (OSD) limited to compulsory (GR)
ones; and
4. Union dues.
CREDITABLE WITHHOLDING Compensation Withholding Tax Expanded Withholding Tax
TAX (Sec. 57, 58) (0-35%) (EWT)
1. More than 3M- 10%
 Filed monthly and 2. 3M and less than- 5 %
remitted using BIR Form (required to submit
1601-C sworn declaration of
his GR/GS not later
than January 15 of
each year or prior to
the initial payment of
the professional fee to
be subject to 5%)
VAT/ OTHER PERCENTAGE TAX exempt 1. More than 3M- 12%
2. 3M and less than-3%

Exception: Optional Vat

SANTILLAN, POLL ANTHONY R.
2016-0472

Registration

BRACKET TAXABLE INCOME PER YEAR INCOME TAX RATE

1 P250,000 and below
2 Above P250,000 to P400,000
3 Above P400,000 to P800,000
4 Above P800,000 to P2,000,000
5 Above P2,000,000 to P8,000,000
6 Above P8,000,000
0%
20% of the excess over P250,000
P30,000 + 25% of the excess over P400,000
P130,000 + 30% of the excess over P800,000
P490,000 + 32% of the excess over P2,000,000
P2,410,000 + 35% of the excess over P8,000,000

COMPENSATION

GR: It is taxable.

Exceptions:

1. Minimum Wage Earner

NCR: 537.O0/day
Even if he receives:
a. Holiday Pay
b. Overtime Pay
c. Night Shift Deferential
d. Hazard Pay

Note:

 Not applicable to those who basic pay is more than SMW even if their annual taxable income
does not exceed 250,000.

Exceptions to the exception:

a. Fringe Benefits
b. Allowances
c. Commission

2. De Minimis Benefits (Sec. 33)

It is given by the employer to employee which is relatively low in value.
3. Christmas Bonus (13th Month Pay)
Not taxable up to 90, 000 only.
4. Post-Employment Benefit
a. Separation Pay
Conditions:
1. Payment triggered by severance of employer-employee relationship; and
2. For reason beyond the control of the employee.
b. Retirement Pay
SANTILLAN, POLL ANTHONY R.
2016-0472

1. RA 4917; or
a. At least 50 years of age;
b. 10 years of employment;
c. Once only; and
d. BIR Accredited Retirement Plan.
2. Labor Code
a. At least 60 Years of Age; and
b. 5 Year employment.

FRINGE BENEFITS (35%)

Any good, service or other benefit furnished or granted in cash or in kind by an employer to an
individual employee (except rank and file employees as defined herein) such as, but not 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 or other similar organizations;
7. Expenses for foreign travel;
8. Holiday and vacation expenses;
9. Educational assistance to the employee or his dependents; and
10. Life or health insurance and other non-life insurance premiums or similar amounts in excess
of what the law allows.

The following fringe benefits are not taxable:

1. Fringe benefits which are authorized and exempted from tax under special laws;
2. Contributions of the employer 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. De minimis benefits as defined in the rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner.

IMPROPERTLY ACCUMULATED EARNINGS TAX (IAET)

Our tax rules impose a 10% tax on improperly accumulated taxable income of corporations. This is
applicable to corporations formed for the purpose of avoiding the income tax with respect to its
shareholders or the shareholders of any other corporation, by permitting the earnings and profits of
the corporation to accumulate instead of dividing or distributing them to the shareholders.

Rationale: to discourage them from improperly accumulating earnings to spare their shareholders
from tax liability should they decide to declare dividends (other than stock dividends).
SANTILLAN, POLL ANTHONY R.
2016-0472

Exceptions:

1. Banks;
2. insurance companies;
3. publicly-held companies; and
4. other corporations covered by special laws.

SEC. 23. General Principles of Income Taxation

1. A citizen of the Philippines residing therein is taxable on all income derived from sources
within and without the Philippines;
2. A nonresident citizen is taxable only on income derived from sources within the Philippines;
3. An individual citizen of the Philippines who is working and deriving income from abroad as
an overseas contract worker is taxable only on income derived from sources within the
Philippines: Provided, That a seaman who is a citizen of the Philippines and who receives
compensation for services rendered abroad as a member of the complement of a vessel
engaged exclusively in international trade shall be treated as an overseas contract worker;
4. An alien individual, whether a resident or not of the Philippines, is taxable only on income
derived from sources within the Philippines;
5. A domestic corporation is taxable on all income derived from sources within and without the
Philippines; and
6. A foreign corporation, whether engaged or not in trade or business in the Philippines, is
taxable only on income derived from sources within the Philippines