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    Income Tax 1

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    Income Tax summary Project

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    Income Tax 1

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    4 views81 pages

    Income Tax Summary Project

    Uploaded by

    marbue
    Income Tax 1

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 81
    TABLE OF CONTENTS I. INDIVIDUAL TAXPAYERS A. RESIDENT CITIZEN Definition Tax Treatment of Income Sources Tax Schedule Tax Rate . Tax Base f Sources of Income Determination of Taxable Income Personal Exemptions ... Deductions from Gross Incomes .. Summary of Withholding Tax Rates .... WOUUNNNEBE B. NON-RESIDENT CITIZEN Definition Tax Treatment of Income Sources - Tax Schedule Tax Rate .. Tax Base .. Sources of Income ... Determination of Taxable Income Personal Exemptions .. Deductions from Gross Incomes Summary of Withholding Tax Rates .. C. RESIDENT ALIEN Definition . 24 Tax Treatment of Income Sources . 24 Tax Schedule 24 Tax Rate 25 Tax Base .. 25 Sources of Income .. 25 Determination of Taxable Income 26 Personal Exemptions ........ 28 Deductions from Gross Incomes 28 Summary of Withholding Tax Rates . 32 NON-RESIDENT ALIEN ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES Definition 36 ‘Tax Treatment of Income Sources 36 Tax Schedule 36 Tax Rate ... 37 Tax Base .. 37 Sources of income .. 37 Determination of Taxable Income .. 38 Personal Exemptions .. 40 Deductions from Gross Incomes 40 Summary of Withholding Tax Rates .. 43 NON-RESIDENT ALIEN NOT ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES Definition . 46 Tax Treatment of Income Sources 46 Tax Rate 46 Tax Base .. 46 Sources of Income = 2 - 47 Determination of Taxable Income i - 48 Personal Exemptions .. - 49 Deductions from Gross Incomes i 49 Summary of Withholding Tax Rates .... 50 II. CORPORATE TAXPAYERS A. DOMESTIC CORPORATION Definition Tax Treatment of Income Sources Tax Rate Tax Base .. a * Determination of Taxable Income Determination of Other Taxable Income Deductions from Gross Incomes .. Exclusion from Gross Income .. Exemptions ..... 53 53 53 54 55 c Summary of Withholding Tax Rates cece 61 RESIDENT FOREIGN CORPORATION Definition ‘Tax Treatment of Income Sources Tax Rate Tax Base — Determination of Taxable Income Determination of Other Taxable Income ....... Deductions from Gross Incomes Exclusion from Gross Income Exemptions Summary of Withholding Tax Rates NON-RESIDENT FOREIGN CORPORATION Definition 73 Tax Treatment of Income Sources is BB Tax Rate Tax Base Pe ceestae Determination of Taxable INCOME .....eoennsens Determination of Other Taxable Income 75 Deductions from Gross Incomes : ior 76 Exclusion from Gross Income ............ oe 26 Exemptions... , : onae: Summary of Withholding Tax Rates... ae oT Definition ‘A citizen of the Philippines who hese permanent home or place of abode in the | Philippines to | which he/she | intends to | return whenever he/she is absent for business or pleesure, ‘Tax Treatment of Income Sources Sources of Income Subject to Tax ‘Within the | Without the Philippines | Philippines A. INDIVIDUAL INCOME TAXPAYER - RESIDENT CITIZEN Compensation income Yes Yes a | =e Busnes rofesorl Income Yes ve Paso Inome Roan ves ves Paste Income Pies andthertoable | y_, am wire fsve income eres come orn Prlippne crrency bank copests 2nd yield or any other monetary benefit from | Yes Yes epost subettutee andor act finds Sansome | Pus Income—interestincone tom | | Cepandeee eerie oes lee ves arhaall eats Aue | | Passive Income terest income form ey eeal| foreign curenc bank epost | | Passive Income - Cash and/or property Yes Yes dividends Tax Schedule Other Sources of Income | yes ves | Over But Not Over ‘Tax Due Phpi0000 | 5% | hp20000 | _Php30000 | _PhpS00 10% ofthe excess over Php20000 | hp30000 | hy 70000 | _Php2250+ 15% ofthe encessoverPhp30000 | hp70009 | _Phptaec00 | __PhpBS00 + 20% of the ences over Php70000 | Phpi40.000 | _Php250600 | PhpZ2500 + 25% ofthe excess over Phpi40.000 Pi250.000 | _Fhs00000 | _PhpS0000 + 5% ofthe excess over Php 250000. | Phg590,000 p25,000 + 52% ofthe excess over Pp500.000 1[Page INDIVIDUAL INCOME TAXPAYER - RESIDENT CITIZEN. Employed by Employed by Regional or Area | Employed | Petroleum Resident Citizen | Headquarters and | by Offshore | Service (in general) | Regional Operating | Banking | Contractor Headquarters of | Units and Multinational Corp. Subcontractor [taxrate [5% -32% 15% oF 56-32% 15% 15% Taxable Compensation Taxable Gross Tax Base | Income (IC) and/or | Compersation toa teat Taxable Business| Income (TGC) | Income (781) Sources of income (Received from al sources within and without the Philippines) Other ner oes Passive Income Sources of Income Income Income Treome afsigtom a Business [a Royallles & Captal employeremployee | and/or rade gains relationship suchas income From sales selarios, washes, of shares femolumant and of stock honoraria commission, taxcble bonuses end fringe benefits, taxable allowances (euch as transportation, representation, entertainment, and the ike) i. Nonmonetay |b. Feesfromthe |b. Prizesand other taxable | b. Capital compensation exercise of winnings gains profession from sales of real propery Gains from Interest income: © Informer sale or Philippine currency bank rowerds exchange of deposits and yield or ary assets | other monetary beneft from deposit substitutes and from trust funds and similar arrangement: 2[Page A. INDIVIDUAL INCOME TAXPAYER - RESIDENT CITIZEN. ‘@._ Taxable pensions and retirement pay Sources of Income (Received from all sources within and without the Philippines) ; Other Compensation | guciness Income Passive Income Sources of Income | Income ‘d. Commissions | 4. Interest income from long-term deposit or investments in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidence by certificates in such forms prescribed by the Bangko Sentral viich are preterminated by the holder before the Sth year based on holding period © Amounts drawnes | salaries by partners Rentalincome | Interest income from foreign currency bank of a partnership deposits Otherincomes ofa |f Other incomes | Cash and/or property similar nature notcovered by | dividends actually or unless specifically compensation | constructively received and exempted by the income share of an indivicual Tax Code, partner in the net profits of | a taxable partnership Determination of Taxable Income (On incomes derived from sources and without the Philippines) Compensation ‘ Income ie Passive Income (On modified gross . (On the gross amount) (On net income basis) | income basis) Gross & Gross income from Royalties - 20% final withholding compensation profession, business tax on gross amount (except income less and/ortrade less the | royalties on books, literary works deductions and/or itemized deductions | and musical compensations which personal and shall be subject to 10% final tax) additional exemptions | 3) Page A. INDIVIDUAL INCOME TAXPAYER - RESIDENT CITIZEN Determi tion of Taxable Income (On incomes derived fram sources within and without the Philippines) (On modified gross income bass) Te Business/Professional Income (On net income basis) Optional standard deduction equivalent to 40% of gress sales tf gross receipt and personal exemption, and if applicable, additional exemption allowances Passive Income (On the gross amount) other taxable winning (except PCSO and Lotto Winnings) - 20% final withholding tax on the gross ‘mount 'B._ Prizes (exceeding Phpl0,000) and Interest income from Philippine currancy bank deposits and yield orany other monetary benefit from deposit substitutes and from trust funds end similar arrangements - 20% final income tay on the gross amount d__ Interest income from long-term deposit or investments in the form ‘of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidence by certificates in such forms prescribed by the Bangke Sentral ‘which are proterminated by the holder before the Sth year based on the holding period at the following rates — (Four (4) years to less than five (S) years ~ 5% (i Three @) years to less than four (4) years - 12%, (i) Less than three (3) years - 20% : Tnterest income from foreign aurrency bank deposits - 7 1/2% final tax on the gross amount actually or constructively received and share of an individual partner in the net profits of a taxable partnership - 10% Cash and/or property dividends 4] Page A. INDIVIDUAL INCOME TAXPAYER - RESIDENT CITIZEN Personal Exemptions Personal Exemptions Additional Exemption for Dependents |'Php50,000 for each individual | Php25,000 for each legitimate, legitimate or legally tatpayer adopted cid provided thatthe numberof dependents for whom additonal exemption may be claimed shovid not exceed fur Deductions from Gross Incomes a Business and/or Professional Income Compensation | (payments incurred in connection with the taxpayer's profession trade | or business are deductible from gross income) | [Ouiypremium [a Occnary and necessary wade, Busnes or professional expense paid | [pamenson | orncured dung the taxable yeor uch asalores wages, grosied- health and/or hospitalization are deductible ‘rom gross compensation 'b. Interest paid or incurred within the taxable year indebtedness in up monetary value of fringe benefits granted to employees, travel, | rental, entertainment, amusement and recreation) connection with the taxpayer's profession, trade or business which shall be reduced by 33% of the grossed-up value of the interest i} Income subjected to final tax © Tewes (Paid or incurred within the taxable year in connection with the ‘aypayers profession, trade or business. except the income tax imposed under the Code (i) Foreign income tax paid by a taxpayer whe did not signify in his/her return his/her desire to have any refund or credit (ii) Estate and Donor’ taxes (iv) Taxes assessed against local bonofits of a kind tonding to increase the valve of the property assessed d._ Losses (Losses actually sustained by the taxpayer in connection with the ‘taxpayer's trade, profession, or business which are charged off within the taxable year and nat compensated for by insurance or ‘other forms of indemnity; (id) Losses from sale or exchanges of capital assets are deductible cinly to the extent of the gain from such sales or exchanges: S|Page INDIVIDUAL INCOME TAXPAYER - RESIDENT CITIZEN _ Deductions from Gross Incomes Compensation Income Business and/or Professional Income | (Payments incurred in connection with the taxpayer's profession, trade cor business are deductible from gross income) Til) Losses from wash sales of stock or securities ere allowed when the aim is made by a dealer in stock or securities, and with respect 19 transaction mede in the ordinary course of business of such dealer under certain conditions; (iv) Losses from wagering transactions are deductible to the extent of the gains from such transactions. @ Net Operating Loss Carry-over {) The amount of net operating loss sustained by an individuat taxpayer engaged in business or practice of profession who does not enjoy an income tax exemption under the Tex Code or special laws at the time such loss wes incurred is allowed to be carried ‘over a8 a deduction from grass income for three (3) consecutive ‘texable years immediately following the year of the loss. {i In the case of businesses or enterprises engaged in mining operations other than oil end gas wells which are not enjoying the benefit of incentives granted under £0 No, 226, as amended, the ret operating loss incurred in the first ten (10) years of the ceperation of their businese may be carried over as deduction from ‘taxable income for five (5) years immediately following the yeor of the loss. 4 Bad Debts | (Bad debts actually ascertained to be worthless and charged off during the taxable year. (Bed debts arising from loss on securities held as capital assets ascertained to be worthiess and charged off within the taxable year by 2 taxpayer, except domestic banks/trust companies the “substantial part of whose business is the receipt of deposits. g. Depreciation @. Areasonable allowance for exhaustion, weer and tear (including reasonable allowance for obsolescence) of property used in trade/business computed using straight-line method, decining- balance method or sum-of-the-years-digit method. ———————— 6 [Page A. INDIVIDUAL INCOME TAXPAYER - RESIDENT CITIZEN Deductions from Gross Incomes Business and/or Professional Income (Payments incurred in connection with the taxpayer's profession, trade or business are deductible from gross income) Compensation Income (i) An allowance for depreciation of properties directly related to production of petroleum initially placed in service in a taxable year using the straight-line or dedining-balance method of, depreciation, at the option of taxpayer. The useful life of properties used in or related to production of petroleum shall be ‘en (10) years or such shorter life as may be permitted by the ‘Commissioner, and five (5) years for those properties not useé directly in the production of petroleum. (ii) An allowance for depreciation in respect of all properties used in mining operations which shall be computed at the normal rate of depreciation if the expected life is 10 years or less, or depreciated ‘over aniy number of years between 5 years and the expected life If | the latter is more then 10 years, and the depreciation thereon

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