STUDENT CODE:_______ NAME:________________________________________ CHAPTER 05: Final Income Taxation

SUMMARY OF FINAL TAX UNDER THE NIRC, AS AMENDED LEGENDS:

INDIVIDUAL CORPORATION
GENERAL RULE: Final tax applies only on identified passive CITIZEN ALIEN FOREIGN 1. ^ For OFW, exempt up to 7 years from
income from sources WITHIN. NON-RESIDENT August 12, 2011 (i.e. up to August 12,
RC NRC RA ETB NETB DC RFC NRFC 2018)
INTEREST INCOME 2. ^^ Subject to preferential tax rate
Local Currency Deposit under applicable tax treaty
Short term interest or yield 20% 20% 20% 20% 25% 20% 20% 30% 3. * Subject to tax sparing rule,
Long term interest or yield [<------------------- Exempt ------------------->] 25% 20% 20% 30% otherwise 30%
Pre-termination interest rate 4. Item of income that may arise sources
- Less than 3 years 20% 20% 20% 20% 25% 20% 20% 30% marked as “N/A” shall be subject to
- 3 to less than 4 years 12% 12% 12% 12% 25% 20% 20% 30% RIT
- 4 to less than 5 years 5% 5% 5% 5% 25% 20% 20% 30%
Foreign Currency Deposit SPECIAL ALIENS
Interest income from FCDUs/OBU depositary banks 15% Exempt 15% Exempt Exempt 15% 15% Exempt Under the old law, employees of offshore
Interest income of EFCDU/OBU banks 10% Exempt 10% Exempt Exempt 10% 10% Exempt banking units, regional operating or
Interest income on foreign loans N/A N/A N/A N/A N/A N/A N/A 20% regional administrative headquarters of
Tax-free covenant bonds 30% 30% 30% 30% 30% [<--------------- RIT --------------->] multinational companies, referred to as
DIVIDEND INCOME SPECIAL ALIENS, are previously subject to
From domestic corporations, in general 10% 10% 10% 20% 25% Exempt Exempt 15%* 15% final tax on gross compensation
From Real Estate Investment Trust or REIT 10% Exempt^ 10% <10%^^ <10%^^ Exempt Exempt <10%^^ income.
From foreign corporations (i.e. RFCs and NRFCs) [<---------------------------------------------------- RIT ---------------------------------------------------->] The special alien classification is now
SHARE IN NET INCOME of taxable partnership, joint venture abolished by virtue of a presidential
10% 10% 10% 20% 25% 10% 10% 30%
and co-ownership veto to the TRAIN law.
ROYALTIES
Passive royalties FINAL WITHHOLDING TAX RETURN
In general 20% 20% 20% 20% 25% 20% 20% 30% BIR Form 0619-F: Monthly Remittance
Passive royalties from cinematographic films and similar Return of Final Income Taxes Withheld –
20% 20% 20% 25% 25% 20% 20% 25%
works the return shall be filed and the tax shall
Passive royalties from printed books, literary works & be paid on or before the 10th day after
10% 10% 10% 10% 25% 20% 20% 30%
musical compositions each month for the first two months of
Active royalties [<---------------------- RIT ---------------------->] 25% [<------- RIT ------->] 30% the quarter
TAXABLE PRIZES, amounting to: BIR Form 1601-FQ: Quarterly Remittance
P10,000 and below [<---------------------- RIT ---------------------->] 25% [<------- RIT ------->] 30% Return of Final Income Taxes Withheld –
Above P10,000 20% 20% 20% 20% 25% [<------- RIT ------->] 30% the return shall be filed and the tax shall
WINNINGS be paid on or before the last day of the
In general 20% 20% 20% 20% 25% [<------- RIT ------->] 30% month after each quarter
PCSO & lotto winnings > P10,000 20% 20% 20% 20% 25% 20% 20% 30% Please check the groupings of taxpayers under
PCSO & lotto winnings ≤ P10,000 [<------------------- Exempt ------------------->] 25% [<---- Exempt ---->] 30% eFPS in Chapter 4.
INFORMER’S TAX REWARD 10% 10% 10% 10% 25% 10% 10% 30%

Source(s): INCOME TAXATION | 2019 EDITION | REX B. BANGGAWAN, CPA, MBA Professor: JAYPAUL OCAMPO ACIDERA, CPA
STUDENT CODE:_______ NAME:________________________________________ CHAPTER 05: Final Income Taxation
INTEREST INCOME OR YIELD ROYALTIES ENTITIES EXEMPT FROM RIT, FIT & CGT
Savings or time deposits with cooperatives are NOT subject to Royalties, active or passive, earned from sources abroad are 1. Foreign governments and foreign government-owned and
Final Income Tax. subject to RIT. controlled corporations
-------------------- 2. International missions or organizations with tax immunity
Interest Income subject to Final Income Tax: WINNINGS 3. General professional partnership
1. Deposit substitute Winnings, regardless of amount, from sources abroad are 4. Qualified employee trust fund
2. Government securities subject to RIT.
3. Monet market placements EXCEPTIONS TO THE GENERAL FINAL TAX ON NRA-NETB OR
4. Trust funds PRIZES NRFC
5. Other investments evidenced by BSP prescribed Prizes generally exempt from FIT: NRA-NETB NRFC
certificates 1. Prizes received by a recipient without any effort on his General INCOME Tax Rate 25% 30%
--------------------
part to join a contest. Exceptions:
Interest Income subject to Regular Income Tax:
a. The recipient was selected without any action on his 1. Capital gain on sale of
1. Lending activities, whether or not in the course of
part to enter the contest. domestic stocks directly to 15% CGT 15% CGT
business
b.The recipient is not required to render substantial future buyer
2. Investments in bonds
services as a condition to receiving the price or reward. 2. Rentals on cinematographic
3. Promissory notes same 25%
2. Prizes from sports competitions that are sanctioned by films and similar works
4. Foreign sources, whether bank or non-bank
their respective national sports organizations. 3. Rentals of vessels same 4.5%
5. Penalty for legal delay or default --------------------
4. Rentals of aircrafts,
Prizes, regardless of amount, from sources abroad are subject
DIVIDENDS machineries, and other same 7.5%
to RIT.
DOMESTIC Dividends generally exempt from FIT: -------------------- equipment
1. Stock Dividends, subject to FIT if: The tax rules on PCSO or lotto winnings shall be applied on a 5. Interest income under the
a. Subsequent (immediate) cancellation and redemption per ticket basis. foreign currency deposit Exempt Exempt
b. Leads to substantial alteration system
2. Liquidating Dividends, subject to RIT if liquidating TAX INFORMER’S REWARD 6. Interest on foreign loans N/A 20%
dividends exceed the cost of the investments The informer must not be a government official or employee 7. Dividend income 15% if tax
same sparing rule
3. Inter-corporate Dividends or their relative within the 6th degree of consanguinity.
is applicable
4. Dividends from Cooperatives --------------------
-------------------- Amount of Cash Reward – whichever is the lower of the 8. Tax on corporate bonds 30% same
--------------------
Stock Split will never be subject to income tax. following per case:
As a rule, NRA-NETBs and NRFCs do not file ITRs.
1. 10% of revenues, surcharges, or fees received recovered
EXCEPT, NRE-NETBs and NRFCs are required to file ITRs to
ENTITIES TAXABLE AS CORPORATIONS ARE SUBJECT TO 10% and or fine or penalty imposed and collected or
report their gain from dealings in domestic stocks directly to
FINAL TAX 2. P1,000,000
buyers.
Share in business partnership net income includes the share
Ownership of the stocks shall not be transferred to the
in the residual profit and provision for salary, interest and OTHER FINAL INCOME TAXES
assignee without the required return and tax clearance
bonus to a partner. 1. Fringe benefits of managerial or supervisory employees
(Certificate Authorizing Registration or CAR) from the BIR
However, if the provision for salaries, interests and bonuses (35% Final Tax)
that the tax on the transfer has been paid.
are EXPENSED as such in the book of the partnership, they 2. Income payments to sub-contractors of petroleum service --------------------
are subject to RIT to the receiving partner, not to FIT. contractors (8% Final Tax) The tax sparing rule is deemed satisfied if the country which
the NRFC is domiciled imposes no tax on dividends from
foreign sources.
Source(s): INCOME TAXATION | 2019 EDITION | REX B. BANGGAWAN, CPA, MBA Professor: JAYPAUL OCAMPO ACIDERA, CPA