Income Tax

Income Tax
Income Tax Description

Income Tax is a tax on a person's income, emoluments, profits arising from property,
practice of profession, conduct of trade or business or on the pertinent items of gross income
specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions if any, authorized
for such types of income, by the Tax Code, as amended, or other special laws.
Who are Required to File Income Tax Returns?

Individuals
Resident citizens receiving income from sources within or outside the Philippines
Employees deriving purely compensation income from two or more employers, concurrently or
successively at any time during the taxable year
Employees deriving purely compensation income regardless of the amount, whether from a
single or several employers during the calendar year, the income tax of which has not been
withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to collectible or
refundable return
Self-employed individuals receiving income from the conduct of trade or business and/or
practice of profession
Individuals deriving mixed income, i.e., compensation income and income from the conduct of
trade or business and/or practice of profession
Individuals deriving other non-business, non-professional related income in addition to
compensation income not otherwise subject to a final tax
Individuals receiving purely compensation income from a single employer, although the income
of which has been correctly withheld, but whose spouse is not entitled to substituted filing
Non-resident citizens receiving income from sources within the Philippines
Aliens, whether resident or not, receiving income from sources within the Philippines
Non-Individuals
Corporations including partnerships, no matter how created or organized.
Domestic corporations receiving income from sources within and outside the Philippines
Foreign corporations receiving income from sources within the Philippines
Estates and trusts engaged in trade or business
[return to index]
Annual Income Tax For Individuals Earning Purely Compensation Income (Including Non-
Business/Non-Profession Related Income)
BIR Form 1700 - Annual Income Tax For Individuals Earning Purely Compensation Income
(Including Non-Business/Non-Profession Related Income)
Documentary Requirements
Certificate of Income Tax Withheld on Compensation (BIR Form 2316)
Duly approved Tax Debit Memo, if applicable
Proofs of Foreign Tax Credits, if applicable
Income Tax Return previously filed and proof of payment, if filing an amended return for the
same taxable year.
Procedures
For Electronic Filing and Payment System (eFPS) Filer
Fill-up applicable fields in the BIR Form No. 1700
Pay electronically by clicking the "Proceed to Payment" button and fill-up the required fields in
the "eFPS Payment Form" click "Submit" button.
Receive payment confirmation from eFPS-AABs for successful e-filing and e-payment.
For Non-eFPS Filer
Fill-up applicable fields in the BIR Form No. 1700 in the downloaded Electronic Bureau of
Internal Revenue Form (eBIRForm) Package
Print the duly accomplished BIR Form No. 1700
Proceed to the nearest Authorized Agent Bank (AAB) under the jurisdiction of the Revenue
District Office where you are registered and present the duly accomplished BIR Form 1700,
together with the required attachments and your payment.
In places where there are no AABs, proceed to the Revenue Collection Officer or duly
Authorized City or Municipal Treasurer located within the Revenue District Office where you
are registered and present the duly accomplished BIR Form 1700, together with the required
attachments and your payment.
Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue
Collection Officer/duly Authorized City or Municipal Treasurer.
For Manual Filer
Fill-up the BIR Form No. 1700 in triplicate copies.
Proceed to the Revenue District Office where you are registered or to any Tax Filing Center
established by the BIR and present the duly accomplished BIR Form 1700, together with the
required attachments.
Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center
representative.
Deadline
On or before the 15th day of April of each year covering taxable income for calendar year 2018
and thereafter
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Annual Income Tax For Individuals, Estates, and Trusts

BIR Form 1701 - Annual Income Tax Return Individuals, Estates and Trusts
Certificate of Income Tax Withheld on Compensation (BIR Form 2316), if applicable
Certificate of Income Payments Not Subjected to Withholding Tax (BIR Form 2304), if
applicable
Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable
Proof of Foreign Tax Credits, if applicable
Income Tax Return previously filed and proof of payment, if filing an amended return for the
same year
Account Information Form (AIF) or the Certificate of the independent Certified Public
Accountant (CPA) with Audited Financial Statements if the gross annual sales, earnings, receipts
or output exceed three million pesos (P3,000,000.00)
Account Information Form or Financial Statements not necessarily audited by an independent
CPA if the gross annual sales, earnings, receipts or output do not exceed P3,000,000.00 and is
subject to graduated income tax rates under Section 24(A)(2)(a)
Proof of prior year’s excess tax credits, if applicable
Procedures
For eFPS Filer
Pay electronically by clicking the “Proceed to Payment” button and fill-up the required fields in
the “eFPS Payment Form” then click “Submit” button.
For Non-eFPS Filer
Fill-up fields in the BIR Form No. 1701 in the downloaded Electronic Bureau of Internal
Revenue Form (eBIRForm) Package
For Manual Filer
representative.
Deadline
Final Adjustment Return or Annual Income Tax Return - On or before the 15th day of April of
each year covering income for calendar year 2018 and thereafter
[return to index]
Account Information Form For Self-Employed Individuals, Estates And Trusts (Including Those
With Mixed Income, i.e., Compensation Income and Income from Business and/or Practice of
Profession)
BIR Form 1701 AIF - Account Information Form for Self-Employed Individuals, Estates and
Trusts (Including those with Mixed Income, i.e., Compensation Income and Income from
Business and/or Practice of Profession) and Estates and Trusts (Engaged in Trade or Business)
NOTE: Pursuant to Sec. 71 of RA 10963, otherwise known as Tax Reform Acceleration and
Inclusion Act, amending Sec. 232 of the Tax Code, as amended, in relation to Revenue
Memorandum Circular No. 6 – 2001, corporations, companies or persons whose gross annual
sales, earnings, receipts or output exceed P3,000,000 may not accomplish this form. In lieu
thereof, they may file their annual income tax returns accompanied by balance sheets, profit and
loss statement, schedules listing income-producing properties and the corresponding income
therefrom, and other relevant statements duly certified by an independent CPA.
None
Procedures
Accomplish BIR Form 1701 AIF in triplicate.
Attach the same to BIR Form 1701.
Deadline
Same deadline as BIR Form 1701 - On or before the 15th day of April of each year covering
taxable income for calendar year 2018 and thereafter
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Quarterly Income Tax For Individuals, Estates And Trusts Including Those With Mixed Income,
i.e., Compensation Income and Income from Business and/or Practice of Profession
BIR Form 1701Q - Quarterly Income Tax Return For Individuals, Estates and Trusts
Proof of other payment/s made, if applicable
Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax
at Source (SAWT), if applicable
Procedures
For eFPS Filer
Fill-up applicable fields in the BIR Form No. 1701Q
For Non-eFPS Filer
Fill-up applicable fields in the BIR Form No. 1701Q in the downloaded Electronic Bureau of
Print the duly accomplished BIR Form No. 1701Q
District Office where you are registered and present the duly accomplished BIR Form 1701Q,
are registered and present the duly accomplished BIR Form 1701Q, together with the required
Receive your copy of the duly stamped and validated tax return and BIR prescribed deposit slip
from the teller of the AABs or Electronic Revenue Official Receipt (eROR) from the Revenue
For Manual Filer
Fill-up the BIR Form No. 1701Q in triplicate copies (Compensation Income need not be reported
in the Quarterly Income Tax Return and is to be declared only on the Annual Income Tax
Return).
established by the BIR and present the duly accomplished BIR Form 1701Q, together with the
Receive your copy of the duly stamped and validated form from the RDO.
Deadlines
May 15 of the current taxable year– for the first quarter
August 15 of the current taxable year – for the second quarter
November 15 of the current taxable year – for the third quarter
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Annual Income Tax For Corporations And Partnerships

BIR Form 1702 - Annual Income Tax Return (For Corporations and Partnerships)
Certificate of Income Payments Not Subjected to Withholding Tax (BIR Form 2304), if
applicable
Proof of Foreign Tax Credits, if applicable
Income tax return previously filed and proof of payment, if amended return is filed for the same
taxable year
Account Information Form (AIF) or the Certificate of the independent CPA with Audited
Financial Statements, if the gross annual sales, earnings, receipts or output exceed P3,000,000.
Proof of prior year’s excess tax credits, if applicable
Procedures
For eFPS Filer
For Non-eFPS Filer
Fill-up fields in the BIR Form No. 1702 in the downloaded Electronic Bureau of Internal
Revenue Form (eBIRForm) Package
For Manual Filer
representative.
Deadline
Final Adjustment Return or Annual Income Tax Return - On or before the 15th day of the fourth
month following the close of the taxpayer’s taxable year
[return to index]
Account Information Form For Corporations And Partnerships

BIR Form 1702 AIF - Account Information Form (For Corporations and Partnerships)
NOTE: Pursuant to Sec. 71 of RA 10963, otherwise known as Tax Reform Acceleration and
Inclusion Act, amending Sec. 232 of the Tax Code, as amended, in relation toRevenue
Memorandum Circular No. 6 – 2001, corporations, companies or persons whose gross annual
sales, earnings, receipts or output exceed P3,000,000 may not accomplish this form. In lieu
thereof, they may file their annual income tax returns accompanied by balance sheets, profit and
loss statement, schedules listing income-producing properties and the corresponding income
therefrom, and other relevant statements duly certified by an independent CPA.
None
Procedures
Accomplish BIR Form 1702 AIF in triplicate.
Attach the same to BIR Form 1702.
Deadline
Same deadline as BIR Form 1702 - On or before the 15th day of the fourth month following the
close of the taxpayer’s taxable year
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Quarterly Income Tax For Corporations And Partnerships

BIR Form 1702Q - Quarterly Income Tax Return (For Corporations and Partnerships)
Previously filed return, if an amended return is filed for the same quarter
Procedures
For eFPS Filer
Fill-up applicable fields in the BIR Form No. 1702Q
For Non-eFPS Filer
Fill-up applicable fields in the BIR Form No. 1702Q in the downloaded Electronic Bureau of
Print the duly accomplished BIR Form No. 1702Q
District Office where you are registered and present the duly accomplished BIR Form 1702Q,
are registered and present the duly accomplished BIR Form 1702Q, together with the required
Receive your copy of the duly stamped and validated tax return and BIR prescribed deposit slip
from the teller of the AABs or Electronic Revenue Official Receipt (eROR) from the Revenue
For Manual Filer
Fill-up the BIR Form No. 1702Q in triplicate copies.
established by the BIR and present the duly accomplished BIR Form 1702Q, together with the
Receive your copy of the duly stamped and validated form from the RDO.
Deadline
Corporate Quarterly Declaration or Quarterly Income Tax Return - On or before the 60th day
following the close of each of the quarters of the taxable year
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Improperly Accumulated Earnings Tax For Corporations

BIR Form 1704 - Improperly Accumulated Earnings Tax Return (For Corporations)
Photocopy of Annual Income Tax Return (BIR Form 1702) with Audited Financial Statements
and/or Account Information Form of the covered taxable year duly received by the BIR; and
Sworn declaration as to dividends declared taken from the covered year's earnings and the
corresponding tax withheld, if any.
Procedures
Fill-up BIR Form 1704 in triplicate.
If there is payment:
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you
are registered and present the duly accomplished BIR Form 1704.
If there is no payment:
Proceed to the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1704, together with the required attachments.
Receive your copy of the duly stamped and validated form from the RDO representative
Deadline
Within fifteen (15) days after the close of the taxable year
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Annual Income Information Form for General Professional Partnerships

Sec. 55. Returns of General Professional Partnership (Tax Code of 1997, as amended)
Every general professional partnership shall file, in duplicate, a return of its income, except
income exempt under Section 32 (B) of this Title, setting forth the items of gross income and of
deductions allowed by this Title, and the names, Taxpayer Identification Numbers (TIN),
addresses and shares of each of the partners.
[return to index]
Income Tax Rates
For Individual Citizens and Resident Aliens Earning Purely Compensation Income and
Individuals Engaged in Business and Practice of Profession
Graduated Income Tax Rates under Section 24(A)(2) of the Tax Code of 1997, as amended by
Republic Act No. 10963
Amount of Net Taxable Income Rate
Over But Not Over
- P250,000 0%
P250,000 P400,000 20% of the excess over P250,000
P400,000 P800,000 P30,000 + 25% of the excess over P400,000
P800,000 P2,000,000 P130,000 + 30% of the excess over P800,000
P2,000,000 P8,000,000 P490,000 + 32% of the excess over P2,000,000
P8,000,000 P2,410,000 + 35% of the excess over
P8,000,000
For Purely Self-Employed Individuals and/or Professionals Whose Gross Sales/Receipts and
Other Non-Operating Income Do Not Exceed the VAT Threshold of P3,000,000, the tax shall be,
at the taxpayer’s option:
8% Income Tax on Gross Sales or Gross Receipts in Excess of P250,000 in Lieu of the
Graduated Income Tax Rates and the Percentage Tax; Or
Income Tax Based on the Graduated Income Tax Rates
For Individuals Earning Both Compensation Income and Income from Business and/or Practice
of Profession, their income taxes shall be:
For Income from Compensation: Based on Graduated Income Tax Rates; and
For Income from Business and/or Practice of Profession:
If the total Gross Sales/Receipts Do Not Exceed VAT Threshold of P3,000,000, the Individual
Taxpayer May Opt to Avail:
8% Income Tax on Gross Sales/Receipts and Other Non-Operating Income in Lieu of the
Graduated Income Tax Rates and the Percentage Tax; Or
Income Tax Based on Graduated Income Tax Rates
If the total Gross Sales/Receipts Exceed VAT Threshold of P3,000,000
Income Tax Based on Graduated Income Tax Rates
On Certain Passive Income of Individual Citizens and Resident Aliens
Passive Income Tax Rate
1. Interest from currency deposits, trust funds and deposit substitutes 20%
2. Royalties (on books as well as literary & musical compositions) 10%
- In general 20%
3. Prizes (P10,000 or less ) Graduated
Income Tax
Rates
- Over P10,000 20%
4. Winnings (except from PCSO and Lotto amounting to P10,000 or 20%
less )
- From PCSO and Lotto amounting to P10,000 or less exempt
5. Interest Income from a Depository Bank under the Expanded Foreign 15%
Currency Deposit System
6. Cash and/or Property Dividends received by an individual from a 10%
domestic corporation/ joint stock company/ insurance or mutual fund
companies/ Regional Operating Headquarter of multinational companies
7. Share of an individual in the distributable net income after tax of a 10%
partnership (except GPPs)/ association, a joint account, a joint venture or
consortium taxable as corporation of which he is a member or co-venture
8. Capital gains from sale, exchange or other disposition of real property 6%
located in the Philippines, classified as capital asset
9. Net Capital gains from sale of shares of stock not traded in the stock 15%
exchange
10. Interest Income from long-term deposit or investment in the form of Exempt
savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced by
certificates in such form prescribed by the Bangko Sentral ng Pilipinas
(BSP)
Upon pre-termination before the fifth year, there should be imposed on
the entire income from the proceeds of the long-term deposit based on
the remaining maturity thereof:
Holding Period
- Four (4) years to less than five (5) years 5%
- Three (3) years to less than four (4) years 12%
- Less than three (3) years 20%
For Non-Resident Aliens Not Engaged in Trade or Business
A. Tax Rate in General – on taxable income from all sources within the same manner as
Philippines individual
citizen and
resident alien
individual
B. Certain Passive Income Tax Rates
1. Interest from currency deposits, trust funds and deposit substitutes 20%
2. Royalties (on books as well as literary & musical compositions) 10%
- In general 20%
3. Prizes (P10,000 or less ) Graduated
Income Tax
Rates
- Over P10,000 20%
4. Winnings (except from PCSO and Lotto) 20%
- From PCSO and Lotto exempt
5. Cash and/or Property Dividends received from a domestic 20%
corporation/ joint stock company/ insurance/ mutual fund companies/
Regional Operating Headquarter of multinational companies
6. Share of a non-resident alien individual in the distributable net 20%
income after tax of a partnership (except GPPs) of which he is a partner
or from an association, a joint account, a joint venture or consortium
taxable as corporation of which he is a member or co-venture
7. Interest Income from long-term deposit or investment in the form of Exempt
savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced by
certificates in such form prescribed by the Bangko Sentral ng Pilipinas
(BSP)
Upon pre-termination before the fifth year, there should be imposed on
the entire income from the proceeds of the long-term deposit based on
the remaining maturity thereof:
Holding Period
- Four (4) years to less than five (5) years 5%
- Three (3) years to less than four (4) years 12%
- Less than three (3) years 20%
8. Capital from the sale, exchange or other disposition of real property 6%
located in the Philippines classified as capital asset
9. Net Capital gains from sale of shares of stock not traded in the Stock
Exchange
- Not over P100,000 5%
- Any amount in excess of P100,000 10%
For Non-resident Aliens Not Engaged in Trade or Business
1. Gross amount of income derived from all sources within the Philippines 25%
2. Capital gains from the exchange or other disposition of real property located in 6%
the Philippines
3. Net Capital gains from the sale of shares of stock not traded in the Stock
Exchange
- Not Over P100,000 5%
- Any amount in excess of P100,000 10%
For Alien Individuals Employed by Regional Headquarters (RHQ) or Area Headquarters and
Regional Operating Headquarters (ROH) of Multinational Companies, Offshore Banking Units
(OBUs), Petroleum Service Contractor and Subcontractor
On the gross income consisting of salaries, wages, annuities, Graduated
compensation, remuneration and other emoluments, such as honoraria Income Tax
and emoluments derived from the Philippines Rates
For General Professional Partnerships
Net Income of the Partnerships 0%
For Domestic Corporations
Rates of Tax on Certain Passive Income of Corporations Tax Rate
1. Interest from currency deposits, trust funds, deposit substitutes and 20%
similar arrangements received by domestic corporations
2. Royalties from sources within the Philippines 20%
3. Interest Income from a Depository Bank under Expanded Foreign 15%
Currency Deposit System
4. Cash and Property Dividends received by a domestic corporation from 0%
another domestic corporation
5. Capital gains from the sale, exchange or other disposition of lands 6%
and/or building
6. Net Capital gains from sale of shares of stock not traded in the stock 15%
exchange
*Beginning on the 4th year immediately following the year in which such corporation
commenced its business operations, when the minimum corporate income tax is greater than the
tax computed using the normal income tax.
For Resident Foreign Corporation
1) a. In General – on taxable income derived from sources within the 30%
Philippines
b. Minimum Corporate Income Tax – on gross income 2%
c. Improperly Accumulated Earnings – on improperly accumulated 10%
taxable income
2) International Carriers – on gross Philippine billings 2½%
3) Regional Operating Headquarters of Multinational Companies– on 10%
taxable income
4.) Regional or Area Headquarters of Multinational Companies exempt
5) Corporation Covered by Special Laws Rate specified
under the
respective
special laws
6) Offshore Banking Units (OBUs) 10%
In general – Income derived by OBUs from foreign currency Exempt
transactions with non-residents, other OBUs, local commercial banks
and branches of foreign banks authorized by BSP
On interest income derived from foreign currency loans granted to 10%
residents other than offshore banking units or local commercial banks,
local branches of foreign banks authorized by BSP to transact business
with OBUs
7) Income derived under the Expanded Foreign Currency Deposit
System
Interest income derived by a depository bank under the expanded 7 ½ %
foreign currency deposit system.
On Income derived by depository banks under the expanded foreign exempt
currency deposit systems from foreign currency transactions with non-
residents, OBUs in the Philippines, local commercial banks including
branches of foreign banks that may be authorized by BSP
On interest income derived from foreign currency loans granted by 10%
depository banks under the expanded foreign currency deposit systems
to residents other than offshore banking units in the Philippines or other
depository banks under the expanded system
8.) Branch Profit Remittances – on total profits applied or earmarked for 15%
remittance without any deduction for the tax component thereof (except
those activities which are registered with the Philippines Economic
Zone Authority)
9.) Interest from currency deposits, trust funds, deposit substitutes and 20%
similar arrangements
10. Royalties derived from sources within the Philippines 20%
Related Revenue Issuances
RMO No. 23-2018, RR No. 8-2018, RA No. 10963, RR No. 12-2007, RR No. 14-2002, RA No.
9337, RR No. 9-98, RR No. 1-98, RR No. 5-97, RR No. 4-96
[return to index]
Frequently Asked Questions

1) What is income?
Income means all wealth which flows into the taxpayer other than as a mere return of capital.
2) What is Taxable Income?
Taxable income means the pertinent items of gross income specified in the Tax Code as
amended, less the deductions, if any, authorized for such types of income, by the Tax Code or
other special laws.
3) What is Gross Income?
Gross income means all income derived from whatever source.
4) What comprises gross income?
Gross income includes, but is not limited to the following:
Compensation for services, in whatever form paid, including but not limited to fees, salaries,
wages, commissions and similar items
Gross income derived from the conduct of trade or business or the exercise of profession
Gains derived from dealings in property
Interest
Rents
Royalties
Dividends
Annuities
Prizes and winnings
Pensions
Partner's distributive share from the net income of the general professional partnerships
5) What are some of the exclusions from gross income?

Life insurance
Amount received by insured as return of premium
Gifts, bequests and devises
Compensation for injuries or sickness
Income exempt under treaty
Retirement benefits, pensions, gratuities, etc.
Miscellaneous items
Income derived by foreign government
Income derived by the government or its political subdivision
Prizes and awards in sport competition
Prizes and awards which met the conditions set in the Tax Code
13th month pay and other benefits not exceeding P90,000
GSIS, SSS, Medicare and other contributions
Gains from the sale of bonds, debentures or other certificate of indebtedness with a maturity of
more than five (5) years
Gains from redemption of shares in mutual fund
6) What are the allowable deductions from gross income?

a) *Optional Standard Deduction - an amount not exceeding 40% of the gross sales/receipts for
individuals and gross income for corporations; or
b) Itemized Deductions which include the following:
- Expenses
- Interest
- Taxes
- Losses
- Bad Debts
- Depreciation
- Depletion of Oil and Gas Wells and Mines
- Charitable Contributions and Other Contributions- Research and Development
- Pension Trusts
* Not allowed to non-resident alien individual
* A General Professional Partnership (GPP) may avail of the OSD only once, either by the GPP
or the partners comprising the partnership
7) Who are not required to file Income Tax returns?
a. An individual earning purely compensation income whose taxable income does not exceed
P250,000.00
b. An individual whose income tax has been withheld correctly by his employer, provided that
such individual has only one employer for the taxable year
c. An individual whose sole income has been subjected to final withholding tax or who is exempt
from income tax pursuant to the Tax Code and other special laws.
d. An individual who is a minimum wage earner
e. Those who are qualified under “substituted filing”. However, substituted filing applies only if
all of the following requirements are present:
- the employee received purely compensation income (regardless of amount) during the taxable
year;
- the employee received the income from only one employer in the Philippines during the taxable
year;
- the amount of tax due from the employee at the end of the year equals the amount of tax
withheld by the employer;
- the employee’s spouse also complies with all 3 conditions stated above;
- the employer files the annual information return (BIR Form No. 1604-CF); and
- the employer issues BIR Form No. 2316 (Oct 2002 ENCS version) to each employee.
8.) Who are exempt from Income Tax?
a. Income from abroad of a non-resident citizen who is:
i. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of
his physical presence abroad with a definite intention to reside therein
ii. A citizen of the Philippines who leaves the Philippines during the taxable year to reside
abroad, either as an immigrant or for employment on a permanent basis
iii. A citizen of the Philippines who works and derives income from abroad and whose
employment thereat requires him to be physically present abroad most of the time during the
taxable year
iv. A citizen who has been previously considered as a non-resident citizen and who arrives in the
Philippines at any time during the year to reside permanently in the Philippines will likewise be
treated as a non-resident citizen during the taxable year in which he arrives in the Philippines,
with respect to his income derived from sources abroad until the date of his arrival in the
Philippines.
b. Overseas Filipino Worker, including overseas seaman
An individual citizen of the Philippines who is working and deriving income from abroad as an
overseas Filipino worker is taxable only on income 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 will be treated as an overseas Filipino worker.
NOTE: A Filipino employed as Philippine Embassy/Consulate service personnel of the
Philippine Embassy/consulate is not treated as a non-resident citizen; hence, his income is
taxable.
c. General Professional Partnership
d. Government Service Insurance System (GSIS)
e. Social Security System (SSS)
f. Philippine Health Insurance Corporation (PHIC)
g. Local Water Districts (LWD)
9) What are the procedures in filing Income Tax returns (ITRs)?
a. For “with payment” ITRs (BIR Form Nos. 1700 / 1701 / 1701Q / 1702 / 1702Q / 1704)
File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with the
Authorized Agent Bank (AAB) of the place where taxpayer is registered or required to be
registered. In places where there are no AABs, file the return directly with the Revenue
Collection Officer or duly Authorized Treasurer of the city or municipality in which such person
has his legal residence or principal place of business in the Philippines, or if there is none, filing
of the return will be at the Office of the Commissioner.
b. For “no payment” ITRs -- refundable, break-even, exempt and no operation/transaction,
including returns to be paid on 2nd installment and returns paid through a Tax Debit
Memo(TDM)
File the return with the concerned Revenue District Office (RDO) where the taxpayer is
registered. However, "no payment" returns filed late shall not be accepted by the RDO but
instead, they shall be filed with an Authorized Agent Bank (AAB) or Collection
Officer/Deputized Municipal Treasurer (in places where there are no AABs), for collection of
necessary penalties.
10) How is Income Tax payable of individuals (resident citizens and non-resident citizens)
computed?
A. Based on Graduated Income Tax Rate
Gross Income P ___________
Less: Allowable Deductions (Itemized or Optional) ___________
Net Taxable Income P ___________
Multiply by Tax Rate (0% to 35%) ____________
Income Tax Due P ___________
Less: Tax Withheld (per BIR From 2316) ____________
Income Tax Payable P____________
B. Based on Preferential Tax Rate of 8%
i. Taxpayers source of income is purely from self-employment
Gross Sales/Receipts P ___________
Add: Non-operating Income ____________
Gross Taxable Income P ___________
Less: Amount allowed as deduction under Sec. 24 (A)(2)(b) of NIRC,
250,000.00
as amended
Net Taxable Income P ___________
Multiply by Tax Rate 8%
Tax Withheld (per BIR From 2307) ____________
Income Tax Payable P ___________
ii. Mixed Income Earner
On Compensation
Total Compensation Income P ___________
Less: Non-taxable Income ____________
13th month pay and other benefits (max) 90,000.00
Taxable Compensation Income P ----------------
Multiply by Tax Rate (0% to 35%) ____________
Tax Due on Compensation P ___________

On Business Income
Gross Sales/Receipts P ___________
Add: Non-operating Income ____________
Taxable Business Income P ___________
Multiply by Tax Rate 8%
Tax Due on Business Income P ___________

Total Income Tax Due (Compensation + Business) P ___________
Tax Withheld (per BIR From 2316/2307) ____________
Income Tax Payable P ___________
11) How is Income Tax Paid?
A. Through withholding
a. Individual Payee: Rate
If the gross annual business or professional income did not exceed 5%
P3,000,000.00
If the gross annual business or professional income is more than 10%
P3,000,000.00
b. Non-individual Payee Rate
If the gross annual business or professional income did not exceed 10%
P720,000.00
If the gross annual business or professional income is more than 15%
P720,000.00
B. Pay the balance as you file the tax return, computed as follows:
Less: Withholding Tax ___________
Net Income Tax Due* P ___________
*Note: When the tax due exceeds P2,000.00, the taxpayer may elect to pay in two equal
installments, the first installment to shall be paid at the time the return is filed and the second
installment on or before October 15 following the close of the calendar year to the Authorized
Agent Bank (AAB) within the jurisdiction of the Revenue District Office (RDO) where the
taxpayer is registered
12) Is the Minimum Corporate Income Tax (MCIT) an addition to the regular or normal income
tax?
No, the MCIT is not an additional tax. An MCIT of 2% of the gross income as of the end of
taxable year (whether calendar or fiscal year, depending on the accounting period employed)
is imposed on a corporation taxable under Title II of the Tax Code, as amended, beginning on the
4th taxable year immediately following the taxable year in which such corporation commenced
its business operations when the MCIT is greater than the regular income tax. The MCIT is
compared with the regular income tax, which is due from a corporation. If the regular income is
higher than the MCIT, then the corporation does not pay the MCIT but the amount of the regular
income tax.
13) Who are covered by MCIT?
The MCIT covers domestic and resident foreign corporations which are subject to the regular
income tax. The term “regular income tax” refers to the regular income tax rates under the Tax
Code. Thus, corporations which are subject to a special corporate tax or to preferential rates
under special laws do not fall within the coverage of the MCIT.
For corporations whose operations or activities are partly covered by the regular income tax and
partly covered by the preferential rate under special law, the MCIT shall apply the regular
income tax rate on its operations not covered by the tax incentives. Newly established
corporations or firms which are on their first 3 years of operations are not covered by the MCIT.
14) When does a corporation start to be covered by the MCIT?
A corporation starts to be covered by the MCIT on the 4th year following the year of the
commencement of its business operations. The period of reckoning which is the start of its
business operations is the year when the corporation was registered with the BIR. This rule will
apply regardless of whether the corporation is using the calendar year or fiscal year as its taxable
year.
15) When is the MCIT reported and paid? Is it quarterly?
The MCIT is paid on an annual basis and quarterly basis. The rules are governed by Revenue
Regulations No. 12-2007.
16) How is MCIT computed?
The MCIT is 2% of the gross income of the corporation at the end of the taxable year.
The computation and the payment of MCIT, shall likewise apply at the time of filing the
quarterly corporate income tax as prescribed under Section 75 and Section 77 of the Tax Code,
as amended. Thus, in the computation of the tax due for the taxable quarter, if the computed
quarterly MCIT is higher than the quarterly normal income tax, the tax due to be paid for such
taxable quarter at the time of filing the quarterly income tax return shall be the MCIT which is
two percent (2%) of the gross income as of the end of the taxable quarter.
“Gross income” means gross sales less sales returns, discounts and cost of goods sold. Passive
income, which have been subject to a final tax at source do not form part of gross income for
purposes of computing the MCIT.
Cost of goods sold includes all business expenses directly incurred to produce the merchandise to
bring them to their present location and use.
For trading or merchandising concern, cost of goods sold means the invoice cost of goods sold,
plus import duties, freight in transporting the goods to the place where the goods are actually
sold, including insurance while the goods are in transit.
For a manufacturing concern, cost of goods manufactured and sold means all costs of production
of finished goods such as raw materials used, direct labor and manufacturing overhead, freight
cost, insurance premiums and other costs incurred to bring the raw materials to the factory or
warehouse.
For sale of services, gross income means gross receipts less discounts and cost of services which
cover all direct costs and expenses necessarily incurred to provide the services required by the
customers and clients including:
Salaries and employees benefits of personnel, consultants and specialists directly rendering the
service;
Cost of facilities directly utilized in providing the service such as depreciation or rental of
equipment used;
Cost of supplies
Interest Expense is not included as part of cost of service, except in the case of banks and other
financial institutions.
“Gross Receipts” means amounts actually or constructively received during the taxable year.
However, for taxpayers employing the accrual basis of accounting, it means amounts earned as
gross income.
17) What is the carry forward provision under the MCIT?
Any excess of the MCIT over the normal income tax may be carried forward and credited against
the normal income tax for the three (3) immediately succeeding taxable years.
18) How would the MCIT be recorded for accounting purposes?
Any amount paid as excess minimum corporate income tax should be recorded in the
corporation’s books as an asset under account title “Deferred charges-MCIT”
19) How long can we amend our income tax return?
There is no prescription period for amending the return. When the taxpayer has been issued a
Letter of Authority, he can no longer amend the return.
20) Can a benefactor of a senior citizen claim him/her as additional dependent in addition to
his/her 3 qualified dependent children at Php25,000 each?
No, pursuant to Revenue Regulations 2-94, the benefactor of a senior citizen cannot claim the
additional exemption. Further, additional exemptions of individual taxpayers are removed under
RA 10963 (Tax Reform for Acceleration and Inclusion).
[return to index]
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Income Tax

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Income Tax

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Income Tax

Income Tax Description

Who are Required to File Income Tax Returns?

Annual Income Tax For Individuals, Estates, and Trusts

Annual Income Tax For Corporations And Partnerships

Account Information Form For Corporations And Partnerships

Quarterly Income Tax For Corporations And Partnerships

Improperly Accumulated Earnings Tax For Corporations

Annual Income Information Form for General Professional Partnerships

Frequently Asked Questions

5) What are some of the exclusions from gross income?

6) What are the allowable deductions from gross income?

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