Im Tax Week2

TAX 1 (BSOA and
BSMA)
INSTRUCTIONAL
MATERIALS
Week 2: September 1 to 7
INCOME TAX ON INDIVIDUALS
A. Classification of Individual Taxpayers. 1. Resident Citizens. A citizen of the

Philippines residing therein. Under the 1987 Constitution1, the following are citizens of
the Philippines.
• Those who are citizens of the Philippines at the time of the adoption of this
Constitution;
• Those whose fathers or mothers are citizens of the Philippines;
• Those born before January 17, 1973, of Filipino mothers, who elect Philippine
citizenship upon reaching the age of majority; and
• Those who are naturalized in accordance with the law.
EXAMPLE:
#1 Pepe and Pilar, husband and wife, with five (5) qualified dependents children
had the
following income in 2018:
Compensation income:
Pepe (gross of withholding tax P 13,500.00) P 242,000.00
Pilar (net of W/tax P 10,000.00) 130,000.00
Gross income on conjugal property of spouses 260,000.00 Expenses on
conjugal property 30,000.00 The spouses are paying a total insurance of p
300.00 a month to XXX Insurance Company on the hospitalization
insurance of the members of the family.
Solution
Gross compensation income P 242,000.00 Share in conjugal property

(260,000.00-
30,000.00)/2 115,000.00 Taxable income 357,000.00 Tax
on:
250,000.00 0 107,000.00 20% 21,400.00
357,000.00
Tax due 21,400.00 Less Withholding tax 13,500.00
Tax still due 7,900.00
NOTES
:
1. Taxable income of P 250,000.00 and below is TAX EXEMPT. See
table provided. 2. Taxable income must be equal to the schedule: SEE THE
ARROW
in the RED COLOR 3. For 20% rate see table. 4. Withholding tax must be
deducted from the tax due to get the still
due. 5. Insurance premium paid is not deductible (Medical cash allowance
to dependents of employees not exceeding P 1,500.00 per employee
per semester or P 250.00/per RR-11-2018;TRAIN LAW) 6. Income
from conjugal property or unidentifiable income of spouses
are considered as a joint to be divided equally between
the spouses.
#2 Carlo, married, with two dependent children, received the following

income:
Rent
:
Philippines P 1,000,000.00 Other Countries 200,000.00 Interest:
Peso deposit, MBTC 100,000.00 US deposit, BDO ( $10,000.00 @ P42.00/$)
420,000.00 Hongkong (HK$ 10,000.00 @ P 5.00/hk$) 50,000.00 Prize(cash)
won in local contest 8,000.00 Prize(TV) won in a local lottery 50,000.00
PCSO/Lotto winnings 2,000,000.00 Prize won in contest U.S 300,000.00 . Lotto
winning in U.S. 100,000.00 Dividend, Domestic Company 600,000.00
Solution
:
Rent Total
1,000,000.0
0
200,000.00 ,1,200,000.00 Interest deposit in Hongkong 50,000.00 Prize(cash)

won in local contest
8,000.00 Prize
won in contest U.S 300,000.00 Lotto
winning in U.S. 100,000.00 Taxable income 1,658,000.00
Bracket Rate Tax 800,000.00 130,000.00 858,000.00 30% 257,400.00
1,658,000.00 Tax Due 387,000.00 Less: Withholding tax 0.00
Tax still due 387,000.00
UNDER TRAIN
LAW:
Personal exemptions (basic and additional) as deductions from gross
income are no longer allowed beginning January 01, 2018.
2. Non-resident Citizen.
• A citizen of the Philippines whose physical presence abroad is with a definite
intention to reside therein – to the satisfaction of the Commissioner of Internal
Revenue;
• 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. A
good example would be Overseas Contract Workers (OCW) or Overseas Filipino
Workers (O FW) who were issued an overseas employment permit. For purposes of
income tax, a seaman is considered an OCW2;
• 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. “Most of the time” means at least 183 days3;
• A citizen who has been previously considered as a non-resident citizen and who
arrives in the Philippines at any time during the taxable year to reside
permanently in the Philippines shall likewise be treated as a nonresident citizen for
the taxable year with respect to his income derived from sources abroad until the date of
his arrival in the Philippines4. So, if the taxpayer, who is previously considered a
non-resident citizen arrived in the Philippines on July 1, 2016 with the intention of
residing permanently in the Philippines, he/she shall be considered a non-resident
citizen for his income from January 1 to June 30, 2016 (prior to his date of arrival) and a
resident citizen for the rest of the year.
Example:
Rent: Philippines P 1,000,000.00 Other Countries 200,000.00 Interest:

For #s 2/3 and 4.1 ( Non-Resident Citizen/Resident

Alien/Non-Resident Alien Engaged in Trade or BusinessNES)
INCOME IS ONLY WITHIN THE PHILIPPINES
NRC/RA/NRAETB Rent in the

Philippines 1,000,000.00 Prize (cash) won in local
contest 8,000.00 Taxable income 1,008,000.00
Bracke
t
800,000.00 130,000.00 208,000.00 30% 62,400.00 1,008,000.00 Tax
due 192,400.00 Less: creditable withholding tax 0.00 Tax still due
192,400.00 FOR NRANETB: 25%
3. Resident
Alien.
• An alien who lives in the Philippines with no definite intention as to his stay (floating
intention);
• One who comes to the Philippines for a definite purpose which in its nature would
require an extended stay and to that end makes his home temporarily in the
Philippines;
• An alien who has acquired a residence in the Philippines and retains his
status as such until he abandons the same and actually departs from the
Philippines.
Example:
Rent
:
Peso deposit, MBTC 100,000.00 US deposit, BDO (
$10,000.00 @ P42.00/$) 420,000.00 Hongkong (HK$
10,000.00 @ P 5.00/hk$) 50,000.00
Prize(cash) won in local contest 8,000.00 Prize(TV) won in a local lottery
50,000.00 PCSO/Lotto winnings 2,000,000.00 Prize won in contest U.S
300,000.00 . Lotto winning in U.S. 100,000.00 Dividend, Domestic Company
600,000.00


Bracke
t
800,000.00 130,000.00 208,000.00 30% 62,400.00 1,008,000.00 Tax
192,400.00 FOR NRANETB: 25%
4. Nonresident Alien (NRA). Engaged in Trade or Business in the

Philippines
• An alien who comes to the Philippines for a definite purpose which in its nature may
be promptly accomplished;
• One who may either be a: (a) NRA engaged in a trade or business (NRAETB) in the
Philippines or (b) NRA not engaged in trade or business (NRANETB) in the
Philippines. A NRA who shall come to the Philippines and stay for an aggregate of
more than 180 days shall be deemed a NRAETB.
Sources of Income Individual Taxpayer Income

Within Income Without Resident Citizen Taxable Taxable Resident Alien
Taxable Not Taxable Nonresident Citizen Taxable Not Taxable
Nonresident Alien engaged in Trade or Business (NRAETB) Taxable Not
Taxable
Nonresident Alien not engaged in Trade or Business
(NRANETB) Taxable Not Taxable
Exampl
e:
Rent
:


Bracke
t
800,000.00 130,000.00 208,000.00 30% 62,400.00 1,008,000.00 Tax
192,400.00
FOR NRANETB: 25% 5. Nonresident Alien (NRA). Engaged in
Trade or Business in the Philippines
Exampl
e:
FOR NRANETB: 25% Vicky Co, Chinese, residing in Macau, China hd the
following data in the Philippines during the year:
Cash Dividend from Singh Corporation, Domestic P 25,000.00
Interest on dollar deposit with metro bank 20,000.00 During the year,
her condominium unit in Baguio City which has a market value of P
1,500,000.00 was sold for P 2,000,000.00
Compute the FWT on Vicky if she is not engaged in trade or

business in the Philippines.
Answers
:
Dividend P 60,000.00 x 25% = P 15,000.00 GSP P 2,000,000.00 x 6% = P
120,000.00 NOTES: 1. 25% final withholding tax on the gross amount of the
following income:
a. Interest b. Cash and/or property dividends c. RENTS d.
Salaries, wages e. Premiums f. Annuities g. Compensation,
remuneration, emoluments h. Capital Gains i. Other fixed or
determinable annual or periodic or casual gains,
profits and income 2. 6% on capital gains presumed to have been
realized from the sale,
exchange or other disposition of real property located in the
Philippines, classified as capital assets, including “pacto de retro” sales
and other forms of conditional sales.
The tax base shall be whichever is the higher
between:
i. The gross selling price and
ii. The higher between the Fair Market Value (FMV) as determined by the
Commissioner of internal Revenue (CIR) and the FMV as determined by the
Provincial or City Assessors 3. In case of dispositions of real property
classified as capital assets to
government or any of its political subdivisions or agencies or to GOCC,
the tax to be imposed shall determine in either of the following at the
OPTION of the taxpayer.
i. In accordance with the graduated rates or ii. 6% final tax on the Gross
Selling price or FMV whichever is
higher. 4. 15% final tax is hereby imposed upon the net capital
gains realized during the taxable year from the sale, barter, exchange or
other disposition of shares of stock in a domestic corporation, except shares
sold or disposed of through the stock exchange.
List of Taxes
• Capital Gains Tax
• Donor’s Tax
• Income Tax
• Value Added Tax (VAT)
• Expanded Withholding Tax
• Withholding Tax on Government Money Payments
• Documentary Stamp Tax
• Estate Tax
• Percentage Tax
• Withholding Tax on Compensation
• Final Withholding Tax
Capital Gains
Tax
Capital Gains Tax is a tax imposed on the gains presumed to have been
realized by the seller from the sale, exchange, or other disposition of capital assets
located in the Philippines, including pacto de retro sales and other forms of
conditional sale.
Documentary Stamp
Tax
Documentary Stamp Tax is a tax on documents, instruments, loan agreements,
and papers evidencing the acceptance, assignment, sale, or transfer of an obligation,
rights, or property incident thereto.
Donor’s
Tax
Donor’s Tax is a tax on a donation or gift, and is imposed on the gratuitous
transfer of property between two or more persons who are living at the time of
the transfer.
Estate
Tax
Estate Tax is a tax on the right of the deceased person to transmit his/her estate
to his/her
lawful heirs and beneficiaries at the time of death and on certain transfers which are
made by law as equivalent to testamentary disposition.
Income Tax –
Philippines
Income Tax is a tax on all yearly profits arising from property, profession, trades or
offices, or as a tax on a person’s income, emoluments, profits, and the like.
Percentage
Tax
Percentage Tax is a business tax imposed on persons or entities who sell or
lease goods, properties, or services in the course of trade or business.
Value Added Tax

(VAT)
Value Added Tax (VAT) is a business tax imposed and collected from the seller in
the course of trade or business on every sale of properties (real or personal), lease of
goods or properties (real or personal), or vendors of services. It is an indirect tax, thus,
it can be passed on to the buyer.
Withholding Tax on
Compensation
Withholding Tax on Compensation is the tax withheld from individuals receiving
purely compensation income.
Expanded Withholding
Tax
Expanded Withholding Tax is a creditable tax prescribed for certain domestic
(Philippine) payors and is creditable against the income tax due of the payee for the
taxable quarter year. The expanded withholding tax normally covers services.
Final Withholding
Tax
Final Withholding Tax is a withholding tax which is prescribed only for certain payors
and is not creditable against the income tax due of the payee for the taxable year.
Income Tax withheld constitutes the full and final payment of the Income Tax due from
the payee on the said income.
Withholding Tax on Government Money

Payments
Withholding Tax on Government Money Payments is the withholding tax withheld
by government offices and instrumentalities, including government-owned or
controlled corporations and local government units, before making any payments to
resident suppliers of goods and services.
What is Passive
Income?
Passive income is an income you earned/generated without trading your time
for money. As simple as that.
9 Sources of passive income in the Philippines
1. Savings
accounts
Bank savings account is one of the easiest ways to earn passive income in the
Philippines. You deposit your money in the bank and earn “interest” from them.
2. Time deposit
accounts
A time deposit is almost the same with a savings account – you deposit your
money in the bank. The difference is that, in time deposit, there is a certain timeframe
(called maturity) when you can claim or withdraw your money back. Meaning, you
have to wait for the maturity period to earn from it.
3. Stock
Dividends
One of the simple sources of passive income in the Philippines is by earning
through stock dividends. If you invested in the stock market, you can earn money
when the company (shares) you owned give dividends to their shareholders. This
usually happens when the company is earning more. Stock dividends can be in form of
cash or shares.
4. Stock price
appreciation
Another way to earn money from the stock market is from stock price
appreciation. I considered it passive income as you don’t need to excel full effort
when buying stocks.
Day trading which means trading and monitoring stocks real time is considered active
income. Long term investing is where you bought “good stocks” now and plan to sell
it 10 to 20 years after.
Investing in the stock market this day is super easy. With your P5,000 you can
already open an account.
5.
Blogging
A blog can be your best source of passive income right now. It is easy to set
up and has a lot of potentials to give and provide your passive income in the future.
This blog is one of our sources of passive income. We earn considerable amount
from ads/sponsor that can help us pay our bills. By having a blog, you can create
multiple sources of passive income. To name a few, here are some of the ways you
can earn money from your blog.
• Advertising
• Selling your own information products(Ebooks or E-courses)
• Earning from Affiliates
6. Building smartphone
application
If you have the knowledge in programming, you can create useful “apps” and
earn passive income from it. Almost everything is now being done through smartphones
by the help of apps or applications. If you have the skills and passion, this can be a
lucrative money-making machine for you.
7. Vending
machines
Vending machines are one of the simplest ways of earning passive income in the
Philippines. Coffee vending machines are available everywhere right now and are
helping Pinoys earn passive income.
Although this may need “little maintenance” for complete operation, this can
still provide you passive income earned while working on your full-time job.
8. Earning from
Royalty
If you can create music or write books on your own, you can definitely build a
great source of passive income. Once the music was produced, you can have it sell
or use by other people or company and earn royalty payment from it. That’s a passive
income! On the other hand, if you’re a passionate writer and can write books, you can
also have it sell by other stores or people and earn royalty payment from them. This
may sound easy but we know it’s not. It definitely needs full effort, skills, time and
passion.
9. Rental
Income
Rental properties are one of the well-known sources of passive income in
the Philippines. Many Pinoys invested in condominiums, apartments, townhouses,
and others and run them as a business.
EXAMPLE OF PASSIVE INCOME WITH COMPUTATONS:

Carlo, married, with two dependent children, received the following
income:
Rent
:
SOLUTION:
Rate RC &RA NRC NRA-ETB NRA-NETB Interest, Peso 20% 20,000.00 20,000.00 20,000.00
25% 25,000.00 US-BDO
7 1⁄2% 63,000.00 Exempt Exempt Exempt Price(TV)

won in a local lottery
20% 10,000.00 10,000.00 10,000.00 Exempt

25% 12,500.00 PCSO/Lotto
20% 400,000.00 400,000.00
25% 500,000.00 Div. Domestic Corp.
10% 60,000.00 60,000.00 20% 120,000.00 25% 150,000.00 Total FWT 553,000.00 490,000.00 150,000.00
687,500.00
WHAT ABOUT THE RENT 1M and Prize(cash) won in local contest P 8,000.00
?????
● New Income Tax Rates on Passive Income in the Philippines
Tax
Passive Income
Rate
1. Interests from any currency bank deposit and yield or any other monetary benefit from
deposit substitutes and from trust funds and similar arrangements
20%
2. Interest income received by an individual taxpayer (except a non-resident individual) from
a depositary bank under the expanded foreign currency deposit system
15%
3. Proceeds of pre-terminated long-term deposit or investment in the form of savings,
common or individual trust funds, deposit substitutes, investment management accounts
and other investments evidenced by certificates in such form as prescribed by the Bangko
Sentral ng Pilipinas (BSP) -- the final tax shall be based on the remaining maturity of the
investment:
a. Four (4) years but less than five (5) years 5%
b. Three (3) years but less than four (4) years 12%
Tax
Passive Income
Rate
c. Less than three (3) years 20%
4. Royalties (except royalties on books and other literary works and musical compositions)
20%
5. Royalties on books and other literary works and musical compositions 10%
6. Prizes (except prizes amounting to P10,000 or less) 20%
7. Winnings (except Philippine Charity Sweepstakes and Lotto winnings amounting to
P10,000 or less)
20%
8. Cash and Property Dividends 10%
9. Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange 15%
10. Capital Gains from sale of Real Property located in the Philippines 6%
● Source: BIR Revenue Regulations 8-2018 (www.bir.gov.ph)
PASSIVE INCOME DERVIED FROM PHILIPPINES SUBJECT TO FWT (final
withholding tax): RC,RA NRC,NRAETB NRANETB INTEREST INCOME
a) Interest income on savings: 20% 20% 25% b) FCDU (foreign currency depository
unit) 15% Exempt Exempt c) Interest income on long term deposit Exempt Exempt 25%
or bank investment (at least 5yrs) In case of PRE-TERMINATION of the long-term bank deposit or bank
investment, depending on the holding period:
5 yrs or more Exempt Exempt 25% 4 yrs to less than 5 yrs 5% 5% 25% 3 yrs to less than 4 yrs 12% 12%
25% Less than 3 yrs 20% 20% 25%
ROYALTIES
RC/RA/NRC NRAETB NRANETB a) Literary works/Books/Musical Composition 10% 10% 25% b ) Other
Royalties 20% 20% 25%
DIVIDENDS
RC,RA,NRC NRAETB NRANETB/
Special
Alien
Employees
SAE a)
Dividends received from DC/Joint Stock Company/ Insurance or mutual fund company
and Regional Operating Headquarters of a Multinational Company
(ROHQs) 10% 20% 25% b) Share in the distributable net income after tax of a
Partnership (except GPP) 10% 20% 25% c)Share in the net income after tax of:
Association/Joint Account/Taxable Joint Venture Or Consortium 10% 20% 25%
● Share in the net income of a Partnership

General
Partnership:
Treated as dividend income, 10% withholding Tax General
Professional Partnership
Not treated as dividend income. Subject to
basic
Tax under section
(24)A
SHARE IN THE NET INCOME OGF A JOINT

PARTNERSHIP
Co-Venturer Taxable JV ***Not-Taxable JV Individual 10% subject to basic tax Corporation
treated as inter-corporate dividend corporate tax
Income, hence, tax-exempt (not as dividend inc.)
***NON-TAXABLE JV
Joint Ventures or consortium organized for the following
purposes:
1) Construction projects 2) Engaged in petroleum, coal, geothermal and other energy
operations pursuant to an
operating or consortium agreement under a service contract with the Government
PRIZES
RC,RA,NRC NRAETB NRANETB 10,000.00 and
Below Basic Tax Basic Tax 25% 10,001 UP 20% 20% 25%
WINNINGS Other Winnings 20% 20% 25% PCSO/lotto winnings:

Prior 2018 Exempt Exempt 25% 2018 up (TRAIN LAW):
10K and below Exempt Exempt 25% More than 10K 20%
Exempt 25%
***Not included are winnings exempt from income tax such as but not limited to:
• Winnings under Sec. 126 of the tax code (subject to OPT(only) of

4%;10%; as the case may be.
• Prizes and awards made primarily in recognition of religious, charitable,
scientific, educational, artistic literary, or civic achievement but only if:
They recipient was selected without any action on his part to enter the contest
or proceeding
The recipient is not required to render substantial future services as a condition
to receiving the prize or award
• All prizes and awards granted to athletes in local and international sports
competitions and tournaments whether held in the Philippines or abroad
and sanctioned by their national sports associations.
CAPITAL GAINS TAX (CGT) and STOCK TRANSACTION TAX (STT) ON

SALE OF SHARES OF DC Not Through the LSE (Local Stock Exchange) (sold
directly to a buyer) 15% of CGT Thorough the LSE 6/10 of 1% of GSP
(Gross Selling Price)
Formula in computing the capital gain (NOT THROUGH THE LSE):
Selling Price P xxx Less: Acquisition cost ( xxx) Cost to sell
( xxx) Net Capital Gain P xxx Rate 15% Capital Gains Tax
(CGT) xxx
Sec.
24D:
"(D) Capital Gains from Sale of Real Property.

-
"(1) In General. - The provisions of Section 39(B) notwithstanding, a final tax of six
percent (6%) based on the gross selling price or current fair market value as determined
in 24 accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed
upon capital gains presumed to have been realized from the sale, exchange, or other
disposition of real property located in the Philippines, classified as capital assets,
including pacto de retro sales and other forms of conditional sales, by individuals,
including estates and trusts: Provided, That the tax liability, if any, on gains from sales
or other dispositions of real property to the government or any of its political
subdivisions or agencies or to government-owned or -controlled corporations shall be
determined either under Section 24(A) or under this Subsection,at the option of the
taxpayer;
● Taxation of Non Resident alien-Not engaged in Trade or business in the
Philippines
1. 25% FWT on ALL
a. Ordinary income b. Passive income derived from all sources within the
Philippines (including interest income from Long-term bank deposit or
investment and PCSO/Lotto winnings except interest income on bank deposit
under FCDU 2. CGT on sale of shares of a domestic corporation directly to a
buyer 3. CGT on sale of a real property classified as capital asset located in
the
Philippine
s
Basic income
Tax
● Self-Employed and/or Professionals (SEP) Individuals earning income purely from

self-employment and/or practice of profession whose gross sales/receipts and other
non-operating income does not exceed the value- added tax (VAT) threshold as
provided under Section 109 (BB) of the Tax Code, as amended, shall have the option to
avail of:
1. The graduated rates under Section 24(A)(2)(a) of the Tax Code, as amended; OR 2.
An eight percent (8%) tax on gross sales or receipts and other non-operating income in
excess of two hundred fifty thousand pesos (P250,000.00) in lieu of the graduated
income tax rates under Section 24(A) and the percentage tax under Section 1 16 all
under the Tax Code, as amended. Unless the taxpayer signifies the intention to elect
the 8% income tax rate in the 1st Quarter Percentage and/or Income Tax Return, or on
the initial quarter return of the taxable year after the commencement of a new
business/practice of profession, the taxpayer shall be considered as having availed of
the graduated rates under Section 24(A)(2)(a) of the Tax Code, as amended. Such
election shall be irrevocable and no amendment of option shall be made for the said
taxable year.
The option to be taxed at 8% income tax rate is not available to a VAT-registered
taxpayer, regardless of the amount of gross sales/receipts, and to a taxpayer who is
subject to Other Percentage Taxes under Title V of the Tax Code, as amended, except
those subject under Section 116 of the same Title. Likewise, partners of a General
Professional Partnership (GPP) by virtue of their distributive share from GPP which is
already net of cost and expenses cannot avail of the 8% income tax rate option.
An individual, whether citizen or resident alien, who is self-employed or practices
a profession, is also subject to the graduated income tax rates above.
However, an individual who has gross sales/receipts and other non-operating
income not exceeding the value-added tax (VAT) threshold (which is currently
pegged at PHP 3,000,000) may opt to be taxed either at:
8% tax on gross sales/receipts and other non-operating income in excess of PHP
250,000 in lieu of the graduated income tax rates and percentage tax (business tax), or
the graduated tax rates.
Business income subjected to graduated tax rates shall also be subject to business
tax (i.e. 12% VAT or 3% percentage tax, as applicable).
● Minimum Wage Earners
Refers to a worker in the private sector who is paid with a statutory minimum wage
(SMW) rates, or to an employee in the public sector with compensation income of
not more than the statutory minimum wage rates in the non-agricultural sector
where the worker/employee is assigned. Such statutory minimum wage rates are
exempted from income tax. Likewise, the exemption covers the holiday pay,
overtime pay, night shift differential pay, and hazard pay earned by an MWE.
The term “statutory minimum wage (SMW)” earner shall refer to a worker in the
private sector paid the statutory minimum wages, or to an employee in the public
sector with compensation income of not more than the statutory minimum wage in
the non-agricultural sector where s/he is assigned. MWEs are except from income
tax on: 2. Minimum wage

3. Holiday pay 4.
Overtime pay 5.
Night shift pay
● Fringe Benefits and De Minimis Benefits (FBT)
Fringe Benefits – means any good, service or other benefit furnished or granted
in cash or in kind other than the basic compensation, by an employer to an individual
employee (except rank and file employee 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. Education assistance to the
employee or his dependents; and 10. Life or health insurance and other non-life
insurance premium or similar amounts
in excess of what the law
allows.
What are the Fringe Benefits that are NOT Subject to the
Tax? The following that are not subject to Fringe Benefit Tax are:
a. Benefits given to employees that are required by the nature of or necessary to
the trade, business or profession of the employer,
b. Benefits given to employees that is for the convenience and advantage of the
employer.
c. Statutory Minimum Wage for Minimum Wage Earners (MWEs) d.
Holiday Pay, Overtime Pay, Night Shift Differential for MWEs only e. 13th
Month Pay and Other Benefits f. De Minimis Benefits Given to
Managerial and Rank and File Employees g. SSS, PhilHealth, and
Pag-IBIG Mandatory Contributions h. Other Non-Taxable Compensation
4. What are the Tax Rate of Fringe Benefits

Tax?
5. How to Compute the Fringe Benefits

Tax?
a. First, determine the Grossed-Up Value of the fringe benefit by dividing the
actual monetary value by 65%.
b. Then, Multiply the Grossed-up value by 35% to get the Fringe Benefit Tax
(FBT). If the employee is a non-resident alien not engaged in trade or business in the
Philippines, get the Grossed-Up Value by dividing the actual monetary value by 75%
and multiply it to 25% to get the Fringe Benefit Tax.
RULES ON FRINGE
BENEFITS
Under the Tax Code, fringe benefits are taxable. As an employer, you have to
withhold tax for the fringe benefits in order for it to become deductible from
business income in computing income tax. The following rules apply to fringe
benefits:
1.) Fringe benefits to rank-and-file employees are not taxable with fringe benefit
tax, but instead are taxable as compensation income subject to normal income
tax rate in Section 24(A) of the NIRC, except for “de minimis benefits” and
benefits provided for the
convenience of the employer. A rank-and-file employee is an employee not
holding a managerial or a supervisory position.
2.) Fringe benefits to managerial and supervisory employees are taxable with
the 32% fringe benefit tax, which is a final tax and is the subject of this article,
except for “de minimis benefits” and benefits provided for the convenience of the
employer. A managerial employee is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer, effectively
recommend such managerial actions if the exercise of such authority is not
merely routinary or clerical in nature but requires the use of independent
judgment.
The fringe benefit tax is computed only to those granted with managerial and
supervisory positions. Other than that, the income is subject to normal income
tax rate.
Those allowances that are received by an employee in fixed amounts and

regularly received by the employee as part of his salaries shall not form part of
the taxable fringe benefit but shall be treated as compensation income.
There are fringe benefits under Section 33(C), however, that are not taxable as
the following:
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. 5. If the
grant of fringe benefits to the employee is required in the nature of, or necessary to
the trade, business or profession of the employer; 6. If the
grant of the fringe benefit is for the convenience of the employer.
COMPUTATION OF THE FRINGE BENEFIT

TAX
Fringe benefits provided to managerial and supervisory employees are subject to

the 32% fringe benefit tax. According to Section 33(A) of the NIRC, fringe benefit
is a final tax on employee’s income to be withheld by the employer. It is the
company that is liable for the fringe benefit tax and not the employee. As an
employer, you are required to file fringe benefit tax remittances using BIR Form
1603 on a quarterly basis.
The tax base of fringe benefits is based on the grossed-up monetary value
(GMV) of the fringe benefits granted by the employer to the employees (except
those rank-and-file employees). The GMV of the fringe benefit is determined by
dividing the monetary value of the fringe benefits by 68% effective January 1,
2000 (RR 3-1998). The rates of the fringe benefit tax that shall be applied is 32%
effective January 1, 2000 and thereafter (RR 3- 1998). The grossed-up monetary
value of the fringe benefit represents the whole amount of income realized by the
employee which includes the net amount of money or net monetary value of
property which has been received plus the amount of fringe benefit tax thereon
otherwise due from the employee but paid by the employer for and in behalf of
his employee.
For a non-resident individual who is not engaged in trade or business in the

Philippines, the fringe benefit tax is 25% imposed on the grossed-up monetary
value of the fringe benefit. The tax base shall be computed by dividing the
monetary value of the fringe benefits by 75%.
The fringe benefit tax of 15% shall be imposed on the grossed-up monetary
value of the fringe benefit and a tax base of 85% for the following individuals: 1.
An alien individual employed by regional or area headquarters of a multinational
company or by regional operating headquarters of a multinational company.
2. An alien individual employed by an offshore banking unit of a foreign bank

established in the Philippines. 3. An alien individual employed by a foreign service
contractor or by a foreign service subcontractor engaged in petroleum operations in
the Philippines. 4. Any of their Filipino individual employees who are employed and
occupying the same position as those occupied or held by the alien
employees.ILLUSTRATIONThe employer granted P85,000 cash benefit
representing reimbursement of the personal expenses of his employee that is the
manager of the subsidiary. How much is the taxable amount of fringe benefit, the
fringe benefit tax, and the allowed deductible fringe benefit expense of the
employer?
The taxable amount of the fringe benefit is computed as follows. This amount will
be used as our tax base when computing the fringe benefit tax.
Monetary value of the fringe benefit (cash payment) 85,000
Divided by the Grossed-Up Monetary Value 68%

Taxable Amount of the Fringe Benefit 125,000
The taxable amount of the fringe benefit tax multiplied by the applicable tax rate
will be our fringe benefit tax.
Taxable Amount of the Fringe Benefit 125,000

Multiplied by the Fringe Benefit Tax Rate 32%
Fringe Benefit Tax 40,000
The deductible fringe benefit expense for income tax purposes is the sum of the
cash payment and the fringe benefit tax. For income tax purposes, the total
amount of the deductible fringe benefit expense is a deductible expense from
business income.
Cash Payment of the Personal Expenses 85,000
Plus The Fringe Benefit Tax 40,000
Deductible Fringe Benefit Expense 125,000
In the books of the company upon payment of the fringe benefit to the employee,
the total deductible fringe benefit is debited to fringe benefit expense and cash
is credited to the amount of payment to the employee and the withholding tax
payable for the fringe benefit tax computed.
What are the Tax Exempt De Minimis Benefits under TRAIN

Law? The following shall be considered as “De Minimis” Benefits:
1. Monetized unused vacation leave credits of private employees
not exceeding ten (10) days during the year.
2. Monetized value of vacation and sick leave credits paid to government
officials and employees.
3. Medical Cash Allowance to dependents of employees, not
exceeding P1,500 per employee per semester or P250 per month.
4. Rice Subsidy of P2,000 or one sack of 50kg. rice per month. 5. Uniform and
Clothing Allowance not exceeding P6,000 per annum. 6. Actual Medical
Assistance, e.g. medical allowance to cover medical and healthcare needs,
annual medical/executive check-up, maternity assistance, and routine
consultations, not exceeding P10,000 per annum.
7. Laundry Allowance not exceeding P300 per month. 8. Employees Achievement
Awards, e.g. for length of service or safety achievement, which must be in the form of
a tangible personal property other than cash or gift certificate, with annual monetary
value not exceeding P10,000 received by the employee under established written plan
which does not discriminate in favor of highly paid employees.
9. Gifts given during Christmas and Major Anniversary Celebration not
exceeding P5,000 per employee per annum.
10. Daily Meal Allowance for Overtime work and night/graveyard shift not
exceeding twenty-five (25%) of the basic minimum wage on per region basis All other
benefits given by employers which are not included in the above enumeration shall
not be considered as “de minimis” benefits, Hence, shall be subject to income tax as
well as withholding tax on compensation income.
UNDER TRAIN
LAW:
Personal exemptions (basic and additional) as deductions from gross
income are no longer allowed beginning January 01, 2018.
2. Non Resident Citizen
3. Resident Alien 4. Non
Resident Alien:
WEEK 3 AND 4
GROSS AND SOURCES OF INCOME
Gross
Income:
All income derived from whatever source, including, but not limited to, the
following items:
• Inclusions from Gross Income
a. Compensation for services in whatever form paid, including, but not
limited to fees, salaries, wages, commissions and similar items. b.
Gross income derived from the conduct of trade or business or the
exercise of a profession c. Gains derived from dealings in property d. Interests
e. Rents f. Royalties g. Dividends h. Annuities i. Prizes and
Winnings j. Pensions k. Partner’s distributive share from the net
income of the General
Professional Partnership
(GPP)
● Exclusions from gross income
(1) Life Insurance. - The proceeds of life insurance policies paid to the heirs or
beneficiaries upon the death of the insured, whether in a single sum or
otherwise, but if such amounts are held by the insurer under an agreement to
pay interest thereon, the interest payments shall be included in gross income.
(2) Amount Received by Insured as Return of Premium. - The amount

received by the insured, as a return of premiums paid by him under life insurance,
endowment, or annuity contracts, either during the term or at the maturity of
the term mentioned in the contract or upon surrender of the contract.
(3) Gifts, Bequests, and Devises. _ The value of property acquired by gift,
bequest, devise, or descent: Provided, however, That income from such property,
as well as gift, bequest, devise or descent of income from any property, in cases
of transfers of divided interest, shall be included in gross income.
(4) Compensation for Injuries or Sickness. - amounts received, through

Accident or Health Insurance or under Workmen's Compensation Acts, as
compensation for personal injuries or sickness, plus the amounts of any damages
received, whether by suit or agreement, on account of such injuries or sickness.
(5) Income Exempt under Treaty. - Income of any kind, to the extent required
by any treaty obligation binding upon the Government of the Philippines.
(6) Retirement Benefits, Pensions, Gratuities, etc.-
(a) Retirement benefits received under Republic Act No. 7641 and those received
by officials and employees of private firms, whether individual or corporate, in
accordance with a reasonable private benefit plan maintained by the employer:
Provided, That the retiring official or employee has been in the service of the same
employer for at least ten (10) years and is not less than fifty (50) years of age at the
time of his retirement: Provided, further, That the benefits granted under this
subparagraph shall be availed of by an official or employee only once. For
purposes of this Subsection, the term 'reasonable private benefit plan' means a
pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for
the benefit of some or all of his officials or employees, wherein contributions are
made by such employer for the officials or employees, or both, for the purpose of
distributing to such officials and employees the earnings and principal of the fund
thus accumulated, and wherein its is provided in said plan that at no time shall any
part of the corpus or income of the fund be used for, or be diverted to, any purpose
other than for the exclusive benefit of the said officials and employees.
(b) Any amount received by an official or employee or by his heirs from the
employer as a consequence of separation of such official or employee from the
service of the employer because of death sickness or other physical disability or for
any cause beyond the control of the said official or employee.
(c) The provisions of any existing law to the contrary notwithstanding, social
security benefits, retirement gratuities, pensions and other similar benefits received
by resident or nonresident citizens of the Philippines or aliens who come to reside
permanently in the Philippines from foreign government agencies and other
institutions, private or public.
(d) Payments of benefits due or to become due to any person residing in the
Philippines under the laws of the United States administered by the United
States Veterans Administration.
(e) Benefits received from or enjoyed under the Social Security System in
accordance with the provisions of Republic Act No. 8282.
(f) Benefits received from the GSIS under Republic Act No. 8291,
including retirement gratuity received by government officials and
employees.
7) Separation Fee
Any amount received by reason of involuntary separation remain EXEMPT

from income tax even if the official or the employee, at the time of separation, had
rendered less than 10 years of service and/or is below 50 years old since the
separation is not actually retirement from service. However, a retirement benefit
although against the will of the employee is not involuntary because it is in
accordance with the Collective Bargaining Agreement (CBA) which the employee
entered into voluntary, hence SUBJECT to income Tax.
(8)Miscellaneous Items. -
(a) Income Derived by Foreign Government. - Income derived from investments in

the Philippines in loans, stocks, bonds or other domestic securities, or from interest
on deposits in banks in the Philippines by (i) foreign governments, (ii) financing
institutions owned, controlled, or enjoying refinancing from foreign governments,
and (iii) international or regional financial institutions established by foreign
governments.
(b) Income Derived by the Government or its Political Subdivisions. - Income

derived from any public utility or from the exercise of any essential governmental
function accruing to the Government of the Philippines or to any political
subdivision thereof.
(c) Prizes and Awards. - Prizes and awards made primarily in recognition of
religious, charitable, scientific, educational, artistic, literary, or civic achievement
but only if:
(i) The recipient was selected without any action on his part to enter the contest or
proceeding; and (ii) The recipient is not required to render substantial future
services as a condition to receiving the prize or award.
(d) Prizes and Awards in sports Competition. - All prizes and awards granted to
athletes in local and international sports competitions and tournaments whether held
in the Philippines or abroad and sanctioned by their national sports associations.
(e) 13th Month Pay and Other Benefits. - Gross benefits received by officials and
employees of public and private entities: Provided, however, That the total exclusion
under this subparagraph shall not exceed Thirty thousand pesos (P30,000) which
shall cover:
(i) Benefits received by officials and employees of the national and local government
pursuant to Republic Act No. 6686; (ii) Benefits received by employees pursuant to
Presidential Decree No. 851, as amended by Memorandum Order No. 28, dated
August 13, 1986; (iii) Benefits received by officials and employees not covered by
Presidential decree No. 851, as amended by Memorandum Order No. 28, dated
August 13, 1986; and (iv) Other benefits such as productivity incentives and
Christmas bonus: Provided, further, That the ceiling of Thirty thousand pesos
(P30,000) may be increased through rules and regulations issued by the Secretary
of Finance, upon recommendation of the Commissioner, after considering among
others, the effect on the same of the inflation rate at the end of the taxable year.
(f) GSIS, SSS, Medicare and Other Contributions. - GSIS, SSS, Medicare and Pag-
ibig contributions, and union dues of individuals.
(g) Gains from the Sale of Bonds, Debentures or other Certificate of Indebtedness.
- Gains realized from the same or exchange or retirement of bonds, debentures or
other certificate of indebtedness with a maturity of more than five (5) years.
(h) Gains from Redemption of Shares in Mutual Fund. - Gains realized by the
investor upon redemption of shares of stock in a mutual fund company as defined
in Section 22 (BB) of this Code.
● Compensation Income
Income arising out of an employer-employee relationship. It encompasses all
remuneration for services performed by an employee for his employer
whether paid in cash or in kind. Remuneration for services constitutes
compensation income even if the relationship of employer and employee does
not exist any longer at the time when payment is made between the person in
whose employ the services had been performed and the individual who
performed them.
Fringe
Benefits:
Taxable FB received
by:
Rank and Fil : subject to basic tax Supervisory or
Managerial : subject to FBT (a final tax) Tax Exempt FB:
If the grant is required by the NATURE of, or necessary to the trade,
business or profession of the employer.
If the grant for the convenience of the

employer
De
minimis
Subject to tax in excess of P 90,000.00
threshold.
Other Benefits include:

Christmas bonus Productivity incentive bonus Loyalty awards Gifts in cash or in
kind and other benefits of similar nature actually received by officials and
employees o both government and private offices.
FURTHER, RR 3-2015emhasized that this exclusions from gross income is

not applicable to:
Self-employed individuals and
Income generated from
business
Fixed or Variable
Allowances:
In general these are subject to income tax and withholding tax on
compensation income. Examples: travel, representation, communication, lving
away allowances.
Pre-computed business
allowances:
Reasonable amounts of reimbursement/advances from travelling and
entertainment expenses which are pre-computed on a daily basis and are paid to
an employee while he is on an assignment or duty need not be subject to the
requirement of substantiation and to withholding. (example per diem).
Business related allowances subject to

liquidation
Any amount paid specifically, either as advances or reimbursements for
travelling, representation and other bona fide ordinary and necessary expenses
incurred or reasonably expected to be incurred by the employee in the
performance of his duties are not compensation subject to withholding if the
following conditions are satisfied:
It is ordinary and necessary travelling and representation or entertainment
expenses paid or incurred by the employee in the pursuit or the trade, business
or profession and
The employee is required to account/liquidate for the foregoing expenses
in accordance with specific requirements with the substantiation for each
category of expenses pursuant to Sec. 34 of the tax code.
Representation and transportation allowances (RATA)

RATA granted to certain officials and employees of the government are
considered reimbursements for the expenses incurred in the performance one’s
duties rather than as additional compensation. However, the excess of RATA, if
not returned to the employer, constitutes taxable compensation income of the
employee.
RATA, or Representation Allowance and Transportation allowance,

is granted to select government officials, as identified in the General Provisions of the
Annual Government Appropriations Act (GAA), to cover related expenses incidental to
and in connection with the actual performance of their respective functions.
RATA has two kinds — commutable and reimbursable.
What is Commutable RATA?
As derived from Section 317, Article 8, Chapter 5, Volume 1 of the Government

Accounting and Auditing Manual, RATA is commutable if the grant
thereof is specifically authorized by law and if funds for its payment
are provided for in the Agency budget. The GAA serves as the law
authorizing the payment of commutable RATA. Payment of the said
allowances presupposes actual rendition of services in line with
official duties.
When is RATA reimbursable?
When the RATA of certain government official has not been provided for in the
Agency budget, unlike commutable RATA, although the incurrence
of the same is allowed under existing rules and regulations, the
said RATA is said to be on reimbursable basis.
As derived from Section 286, Article 1, Chapter 5, Volume 1 of the Government

Accounting and Auditing Manual, reimbursable RATA should be
duly supported by receipts or by a certification to the effect that the
expenses had been incurred in accordance with the purpose for
which the allowance is granted.
Stipends of Resident Physicians

The stipends received by resident physicians during their intensive training
in the residency program of a hospital and individuals engaged in the practice of
profession or calling like doctors of medicine are subject to CWT imposed under
the Tax code, as amended.
Cost of Living Allowance (COLA)

COLA of minimum wage earners is exempt from income tax. The COLA
forms part of the new wage rates or statutory minimum wage. Hence, it is
covered by the income tax exemption of MWEs’ under RA 9504, as implemented
by RR No. 10-08 which covers the statutory minimum wage (inclusive of COLA
under NCR Wage Order # NCR-16), including holiday pay, overtime pay, night
shift differential pay and hazard pay.
Premiums of Life Insurance

Premiums of life insurance covering the life of an employee paid by the
employer is taxable income to the employee, where the insured employee,
directly or indirectly is the beneficiary under the policy.
Retirement Benefits, Separation Pay,

Pension
With Reasonable private benefit
plan
Retirement pay as a rule, is taxable, except those received by
officials and employees of private firms, whether individual or corporate, under a
reasonable private benefit plan maintained by the employer which meets the
following:
1. The retirement pay as a rule, is taxable, except those received by
officials and employees of private firms, whether individual or
corporate, under a reasonable private benefit plan maintained by the
employer which meets the following requirements:
a. The retirement plan must be approved by the BIR. b. The

retiring officials or employees must have been in the service
of the same employer for at least 10 years. And c. Is not less
fifty (50) years of age at the same time of retirement.
In the absence of reasonable private benefit

plan
An employee may receive tax-exempt retirement benefits
who has reached the age of 60 or more, but not more than 65 years, who has served at
least 5 years in their establishment (BIR ruling # 495-14 dated 12.11.14)
Tips and Gratuities:

If paid directly to an employee: taxable income of the employee but
not subject to withholding
If accounted for by the employee to the employer (example:

included in the bill paid by customers) Taxable income of the employee and subject to
withholding tax
Rental
Income
Amount paid for the use or enjoyment of a thing (real or personal)or

right.1
Formula
:
Rental Payments P xxx Expenses of the lessor assumed by the

lessee xxx Income from leasehold improvements xxx Total
Rental Income P xxx
Taxable rent income of the lessor may be in the form of:

1. Cash received 2. Obligations of the lessor to the third persons
paid or assumed
by the lessee in consideration of the contract lease. 3. Advance payment:
a. Prepaid rent (reported in full in the year of receipt) b.
A security deposit that is applied to rental
Non-taxable rent income of the lessor may be in the form

of:
a. Advance rentals representing option b. Security deposits to
ensure faithful performance of certain
obligations of the
lessee.
Rental
Payments:
Shall be taxable on the year received, whether earned or unearned,
provided, there is no restrictions to it use, and regardless pf method of accounting
employed.
Security deposit shall be

taxed:
Upon forfeiture in favor of the lessor
Upon application as rental payments
LEASEHOLD
IMPROVEMENTS
Improvements by the lessee shall be treated as income by
the lessor if:
1. Improvements will be owned by the lessor (transfer of ownership)
at the end of the lease. 2.
● Dividend Income
These dividend types

are:
Cash dividend.
The cash dividend is by far the most common of the dividend types used.
TAXABLE UPON DECLARATION
Stock
dividend.
A stock dividend is the issuance by a company of its common stock to its
common shareholders without any consideration. GENERAL RULE: NOT
TAXABLE BECAUSE THEY ARE NOT REALIZED INCOME.
Property dividend.
...
Occurs when a company declares and distributes assets other than cash. They
are recorded at the fair market value of the asset being distributed. EXEMPT UP TO
THE EXTENT OF THE COST OF INVESTMENT BEING A MERE RETURN OF
CAPITAL. HOWEVER ANYTHING IN EXCESS OF THE COST SHALL BE
CONSIDERED INCOME THEREFORE TAXABLE.
A property dividend can either include shares of a subsidiary company or
any physical assets owned by the company such as inventories,
equipment or real estate.
Scrip dividend.
...
The term scrip dividend refers to the process of providing
shareholders with the choice of receiving a cash dividend, a dividend at a future point in
time, or common stock. When a corporation issues a scrip dividend, they're allowing
shareholders to increase the size of their holdings without incurring any fees.
Liquidating dividend.
A liquidating dividend is a type of payment that a corporation makes to its
shareholders during a partial or full liquidation. For the most part, this form of
distribution is made from the company's capital base. As a return of capital, this
distribution is typically not taxable for shareholders. EXEMPT UP TO THE EXTENT
OF THE COST OF INVESTMENT BEING A MERE RETURN OF CAPITAL. HOWEVER
ANYTHING IN EXCESS OF THE COST SHALL BE CONSIDERED INCOME
THEREFORE TAXABLE.
SITUS OF DIVIDEND
INCOME
1) Dividends from within:
a) Dividend income from DC b) Dividend income from Foreign Corporation. IF at
least 50% of the gross income for the three year period ending with the close of its
taxable year preceding the declaration of such dividends (or for such part of such
period as the corporation has been in existence) was derived from sources within
the Philippines.
2) Dividends from without:
a) Dividend income from Foreign Corporation (in general) b) Dividend income from
Foreign Corporation, IF the ratio of the gross income Philippines over worldwide
income for the three year period ending with the close of its taxable year preceding
the declaration of such dividends (or for such part of such period as the corporation
has been in existence) is less than 50%
3) Partly within and partly without
Domestic Corp Income is purely From the Phils
Foreign Corp FORMULA If Ratio is:

GI-Phils ilippines
GI-World SS THAN
F GREATER Equal to:
THAN 50%: %: income
income is derived
treated as rtly from
entirely urces within
derived from d partly
sources thout the
outside the ilippines.
● Prizes and Other Winnings
RC,RA,NRC NRAETB/SAE NRANETB
10,000.00 and Below Basic Tax Basic Tax 25% 10,001 UP 20% 20% 25%
WINNINGS Other Winnings 20% 20% 25% PCSO/lotto winnings:
Prior 2018 Exempt Exempt 25% 2018 up (TRAIN LAW):
10K and below Exempt Exempt 25% More than 10K 20%
Exempt 25%
NOTE PCSO/Lotto- taxable if received by a NRANETB and Special Alien

Employees (SAE).
SUBJECT to BASIC INCOME TAX:
1. Prizes and other winnings derived by resident citizens and domestic

corporations from sources without the Philippines. 2. Prizes and winning received by
corporations 3. Prizes received by individuals from sources within the Philippines
amounting to
P 10,000.00 and below
Exempt from income tax:
1. Prize and award made primarily in recognition of:

➢ Religious, Charitable ➢
Scientific ➢ Educational
artistic, literary ➢ Civic
achievement Provided:
a. Selected w/o any action on his part to enter the contest or proceeding (not
constituting gains from labor)
b. Not required to render substantial future services as a condition to receive the
prize/award
2. All prizes and awards granted to athletes in local and international sports
competitions and tournaments, whether held in the Philippines or abroad and
sanctioned by their respective sports association are not subject to income tax except
talent fee and royalty income ( for they are subject to income tax. talent fee and royalty)
3. Winnings on horse racing.
● Gross Income from whatever source derived:

The law imposes a tax on income from whatever source which means that it includes
income whether coming from LEGAL or ILLEGAL sources:
Examples:
a. Income from jueteng b. Income from
swindling activities c. Recovery of bad
debts d. Refund of taxes e,
Unutilized/excess campaign funds f.
Forgiveness of indebtedness
RECOVERY of BAD
BEDTS:
In order for recovery of bad debts be considered income, the following must
be complied:
1. Bad debts were written off in the previous year/s 2. Such
bad debts were deducted in arriving at taxable year 3. There
is a resulting tax benefit on the deduction
REFUND OF TAXES:
The following are the requirements before refund of taxes be considered

income:
1. There is payment of tax in the previous year/s 2. Such tax

paid was deducted in arriving at the taxable income 3. There is
a resulting tax benefit on the deduction
FORGIVENESS OF
INDEBTEDNESS
TYPE TAX TREATMENT Debtor performs services to

the creditor Compensation income Creditor desires to benefit the debtor
without any consideration Gift Creditor is a corporation and the debtor is a
stockholder of such corporation Dividend income
LIFE
INSURANCE
General Rule: Tax exempt since it is a mere reimbursement for the loss of
life.
Exception the following shall be taxable:
1. The beneficiary was chosen for a valuable consideration
2. The interest earned on the insurance policy
RETURN OF
PREMIUM
The amount received by the insured, as a return of premiums paid by him under
life insurance, endowment, or annuity contracts, either during the term or at the maturity
of the term mentioned in the contract or upon surrender of the contract.
Return of Premium Exempt In
excess Income
● GIFTS, BEQUEST AND DEVISES

The value of the property acquired by gifts, bequest, devises or descent: provided,
however, that income from such property, as well as gift, bequest, devise or descent
of income from any property, in cases of transfers of divided interest, shall be
included in gross income.
● COMPENSDATION FOR INJURIES OR SICKNESS

Amounts received through Accident or Health Insurance or under Workmen’s
Compensation Act, as compensation for personal injuries or sickness, plus the
amounts of any damages received, whether by suit or agreement, on account of
such injuries or sickness.
● INCOME EXEMPT UNDER TREATY

Income of any kind, to the extent required by any treaty obligation binding upon the
Government of the Philippines, shall be exempt.
● RETIREMENT BENEFITS, PENSIONS, GRATUITIES ETC.

1. Retirement benefits received under R.A #7641 2. Those received by officials
or employees of private firms, whether individual or corporate, in accordance with
a reasonable private benefit plan maintained by the employer: Provided:
a. That the retiring official or employee has been in the service of the
same employer for at least 10 years.
b. At least 50 years of age at the time of his/her retirement c. That the benefits granted
shall be availed of by an official or employee only once.
3. Any amount received by official or employee or by his heirs from the employer
as a consequence of separation of such official or employee form the services of
the employer because of:
a. Death b. Sickness c. Other physical disability or for any cause beyond the
control of the said official or employee
● MISCALLENEOUS ITEMS:
SOURCES OF
INCOME
1. Income derived in full from sources within 2. Income derived in full from
sources outside 3. Income derived partly from sources within and partly from
sources without
Determination of income (whether within or outside the

Philippines) Income Test of Source of income Income from services
Place of Performance Rent Location of property Royalties Place of use of
intangible Gain on sale of real property Location of property Gain on sale
of personal property purchased in one country and sold in another
Place of sale Gain on sale
of domestic shares of stock Income within Interest
Residence of debtor Dividend
from domestic company Income within Foreign company ➢ Income within IF
50% or more of the gross income of the company for preceding three years
prior to declaration of dividend was derived from sources within ➢ Income
without if less than 50% of the gross income of the company for the preceding
three years prior to declaration of dividend was derived from sources within.
0% to 50% The Dividend income is purely foreign 51% to 85% The dividend
income is partly Philippines and partly foreign
Example
:
Problem
1
Luto Corporation, a domestic corporation, was granted a loan pf $500,000.00 by Wells
Fargo Bank. The interest earned by the bank was P 250,000.00
Is the interest an income within or
without?
The test of source of income on interest is dependent upon the
residence of the debtor. Considering Luto Corporation is a domestic corporation, its
residence is within the Philippines, Hence the interest in within.
Problem
2
In 2018, Pako Corporation, a domestic corporation, received a dividend of P
150,000.00 from Geneva corp, a Swiss Corp., whose gross income from 2014 to
2017 are as follows:
Year Philippines Switzerland Total 2015 1,600,000.00 1,500,000.00 3,100,000.00
2016 1,300,000.00 1,200,000.00 2,500,000.00 2017 1,940,000.00 1,260,000.00
3,300,000.00 Total 4,840,000.00 3,960,000.00 8,800,000.00
How much of the dividend income is classified as income from

Philippine sources?
Dividend income within 4,840,000.00
Dividend Total 8,800,000.00
= 55% (SINCE IT IS MORE THAN 50% THEN DIVIDEND
INCOME IS PARTLY PHILIPPINES AND PARTLY FOREIGN)
55% X 150,000.00 = P 82,500.00
Problem 3:
Robin has been contracted in the Philippines by Servicio Corporation, a
domestic corporation, to work in Saudi Arabia. The contract provides that
Robin’s monthly salary of P 80,000.00 in Saudi Arabia will be paid to his family I
in the Philippines.
Is the salary an income within or income
without?
The salary of Robin in an income from services. When an income is
earned from services being rendered, the test of source of income is the
PLACE OF PERFORMANCE. Since the services are being rendered in Saudi
Arabia, the salary is classified as income without.
Problem 4:
Bong and Fidel entered into a contract, whereby the letter will lease to the former
his apartment house located in Makati. It was also agreed that the monthly rental
will be remitted to Cuba where Fidel is a resident. After a year, Fidel decided to
sell the apartment house to Bong realizing a gain of P 80,000.00
Is the monthly rental an income within? How about the gain on the sale of the
property?
The rental income is an income within because the property is real and it is
located in the Philippines. The gain on the sale of the property is also an
income within because the property is located in the Philippines.
When a property is REAL, the determination of source of the income from rent
and/or sale of the property shall be based on its location.
INCOME PARTLY WITHIN AND PARTLY WITHOUT THE

PHILIPPINES:
The following items shall be treated as gross income derived from sources
partly within and partly without the Philippines: 1. Income from transportation (
e.g. Foreign steamship companies) or other
services rendered partly within and partly without the Philippines 2. Income from
sales of personal property produces ( in whole or in part) by the
taxpayer within and sold without the Philippines or produces ( in whole or in
part) by the taxpayer without and sold within the Philippines.
In case of the above items, the net income may first be computed by
deducting the expenses. losses, or other deductions apportioned or
allocated thereto and a ratable part of any expenses, losses or other
deductions which cannot be allocated to some items or class of gross
income and the portion of such net income attributable to source within the
Philippines may be determined by processes of formulas of general
apportionment prescribed by the Secretary of Finance.
WEEK 5 AND 6 SEPTERMBER 21 TO OCTOBER 01
CAPTIAL ASSETS AND ORDINARY ASSETS/REMEDIES AND DATE

OF FILING AND MISCELLANEOUSTOPICS
Classification of
Assets
1. Ordinary
The following are classified as ordinary
assets
a. Stock in trade of the taxpayer or other property of
a kind which would properly be included in the
inventory of the taxpayer b. Property held by the
taxpayer primary for sale to
customers in the ordinary course of his trade or
business c. Property used in the trade or
business, of a
character which is subject to allowance for
depreciation d. Real property used in trade or
business of the
taxpayer 2. Capital 1. These are properties not related to the taxpayer’s
business
2. And property related to the taxpayer’s business but held only
as investment
The sale of the above assets will result either to gain or loss. The
gain is subject to basic tax while the loss is fully deductible in
arriving at the taxable income.
Examples of capital and ordinary assets

Asset Classification Reason Accounts Receivable Capital Not included
in the 4 categories
of ordinary
assets
Securities held as investment Capital
Not included in the 4 categories of ordinary assets Inventories Ordinary See Letter A Office Equipment
Ordinary See letter C Land used in business Ordinary See letter D Land 4 sale by real estate dealer
Ordinary See letter A Residential house Capital Not included in the 4 categories
of ordinary assets Family vacation house Capital Not.........ordinary assets Family pleasure yacht Capital
Not.........ordinary assets Personal collection Capital Not.........ordinary assets Business of a single
proprietorship sold to a corporation
Ordinary/ Capital
The sale would be considered a sale of different assets... eg. Accounts receivable is CAPITAL..while
fixed assets is ORDINARY Interest of a partner in a partnership Capital Not.....ordinary assets Car: 1⁄2 of
the time use in the business while the other half for personal use: Half of the value, for business use Half
of the value for personal use
ORDINARY
CAPITAL
See letter C.
Not....ordinary assets
● Rules on capital assets transactions
Corporation Individual The capital gain or loss will always be considered at
100% regardless of the length of the holding period
The capital gain or loss will be considered at:
100%, if the asset was held for not more than 12 months(short term) other wise
50%(long term) Capital losses are deductible only to the extent of capital gains
Capital losses are deductible only to the extent of capital gains Net capital losses are
deductible only to the extent of capital gains
Capital losses are deductible only to the extent of capital gains Net capital loss
carry-over* is not available
Net capital loss carry-over* is available
*Net capital loss carry over- if the taxpayer, other than a corporation, sustains in any
taxable year a net capital loss, such loss, in an amount not to excess of the net income
of such year (E.O. #37: net income should be understood as taxable income) will be
treated in the succeeding year as a loss from a sale or exchange of a capital asset held
for not more than 12 months.
Sale or disposition of real property by an individual is subject to 6% CAPITAL GAINS
TAX
Problems:
Chin-Chin, married with one dependent child show the following:
2018 2019 Gross business income 200,000.00 300,000.00 Deductions 90,000.00
100,000.00 Sale of Capital assets (personal properties)
Capital assets Cost Selling Price Holding Period Yr. of sale
1 20,000.00 60,000.00 2 yrs 2018 2 200,000.00 45,000.00 6 months 2018 3 100,000.00
450,000.00 3 yrs 2019 4 130,000.00 80,000.00 14 months 2019 Required: Determine
the taxable income of chin-chin in 2018 and 2019
2018 2019 Gross income 200,000.00 300,000.00 Deductions 90,000.00 100,000.00 Net income 110,000.00
200,000.00 CA1/CA3 CA3
60,000.00 450,000.00
Selling price Cost 20,000.00 100.0000
Long-term
40,000.00 350,000.00 X rate 50% 50%
20,000.00 175,000.00 CA2/CA4 CA4
Selling price 55,000.00
80,000.00 Cost 200,000.00 130,000.00 Long-term (155,000.00) (50,000.00) X rate 50% 50%
(135,000.00) (25,000.00) Taxable income for 2018
110,000.00
(110,000.00) 40,000.00
240,000.00
Taxable income for 2019
NOTE:
The net capital loss of P 135,000.00 cannot be deducted from the net income of P 110,000.00 because of
the rule that “capital losses are deductible only from the capital gains”. The net income is not a gain.
The net capital loss in 2018 is P 135,000.00. however, since the net income in that year is P 110,000.00
only, then the carry-over to 2019 of the capital loss should not exceed the amount of P
110,000.00 Or TAXABLE INCOME IN PRIOR YEAR OR NET CAPITAL LOSS IN PRIOR YEAR
WHICHEVER IS LOWER.
● Sales of real property classified as capital

assets
Capital gains presumed to have been realized from the sale, exchange or other
disposition of real property located in the Philippines classified as capital assets,
including pacto de retro sales and other forms of conditional sales, by individuals,
including estate and trust shall be taxed at the rate of 6%nased on the gross selling
price, fair market value or zonal value prevailing at the time of sale. Whichever is
the highest. However, the zonal value is available only on land. With the exception
of condominium units, buildings and other improvements do not have zonal value.
The following requisites must be present in order that the rule will apply: 1. There
must be a sale, exchange or disposition of property 2. There must be real property 3.
It must be a capital asset 4. The seller (taxpayer) must e individual, estate or trust 5.
The real property must be located in the Philippines If the property is sold or disposed
in favour of the government or any of its political subdivisions or agencies or to the
government owned and controlled corporations, the taxpayer shall have the following
options:
1. Pay the tax based on this rule or 2. To include the gain in his gross income subject
to the graduated rates of tax The sale of a real property which is a capital asset shall
be filed and paid within 30 days following each sale or disposition of the property
unless the taxpayer decides to choose the second option above.
The date of sale or disposition shall be the date of notarization of the sales
documents.
Illustration
:
Nikka sold her vacant lot for P 2M. The zonal value of the property is P 1.9M
while the fair market value in the tax declaration amounts to P 1.820M.
How much is the final tax?
Gross selling price (highest) P 2,000.000.00 Rate 6% Final tax P
120,000.00
● Filing and payment of tax returns

Manner of filing: 1. Manual 2. Electronic Filing and
Payment System (EFPS) 3. eBIR Forms
Final withholding tax on passive income:
1. Final withholding Tax on passive income
Months Manual Filing January to November 10th day of the month following the month
the withholding was made December January 15 of the succeeding year
2. Capital Gains Tax a. Shares of Stocks
i. Ordinary Return 30 days after each transaction ii. Final Consolidation
Return
On or before April 15 of the following year
b. Real Property 30 days following each sale or other
disposition
3. Fringe Benefits Tax - 10th day of the following month the end of the calendar
quarter in which the fringe benefits were granted.
4. Basic Income Tax
On or Before April 15th of the following year. The individual taxpayer is required to file a
quarterly tax return (regardless of the results of operations) as follows:
1st Quarter April 15th 2nd Quarter Aug 15th (or 45 days after the end of the quarter) 3rd
Quarter Nov. 15th (or 45days after the end of the quarter) 4th Quarter April 15th of the
succeeding year
Required to File:
1. RC receiving income WITHIN AND WITHOUT 2. Employee deriving purely
compensation income from 2 or more employers,
concurrently or successively at anytime during the taxable year. 3. Employees deriving
from a single or several employees during the calendar
year, the income tax of which has been withheld correctly (i.e. tax due is not equal to
the tax withheld) resulting to collectible or refundable return. 4. Self-employed
individuals, receiving income from the conduct of trade or
business and/or practice of profession. 5. Individuals deriving mixed income, i.e.
compensation income and income
from conduct of trade and/or practice of profession.
6. Individuals deriving other non-business, non-professional related income in
addition to compensation income not otherwise subject to a final tax 7. 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”. 8. Marginal income earners 9. Non-resident citizens
receiving income from sources within the Philippines 10. Aliens, whether resident or not,
receiving income from sources within the
Philippines.
NOT REQUIRED TO FILE:
1. Minimum wage earners 2. Those who are qualified under “substituted filing” of
income tax returns.
BIR Forms FORM
FORM TITLE
NO. 2307 Certificate of Creditable Tax Withheld At Source 2316
Certificate of Compensation Payment/Tax Withheld For Compensation Payment
With or Without Tax Withheld 2550M Monthly Value-Added Tax Declaration 2550Q
Quarterly Value-Added Tax Return
RMC No.
Subject Matter RMC- REVENUE MEMORANDUM CIRCULAR
Date Issued 29-2019
Feb
2019
26,
Provides guidelines in keeping, maintaining and registration of Books of Accounts
RMC No. BIR Form No. Date Issued Manual eBIR eFPS
17-2019
1701A- Annual Income Tax Return for Individuals Earning Income PURELY from
Business/Profession
Jan 24, 2019 ✔ ✔ ✖
19-2019
1700- Annual Income Tax Return For Individuals Earning Purely Compensation Income
(Including Non-Business/Non- Profession Related Income)
Jan 30, 2019 ✔ ✔ ✖
1702-EX- Annual Income Tax Return

For Corporation, Partnership, and
Other Non- Individual Taxpayer
EXEMPT Under the Tax Code, as
Amended, {Sec. 30 and those
exempted in Sec. 27(C)} and Other
Special Laws, with NO Other Taxable
Income
1702-RT- Annual Income Tax Return

For Corporation, Partnership and
Other Non- Individual Taxpayer 27-201
Subject Only to REGULAR Income 9
Tax RateDescription 1901- Application for Registration for
Self-Employed (Single
19-201 Proprietor/Professional), Mixed
9 Income Individuals, Non-Resident
s Tax Return for Alien Engaged in Trade/Business,
of Shares of Stocks Estate and Trust
h the Local Stock
Jan 30, 2019 ✔ ✔ ✖

Jan 30, 2019 ✔ ✔ ✖
ation For
uding
nd
Feb 21, 2019 ✔ N/A N/A
Feb 21, 2019 ✔ N/A N/A
1902- Application for Registration For
Individuals Earning Purely
Compensation Income (Local and
Alien Employee)
1904- Application for Registration For

One-Time Taxpayer and Person
Registering under E.O. 98 (Securing a
TIN to be able to transact with any
Government Office)
1905- Application for

Registration Information
Update/Correction/Cancellatio
n
1906- Application for Authority to

Print Receipts and Invoices
1701- Annual Income Tax Return For 37-2019
Individuals (including MIXED Income
Mar 18, 2019 ✔ ✔ ✖ Earner), Estates and Trusts
41-2019
1702-MX- Annual Income Tax Return for Corporation, Partnership and Other Non-
Individual with MIXED Income Subject to Multiple Income Tax Rates or with Income
Subject to SPECIAL/PREFERENTIAL RATE
Apr 02, 2019 ✔ ✔ ✖
54-2019
1800- Donor’s Tax Return
1801- Estate Tax Return
May 17, 2019 ✔ ✔ N/A
73-2019
1604-C- Annual Information Return of Income Taxes Withheld on Compensation
1604-E- Annual Information Return of Creditable Income Taxes Withheld (Expanded)/
Income Payments Exempt from Withholding Tax
1604-F- Annual Information Return of Income Payments Subjected to Final Withholding
Taxes
Jul 24, 2019 ✔ N/A N/A
74-2019
2306- Certificate of Final Tax Withheld At Source
2307- Certificate of Creditable Tax Withheld at Source
Jul 24, 2019 ✔ N/A N/A
75-2019 1914- Application for Tax Credits/Refunds Jul 29, 2019 ✔ N/A N/A
100-2019
2316- Certificate of Compensation Payment/Tax Withheld For Compensation Payment
With or Without Tax Withheld
Sept 30, 2019 ✔ N/A N/A
106-2019
2000-OT- Documentary Stamp Tax Declaration/Return (One-Time Transactions)
Oct 11, 2019 ✔ ✔ ✖
126-2019
2306- Certificate of Final Tax Withheld at Source
2307- Certificate of Creditable Tax Withheld at Source
2316- Certificate of Compensation Payment/Tax Withheld
Nov 26, 2019 ✔ N/A N/A
1702-EX- Annual Income Tax Return Income
for Corporation, Partnership and
Other Non-
134-201
9 139-201
e, Taxpayers as 9
T [Sec. 30 Under e Return
terest
Dec 5, 2019 ✔ ✔ ✖ n
Dec 5, 2019 ✔ ✔ ✖ c.
Dec 18, 2019 ✔ N/A N/A
exempted in Sec. 27(C)] and Other Dec 18, 2019 ✔ N/A N/A
Special Laws, with NO Other Taxable
1601-EQ- Quarterly Remittance
Return of Creditable Income Taxes
Withheld (Expanded)
NOTABLE RMC:
29-2019
• Pursuant to Section 232 of the National Internal Revenue Code as amended by

Republic Act (R.A.) No. 10963 and in relation to R.A. No. 11032 otherwise known as
Ease of Doing Business and Efficient Government Service Delivery Act of 2018.
This Circular is being issued to continuously support our government programs in
improving our country’s competitiveness ranking in starting a business relative to (1)
keeping and maintaining of books of accounts; and (2) registration deadline of
books of accounts.
• Books of Accounts shall be kept at all times in the place of business of the
taxpayer. Such books and registers, together with records, vouchers, and other
supporting papers and documents prescribed by the Bureau of Internal Revenue
(BIR), kept by taxpayers shall be preserved intact, unaltered and unmutilated.
keeping of two or more sets of records or books of accounts is prohibited.
• All taxpayers are required to preserve their books of accounts, including subsidiary
books and other accounting records, for a period of ten (10) years reckoned from the
day following the deadline in filing a return, or if filed after the deadline, from the date
of filing of the return, for the taxable year when the last entry was made in the books
accounts: Provided that within the first five (5) years reckoned from the day following
the deadline in filing a return, or if filed after the deadline, from the date of the filing
of the return, for the taxable year when the last entry was made in the books of
accounts, the taxpayer shall retain hard copies of the books of accounts, including
subsidiary books and other accounting records. Thereafter, the taxpayer may retain
only an electronic copy of the hardcopy (paper) of the books of accounts, subsidiary
books and other accounting records in an electronic storage system which is
compliant with the requirements set forth under Section 2-A, of Revenue
Regulations No. 5-2014.
RMC No. 17-2019 (Form

1701A)
• The new ITR should be used by individuals earning income purely from the
business/profession who are under the graduated income tax rates with Optional
Standard Deduction (OSD) as a mode of deduction or those who choose to avail of
the 8% flat income tax rate beginning in the year 2018, which is due on or before
April 15, 2019.
• Taxpayers must file using manual return, Electronic BIR Forms (eBIRForms) and
eFPS and must pay by manual or online payment.
• The eFPS that filed and paid tax revenue due for 2018 using the old return (BIR
Form No. 1701) is still required to file an annual ITR use of the new BIR Form No.
1701A and mark it as an amended return.
RMC No. 19-2019 (Form 1700, 1702-EX,

1702-RT)
• The revised manual return is available on the BIR website under the BIR
Forms-Income Tax Return section. However, forms are not yet available in the
Electronic Filing and Payment System (eFPS) and Electronic Filing and Payment
System (eFPS) and Electronic Bureau of Internal Revenue Forms (eBIRForms);
thus, eFPS / eBIRForms filers should use the existing old version available in eFPS
and the Offline eBIRForms Package in filing said returns except BIR Form No.1700
where the manual return will be used in filing and paying the income tax due
thereon.
• Once the abovementioned returns are available in eFPS or included in the new
Offline eBIRForms Package, a revenue release issuance will be released to
announce the availability of the returns.
RMC No. 27-2019 (Form 1901, 1902, 1903, 1904, 1905,

1906)
• This Circular was issued to notify taxpayers and others concerned about
having an enhanced version (January 2018 ENCS) of the registration forms,
hereto attached as Annex “A-F” which was revised due to the implementation
of the Tax Reform for Acceleration and Inclusion (TRAIN).
RMC No. 37-2019 (Form

1701)
• The Commissioner of Internal Revenue (CIR) issued Revenue Memorandum

Circular (RMC) No. 37-2019 dated March 18, 2019, to circularize the availability of
enhanced Annual Income Tax Return for Individuals (including Mixed Income
Earner), Estates and Trusts (Bureau of Internal Revenue [BIR] Form No. 1701
January 2018) [ENCS]) as amended due to the implementation of the Tax Reform
for Acceleration and Inclusion Law.
• Please be informed, however, that the form is not yet available in the Electronic
Filing and Payment System (eFPS) and Electronic BIR Forms (eBIRForms); thus,
eFPS / eBIRForms filers should use a manual return on filing and paying the Tax
Reform for Acceleration and Inclusion Law.
• Revenue District Offices will receive manually filed returns by taxpayers, either
without payments or returns with payments being made online.
• The earnings will be released when the enhanced return is available on eFPS or is
already included in the new Offline eBIRForms Package.
RMC No. 41-2019
(1702-MX)
• The Commissioner of Internal Revenue has issued the Revenue Memorandum

Circular (RMC) No. 41-2019 dated on March 28, 2019 (the “Circular”), to
prescribe the new enhanced BIR Form No.1702-MX to be used by non-individuals
with mixed income subject to multiple income tax rates, or income subject to
special or rate in filing of annual income tax return and income tax payment due
on or before April 15, 2019.
• For taxpayers who have been elected to Optional Standard Deduction (OSD) and
General Professional Partnerships elected to OSD as a means of deduction in the
First Quarter, the manual returns should be used in filing and paying of the income
tax due.
RMC No. 54-2019 (1800,

1801)
• The Bureau of Internal Revenue (BIR) has issued the Revenue Memorandum
Circular (RMC) No. 54-2019 on May 17, 2019, which circularizes the availability of
the revised BIR Form No. 1800 (Donor’s Tax Return) and Form No. 1801 (Estate
Tax Return). The revised manual return on the BIR website is available under the
BIR Forms-Transfer Tax Return section but is not yet available in the Electronic
Bureau of Internal Revenue Forms (eBIRForms)
RMC No. 73-2019 (1604-C, 1604-E, 1604-F) & RMC No. 74-2019 (2306,
2307)
• This Tax Alert was issued to notify all the concerned about the newly issued BIR
Forms 1604C and 1604F, amended BIR Form 1604E, and enhanced BIR Forms
2306 and 2307, in connection with the implementation of TRAIN Law (RA 10963)
on January 1, 2018.
• Starting last year 2019, Separate annual information returns for income tax
withheld on compensation (BIR Form 1604C) and income payments subject to
final withholding taxes (BIR Form 1604F) must be filed by the withholding tax
agents.
• The newly released forms are only available manually on the BIR website under
the BIR Forms-Payment / Remittance Forms Section. A separate issuance must be
issued by the BIR when the new forms are already available in the electronic filing
and payment system (EFPS) and eBIRForms.
• A new format for Alphalist employees has also been released by BIR. The
alphalist of employees is simplified into two schedules from the previous five
schedules. The new alphalist now requires information on (1) the employment
status of employees: Regular, Casual, Contractual / Project based, Seasonal,
Probationary, Apprentice / Learners; and (2) the reason of separation, if applicable:
Terminated, Transferred, Retirement, and Death.
• The BIR Forms 2306 and 2307 in the FWT and CWT, respectively, were
enhanced to show the revised ATC schedules following the implementation of
the TRAIN Law.
RMC No. 75-2019

(1914)
• Commissioner of Internal Revenue issued RMC No. 75-2019 dated on 26 July

2019 to recommend the availability of the revised BIR Form No. 1914 [Application
for Tax Credits / Refunds].
• The newly revised form can be downloaded as “Annex A”, must be executed and
filed by taxpayers applying for tax refund/credits.
RMC No.
100-2019
• This Circular was issued to prescribe the revised BIR Form No.23 [Certificate
Payment/Tax withheld] January 2018 (ENCS) hereto attached as Annex “A” as
amended due to the implementation by Republic (RA) No. 10963, known as the Tax
Reform for Acceleration and Inclusion (TRAIN) Law. The revised certification must
be made by the employer and given to each employee receiving a salary, indicating
that the total amount paid and taxes have not been reflected from the calendar
year.
RMC No.
106-2019
• Newly revised BIR Form No. 2000-OT [Documentary Stamp Tax

Declaration/Return (One Time Transaction)] January 2018 (ENCS) hereto attached
as Annex “A”, which was revised due to the implementation of the Tax Reform for
Acceleration and Inclusion (TRAIN) Law.
RMC No.
126-2019
• It is observed that many withholding agents, particularly those who generate the
BIR Withholding Certificates Forms through their Computerized Accounting System
(CAS), clamor that they be allowed to use the old versions of the said Certificates
Forms pending the required configuration of CAS to be undertaken in compliance
with the existing revenue issuances.
• Hence, pending reconfiguration of CAS which shall not be beyond December
31,2019, withholding agents shall be allowed to use and issue old versions of the
abovementioned Certificates Forms for all transactions covering the taxable year
ending December 31 ,2019.
RMC No.
134-2019
• Issued to prescribe the newly-revised BIR Form No.

1702-EX
• The aforesaid return includes both the Optional Standard Deduction (OSD)
and the itemized deductions, which are available to be claimed by General
Professional Partnerships (GPPs).
• The revised manual return is already available in the BIR website under the BIR
Forms- lncome Tax Return Section and in the Offline (eBIRForms) Package v7.5.
However, the form is not yet available in the Electronic Filing and Payment System
(eFPS).
RMC No. 139-2019 (1601-EQ,

1602Q)
• This Tax Alert is issued to notify all concerned with the newly issued BIR Form
1602Q and to improve BIR Form 1601-EQ, in connection with the implementation
of the TRAIN Law (RA 10963).
• The newly released BIR Form 1602Q will be used by banks and other
Institutions in remitting their quarterly final taxes withheld on interest paid on
deposits and yields or any other monetary benefit from deposits of substitutes
and trust fund and similar arrangements.
• BIR Form 1601-EQ was amended as a result of certain changes in the rate of
creditable withholding tax on MERALCO payments and interest income on all other
debt instruments, not within the coverage of deposit substitutes (i.e. from 32% /
20% to 15%).
• The new/improved returns are already available manually and can be
downloaded from the BIR website. However, it is not yet available on the
Electronic BIR Form (eBIRForm) and Electronic Filing and Payment System
(EFPS). Thus, eFPS / eBIRForms filers must use the existing version of BIR
Forms l601-EQ and 1602 with eFPS, and the existing version of BIR Form No.
1602Q in Offline eBlRForms Package v7.5 in filing and remitting taxes due
thereon.
● to the state and

taxpayer
● Administrative collection remedies of the
government\
● Capital gain tax
return
● Income tax return on passive
income
● Different judicial remedies available to a
taxpayer
● Remedies available to the state and
taxpayers
● Grounds for compromise and minimum compromise
rates
●
Surcharge
● Administrative penalties and
surcharges
• Filing of tax
returns

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TAX 1 (BSOA and

INCOME TAX ON INDIVIDUALS

A. Classification of Individual Taxpayers. 1. Resident Citizens. ​A citizen of the

Gross compensation income P 242,000.00 Share in conjugal property

#2 Carlo, married, with two dependent children, received the following

200,000.00 ,1,200,000.00 ​Interest deposit in Hongkong ​50,000.00 Prize(cash)

Rent: Philippines P 1,000,000.00 Other Countries 200,000.00 Interest:

For #s 2/3 and 4.1 ( ​Non-Resident Citizen​/Resident

NRC​/RA/​NRAETB ​Rent in the

For #s 2/3 and 4.1 ( ​Non-Resident Citizen​/Resident

NRC​/RA/​NRAETB ​Rent in the

4. Nonresident Alien (NRA). Engaged in Trade or Business in the

Sources of Income Individual Taxpayer Income

For #s 2/3 and 4.1 ( ​Non-Resident Citizen​/Resident

NRC​/RA/​NRAETB ​Rent in the

Compute the FWT on Vicky if she is not engaged in trade or

Value Added Tax

Withholding Tax on Government Money

EXAMPLE OF PASSIVE INCOME WITH COMPUTATONS:

7 1⁄2% ​63,000.00 Exempt Exempt Exempt Price(TV)

20% ​10,000.00 10,000.00 10,000.00 Exempt

● ​Share in the net income of a Partnership

SHARE IN THE NET INCOME OGF A JOINT

WINNINGS ​Other Winnings 20% 20% 25% PCSO/lotto winnings:

• Winnings under Sec. 126 of the tax code (subject to OPT(only) of

CAPITAL GAINS TAX (CGT) and STOCK TRANSACTION TAX (STT) ON

"(D) Capital Gains from Sale of Real Property.

● ​Self-Employed and/or Professionals (SEP) ​Individuals earning income purely from

tax on: ​2. Minimum wage

● ​Fringe Benefits and De Minimis Benefits (FBT)

4. What are the Tax Rate of Fringe Benefits

5. How to Compute the Fringe Benefits

Those allowances that are received by an employee in fixed amounts and

COMPUTATION OF THE FRINGE BENEFIT

Fringe benefits provided to managerial and supervisory employees are subject to

For a non-resident individual who is not engaged in trade or business in the

2. An alien individual employed by an offshore banking unit of a foreign bank

Monetary value of the fringe benefit (cash payment) 85,000

Divided by the Grossed-Up Monetary Value 68%

Taxable Amount of the Fringe Benefit 125,000

Fringe Benefit Tax 40,000

Cash Payment of the Personal Expenses 85,000

Plus The Fringe Benefit Tax 40,000

Deductible Fringe Benefit Expense 125,000

What are the Tax Exempt De Minimis Benefits under TRAIN

● ​Exclusions from gross income

(2) Amount Received by Insured as Return of Premium​. - The amount

(4) Compensation for Injuries or Sickness. ​- amounts received, through

Any amount received by reason of involuntary separation remain EXEMPT

(a) Income Derived by Foreign Government. - Income derived from investments in

(b) Income Derived by the Government or its Political Subdivisions. - Income

If the grant for the convenience of the

Other Benefits include:

FURTHER, RR 3-2015emhasized that this exclusions from gross income is

Business related allowances subject to

Representation and transportation allowances (RATA)

RATA, or Representation Allowance and Transportation allowance,

RATA has two kinds — commutable and reimbursable.

What is Commutable RATA?

As derived from Section 317, Article 8, Chapter 5, Volume 1 of the Government

When is RATA reimbursable?

As derived from Section 286, Article 1, Chapter 5, Volume 1 of the Government

Stipends of Resident Physicians

Cost of Living Allowance (COLA)

A. Classification of Individual Taxpayers. 1. Resident Citizens. A citizen of the

200,000.00 ,1,200,000.00 Interest deposit in Hongkong 50,000.00 Prize(cash)

For #s 2/3 and 4.1 ( Non-Resident Citizen/Resident

NRC/RA/NRAETB Rent in the

For #s 2/3 and 4.1 ( Non-Resident Citizen/Resident

NRC/RA/NRAETB Rent in the

For #s 2/3 and 4.1 ( Non-Resident Citizen/Resident

NRC/RA/NRAETB Rent in the

7 1⁄2% 63,000.00 Exempt Exempt Exempt Price(TV)

20% 10,000.00 10,000.00 10,000.00 Exempt

● Share in the net income of a Partnership

WINNINGS Other Winnings 20% 20% 25% PCSO/lotto winnings:

● Self-Employed and/or Professionals (SEP) Individuals earning income purely from

tax on: 2. Minimum wage

● Fringe Benefits and De Minimis Benefits (FBT)

● Exclusions from gross income

(2) Amount Received by Insured as Return of Premium. - The amount

(4) Compensation for Injuries or Sickness. - amounts received, through

Foreign Corp FORMULA If Ratio is:

NOTE PCSO/Lotto- taxable if received by a NRANETB and Special Alien

1702-EX- Annual Income Tax Return

1702-RT- Annual Income Tax Return

Jan 30, 2019 ✔ ✔ ✖

1904- Application for Registration For

1905- Application for

1906- Application for Authority to

• Pursuant to Section 232 of the National Internal Revenue Code as amended by

RMC No. 17-2019 (Form

RMC No. 19-2019 (Form 1700, 1702-EX,

RMC No. 27-2019 (Form 1901, 1902, 1903, 1904, 1905,

RMC No. 37-2019 (Form

• The Commissioner of Internal Revenue (CIR) issued Revenue Memorandum

• The Commissioner of Internal Revenue has issued the Revenue Memorandum

RMC No. 54-2019 (1800,

• Commissioner of Internal Revenue issued RMC No. 75-2019 dated on 26 July

• Newly revised BIR Form No. 2000-OT [Documentary Stamp Tax

• Issued to prescribe the newly-revised BIR Form No.