INCOME TAXATION OF INDIVIDUALS: CITIZENS

CITIZENS
RESIDENT NON-RESIDENTS
Definition Sec 22 (E)
1. A citizen of the Philippines who establishes to the satisfaction of the Commissioner that
fact of his physical presences abroad with definite intention to reside therein.
2. 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.
3. 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.
4. A citizen who has been previously considered as non-resident citizen 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 in which he arrives in
the Philippines with respect to his income derived from sources abroad until the date of his
arrival in the Philippines.

Tax Code Reference Sec 24 Sec 24 ( income w/in the Philippines)

Sec 23 ( income outside Philippines)
Tax Base taxable income earned from all sources within and taxable income from all sources within the Philippines
without the Philippines
Tax Rates - In general 5% - 34 % in 1998 5% - 34% in 1998 (for income w/in the Phils)
5% - 33% in 1999 5% - 33% in 1999 (for income w/in the Phils)
5% - 32% in 2000 - 2017 5%- 32% in 2000 - 2017 (for income w/in the Phils)
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022 (for income w/in the Phils)
0% - 35% (new brackets) in 2023 0% - 35% (new brackets) in 2023 (for income w/in the Phils)
EXEMPT (for income w/out the Phils)
Tax Base & Rates - Optional 8% on gross sales/receipts and other non- 8% on gross sales/receipts and other non-operating income
For Individuals qualified as Self Employed and/or operating income in lieu of business taxes under in lieu of business taxes under Sec 116 (for income w/in the
Professionals [SEP] covered by Sec 116 whose gross Sec 116 Phils)
sales/receipts and other income does not exceed the
VAT Threshold of P3M and who are not VAT registered
Tax Rates - On Passive Incomes (subject to Final Taxes [FT])
Interest on any currency bank deposit and yield or any other 20% FT 20% FT
monetary benefit from deposit substitutes [Sec 22(Y)] and
from trust fund and similar arragements
Interest from a depository bank under the expanded foreign 15% [7.5% - deleted] FT EXEMPT [Sec 2.24 RR 10-98 ]
currency deposit system [RR 10-98]
Interest on long term deposit or investment [Sec 22(FF)] in EXEMPT EXEMPT
the form of savings, common or individual trust funds,
deposit substitutes, investment management accounts and
other investments evidenced by certificates in such form
prescribed by the BSP
Pre-terminated long term investment (should actually based 4 yrs to < 5 years -- 5%FT 4 yrs to < 5 years -- 5%FT
on expired term) 3 years to < 4 years -- 12%FT 3 years to < 4 years -- 12%FT
Less than 3 years -- 20%FT Less than 3 years -- 20%FT
Other interest income derived within the Philippines 5% - 34%, 33%, 32% 5% - 34%, 33%, 32%
Beginning Jan 1, 2018 Beginning Jan 1, 2018
8% option or 8% option or
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023 0% - 35% (new brackets) in 2023
Other interest income derived outside the Philippines 5% - 34%, 33%, 32% EXEMPT
Beginning Jan 1, 2018
8% option or
0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023
Royalties - in general 20% FT 20% FT
Royalties on books, other literary works and musical 10% FT 10% FT
compositions
Prizes - more than P10,000 20% FT 20% FT
Prizes - P10,000 or less 5% - 34%, 33%, 32% 5% - 34%, 33%, 32%
Beginning Jan 1, 2018 Beginning Jan 1, 2018
8% option or 8% option or
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023 0% - 35% (new brackets) in 2023
Prizes - PCSO & Lotto winnings (more than P10,000) 20% FT 20% FT
Prizes - PCSO & Lotto winnings (P10,000 or less) EXEMPT EXEMPT
Other prizes or winnings within the Philippines 20% FT 20% FT
Other prizes or winnings outside the Philippines 5% - 34%, 33%, 32% EXEMPT
Beginning Jan 1, 2018
8% option or
0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023
Cash and/or Property Dividends from a domestic corp or 6% FT beginning Jan 1, 1998 6% FT beginning January 1, 1998
share in distributable net income after tax of a partnership 8% FT beginning Jan 1, 1999 8% FT beginning January 1, 1999
(except general professional partnerhip), association, joint 10% FT beginning Jan 1, 2000 10% FT beginning January 1, 2000
account, or joint venture or consortium taxable as
corporation
Other Cash and/or Property Dividends (e.g. from a foreign 5% - 34%, 33%, 32% 5% - 34%, 33%, 32%
corp) Beginning Jan 1, 2018 Beginning Jan 1, 2018
8% option or 8% option or
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023 0% - 35% (new brackets) in 2023
On domestic shares of stock not traded through local stock 15% [5% / 10% - deleted] FT 15% [5% / 10% - deleted] FT
exchange (based on net capital gains)
On shares of stock traded through local stock exchange 1/6 of 1% [1/2 of 1% - deleted] FT (Percentage 1/6 of 1% [1/2 of 1% - deleted] FT (Percentage Tax)
(based on gross selling price) [Sec 127(A) & (D)] Tax)
On real property (based on gross selling price or FMV 6% FT 6% FT
whichever is higher) - In general
On real property sold to the government - subj to option 6% FT or 6% FT or
5% - 34%, 33%, 32% 5% - 34%, 33%, 32%
Beginning Jan 1, 2018 Beginning Jan 1, 2018
8% option or 8% option or
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023 0% - 35% (new brackets) in 2023
On real property sold to acquire or construct new principal EXEMPT subj to certain conditions EXEMPT subj to certain conditions
residence
Atty. Marissa O. Cabreros, CPA as of January 1, 2018
 INCOME TAXATION OF INDIVIDUALS: ALIENS

ALIENS
NON-RESIDENT ALIEN
RESIDENT ALIEN ENGAGED IN BUSINESS NOT ENGAGED IN BUSINESS

Definition Sec 22 (F) Sec 22 (G) / Sec 25 (A)(1) Sec 22 (G)

An individual whose residence is within the An individual whose residence is not within the An individual whose residence is not within the
Philippines and who is not a citizen thereof. Philippines and who is not a citizen thereof but Philippines and who is not a citizen thereof but
stays in the Philippines for an aggregate period stays in the Philippines for an aggregate period of
of more than 180 days during any calendar year or less than 180 days during any calendar year

Tax Code Reference Sec 24 Sec 25 (A) Sec 25 (B)

Tax Base - in general taxable income earned from all
taxable income earned from all gross income from all sources
sources within the Philippines
sources within the Philippines within the Philippines
Tax Rates - In general 5% - 34 % in 1998 5% - 34 % in 1998 25%FT
5% - 33% in 1999 5% - 33% in 1999
5% - 32% in 2000 - 20175% - 32% in 2000 - 2017
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023
0% - 35% (new brackets) in
2023
Tax Base & Rates - Optional 8% on gross sales/receipts and 8% on gross sales/receipts and N/A
For Individuals qualified as Self Employed and/or Professionals other non-operating income in lieu other non-operating income in
[SEP] covered by Sec 116 whose gross sales/receipts and other of business taxes under Sec 116 lieu of business taxes under
income does not exceed the VAT Threshold of P3M and who are Sec 116
not VAT registered
Tax Rates - On Passive Income (subject to Final Tax [FT])
Interest on currency bank deposit and yield or any other monetary 20% FT 20% FT 25% FT
benefit from deposit substitutes and from trust fund and similar
arragements
Interest from a depository bank under the expanded foreign 15% [7.5% - deleted] FT EXEMPT EXEMPT
currency deposit system Sec 27(D)(3) Sec 27(D)(3)
Sec 2.27(c)RR 10-98 RR 10-98
Interest on long term deposit or investment [Sec 22(FF)] in the form EXEMPT EXEMPT 25% FT
of savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced
by certificates in such form prescribed by the BSP

Pre-terminated long term investment (should actually based on 4 yrs to < 5 years -- 5% 5 yrs to < 5 years -- 5% 25% FT
expired term) 3 years to < 4 years -- 12% 3 years to < 4 years -- 12%
Less than 3 years -- 20% Less than 3 years -- 20%
Other interest income derived within the Philippines 5% - 34%, 33%, 32% 20%FT 25% FT
Beginning Jan 1, 2018
8% option or
0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023
Other interest income derived outside the Philippines EXEMPT EXEMPT EXEMPT
Royalties - in general 20% FT 20% FT 25% FT
Royalties on books, other literary works and musical compositions 10% FT 10% FT 25% FT
Royalties on cinematographic films and similar works [Sec 28(B)(2)] 20% FT 25% FT 25% FT

Prizes - more than P10,000 20% FT 20% FT 25% FT

Prizes - P10,000 or less 5% - 34%, 33%, 32% 5% - 34%, 33%, 32% 25% FT
Beginning Jan 1, 2018 Beginning Jan 1, 2018
8% option or 8% option or
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023 0% - 35% (new brackets) in
2023
Prizes - PCSO and Lotto winnings (more than P10,000) 20% FT 20% FT 25% FT
Prizes - PCSO and Lotto winnings (P10,000 or less) EXEMPT EXEMPT EXEMPT
Sec 27(D)(3)
RR 10-98
Other prizes or winnings within the Philippines 20% FT 20% FT 25% FT
Other prizes or winnings outside the Philippines EXEMPT EXEMPT EXEMPT
Cash and/or Property Dividends from a domestic corp or share in 6% FT beginning Jan 1, 1998 20% FT 25% FT
distributable net income after tax of a partnership (except a general 8% FT beginning Jan 1, 1999
professional partnership), association, joint account, or joint venture 10% FT beginning Jan 1, 2000
or consortium taxable as corporation 10% FT beginning Jan 1, 2018
Other Cash and/or Property Dividends (e.g. from a foreign corp in 5% - 34%, 33%, 32% 5% - 34%, 33%, 32% 25%FT
the Philippines) Beginning Jan 1, 2018 Beginning Jan 1, 2018
8% option or 8% option or
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023 0% - 35% (new brackets) in
2023
Other Cash and/or Property Dividends (e.g. from a foreign corp NOT EXEMPT EXEMPT EXEMPT
in the Philippines)
On domestic shares of stock not traded through local stock 15% [5% / 10% - deleted] FT 15% [5% / 10% - deleted] FT 15% [5% / 10% - deleted] FT
exchange (based on net capital gains)
On shares of stock traded through local stock exchange (based on 1/6 of 1% [1/2 of 1% - deleted] FT 1/6 of 1% [1/2 of 1% - deleted] 1/6 of 1% [1/2 of 1% - deleted] FT
gross selling price) [Sec 127(A) & (D)] (Percentage Tax) FT (Percentage Tax) (Percentage Tax)
On real property (based on gross selling price or FMV whichever is 6% FT 6% FT 6% FT
higher) - In general
On real property sold to the government - subj to option 6% FT or 6% FT or 6% FT or
5% - 34%, 33%, 32% 5% - 34%, 33%, 32% 5% - 34% 33%, 32%
Beginning Jan 1, 2018 Beginning Jan 1, 2018 Beginnig Jan 1, 2018
8% option or 8% option or 8% option or
0% - 35% in 2018 -2022 0% - 35% in 2018 -2022 0% - 35% in 2018 -2022
0% - 35% (new brackets) in 2023 0% - 35% (new brackets) in 0% - 35% (new brackets) in 2023
2023
On real property sold to acquire or construct new principal residence EXEMPT subj to certain conditions N/A N/A
RR 13-99 RR 13-99
Atty. Marissa O. Cabreros, CPA as of January 1, 2018
 CORPORATIONS
RESIDENT
DOMESTIC FOREIGN
Definition Sec 22 (B) & (C ) Sec 22 (H)
Applies to corporation created Applies to foreign corporation
or organized in the Philippines engaged in trade or business
or under its laws within the Philippines
NON-RESIDENT
FOREIGN
Sec 22 (I)
Applies to a foregin corporation
not engaged in trade or business
within the Philippines

Tax Code Reference Sec 27 Sec 28 (A) Sec 28 (B)

Tax Base taxable income from all taxable income from all gross income from all sources
sources within and without the sources within the Philippines within the Philippines
Philippines
Tax Rates - In general 34% in 1998 34% in 1998 34% in 1998
33% in 1999 33% in 1999 33% in 1999
32% in 2000-2005 32% in 2000-2005 32% in 2000-2005
35 % in 2006-2008 35 % in 2006-2008 35 % in 2006-2008
30% in 2009 & thereafter 30% in 2009 & thereafter 30% in 2009 & thereafter
Tax Rates - on Passive Income (Subject to Final Tax [FT])
Interest on any currency bank deposit and yield or any other 20% FT 20% FT 34% in 1998
monetary benefit from deposit substitutes and from trust funds 33% in 1999
and similar arragements 32% in 2000-2005
35 % in 2006-2008
30% in 2009 & thereafter
Interest on foreign currency deposit system 15% [7.5% - deleted] FT 7.5% FT EXEMPT
Interest Income on Foreign Loans contracted on or after N/A N/A 20% FT
August 1, 1986
Interest Income received by a FCDU (Sec 27)
Income derived by a depository bank under the expanded EXEMPT [RA No. 9294] EXEMPT [RA No. 9294] N/A
foreign currency deposit system from foreign currency
transactions with nonresidents, offshore banking units in the
Philippines, local commercial banks including branches of
foreign banks that may be authorized by the Bangko Sentral
ng Pilipinas (BSP) to transact business with foreign currency
deposit system
Interest income from foreign currency loans granted by such 10% FT 10% FT N/A
depository banks under said expanded system to residents
other than offshore banking units in the Philippines or other
depository banks under the expanded system
Interest Income received by an OBU (Sec 28)
Income derived by a depository bank under the expanded N/A EXEMPT [RA No. 9294] N/A
foreign currency deposit system from foreign currency
transactions with nonresidents, offshore banking units in the
Philippines, local commercial banks including branches of
foreign banks that may be authorized by the Bangko Sentral
ng Pilipinas (BSP) to transact business with foreign currency
deposit system

Interest income from foreign currency loans granted to N/A 10% FT N/A
residents other than offshore banking units or local
commercial banks , including local branches of foreign
banks that may be authorized by BSP to transact with
offshore banking units
Royalties 20% FT 20% FT 34% in 1998
33% in 1999
32% in 2000-2005
35 % in 2006-2008
30% in 2009 & thereafter
Dividends EXEMPT EXEMPT 15% FT (conditional)
Tax Rates - on capital gains
On shares of stock not traded (based on net capital gains) 15% [5% / 10% - deleted] FT 5% / 10% FT 5% / 10% FT
On Land or Buildings (classified as capital assets) 6% FT 34% in 1998 34% in 1998
based on gross selling price or 33% in 1999 33% in 1999
FMV whichever is higher 32% in 2000-2005 32% in 2000-2005
35 % in 2006-2008 35 % in 2006-2008
30% in 2009 & thereafter 30% in 2009 & thereafter
Tax Rate - Minimum Corporate Income Tax (MCIT) 2% 2% N/A
Tax Rate - Branch Profit Remittance Tax (BPRT) N/A 15% N/A
Tax Rate - Improperly Accumulated Earnings Tax (Sec 29) 10% 10% N/A
Atty. Marissa O. Cabreros, CPA as of January 1, 2018
 INCOME TAXATION: SPECIAL RULES

SPECIAL RATES FOR CERTAIN ALIEN INDIVIDUALS

Alien Employed by Regional or Area Headquarters and 15% on gross 5% - 34%, 33%, 32% [regular tax rate]
Regional Operating Headquarters of Multinational income on salaries, and FT rate for any other income earned from all
Companies [Sec 25 (C )] wages, annuities, other sources within the Philippines
compensation, Starting January 1, 2018
Alien Individual Employed by Offshore Banking Units remuneration and 0% - 35% in 2018 -2022
[Sec 25 (D)] other emoluments 0% - 35% (new brackets) starting 2023
such as honoraria on taxable compensation income
Alien Individual Employed by Petroleum Service and allowances (until and FT rate for any other income earned from all
Contractor and Subcontractor [Sec 25(E)] 2017) other sources within the Philippines

SPECIAL RATES FOR CORPORATIONS

DOMESTIC CORPORATION
Proprietary Educational Institutions and 10% on taxable income
Hospitals 30% on entire taxable income, if total gross income from
unrealted trade, business, or activity exceed 50% of
total income
GOCC, Agencies and Instrumentalities 30% same tax rate upon their taxable income in a similar
business, industry or activity
GSIS / SSS / PHIC / [PCSO - deleted] / LWD EXEMPT
Depository Banks 10% on interest income from foreign currency transactions
including interest income from foreign loans

RESIDENT FOREIGN CORPORATION

International Air Carriers 2 1/2 % on Gross Philippine Billings
International Shipping 2 1/2 % on Gross Philippine Billings
Offshore Banking Units 10% any interest income derived from foreign currency
loans granted to residents other than offshore
banking units or local commercial banks, including
local branches of foreign banks that may be
authorized by the BSP to transact business with
offshore banking units
EXEMPT income derived by offshore banking units authorized
by the Bangko Sentral ng Pilipinas (BSP), from
foreign currency transactions with nonresidents,
other offshore banking units, local commercial
banks, including branches of foreign banks that may
be authorized by the Bangko Sentral ng Pilipinas
(BSP) to transact business with offshore banking
units

Regional or Area Headquarters EXEMPT

Regional Operating Headquarters 10% on taxable income

NON RESIDENT FOREIGN CORPORATION

Cinematographic Film Owner, Lessor or Distributor 25% on Gross Income
Owner or Lessor of Vessel Charted by Philippine 4.5% on Gross Rentals
Nationals
Owner or Lessors of Aircraft, Machineries and Other 7.5% on Gross Rentals
Equipment
Atty. Marissa O. Cabreros, CPA as of January 1, 2018