Income tax hindi lang dahil kumita ka o nag work ka. his employment. For 2019, Mr.
, Mr. CSO earned a total
Types of Income
1. Ordinary income
Income na pinaghirapan mo, sa pagwowork mo,
pagbusiness.
 Purely Compensation Income Earner
- Nakukuha income sa pamamagitan ng sahod.
- Merong employer-employee relationship.
 Self-employed/pro
- My business. Sole proprietor
- Offers Professionals services, hindi employed
ginagawa nila, nag rerendered ng service sa
mga client (doctor, engineer etc.)
- Empleyado mo sarili mo.
 Mixed Income Earner
- May business at mayroong employer-employee
relationship.
2. Passive income
Passive, wala kang ginagawa pero kumikita ka. Example
naglagay ng pera sa bangko wala na iba ginawa pero
kumita ng interest.
May interest income, ‘yung interest ‘yun ‘yung passive.
Earned mo pero hindi ka nag effort.
3. Capital Gain
Maraming rule dito. May subject sa basic tax, merong
dalawa na capital gains na madiscuss sa capital gains
tax.
Purely Compensation Income Earner
 Individual whose source of income is PURELY
derived from an employer-employee
relationship.
 Shall be taxed based on the graduated income
tax rates prescribed.
Example
Mr. PSJ works for J.H.I.T Inc. He is not engaged in
business nor has any other source of income other than
taxable compensation income of P2, 060,000.
Analyse:
 PSJ is a purely compensation income earner
 Use graduated rate or ‘yung tax table
2,060,000 – 2,000,000 = 60,000
60,000 × 32% = 19,200
19,200 + 490,000 = 509,200.00
Purely Self-employed Individual or Professionals
 The rate of tax or purely self-employed
individuals and/or professionals whose gross
sales/receipt and other non-operating income
does not exceed the VAT thershold
(P3,000,000) as provided in Section 109 (BB) of
the tax code as amended, shall have the option
to avail of:
Self-employed individual gross sales/receipt and other
non-operating income hindi lumagpas sa VAT threshold
na 3M. Merong rule sa BUS TAX, kapag 3M below siya
ay subject sa opt, magiging VAT registered siya kapag
more than 3M.
OPTIONS ng mga hindi lumagpas sa VAT threshold
(PURELY SELF-EMPLOYMENT/PRACTICE OR
PROFESSIONAL)
 Graduated rates under Sec 24A
 8% tax (Gross Sales/Receipts & OTHER NON-
OPERATING INCOME in excess of P250,000)
In lieu of:
 The Graduated Income Tax Rates under Sec 24A
and
 The Percentage Tax under Sec 11
TAXPAYER WHO DID NOT QUALIFY FOR THE 8%
INCOME TAX RATE
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  Shall be subject to graduated INCOME TAX
RATE, and
 Shall also be subject to the applicable BUSINESS
TAXES, if any.
Role ng 8% para mapalitan ang income and business tax
instead ang babayaran na lang niya ay 8% base sa (Gross
Sales + Receipt -250k)
Ms. Nami operates a convenience store while she
offers bookkeeping services to her clients. In 2019, her
gross sales amounted to P800, 000 in addition to her
receipts from bookkeeping services of P300, 000. She
already signified her intention to be taxed at 8% income
tax rate in her 1st quarter return.

Differentiate:

May case na mas malaki ang makukuha sa 8% option Gross Sales – sales of goods
kesa sa dalawang tax. Mas maganda gamitin ang income
Gross Receipts – sales of service
and business tax kapag marami kang expenses mas
maliit ang net. Analyze:

Ms. Nami have convenience store meron rin

siyang bookkeeping services.
PAALALA
8% tax on Gross Sales/Receipts and OTHER
 Bawal mag-avail ng 8% kapag VAT-Registered
NON-OPERATINF INCOME in excess of P250,000
ka regardless sa kung magkano ang gross
sales/receipts mo Ang tax base dito ay gross. Kapag nag tax table or
graduated tax rate ang tax base ay net kapag option tax
1,000,000 ✔ 1,000,000 (VR) ✖ 5,000,000 ✔
base is gross.
 General Rule: Taxpayer shall be considered
Computation:
having availed of the graduated income tax
rates UNLESS the taxpayer signifies in the 1st P800, 000 + 300,000 = 1,100,000 – 250,000 =
Quarter Income Tax Return of the taxable year, 850,000 × 8% = 68,000 ito babayaran niya for
the intention to elect the 8% income tax and the year, walana siyang babayaran na business
such election shall be IRREVOCABLE. tax or kung ano ano tax.
Once nag avail ng option irrevocable na ‘yun sa buong
taon. Example sa first quarter nag avail ng option tapos
sa susunod ayaw mo na, hindi pwede ‘yun kasi for the
whole year na iyon.

SUMMARY

 Compensation income earner

- Use graduated tax rate or the tax table
 Self-employed
- General rule, walang sinabi paano tax-
an, gamitin tax table
- Nagkakaroon ng option kapag may
sinabi kapag walang sinabi walang Example
option.
Ms. Nami above, failed to signify her intention
Example to be taxed at 8% income tax rate on gross sales
P1,100,000 in her 1st Quarter Income Tax
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 Return, and she incurred cost of sales and
operating expenses amounting to P600,000 and
P200,000, respectively.
Analyze:
Additional info na bukod sa income niya 800k at
300k nakapag incurred pa siya ng cost of sale
and operating expenses na 600k and 200k
respectively. Gagamitin natin ay ang graduated
tax rate under section 24A, dahil sa word na
failed to signify her intention
Compute:
300,000 ang bracket sa tax table is 250k to 400k
(300,000 – 250, 000) × 20% = 10,000 (income tax due)
Aside from income tax, she is likewise liable to pay
business tax
(1,100,000 × 3% = 3,300 OPTs)
×××××××××××××××××××××××××××××××××
A NON-VAT REGISTERED TAXPAYER who initially opted
to avail of the 8% option but has EXCEEDED THE VAT
THRESHOLD during the taxable year:
 Shall be subject to 3% tax on the first
P3,000,000 of his/her gross sales/receipts under
Section 116 of the tax code, as amended,
without imposition of any penalty. If payment is
timely made on the following month when
threshold is breached.
 The EXCEES OF THE THRESHOLD shall be
 Subject to VAT PROSPECTIVELY, and
 The 8% income tax previously paid shall
be credited to the income tax due
under the graduated rates provided in
the Section 24A of the Tax Code as
amended.
Example
Trafalgar Law signified her intention to be taxed
at 8% income tax rate on gross sales in her 1 st
quarter income tax rate return. However, her
gross sales during the taxable year has
exceeded the VAT Threshgros
In paying tax is per quarter.
Analyze:
Quarter 1
1. Self-employed
2. Hindi lumagpas ng 3M. No
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 3. Signify 8%. Yes Hindi pa lagoas 3M kaya pwede pa option (8%) hindi pa
lagpas threshold

To compute tax due

500k Q1 + 500k Q2 + 2M Q3 = 3M – 250k × 8% =

220,000

500k – 300k – 120k = 800k net income for the tax due
(500k – 250k) × 8% = 20k

Quarter 2
Quarter 4
Total sales niya sa quarter 2 is 1M (add the previous and
the current) Total sales niya is 6M na lagpas na siya sa threshold na
3M. hindi na siya pwede siya 8% option.
To compute tax due
Net income is computed:
500k Q1 + 500k Q2 = 1M – 250k × 8% = 60, 000
3M – 1.2M – 720K = 1,080,000

Cumulative Sales is computed:

Add all net income from Q1 to Q4.

80k + 80k + 320k + 1,080k = 1,560,000 ito ang

net income sa buong quarter

To compute tax due using graduated tax rate:

1,560,000 – 800k = 760k × 30% + 130k =

358,000

Quarter 3

How much is the cumulative sales for Q3? Total is

3,000,000 (add Q1, Q2 and Q3 total sale)

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