ALYZA P.

CACULITAN BSBA 2

WHAT IS REGULAR INCOME TAXATION?

Ordinary income is any type of income earned by an organization or an
individual that is taxable at ordinary rates. It includes (but is not limited to) wages,
salaries, tips, bonuses, commissions, rents, royalties, short-term capital gains,
unqualified dividends, and interest income.
- Ordinary income is any type of income that’s taxable at ordinary rates.
- Examples of ordinary income include salaries, tips, bonuses, commissions,
rents, royalties, short-term capital gains, unqualified dividends, and interest
income.
- For individuals, ordinary income usually consists of the pretax salaries and
wages they have earned.
- In a corporate setting, ordinary income comes from regular day-to-day
business operations, excluding income gained from selling capital assets.
Income of residents in Philippines is taxed progressively up to 32%. Resident
citizens are
taxed on all their net income derived from sources within and without the
Philippines.
For nonresident, whether an individual or not of the Philippines, is taxable only
on income
derived from sources within the Philippines.

Understanding Ordinary Income

Ordinary income comes in two forms: personal income and business income.
Personal ordinary income can be defined as any kind of cash inflow that is
subject to the standard marginal income tax rates, as outlined by the Internal
Revenue Service (IRS).

For businesses, on the other hand, the term refers to any type of income
generated from regular day-to-day business operations—excluding any income
earned from the sale of long-term capital assets, such as land or equipment.
Individuals

For private individuals, ordinary income typically consists of the salaries and
wages that they earn from their employers before taxes. If, for example, a person
holds a customer service job at Target and earns $3,000 per month, then their
annual ordinary income can be calculated by multiplying $3,000 by 12.
If this customer service employee has no other income sources, then $36,000
is the amount that would be taxed on their year-end tax return as gross income.
Alternatively, if the same person also owned property and earned $1,000 a month
in rental income, then their ordinary income would increase to $48,000 per year.
WHAT IS THE REGULAR INCOME TAX IN THE PHILIPPINES?
The Philippines
Income Tax Rate
5%-32%
Corporate Tax Rate 30%
Sales Tax/ VAT rate 12%
Personal Income Tax
Income of residents in Philippines is taxed progressively up to 32%. Resident
citizens are taxed on all their net income derived from sources within and without
the Philippines. For nonresident, whether an individual or not of the Philippines, is
taxable only on income. derived from sources within the Philippines.
Taxable Income (PhP) Tax Rate
Php 0-10,000 5%
Php 10,000-30,000 10%
Php 30,000-70,000 15%
Php 70,000 140,000 20%
Php140,000 – 250,000 25%
Php 250,000-500,000 30%
Php 500,000 and above 32%
- The above rates apply to individuals who derive income from business
(including capital gains from the sale transfer or exchange of shares in a foreign
corporation) or from the practice of a profession.
 - Individuals holding managerial and highly technical positions employed by
RHQs1, ROHQs2 , multinational companies and offshore business units are taxed
at 15% on their gross income.

Income in Philippines is divided into the following three categories which are
taxed separately, as summarized below.

1. Compensation employment income: This income is taxed at progressive rates on

gross income after deduction of personal and additional exemptions but without
deductions for
expenses.
2. Passive income: This income, including dividends and interest, is subject to tax
at 7.5%.
3. Business income and professional income: This income is taxed at progressive
rates on net
business income after deduction of certain specified expenses.