INCOME TEST OF SOURCE OF INCOME

Interest Income Residence of debtor

Income from services Place of performance
Rent Location of property
Royalty Place of sue of intangible
Gain on sale of real property Location of property
Gain on sale of personal property purchases Place of sale
in one country and sold in another
Dividend
 From Domestic Corp Income within
 From Foreign Corp a. Income within - if 50% or more of the gross income of the foreign corporation for the preceding 3 years prior to the
declaration of dividend or for such part of such period as the corporation has been in existence, was derived from
sources within Phils

(Phil gross income/ total gross income) * dividend = income within

b. Income without - if less than 50% of the gross income of the foreign corporation for the preceding 3 years prior to the
declaration of dividend or for such part of such period as the corporation has been in existence, was derived from
sources within Phils

Sale of domestic shares Income within

Sale of foreign shares Income within
Income from transportation and other partly within and partly without Phils
services rendered partly within and partly
without Phils
Who could be Tax Type of Tax
taxed Imposed
Individuals Income Type of Income Tax Kind of Individual Tax Payer
Tax
1. Returnable Income (ITR) 1. Resident Citizen
a. Compensation income 2. Non-resident citizen (183 days or more stay outside Phils)
b. Income from trade, business or profession 3. OCW
c. Gains from sale of ordinary assets 4. Citizen working or deriving income from work and registered
d. Net capital gain from sale of other capital assets with POEA
e. Other taxable income not subject to FT or CGT 5. Seaman and works as a complement of vessel engaged
2. Passive Income (FT) exclusively in international trade
a. Interest from any currency (usually Peso) bank deposit 6. Resident Alien
b. Yield of monetary benefits from deposit substitutes, trust funds 7. Non-resident alien -engaged in trade or business (180 days or
and similar arrangements more stay in Phils)
c. Royalties 8. Non-resident -not engaged in trade or business
d. Prizes 9. Special
e. Winnings a) Non-resident alien cinematographic film owner, lessor
f. Interest from depositary bank under expanded foreign or distributor (25%)
currency deposit system b) Subcontractor, whether citizen, resident alien or
g. Interest income form long term deposit or investment of 5 NRAETB of service contractors engaged in petroleum
years or more operations (8%)
h. Cash or property dividends received from domestic c) Filipinos registered with BOI availing ITH (Exempt)
corporation or regional operating headquarter of an MNC d) PEZA- registered individuals availing of ITH (Exempt)
i. Share of an individual partner in the after-tax net income of a e) PEZA- registered individuals availing of 5% gross
business partnership or an organization or consortium taxable income tax incentive (5%)
as a corporation f) Individuals registered as Brgy Micro Business
3. Capital Gains (CGT) -capital assets Enterprises (Exempt)
a. Real property in the Philippines classified as asset
b. Shares of domestic corporation, where seller is not a dealer in 10. MWEs
securities
Partnerships Income Tax
EXN:
1. General professional partnership
2. Joint venture or consortium for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy
operations pursuant to an operating consortium agreement under a service contract with the government
Partner Co-venturer
1. Citizen or resident alien – 10% 1. Domestic corp - Exempt
2. Non-resident alien engaged in trade or business – 20% 2. Resident foreign corp - Exempt
3. Non-resident alien not engaged in trade or business – 20% 3. Non-resident foreign corp - 15%
Corporations Standard Income Tax Penalty Income Tax Special Income Tax
1. Net Income Tax (Ordinary Income) 1. Minimum Corporate Income Tax 1. Gross Income Tax
2. Final Withholding Tax (Passive Income) 2. Improperly Accumulated Earnings Tax 2. Branch Profits Remittance Tax
3. Capital Gain Tax
Estates (taxed as individual)
 1. Payable by fiduciary or trustee
(executor or administrator) –
under Judicial administration
2. Payable by heir or beneficiaries
– not under judicial
administration
Trusts
(taxed as individual
1) If the trust’s gross sales/receipts plus other non-operating income exceeds the VAT threshold of P3,000,000 - GRADUATED
RATES
2) If such trust’s gross sales/receipts plus other non-operating income does not exceed the VAT threshold of P3,000,000 the
trustee shall have the option for the trust to be taxed at:
a) Eight percent (8%) of gross sales or gross receipts, plus other non-operating income in excess of Two Hundred Fifty
Thousand Pesos (P250,000)
b) The graduated (progressive) rates
 Returnable Income
Individual tax Source of Type of returnable Tax base Tax rate
payer taxable income
income
Resident Citizen Within and Compensation income Taxable compensation Graduated rates
without (ER-EE relations) income
Non -resident Within
citizen
OCWs
Resident alien Income from business, Gross income less Graduated rates GR: Purely self-employed / mixed earners can avail 8% if gross
trade or practice of deductions sales/receipts plus non-operating income does not exceed VAT
profession threshold of 3M
NRA-ETB Gross sales/receipts 8%
plus non-operating EXN:
income a. VAT registered tax payers
b. Taxpayer subject to OPT other than 3%OPT
c. Partners of GPP
d. Individuals enjoying income tax exemption (BMBES)
e. Taxpayers who fail to signify their intention to avail of the
8% income tax rate in the first quarter of ITR
GR: 250k deduction if purely self-employed individual
Non-resident Gross income 25%
alien

Passive Income
Passive Income Citizen and RA NRA-ETB NRA-NETB
Interest from any currency (usually Peso) 20% 20% 25% of gross income from sources within
bank deposit Philippines
Yield of monetary benefits from deposit 20% 20%
substitutes, trust funds and similar
arrangements
Royalties 20% 20%

EXN: books, literary, works and musical 10% 10%

corporations
Prizes of more than 10k 20% 20%

EXN: 10k ore less Exempt; ITR Exempt; ITR

Winnings 20% 20%

EXN: PCSO Exempt if 10K or less Exempt

Interest from depositary bank under 15% Exempt
expanded foreign currency deposit system
EXN: Exempt if NRC
Interest income form long term deposit or Exempt Exempt
investment of 5 years or more
Cash or property dividends received from 10% 20%
domestic corporation or regional
operating headquarter of an MNC
Share of an individual partner in the after- 10% 20%
tax net income of a business partnership
or an organization or consortium taxable
as a corporation
Gross Income Exclusion from Gross Income
1. Compensation for services 1. Proceeds of Life Insurance Upon Death of Insured EXN: interest payments
a) Cash 2. Amount received as return of premium
b) Allowances 3. Gifts, bequests and devices
c) Property in lieu of cash 4. Compensation for injury or sickness plus amount of any damage whether by suit or agreement
d) Employer’s stock on account of such injuries and damages representing compensation for personal injuries
e) Promissory notes arising from libel, defamation, slander, breach of promise to marry or alienation of affection
f) Forgiveness of debt for services rendered to creditor (moral damages includes, exemplary excluded)
(debtor is stockholder, condonation amounts to indirect 5. Retirement benefits
payment of dividend) a. RA 7641
g) Income tax of employee assumed or paid by employer in i. 60 or more but not beyond 65
consideration of latter’s services ii. Served at least 5 years in same establishment
h) Pensions and retiring allowances not exempt by law b. Tax Code
2. Stock options (CWT if rank and file; FBT if supervisory employee) i. Reasonable private benefit plan maintained by employer
3. Fringe benefits (FBT if supervisory; ITR if rank and file) ii. Retiring official or employee has been in the service of the same employer
4. Salaries and allowances during leave of absences for at least 10 years
5. Separation not due to cause beyond control of employees iii. Retiring official or employee is not less than 50 years of age at the time of
6. Fees for services retirement
7. Dismissal payment iv. Benefits of exemption shall be availed of by an official or employee only
8. Tips and gratuities (not subject to withholding tax) once
Conduct of trade or business or the exercise of profession
Note: Professional Income vs Compensation Income (No deduction 6. Separation pay due to cause beyond control of employee, regardless of age and length of
allowed against compensation income ) service
Partner’s distributive share from net income of GPP 7. Social security benefits, retirement, gratuities, pensions and other similar benefits received by
Rents resident or non-resident if the Philippines or aliens who come to reside in the Phils, from
1) Obligations of lessor to third persons paid or assumed by foreign agencies and other institutions private or public
lessee 8. Payment of benefits due or become due to any person residing in the Phils under the laws of
2) Advance payment must be pre-paid rentals the US administered by the US Veterans Administration
3) Security deposit applied to rentals 9. SSS benefits
4) Leasehold improvement 10. GSIS benefits
Annuities (excess of premium) 11. Maternity benefits
Gains from derived from dealings in property (ordinary asset) 12. Miscellaneous Items
Interest Income 1) Income derived by foreign governments, financing institutions owned or controlled
Royalties received by resident citizens and domestic corps from sources
outside Phils.
Dividends
1) Cash/property dividend received by resident citizen or
domestic corp from a foreign corporation
2) Liquidating dividends
Prizes or Winnings
1) Prizes amounting to 10k or less received by a citizen, resident
alien or NRAETB
2) Prizes received by domestic corp
3) Prizes received by RFCs within Phils
4) Prizes and winnings received by resident citizens from sources
without Phils
Income from other sources
1) Damages for less of profits
2) Recovery of bad debts (tax benefit rule)
 Taxable – if the deduction of the bad debt in prior
year resulted in an income tax benefit to the taxpayer,
the bed debt recovered is taxable income in the year
of recovery
 Not Taxable – if the deduction of the bad debt did
not result in an income tax benefit to the taxpayer
(i.e., where the result of the business operation was
net loss even without the bad debt deduction), the
bad debt recovered is not taxable income but is
treated as a mere recovery or return or capital.
3) Refund of deductible tax
4) Tournament prizes: cash prizes won by local
players/participants in tournaments (FT if foreign players;
Exempt if athletes in local and international sports
competitions abroad or in Phils and sanctioned by their
national sports association
5) Forgiveness of debt
 Included in the ITR: When a creditor cancels the
debt as part of a business transaction, or in
consideration of personal services of the debtor, the
condoned debt is taxable income to the debtor.
 Taxed as a dividend: where the debtor is a
stockholder of the corporation which condoned the
debt, the condonation is considered an indirect
payment of dividend
 Subject to donor’s tax: If a creditor merely desires to
benefit a debtor, and without any consideration
by foreign govts and international or regional financial institutions established by
foreign governments from investments or deposits in the Phils
2) Income derived by Phil govt or its political subdivisions from exercise of government
function
3) Prizes awards primarily in recognition of religious, charitable, scientific, educational,
artistic, literary or civic achievement if
i. Selected without any action on his part to enter the contest or proceeding
ii. Recipient is not required to render substantial future services as condition
to receiving prize or award
4) 13th month pay, Christmas Bonus, excess of de minimis benefits (not more than 90K),
whether public of private employees
5) Compulsory or mandatory contribution of employees to GSIS,SSS, Medicare, PAG-
IBIG, union dues of individuals (excess not deductible from gross income)
6) Gains from sale, exchange or retirement of binds, debentures or other certificates if
indebtedness with a maturity if more than 5 years
7) Gains from redemption of shares in Mutual Fund
8) Income of non-residents from transaction with Domestic Depositary Banks and OBUs
under the Expanded Foreign Currency Deposits
9) Personal Equity and Retirement Account
10) RATA to certain officials and employees of govt from rank of Dept Secretaries to
Division Chiefs are not subject to income tax and to the withholding tax
11) Personnel Economic Relief Allowance granted to national govt and local govt units
and GOCCs
12) Capital contributions to corporations/partnerships
13) Projected related income from development of socialized housing sites
14) Income from commercialization of technologies developed by local inventors or
researchers under RA 7459 during the first 10 years from date of first sale
15) Proceeds which constitute a fund held in trust by the taxpayer and which do not
redound to the benefit of the taxpayer
 therefor cancels the debt, the amount of the debt is a
gift from the creditor to the debtor.
6) Income from illegal sources
7) Unutilized/ Excess campaign funds
8) Early withdrawals from PERA which do not qualify for exclusion
from taxable gross income
9) Gain in the sale or retirement by a corp of its own bonds
10) Stock options granted to a supplier of goods or services
 Deduction Individuals Estates Trusts Corps Partnerships
EE Self-employed under
graduated rates
ID/OSD No YES YES YES YES YES
on income distributed on income distributed to
to heirs/beneficiaries heirs/beneficiaries and if
and if taxed under taxed under graduated
graduated rates rates
OSD Resident citizens Domestic and resident GPPs, provided GPP and
1. 40% Non-resident citizens foreign corporations partners compromising
2. Made in 1st Resident alien such partnership may avail
Quarterly return OSD only once and either
3. Failure to indicate by GPP or the partners
OSD and failure to compromising partnership
failure means
claim od ID

*
OSD – fixed percentage deduction without regard to any actual expenses in lieu of itemized deductions
*
ITEMIZED – taxpayer specifying particular expenses to be deducted from gross income

ITEMIZED DEDUCTIONS
Ordinary Special NON-DEDUCTIBLES
Business expense Special deductions of insurance companies Personal, living and family expenses
Net OF 250, 000 if individual taxpayer is purely self-employed or practice of
profession
Interest expense Special deductions of real estate investment trusts Expenditures which are capitalized
EXN: intangible drilling and development costs incurred in petroleum
operations which may be deducted in full
Deductible tax Deductions of establishments granting sales discounts to Premiums paid by an employee
persons with disability (no double discount) a) Covering life of an employee
b) Beneficiary is an employee
Note: If the employee is the beneficiary, the premiums paid by an employee
are deductible and are fringe benefits to employees
Loss Tax incentives for employers of disabled persons Losses from sales/exchanges or property between related parties
Exchanges solely in kind pursuant to mergers/consolidations
Rate: 25% of the salary Losses from wash sales where the seller is NOT a dealer in securities
Bad debts Tax incentives for establishments granting sales discounts 1. Interest paid in advance (thru discount) by a cash-basis taxpayer.
to senior citizens The interest expense is not allowed to be deducted in the year the
cash-basis taxpayer takes out the loan (The interest expense will be
deducted only in the year the debt is paid)
2. Interest Paid Between Members of a Family or Related Taxpayers
 Between the taxpayer and his brothers/sisters, spouse,
ancestors, and lineal descendants;
 Between a corporation and an individual who owns,
directly or indirectly, more than 50% in value of the
outstanding stock of such corporation (except in cases
of distribution in corporate liquidation);
 Between 2 corporations where more than 50% in value
of the outstanding capital stock of each corporation is
owned, directly or indirectly, by the same individual
(except in cases of distribution in corporate liquidation);
 Between grantor and a fiduciary (trustee) of a trust;
 Between the fiduciaries of 2 trusts having the same
grantor;
 Between the fiduciary and a beneficiary of a trust.
3. If debt is incurred to finance petroleum exploration
4. Interest expense attributable to income without the Philippines of
an alien or foreign
5. Corporation
6. Interest on preferred stock which is actually a dividend
7. Interest on debt incurred to purchase a tax-exempt security
8. Interest which is not stipulated in writing

Depreciation/depletion Additional deductions from gross income of private Bad debts


Pension trust contributions
Charitable contributions
establishments for compensation paid to senior citizens
Rate: 15% of the salary
Tax incentives for establishments and institutions with
rooming-in and breastfeeding practices
Tax incentives for lawyers or GPPs rendering free legal
services (60 hour mandatory legal aid excluded)
1. Bad debts not connected with the trade, business, or profession of
the taxpayer.
2. Bad debts between related parties
3. When mortgage is foreclosed and the collateral is bought by the
mortgagee in foreclosure sale,
the difference between the amount of the loan and purchase price
of the collateral is not allowed as a bad debt deduction. Any loss
deferred until the property is eventually sold by the mortgagee.
Fines and penalties due to late payments of tax

Rate: 10% of gross income or amount that could have

been collected, whichever is lower

Research and development
expenditures
Foreign income taxes paid taken as
deductions by resident citizens of
foreign corporations
Tax incentives for establishments for participating in the
dual training system
Rate: 50% of system expenses as long as it will not
exceed 5% of direct expenses and in no case more than
25M/ year

Tax incentives for enterprises adopting productivity

incentive programs
Rate: 50% of productivity incentives
Donation to public schools
Qualified Employers contribution to employees PERA
Tax incentives granted to registered tourism enterprises
in tourism enterprises zones
Tax incentives granted to qualified jewelry enterprises
Tax deduction for hospitals or medical clinics

ORDINARY DEDUCTIONS
Business expenses: Requisites:
1. Compensation expenses 1) Ordinary and necessary for the business;
2. Travelling expenses - must be incurred while away from 2) Incurred or paid during the taxable year;
home (“tax home”). Tax home refers to the place of work, 3) Connected with the trade, profession, or business of the taxpayer;
business, or employment. 4) Reasonable expenses of the business;
3. Entertainment, amusement and recreational, subject to 5) Substantiated by official receipts/records;
ceilings 6) The withholding tax required to be withheld has been withheld and remitted to the BIR
 For taxpayers engaged in the sale of goods and
properties: ½ of 1% of net sales
 For taxpayers engaged in the sale of
services/leasing of properties: 1% of net revenues.
4. Materials and supplies actually consumed in business
5. Maintenance and repairs which do not add to the value of
the property nor appreciably prolong its life
6. Rental expenses of the lessee of property used in business
 Advance or prepaid rentals are not allowed to be
deducted in year of payment. Instead, advance
rentals shall be apportioned over the term of the
lease.
 Taxes and other obligations of the lessor which are
paid by the lessee, are allowed as deductions.
 Depreciation of leasehold improvement is available
as deduction to the lessee.
7. Advertising and selling expenses
8. Operating expenses of transportation equipment
9. Insurance premiums against fire, storm, theft, accident or
other similar losses in the trade or business

Interest expense 33% of interest income subject to Final Tax beginning January 2009
Exceptions: Where Interest Expense is Deductible in Full
1. If taxpayer has no interest income subject to Final Tax;
2. Interest on all unpaid business-related taxes (RR 13-2000);
3. Interest payments of an occupant of a socialized housing project incurred for the construction
or purchase of the house (R.A. No. 7279)
Deductible tax Requisites:
1. Paid or incurred within the taxable year;
2. Must be connected with the profession, trade, or business of the taxpayer; and
3. Is directly imposed on the taxpayer.
Examples of deductible taxes: import duties; business taxes (like percentage taxes); local business
taxes; community tax; privilege and license taxes; excise taxes, Documentary Stamp Tax (DST);
automobile registration fees; real property tax; fringe benefit tax (FBT)
Loss 1. Casualty losses due to mishap, accident, fortuitous event, robbery, theft, embezzlement of
 a) Must involve ordinary properties property used in the trade, profession, or business of the taxpayer
b) Actually sustained; 2. Business losses – losses incurred in the trade, profession, or business of the taxpayer.
c) Not claimed as a deduction for estate tax 3. Net Operating Loss Cary-Over (“NOLCO”) – excess of allowable deductions (excludes NOLCO and
purposes; any item of incentive deduction under special laws that does not involve any cash outlay) over
d) Not compensated for by insurance or by other gross income in a taxable year
forms of indemnity; 4. Special losses
e) Must be reported to the BIR within 45 days a) Loss of income which was previously reported under the accrual method.
from the date of loss. b) Wagering losses – deductible only to the extent of gains or winnings.
Note: Cost of Lotto or Sweepstakes ticket will not be deductible from Lotto or
Sweepstakes winnings if such winnings are exempt from tax (not more than P10,000 if won
by a citizen or RA or regardless of the amount if won by a NRAETB)
c) Loss due to the voluntary removal of old buildings or old machinery
Losses from sale of ordinary assets EXN: No deduction: Where a taxpayer buys land on which structures are erected, and then
(b) Partner’s share in the losses of a GPP. such taxpayer proceeds to remove the structures. It is presumed that the price of the
land already includes the cost of such removal.
d) Loss of Useful Value – loss of usefulness of an asset or property used in business due to
changes in business conditions
e) Securities, shares of stock (classified as ordinary assets) becoming worthless (value is close
to zero; not mere shrinkage in value)
f) Abandonment Losses in Petroleum Operations
g) Losses from Sales of Shares of Stock Where the Seller is a Dealer in Securities

Bad debts Requisites:

a) There must be a valid and subsisting debt owed the taxpayer;
b) The debt must be connected with the trade, business, or profession of the taxpayer;
c) The debt must be ascertained to be worthless or uncollectible;
d) The debt must be charged off within the taxable year.
Note: Recovery of bad debts previously allowed as a deduction is governed by the Tax Benefit Rule. The
recovery of a bad debt is included in gross income if its deduction in a previous year resulted in
an income tax benefit to the taxpayer (i.e., a decrease in tax)

Depreciation/depletion Requisites:
1) Asset must be used in trade, business, or profession of the taxpayer;
2) Asset has a limited useful life;
3) Allowance for depreciation must be reasonable;
4) 4) Allowance for depreciation must be charged off during the year.
Pension trust contributions
Charitable contributions Requisites:
1) Contributions or gifts are actually paid;
Limit of Contributions 2) Given to entities specified by law;
1) Corporations: 5% 3) Net income of the recipient does not inure to benefit of any stockholder or individual owner;
2) Individuals: 10% 4) Taxpayer making the charitable contribution must be engaged in trade, business, or profession.

Deductible in FULL
 1) Donations to the government or to GOCCs for PRIORITY ACTIVITIES in education, health, youth
and sports development, human settlements, science and culture, or economic development as
determined by the NEDA;
2) Donations to foreign institutions and organizations pursuant to treaties or agreements entered
into by the Philippine government
3) Donations to entities pursuant to special law i.e. State colleges and universities
4) Donations to accredited NGOs
a) Organized and operated exclusively for scientific, research, educational, character building,
youth and sports development, heath, social welfare, cultural, or charitable purposes;
b) No part of the net income of such NGO inures to the benefit of any private individual;
c) Uses the donation not later than the 15th day of the 3rd month after the close of its taxable
year;
d) It administrative expenses ≤ 30% of total expenses;
e) Its assets, upon dissolution, shall be given or distributed to another NGO organized for a
similar purpose, or to the state for a public purpose.
SUBJECT TO LIMIT
1) Donations to the government or GOCCs exclusively for public purpose, but not for PRIORITY
activities;
2) Donations to accredited domestic corporations or associations organized and operated
exclusively for religious, charitable, scientific, youth and sports development, cultural, educational,
or the rehabilitation of veterans;
3) Donations to social welfare institutions;
4) Donations to non-governmental organizations (“NGOs”)

Research and development expenditures

Foreign income taxes paid taken as deductions by resident citizens
of foreign corporations
Kinds of Tax Base Tax Rates
Corp
Domestic DC in general Income from all sources within and Either of which is higher
without NCIT – 30% of taxable income
MCIT – 2% of Gross Income
Whose ratio to COS to Gross Sales/Receipts does not Optional Rate of 15% of Gross Income
exceed 55% subject to ff conditions:
1. Tax effort ratio – 20% Of GNP
2. Ratio of Income tax collection to total revenues
– 40%
3. VAT tax effort - 4% of GNP
4. Ratio of CPSP to GNP – 0.9%
Proprietary Educational Institutions and Hospitals 10% of Taxable income – gross income activities does not
exceed 50% of total gross income

NCIT/MCIT – if exceeding 50%

Resident RFC in general Income from all sources within and Either of which is higher
foreign without NCIT – 30% of taxable income
corporations MCIT – 2% of Gross Income
Whose ratio to COS to Gross Sales/Receipts does not Income derived during a taxable year Optional Rate of 15% of Gross Income
exceed 55% subject to ff conditions: from sources within Phils
1. Tax effort ratio – 20% Of GNP
2. Ratio of Income tax collection to total revenues
– 40%
3. VAT tax effort - 4% of GNP
4. Ratio of CPSP to GNP – 0.9%
International Carriers Gross Philippine Billings Either
1. Preferential Tax Rate of 2.5% or Tax exemption (on
basis of reciprocity)
2. Offline carriers/no landing rights -30% however
treaty must be considered
Off-shore banking units Income derived from foreign currency EXEMPT, except net income from transactions as may be
transactions with non-residents, other specified by Secretary of Finance
OBUs, local commercial banks,
including branches of foreign banks
Interest Income derived from foreign 10% final tax
currency loans granted to residents,
other than those included in the above
list
Regional or area headquarters of multinational Income derived within the Phils only EXEMPT
companies
Regional Operating headquarters of multinational 10% of taxable income
companies
 Non-resident NRFC in general Income derived within Phils, except 30% Final Tax on Gross Income
foreign capital gains from sale of shares of
corporations stock not traded in the stock exchange
Non-resident cinematographic film owner/distributor Income derived within Phils only 25% of Gross Income
Non-resident owner or lessor of vessels chartered by Gross rentals, lease or charter fees from 4.5% of gross rentals, leases or charters to Filipino citizens or
Philippine Nationals leases or charters to Filipino citizens or corporations, as approved by Maritime Industry Authority
corporations
Non-resident owner or lessor of aircraft, machineries and Rentals or charters and other fees 7.5% of gross rentals or fees
other equipment derived within Phils

MCIT – prevents tax evasion and minimizes tax avoidance schemes achieved through sophisticated and artful manipulations of deductions and other stratagems and commences on
the 4th taxable year immediately following the year in which such corporation commenced its business operations

GIT – available only to firms whose ratio of cost of sales to gross sales or receipts from all sources does not exceed 55% and its application must be authorized by the President upon
recommendation by the Secretary of Finance

IAET – If earnings and profits were distributed, shareholders would be liable to income tax thereon, whereas if there is no distribution, they would incur no tax in respect to the
undistributed earnings and profits of corporation and is being imposed as penalty and as form of deterrent to the avoidance of tax upon shareholders who are supposed to pay
dividends tax on the earning distributed to them by the corporation

Branch Profits Remittance Tax – imposed on any profit remitted by a branch to its head office based on total profits applied for earmarked for remittance without any deduction for
the tax component thereof except those activities which are registered with the PEZA and imposed in order to equalize the tax burden on foreign corporations maintaining, on one
hand, local branch offices and organizing, on the other hand, subsidiary domestic corporations
 ORDINARY INCOME

Corporate Taxpayer Source Tax Rate

Domestic Within and without 30% of net income
Resident foreign corporations Within 30% of net income
Non-resident foreign corporations Within FWT of 30% on gross income
PASSIVE INCOME

Domestic and Resident Foreign Corp Non-resident Foreign Corporation

Interest on currency bank deposit 20% 30%
Yield or any other benefit from deposit substitutes and 20% 30%
trust funds and similar arrangements
royalties 20% 30%
Interest from a depositary bank under the expanded 7.5% (RFC) Exempt
foreign currency deposit system 15% (DC)
IINTERCOPORATE DIVIDEND

Payor Recipient Tax

Domestic Corporation Domestic Corp Not taxable
Domestic Corporation RFC Not taxable
Domestic Corporation NRFC 15% FT

CAPITAL GAINS TAX

Sale, exchange or other disposition of shares of stock

1. Not traded at the stock exchange Domestic 15%
Foreign 5% if net gain is over 100K
10% of amount in excess of 100K
2. Listed and traded at stock exchange All 6/10 OF 1% on gross selling price

Sale of Real Property Classified as Capital Asset Domestic Final tax rate of 6%
EXN: Resident Foreign Normal rate of 30%
1. Sale or raw lands to be used for social housing Non-resident foreign Final tax of 30%
projects or sold under community mortgage
2. Land transfers under CARP