TX-202 TAXATION OF INDIVIDUALS, TRUST AND ESTATES

I. Final tax rates on certain passive income from Philippine sources

a) Rates of tax on certain passive income

1) Sec. 24(B) – for residents or citizens

a. Interest from any currency bank deposit 20%

b. Yield or any other monetary benefit from deposit substitute (obtained
20%
from 20 or more individual or corporate lenders)
c. Yield or any other monetary benefit from trust funds and similar
20%
arrangements
d. Royalties (except royalties on books and other literary works and musical
20%
compositions)
e. Prizes [except prizes amounting to P10,000 or less which shall be subject
20%
to tax under Sec. 24 (A)]
f. Winnings (except winnings amounting to P10,000 or less from Philippine
20%
Charity Sweepstakes Office (PCSO) games which shall be exempt)
g. Royalties on books and other literary works and musical compositions 10%
h. Tax informer’s reward 10%

2) Sec. 25(A)(2) – for non-resident citizens engaged in trade or business

a. Interest from any currency bank deposit 20%

b. Yield or any other monetary benefit from deposit substitute (obtained
20%
from 20 or more individual or corporate lenders)
c. Yield or any other monetary benefit from trust funds and similar
20%
arrangements
d. Royalties (except royalties on books and other literary works and musical
20%
compositions)
e. Prizes [except prizes amounting to P10,000 or less which shall be subject
20%
to tax under Sec. 24 (A)]
f. Winnings (except winnings amounting to P10,000 or less from Philippine
20%
Charity Sweepstakes Office (PCSO) games which shall be exempt)
g. Royalties on books and other literary works and musical compositions 10%
h. Tax informer’s reward 10%
i. Cinematographic films and similar works shall be subject to the tax
25%
provided under Section 28 of the Tax Code

3) Sec. 25 (B) – For non-resident aliens not engaged in trade or business

a. Interest from any currency bank deposit 25%

b. Yield or any other monetary benefit from deposit substitute (obtained
25%
from 20 or more individual or corporate lenders)
c. Yield or any other monetary benefit from trust funds and similar
25%
arrangements
d. Royalties, in general 25%
e. Royalties on books, as well as other literary works and musical
25%
compositions
f. Prizes 25%
g. Other winnings 25%

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 RES/CIT NRAETB NRANETB
a. Interest income received by individual taxpayer
(except non-resident individual) from a
15% Exempt Exempt
depositary bank under expanded foreign
currency deposit system
b. Interest income from long-term deposit or
investment in the form of savings, common or
individual trust funds, deposit substitutes,
investment management accounts and other Exempt Exempt 25%
investments evidenced by certificates in such
form prescribed by Bangko Sentral ng Pilipinas
(BSP)
If pre-terminated before fifth year, a final tax
shall be imposed based on remaining maturity:
4 years but less than 5 years 5% 5% 25%
3 years but less than 4 years 12% 12% 25%
Less than 3 years 20% 20% 25%

b) Cash and/or property dividends

RES/CIT NRAETB NRANETB

a. Cash and/or property dividends actually or
constructively received from a DOMESTIC
CORP. or from JOINT STOCK CO., INSURANCE
10% 20% 25%
or MUTUAL FUND COMPANIES and REGIONAL
OPERATING HEADQUARTERS of multinationals
(beginning January 1, 2000}
b. Share of an individual in the distributable net
income after tax of a PARTNERSHIP (OTHER
THAN a general professional partnership) of 10% 20% 25%
which he is a partner (beginning January 1,
2000)
c. Share of an individual in the net income after
tax of an ASSOCIATION, a JOINT ACCOUNT, or
a JOINT VENTURE or CONSORTIUM taxable as 10% 20% 25%
a corporation of which he is a member or co-
venturer (beginning January 1, 2000)

1. Identify whether the following are subject to final tax or not (year 2018). Taxpayer is RESIDENT
CITIZEN unless otherwise stated (Y/N).

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II. Capital Gains Tax (CGT)

1. An individual taxpayer holds shares of stock as investment (P120,000 par value). During 2022, he sells
the shares he bought for P100,000 for P180,000 directly to a buyer. How much is the capital gains tax
on the sale, if any?

2. An individual taxpayer holds shares of stock as investment which he bought from a publicly-listed
company for P500,000 (P500,000 par value). The shares are listed and traded in the local stock
exchange. During the current year, he sells them for P750,000.

How much is the percentage tax, if any?

3. An individual taxpayer invested P300,000 in the common shares of SMC Corp (P150,000 par value).
During the current year, he sold these shares to a buyer not through the local stock exchange for
P250,000.

1) How much was the capital gains tax on the sale, if any?
2) Assuming the shares are listed and traded in the local stock exchange, how much was the
percentage tax?

4. During the year 2021, Ms. Kat Antonio sold her vacation house for P500,000. She acquired it for
P700,000 two (2) years ago. The fair market value of the vacation house at the time of sale was
P800,000. Ms. Antonio was going to use the proceeds to build her new principal residence within
eighteen (18) months after informing BIR within thirty (30) days of such intention. How much is the
capital gain tax, if any?

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 5. Mr. C. Avenido acquired his principal residence in 2016 at a cost of P1,000,000. He sold the said property
on January 1, 2018, with a fair market value of P5,000,000 for a consideration of P4,000,000. Within
the 18-month reglementary period he purchased his new principal residence at cost of P7,000,000.

1) How much is the capital gains tax due?

2) How much is the basis of the new principal residence?

6. Using the same data in item no. 5, if for example, Mr. Avenido acquired his new principal residence
within the 18-month reglementary period but did not utilize the entire proceeds of the sale in acquiring
his new principal residence because he only used P3,000,000 thereof in acquiring his new principal
residence.

1) How much is the capital gains tax?

2) How much is the basis of the new principal residence?

III. Tax rates for special aliens and their Filipino counterparts

The preferential income tax rate of 15% of qualified employees of Regional Headquarters, Regional
Operating Headquarters, Offshore Banking Units, and Petroleum Service Contractors and
Subcontractors shall no longer be applicable without prejudice to the application of preferential tax
rates under existing international tax treaties.

Integrative Case:

1. A married resident citizen supports three (3) qualified dependent children and a brother-in-law who is
a PWD, unmarried and not gainfully employed. He has the following data on income and expenses for
the year 2021:

Salary, Philippines 560,000

Gross business income, Philippines (gross sales, P1,700,000) 500,000
Business expenses, Philippines 180,000
Gross business income, USA (gross sales, P1,500,000) 900,000
Business expenses, USA 300,000
Interest income from bank deposit, Philippines 50,000
Interest income from bank deposit, USA 70,000
Interest income from domestic depository bank under EFCDS 80,000
Interest income from a debt instrument not within the coverage of deposit 50,000
substitute, Philippines, gross of 20% creditable withholding tax (issue price
is P300,000)
Interest income from a debt instrument within the coverage of a deposit 60,000
substitute, Philippines (issue price P500,000)
Royalty on book published in the Philippines 100,000
Prize in a contest he joined in the Philippines 5,000
Philippine Charity Sweepstakes winnings 1,000,000
Gain from sale of shares of stock not traded through the local stock 150,000
exchange (P200,000 par value)
Dividend received from a domestic corporation 40,000
Tax payments, first three (3) quarters 100,000

1) How much is the total final tax on certain passive income?

2) How much is the capital gains tax?
3) Can the taxpayer avail of the 8% income tax option?
4) How much is the taxable net income and income tax due and the business tax?

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2. A resident alien individual supports two (2) qualified dependent adopted children and a foster child.
He asks you to assist him in the preparation of his tax return for his income in 2020. He provides you
the following information:

Gross business income, Philippines (gross sales, P3,000,000) 1,000,000

Gross business income, Japan (gross sales, P7,000,000) 5,000,000
Business expenses, Philippines 200,000
Business expenses, Japan 800,000
Philippine Charity Sweepstakes winnings 500,000
Japanese Sweepstakes winnings 400,000
Interest income, Bank of Tokyo, Japan 100,000
Interest income received from a depository bank under EFCDS, Philippines 300,000
Interest on peso bank deposit, Philippines 100,000
Income taxes paid for the first three (3) quarters 50,000

1) Can the taxpayer avail of the 8% income tax rate?

2) How much was the taxable net income and income tax due if he avails of the 8% income tax rate?
3) How much was the final tax on passive income?
4) Assuming the taxpayer failed to avail of the 8% income tax, how much is his taxable income and the
income tax due?

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