Income - means all wealth.
Which flows into the
taxpayer other than a mere return of capital. It is the
return in money from one’s business, labor, or capital
invested (gains, profits, salary, wages.)
- The words “income from any source whatever”,
disclose a legislative policy to include all income
not expressly exempted from the class of
taxable income under our laws.
● Mayroon income na exempted sa tax. Provided,
expressly, na ito ay sinabi ng batas na ito ay
exempted. Kapag hindi nabanggit, for sure may
tax.
Income Tax - a tax on a yearly profits arising from
property, profession, trade or business, or is a tax on a
person’s income, emoluments, profits and the like.
● Hindi tinatax mismo yung property, profession,
trade or business but rather yung PROFITS.
● Hindi lahat ng income ay subject sa income tax
dahil it depends on its category.
Categories of Income Tax:
● Compensation Income - From labor (Subject to
income tax)
● Business Income - From business (Subject to
income tax)
● Mixed- mayroon kang negosyo at trabaho
(Subject to income tax)
● Passive Income - Income na kahit wala kang
gawin, pwede ka kumita. (Subject to Final Tax)
● Capital Gains from sale of shares of stocks, not
traded thru Local Stocks Exchange - sale of stocks
(capital asset) (Subject to Capital Gains Tax)
● Capital Gains from sale of real properties - sale of
property (Subject to to Capital Gains Tax)
● Fringe Benefit- benefit ng empleyado (Fringe
Benefit Tax) (Employer yung tinatax)
INCOME TAX FINAL TAX CGT
Compensation Interest Shares
Business Winnings Land
Professional
● Kapag na tax-an ka na ng isa diyan sa tatlong
category, hindi ka na pwede pa ma tax-an sa iba pa.
Matatax-an ka dipende sa category ng income mo.
Passive Income - Earned with very minimal
involvement from the taxpayer and is generally
irregular in timing and amount.
● Wala kang gagawin masyado, pero kumikita ka. Tapos
yung timing at kita mo is irregular unlike trabaho at
negosyo na need mag effort (income = sweldo per
kinsenas at katapusan)
“Their existence can be difficult to predict while their
actual amount may be difficult to determine. Thus, the
final withholding at source is the most favored scheme
in taxing items of passive income.”
Dahil sa kakaibang characteristics ng passive income,
yung paraan ng pagtatax sa kaniya ay para maibalik
yung scheme ng final withholding at source.
Final Tax - tax withheld at source. (meaning dun sa
moment ng pagkita mo ng passive income,
nagkakaroon na ito agad ng tax. The tax is Final.
- The amount of income tax that is withheld by a
withholding agent is constituted as full and final
payment of the income tax due from the payee
on said income. ( Binabanggit na merong
parties involved sa pagbabayad ng tax.)

Payee- yung kumita ng passive income (yung nanalo ng
winnings)
Payor- yung magreremit/magbabayad sa BIR (yung
nagparaffle)Sila kukuha nung tax at sila ang
magbabayad ng tax kaya sila yung final tax.
● Interest and Yields ay hindi para sa pautang but
rather, sa mga deposit sa mga banks, sa mga
investments, and financial institutions. Na kapag
kumita ka doon, automatically binabawasan na nila
ng 20% kasi yun yung tax mo sa passive income.
● Pwede pa rin maexempt sa tax pero need na tingnan
if gaano katagal. If sakali yung deposit or investment
is short-term, therefore, it can be subject to tax up to
20% pero maaaring maiba from the exemption of
the General rule.

● Final tax is not applicable to all. But rather applicable Short Term Investment - 20% interest
lang dun sa mga passive income na nangyari sa Long Term Investment - 0% interest or EXEMPT
pilipinas.
Interest Tax Rate:
● Kapag nasubject na sa Final tax, hindi na sya pwede Less Than 3 Years - 20%
pa sa income/regular tax. 3 > 4 years - 12%
4 > 5 years - 5%
Passive Income 5 years or more - 0% as if exempted
General Rule
RC/RA/NRC NRA-ETB NRA-NETB Interest na pwede ma-exempt if NRC or NRA
● Interest Under Foreign Currency Deposit System
Interest (FCDS) Situation when there is a bank in the PH that
Yields is involved with FCD na kumikita ng Interest. (Di
Royalties 20% 20% 25% naman kasi taga PH yung foreign Currency)
Prizes ● Pero kung yung nag deposit sa FCDS tapos yung
Winnings
kumita nung interest ay Resident/RA, the tax will be
Dividends Whether 15%
the income
is active or ROYALTIES - kabayaran mo kasi meron kang ginamit na
Share in Net passive of kaparatan (copyright, trademark, patent and etc.)
Income: 10% 20% NRA-NETB,
● Partnership automatica
● Association -lly a ● Since gumamit ka ng intellectual property, kailangan
● Joint subject for mo bayaran yung author or naka invent kasi
Account 25%, which property nila ‘yon.
● Joint is already a ● Sa point of view nung naka invent, passive income
Venture Final Tax. siya at meron siyang tax ng 20%. Pero if yung
royalties ay nag a-arise because of ART related, 10%
INTERESTS and YIELDS - hindi applicable sa yung tax rate.
pagpapautang ng pera. Ang applicable lamang rito ay
ang interest that arises from DEPOSITS. (Banks, PRIZES - meron kang effort.
investments and other institutions) WINNINGS - luck.
Sample: sa bank binabawasan ka ng 20% ng tax - Both na 20% ang rate
coming from your interest income.
 Exemptions:
● But, if the Prize is 10k or less, it will be subjected to
income tax under SEC. 24 (A), hindi lang sa Final Tax.
Wherein, ihahalo mo siya dun sa mga active income
mo. (Applicable sa lahat ng indiv taxpayers except sa
NRA-NETB)
● Yung prizes, hindi naman sa lahat ng pagkakataon ay
subject sa Final Tax or subject sa Sec 24 A. May mga
prizes na pwedeng exempted. (Prizes from religious,
charitables, scientific, educational, artistic, literary or
civic orgs)

● If PCSO or Lotto Winnings, 10k or less will be

EXEMPTED. (Applicable lang sa RC/RA/NRC)

● If NRA-ETB tapos nanalo ka sa PCSO or Lotto, kahit

anong amount EXEMPTED ka. (nakalimutan irevise
lol)
● If yung Winnings mo ay HINDI nanggaling sa PCSO or
Lotto, kapag 10k or less, taxable siya. Dahil yung
PCSO or Lotto ay galing sa gobyerno.

DIVIDENDS and SHARE in NET INCOME - In taxation,

whether it is a corporation or a partnership, iisa lang
yung pagtingin niya. ( for RC/NRC/RA, 10% yung tax)
(20% naman if NRA ETB)