Introduction to Regular

Income Taxation
 CHARACTERISTICS:
1. General in coverage
2. A net income tax
3. An annual tax
4. Creditable withholding Tax
5. Progressive or Proportional tax

INCOME TAXATION SCHEMES
1. Final Income Taxation
2. Capital Gains Taxation
3. Regular Income Taxation
TAX MODEL:
Gross Income-inclusions P xxx,xxx
Less: Allowable deductions xxx,xxx
Taxable Income P xxx,xxx
DETERMINATION OF TAXABLE INCOME
 Taxable Income of Individual Income Taxpayers
 Compensation Income
Gross compensation income P xxx, xxx
Less: Non-Taxable compensation xxx, xxx
Taxable compensation income P xxx, xxx

 Business or professional income

Gross income from Business/profession P xxx, xxx
Add: Non-operating income xxx, xxx
Total Gross Income P xxx, xxx
Less: Allowable deductions xxx, xxx
Taxable net income P xxx, xxx
Compensation Income
Gross compensation income P xxx, xxx
Less: Non-Taxable compensation xxx, xxx
Taxable compensation income P xxx, xxx

Business or professional income

Gross income from Business/profession P xxx, xxx
Add: Non-operating income xxx, xxx
Total Gross Income P xxx, xxx
Less: Allowable deductions xxx, xxx
Taxable net income P xxx, xxx
DETERMINATION OF TAXABLE INCOME
 Taxable Income of Corporate Income
Taxpayers
 Computed in the same manner as pure
business or professional income
earner.
DETERMINATION OF TAXABLE INCOME
 Taxable Income of Corporate Income
Taxpayers
 Computed in the same manner as pure
business or professional income
earner.
  INDIVIDUAL INCOME TAX

TYPES OF REGULAR INCOME TAX

1. Individual Income tax
2. Corporate Income Tax
Illustration: Income Tax Computation
A resident citizen has a compensation income of P1,250,000
w/in the Philippines and P150,000 from abroad.

2022 Tax Due

Taxable compensation Income 1,400,000

Less: Lower limit of the income
Bracket taxable income qualifies 800,000 P 130,000
Excess 600,000
Multiply by: bracket marginal rate 30% 180,000
Total Income Tax Due P 310,000

2023 Tax Due

Taxable compensation Income 1,400,000

Less: Lower limit of the income
Bracket taxable income qualifies 800,000 P 102,500
Excess 600,000
Multiply by: bracket marginal rate 25% 150,000
Total Income Tax Due P 252,500
 Illustration:
A corporation has a net income of P1,200,000 in the Philippines
and P800,000 from abroad.

Large Domestic Corporation

Taxable Income(World) P 2,000,000
Tax rate 25%
Income Tax Due P 500,000

Domestic MSME
Corporate Income tax Taxable Income(World) P 2,000,000
Tax rate 20%
• Regular corporate income tax (RCIT) Income Tax Due P 400,000
• Proportional or flat tax rate
Resident Foreign Corporation
• 25% domestic or foreign corp Taxable Income(Philippines) P 1,200,000
Tax rate 25%
• 20% domestic MSMEs Income Tax Due P 300,000

• Not more than 100M Assets

• Not more than 5M taxable income MINIMUM CORPORATE INCOME TAX (MCIT)
 2% of total Gross Income

SPECIAL CORPORATIONS
 Lower tax rates but not 0%

EXEMPT CORPORATIONS
 0% tax rates
INCOME TAX RETURNS
Exclusion from Gross Income
 Items excluded in Gross Income
A. Proceeds of life insurance policy
B. Amount received by the insured as a
return of premium
C. Gift, bequest, devise, or descent
Exclusion from Gross Income D. Compensation for injuries or sickness
• Income w/c will not subject to income E. Income exempt under treaty
tax
F. Retirement benefits, pensions,
gratuities
G. Miscellaneous Items
Items excluded in Gross Income Scenario 2
A. Proceeds of life insurance policy Upon death of Alberto, the insurance company negotiated fro an
extension of the payment of proceeds w/in the insurance
company shall pay P1,050,00 on the extended payment.
Exception:  1M is taxable or not?
▪ If held w/ the agreement to pay  50k is taxable or not?
interest, Interest payment shall be
included in gross income
Scenario 3
Alberto outlived the policy and collected the maturity value of
B. Amount received by the insured as a P500,00.
Total Proceeds P500,000
return of premium Return of premium 200,000 (20,000 x 10 yrs)
Illustration: Return on Capital P300,000 (item of gross income)

Alberto is insured in a P1,000,000 life insurance Scenario 4

policy w/ annual premium payments of P20,000 for
After 6 yrs of payment, Albert assigned the policy to Gino who
10 years. If he outlives the policy after the 10th year, paid him P130,000. Gino continued the premium payments for
he will be paid a P500,000 maturity value. two more years after w/c Albert died. Gino collected the 1M
insurance proceeds.
Assignment or sale of policy P 130,000
Return of premium 120,000 (6yrs x 20,000)
Scenario 1 Return on capital P 10,000
Alberto died on the 9th year of coverage and his heirs collected Insurance Proceeds P1,000,00
the 1M proceeds. Return of capital 170,000 [130,000+(20,000x2)]
1M is taxable or not? Return on capital 830,000
C. Gift, bequest, devise, or descent

Is the amount taxable or not?

 400,000 (transfer tax, not income tax)
 50,000 (gross income, donor)
 150,000 (gross income, Juan)

D. Compensation for injuries or sickness

Is the amount taxable or not?

 200,000 (non-taxable returns of capital)
 100,000 (non-taxable returns of capital)
 40,000 (item of gross income)
E. Income exempt under treaty
 Under the exemption of doctrine of
international comity
F. Retirement benefits, pensions, 2. Retirement Benefit under RA 7641
 In the absence of a retirement plan
gratuities
1. Reasonable Private benefit Plan
 Requisites of Exemption
3. Separation or Termination
3. Separation or Termination 4. Social Security Benefits, Retirement
Gratuities and Other similar benefits
from foreign government agencies and
other institutions, private or public

5. United States Veterans Administration

(USVA)
6. Social Security Sytem (SSS) Benefits
under RA 8282
7. GSIS Benefits under 8291
G. Miscellaneous Items
G. Miscellaneous Items
THANK YOU!