08/09/2023

NRC
RC RA
RC
RC
NRA-
NETB

A taxpayer, married, without

qualified dependent child,
had the following data for
taxable year 2023:

Gross Income PH 800,000

Gross Income 600,000
USA
Expenses PH 400,000
Expenses USA 300,000

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Assuming the taxpayer is the following

How much is the taxable income?

TYPES OF INCOME
A. Resident citizen 3,500,00
B. Non - resident citizen 2,000,000
C. Resident alien 2,000,000
D. Non- resident alien ENGAGED in trade or business 2,000,000
E. Non-resident alien NOT ENGAGED in trade or business
5,000,000

PASSIVE INCOME GRADUATED TAX RATES

Types of Income
ORDINARY or REGULAR INCOME
● Compensation (salaries or wages)
● Business income
● Practice of profession
● Subject to graduated rates or
preferential rates
● Subject to FWT (final withholding tax)
● Not subjected to graduated rates
● Interest,dividend income,
royalties,prizes and other winnings
CAPITAL GAINS TAX
● Gains from sale of shares of stock not
traded
● Capital gains from sale of real
property

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PURE COMPENSATION EARNER

How much is the taxable income?

Total Compensation 100,000

Total Compensation 100,000
EXERCISE Overtime, night
differential, hazard
150,000
Overtime, night differential, 150,000
pay and holiday pay. hazard pay and holiday pay.
How much is the taxable income?
Mandatory 7,000 Total income 250,000
contributions
Lee Dong Wook, a minimum wage earner for Gumiho Company earned the following:
Non-taxable benefits 5,000
Less : Mandatory 7,000
contributions
Total Compensation 100,000
Non-taxable 5,000
Overtime, night differential, 150,000
benefits
hazard pay and holiday pay.
Taxable income 238,000
Mandatory contributions 7,000
How much is the taxable due?
Non-taxable benefits 5,000

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SEP (business
income)
Compensation
Income

SELF EMPLOYED Income Tax Business Tax

Income Tax Business Tax

AND/OR Graduated
12% VAT or
PROFESSIONALS
rate or
Graduated
rate
8 % tax 3%
(if applicable) percentage tax

Individual
taxpayer GROSS INCOME TAX BUSINESS TAX
RECEIPTS/GROSS
SALES
SEP Purely
Compensation GRADUATED TAX PERCENTAGE TAX
Purely SEP
RATE
(business Mixed Income Graduate Rate
NOT MORE THAN
income) OR
3MIO
AT THE OPTION OF THE TAXPAYER, 8%
Gross ≤ 3mio
Business Compensation
OF THE GROSS RECEIPTS IN EXCESS OF ₱ 250,000
Gross > 3mio Income IN LIEU OF THE GRADUATED INCOME TAX RATE

Graduated or GRADUATED TAX 12% VALUE ADDED

8% Gross > 3mio Gross ≤ 3mio Graduated
Rate MORE THAN 3MIO RATE TAX unless engaged in
Graduated
Rate vat exempt sales
Graduated Graduated or
Rate 8%

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THE FOLLOWING ARE NOT ALLOWED TO

AVAIL OF THE 8%

1. VAT registered taxpayers (regardless of gross

sales/receipts)
2. Those liable for percentage taxes other than Sec 116
under TITLE V of NIRC

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ILLUSTRATION 1

ILLUSTRATION 2

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Mr. Pang Oh is a professional practicing his profession. GROSS SALES ₱ 2,800,000

He has his data as below: COST OF SALES (1,500,000)
GROSS SALES ₱ 2,800,000 OPERATING EXPENSES (750,000)
COST OF SALES (1,500,000) NET INCOME ₱ 550,000
OPERATING EXPENSES (750,000) How much is the income tax due?
NET INCOME ₱ 550,000 Problem is silent, we use graduated rates.
Solution: 2023 rates
1. How much is the income tax due?
2. If the professional opted to avail of the 8% preferential tax rate, First 400,000 income 22,500
how much is the income tax due? In excess of 400,000 30,000 (150,000 x 20%)
Income tax due 52,500

GROSS SALES ₱ 2,800,000 GROSS SALES ₱ 2,800,000

COST OF SALES (1,500,000) COST OF SALES (1,500,000)
OPERATING EXPENSES (750,000) OPERATING EXPENSES (750,000)
NET INCOME ₱ 550,000 NET INCOME ₱ 550,000
How much is the income tax due? If the professional opted to avail of the 8% preferential tax rate, how
Problem is silent, we use graduated rates. much is the income tax due?
Solution: 2022 rates Solution:
GROSS SALES 2,800,000
First 400,000 income 30,000 LESS DEDUCTION (250,000)
In excess of 400,000 37,500 (150,000 x 25%) NET 2,550,000
Income tax due 67,500 RATE X ____8%
TAX DUE 204,000

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Exercise: Professional with income from PURE practice Ms Pera Ko Toh, Purely SEP is using 8% but gross sales
breached the 3mio threshold during the taxable year
In ‘000 Q1 Q2 Q3 Q4
ANNUAL
Solution:
Determine the income tax due: 8% 8% 8% GRADUATED
First 800,000 102,500 SALES 500 500 2,000 3,500
Gross sales 5,000,000 In excess of 800,000
Cost of Sales (2,250,000) 700,000 x 25% 175,000 COS (300) (300) (1,200) (1,200)
Operating Expenses (1,250,000) Tax Due 277,500 GROSS INCOME 200 200 800 2,300
Net Taxable Income 1,500,000 OPERATING EXPENSES (120) (120) (480) (720)
NET TAXABLE INCOME 80 80 320 1,580

SOLUTION
SALES FOR THE YEAR 6,500 Using Graduated Rate
COST OF SALES FOR THE (3,000)
YEAR First 2mio 402,500
In excess of 2mio
GROSS INCOME 3,500 60,000 x 30% 18,000
OPERATING EXPENSE (1,440) Income Tax Due 420,500

NET TAXABLE INCOME 2,060 Less:

Quarterly Payments (220,000)
Quarterly Tax Payments (Q1-Q3)
Total Gross Receipts 3,000
Less Deduction (250) Annual Income
Net of Deduction 2,750 Tax Payable 200,500
x Tax Rate 8%
TotalQuarterly Payments 220