MAC 408 - Strategic Tax Management o Capital gains from sales of real property

in the Philippines (basic tax if located in

Classification of Individual Income Taxpayers abroad)
1. Resident citizens – Net income, Within and  CGT = 6% x the higher
without between Gross Selling
2. Non resident citizen – Net income, Within only Price and Fair Market
3. Resident Aliens – Net income, Within only Value
4. Nonresident Aliens  The fair market value
 Engaged in trade/business (NRA-ETB) – (FMV) above of real
Net income, Within only property shall refer to
the higher between: Fair
 Not engaged in trade/business (NRA-
market value as
NETB) – Gross income, Within only
provided by
*Passive income such as
City/Municipal or
dividend income is not considered as
Provincial assessors;
income derived from trade or business.
and Zonal value as
Importance of classification: provided by the
Commissioner of
They differ as to situs of income, manner of computing Internal Revenue (CIR)
tax, treatment of certain passive incomes, allowable
deductions. References in the tax codes. o Capital assets - include all other
property held by the taxpayer (whether
or not connected with his trade or
TYPE OF INCOME business) not included in the definition
of ordinary assets above.
 Ordinary or regular income – compensation, o Gain on sale of capital assets are
subjected to graduated tax classified as capital gains.
o Interest income is subject graduated
tax rate PURELY COMPENSATION INCOME EARNERS
 Passive income derived from Philippine sources
 Regular income tax
– final withholding taxes
o Interest income, dividend income, SELF EMPLOYED &/or PROFESSIONALS (SEP)
royalties, prize and other winnings
o Passive income derived from abroad are  More than 250K less than 3M - (Gross
subject to basic tax income)
o Earned with very minimal involvement 1. GRADUATED TAX RATE
from the taxpayer and is generally 2. 8% (GROSS SALES - 250k)
irregular in timing and amount  Exceed 3M
 Capital gains subject to capital gains tax (CGT) 1. GRADUATED TAX RATE
– capital gains not subject to CGT are subject to
basic tax MIXED INCOME EARNER
o Capital gains from sale of shares of
 COMPENSATION - Regular income tax
stocks of domestic corporation not +++
traded in the local stock exchange
 Prior to 2018  More than 250K less than 3M (Gross
5% on 1st Income)
100,000 capital gain 1. GRADUATED TAX RATE
10% in excess 2. 8% (GROSS SALES)
of 100,000 capital gain  Exceed 3M
 Beginning 2018 1. GRADUATED TAX RATE
15% of capital
gain
 There is no CGT if the FILING OF INCOME TAX RETURNS
transaction resulted to a
capital loss. BASIC TAX
 Value of share of stock  For Purely Compensation Income Earners - On
at the time of sale shall or before April 15 of the succeeding year
be the fair market value.  For Business Income Earners - The individual
taxpayer is required to file a quarterly tax return
( May 15, Aug 15, Nov 15, and April 15)
FINAL WITHHOLDING TAX ON PASSIVE INCOME
 Prior to 2018 - January to November – 10th day
of the month December – January 15
 2018 – not later than the last day of the month
CAPITAL GAINS TAX
a. Share of Stock
Ordinary Return – 30 days after each transaction
Final Consolidated Return – on or before April
15 of the following year
b. Real Property – 30 days following each sale or other
disposition
SUBSITUTED FILING OF INCOME TAX RETURNS
(ITR)
Under RA 9504 and RR 10-2008, individual taxpayers
may no longer file income tax return provided he has (all
the requirements must be satisfied):
1. Receiving purely compensation income, regardless of
amount
2. The amount of income tax withheld by the employer is
correct (Tax due = Tax withheld)
3. Only one employer during taxable year
4. If married, the employee’s spouse also complies with
all the three aforementioned conditions, or otherwise
receives no income.

MANNER OF FILING
a. Manual Filing
b. Electronic Filing and Payment System (EFPS)
c. eBIR Forms

1st installment: at the time of filing the annual ITR

2nd installment: on or before October 15 following the
close of the calendar year

PLACE OF FILING INCOME TAX RETURN

1. Authorized Agent Banks
2. Revenue District Officer
3. Collection Agent
4. Duly Authorized City or Municipal Treasurer

PERSONS REQUIRED TO FILE INCOME TAX

RETURN
1. Individuals engaged in business and/or practice of
profession
2. Individuals deriving compensation from two or more
employers concurrently at any time during the taxable
year
3. Employees deriving compensation income, the
income tax of which has not been withheld correctly
4. Individuals deriving other non-business, non-
professional-related income in addition to compensation
income not otherwise
subject to final tax
5. Individuals receiving purely compensation income
from a single employer
6. Non-resident alien engaged in trade or business in the
Philippines deriving purely compensation income

PERSONS NOT REQUIREDTO FILE INCOME TAX

RETURN
1. An individual earning purely compensation income
whose taxable income does not exceed 250,000.
2. An individual whose income tax has been correctly
withheld by his employer
3. An individual whose sole income has been subjected
to final withholding tax
4. Minimum wage earners, the Certificate of Withholding
filed by the respective employers, duly stamped
“Received” by the
Bureau