BUSINESS INCOME

Any income not related to an employee-employer relationship is

generally subject to tax on a net income basis. It includes
gains, profits and income in whatever form derived from any
source, legal or illegal such as those derived from:
 exercise of profession or vocation
 trade, business or commerce
 dealings in property
 fruits of the ownership or use of property
 interest, rent, dividends, securities
 other transactions of a business for gain or profit

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 BUSINESS INCOME

A partner in a general professional partnership is

liable to income tax on his distributive share,
actually or constructively received.

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 TAX RATES

Rate
Gross 35% (final tax of alien employed by ROH and RAH
income subject to reciprocity clause or principle)

Fringe 35% based on the grossed up monetary value with

benefit grossed up divisor of 65% (OBU petroleum services
contractor and sub-contractor)
Other Same as the rate of Resident alien
income

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 Tax on Certain Passive Income
of Individual

Nature of Income Tax Rate

PHILIPPINE BANK DEPOSIT
20% final tax
When received by citizens and
resident aliens is subject to
When received by non-resident alien
20% final tax
doing business in the Philippines

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 Tax on Certain Passive Income
of Individual

Nature of Income Tax Rate

LONG-TERM DEPOSIT OR INVESTMENT
WITH MATURITY PERIOD OF MORE Exempt from income tax.
THAN 5 YEARS However, if the deposit is
pre-terminated before the
When received by citizens and 5th year, interest income
resident aliens becomes taxable at 5%-20%
depending on the remaining
maturity
When received by non-resident Same as above
alien doing business in the
Philippines

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 Tax on Certain Passive Income
of Individual

Nature of Income Tax Rate

FOREIGN CURRENCY DEPOSITS 15% final tax

a) Resident Citizen/Alien
b) Non-resident Individuals Exempt

However, if deposit is pre-

terminated before the 5th
year, interest income becomes
taxable 5-20% depending on
the remaining maturity

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 Tax on Certain Passive Income
of Individual

Nature of Income Tax Rate

ROYALTIES, WINNINGS, PRIZES
20% final tax
When received by citizens and However, royalties on books,
resident aliens literary works and musical
compositions shall be taxable
at a lower rate 10%
When received by a non- 20% final tax
resident alien doing business
in the Philippines However, royalties on books,
literary works and musical
compositions shall be taxable
at a lower rate of 10%

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 Tax on Certain Passive Income
of Individual

Nature of Income Tax Rate

a. Interest income from:
Philippine bank deposit 20% final tax
Long-term deposit or investment 20% (exemption applies
more than 5 years only to individuals)
Foreign currency deposit 15%
b. Dividends from a domestic 10%
corporation

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 Tax on Certain Passive Income
of Individual

Nature of Income Tax Rate

c. Capital gains from sales, Not over P100,000
exchange on other disposition -5% Final Tax
of unlisted shares of stocks
In excess of P100,000
-10%* Final Tax
d. Capital gains from sale, 6% final tax on the gross
exchange on disposition of selling price, fair market
real property treated as or zonal value, whichever
capital assets is higher.

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 Tax on Certain Passive Income
of Individual

Nature of Income Tax Rate

c. Capital gains from sale of Not over P100,000
shares of stock not traded in -5% final tax
the stock exchange, exchange
on other disposition of In excess of P100,000
unlisted shares of stocks -10% final tax
d. Capital gains from sale, 6% final tax on the gross
exchange on disposition of selling price; fair market
real property treated as or zonal value, whichever
capital assets is higher

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 Tax on Certain Passive Income
of Individual

Nature of Income Tax Rate

a) Interest income on foreign Final tax of 20%
loans contracted on or after
August 1, 1986

b) Dividends from a domestic Final tax of 15% subject to the condition

corporation that the country where the non-resident
foreign corporation is domiciled allows a
credit for taxes deemed paid in the
Philippines equivalent to: (Tax Sparing
Provision)
20% for 1997
19% for 1998
18% for 1999
17% for the year 2000 and thereafter

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