BIR Form No.

1702-RT

This return shall be filed by Corporation, Partnership and

other Non-Individual Taxpayer subject to REGULAR
Income Tax Rate of 20% or 25%.
 Income Taxation on Partnership

Taxable Partnership Non-Taxable Partnership

Ordinary partnerships are treated as General Professional Partnerships are
corporations. exempt from income tax.

The net income of partnerships shall be computed in the same manner as a corporation.
Income Taxation on Partnership
Ordinary Partnership General Professional Partnership
Tax Rates 20% - 25% RCIT of the Taxable Exempt from Income Tax
Income; 2% MCIT of Gross Income
(same as that of a corporation)

Partners’ Share Subject to Final Tax Subject to Graduated Tax Rates. Each
partner in a GPP shall be liable for
income tax only in their separate and
individual capacities.

Withholding Tax 10% Final Income Tax for residents 15% if the payments to the partner for
or citizens; 20% for non-resident the current year exceeds P720,000, 10%
alien ETB if otherwise.
Ordinary Partnership
Triple G, a business partnership, had the following data.

Gross Income P750,000

Cost and expenses 200,000
Dividends from a domestic corporation 75,000
Interest income (from bank deposit) 10,000

Compute the income tax due of the partnership. Use 20%.

Income Tax Due
Gross Income P750,000
Less: Cost and expenses 200,000
Taxable Income P550,000
Multiply 20%
Income Tax Due P110,000

Business partnerships are subject to income tax at a rate similar to that

of a corporation because partnerships are considered as corporations
subject to corporate tax.
Distributable Income to Partners
Taxable Income P750,000
Add Other Income
Dividend 75,000
Interest, net of tax (P10,000 x 80%) 8,000
Total P633,000
Less: Income Tax Paid (165,000)
Distributable Income P468,000

The partnership’s net income shall be deemed to have been actually or

constructively received by the partners in the same taxable year.
Final Income Tax
Assume Partners G and GG share profits and losses in the ratio of 55% :
45%, respectively. Compute the respective final withholding taxes.
G GG
Distributable Income P468,000 P468,000
P/L Ratio 55% 45%
P257,400 P210,600
Multiply 10% 10%
Final Tax 25,740 21,060

The partnership will remit the final taxes to the BIR.

General Professional Partnership
Mr. G is a partner of GGG CPA, a general professional partnership. In
the said partnership he owns 25% interest. In 2024, the partnership
had gross receipts of P10 million. The recorded costs of service and
operating expenses of the partnership were P2,750,000 and
P1,500,000, respectively. How much is the partnership’s income tax
due?

Nil. There is no income tax liability for GGG CPA, as it is a GPP. However,
it is liable to business tax.
Mr. G’s Share
Gross Receipts P10,000,000
Less: Cost of Service (2,750,000)
Gross Income P7,250,000
Less: Operating Expenses (1,500,000)
Net Income for distribution to partners P5,750,000
Mr. G’s Interest 25%
Ms. G’s Share P1,437,500
Mr. G’s Income Tax Due
First P800,000 See bracket over P800,000 but not over P2,000,000 P102,500
Next 637,500 (P1,437,500 – P800,000) x 25% 159,375
Total P1,437,500 Income Tax Due P261,875

Since the partner’s distributive share in a GPP is already net of costs and expenses,
Mr. G is no longer allowed any deduction on his distributive share. Furthermore, he
is not allowed to avail of the 8% income tax rate option.
Optional Standard Deduction
GPP can claim either itemized deductions or OSD.

However, partners and the GPP can no longer simultaneously avail of

the optional standard deduction.
Optional Standard Deduction
Mr. G is a partner of GGG CPA, a general professional partnership. In
the said partnership he owns 25% interest. In 2024, the partnership
had gross receipts of P10 million. The recorded costs of service and
operating expenses of the partnership were P2,750,000 and
P1,500,000, respectively. Compute Mr. G’s income tax due of assuming
the partnership availed of the OSD.
Mr. G’s Share
Gross Receipts P10,000,000
Less: Cost of Service (2,750,000)
Gross Income P7,250,000
Less: OSD (P7,250,000 x 40%) (2,900,000)
Net Income for distribution to partners P4,350,000
Mr. G’s Interest 25%
Ms. G’s Share P1,087,500
Mr. G’s Income Tax Due
First P800,000 See bracket over P800,000 but not over P2,000,000 P102,500
Next 287,500 (P1,087,500– P800,000) x 25% 71,875
Total P1,087,500 Income Tax Due P174,375

Since the partner’s distributive share in a GPP is already net of costs and expenses,
Mr. G is no longer allowed any deduction on his distributive share. Furthermore, he
is not allowed to avail of the 8% income tax rate option.
Income Taxation on Co-Ownership
Taxable Co-Ownership
Treated similarly to a corporation and is
subject to corporate income taxes.
Non-Taxable Co-Ownership
The individual co-owners are liable for
the taxes due on their respective shares
and the co-ownership itself is not
considered as a separate taxable entity.
Non-Taxable Co-Ownership
In 2024, Robert and Annie inherited a plantation from their aunt.
During the year, the property's net earnings, after itemized expenses,
were P3,000,000, of which Robert and Annie each received P1,000,000.
How much is the income tax on the earnings from the plantation?

Nil
When Taxable
Co-ownership is taxable when:

1. The income of the co-ownership is reinvested by the co-owners in business

creating a partnership.

2. When a co-ownership is formed or established voluntarily, or upon agreement

of the parties.

3. Where the inherited property remained undivided for more than 10 years and
no attempt was ever made to divide the same among the co-heirs, nor was the
property under administration proceedings nor held in trust, the property
should be considered as owned by an unregistered partnership.
Taxable Co-Ownership
In 2000, Grace and Marjorie received a plantation from their aunt,
Everlyn. The cousins continued to maintain the plantation. In 2024, the
net income of the plantation was P5,000,000, of which P1,000,000
each was received by Grace and Marjorie before deducting the
applicable withholding tax. Compute the income tax due. Use 20% RCIT.

= P5,000,000 x 20%
= P1,000,000
Co-Owners’ Share
Grace Marjorie
Taxable Income P5,000,000 P5,000,000
Less: Income Tax Paid (1,000,000) (1,000,000)
Distributable Income P4,000,000 P4,000,000
Divided by 2 2
Co-Owners’ Share P2,000,000 P2,000,000
Final Tax
Grace Marjorie
Co-Owners’ Share P2,000,000 P2,000,000
Multiply by 10% 10%
Final Tax P200,000 P200,000

The co-ownership (treated as a corporation) will remit the final taxes to the BIR.
Income Taxation on Joint Venture
Taxable Joint Venture Non-Taxable Joint Venture
Generally, treated as corporation. 1. Joint Venture undertaking
construction projects

2. Joint Venture engaging in petroleum,

coal, geothermal and other energy
operations pursuant to an operating
or consortium agreement under a
service contract with the
government.
Income Taxation on Joint Venture
Taxable Joint Venture Non-Taxable Joint Venture
Tax Rates 20% - 25% RCIT of the Taxable Exempt from Income Tax
Income; 2% MCIT of Gross Income
(same as that of a corporation)

JV’s Share Treated as Intercorporate Reported as part of gross income subject

Dividends to RCIT.

Withholding Tax Tax Exempt 15% EWT

Revenue Regulation No. 14-2023
Income payments made by joint ventures, whether incorporated or not
taxable or non-taxable, to their local/resident supplier of goods and
services, shall be subjected to the following withholding tax rates:

• Supplier of goods – one percent (1%)

• Supplier of services – two percent (2%)
Revenue Regulation No. 14-2023
The share of each co-venturer or member from the net income of the
joint venture or consortium that is not taxable as a corporation, prior to
actual or constructive distribution, shall be subject to a

• 15% withholding tax rate.

Non-Taxable Joint Venture
A Corp. and B Corp. formed a joint venture for a construction
project of the government. The companies agreed that they
share profit equally. The joint venture received the total contract
price of P10,000,000. The cost of the project amounted to
P6,000,000. Operating expenses related to the joint venture
amounted to P1,000,000. Compute the income tax due of the
joint venture.

Nil
A Corp.’s Income Tax Due
In 2024, A Corp. has gross income of P1,000,000 and allowed
deductions of P300,000. Compute the income tax due of A Corp. Use
20% RCIT.
A Corp.’s Income Tax Due
Net income of the Joint Venture
(P10,000,000 – P6,000,000 – P1,000,000) P3,000,000
Multiply by 50%
Share in Non-Taxable Joint Venture P1,500,000
Add: Taxable Income from Separate Operation
(P1,000,000 – P300,000) 700,000
Taxable Income of A Corp. P2,200,000
Multiply by 20%
Income Tax Due P440,000
A Corp.’s Income Tax Payable
Income Tax Due P440,000
Less: CWT (P1,500,000 x 15%) (225,000)
Income Tax Payable P215,000
Note that the share of each co-venturer or member from the net income of the
joint venture or consortium that is not taxable as a corporation, prior to actual or
constructive distribution, shall be subject to a 15% withholding tax rate.
Taxable Joint Venture
A Corp. and B Corp. formed a joint venture. The companies
agreed that they share profit equally. The joint venture received
the total contract price of P10,000,000. The cost of the project
amounted to P6,000,000. Operating expenses related to the joint
venture amounted to P1,000,000. Compute the income tax due of
the joint venture.
Taxable Joint Venture
Revenue P10,000,000
Less: Cost (6,000,000)
Gross Income P4,000,000
Less: OPEX (1,000,000)
Taxable Income P3,000,000
Multiply by 20%
Income Tax Due P600,000

Note that the distribution of shares of each co-venturer or member from the net
income of a taxable joint venture or consortium will be treated as distribution of
dividends.
Income Taxation on Estates and Trusts
Individual Income Taxation shall extend to the following:
1. Income accumulated in trust for the benefit of unborn or unascertained person or
persons with contingent interests, and income accumulated or held for future
distribution under the terms of the will or trust;
2. Income which is to be distributed currently by the fiduciary to the beneficiaries, and
income collected by a guardian of an infant which is to be held or distributed as the
court may direct;
3. Income received by estates of deceased persons during the period of administration or
settlement of the estate; and
4. Income which, in the discretion of the fiduciary, may be either distributed to the
beneficiaries or accumulated.
Exception
Individual Income Taxation shall NOT extend to employee's trust which
forms part of a pension, stock bonus, or profit-sharing plan of an
employer for the benefit of some or all of his employees.
Income Taxation on Estates
Taxable Estate Estate under judicial settlement
Income Tax Due The tax shall be computed upon the taxable income of the trust and shall be
paid by the fiduciary.

Taxable Income Computed in the same manner and on the same basis as in the case of a
self-employed individual.

Special Deduction The amount of income of the estate for the taxable year which is properly
paid or credited during such year to any legatee, heir, or beneficiary

Withholding Tax The income distributed to beneficiaries of an estate is subject to a 15%

CWT to be withheld by the estate
Income Distribution to Beneficiaries
The amount so allowed as a deduction shall be included in computing
the taxable income of the legatee, heir, or beneficiary.

However, where no such distribution to the heirs is made during the

taxable year that such income is subjected to income tax payments by
the estate, the subsequent distribution thereof is no longer taxable on
the part of the recipient heir.
Income Tax Due on Estate
T died on January 1, 2024. He left a gross estate with a cost of
P25,000,000 but valued at P20,000,000 under an administrator. During
the year, the gross income derived from the business of the estate was
P4,000,000 while the related expenses amounted to P1,500,000.
Beneficiaries F and K were given P1,000,000 each. How much is the
income tax due on the estate?
Income Tax Due on Estate
Gross Income P4,000,000
Less Deductions:
Expenses (1,500,000)
Distribution to beneficiaries (1,000,000 x 2 (2,000,000)
Taxable Income P500,000

First P400,000 See bracket over P800,000 but not over P2,000,000 P22,500
Next 100,000 (P500,000 – P400,000) x 20% 20,000
Total P500,000 Income Tax Due P42,500
Income Taxation on Trusts
Taxable Trust Irrevocable Trusts (Except Employee’s Trust)

Income Tax Due The tax shall be computed upon the taxable income of the trust and shall be
paid by the fiduciary.

Taxable Income Computed in the same manner and on the same basis as in the case of an
individual.

Withholding Tax The income distributed to beneficiaries of a trust is subject to a 15% CWT
to be withheld by the estate
Employee’s Trust
This includes pension, stock bonus, or profit-sharing plan of an
employer for the benefit of some or all of his employees.
Conditions for Exemption of Employee’s Trust
1. The employee’s trust must form part of a pension, stock bonus, or profit-
sharing plan of an employer for the benefit of some or all of his employees;
2. Contributions are made to the trust by such employer, or employees, or both;
3. The contributions are made for the purpose of distributing to such employees
the earnings and principal of the fund accumulated by the trust in accordance
with such plan;
4. Under the trust instrument, it is impossible, at any time prior to the satisfaction
of all liabilities with respect to employees under the trust, for any part of the
corpus or income to be (within the taxable year or thereafter) used for, or
diverted to, purposes other than for the exclusive benefit of his employees.
Special Deduction of Trusts
1. The amount of the income of the trust for the taxable year which is to be
distributed currently to the beneficiaries;

2. The amount of income collected by a guardian of an infant which is to be held

or distributed as the court may direct; and

3. The amount of the income of the trust for the taxable year which is properly
paid or credited to any beneficiary.

The income distributed to beneficiaries of a trust is subject to a 15% CWT to be

withheld by the estate.
Income of Trust Taxed Directly to the Grantor
1. In case of a revocable trust, income from such part of the trust estate title to
which may be revoked by the grantor or revested in the grantor.

2. In the case of a trust the income of which, in whole or in part, may be held or
distributed for the benefit of the grantor. That part of the income which may be
held or distributed for the benefit of the grantor should be included in the
income tax return of the grantor.

3. Such part of the income of the trust which may be applied to the payment of
premiums upon policies of insurance on the life of the grantor. Such part of the
income shall be included in computing the taxable income of the grantor.
Income Tax Due on Trust
In 2024, Roger created an irrevocable trust that covers an income-
producing property, with Maria as fiduciary and Alex as beneficiary. It
was provided in the trust that Maria was to utilize the income of the
property in the following manner:

• Pay the life of the insurance premium of Roger, the grantor,

P200,000
• Distribute the income to the beneficiary, Alex, P100,000

The property held in trust earns P1,000,000 during the year.

Income Tax Due on Trust
Gross Income P1,000,000
Less Deductions:
Insurance premium payments (200,000)
Income Distribution (100,000)
Taxable Income P700,000

First P400,000 See bracket over P800,000 but not over P2,000,000 P22,500
Next 300,000 (P700,000 – P400,000) x 20% 60,000
Total P700,000 Income Tax Due P82,500
Consolidation of Income of Two or More Trusts
Consolidation of Income applies where in the case of two or more
trusts,

1. the creator of the trust in each instance is the same person, and
2. the beneficiary in each instance is the same.
Tax on Consolidated Income
The tax is computed based on consolidated income.

Income tax due of each is equivalent to the proportion of taxable

income of each trust to the consolidated income of the several trusts.

Taxable Income of Each Trust

Income Tax Due of Income Tax Due on
= x
Each Trust Consolidated Income
Consolidated Income
Non-Taxable Trust
In the following instances, the income shall be included in computing
the taxable income of the grantor.

• Revocable trust
• Income for the benefit of the grantor