FINAL INCOME

TAXATION
CHAPTER 5
FEATURES:
1. FINAL TAX
2. TAX WITHHOLDING AT SOURCE
3. TERRITORIAL IMPOSITION
4. IMPOSED ON CERTAIN PASSIVE INCOME AND PERSONS
NOT ENGAGED IN BUSINESS IN THE PHILIPPINES
 PASSIVE INCOME SUBJECT TO FINAL TAX
1. INTEREST FROM BANK DEPOSITS
2. DOMESTIC DIVIDENDS
3. DIVIDEND INCOME FROM REAL ESTATE INVESTMENT TRUSTS
4. SHARE IN NET INCOME OF A BUSINESS PARTNERSHIP, TAXABLE ASSOCIATION, JOINT
VENTURE, JOINT ACCOUNTS, OR CO-OWNERSHIP
5. ROYALTIES
6. PRIZES
7. WINNINGS
8. INFORMER’S TAX REWARD
9. INTEREST INCOME ON TAX-FREE CORPORATE COVENANT BONDS
 INTEREST INCOME
INTEREST INCOME RECIPIENT
INDIVIDUALS CORPORATION NRA-NETB/NRFC
FROM BANKS
• SHORT-TERM DEPOSITS/CERTS 20% 20% 25%
• LONG TERM DEPOSITS/CERTS EXEMPT RIT 25%
FROM NON-BANKS
• SHORT-TERM DEPOSITS/CERTS RIT RIT 25%
LONG TERM DEPOSITS/CERTS RIT RIT 25%
 PRE-TERMINATION OF LONG TERM DEPOSITS

HOLDING PERIOD PRE-TERMINATION TAX

LESS THAN 3 YEARS 20%
3 YRS TO LESS THAN 4 YRS 12%
4 YRS TO LESS THAN 5 YRS 5%
5 YRS OR MORE 0%
 FOREIGN CURRENCY DEPOSIT WITH FCDB

TAXPAYER INDIVIDUALS CORPORATION

• RESIDENTS 15% 15%
• NON RESIDENTS EXEMPT EXEMPT
 JOINT ACCOUNTS ON FOREX DEPOSITS

IF THE BANK ACCOUNT IS JOINTLY IN THE NAME OF A NON-

RESIDENT AND A RESIDENT TAXPAYER, 50% OF THE INTEREST
SHALL BE EXEMPT WHILE THE OTHER 50% SHALL BE SUBJECT
TO THE 15% FINAL TAX.
INTEREST INCOME SUBJECT TO RIT
1. LENDING ACTIVITIES
2. INVESTMENT IN CORPORATE BONDS
3. PROMISSORY NOTES
4. FOREIGN SOURCES, WHETHER BANK OR NON-BANK
5. PENALTY FOR LEGAL DELAY
DIVIDENDS
- ANY DISTRIBUTION MADE BY A CORPORATION TO
ITS SHAREHOLDERS OUT OF ITS EARNINGS OR
PROFITS AND PAYABLE TO ITS SHAREHOLDERS
WHETHER IN MONEY OR IN OTHER PROPERTY.
TYPES OF DIVIDENDS

1. CASH DIVIDEND
2. PROPERTY DIVIDEND
3. SCRIP DIVIDEND
4. STOCK DIVIDEND **
5. LIQUIDATING DIVIDEND **
STOCK DIVIDEND VS STOCK SPLIT

• CAPITALIZATION OF • REDUCTION IN THE PAR

EARNINGS VALUE OF STOCK AND AN
INCREASE IN THE
NUMBER OF SHARES OF
SHAREHOLDERS

• MAY BE SUBJECTED TO • NEVER BE SUBJECTED TO

TAXES INCOME TAX
 DIVIDEND TAX RULES
SOURCE RECIPIENT OF DIVIDEND
INDI CORP NRA-ETB NRA-NETB NRFC
DOMESTIC CORP 10% EXEMPT 20% 25% 25% OR 15% **

FOREIGN CORP RIT RIT RIT RIT RIT

EXEMPT DIVIDENDS

1. INTER-CORPORATE DIVIDENDS FROM DOMESTIC

CORPORATIONS
2. DIVIDENDS FROM COOPERATIVES
3. QUALIFIED FOREIGN-SOURCED DIVIDENDS
ENTITIES TAXABLE AS CORPORATIONS ARE
SUBJECT TO 10% FINAL TAX

1. REAL ESTATE INVESTMENT TRUSTS

2. BUSINESS PARTNERSHIPS
3. TAXABLE ASSOCIATIONS
4. TAXABLE JOINT VENTURES, JOINT ACCOUNTS OR
CONSORTIA
5. TAXABLE CO-OWNERSHIPS
 SHARE IN NET INCOME OF TAXABLE
PARTNERSHIPS, JV AND CO-OWNERSHIPS

RECIPIENT
INDIVIDUALS CORPORATIONS NRA-ETB NRA-NETB/NRFC
SHARE IN 10% 10% 20% 25%
NET INCOME
ROYALTIES
RECIPIENT

SOURCE INDIVIDUALS CORPORATIONS NRA-NETB /

NRFC
• GENERAL 20% 20% 25%

• CINEMATOGRAPHIC 20% 20% 25%

FILMS

• BOOKS, LITERARY 10% 20% 25%

WORKS, MUSICAL
COMPOSITIONS

• ACTIVE ROYALTIES RIT RIT 25%

PRIZES

• MAY BE EXEMPT FROM INCOME TAX OR SUBJECT

TO EITHER FINAL TAX OR REGULAR INCOME TAX
EXEMPT PRIZES
1. PRIZES RECEIVED BY A RECIPIENT WITHOUT ANY
EFFORT ON HIS PART TO JOIN A CONTEST
2. PRIZES FROM SPORTS COMPETITIONS THAT ARE
SANCTIONED BY THEIR RESPECTIVE NATIONAL
SPORTS ORGANIZATIONS
REQUISITES FOR EXEMPTION

1. THE RECIPIENT WAS SELECTED WITHOUT ANY

ACTION ON HIS PART TO ENTER THE CONTEST
2. THE RECIPIENT IS NOT REQUIRED TO RENDER
SUBSTANTIAL FUTURE SERVICES AS A CONDITION
TO RECEIVING THE PRICE OR REWARD
 TAX RATES

RECIPIENT
AMOUNT OF PRIZE INDIVIDUALS CORPORATIONS NRA-NETB /
NRFC
• > P10,000 20% RIT 25%

• < P10,000 RIT RIT 25%

 WINNINGS
RECIPIENT
AMOUNT OF PRIZE INDIVIDUALS CORPORATIONS NRA-NETB /
NRFC
• GENERAL 20% RIT 25%

• PCSO WINNINGS > 20% 20% 25%

10,000
• PCSO WINNINGS < EXEMPT EXEMPT 25%
10,000
TAX INFORMER’S REWARD
• CASH REWARD GIVEN TO ANY PERSON
INSTRUMENTAL IN THE DISCOVERY OF
VIOLATIONS OF THE NIRC OR DISCOVERY AND
SEIZURE OF SMUGGLED GOODS.

• SUBJECT TO 10% FINAL TAX

 REQUISITES
1. DEFINITE SWORN INFORMATION NOT YET IN THE POSSESSION OF THE BIR
2. THE INFORMATION LED TO THR DISCOVERY OF FRAUD UPON INTERNAL
REVENUE LAWS OR PROVISIONS
3. ENFORCEMENT RESULTS IN REOVERY OF REVENUES, SURCHARGES, AND FEES
AND/OR CONVICTION OF THE GUILTY PARTY
4. THE INFORMER MUST NOT BE A:
a) BIR OFFICIAL OR EMPLOYEE
b) OTHER PUBLIC OFFICIAL OR EMPLOYEE
c) RELATIVE WITHIN 6TH DEGREE CONSANGUINITY OF THOSE IN A AND B.
 AMOUNT OF CASH REWARD

WHICHEVER IS LOWER, PER CASE

1. 10% OF REVENUES, SURCHARGES, OR FEES RECOVERED

AND/OR FINES OR PENALTIES COLLECTED, OR

2. P 1,000,000
FINAL WITHHOLDING TAX RETURN
• BIR FORM 0619-F (MONTHLY REMITTANCE RETURN)
• DEADLINE: ON OR BEFORE THE 10TH MONTH FOLLOWING THE
MONTH IN WHICH THE WITHHOLDING WAS MADE

• BIR FORM 1601-FQ (QUARTERLY REMITTANCE RETURN)

• DEADLINE: ON OR BEFORE THE LAST DAY OF THE MONTH AFTER
EACH QUARTER
ILLUSTRATIONS