Taxationlaw1 - Paulita's Draft (Individuals)

INDIVIDUALS
CITIZENS
A. RESIDENT CITIZENS (RC)
(n) A citizen of the Philippines residing therein, unless he qualifies as a nonresident citizen
under Section 22 (E) of the NIRC.
He is a citizen of the Philippines who stays in the Philippines without the intention of
transferring his physical presence abroad, whether to stay permanently or temporarily as
an overseas contract worker (DOMONDON, Taxation Vol. II (2009))
Applicable Taxes:
1. Taxable Income;
2. Final Withholding tax on Passive Income subject to final tax; or
3. Capital Gains Tax on capital assets subject to capital gains tax.
TAXABLE INCOME
RESIDENT CITIZEN
TAX BASE: Income derived

during a taxable year from all
sources, within and without
the Philippines.
Tax Rates: Taxable Net

Income subject to graduated
rate of 5%-32%.
Amount of Net Taxable

Income
Over
Rate
But Not Over

P10,000
5%
P10,000
P30,000
P500 + 10% of the Excess over P10,000
P30,000
P70,000
P2,500 + 15% of the Excess over P30,000
P70,000
P140,000
P140,000
P250,000
P250,000
P500,000

P125,000 + 32% of the Excess over P500,000 in 2000 and
Income Subject to GRADUATED RATES:
1.
2.
3.
4.
5.
Compensation Income;
Business and Professional Income;
Capital Gains not subject to final tax;
Passive income not subject to final tax; and
Other income.
Final Withholding Tax on Passive Incomes

subject to Final Tax
RESIDENT CITIZEN
Interest Income
LIQUIDATIN
G
DIVIDENDS
Liquidating
gain is
subject to:
Graduated
Rates of 5%-
Royalties
A. Yield from
Deposit
Substitutes,
Turst, Frunds &
Other similar
arrangments:
20%
B. Net Income
From Expanded
Foreign
Currency
Deposit System:
7.5%
Prizes &
Winnings
A. Use and
exhaustion of
property such as
earnings from
copyrights,
patents,
trademarks,
formulas and
natural
resources under
B. Royalties
from books,
literary works
and musical
compositions:
10%
C. Interest
Income from
Local Bank
Deposits:
20%
NOTES:
1. It covers both
payments made:
- Under license; and
- Under Compensation
which a person would
be obliged to pay for
fraudulently copying
or infringing the right.
2. Royalties must be
derived from sources
within the Philippines
to be considered as
passive income.
3. If it is derived from
sources outside the
Philippines, the
Dividends
A. Prizes (except
P10,000 or less)
& Winnings
(regardless of
the amount):
20%
XPN: PCSO and
lotto winnings
are not subject
NOTES:
1. Prizes amounting to
P10,000 or less,
although exempt from
final tax, are to be
included in gross
income and subject to
the graduated rates.
2. Prizes and
Winnings from
sources without the
PH are included in the
Gross Income of a
Resident Citizen.
CAPITAL GAINS TAX

RULES ON CAPITAL GAINS AND LOSSES
of a RESIDENT CITIZEN
CASH &
PROPERTY
DIVIDENDS
1. On:
a. Cash &/or
Property
Dividends
from
domestic
corporation
or from a
joint stock
company,
etc.
b. Share in
the
distributable
net income
after tax of a
taxable or
business
partnership;
and
c. Share in
the net
income after
tax of an
association, a
joint account,
or a joint
venture or
consortium
taxable as a
corporation
of w/c he is a
member or
co-venturer:
10%
2. On cash
and/or
property
STOCK
DIVIDENDS
GR: A stock
dividend
representing the
transfer of
surplus to
capital account
shall not be
taxable. (Sec 73,
B, NIRC)
Exceptions:
1. It gives the
shareholder an
interest
different from
that which his
former stock
represented;
2. Different
classes of stocks
were issued;
3. Stock
dividend is table
to Usufructuary;
4. When there is
redemption or
cancellation
essentially
equivalent to
the distribution
of taxable
dividends;
5. The recipient
is either than
the shareholder;
and
6. Dividends
CAPITAL ASSETS
ORDINARY ASSETS
1. Stocks in Trade of the
taxpayer or other properties of a
kind which would properly be
included in the inventory of the
taxpayer if on hand at the close
of the taxable year.
All properties not classified as

ordinary asset.
-SUBJECT TO CGTA.
2. Property held by the taxpayer

primarily for sale to customers in
the ORDINARY COURSE OF
BUSINESS.
3. Personal Property used in
trade or business subject to
depreciation.
Sales of shares of stock of a

domestic corporation not
listed and not traded
through stock exchange by
a non-dealer securities:
B.
4. Real property used in trade or

business.
1st P100,000.00 5%
In excess of
P100,000.00 10%
Sale or Other Disposition of
Real Property subject to
CGT:
6% on the gross selling
price or zonal values of
the provincial and city
assessors, whichever is
the highest
Note: The above-mentioned

list is
exclusive.
Tax
Treatment:
1.
Ordinary Gains
included in the gross
income.
2.
Ordinary Losses
deductible from gross
income.
OTHER CAPITAL ASSETS NOT

SUBJECT TO CGT
Involves sale or exchange or one
considered as equivalent to a
sale or exchange of property
classified as capital asset
except:
1.
Unlisted shares of stock

of a domestic
corporation; and
2.
Real property in the

Philippines held as
capital asset.
Tax Treatment and Rate:
Included in the gross income
subject to the regular income tax
rates.
Tax Base:
Net Capital Gains
Tax Base:
Net Capital Gains on a per
transaction basis.
XPNS:
- Sale of Principal Residence
- Buyer is the Government or
any of its political
subdivisions
- Sale subject to right of
redemption
-NOT SUBJECT TO CGT
Regular Income Tax

Rates
Rules to be followed in
the determination of the
gross income:
Fringe
Benefits
Holding Period
(NIRC, Sec 29 B)
Loss Limitation Rule
(NIRC, Sec 29 C)
NELCO (NIRC, Sec 29
D)
Subject to Withholding Tax on

Notes: The rules
on capital
WAGES
RANK AND FILE
Notes:
Similar fringe benefits granted to
managerial or supervisory employees
which are subject to FBT may
likewise be given to R&F employees.
The monetary value of the fringe
benefits given to R&F employees,
although not subject to FBT, shall be
SUPERVISORY /
Fringe Benefits Subject to FBT:
1. Housing
2. Expense Account
3. Vehicle of Any Kind
4. Household Expenses
5. Interest on loan less than the market rate to
the extent of the difference between the market
rate and actual rate granted
6. Membership fees, dues and other expenses in
social and athletic club
7. Holiday and Vacation Expenses
8. Expenses for Foreign Travel
9. Educational Assistance to employee or his
dependents
Subject to Fringe Benefit Tax Rate

32%
XPNS:
- DE MINIMIS BENEFITS
- BENEFITS PROVIDED FOR THE
CONVENIENCE OF THE EMPLOYER
Tax Base: Grossed-up Monetary Value
(GMV) of Fringe Benefits
Determination of GMV: by dividing
the monetary value of the fringe
benefit by 68%
Gross
Income of a Resident Citizen subject to
Income Tax
All
income derived from whatever source, including but not

PARTNERS
SHARE IN THE
NET INCOME OF
THE GENERAL
PROFESSIONAL
PARTNERSHIP
RENT
S
COMPENSATI
GAINS FROM
DEALINGS IN
PROPERTY
ROYALTI
ES
ANNUITI
ES
GROSS
PENSIO
DIVIDEN
DS
INTERES
TS
GROSS INCOME
FROM
PROFESSION,
TRADE OR
PRIZES AND
WINNINGS
The following are

likewise included in
the taxpayers gross
income:
1. Treasure found or
punitive damages
representing profits lost;
2. Amount received by
mistake;
Meaning of the Phrase Gross Income from whatever

Derived
-
Indicates a legislative policy to include all

not expressly
exempted within the class of taxable income
our laws.
(CIR vs. AIR India, G.R. No. 72443, January 29,
3. Cancellation of the
taxpayers indebtedness
on account of service
rendered;
4. Payment of usurious
interest;
Source
5. Illegal gains;
income
6. Tax refunds and bad

debts recovered;
under
7. Subsidy; and
1988)
8. Unutilized or excess of
the campaign funds,
which is in excess of
campaign contributions
over the candidates
EXCLUSIONS FROM GROSS INCOME OF RESIDENT CITIZEN
Income received or earned but is not included in the determination of gross income
and thus not taxable either because:
1.
2.
3.
4.
They are not income, gain or profit.

They represent return of capital.
They are subject to another kind of internal revenue tax.
They are income, gain or profits which are expressly exempt from income tax under the
Constitution, tax treaty, NIRC or general or special law.
EXCLUSION VS. EXEMPTION

EXCLUSION
EXEMPTION
Refers to the
removal
of
otherwise
taxable
items
from the reach
of taxation
Refers
to
an
immunity
or
privilege,
freedom
from
charge
or
burden to which
other
persons
are subject to
tax
(PLDT v Laguna, G.R. No. 151899, August 16, 2005)
1. PROCEEDS OF LIFE INSURANCE
CONDITION: The life insurance proceeds must be paid to the heirs or beneficiaries by reason of
death of the insured, whether in a single sum or installment.
2. RETURN OF INSURANCE PREMIUM
ITEMS OF
EXCLUSI
ONS
CONDITION: The amounts must be received as a return of premiums paid by him under life
insurance, endowment or annuity contracts.
3. GIFT, BEQUEST, DEVISE OR DESCENT
CONDITION: Only donated property is excluded from gross income.
4. COMPENSATION FOR INJURIES OR SICKNESS

CONDITION: The term injury includes death, even if there is no injury. If the person dies, the
compensation received on account of his death is also excluded from the gross income.
5. RETIREMENT BENEFITS, PENSIONS AND GRATUITIES
CONDITION: It does not matter whether the retirement is voluntary. As long as requirements are
met, the retirement proceeds are excluded from gross income.
6. INCOME EXEMPT UNDER TREATY
CONDITION: Income of any kind to the extent required by any treaty obligation binding upon the
Government of the Philippines may be excluded from the gross income.
7. MISCELLANEOUS ITEMS
- PASSIVE INCOME
- INCOME DERIVED BY THE PHILIPPINE GOVERNMENT OR ITS POLITICAL SUBDIVISION
- PRIZES AND AWARDS
- PRIZES AND AWARDS GRANTED TO ATHLETES IN SPORTS COMPETITIONS LOCALLY OR ABROAD AND
SANCTIONED BY THEIR NATIONAL SPORTS ASSOCIATION
- 13TH MONTH PAY AND OTHER BENEFITS UP TO P30,000.00
- GSIS, SSS, MEDICARE (NOW PHILHEALTH) AND PAG-IBIG CONTRIBUTIONS AND UNION DUES OF
INDIVIDUALS
- GAINS DERIVED FROM SALE OR EXCHANGE OF BONDS, DEBENTURES, OR OTHER CERTIFICATE OF
INDEBTEDNESS WITH A MATURITY OF MORE THAN 5 YEARS
- GAINS FROM REDEMPTION OF SHARES IN MUTUAL FUNDS
DEDUCTIONS FROM GROSS INCOME OF RESIDENT CITIZEN

ALLOWABLE DEDUCTIONS
FOR RESIDENT CITIZEN
ITEMIZED
DEDUCTION
PERSONAL
OPTIONAL
EXEMPTIONS STANDARD
DEDUCTIONS
PREMIUM
PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION
INSURANCE
B. NON-RESIDENT CITIZENS (NRC)

(n) A citizen of the Philippines who
establishes to the
satisfaction of the Commissioner the fact of his physical presence abroad with a definite
intention to reside therein.
A citizen of the Philippines

who:
Works and derives income
from abroad and whose
employment thereat
requires him to be
physically present abroad
most of the time during
the taxable year;
Leaves the Philippines

during the taxable year to
reside abroad, either as an
immigrant or for
employment on a
permanent basis;
Has been previously

considered as a nonresident citizen and who
arrives in the Philippines
at any time during the
taxable year to reside
permanently in the
Philippines shall be
considered non-resident
for the taxable year in
which he arrives in the
Philippines with respect to
his income derived from
3 TYPES OF NON-RESIDENT
CITIZENS
IMMIGRANTS
Citizens of the
Philippines who
leave the
Philippines during
the taxable year
to reside abroad,
either as
immigrants or for
employment on a
permanent basis.
EMPLOYEES OF
A FOREIGN
ENTITY ON A
PERMANENT
BASIS
OFWs
Citizens of the
Philippines who
are working and
deriving income
from abroad as
overseas contract
workers.
Citizens of the
Philippines who
work and derive
income from
abroad and
whose
employment
thereat requires
them to be
physically
Applicable Taxes:
present abroad
most of the time
1. Taxable Income;
during the
taxable year.
TAXABLE INCOME
during a taxable yearNON-RESIDENT
from all
Income
subject to graduated
CITIZEN
sources, within the
rate of 5%-32%.
Philippines.

Income
Over
Rate
But Not Over

P10,000
5%
P10,000
P30,000
P30,000
P70,000
P70,000
P140,000
P140,000
P250,000
P250,000
P500,000


1.
2.
3.
4.
5.
Other income.
1. On:
Final Withholding Tax on Passive

Incomes subject to Final Tax
b. Share in
the
distributable
net income
after tax of a
taxable or
business
partnership;
and
B. Royalties
from books,
literary works
and musical
NON-RESIDENT
CITIZEN
compositions:
10%
Interest Income
LIQUIDATIN
G
DIVIDENDS
Liquidating
gain is
subject to:
Graduated
Rates of 5%-
Royalties
A. Interest
C.
B.
Net
YieldIncome
from
Income
From
Deposit
Expanded
from
Local Bank
Foreign
Substitutes,
Deposits:
Currency
Turst,
Frunds &
Deposit
Other
similar
System:
20%
arrangments:
7.5%
20%
EXCEPT OCW
AND SEAMEN
Prizes &
NOTES:
1. It covers both
Winnings
payments made:
A. Use and
exhaustion
of
which
a person would
be
obliged tosuch
pay for
property
as
earnings
or
infringing from
the right.
2.
Royalties must be
copyrights,
patents,
to
be considered as
trademarks,
passive income.
formulas
and
natural
sources
outside the
Philippines, the
a. Cash &/or
Property
Dividends
from
domestic
corporation
or from a
joint stock
company,
etc.
NOTES:
Dividends
P10,000 or less,
A.
Prizes
(except
although
exempt
from
final tax, are
be
P10,000
ortoless)
included in gross
&
Winnings
(regardless
of
the amount):
2. Prizes and
Winnings from
20%
sources without the
PH are NOT included
XPN:
PCSO
and of
in the Gross
Income
a Non-Resident
lotto
winnings
Citizen.
are not subject
c. Share in
the net
income after
tax of an
association, a
joint account,
or a joint
venture or
consortium
taxable as a
corporation
CASH &
ofPROPERTY
w/c he is a
member
or
DIVIDENDS
co-venturer:
GR: A stock
dividend
representing the
transfer of
surplus to
capital account
shall not be
taxable. (Sec 73,
B, NIRC)
Exceptions:
1. It gives the
shareholder an
interest
different from
that which his
former stock
represented;
2. Different
classes of stocks
were issued;
3. Stock
dividend is table
to Usufructuary;
4. When there is
redemption or
cancellation
essentially
STOCK
equivalent
to
DIVIDENDS
the distribution
of taxable
dividends;
10%
2. On cash
and/or
property
dividends
from a
5. The recipient
is either than
the shareholder;
and
CAPITAL ASSETS
ordinary asset.
-SUBJECT TO CGTA.
CAPITAL

1st P100,000.00 5%
In excess of P100,000.00
ON 10%
CAPITAL GAINS AND
GAINS TAX
RULES
LOSSES
of a NON-RESIDENT CITIZEN
B.

CGT:
ORDINARY ASSETS

the highest
Tax Base:

SUBJECT TO CGT
except:

BUSINESS.

transaction basis.
1.
XPNS:
2.

depreciation.

subdivisions
redemption

business.
list
exclusive.
Tax is
Treatment:
1.
Ordinary Gains
income.
2.
Ordinary Losses
income.
-NOT SUBJECT TO CGT
Regular Income Tax

Rates
gross income:
Holding Period
(NIRC, Sec 29 B)
(NIRC, Sec 29 C)
NELCO (NIRC, Sec 29
D)

of a domestic
corporation; and

Philippines held as
capital asset.
rates.
Tax Base:
Net Capital Gains
Fringe Benefits

WAGES
Notes:
RANK AND FILE

SUPERVISORY /
32%
XPNS:
1. Housing
2. Expense Account
dependents

benefit by 68%
Gross
Income of a Non-Resident Citizen subject
to Income Tax
All

PARTNERS
SHARE IN THE
NET INCOME OF
THE GENERAL
PROFESSIONAL
PARTNERSHIP
The following are

the taxpayers gross
income:
RENT
S
COMPENSATI
GAINS FROM
DEALINGS IN
PROPERTY
ROYALTI
ES
PRIZES AND
WINNINGS
ANNUITI
ES
GROSS
GROSS INCOME
FROM
PROFESSION,
TRADE OR
PENSIO
punitive
damages
mistake;
DIVIDEN
DS
3. Cancellation
of the
INTERES
on account
of service
TS
rendered;
interest;
5. Illegal gains;
debts recovered;
7. Subsidy; and
the campaign funds,
over the candidates
Meaning of the Phrase Gross Income from whatever Source Derived

-
Indicates a legislative policy to include all income not expressly

exempted within the class of taxable income under our laws.
(CIR vs. AIR India, G.R. No. 72443, January 29, 1988)
EXCLUSIONS FROM GROSS INCOME OF NON-RESIDENT CITIZEN

1.
2.
3.
4.


EXCLUSION
EXEMPTION
Refers to the
removal
of
otherwise
taxable
items
from the reach
of taxation
Refers
to
an
immunity
or
privilege,
freedom
from
charge
or
burden to which
other
persons
are subject to
tax
ITEMS OF
EXCLUSI
ONS


- PASSIVE INCOME
- PRIZES AND AWARDS
INDIVIDUALS
DEDUCTIONS FROM GROSS INCOME OF NON-RESIDENT CITIZEN

FOR NON-RESIDENT
CITIZEN
ITEMIZED
DEDUCTION
PERSONAL
OPTIONAL
EXEMPTIONS STANDARD
DEDUCTIONS
PREMIUM
PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION
INSURANCE
alien
A. RESIDENT ALIENS (RA)

(n) An individual whose residence is within the Philippines and who is not a citizen thereof.
He is not a mere transient or sojourner.
An alien is considered a
resident of the Philippines
for income tax purposes if:
He has no definite intention as to his stay in

the Philippines.
His purpose is of such a nature that an
extended stay may be necessary for its
accomplishment and to that end, the alien
makes his home temporarily in the Philippines.
*An alien who shall have stayed in the Philippines for

more than one year by the end of the calendar year is a resident alien. An alien who
has acquired residence in the PH retains his status as a resident alien until he
abandons the same and actually departs from the PH. Mere intention to change his
residence is not enough.
Applicable Taxes:
1. Taxable Income;
TAXABLE INCOME
RESIDENT ALIEN
during a taxable year from all
Income subject to graduated
sources, within the
rate of 5%-32%.
Philippines.

Income
Over
Rate
But Not Over

P10,000
5%
P10,000
P30,000
P30,000
P70,000
P70,000
P140,000
P140,000
P250,000
P250,000
P500,000

1.
2.
3.
4.
5.
Other income.

RESIDENT ALIEN
Interest Income
LIQUIDATIN
G
DIVIDENDS
Liquidating
gain is
subject to:
Graduated
Rates of 5%-
Royalties
A. Yield from
Deposit
Substitutes,
Turst, Frunds &
Other similar
arrangments:
20%
B. Net Income
From Expanded
Foreign
Currency
Deposit System:
7.5%
Prizes &
Winnings
A. Use and
exhaustion of
property such as
earnings from
copyrights,
patents,
trademarks,
formulas and
natural
resources under
B. Royalties
from books,
literary works
and musical
compositions:
10%
C. Interest
Income from
Local Bank
Deposits:
20%
NOTES:
1. It covers both
payments made:
to be considered as
passive income.
sources outside the
Philippines, the
Dividends
A. Prizes (except
P10,000 or less)
& Winnings
(regardless of
the amount):
20%
XPN: PCSO and
lotto winnings
are not subject
NOTES:
P10,000 or less,
included in gross
2. Prizes and
Winnings from
sources without the
PH are NOT included
in the Gross Income of
a Resident Alien.
CASH &
PROPERTY
DIVIDENDS
1. On:
a. Cash &/or
Property
Dividends
from
domestic
corporation
or from a
joint stock
company,
etc.
b. Share in
the
distributable
net income
after tax of a
taxable or
business
partnership;
and
c. Share in
the net
income after
tax of an
association, a
joint account,
or a joint
venture or
consortium
taxable as a
corporation
of w/c he is a
member or
co-venturer:
10%
2. On cash
and/or
property
dividends
from a
STOCK
DIVIDENDS
GR: A stock
dividend
representing the
transfer of
surplus to
capital account
shall not be
taxable. (Sec 73,
B, NIRC)
Exceptions:
1. It gives the
shareholder an
interest
different from
that which his
former stock
represented;
2. Different
classes of stocks
were issued;
3. Stock
dividend is table
to Usufructuary;
4. When there is
redemption or
cancellation
essentially
equivalent to
the distribution
of taxable
dividends;
5. The recipient
is either than
the shareholder;
and
6. Dividends
CAPITAL GAINS TAX

RULES ON CAPITAL GAINS AND LOSSES
of a RESIDENT ALIEN
CAPITAL ASSETS
ORDINARY ASSETS

ordinary asset.
-SUBJECT TO CGTA.

BUSINESS.
depreciation.

1st P100,000.00 5%
10%
B.

business.

CGT:
the highest

list is
exclusive.
Tax
Treatment:
1.
2.
Ordinary Gains
income.
Ordinary Losses
income.
Tax Base:
transaction basis.
XPNS:
subdivisions
redemption
-NOT SUBJECT TO CGT
Regular Income Tax

Rates
gross income:
Holding Period
(NIRC, Sec 29 B)
(NIRC, Sec 29 C)
NELCO (NIRC, Sec 29
D)

SUBJECT TO CGT
except:
1.

of a domestic
corporation; and
2.

Philippines held as
capital asset.
rates.
Tax Base:
Net Capital Gains
Fringe Benefits

WAGES
Notes:
RANK AND FILE

SUPERVISORY /
32%
XPNS:
1. Housing
2. Expense Account
dependents

benefit by 68%
Gross
Income of a Resident Alien subject to
Income Tax
All

PARTNERS
SHARE IN THE
NET INCOME OF
THE GENERAL
PROFESSIONAL
PARTNERSHIP
RENT
S
COMPENSATI
GAINS FROM
DEALINGS IN
PROPERTY
ROYALTI
ES
ANNUITI
ES
GROSS
PENSIO
DIVIDEN
DS
INTERES
TS
GROSS INCOME
FROM
PROFESSION,
TRADE OR
PRIZES AND
WINNINGS
The following are

the taxpayers gross
income:
punitive damages
mistake;

Derived
-

not expressly
our laws.
rendered;
interest;
Source
5. Illegal gains;
income

debts recovered;
under
7. Subsidy; and
1988)
the campaign funds,
over the candidates
EXCLUSIONS FROM GROSS INCOME OF RESIDENTALIEN

1.
2.
3.
4.


EXCLUSION
EXEMPTION
Refers to the
removal
of
otherwise
taxable
items
from the reach
of taxation
Refers
to
an
immunity
or
privilege,
freedom
from
charge
or
burden to which
other
persons
are subject to
tax
ITEMS OF
EXCLUSI
ONS

- PASSIVE INCOME
- PRIZES AND AWARDS
INDIVIDUALS
DEDUCTIONS FROM GROSS INCOME OF RESIDENT ALIEN

FOR RESIDENT CITIZEN
ITEMIZED
DEDUCTION
B.
PERSONAL
OPTIONAL
EXEMPTIONS STANDARD
DEDUCTIONS
ALIENS (NRA)
(n) An individual whose residence is not
and who is not a citizen thereof.
PREMIUM
PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION
INSURANCE
NON-RESIDENT
A. ENGAGED IN TRADE OR BUSINESS

- A non-resident alien whose stay in the
Philippines is more than 180 days during any
calendar year.
CLASSIFICATIONS OF NONRESIDENT ALIEN
B. NOT ENGAGED IN TRADE OR BUSINESS
- A non-resident alien whose stay in the
Philippines is NOT more than 180 days during
any calendar year.
*The term trade or business includes the performance of services by the taxpayer
as an employee. The term has also been expanded to include the exercise of
profession.
Applicable Taxes:
1. Taxable Income;
TAXABLE INCOME (NRA-ETB)

NON-RESIDENT ALIEN ENGAGED IN
TRADE OR BUSINESS
TAX BASE: Regular income

derived
from sources within
the Philippines.
Income
Over

Income subject
Rate to graduated
rate of 5%-32%.
But Not Over

P10,000
5%
P10,000
P30,000
P30,000
P70,000
P70,000
P140,000
P140,000
P250,000
P250,000
P500,000
1.
2.
3.
4.
5.
Other income.

NON-RESIDENT ALIEN ENGAGED IN
TRADE OR BUSINESS
Interest Income
LIQUIDATIN
G
DIVIDENDS
Liquidating
gain is
subject to:
Graduated
Rates of 5%-
Royalties
A. Yield from
Deposit
Substitutes,
Turst, Frunds &
Other similar
arrangments:
20%
B. Net Income
From Expanded
Foreign
Currency
Deposit System:
N/A
Prizes &
Winnings
A. Use and
exhaustion of
property such as
earnings from
copyrights,
patents,
trademarks,
formulas and
natural
resources under
B. Royalties
from books,
literary works
and musical
compositions:
10%
C. Interest
Income from
Local Bank
Deposits:
20%
NOTES:
1. It covers both
payments made:
to be considered as
passive income.
sources outside the
Philippines, the
Dividends
A. Prizes (except
P10,000 or less)
& Winnings
(regardless of
the amount):
20%
XPN: PCSO and
lotto winnings
are not subject
NOTES:
P10,000 or less,
included in gross
2. Prizes and
Winnings from
sources without the
PH are NOT included
a Non-Resident Alien
Engaged in Trade or
Business.
CASH &
PROPERTY
DIVIDENDS
1. On:
a. Cash &/or
Property
Dividends
from
domestic
corporation
or from a
joint stock
company,
etc.
b. Share in
the
distributable
net income
after tax of a
taxable or
business
partnership;
and
c. Share in
the net
income after
tax of an
association, a
joint account,
or a joint
venture or
consortium
taxable as a
STOCK
DIVIDENDS
GR: A stock
dividend
representing the
transfer of
surplus to
capital account
shall not be
taxable. (Sec 73,
B, NIRC)
Exceptions:
1. It gives the
shareholder an
interest
different from
that which his
former stock
represented;
2. Different
classes of stocks
were issued;
3. Stock
dividend is table
to Usufructuary;
4. When there is
redemption or
cancellation
essentially
equivalent to
the distribution
of taxable
dividends;
5. The recipient
is either than
the shareholder;
and
6. Dividends
CAPITAL GAINS TAX

RULES ON CAPITAL GAINS AND LOSSES of a
NON-RESIDENT ALIEN ENGAGED IN TRADE
OR BUSINESS
CAPITAL ASSETS
ORDINARY ASSETS

ordinary asset.
-SUBJECT TO CGTA.

BUSINESS.
depreciation.

1st P100,000.00 5%
10%
B.

business.

CGT:
the highest

list
exclusive.
Tax is
Treatment:
1.
Ordinary Gains
income.
2.
Ordinary Losses
income.

SUBJECT TO CGT
except:
1.

of a domestic
corporation; and
2.

Philippines held as
capital asset.
rates.
Tax Base:
Net Capital Gains
Tax Base:
transaction basis.
XPNS:
subdivisions
redemption
A NRA is not entitled to the
exemption of payment of
CGT in case of sale of
Principal Residence.
-NOT SUBJECT TO CGT
Regular Income Tax

Rates
gross income:
Fringe
Benefits
RANK AND FILE
Holding Period
(NIRC, Sec 29 B)
(NIRC, Sec 29 C)
NELCOSubject
(NIRC, Sec
29
to Withholding
Tax on
D)
WAGES
Notes:
SUPERVISORY /
32%
1. Housing
2. Expense Account
dependents
XPNS:
benefit by 68%
Gross
Income of a NonResident Alien engaged in trade or

business subject to Income Tax
All

PARTNERS
SHARE IN THE
NET INCOME OF
THE GENERAL
PROFESSIONAL
PARTNERSHIP
RENT
S
COMPENSATI
GAINS FROM
DEALINGS IN
PROPERTY
ROYALTI
ES
ANNUITI
ES
GROSS
PENSIO
DIVIDEN
DS
INTERES
TS
GROSS INCOME
FROM
PROFESSION,
TRADE OR
PRIZES AND
WINNINGS
The following are

the taxpayers gross
income:
punitive damages
mistake;

Derived
-

not expressly
our laws.
rendered;
interest;
Source
5. Illegal gains;
income

debts recovered;
under
7. Subsidy; and
1988)
the campaign funds,
over the candidates
EXCLUSIONS FROM GROSS INCOME OF NON-RESIDENTALIEN

ENGAGED IN TRADE OR BUSINESS
1.
2.
3.
4.


EXCLUSION
EXEMPTION
Refers to the
removal
of
otherwise
taxable
items
from the reach
of taxation
Refers
to
an
immunity
or
privilege,
freedom
from
charge
or
burden to which
other
persons
are subject to
tax
ITEMS OF
EXCLUSI
ONS

- PASSIVE INCOME
- PRIZES AND AWARDS
INDIVIDUALS
DEDUCTIONS FROM GROSS INCOME OF NON-RESIDENT ALIEN

ENGAGED IN TRADE OR BUSINESS
FOR NON-RESIDENT
ENGAGED IN TRADE OR
BUSINESS
ITEMIZED
DEDUCTION
PERSONAL
EXEMPTIONS
PREMIUM
PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION
INSURANCE
TAXABLE INCOME (NRA-NETB)

NON-RESIDENT ALIEN NOT ENGAGED IN
TRADE OR BUSINESS

within the Philippines only.
Tax Rates: 25% tax on the

Gross Income and NO
DEDUCTIONS ARE
ALLOWED.
*The entire income received from all

sources within
the Philippines by every nonresident alien individual not engaged in trade or business
within the Philippines shall be taxable as interest, cash and/or property dividends,
rents, salaries, wages, premiums, annuities, compensation, remuneration,
emoluments, or other fixed or determinable annual or periodic or casual gains,
profits, and income, and capital gains, a tax equal to twenty-five percent (25%) of
such income. (Section 25 (B))

TRADE OR BUSINESS
Interest Income
LIQUIDATIN
G
DIVIDENDS
Liquidating
gain is
subject to:
Royalties
A. Yield from
Deposit
Substitutes,
Turst, Frunds &
Other similar
arrangments:
25%
25%
B. Net Income
From Expanded
Foreign
Currency
Deposit System:
N/A
Prizes &
Winnings
A. Use and
exhaustion of
property such as
earnings from
copyrights,
patents,
trademarks,
formulas and
natural
resources under
B. Royalties
from books,
literary works
and musical
compositions:
25%
C. Interest
Income from
Local Bank
Deposits:
25%
NOTES:
1. It covers both
payments made:
to be considered as
passive income.
sources outside the
Philippines, the
Dividends
A. Prizes &
Winnings
(regardless of
the amount):
25%
XPN: PCSO and
lotto winnings
are not subject
to final tax.
NOTES:
1. Prizes and
Winnings from
sources without the
PH are NOT included
a Non-Resident Alien
NOT Engaged in Trade
or Business.
CASH &
PROPERTY
DIVIDENDS
1. On:
a. Cash &/or
Property
Dividends
from
domestic
corporation
or from a
joint stock
company,
etc.
b. Share in
the
distributable
net income
after tax of a
taxable or
business
partnership;
and
c. Share in
the net
income after
tax of an
association, a
joint account,
or a joint
venture or
consortium
taxable as a
STOCK
DIVIDENDS
GR: A stock
dividend
representing the
transfer of
surplus to
capital account
shall not be
taxable. (Sec 73,
B, NIRC)
Exceptions:
1. It gives the
shareholder an
interest
different from
that which his
former stock
represented;
2. Different
classes of stocks
were issued;
3. Stock
dividend is table
to Usufructuary;
4. When there is
redemption or
cancellation
essentially
equivalent to
the distribution
of taxable
dividends;
5. The recipient
is either than
the shareholder;
and
6. Dividends
CAPITAL GAINS TAX

RULES ON CAPITAL GAINS AND LOSSES of a
TRADE OR BUSINESS
CAPITAL ASSETS
ORDINARY ASSETS
BUSINESS.

ordinary asset.
-SUBJECT TO CGTA. Sales of shares of stock of a
listed and not traded through
stock exchange by a non-dealer
securities:
B.
Sale or Other
Disposition of Real Property
subject to CGT:

list is
exclusive.
Tax
Treatment:
1.
Ordinary Gains
income.
2.
Ordinary Losses
income.

except:
1.

of a domestic
corporation; and
2.
1st P100,000.00 5%
10%

depreciation.
business.

SUBJECT TO CGT

the highest

Philippines held as
capital asset.
rates.
Tax Base:
Net Capital Gains
Tax Base:
transaction basis.
XPNS:
subdivisions
redemption
A NRA is not entitled to the
exemption of payment of
CGT in case of sale of
Principal Residence.
-NOT SUBJECT TO CGT
Fringe
Benefits
Regular Income Tax

Rates
gross income:
Holding Period
(NIRC, Sec 29 B)
(NIRC,Subject
Sec 29 C)
to Withholding Tax on
NELCOWAGES
(NIRC, Sec 29
Notes:
RANK AND FILE

SUPERVISORY /
1. Housing
2. Expense Account
dependents

25%
XPNS:
benefit by 75%
Gross Income of a Non-Resident Alien NOT

engaged in trade or business subject to
Income Tax
All

PARTNERS
SHARE IN THE
NET INCOME OF
THE GENERAL
PROFESSIONAL
PARTNERSHIP
RENT
S
COMPENSATI
GAINS FROM
DEALINGS IN
PROPERTY
ROYALTI
ES
ANNUITI
ES
GROSS
PENSIO
DIVIDEN
DS
INTERES
TS
GROSS INCOME
FROM
PROFESSION,
TRADE OR
PRIZES AND
WINNINGS
The following are

the taxpayers gross
income:
punitive damages
mistake;

Derived
-

not expressly
our laws.
rendered;
interest;
Source
5. Illegal gains;
income

debts recovered;
under
7. Subsidy; and
1988)
the campaign funds,
over the candidates
EXCLUSIONS FROM GROSS INCOME OF NON-RESIDENTALIEN

NOT ENGAGED IN TRADE OR BUSINESS
1.
2.
3.
4.


EXCLUSION
EXEMPTION
Refers to the
removal
of
otherwise
taxable
items
from the reach
of taxation
Refers
to
an
immunity
or
privilege,
freedom
from
charge
or
burden to which
other
persons
are subject to
tax
ITEMS OF
EXCLUSI
ONS

- PASSIVE INCOME
- PRIZES AND AWARDS
INDIVIDUALS
DEDUCTIONS FROM GROSS INCOME OF NON-RESIDENT ALIEN

NOT ENGAGED IN TRADE OR BUSINESS
NOTE: No deductions are allowed on a Non-Resident Alien not engaged in Trade or Business.
Special Classes of Individual Employees

SPECIAL CLASSES OF INDIVIDUAL
MINIMUM WAGE
MWEs shall be exempt from
the payment of income tax
and withholding tax. The
holiday pay, overtime pay,
nightshift differential and
hazard pay received by such
minimum wage earners shall
likewise be exempt from
income tax.
Individual whether FILIPINO or ALIEN

employed by the following:
Regional or area
headquarters and
regional operating
headquarters of
multinational
companies in the
Tax Rate: 15%
Tax Base: Gross income
received as salaries,
wages, annuities,
compensation,
remuneration and other
emoluments, such as
honoraria and
allowances.
Persons Liable:
Alien and Filipinos
occupying managerial
and technical positions
in said establishment.
Option
1:
Final
income
tax of:
15%
Filipinos
must be
holding a
manageri
al or
superviso
ry
position
though
there are
no aliens
holding
the same
position.
Option 2:
Graduate
d Rates
on
taxable
compensa
tion
income:
5%-32%
Offshore banking units

established in the
Philippines.
Foreign Service
contractors or subcontractors engaged in
petroleum operations
in the Philippines.
Tax Rate: 15%

wages, annuities,
compensation,
emoluments, such as
honoraria and
allowances.
Persons Liable:
Alien and Filipinos
Option
1:
Final
income
tax of:
15%
Filipinos
must be
holding a
manageri
al or
superviso
ry
position
AND
there are
aliens
holding
the same
Option 2:
Graduate
d Rates
on
taxable
compensa
tion
income:
5%-32%
Tax Rate: 15%

wages, annuities,
compensation,
emoluments, such as
honoraria and
allowances.
Persons Liable:
Alien and Filipinos
Option
1:
Final
income
tax of:
15%
Filipinos
must be
holding a
manageri
al or
superviso
ry
position
AND
there are
aliens
holding
the same
Option 2:
Graduate
d Rates
on
taxable
compensa
tion
income:
5%-32%
Fringe Benefits for Individual whether

FILIPINO or ALIEN employed by Regional or
area headquarters and regional operating
headquarters of multinational companies
in the Philippines, Offshore banking units
established in the Philippines or Foreign
Service contractors or sub-contractors
engaged in petroleum operations in the
Philippines.
WAGES
RANK AND FILE
Notes:
SUPERVISORY /
1. Housing
2. Expense Account
dependents

15%
XPNS:
benefit by 85%
EXCLUSIONS FROM GROSS INCOME OF Individual whether

FILIPINO or ALIEN employed by Regional or area headquarters
and regional operating headquarters of multinational
companies in the Philippines, Offshore banking units
established in the Philippines or Foreign Service contractors or
sub-contractors engaged in petroleum operations in the
Philippines.
1.
2.
3.
4.


EXCLUSION
EXEMPTION
Refers to the
removal
of
otherwise
taxable
items
from the reach
of taxation
Refers
to
an
immunity
or
privilege,
freedom
from
charge
or
burden to which
other
persons
are subject to
tax
ITEMS OF
EXCLUSI
ONS

- PASSIVE INCOME
- PRIZES AND AWARDS
INDIVIDUALS

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INDIVIDUALS

TAX BASE: Income derived

Tax Rates: Taxable Net

Amount of Net Taxable

But Not Over

P500 + 10% of the Excess over P10,000

P2,500 + 15% of the Excess over P30,000

P8,500 + 20% of the Excess over P70,000

P22,500 + 25% of the Excess over P140,000

P50,000 + 30% of the Excess over P250,000

Income Subject to GRADUATED RATES:

Final Withholding Tax on Passive Incomes

CAPITAL GAINS TAX

All properties not classified as

2. Property held by the taxpayer

Sales of shares of stock of a

4. Real property used in trade or

Note: The above-mentioned

OTHER CAPITAL ASSETS NOT

Unlisted shares of stock

Real property in the

Regular Income Tax

Subject to Withholding Tax on

RANK AND FILE

Subject to Fringe Benefit Tax Rate

income derived from whatever source, including but not

The following are

Meaning of the Phrase Gross Income from whatever

Indicates a legislative policy to include all

6. Tax refunds and bad

EXCLUSIONS FROM GROSS INCOME OF RESIDENT CITIZEN

They are not income, gain or profit.

EXCLUSION VS. EXEMPTION

4. COMPENSATION FOR INJURIES OR SICKNESS

DEDUCTIONS FROM GROSS INCOME OF RESIDENT CITIZEN

B. NON-RESIDENT CITIZENS (NRC)

A citizen of the Philippines

Leaves the Philippines

Has been previously

Amount of Net Taxable

But Not Over

P500 + 10% of the Excess over P10,000

P2,500 + 15% of the Excess over P30,000

P8,500 + 20% of the Excess over P70,000

P22,500 + 25% of the Excess over P140,000

P50,000 + 30% of the Excess over P250,000

Income Subject to GRADUATED RATES:

Final Withholding Tax on Passive

are not subject

Sales of shares of stock of a

Sale or Other Disposition of

6% on the gross selling

OTHER CAPITAL ASSETS NOT

2. Property held by the taxpayer

Net Capital Gains on a per

3. Personal Property used in

- Sale of Principal Residence

4. Real property used in trade or

-NOT SUBJECT TO CGT

Regular Income Tax

Unlisted shares of stock

Real property in the

Subject to Withholding Tax on

RANK AND FILE

Taxationlaw1 - Paulita's Draft (Individuals)

Taxationlaw1 - Paulita's Draft (Individuals)