Taxation 1 (Income Taxation) TAX

Notes Passive Income subject to FINAL TAX RATE

Interests from any currency bank deposit and yield or any other
monetary benefit from deposit substitutes and from trust funds and
similar arrangements.
20%
*Example: Interest from BPI Savings Deposit
Graduated Rates Interest income received by an individual taxpayer from a
under TRAIN LAW: depository bank under the expanded foreign currency deposit system.
*except (a NON-RESIDENT INDIVIDUAL)
15%
Range of Taxable Tax Due = a + (b x c) Proceeds of predetermined long-term deposit or investment in the form of
Income savings, common or individual trust funds, deposit substitutes, investment
management accounts and other investments evidenced by certificates in such
Not Basic Additional Of form as prescribed by the BSP
Over Over Amount Rate excess *the final tax shall be based on the remaining maturity of the investment:
5%
over - 4 years but LESS than 5 years
- 250,000 - - - 12%
- 3 years but LESS than 4 years
250,000 400,000 - 20% 250,000 20%
- LESS than 3 years
400,000 800,000 30,000 25% 400,000
Royalties – general (Example: Royalty from Invention) 20%
- Except: on books and other literary works and musical compositions
800,000 2,000,000 130,000 30% 800,000 10%
2,000,000 8,000,000 490,000 32% 2,000,000 Prizes (Example: Prize in a Painting Competition amounted to 50,000)
*except prizes amounting to 10,000 or less.
20%
8,000,000 - 2,410,000 35% 8,000,000 Winnings
*except PCSO and Lotto winnings amounting 10,000 or less.
20%
Cash and Property Dividends 10%
*Example: Dividends received from a Domestic Corporation
Capital Gains from Sale of Shares of Stock NOT traded in the Stock Exchange 15%
Capital Gains from Sale of Real Property located in the Philippines 6%

Source: Ballada, Win & Ballada, Susan, Income Taxation – Made Easy 2019, 17th Edition
 (Individuals)  Non-Resident
On Passive  Resident Citizen
 Non-Resident Citizen
Alien Engaged in
Trade or Business
in the Philippines
Income  Resident Alien (NRA-ETB)

Interests from any currency bank deposit and yield or any other monetary benefit 20% 20%
from deposit substitutes and from trust funds and similar arrangements.
*Example: Interest from BPI Savings Deposit
Interest income received by an individual taxpayer from a depository bank under 7.5% EXEMPT
the expanded foreign currency deposit system. (Non-resident citizen is tax exempt)
Interest income from long-term deposit or investment in the form of savings, EXEMPT EXEMPT
common or individual trust funds, deposit substitute, investment management accounts
(IMA) and other investments evidenced by certificates in such form prescribed by the
BSP with 5 year term or longer.
Proceeds of predetermined long-term deposit or investment before the 5th year:
- 4 years but LESS than 5 years 5% 5%
- 3 years but LESS than 4 years
12% 12%
- LESS than 3 years
20% 20%
Royalties – general (Example: Royalty from Invention) 20% 20%
Royalties on books and other literary works and musical compositions 10% 10%
Prizes 20% 20%
*Example: Prize in a Painting Competition amounted to 50,000
*except prizes amounting to 10,000 or less.

Winnings 20% 20%

*except PCSO and Lotto winnings amounting 10,000 or less.
*PCSO and Lotto winnings are tax exempt.

Source: Ballada, Win & Ballada, Susan, Income Taxation – Made Easy 2019, 17th Edition
 DOMESTIC CORPORATION
TAX BASE TAX RATE
1. In General 1. Taxable Income from All Sources (Income 30%
within/out)
2. Minimum Corporate Income Tax 2. Gross Income 2%
3. Improperly Accumulated Earnings Tax 3. Improperly Accumulated Taxable Income 10%

Proprietary Educational Institution Taxable Income from All Sources 10%

(Income within/out)

Non-stock, Non-Profit Hospital Taxable Income from All Sources 10%

(Income within/out)

GOCC, Agencies and Instrumentalities

(See 1a-1b)
National Government % LGUs 1a – General 30%
1b – MCIT 2%
Taxable Partnership

Exempt Corporation
1. On Exempt Activities 0%
2. On Taxable Activities (See 1a-1b)
1a – General 30%
1b – MCIT 2%

General Professional Partnership EXEMPT

Rate specified under the
Corporation covered by Special Laws respective special laws

Source: Ballada, Win & Ballada, Susan, Income Taxation – Made Easy 2019, 17th Edition
 RESIDENT FOREIGN CORPORATION
TAX BASE TAX RATE
1. In General 1. Taxable Income from All Sources 30%
(Income within/out)
2. Minimum Corporate Income Tax 2. Gross Income 2%
3. Improperly Accumulated Earnings 3. Improperly Accumulated Taxable Income 10%
Tax

International Carriers Gross Philippine Billings 2.50%

Regional Operating Headquarter (ROH) Taxable Income (within) 10%

Gross Taxable Income on Foreign 10%

Currency Trans.
Offshore Banking Unit (OBUs) 30%
On Taxable Income other than Foreign
Currency Transaction
Gross Taxable Income on Foreign 10%
Foreign Currency Deposit Units (FCDU) Currency Trans.
30%
On Taxable Income other than Foreign
Currency Transaction

Corporation covered by Special Laws Rate specified under the respective

special laws

Source: Ballada, Win & Ballada, Susan, Income Taxation – Made Easy 2019, 17th Edition
 NON-RESIDENT FOREIGN CORPORATION
Tax Base Tax Rate
Cinematographic Film Owner, Lessor Gross Income 25%
or Distributor

Owner or Lessor of Vessels Gross rentals, charters and other fees 4.50%
Chartered by Philippine Nationals

Owner or Lessor of Aircraft, Gross rentals, charters and other fees 7.50%
Machinery and Other Equipment

Source: Ballada, Win & Ballada, Susan, Income Taxation – Made Easy 2019, 17th Edition
 DOMESTIC RESIDENT
ON PASSIVE INCOME CORPORATION CORPORATION
Interests

Interests from bank deposit and yield or any

other monetary benefit from deposit substitutes 20% 20%
and from trust funds and similar arrangements.

Interest income from a depository bank under the

expanded foreign currency deposit system. 7.50% 7.50%
Income derived by a depository bank under the
expanded foreign currency deposit system from
foreign currency transactions with local
commercial banks, including branches of foreign 10% 10%
banks that may be authorized by the BSP,
including interest income from foreign currency
loans.

Royalties 20% 20%

Dividends

Dividends received by a domestic/resident EXEMPT EXEMPT

foreign corporation from a domestic corporation
Capital Gains

Capital Gains on the net capital gain from sale,

exchange or other disposition of shares of stock
in a domestic corporation NOT TRADED in the
stock exchange
- Not over P100,000 5% 5%
- Amount on excess of P100,000 10% 10%

Source: Ballada, Win & Ballada, Susan, Income Taxation – Made Easy 2019, 17th Edition
 ALLOWABLE DEDUCTIONS (CORPORATION)
NOTE: Only one (1) Allowable Deductions

Optional Standard Deduction *amount not exceeding 40% of its

gross income

Itemized Deduction

TAX BASE TAX RATE

Gross Income Tax (GIT) Gross Income 15%

Estates and Trusts Gross Income Graduated Rates Table

Source: Ballada, Win & Ballada, Susan, Income Taxation – Made Easy 2019, 17th Edition