TAXATION IN A NUTSHELL (Sec.

24B, NIRC)
PASSIVE INCOMES (Taxpayer did nothing to receive this income)
Rules:

1. In the application of this income tax, determination of whether there is gain or loss is immaterial because GAIN IS PRESUMED.
2. All income must be from sources within; otherwise it is not passive and subject to NIT where most of the taxpayers are exempt (NRC, NRAE,
NRANE, RFC and NRFC)
3. If income is from within but not subject to Final Income Tax, it is not automatically exempt, it may be subjected to NIT or GIT depending on the
status of the taxpayer.
3. Not applicable if sources is outside of the Philippines because there is no withholding agent there.
4. If income is subjected to FIT. It is no longer included in the ITR except: Sale of realty and sale of shares of stock subject to FIT (those not
traded in stock exchange)
5. Income earner is one liable nut if the withholding agent fails to withhold and pay the amount of FIT, the liability will be shifted on him.
6. For AEMOPS, depends on their status.

INDIVIDUALS
INCOME

RAT
E

20%
Bank
Interest
7.5%

R
C

NR
C

R
A

NRA
E

NRAN
E

CORPORATIO
NS
D RF NRF
C
C
C

1. Recipient must be
individuals
2. Interest earned in
the Philippines

GIT
of
25%
EXEM
PT
(24B)

Bank is Expanded Foreign

Currency Deposit System
(EFCDS)
1. Income derived from
the Phils.
2. Less than 10K

Prizes
(derived
from
contests and
promotions)

GIT
of
35%

20%

Tax law supplements /joel ofilan 2015Page 1

REQUISITES

NIT
(LAW
IS
SILEN

Note : NIT Applies if :

1. Income outside the
Phils.
2. More than 10K
3. Received by Corpos

EXCEPTIONS
Long
term
Deposits
(but
if
preterminated subject to following
rates:
4yrs less than 5 yrs = 5%
3yrs less than 4 yrs = 12%
Less than 5 yrs = 20%
Depositor is Non-resident, interest
earned is Exempt from tax
1. 32B7c prizes & awards in
recognition
of
charitable,
scientific, education, artisitic,
literary or civic achievements
(exclusions frpm Gross)
Provided :
A. No action on the part of
the recipient to enter said
contest;
B. He is not required to
render substantial future

NOTES

If FIT does not Apply. Apply

NIT or GIT depending on
the taxpayer

If FIT does not Apply. Apply

NIT or GIT depending on
the taxpayer

If FIT does not Apply. Apply

NIT or GIT depending on
the taxpayer

services as a condition to
receive the prize.
2. RA 7549 those given to
athletes sanctioned by their
national associations

INDIVIDUALS
RATE
R
C

WINNIN
GS

NR
C

R
A

NRA
E

NRAN
E

D
C

RF
C

20%

20%
ROYALTIE
S
10 %

TAXABLE
DIVIDEN

10%

Tax law supplements /joel ofilan 2015Page 2

REQUISITES

GIT
of
25
%

EXCEPTIONS

NOTES

NRFC

111

INCOME

CORPORATIO
NS

GIT
of
35%

Income derived from the

Phils.

1. It must be issued
by a DC.
2. Must be received

1. Inco
me
deri
ved
fro
m
the
Phil
s.
2. Mus
t be
rec
eive
d
by
indi
vid
uals

Winning
from Lotto
and
sweepsta
kes
(subject
to NIT)

If received
by
Corpo
subject to
NIT or GIT.
If FIT does
not Apply.
Apply NIT
or
GIT
depending
on
the
taxpayer.

Received by NRANE and NRFC

Stock Dividends and Liquidating

dividends because there is no

If issuer is a foreign
Corporation, apply the rule on
intercorporate dividends;

DC- DC = exempt

DS
(Cash &
Property
only other
kinds are
either
exempt or
subject to
NIT)

by individuals

25A2

20%

GIT
of
25
%

INDIVIDUALS
INCOME

Tax on
Sales of
Share
not
traded

CORPORATIO
NS

RATE
R
C

NR
C

R
A

NRA
E

Not over
P100K
5% and in
excess
thereof
10%
Tax base :
Net capital
Gain

Tax law supplements /joel ofilan 2015Page 3

EXEM

GIT OF
35%
subject
to tax
deemed
paid
credit
rule
hence
15%

NRAN
E

D
C

RF
C

gain presumed.
Except : Cancellation and
redemption

DC-RFC = exempt
DC-NRFC = FIT 15/30%
FC DC = NIT
*FC-RFC = within =NIT
w/o = exempt
*FC NRFC = within =GIT
w/o = exempt
*Apply the 50 and 3 years
rule to determine if income
is within or w/o

REQUISITES

EXCEPTIONS

NOTES

NRFC
25A3

25B

1. Stock
being
sold is
a
share
in a DC
(incom
e
within)
2. Must
be
a
capital
asset
3. Must
not be

Those
sold by a
broker or
dealer,
which is
an
ordinary
asset.

Subject to
Holding
period
1. If
hel
d
mor
e
tha
n
12
mos
.
and

listed
and
traded
in
stock
exchan
ge ( if
listed
and
traded

Percen
tage
tax
applies
, Sec.
127
NIRC)
4. Seller
is the
stockh
older
himself

(see
discussion
s on
Sababan
Notes
page51)

all
the
ele
me
nts
are
pre
sen
t
50
%
of
Net
Cap
ital
gai
ns
are
exe
mpt
,
the
rem
aini
ng
50
% is
subj
ect
to
inco
me
tax
2. If
hel
d
less
tha
n
12
mos
.
100

Tax law supplements /joel ofilan 2015Page 4

% is
subj
ect
to
inco
me
tax

Tax law supplements /joel ofilan 2015Page 5