Jan 2018-2022 RATE FOR INDIVIDUALS 24 A-2-a

Not over 250,000 0%

Over 250,000 but not over 400,000
Over 400,000 but not over 800,000
Over 800,000 but not over 2,000,000
Over 2,000,000 but not over 8,000,000
Over 8,000,000
TAX RATE FOR NON-RESIDENT ALIENS
Non-resident not engaged
20% excess of 250,000
30,000 + 25% excess 400,000
130,000 + 30% excess 800,000
490,000 + 32% excess 2,000,000
2,410,000 +35% excess 8,000,000
25%

Graduated – Tax base is Net income

8% - Tax base is Gross income

Note:

1. Provided: Minimum wage earners and their holiday pay shall be exempt
2. Self-employed individuals have the option to avail of an 8% tax on gross sales in excess of
250,000 and percentage tax under 116 (maam: the 8% kicks in after reducing the 250K)
3. For mixed earners:
a. Income from Compensation- Rates in 24-A-2-a
b. Income from business:
i. Not exceed the VAT Threshold- A-2-a OR 8% and percentage tax under 116
ii. If exceeds the VAT threshold- 24-A-2-a
 RULES FOR INCOME TAX:
(Sec. 109[BB]) VAT THRESHOLD – 3M
P Compensational – Graduated
P SEP – if under VAT THRESHOLD + Opts for 8% (reduce the 250K THEN apply the 8%)
If EXCEEDS VAT – graduated
Mixed Income – Split into Comp and SEP  apply rules above
o 250k doesn’t exist here because its assumed nandun na sa Graduated portion
o SEP portion here is always full 8%

Minimum wage earners
Non-resident engaged in trade or business
Non-resident citizen including OFWs
Worker in the private sector paid the statutory
minimum wage or to an employee in the public
sector with compensation income on not more
than the statutory minimum wage
A nonresident alien individual who shall come to
the Philippines and stay therein for an aggregate
period of more than one hundred eighty (180)
days during any calendar year shall be deemed a
'nonresident alien doing business in the
Philippines'
An individual citizen of the Philippines who is
 working and deriving income from abroad as an
overseas contract worker is taxable only on
income derived from sources within the
Philippines: Provided, That a seaman who is a
citizen of the Philippines and who receives
compensation for services rendered abroad as a
member of the complement of a vessel engaged
exclusively in international trade shall be treated
as an overseas contract worker
Mixed income earners Taxpayers earning both compensation income and
income from business or practice of profession

PASSIVE INCOME

Non-resident citizens taxed CITIZEN/RESIDENT ALIEN NON RESIDENT ALIEN NRA NOT
same as Citizen EXC: for ENGAGED IN TRADE ENGAGED IN
income outside PH (SAME 20% BASE AS 1ST TRADE (25% when
COLUMN WHEN NOT nothing provided)
[FCD/OBUs] STATED)
Interest from bank deposits; 20% 20% 25%
trust funds; royalties; prizes
exceeding 10,000; other
winnings
Books, other literary works 10% 10% 25%
and musical compositions
Royalties on 20% (Royalties in 25% (Sec. 28B2) 25%
cinematographic films and General)
similar works
Winnings amounting to Exempt Exempt Exempt
10,000 or less from PCSO
Winnings amounting to Graduated 24 (A) Graduated 24 (A) 25%
10,000 or less (Prizes
amounting to 10,000 or less)
Interest income received 15% Exempt Exempt
from depository bank under
the expanded foreign
currency deposit system
Interest income from long Exempt Exempt 25%
term deposit or investment
in the form of savings,
common, or individual trust Except: If preterminated Except: If
funds, deposit substitutes, before the 5th year tax preterminated before
investment management will be imposed based on the 5th year tax will be
accounts, and other the remaining maturity: imposed based on the
investemnets evidenced by remaining maturity:
certificates 4-5 years 5%
3-4 years 12% 4-5 years 5%
Less than 3 years 20% 3-4 years 12%
Less than 3 years 20%
Cash/property dividends 10% 20% 25%
received from domestic
corporation or from a joint
stock company, insurance,
MF, or shares in net income
after tax of a partnership,
association, joint account,
joint venture, consortium
Cash/property dividends Graduated
received from foreign
corporation IN PH
Cash/property dividends Exempt Exempt Exempt
received from foreign
corporation NOT IN PH
Alien individuals employed N/A 15% gross
by regional or area HQ and
Regional Operating HQs of AFTER JAN. 1 2018 =
MN companies (except GRADUATED SCALE
those registered in SEC after
January 1, 2018)
Alien individual employed N/A 15% gross
by offshore banking units
(except those registered in AFTER JAN. 1 2018 =
SEC after January 1, 2018) GRADUATED SCALE
Alien individual employed 15% gross
by Petroleum Contractor
and Subcontractor (except AFTER JAN. 1 2018 =
those registered in SEC after GRADUATED SCALE
January 1, 2018)

CAPITAL GAINS

From stocks not listed in stock 15% on net capital gains 15% on net capital gains 15% on net capital gains
exchange not listed in stock
exchange
From stocks listed in stock
exchange?
Capital gains from sale, 6% (Gross selling price 6% (Gross selling price 6% (Gross selling price
exchange, disposition of real OR FMV; whichever is OR FMV; whichever is OR FMV; whichever is
property in the ph higher) higher) higher)
EXEMPTION: sale of principal
residence
Requirements:
1. Historical cost adjusted
basis of old property be
carried over to new
property
2. Commissioner is duly
notified within 30 days
from date of sale
3. Once only ever 10 years
EXEMPTION: Sale of EXEMPTION: N/A (Di na EXEMPTION: N/A (Di na
principal residence, sila Resident if that were sila Resident if that were
proceeds to be utilized the case) the case)
w/in 18 months from
sale (needs proof)
>ONLY USED ONCE
EVERY 10 YEARS
IF NOT FULLY UTILIZED:
>portion not utilized is
subject to CGT
FMV/Gross selling x
unutilized/Price it was
sold
(ex. 100k but 20k
unused: 100 x 20/100?)

Sales to Government, 6% AS STATED ABOVE 6% AS STATED ABOVE 6% AS STATED ABOVE

Agencies, GOCCs OR Sec 24 (A), at the OR Sec 24 (A), at the OR Sec 24 (A), at the
option of taxpayer option of taxpayer option of taxpayer

25 C/D/E (Aliens employed by RHQ, ROHQ, OBU, Petroleum Contractors) = 15% preferential tax
 same tax treatment shall apply to Filipinos employed and occupying the same position as those of
aliens employed by these multinational companies. (PH citizens taxed this way rin kahit under
NRA yung section na to)
 F: Preferential tax won’t apply for such applying w/ SEC AFTER Jan. 1, 2018
o MAAM: Veto only took out the freeze provision (Jan. 1, 2018)  BUT!! C/D/E still exists so
pointless
 Walang Jurisprudence  BUT they’re just using the “intent of the President” SO
GRADUATED RATE
CORPORATIONS

DOMESTIC (SEC. 27)

Corporations, in general; (27a) 30% of taxable income

Corporations, agencies, instrumentalities owned
or controlled by the Government; (27c)
Proprietary educational institutions and hospitals,
if the gross income from unrelated trade, business
or other activity exceeds fifty percent (50%) of the
total gross income derived by such educational
institutions or hospitals from all sources (27b-
EXCEPTION)
Option for 15% of gross income if the ff:
(1) A tax effort ratio of twenty percent (20%) of
Gross National Product (GNP);
(2) A ratio of forty percent (40%) of income tax
collection to total tax revenues;
(3) A VAT tax effort of four percent (4%) of
GNP; and
(4) A 0.9 percent (0.9%) ratio of the
Consolidated Public Sector Financial Position
(CPSFP) to GNP.

MCIT applies
Proprietary educational institutions and hospitals 10%
which are nonprofit (27b)
30% if more than 50% of gross income from
unrelated trade
GSIS, SSS, PHIC, local water districts Exempt
 Educational
o 60% profit 40% tuition = 30% ENTIRE INCOME
o 40% profit 60% tuition = 10% ENTIRE INCOME

PASSIVE INCOME (EXCLUSIVE ENUMERATION IN 27d)

Interest on currency bank deposit and yield or any 20%

other monetary benefit from deposit substitutes
and from trust funds and similar arrangements
received by domestic corporations, and royalties,
derived from sources within the Philippines
FCDU 15%
Prizes and Winnings 30% (Standard rate in 27A since walang
Cash/Property Dividends enumerated nito)
Intercorporate Dividends from Domestic Corp Exempt
(27d4)

CAPITAL GAINS (STILL UNDER PASSIVE)

Real Property (Sale, Exchange, 6% based on the gross selling price of

Disposition of Lands and/or Buildings fair market value as determined in
w/c are not actually used in business + accordance with Section 6(E) of this
Code, whichever is higher (SO ALSO
 treated as capital assets) (27d5) GROSS SELLING PRICE OR FMV)

Shares of Stock not listed/traded in PSE 15% FT

(27d2)

FOREIGN (Sec. 28)

Resident

Corporations, in general; (28a1) 30% taxable income

Option to be taxed at 15% (Sec. 27a)

MCIT applies
Proprietary educational institutions and hospitals 10%
which are nonprofit (27b)
SPECIAL CORPORATIONS
2.5% on Gross Philippine Billings
OPTION: preferential tax rate based
on applicable tax treaty (1.5% daw
accdg. To maam)
 ‘Gross Philippine Billings’
refers to the amount of gross
revenue derived from carriage
International Carriers (Air or Sea) of persons, excess baggage,
1) Air Carrier cargo, and mail originating
2) Shipping from the Philippines in a
continuous and uninterrupted
flight, irrespective of the place
Maam: Important is 1) originating from PH 2) continuous and
of sale or issue and the place
uninterrupted flight
of payment of the ticket or
RR: Stopover is an acceptable break for transhipment
passage document
> Change in airline will break this chain
 OR gross revenue whether for
passenger, cargo or mail
originating from the
Philippines up to final
destination, regardless of the
place of sale or payments of
the passage or freight
documents.

10% - if residents OTHER THAN

Offshore Banking Units OFFSHORE BANK UNITS
 Exempt if OBU receives
Regional or Area HQ (Supervisory lang, coordinating center) Exempt

Regional Operating HQ (Actual Operating: business planning, general

10% of taxable income
administration and planning, etc)

15% of total profits for remittance

BRANCH PROFIT REMITTANCE TAX (BPRT) w/o deduction for tax component
EXC: PEZA activities

Non-Resident

IN GENERAL 30% FT

Non-resident cinematographic film owner, lessor or

25% of gross income
distributor

4.5% of gross rentals, lease,

Non-resident owner or lessor of vessels
or charter fees

Non-resident owner or lessor of aircraft, machineries and

7.5% of gross rentals or fees
equipment

CAPITAL GAINS TAX

30% FT (NONE PROVIDED SO GR OF 30%)

Real Property

P100,000 and below - 5%


Shares of Stock not listed/traded in PSE
>P100,000 - 10%

Gross income includes all of the income a person receives during a year that is not explicitly exempt
from taxation, whereas taxable income is the amount of income that is actually subject to taxation,
after all allowable deductions or exemptions have been subtracted from the gross income.

Sec. 27 E4 - 'gross income' shall mean gross sales less sales returns, discounts and allowances and cost
of goods sold. ‘Cost of goods sold' shall include all business expenses directly incurred to produce the
merchandise to bring them to their present location and use
MCIT – DOMESTIC/FOREIGN RESIDENT
 2% on Gross income; 4th taxable year after corp. commences operations IF greater than 30% FT
on Taxable income (SO WHICHEVER IS GREATER)
o Ex. Start 2014  Start on 2018
 Excess of MCIT over the normal income tax shall be carried forward and credited against normal
income tax for the 3 immediately succeeding years.
o Only applies if Regular Income Tax is greater than the MCIT carry over

 Relief from MCIT

MCIT may be suspended by the Sec. of Finance when corporation’s losses are due to:
o (1) Prolonged labor dispute
o (2) Force majeure
o (3) Legitimate business reverses
 GROSS INCOME (Sec. 27e4) – Only business expenses are reduced
o IF GOODS: gross sales less 1) sales returns 2)discounts and allowances 3) cost of goods
sold
 Cost of goods sold shall mean all business expenses directly incurred to product
the merchandise to bring them to their present location and use.
o IF SERVICES: gross receiptsless 1) sales returns 2)discounts and alowances 3) cost of
services
 Cost of services shall mean all direct costs and expenses necessarily incurred to
provide the services required by the customers and clients.
 TAXABLE INCOME (Sec. 31) - pertinent items of gross income specified in this Code, less
the deductions, if any, authorized for such types of income by this Code or other special
laws