GENERAL PRINCIPLES OF INCOME TAXATION IN THE PHILIPPINES (Sec.

23)

(1) RESIDENT CITIZEN – Sources from within and without the Philippines

(2) NONRESIDENT CITIZEN - Sources from within the Philippines

(3) OFW & SEAMEN – Sources from within the Philippines

(4) DOMESTIC CORPORATION - Sources from within and without the Philippines

(5) RESIDENT & NONRESIDENT ALIEN - Sources from within the Philippines

(6) FOREIGN CORPORATION - Sources from within the Philippines

INCOME TAX RATES (Sec. 24, A)

 For married individuals, their individual incomes shall be computed separately

based on their respective taxable income. Provided, that if any income cannot be
attributed definitely attributed to any one of them the same shall be divided equally
between the spouses for purposes of determining their respective taxable income.

 Minimum wage earners are exempt from the payment of income tax on their taxable
income.

RATES ON CERTAIN PASSIVE INCOME (Sec. 24, B)

(A) Interests, Royalties, Prizes, and other winnings

Final Tax of 20%:

 Any currency bank deposit and yield

 Any other monetary benefit from deposit substitutes, trust funds, & similar
arrangements
 Royalties (XPN: Royalties on books, other literary works, & musical
compositions, a final tax of 10% will apply)
 Prizes (XPN: Prizes amounting to P 10,000 or less, income tax of 5% will
apply)
 Other winnings (XPN: PCSO and Lotto Winnings)

Final Tax of 7.5%:

 Interest income from a depositary bank under the foreign currency deposit
system (XPN: Nonresident individual)
 Interest from long-term deposits
 GR: Exempt from tax under this section
 XPN: termination before the 5th year, final tax shall be imposed on the entire
income , deducted and withheld by the depositary bank from the proceeds of
such:
 4 to less than 5 years – 5%
 3 to less than 4 years – 12%
 less than 3 years – 20%

(1) Cash and/or property dividends

Final Tax of 10%:

On income received by an individual from a domestic corporation or from a joint

stock company, insurance or mutual fund companies operating headquarters of
multinational companies OR share of an individual in the distribution of net income
after tax of a partnership (XPN: GPP), or share of an individual from the net income
after tax of an association, a joint account, or a joint venture or consortium taxable
as a corporation of which he is a member or co-venturer.

CAPITAL GAINS FROM SALE OF SHARES OF STOCK NOT TRADED IN THE STOCK
EXCHANGE (Sec. 24, C)

imposed upon the net capital gains realized during the taxable year from the sale, barter,
exchange or other disposition of shares of stock in a domestic corporation, except shares
sold, or disposed of through the stock exchange.

 Not over P100,000 – 5%

 On any amount in excess of P100,000 – 10%

CAPITAL GAINS FROM SALE OF REAL PROPERTY (Sec. 24, D)

Final tax of 6% based on the gross selling price or current FMV as determined by Sec. 6 (E)
of this Code:

(E) Authority of the Commissioner to Prescribe Real Property Values. - The

Commissioner is hereby authorized to divide the Philippines into different zones or
areas and shall, upon consultation with competent appraisers both from the private
and public sectors, determine the fair market value of real properties located in each
zone or area. For purposes of computing any internal revenue tax, the value of the
property shall be, whichever is the higher of:

(1) The fair market value as determined by the Commissioner; or

(2) The fair market value as shown in the schedule of values of the Provincial
and City Assessors.
XPN: Disposition of Principal Residence (Exempt from payment of CGT)
 Proceeds are fully utilized for acquiring or constructing a new principal residence
within 18 months