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INCOME TAXATION

INCOME TAXPAYER

TAXABLE
INCOME

EXEMPTIONS ALLOWED
TAX RATES

PERSONAL

ADDITIONAL

DEDUCTIONS
ALLOWED

OPTIONAL
STANDARD
DEDUCTIONS

Rule: NO
Exception:
Premium Payments
on Health and/or
Hospitalization
Insurance

NO

INDIVIDUAL
Taxable compensation arising
from employer-employee
relationship- 5% - 32%
graduated rate

Resident Citizen (RC)

Non-Resident Citizen (NRC)

Resident Alien (RA)

Non-Resident Alien Engaged


in Trade and Business
(NRA-ETB)

All sources (within


and without the
Philippines)

Income from
sources within the
Philippines

Income from
sources within the
Philippines

Income from
sources within the
Philippines

Taxable income arising from


business and other income- 5% 32% graduated rate

Taxable compensation arising


from employer-employee
relationship- 5% - 32%
graduated rate
Taxable income arising from
business and other income- 5% 32% graduated rate
Taxable compensation arising
from employer-employee
relationship- 5% - 32%
graduated rate
Taxable income arising from
business and other income- 5% 32% graduated rate
Taxable compensation arising
from employer-employee
relationship- 5% - 32%

YES

YES

YES

YES
(NOTE:
Deductible first
from
compensation
income, the
excess from other
income)

YES

YES

YES

Rule: NO
Exception:
Premium Payments
on Health and/or
Hospitalization
Insurance

NO

YES

YES

YES

YES

YES

YES

Rule: NO
Exception:
Premium Payments
on Health and/or
Hospitalization
Insurance

NO

YES

YES

YES

YES

YES
condition:
reciprocity rule

NO

Rule: NO
Exception:
Premium Payments

NO

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San Beda College of Law


2012 CENTRALIZED BAR OPERATIONS

YES
RATE: 40% of his
gross sales or
gross receipts

158

TAXATION LAW
Income Taxation

INCOME TAXPAYER

EXEMPTIONS ALLOWED

TAXABLE
INCOME

TAX RATES

PERSONAL

ADDITIONAL

graduated rate

Taxable income arising from


business and other income- 5% 32% graduated rate

DEDUCTIONS
ALLOWED

OPTIONAL
STANDARD
DEDUCTIONS

on Health and/or
Hospitalization
Insurance
YES
condition:
reciprocity rule

NO

YES

NO

NO

NO

NO

NO

NO

NO

NO

NO

N/A

N/A

N/A

25% on gross income derived


from business
Non-Resident Alien Not
Engaged in Trade and
Business (NRA-NETB)

Special Classes of Individual


Employees (whether Filipino
or Alien) employed by:
1) Regional Area
Headquarters or
Regional Operating
Headquarters in the
Philippines
2) Offshore banking units
established in the
Philippines;
3) Foreign service
Contractors or
subcontractor engaged
in petroleum operations
in the Philippines

Income from
sources within the
Philippines

Gross Income derived from


business equivalent to gross
sales less returns, discounts, and
allowances and cost of goods
sold.
15% on Gross income received
as salaries, wages, annuities,
compensation, remuneration and
other emoluments, such as
honoraria and allowances.

Income from
sources within the
Philippines

NOTE: For other sources within


the Philippines, income shall be
subject to pertinent income tax
(graduated tax rates, final tax on
passive income, capital gains
depending whether a citizen or
an alien), as the case may be.

Passive Income subject to final tax


1)
RC, NRC, RA

Interest Income

20% - from any currency


deposit and yield or other
monetary benefit from
deposit substitute and from
trust funds and similar
arrangements.

N/A

INCOME TAXPAYER

EXEMPTIONS ALLOWED

TAXABLE
INCOME

TAX RATES
2)

3)

1)

2)

NRA-ETB
3)

1)
NRA-NETB

7.5% - From a depository


bank under the expanded
foreign currency deposit
system (FCDS) and an
offshore banking unit (OBU)
(exception: NRC)
From long-term deposit or
investment
a) Held for more than 5
years Exempt
b) 4 yrs less than 5 yrs
5%
c) 3 yrs less than 4 yrs.
12%
d) Less than 3 yrs. 20%
20% - From any currency
deposit and yield or other
monetary benefit from
deposit substitute and from
trust funds and similar
arrangements.
EXEMPT - From a
depository bank under the
expanded foreign currency
deposit system (FCDS) and
an offshore banking unit
(OBU)
From long-term deposit or
investment
a) Held for more than 5
years Exempt
b) 4 yrs less than 5 yrs
5%
c) 3 yrs less than 4 yrs.
12%
d) Less than 3 yrs. 20%
25% - from any currency
deposit and yield or other
monetary benefit from
deposit substitute and from

OPTIONAL
STANDARD
DEDUCTIONS

PERSONAL

ADDITIONAL

DEDUCTIONS
ALLOWED

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

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San Beda College of Law


2012 CENTRALIZED BAR OPERATIONS

160

TAXATION LAW
Income Taxation
TAXABLE
INCOME

INCOME TAXPAYER

RC, NRC, RA, NRA-ETB


Royalties
NRA-NETB

RC, NRC, RA, NRA-ETB

1)
RC, NRC, RA
2)

3)

Cash / Property
Dividends from
Domestic
Corporations
Share in the
distributable net
income after tax
of a business
partnership,
Share in the net
income after tax
of an
association, a

OPTIONAL
STANDARD
DEDUCTIONS

PERSONAL

ADDITIONAL

DEDUCTIONS
ALLOWED

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

NOTE: Prizes less than P10,000


subject to graduated rates
25% on prizes

N/A

N/A

N/A

N/A

10% final tax

N/A

N/A

N/A

N/A

20% final tax

N/A

N/A

N/A

N/A

trust funds and similar


arrangements.
2) EXEMPT - From a
depository bank under the
expanded foreign currency
deposit system (FCDS) and
an offshore banking unit
(OBU)
3) 25% - From long-term
deposit or investment
1) 20% - Royalties in General
2) 10% - From books, literary
works and musical
compositions
1) 25% - Royalties in General
2) 25% - From books, literary
works and musical
compositions
20% on prizes exceeding
P10,000 and winnings (not
subject to the P10,000 limit).

Prizes and Winnings

NRA-NETB

NRA-ETB

EXEMPTIONS ALLOWED
TAX RATES

INCOME TAXPAYER

NRA-NETB

RC
NRC, RA
RC, NRC, RA
NRA-ETB, NRA-NETB

EXEMPTIONS ALLOWED

TAXABLE
INCOME
joint account, or
a joint venture
or consortium
taxable as a
corporation of
which he is a
member or coventurer.
Cash / Property
Dividend from
Foreign
Corporations
Cinematographic
Film and Similar
Works

OPTIONAL
STANDARD
DEDUCTIONS

PERSONAL

ADDITIONAL

DEDUCTIONS
ALLOWED

25% final tax

N/A

N/A

N/A

N/A

5%-32% Graduated rates

N/A

N/A

N/A

N/A

If considered as income within


5%-32%graduated rates

N/A

N/A

N/A

N/A

5%-32% Graduated rates

N/A

N/A

N/A

N/A

25% final tax

N/A

N/A

N/A

N/A

YES, if taxed under


NCIT otherwise,
NO

YES, if taxed
under NCIT
otherwise, NO

NO

NO

TAX RATES

TAX ON CORPORATIONS
1)

2)
3)
4)
Domestic Corporations (DC)

Income within and


without
5)

6)

NCIT - 30% (effective


January 1, 2009) on the
taxable income
Capital Gains Tax
Final tax on passive income
same rules as those
imposed on individuals
MCIT 2% Gross income
EXCEPT income exempt
from income tax and income
subject to final withholding
tax
Effective January 1, 2000,
the President through the
Sec. Finance may allow DC
the option to be taxed at
15% of gross income.
IAET 10% on improperly
accumulated taxable income
(in addition to other taxes)

N/A

N/A

Special Domestic Corporations


1)

Proprietary Educational
Institutions and Nonprofit Hospitals

Rule: 10% of the net income


except those subject to capital
gains tax and passive income

N/A

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San Beda College of Law


2012 CENTRALIZED BAR OPERATIONS

N/A

162

TAXATION LAW
Income Taxation

INCOME TAXPAYER

EXEMPTIONS ALLOWED

TAXABLE
INCOME

TAX RATES

PERSONAL

ADDITIONAL

DEDUCTIONS
ALLOWED

N/A

N/A

NO

N/A

YES, if taxed under


NCIT otherwise,
NO

OPTIONAL
STANDARD
DEDUCTIONS

NO

subject to final tax (stock, nonprofit plus other requisites above


discussed)
Exceptions:
30% IF the gross income
from unrelated trade,
business or other activity
exceeds 50% of the total
gross income derived from
all sources;
b) Exempt if non stock nonprofit PRIVATE
educational institution and
hospital
Rule: Exempt from all taxes,
except net income from such
transactions as may be specified
by the Secretary of Finance,
upon recommendation by the
Monetary Board to be subject to
the regular income tax payable
by banks.
a)

2)

Depositary Banks
(FCDS)

Resident Foreign
Corporation engaged in
trade or business (RFC)

Income within only

Exceptions: Final tax of 10% on


interest income from foreign
currency loans granted by such
depository banks under said
expanded system to residents
other than offshore units in the
Philippines or other depository
banks under the expanded
system.
1) NCIT - 30% (effective
January 1, 2009) on the
taxable income
2) Capital Gains Tax
3) Final Tax on Passive income
4) MCIT 2% Gross income

N/A

YES, if taxed
under NCIT
otherwise, NO

INCOME TAXPAYER

EXEMPTIONS ALLOWED

TAXABLE
INCOME

TAX RATES

5)

6)

PERSONAL

ADDITIONAL

DEDUCTIONS
ALLOWED

OPTIONAL
STANDARD
DEDUCTIONS

NO

NO

NO

NO

EXCEPT income exempt


from income tax and income
subject to final withholding
tax
Effective January 1, 2000,
the President through the
Sec. Finance may allow
RFC the option to be taxed
at 15% of gross income.
BRANCH PROFIT
REMITTANCE TAX 15%
of total profit applied or
earmarked for remittance
without any deduction for tax
component thereof

Special Resident Foreign Corporations


1)

2)

3)

International Carriers

Off Shore Banking Units


authorized by BSP

Resident Depositary
Bank (FCDU)

2.5% on Gross Philippine Billings


Rule: Exempt
Exception: It is subject to final
tax of 10% on interest income
derived from foreign currency
loans granted to residents other
than offshore banking units or
local commercial banks,
including local branches of
foreign banks that may be
authorized by the BSP to
transact business with offshore
banking units.
Rule: Exempt from all taxes,
except net income from such
transactions as may be specified
by the Secretary of Finance,
upon recommendation of the
Monetary Board to be subject to
the regular income tax payable
by banks.
Exception: It is subject to final
tax of 10% on interest income
from foreign currency loans

163

San Beda College of Law


2012 CENTRALIZED BAR OPERATIONS

164

TAXATION LAW
Income Taxation

INCOME TAXPAYER

TAXABLE
INCOME

EXEMPTIONS ALLOWED
TAX RATES

PERSONAL

DEDUCTIONS
ALLOWED

OPTIONAL
STANDARD
DEDUCTIONS

NO

NO

NO

NO

N/A

NO

NO

ADDITIONAL

granted by such depository


banks under said expanded
system to residents other than
offshore units in the Philippines
or other depository banks under
the expanded system.
4)
5)

Regional or Area
Headquarters
Regional Operating
Headquarters

Non-resident Foreign
Corporation - not engaged
in trade or business (NRFC)

EXEMPT

Income within only

10% of the taxable income from


sources within the Philippines
1) 30% final tax on gross
income
2) Capital Gains Tax except
capital gains tax on sale or
disposition of real properties.

N/A

Special Non-resident Foreign Corporation


1)

2)

3)

Non-resident
Cinematographic Film
Owners, Lessors or
Distributors

25% on gross income from


sources within the Philippines

N/A

N/A

NO

NO

Non-resident Owner or
Lessor of Vessels
Chartered by Philippine
Nationals

4.5% on Gross rentals, lease or


charter fees from leases or
charters to Filipino citizens or
corporations, as approved by the
Maritime Authority.

N/A

N/A

NO

NO

Non-resident Owner or
Lessor of Aircraft and
other Equipment

7.5% on gross rental or fee

N/A

N/A

NO

NO