DEFINITION OF TERMS

person: an individual, a trust, estate or corporation

nonresident citizen:
(1) A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence
abroad with a definite intention to reside therein.
(2) A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an
immigrant or for employment on a permanent basis.
(3) A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him
to be physically present abroad most of the time during the taxable year.
(4) A citizen who has been previously considered as nonresident citizen and who arrives in the Philippines at any time
during the taxable year to reside permanently in the Philippines shall likewise be treated as a nonresident citizen for the
taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date
of his arrival in the Philippines.
resident alien: an individual whose residence is within the Philippines and who is not a citizen thereof
nonresident alien: an individual whose residence is not within the Philippines and who is not a citizen thereof
statutory minimum wage: a rate fixed by the Regional Tripartite Wage and Productivity Board, as defined by the Bureau
of Labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE)
minimum wage earner: a worker in the private sector paid the statutory minimum wage, or to an employee in the
public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector
where he/she is assigned
deposit substitutes: an alternative from of obtaining funds from the public (the term 'public' means borrowing from
twenty (20) or more individual or corporate lenders at any one time) like promissory notes for specific purposes
long-term deposit or investment certificates: certificate of time deposit or investment with a maturity period of not less
than five (5) years, and issued by banks only (not by nonbank financial intermediaries and finance companies) to
individuals in denominations of Ten thousand pesos (P10,000) and other denominations as may be prescribed by the
BSP
royalties: payment for use of intangibles
corporation: includes partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas
en participacion), association, or insurance companies, but does not include general professional partnerships and a
joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal,
geothermal and other energy operations pursuant to an operating consortium agreement under a service contract with
the Government. 'General professional partnerships' are partnerships formed by persons for the sole purpose of
exercising their common profession, no part of the income of which is derived from engaging in any trade or business.
domestic corporation: created or organized in the Philippines or under its laws
foreign corporation: a corporation which is not domestic
resident foreign corporation: a foreign corporation engaged in trade or business within the Philippines
nonresident foreign corporation: a foreign corporation not engaged in trade or business within the Philippines
regional or area headquarters: a branch established in the Philippines by multinational companies and which
headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and
coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets
regional operating headquarters: a branch established in the Philippines by multinational companies which are engaged
in any of the following services: corporate finance advisory services; logistic services; research and development services
-shares of stocks can be property dividends (vs. stock dividends)
-EFCDS: a law granting local commercial banks or a local branch of foreign bank authorized by the BSP to engage in
foreign currency-denominated transactions
-Article 415, paragraph 1: The following are immovable property – LAND, BUILDINGS, roads and constructions of all
kinds adhered to the soil
-personal and additional exemptions are subsumed in the 250K tier
TAX BASE AND TAX RATES – INDIVIDUALS

Individual Taxpayer Purely Compensation Income Purely Income from Mixed Income
Self-employment or
Practice of Profession

RC (within and without) Tax Base: Taxable Income Option 1. Graduated a. Compensation
NRC (within) 01/01/18 to 12/31/22 Tax Base: Net Income Income – Graduated
RA (within) 250K below - - - Option 2. If GS/R + NOI b. Income from Self-
250K-400K – 20% 250K < 3M Employment
400K-800K 30K 25% 400K Tax Base: GS/R+NOI – Option 1. Graduated
800K-2M 130K 30% 800K 250K Tax Base: Net Income
2M-8M 490K 32% 2M Tax Rate: 8% added to Compensation
8M above 2.41M 35% 8M Income
NRA-ETB (within) 01/01/23 onward Option 2. If GS/R + NOI
250K below - - - < 3M
250K-400K – 15% 250K Tax Base: GS/R+NOI
400K-800K 22.5K 20% 400K Tax Rate: 8%
800K-2M 102.5K 25% 800K
2M-8M 402.5K 30% 2M
8M above 2.2025M 35% 8M

NRA-NETB (within) 25% 25% 25%

TAX BASE AND TAX RATES – INDIVIDUALS
Individual Taxpayer Passive Income
RC (within and without) i. interest income – 20%
NRC (within) E1: EFCDS – 15%
RA (within) E2: LTD
>=5 years – exempt
<5 years – 20%
ii. royalties – 20%
E1: b, lw, mc – 10%
iii. prizes and other winnings –
20%
E1. <= 10K prizes – added to OI
subject to graduated rates
E2. <= 10K from PCS and Lotto
winnings – exempt
E3. in recognition of
R,C,S,E,A,L,or C achievements if
(1)the recipient was selected to
join a contest w/o any action on
his part, and (2) was not
required to render substantial
future services as a condition of
receipt – exempt
E4. granted to athletes in sports
contests and sanctioned by their
national associations – exempt
iv. cash and property dividends
– 10%
NRA-ETB (within) i. interest income – 20%
E1: EFCDS – exempt
E2: LTD
x>=5 years – exempt
4 years<=x<5 years – 5%
3 years<=x<4 years – 12%
Capital gains on shares Capital gains on real
of stock of a domestic property classified as
corporation not traded capital asset
in the stock exchange
TAX BASE: Net Capital TAX BASE: Higher of
Gains = Selling Price – Gross Selling Price of
Acquisition Cost FMV (higher of zonal
TAX RATE: 15% value determined by
the BIR Commissioner
and assessed value
determined by the LGU
assessor) = presumed
gain
TAX RATE: 6%
E1: sale of principal
residence and proceeds
is fully utilized in
acquiring or
constructing a new
principal residence
within 18 calendar
months from the date
of disposition – exempt
-the historical cost or
adjusted basis of the
real property disposed
is carried over to the
new principal residence
acquired or constructed
-the Commissioner is
notified within 30 days
from the date of
disposition of his
intention to avail of the
tax exemption
-the tax exemption can
only be availed of once
every 10 years
-if there is no full
utilization of the
proceeds of disposition,
taxable portion = Tax
Base * unutilized
portion/GSP
TAX BASE: Net Capital TAX BASE: Higher of
Gains = Selling Price – Gross Selling Price of
Acquisition Cost FMV (higher of zonal
TAX RATE: 15% value determined by
the BIR Commissioner
and assessed value
determined by the LGU

NRA-NETB (within)
x<3 years – 20% assessor)
ii. royalties – 20% TAX RATE: 6%
E1: b, lw, mc – 10%
iii. prizes and other winnings –
20%
E1. <= 10K prizes – added to OI
subject to graduated rates
E2. from PCS and Lotto winnings
– exempt
iv. cash and property dividends
– 20%
25% TAX BASE: Net Capital TAX BASE: Higher of
Gains = Selling Price – Gross Selling Price of
Acquisition Cost FMV (higher of zonal
TAX RATE: 15% value determined by
the BIR Commissioner
and assessed value
determined by the LGU
assessor)
TAX RATE: 6%

Minimum Wage Earners

-Tax exempt as regard the statutory minimum wage rate, holiday pay, OT pay, NSD pay, and hazard pay even if the
aggregate amount is >250k
-Other incomes are taxable as the case may be

Members of General Professional Partnership

-should only focus on one type of professions
-taxed based on their individual capacities
-cannot avail of the 8% income tax rate option

Senior Citizens and Persons with Disability

-taxed based on their individual capacities
-if minimum wage, tax exempt as regard the statutory minimum wage rate, holiday pay, OT pay, NSD pay, and hazard
pay even if the aggregate amount is >250k

Alien individual employed by R/AHQs or ROHQs of MNCS, OBUs, Petroleum Service Contractor and Subcontractor
registered with SEC before 01/01/18 - 15% of gross income
TAX BASE AND TAX RATES – CORPORATIONS

Corporate Tax Payer RCIT MCIT GIT

Domestic Corporation GR: 30% on taxable income 2% on gross income 15% on gross income
E1: Section 30 – exempted Case 1. Trading or Case 1. Trading or
(since they are performing merchandising concern merchandising concern
government functions) Gross Income = GS – SR,D,A Gross Income = GS –
E2: Non-profit (not – COGS SR,D,A – COGS
necessarily charitable) Case 2. Manufacturing Case 2. Manufacturing
proprietary educational concern concern
institutions Gross Income = GS – SR,D,A Gross Income = GS –
Case 1. Gross income from – COGMS SR,D,A – COGMS
unrelated trade, business, Case 3. Servicing Concern Case 3. Servicing
activity <= 50% of total gross Gross Income = GS-SR,D,A- Concern
income COS Gross Income = GS-
=10% on taxable income SR,D,A
Case 2. Gross income from if COGS/GS&R <= 55%
unrelated trade, business, + other four conditions
activity > 50% of total gross
income
=30% on taxable income
E3: Non-profit (not
necessarily charitable)
hospital institutions
Case 1. Gross income from
unrelated trade, business,
activity <= 50% of total gross
income
=10% on taxable income
Case 2. Gross income from
unrelated trade, business,
activity > 50% of total gross
income
=30% on taxable income
E4: GOCCs, agencies,
instrumentalities
Case 1. SSS, GSIS, PHIC, LWDs
– exempt
Case 2. Others – as the case
may be

Resident Foreign GR: 30% on taxable income
Corporation E1: International Carriers (air
carrier or shipping) – 2.5% on
gross PH billings
E2: OBUs
Case 1. FCTS to nonresidents,
OBUs, commercial banks –
exempt
Case 2. FCLs to residents
except OBUs and commercial
banks – 10%
E3: RAHQs – exempt (if earns
2% on gross income 15% on gross income
Case 1. Trading or Case 1. Trading or
merchandising concern merchandising concern
Gross Income = GS – SR,D,A Gross Income = GS –
– COGS SR,D,A – COGS
Case 2. Manufacturing Case 2. Manufacturing
concern concern
Gross Income = GS – SR,D,A Gross Income = GS –
– COGMS SR,D,A – COGMS
Case 3. Servicing Concern Case 3. Servicing
Gross Income = GS-SR,D,A- Concern
COS Gross Income = GS-
 income, at 30%)
E4: ROHQs – 10%
E5: Branch Profit Remittance
Tax – 15% on branch profits
earmarked (need not be
actual) for remittance
Nonresident Foreign GR: 30% on gross income
Corporation E1: NR Cinematographic film
owner, lessor, distributor –
25% on gross income
E2: NR owner or lessor of
vessels chartered by PH
nationals – 4.5% of gross
rental, lease or charter fees
from lease or charters to PH
citizens or corporations as
approved by the MIA
E3: NR owner or lessor of
aircraft, machineries, and
other equipment – 2.5% of
gross rental, lease or charter
fees from lease or charters
Corporate Tax Payer Passive Income
Domestic Corporation i. interest income – 20%
E1: EFCDS – 15%
ii. royalties – 20%
iii. intercompany dividends –
exempt
Resident Foreign i. interest income – 20%
Corporation E1: EFCDS – 7.5%
ii. royalties – 20%
iii. intercompany dividends –
exempt
Nonresident Foreign i. interest on foreign loans –
Corporation 20%
ii. intercompany dividends –
15% subject to tax sparing
rule
SR,D,A
if COGS/GS&R <= 55%
+ other four conditions
- -
Capital gains on shares of Capital gains on real
stock of a domestic property classified as
corporation not traded in capital asset
the stock exchange
TAX BASE: Net Capital Gains TAX BASE: Higher of
= Selling Price – Acquisition Gross Selling Price of
Cost FMV (higher of zonal
TAX RATE: 15% value determined by
the BIR Commissioner
and assessed value
determined by the LGU
assessor) = presumed
gain
TAX RATE: 6%
TAX BASE: Net Capital Gains 30%?
= Selling Price – Acquisition
Cost
TAX RATE:
<= 100K – 5%
>100K – 10%
TAX BASE: Net Capital Gains 30%?
= Selling Price – Acquisition
Cost
TAX RATE:
<= 100K – 5%
>100K – 10%
Improperly Accumulated Earnings Tax
TAX BASE: Improperly accumulated taxable income = taxable income + income not subject to tax/excluded from gross
income + income exempt from tax + income subject to final tax + NOLCO deducted – dividends paid – income tax paid –
reasonable needs