TAXABLE INCOME CITIZEN & RESIDENT ALIEN

CITIZENSHIP & INSIDE RP OUTSIDE RP

RESIDENCY TAX RATE ON CERTAIN PASSIVE INCOME ON FINAL TAX
Resident Citizen   CITIZEN AND RESIDENT ALIEN
Non-resident Citizen  X Interest under the expanded foreign currency deposit system 15%
Overseas Contract Worker  X  Non-resident citizen
Resident Alien  X  Non-resident aliens engaged in trade/ business EXEMPT
Non-resident Alien  X Royalty from books, literary works, and musical 10%
Domestic Corp.   compositions
Foreign Corp.  X Royalty other than above 20%
Interest on any current bank deposit, yield or monetary 20%
benefits from deposit substitute, trust fund and similar
INCOME TEST OF SOURCE OF INCOME arrangement
INTEREST INCOME Residence of Debtor Prize exceeding P10,000 20%
DIVIDEND INCOME: 1. Income within WINNINGS 20%
1. FROM DOMESTIC CORP 2. a. Income within, if 50% or Except: Phil. Charity Sweepstakes and Lotto amounting to
2. FROM FOREIGN CORP more of the gross income of the P10,000 or less = EXEMPT
foreign company (for the past 3 DIVIDEND FROM: 10%
years) was derived from sources  Domestic Corp, or
within the PH.  Joint Stock Company, or
b. Income without, if less than  Mutual Fund Company, and
50% of the gross income of  Regional Operating Headquarters of Multinational
the foreign company (for the Company, or
past 3 years) was derived  Share in the Distributive Net Income After Tax of A
from sources within the PH. Partnership (EXCEPT: GPP)
SERVICE INCOME Place of performance  Joint Stock, or
RENT INCOME Location of property  Joint Venture, or
ROYALTY INCOME Place of use of intangible  Consortium Taxable as a Corporation
GAIN ON SALE OF REAL Location of property
PROPERTY  Non-resident Aliens engaged in trade/business 20%
GAIN ON SALE OF PERSONAL Place of sale
PROPERTY  Dividends from Foreign Corp for:
GAIN ON SALE OF DOMESTIC Income within o Resident Citizen Sec. 24(a)
SHARES OF STOCK
o Resident Aliens (Income derived abroad) NOT TAXED
Interest on long-term deposit or investment in banks, with EXEMPT
maturity of 5 years or more

Note: if the holder of the certificate pre-terminate before the 4 years to < 5
5th year a final tax should be imposed on the entire income years= 5%

3 years to < 4
years =12%
 Corporations = 30%
< 3 years =
20%

TAX RATE ON INTEREST INCOME FROM FOREIGN CURRECY

DEPOSIT
Interest income actually received by a resident citizen or 15% final
resident alien from FCD withholding tax TAX RATE ON CAPITAL GAINS
If it was deposited by an: EXEMPT On sale of shares of stock of a domestic corporation 15% of the Net Capital
 OCW or NOT TRADED thru a local stock exchange held as Gains
 Seamen or a capital asset
 Non-resident alien On sale of real property in PH held as a capital 6% of the:
If it was in a bank account in the joint names of an OCW 50% EXEMPT asset  gross selling price
and his spouse (who is a resident) & or
50% final  current market
withholding tax of value at the time of
15% the sale, w/c ever is
Interest income actually received by a domestic 15% FWT higher
corporation or resident foreign corporation from FCD

TAX RATE ON INCOME FROM SALE, BARTER, EXCHANGE OR

TYPE OF INCOME TAX RATE BASIS OTHER DISPOSITION OF SHARES OF STOCK
INTEREST INCOME If shares of stock are listed and traded thru the 6/10% of 1% of the:
Interest or yield from 20% FWT Sec 24(B)(1) local stock exchange Gross selling price or
deposit substitute Sec. 25 (A)(2) Gross value in money of
Interest income from EXEMPT Sec 24(B)(1) the shares of stock
long-term deposits or Sec. 25 (A)(2) If shares not traded thru the local stock exchange 15% of the capital gains
placements with banks (subj to tax only if it results into a gain)
Interest income if 4 years to < 5 years= Sec 24(B)(1)
preterminated 5% Sec. 25 (A)(2)
TAX BASE OF DISPOSITION OF STOCK
3 years to < 4 years Shares of stock listed and traded thru FMV = Actual selling price
=12% the local stock exchange
Listed but not traded thru LSE FMV = Closing price on the day when
the shares were sold, transferred or
< 3 years = 20%
exchanged (if no sale was made on that
GAINS FROM THE SALE OR TRADE
day in the LSE, the closing price on
Long-term bonds EXEMPT Sec 32 (B)(7) the day nearest to such disposition)
Has maturity of more
Not listed and not traded thru LSE FMV = Value of the shares of stock at
than 5 years
the time of the sale.
Short-term bonds Subject to regular Sec 32
Maturity= less than 5 income tax rates Adjusted Net Asset Method shall be
years Individual = Schedular used.
 FINAL TAX RATE ON SALE, EXCHANGES, OR TRANSFERS OF
REAL PROPERTY CLASSIFIED AS CAPITAL ASSETS
Sale of real property in the PH 6% of the:
 gross selling
price or
 current market
value at the
time of the sale,
w/c ever is
higher
If sale was made to the Government or GOCCs Either:
 6% of the
GSP/CMV; or
 Normal income
tax rate
Taxpayer’s option

CREDITABLE WITHHOLDING TAX ON SALES, EXCHANGES, OR

TRANSFERS OF REAL PROPERTIES CLASSIED AS ORDINARY
ASSETS
If the seller is habitually engaged in the real estate
business
 Selling price is <P500,000 1.5%
 Selling price is P500,000 to P2M 3%
 Selling price is above P2M 5% of the gross
selling price/current
market value, w/c
ever is higher
If the seller is not habitually engaged in the real estate 7.5% of the
business GSP/CMV, w/c ever
is higher
If the seller is exempt from creditable withholding tax EXEMPT
as per RR 2-1998
 3 years to < 4
years =12%

< 3 years =
TAX ON NON-RESIDENT ALIENS 20%

TAX RATE ON CERTAIN PASSIVE INCOME ON NON- FINAL TAX

RESIDENT ALIENS ENGAGED IN TRADE, BUSINESS,
OR EXERCISING A PROFESSION
Interest under the expanded foreign currency deposit system EXEMPT TAX RATE ON CAPITAL GAINS
Royalty from books, literary works, and musical 10% (same with residents, and nonresidents aliens not engaged in business)
compositions On sale of shares of stock of a domestic corporation
Royalty other than above 20% NOT TRADED thru a local stock exchange held as
Interest on any current bank deposit, yield or monetary 20% a capital asset:
benefits from deposit substitute, trust fund and similar Capital gains not over P100,000 5% of the Net Capital
arrangement Gains
Prize exceeding P10,000 20%
WINNINGS 20% Capital gains in excess of P100,000 10% of the Net Capital
Except: Phil. Charity Sweepstakes and Lotto amounting to Gains
P10,000 or less = EXEMPT
DIVIDEND FROM: On sale of real property in PH held as a capital 6% of the:
 Domestic Corp, or 20% asset  gross selling price
 Joint Stock Company, or or
 Mutual Fund Company, and  current market
 Regional Operating Headquarters of Multinational value at the time of
Company, or the sale, w/c ever is
 Share in the Distributive Net Income After Tax of A higher
Partnership (EXCEPT: GPP)
 Joint Stock, or
 Joint Venture, or NON RESIDENT ALIENS NOT ENGAGED IN BUSINESS IN PH ARE
 Consortium Taxable as a Corporation TAXED 25% OF THEIR ENTIRE INCOME W/IN THE PH.

FOREIGN CORP = EXEMPT SPECIAL ALIENS

NON-RESIDENT ALIENS – NOT TAXED WORLDWIDE
SPECIAL ALIENS TAX RATE
Gross Income from cinematography films and similar 25% Employed by: 15% on gross income
works  regional or area headquarter and
Interest on long-term deposit or investment in banks, with EXEMPT  regional operating headquarters established in
maturity of 5 years or more the PH by multinational
Employees by Offshore Banking Units 15% on gross income
Note: if the holder of the certificate pre-terminate before the 4 years to < 5 Permanent resident of a foreign country but who is 15% of salaries, wages,
5th year a final tax should be imposed on the entire income years= 5% employed and assigned in the PH by a foreign service annuities, compensation,
contractor or by a foreign service subcontractor remuneration, and other
engaged in petroleum operations in the PH emoluments. PARTNERSHIP IS return on their incomes the corporate income
TAXED and expenses for the tax rate.
purpose of ascertaining
the partner’s taxable
shares

PARTNERSHIP

DIFFERENCES BETWEEN NON-TAXABLE AND TAXABLE

PARTNERSHIP
DOMESTIC CORPORATIONS
NON-TAXABLE TAXABLE
PARTNERSHIP PARTNERSHIP TAX RATE OF DOMESTIC 30% of taxable income from all
WITH REGARD TO Will form part of Partner’s distributive CORPORATIONS sources WITHIN and OUTSIDE the
DISTRIBUTIVE partner’s gross income share in the net income PH; or
SHARES in the ITR subject to the is subject to a final tax
 Is a partner’s graduated income tax of: 2% of gross income if MCIT applies;
computed and rates or
ascertained share 10% - if Resident
in the net profits Will be subject to a Citizens, Non-resident
creditable withholding Citizens, OCWs, or 15% of gross income if the following
of the partnership,
tax of: Resident Aliens. conditions are met:
whether actually
1. Tax effort ratio of 20% of GNP
distributed to the
15% - if income 20% - for Non-Resident 2. Ration of 40% of income tax
partners or not.
payment exceed Alien Engaged in Trade collection to total tax revenues
P720,000 for the current and Business 3. VAT tax effort of 4% of GNP;
year; or (NRAETB) and
4. 0.9% ratio of the Consolidated
10% - if does not exceed Public Sector Financial Position
P720,000 (CPSFP) to GNP (this last one
has yet to be implemented)
To be withheld and paid
by the partnership to the
SPECIAL RULE ON PROPRIETARY EDUCATIONAL INSTITUTIONS
BIR.
AND HOSPITALS
WITH REGARD TO May be claimed as a Not deductible since
PARTNER’S SHARE deductible expense in subject to final tax.
TAX RATE OF PROPRIETARY 10% on their taxable income
IN NET LOSS OF his personal income tax
EDUCATIONAL INSITUTIONS except for passive income, or
THE PARTNERSHIP return
AND HOSPITALS WHICH ARE
WITH REGARD TO Still required to file an Deemed and treated as NON-PROFIT 30% on their entire taxable income
HOW THE annual information corporations subject to if the gross income from unrelated
 trade, business, or other activity tax.
exceeds 50% of the total gross FOR NON-STOCK, NON-PROFIT All revenues and assets used actually,
income of the institution. EDUCATIONAL INSTITUTIONS directly and exclusively (ADE) for
educational purposes are EXEMPT.
In computing the 30% of the entire
taxable income, include: Income from canteens and
 Income subject to tax bookstores are also EXEMPT if:
 Income which are exempt  They are owned; and
 Operated by the educational
institution; and
 Located within the school
premises.

Lease properties are likewise

EXEMPT if the profits are used ADE
for educational purposes.
FOR NON-STOCK, NON-PROFIT, Still liable for taxes on:
SUMMARY OF RULES ON EDUCATIONAL INSTITUTIONS CORPORATIONS WHO ARE 1. Income derived from any of
EXEMPT UNDER SECTION 30 their real properties;
FOR PRIVATE EDUCATIONAL Entitled to the reduced rate of 10% 2. Any activity conducted from
INSTITUTIONS corporate income tax if: profit regardless of disposition
1. The proprietary educational thereof;
institution is non-profit; 3. Interest income from any bank
2. Its gross income from unrelated deposits or yields on deposit
trade, business, or activity does substitutes (final tax of 20%)
not exceed 50% of its total 4. If its foreign currency deposit,
gross income. final tax of 7.5%
5. They shall also be the
 Income derived from trade, withholding agents for their
business, or other activity is still employee’s compensation
taxable. income subject to withholding
tax.
 Bank deposits and foreign
currency deposits are exempt
from withholding taxes but SPECIAL RULE ON GOCCs, AGENCIES OR INSTRIMENTALITIES
they must show proof that such
- Shall pay the same rate upon their taxable income upon corporations or
income is used to fund proposed
projects for their institution’s associations engaged in similar business, industry, or activity.
improvement. - EXCEPT for the ff exempt GOCCs:
1. GSIS
2. SSS
 They shall also be the
3. PHIC
withholding agents for their
employee’s compensation 4. PCSO
income subject to withholding
- PAGCOR’s income derived from gaming operations subject to 5% franchise CAPITAL GAINS ON SALE OR DISPOSITION OF SHARE OF STOCK
tax
- For income derived from the operation of other related services – normal TAX RATE ON INCOME FROM SALE, BARTER, EXCHANGE OR
corporate income tax. OTHER DISPOSITION OF SHARES OF STOCK
If shares of stock are LISTED AND TRADED thru 6/10 of 1% of the
PASSIVE INCOME OF DOMESTIC CORPORATION LSE gross selling price or
gross value in
TAX RATE ON PASSIVE INCOME OF DOMESTIC FINAL TAX Tax base: FMV is the actuals selling price money of the shares
CORPORATIONS of stock
Interest under the expanded foreign currency deposit 15% If shares NOT TRADED thru the LSE 15% of the net
system capital gains
Royalties of all types within the PH 20% If listed and not traded
- Abroad – 30% tax rate Tax base: FMV is the closing price on the day when the
Interest on any current bank deposit, yield or other 20% share were sold, transferred, or exchanged
monetary benefits from deposit substitute, trust or other
monetary benefits from deposit substitute, trust fund and If not listed and not traded
similar arrangement Tax base: FMV is the value of the shares of stock at the
Dividend from domestic corporations (intercorporate EXEMPT time of the sale.
dividend)

BANKS AND INCOME DERIVED UNDER THE EXPANDED FOREIGN CAPITAL GAINS ON SALE, EXCHANGE, OR TRANSFER OF REAL
CURRENCY DEPOSIT SYSTEM PROPERTY CLASSIFIED AS CAPITAL ASSETS

TAX RATE OF BANKS ON INCOME DERIVED FINAL TAX FINAL TAX RATE ON SALE, EXCHANGES, OR TRANSFERS OF
UNDER THE EXPANDED FCD SYSTEM REAL PROPERTY CLASSIFIED AS CAPITAL ASSETS
Income derived by a depository bank from foreign currency EXEMPT Sale of real property in the PH 6% of the:
transactions with non-resident, OBUs, etc  gross selling
Interest income from foreign currency loans granted by a 10% price or
bank to residents other than OBUs  current market
Income of non-residents (individuals or corporations) from EXEMPT value at the
transactions with depositary bank under the expanded FCD time of the sale,
system w/c ever is
TAX RATE ON CAPITAL GAINS higher
On sale of shares of stock of a domestic corporation 15% of the net If sale was made to the Government or GOCCs Either:
NOT traded thru local stock exchange held as capital capital gains  6% of the
asset GSP/CMV; or
 Normal income
On sale of real property in the PH held as a capital asset 6% of the gross
tax rate
(only applies to lands and/or buildings) selling price, or
Taxpayer’s option
current market value
at the time of sale,
whichever is higher.
TAX TREATMENT OF SALES, EXCHANGES, OR TRANSFERS OF REAL
PROPERTIES CLASSIFIED AS ORDINARY ASSETS
 CREDITABLE WITHHOLDING TAX ON SALES, EXCHANGES, OR Dividend from domestic corporations (intercorporate EXEMPT
TRANSFERS OF REAL PROPERTIES CLASSIED AS ORDINARY dividend)
ASSETS
If the seller is habitually engaged in the real estate
business CAPITAL GAINS
 Selling price is <P500,000 1.5%
 Selling price is P500,000 to P2M 3% On sale of shares of stock of a domestic corporation
 Selling price is above P2M 5% of the gross NOT traded thru local stock exchange held as
selling price/current capital asset
market value, w/c  Capital Gains not over P100,00 5% of the net capital
ever is higher gains
If the seller is not habitually engaged in the real estate 7.5% of the
business GSP/CMV, w/c ever  Capital Gains in excess of P100,00 10% of the net capital
is higher gains
If the seller is exempt from creditable withholding tax EXEMPT
as per RR 2-1998
On sale of real property in the PH held as a No provision for capital
capital asset in the PH gains for sale of realty.
Hence, it will be subject to
the regular corporate
INCOME TAX ON RESIDENT FOREIGN CORPORATIONS income tax rate.

TAX RATE OF FOREIGN 30% of taxable income from all

RESIDENT CORPORATION sources WITHIN the PH, or SPECIAL RULE ON INTERNATIONAL CARRIERS

2% gross income if MCIT applies, or - Tax rate for international carriers is 2.5% of Gross Philippine Billings.
- Under RA 10378, international carriers doing business in the PH may
15% gross income (again the GIT has avail of a preferential rate or exemption from tax based on:
yet to be implemented)  A treaty or international agreement to which the PH is a signatory.
SPECIAL RULE FOR OFFSHORE BANKING UNITS

PASSIVE INCOME OF FOREIGN RESIDENT CORPORATIONS - Tax rate of offshore banking units authorized by the BSP including any
interest income foreign currency loans granted to residents 10% final tax.
TAX RATE ON PASSIVE INCOME OF DOMESTIC FINAL TAX - Income of nonresidents from transactions with OBUs shall be EXEMPT
CORPORATIONS from income tax.
Interest under the expanded foreign currency deposit 7.5%
system
Royalties of all types within the PH 20% TAX RATE ON INTEREST INCOME FROM FOREIGN CURRECY
 Abroad – EXEMPT (ONLY TAXE FROM DEPOSIT
SOURCES WITHIN PH) Interest income actually received by a resident citizen or 7.5 final
Interest on any current bank deposit, yield or other 20% resident alien from FCD withholding tax
monetary benefits from deposit substitute, trust or other If it was deposited by an: EXEMPT
monetary benefits from deposit substitute, trust fund and  OCW or
similar arrangement  Seamen or
  Non-resident alien
If it was in a bank account in the joint names of an OCW 50% EXEMPT
and his spouse (who is a resident) &
50% final
withholding tax of
7.5%
Interest income actually received by a domestic 7.5% FWT
corporation or resident foreign corporation from FCD

SPECIAL RULE ON PROFITS REMITTED BY A BRANCH (BRANCH

PROFIT REMITTANCE TAX)
- Any profit remitted by a branch to its head office shall be subject to a tax
of 15% of the total profits applied or earmarked for remittance w/o any
deductions for the tax component.
- Except those registered with PEZA (they have their own tax rules as
incentives)
- The ff are not treated as branch profit:
1. Interest
2. Dividends
3. Rents
4. Royalties INCOME TAX ON NON-RESIDENT FOREIGN CORPORATIONS
5. Payment for technical services. - Non-resident foreign corporations are subject to 30% income tax on the
6. Salaries and wage premiums gross income derived during each taxable year from ALL SOURCES
7. Annuities, emoluments, or other fixed or determinable casual gains WITHIN THE PH ONLY.
8. Profits, income, and capital gains.
SPECIAL NON-RESIDENT FOREIGN CORPORATIONS
Nonresident Cinematography Film 25% of its gross income from all
SPECIAL RULE ON REGIONAL OR AREA HEADQUARTERS (RAHQs) Owner, Lessor or Distributor sources within the PH
AND REGIONAL OPERATING HEADQUARTERS (ROHQs) Nonresident Owner or Lessor of 4 1/2 % of gross rentals, lease or
Vessels Chartered by PH Nationals charter fees from leases ort charters to
Filipino citizens or corporations, as
 Regional or Area Headquarters- EXEMPT from income tax. approved by the Maritime Industry
 Regional Operating Headquarters – 10% on taxable income Authority.
Nonresident Owner or Lessor of Rentals, charters and other fees derived
Aircraft, Machineries and Other by a nonresident lessor of aircraft,
Equipment machineries and other equipment shall
be subject to a tax of 7 ½ % of gross
rentals or fees.

TAX RATE ON CERTAIN INCOMES OF FOREIGN NON-RESIDENT

CORPORATIONS
 TAX RATE ON PASSIVE INCOME OF FOREIGN NON- FINAL corporation
RESIDENT CORPORATIONS TAX
Interest on foreign loans (foreign non-resident lends to a domestic 20%  An improperly accumulated earnings tax of 10% of improperly accumulate
corporation) taxable income is imposed on corporations that permit earnings and profits
Dividend from domestic corporations (intercorporate dividend) 15% to accumulate instead of being divided or distributed.

 Subject to the condition that the country in which the non-

resident foreign corporation is domiciled allows a credit
against the tax due from the non-resident foreign corporation
taxes deemed to have been paid in the Philippines equivalent
to 15%.
 If they don’t, the dividends will be taxed at 30% of gross
income.

TAX RATE ON CAPITAL GAINS (same as foreign resident corporations)

On sale of shares of stock of a
domestic corporation NOT TRADED
thru LSE held as a capital asset:

 Capital gains not over P100,000 5% of the net capital gains

 Capital gains in excess of 10% of the net capital gains
P100,000
On sale of real property in the No provision for capital gains for sale
Philippines of realty.
Hence, it will be subject to the regular
corporate income tax rate.

SUMMARY OF THE TAX RATES ON SPECIAL CORPORATIONS

SPECIAL CORPORATION
Tax Rate Tax Base
Nonresident owner of lessor 4.5% Gross rentals, lease, and
of vessel charter fees from the PH
Nonresident cinematography 25% Gross income from the PH
film owner, lessor, or
distributor
Nonresident lessor of aircraft, 7.5% Gross rentals, charges and
machinery and other other fees from PH sources
equipment
Proprietary educational 10% Taxable income from all
institution and non-profit sources
hospital
Resident International Carrier 2.5% Gross PH Billings
Regional Operating 10% Philippine Taxable Income
Headquarters of multinational