INCOME TAXATION OF INDIVIDUALS: CITIZENS

CITIZENS
RESIDENT
Definition

Tax Code Reference

Tax Base
Tax Rates In general

Tax Rates On Passive Incomes (subject to Final Taxes[FT])

Interest on any currency bank deposit and yield or any other
monetary benefit from deposit substitutes [Sec 22(Y)] and
from trust fund and similar arrangements
Interest from a depository bank under the expanded foreign
currency deposit system [RR 10-98]
Interest on long term deposit or investment [Sec 22 (FF)] in
the form of savings, common or individual trust funds, deposit
substitutes, investment management accounts and other
investments evidenced by certificates in such form prescribed
by the BSP
Pre-terminated long term investment (should actually based
on expired term)
Other interest income derived within the Philippines
Other interest income derived outside the Philippines
Royalties in general
Royalties on books, other literary works and musical
compositions
Prizes - more than P10,000
Prizes P10,000 or less
Prizes PCSO & Lotto winnings
Other prizes or winnings within the Philippines
Other prizes or winnings outside the Philippines
Cash and/or Property Dividends from a domestic corp or
share in distributable net income after tax of a partnership
(except general professional partnership), association, joint
account, or joint venture or consortium taxable as corporation
Other Cash and/or Property Dividends (e.g. from a foreign
corp)
On domestic shares of stock not traded through local stock
exchange (based on net capital gains)
On shares of stock traded through local stock exchange
(based on gross selling price) [Sec 127(A) & (D)]
On real property (based on gross selling price or FMV
whichever is higher) in general
On real property sold to the government subj to option
On real property sold to acquire or construct new principal
residence

Sec 24
Taxable income earned from
all sources within and without
the Philippines
5% - 34% in 1998
5% - 33% in 1999
5% - 32% in 2000
5% - 32% thereafter

NON-RESIDENTS
Sec 22 (E)
1. A citizen of the Philippines who establishes to
the satisfaction of the Commissioner that fact
of his physical presences abroad with 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 of 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 non-resident citizen who arrives in the
Philippines at any time during the taxable year
to reside permanently in the Philippines shall
likewise be treated as non-resident 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.
Sec 24 (income w/in the Philippines)
Sec 23 (income outside Philippines)
Taxable income from all sources within the
Philippines
5% - 34% in 1998 (for income w/in the Phils)
5% - 33% in 1999 (for income w/in the Phils)
5% - 32% in 2000 (for income w/in the Phils)
5% - 32% thereafter (for income w/in the Phils)
EXEMPT (for income w/out the Phils)

20% FT

20% FT

7.5% FT

EXEMPT [Sec 2.24 RR 10-98]

EXEMPT

EXEMPT

4 years to < 5 years 5% FT

3 years to < 4 years 12% FT
Less than 3 years 20% FT
5% - 34%, 33%, 32%
5% - 34%, 33%, 32%
20% FT
10% FT

4 years to < 5 years 5% FT

3 years to < 4 years 12% FT
Less than 3 years 20% FT
5% - 34%, 33%, 32%
EXEMPT
20% FT
10% FT

20% FT
5% - 34%, 33%, 32%
EXEMPT
20% FT
5% - 34%, 33%, 32%
6% FT beginning Jan 1, 1998
8% FT beginning Jan 1, 1999
10% FT beginning Jan 1, 2000

20% FT
5% - 34%, 33%, 32%
EXEMPT
20% FT
EXEMPT
6% FT beginning Jan 1, 1998
8% FT beginning Jan 1, 1999
10% FT beginning Jan 1, 2000

5% - 34%, 33%, 32%

5% - 34%, 33%, 32%

5% / 10% FT

5% / 10% FT

1/2% of 1% FT (Percentage
Tax)
6% FT

% of 1% FT (Percentage Tax)

6% FT or 5% - 34%, 33%, 32%

EXEMPT subj to certain
conditions

6% FT or 5% - 34%, 33%, 32%

EXEMPT subj to certain conditions

6% FT

INCOME TAXATION OF INDIVIDUALS: ALIENS

ALIEN
RESIDENT ALIEN
Definition

Sec 22 (F)
An
individual
whose
residence is within the
Philippines and who is not a
citizen thereof

Tax Code Reference

Tax Base

Sec 24
Taxable income earned from
all sources within the
Philippines
Tax Rates In general
5% - 34% in 1998
5% - 33% in 1999
5% - 32% in 2000
5% - 32% thereafter
Tax Rates On Passive Incomes (subject to Final Taxes[FT])
Interest on any currency bank deposit and yield or
20% FT
any other monetary benefit from deposit substitutes
and from trust fund and similar arrangements
Interest from a depository bank under the expanded
7.5% FT
foreign currency deposit system
Interest on long term deposit or investment [Sec 22
(FF)] in the form of savings, common or individual
trust funds, deposit substitutes, investment
management accounts and other investments
evidenced by certificates in such form prescribed by
the BSP
Pre-terminated long term investment (should
actually based on expired term)
Other interest income derived within the Philippines
Other interest income derived outside the
Philippines
Royalties in general
Royalties on books, other literary works and musical
compositions
Royalties on cinematographic films and similar
works [Sec 28 (B)(2)]
Prizes - more than P10,000
Prizes P10,000 or less
Prizes PCSO & Lotto winnings

Other prizes or winnings within the Philippines

Other prizes or winnings outside the Philippines
Cash and/or Property Dividends from a domestic
corp or share in distributable net income after tax of
a partnership (except general professional
partnership), association, joint account, or joint
venture or consortium taxable as corporation
Other Cash and/or Property Dividends (e.g. from a
foreign corp in the Philippines)
Other Cash and/or Property Dividends (e.g. from a
foreign corp NOT in the Philippines)
On domestic shares of stock not traded through
local stock exchange (based on net capital gains)
On shares of stock traded through local stock
exchange (based on gross selling price) [Sec
127(A) & (D)]
On real property (based on gross selling price or
FMV whichever is higher) in general
On real property sold to the government subj to
option
On real property sold to acquire or construct new
principal residence

NON-RESIDENT ALIEN
ENGAGED IN BUSINESS
NOT ENGAGED IN
BUSINESS
Sec 22 (G) / Sec 25 (A)(1)
Sec 22 (G)
An
individual
whose An
individual
whose
residence is not within the residence is not within the
Philippines and who is not a Philippines and who is not a
citizen thereof but stays in the citizen thereof but stays in the
Philippines for an aggregate Philippines for an aggregate
period of more than 180 days period of more than 180 days
during any calendar year
during any calendar year
Sec 25 (A)
Sec 25 (B)
Taxable income earned from
gross income from all
all sources within the
sources within the
Philippines
Philippines
5% - 34% in 1998
25% FT
5% - 33% in 1999
5% - 32% in 2000
5% - 32% thereafter
20% FT

25% FT

EXEMPT

EXEMPT
Sec 27 (D)(3)
Sec 2.27 (c) RR 10-98
EXEMPT

EXEMPT
Sec 27 (D)(3)
RR 10-98
25% FT

4 years to < 5 years 5%

3 years to < 4 years 12%
Less than 3 years 20%
5% - 34%, 33%, 32%
EXEMPT

5 years to < 5 years 5%

3 years to < 4 years 12%
Less than 3 years 20%
20% FT
EXEMPT

25% FT

25% FT
EXEMPT

20% FT
10% FT

20% FT
10% FT

25% FT
25% FT

20% FT

25% FT

25% FT

20% FT
5% - 34%, 33%, 32%
EXEMPT

20% FT
5% - 34%, 33%, 32%
EXEMPT

20% FT
EXEMPT
6% FT beginning Jan 1, 1998
8% FT beginning Jan 1, 1999
10% FT beginning Jan 1,
2000

20% FT
EXEMPT
20% FT

25% FT
25% FT
EXEMPT
Sec 27 (D)(3)
RR 10-98
25% FT
EXEMPT
25% FT

5% - 34%, 33%, 32%

5% - 34%, 33%, 32%

25% FT

EXEMPT

EXEMPT

EXEMPT

5% / 10% FT

5% / 10% FT

5% / 10% FT

1/2% of 1% FT (Percentage
Tax)

1/2% of 1% FT (Percentage
Tax)

1/2% of 1% FT (Percentage
Tax)

6% FT

6% FT

6% FT

6% FT or 5% - 34%, 33%,
32%
EXEMPT subj to certain
conditions

6% FT or 5% - 34%, 33%,
32%
N/A
RR 13-99

6% FT or 5% - 34%, 33%,
32%
N/A
RR 13-99

INCOME TAXATION: SPECIAL RULES

SPECIAL RATES FOR CERTAIN ALIEN INDIVIDUALS
Alien Employed by Regional or Area Headquarters
15% on gross income, on
and Regional Operating Headquarters of
salaries, wages, annuities,
Multinational Companies [Sec 25 (C)]
compensation, remuneration and
other emoluments such as
Alien Individual Employed by Offshore Banking Units
honoraria and allowances
[Sec (D)]
Alien Individual Employed by Petroleum Service
Contractor and Subcontractor [Sec 25 (E)]

5% - 43%, 33%, 32% [regular

tax rate] or FT rate for any
other income earned from all
other sources within the
Philippines

SPECIAL RATES FOR CORPORATIONS

DOMESTIC CORPORATION
Proprietary Educational Institutions
and Hospitals

10%
35%

GOCC, Agencies and Instrumentalities

32%

GSIS / SSS / PHIC / PCSO

Depository Banks

RESIDENT FOREIGN CORPORATION

International Air Carriers
International Shipping
Offshore Banking Units

EXEMPT
10%

2 1/2%
2 1/2%
10%

EXEMPT

Regional or Area Headquarters

Regional Operating Headquarters
NON RESIDENT FOREIGN CORPORATION
Cinematographic Film Owner, Lessor
or Distributor
Owner or Lessor of Vessel Charted by
Philippine Nationals
Owner or Lessor of Aircraft,
Machineries and Other Equipment

On taxable income
On entire taxable income, if total gross
income from unrelated trade,
business, or activity exceed 50% of
total income
Same tax rate upon their taxable
income in a similar business, industry
or activity
On interest income from foreign
currency transactions including
interest income from foreign loans

On Gross Philippine Billings

On Gross Philippine Billings
Any 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
Income derived by offshore banking
units authorized by the Bangko Sentral
ng Pilipinas (BSP), from foreign
currency transactions with
nonresidents, other offshore banking
units, local commercial banks,
including branches of foreign banks
that may be authorized by the Bangko
Sentral ng PIlipinas (BSP) to transact
business with offshore banking units

EXEMPT
10%

On taxable income

25%

On Gross Income

4.5%

On Gross Rentals

7.5%

On Gross Rentals

INCOME TAXATION OF CORPORATIONS

CORPORATIONS
DOMESTIC

RESIDENT FOREIGNERS

Definition

Sec 22 (B) & (C)

Applies to corporation
created or organized in the
Philippines or under its laws

Tax Code Reference

Tax Base

Sec 27
Taxable income from all
sources within and without
the Philippines
34% in 1998
33% in 1999
32% in 2000-2005
35% in 2006-2008
30% in 2009 & thereafter

Sec 22 (H)
Applies to foreign
corporation engaged in trade
or business within the
Philippines
Sec 28 (A)
Taxable income from all
sources within the
Philippines
34% in 1998
33% in 1999
32% in 2000-2005
35% in 2006-2008
30% in 2009 & thereafter

20% FT

20% FT

7.5% FT
N/A

7.5% FT
N/A

34% in 1998
33% in 1999
32% in 2000-2005
35% in 2006-2008
30% in 2009 & thereafter
EXEMPT
20% FT

EXEMPT [RA No. 9294]

EXEMPT [RA No. 9294]

N/A

10% FT

10% FT

N/A

N/A

EXEMPT [RA No. 9294]

N/A

N/A

10% FT

N/A

20% FT

20% FT

EXEMPT

EXEMPT

34% in 1998
33% in 1999
32% in 2000-2005
35% in 2006-2008
30% in 2009 & thereafter
15% FT (conditional)

5% / 10% FT

5% / 10% FT

5% / 10% FT

6% FT
based on gross selling price
or FMV whichever is higher

34% in 1998
33% in 1999
32% in 2000-2005
35% in 2006-2008
30% in 2009 & thereafter
2%
15%
10%

34% in 1998
33% in 1999
32% in 2000-2005
35% in 2006-2008
30% in 2009 & thereafter
N/A
N/A
N/A

Tax Rates in general

Tax Rates on Passive Income (Subject to Final Tax[FT])

Interest on any currency bank deposit and yield or any
other monetary benefit from deposit substitutes and
from trust funds and similar arrangements

Interest on foreign currency deposit system

Interest Income on Foreign Loans contracted on or
after August 1, 1986
Interest Income received by a FCDU
Income derived by a depository bank under the
expanded foreign currency deposit system from foreign
currency transactions with nonresidents, offshore
banking units in the Philippines, local commercial
banks including branches of foreign banks that may
be authorized by the Bangko Sentral ng Pilipinas (BSP)
to transact business with foreign currency deposit
system
Interest income from foreign currency loans granted by
such depository banks under said expanded system to
residents other than offshore banking units in the
Philippines or other depository banks under the
expanded system
Interest Income received by an OBU
Income derived by a depository bank under the
expanded foreign currency deposit system from foreign
currency transactions with nonresidents, offshore
banking units in the Philippines, local commercial
banks including branches of foreign banks that may
be authorized by the Bangko Sentral ng Pilipinas (BSP)
to transact business with foreign currency deposit
system
Interest income 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 BSP to
transact with offshore banking units
Royalties

Dividends
Tax Rates on capital gains
On shares of stock not traded (based on net capital
gains)
On Land or Buildings (classified as capital assets)

Tax Rate Minimum Corporate Income Tax (MCIT)

Tax Rate Branch Profit Remittance Tax (BPRT)
Tax Rate Improperly Accumulated Earnings Tax (Sec
29)

2%
N/A
10%

NON-RESIDENT
FOREIGNERS
Sec 22 (I)
Applies to a foreign
corporation not engaged in
trade or business within the
Philippines
Sec 28 (B)
gross income from all
sources within the
Philippines
34% in 1998
33% in 1999
32% in 2000-2005
35% in 2006-2008
30% in 2009 & thereafter