Corporations: The term corporation shall include partnerships, no matter how created or organized, joint-stock ventures, joint accounts

( cuentas en participacion) , associations, 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 or consortium agreement under a service contract with the government. (Sec 22, b) Types of Corporations: A. Domestic Corporation B. Foreign Corporation Resident ( engaged in business) Non-Resident (not engaged in business) - Is taxed on its gross income *cannot have cost of sales because its not engaged in business* - Earns money from fixed determinable income: 1. Interests, Dividends, Royalties 2. Rents, Salaries 3. Premiums, except reinsurance premiums 4. Annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits or income. 5. Capital gains EXCEPT from the sale of shares of stock not traded in the stock exchange of a domestic corporation. Corporations Exempt from Income Tax: (see Sec 30) 1. 2. 3. 4. Government Educational Institutions Non-stock and non-profit educational institutions Nonprofit labor, agricultural and horticultural organizations Associations of farmers, fruit growers, and the like whose primary function is to market the product of their members. 5. Organizations with a purely local operation whose income is derived only from assessments, dues, and fees collected from their members to meet operational expenses such as fire insurance company, farmers or other mutual typhoon associations, mutual ditch or irrigation company and mutual or cooperative telephone company. 6. Non-stock corporation or associations organized and operated exclusively for religious, charitable, scientific, athletic or cultural purposes, or for the rehabilitation of veterans; provided that no individual person owns its assets or no individual person receives benefit on its earnings. 7. Non-stock/non-profit mutual savings bank or non stock/non profit cooperative bank. 8. Nonprofit civil league or organization operating exclusively for the promotion of social welfare. 9. Cemetery company owned and operated exclusively for the benefits of its members only. 10. Nonprofit business league , chamber of commerce, or board of trade. 11. Associations, orders, beneficiary societies operating for the exclusive benefits of their members. Deduction of a Corporation: 1. 2. Itemized Deduction Optional Standard Deduction ( applies to general Professional partnership too) 40%

Type of Tax

Tax rate

Domestic Corporation

Foreign Corporation Resident Non-Resident On GROSS income

Normal corporate Income Tax Minimum corporate Income tax

30%

on NET income

On NET income

2% * 4 years and earning a minimum income 6%

On Gross On price or FMV whatever is higher

On Gross On price or FMV whatever is higher

--------30% final tax * determinable income* On net capital gain On selling price

Sale of real property

Capital Gains tax

Capital gains on sale of shares of stock NOT listed in SEC Capital gains on sale of shares of stock listed in SEC

100000---5% Excess---10% of 1% *percentage tax

On net capital gain On selling price

On net capital gain On selling price

Net capital gains on sales or disposition of lands and or buildings outside of the Phils. Interest from Depository bank under expanded foreign currency deposit Royalties, Yield or monetary substitutes from deposits substitutes, trust funds and other arrangements Interest on currency bank deposit Final tax on income of domestic banks under the expanded foreign currency deposit system

30%

On net gain

Not taxable

Not taxable

7.5% 20%

On Interest earned On total earning

On Interest earned On total earning

Tax exempt 30% on total earning

Tax on Passive Income (Sec 27)

20% 10%

On interest earned On income derived and interest from foreign currency loans granted to residents -----

On interest earned On income derived and interest from foreign currency loans granted to residents -----

30% on interest

Other Passive Income

------

Inter-corporate dividends Interest on foreign Loans contracted on or after Aug 1 ,1986 Special Domestic Corporations Proprietory educational institutions (except those whose gross income from unrelated sources exceeds 50% of their total income)

15% ( if allowed by country otherwise, 30%) 20% 10% 10% 30% if unrelated earnings exceed 50% of earnings *inclusive of tuition fees 10% 10% 30% if unrelated earnings exceed 50% of earnings *inclusive of tuition fees 30% NCIT Tax exempt 30%

Withholding final tax of 15% On interest

On interest

On interest

---

---

Non Profit Hospitals (except those whose gross income from unrelated sources exceeds 50% of their total income)

---

---

Government owned and controlled corporations Exempt government organizations ( GSIS, SSS, PHIC, PCSO)

---

---

Special Resident Foreign Corporations

International Carrier Offshore Banking units Branch Remittances Regional area headquarters Regional Operating Headquarters Cinematographic owner/distributor Lessor /owner of machinery, aircraft or other equipment Owner/lessor of vessels chartered by Philippine Nationals

2% 10% 15% Tax exempt (sec 22DD) 10% 25% 7.5% 4.5%

-----------------

On GROSS Philippine Billings On Gross Income Of remittances (gross) --On taxable income -------

----------On gross income On gross income ON gross income

Special Nonresident foreign Corporations

Tax on Individuals Taxpayers are natural persons with income derived within the territorial jurisdiction of a taxing authority. Types of Individuals: 1. Citizens a. Resident - stays permanently in the Philippines - stayed outside the Philippines for less than 183 days b. Non-Resident stayed outside of the Philippines for 183 days or more has established proof to the BIR commissioner of his definite intention to reside outside the Philippines on a permanent basis as an immigrant or employee. - One whose job requires him to be physically present abroad for majority of the taxable year - Overseas worker, seaman ( treated as an overseas worker) -

2.

Aliens a. Resident - not citizens - but reside in the Philippines - resided for more than 1 year in the Philippines

b. Non-resident
b.1 Engaged in business - stayed within the Philippines for more than 180 days b.2 Not engaged in business - stayed in the Philippines for 180 days or less. Taxable Individual Tax Payer Citizen Resident Non-Resident Resident Non-Resident engaged in trade and business Non-Resident NOT engaged in trade and business Inside the Philippines yes yes yes Yes yes Outside the Philippines Yes No No No No

Alien

Personal Exemptions are the arbitrary amounts allowed bu the law as a deduction from the gross compensation income and/or net business income and or/professional income as the case may be, for personal, living, or family expenses. Types of Exemptions: A. Basic Personal Exemptions ( Php 50,000) B. Additional Exemptions- allowed for qualified dependent children of an individual tax payer ( Php 25,000 for each child, max is 4 children)

Classification of Taxes on Individual 1. Normal (tabular) graduated tax 2. Passive Income 3. Capital Gains Tax I. Normal (tabular) Graduated Tax Not over 10,000 Over 10,000 but not over 30,000 Over 30,000 but not over 70,000 Over 70,000 but not over 140,000 Over 140,000 but not over 250,000 Over 250,000 but not over 500,000 Over 500,000 5% 500 + 10% of the excess over 10,000 2,500 + 15% of the excess over 30,000 8,500 +20% of the excess over 70,000 22,500 + 25% of the excess over 140,000 50,000 +30% of the excess over 250,000 125,000 +32% of the excess over 500,000

Taxable Income- means gross income less deductions and/or personal and additional exemptions, and special deductions if any. Income Tax due is based on his/her net taxable income

II. Passive Income

Passive income is an income earned from allowing another to use ones rights, or game of chance or investment, which the taxpayer merely waits for the income to come in. In its simplest, passive income is income earned without doing anything. Interests, prizes, royalties, cash or property dividends. SUBJECT TO FINAL TAX III. Capital Gains Tax These taxes are imposed on sales or exchanges of properties not used in business.

Type of tax Interest from any currency bank deposit and yield and on any other monetary benefit from deposit substitutes and from trust funds and similar arrangements, royalties, prizes (over 10,000), and other winnings (except from PCSO and Lotto) Royalties on literary works and musical compositions Interest from a depository bank under the expanded foreign currency deposit system Interest income from long-term deposits or investment in the form of savings, common or individual trust funds, deposit substitutes, investment and management accounts and other investments evidenced w/ a certificate If holder of certificate pre-terminate the deposit or investment before the 5th year a final tax shall be imposed on the entire income. Cash/property dividends/share in partnership profits.

Tax rate

Citizen R

NR

Resident Alien On gross

NR Alien ETB On gross

NETB ---

20%

On gross On gross

On gross On gross On gross On gross On gross ------On gross ---

10% On gross 7% --Tax exempt -----

Passive Income

---

4 yrs to less than 5yrs: 5% 3yrs-less than 4yrs: 12% Less than 3yrs: 20% 10% 6% on FMV/selling price whichever is higher 100,000:5% Excess: 10%

On gross

On gross

On gross

On gross ---

On gross

On gross

On gross

On gross ---

Sale of real property

Whichev er is higher On net

Whichev er is higher On net

Whichev er is higher On net

Whicheve r is higher

Whichev er is higher On net

Capital gains from sale of shares of stock not traded in the stock exchange
Tax on NRA *NETB Income from all sources of the Philippines. Interest, cash/property dividends, rents, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other

On net

--25%

---

---

---

On gross

fixed determinable annual or periodic or causal gains, profits and income and capital gains

Alien individual employed by regional or area headquarters and regional operating head quarters if multinational corporations Tax on NRA *NETB Alien individuals employed by offshore banking units Alien employee employed by petroleum service contractor and subcontractor

15%

---

---

---

---

On gross

On gross 15% ---------

15% ---------

On gross