INCOME TAX ON INDIVIDUAL

A. RESIDENT CITIZEN & RESIDENT ALIEN INDIVIDUALS (RCI & RAI)

a. GRADUATED INCOME TAX RATE (Sec. 24A)
Tax base: TAXABLE INCOME as defined in Sec 31
Pertinent items in GI
Less: Deductions &/or Personal Exemptions
Not over P10,000

5%

Over P10,000 but not over P30,000

P500 + 10% of the excess over P10,000

Over P30,000 but not over P70,000

P2,500 + 15% of the excess over P30,000

Over P70,000 but not over P140,000

P8,500 + 20% of the excess over P70,000

Over P140,000 but not over P250,000

P22,500 + 25% of the excess over P140,000

Over P250,000 but not over P500,000

P50,000 + 30% of the excess over P250,000

Over P500,000

P125,000 + 32% of the excess over P500,000

Formula: Taxable income x Tax Rate = Tax Due

b. FINAL TAX on Certain Passive Income (Sec 24B)
Tax Base: interests, royalties, awards, dividends, capital gains on sale of shares, realty
Tax Rate on Certain Passive Income on RCI & RAI
1. Interest under the expanded foreign currency deposit system (EFCDS) (see RR 10-98)
Nonresident citizens: exempt
If it was deposited by an OCW or seaman or nonresident citizen
If it was in a bank account in the joint names of an OCW and his spouse (who is a resident)
2. Royalty from books,
literary works, &
musical compositions
3. Royalty other than above

Final Tax
7.5% (vs exempt for
nraie)

exempt
50% exempt/ 50%
FWT of 7.5%
10%
20%

4. Interest on any current bank deposit,

yield or other monetary benefits from
deposit substitute,
trust fund & similar arrangement
5. Prize exceeding P10,000

20%

6. Other winnings ,except Phil Charity Sweepstakes & Lotto

20%

7. Dividend from a domestic corp,

joint stock company,
insurance or mutual fund company, &
ROHQ of multinational company or
share in the distributive net income after tax of a
partnership (GPP)
joint stock/joint venture/consortium taxable as a corporation
But what about dividends from foreign corporations for citizens (not resident aliens)?
Well, the income here enters into the computation for Sec 24 (a) tax calendar. For
resident aliens, they are not taxed since its income derived from abroad.
8. Interest on long-term deposit or investment in banks (with maturity of 5 yrs/ more)
Pre-termination:
4yrs less than 5yrs 5%
3yrs less than 4yrs 12%
less than 3yrs 20%

20%

10% (vs 20% for nonresident aliens engaged in

trade/biz)

exempt

c. FINAL TAX on CAPITAL GAINS (24 C&D)

GENERAL RULE on Capital Gains
1.

On sale of shares of stock of a domestic corporation NOT listed and

NOT traded thru a local stock exchange held as a capital asset,
o Capital gains not over P100,000
o Capital gains in excess of P100,000 (see RR 6-2008)

Tax Rate & Tax Base

5% of the net capital gains

10% of the net capital gains

2. On sale of real property in the Philippines held as a capital asset (see

RR 8-98)

6% of the gross selling price, or

the current market value at the
time of sale, whichever is higher

Except:
If sale was made to the Govt/GOCC

Either 6% of the gross selling

price/current market value or
under the normal income tax
rate, taxpayers option

EXCEPTION: Tax Rate on Income from Sale, Barter, Exchange or

other Disposition of Shares of Stock (RR 6-2008)

Tax Rate & Tax Base

If shares of stock are listed and traded through the local stock exchange

of 1% (or .005%) of the gross

selling price or gross value in
money of the shares of stock

If shares not traded through the local stock exchange

o Capital gains not over P100,000
o Capital gains in excess of P100,000

5% of the net capital gains

10% of the net capital gains

B. NON-RESIDENT ALIEN INDIVIDUALS (NRAI)

1. NRAI ENGAGED in TRADE/BUSINESS in the PH (NRAIE) (Sec 25A)
Tax base: TAXABLE INCOME derived WITHIN the PH
In GENERAL
Not over P10,000

5%

Over P10,000 but not over P30,000

P500 + 10% of the excess over P10,000

Over P30,000 but not over P70,000

P2,500 + 15% of the excess over P30,000

Over P70,000 but not over P140,000

P8,500 + 20% of the excess over P70,000

Over P140,000 but not over P250,000

P22,500 + 25% of the excess over P140,000

Over P250,000 but not over P500,000

P50,000 + 30% of the excess over P250,000

Over P500,000

P125,000 + 32% of the excess over P500,000

Tax Rate on Certain Passive Income on NRAIE

Final Tax

1. Interest under the expanded foreign currency deposit system

Exempt
(7.5% for RCI & RAI)

2. Royalty from books, literary works, & musical compositions

10%

3. Royalty other than above

20%

4. Interest on any current bank deposit, yield or other monetary benefits from deposit
substitute, trust fund & similar arrangement

20%

5. Prize exceeding P10,000

20%

6. Other winnings, except Phil Charity Sweepstakes & Lotto

20%

7. Dividend from a domestic corp, or from a joint stock company, insurance or mutual
fund company, & regional operating headquarters of multinational company or share
in the distributive net income after tax o a partnership (except a general professional
partnership), joint stock or joint venture or consortium taxable as a corporation

20%

(10& for RCI & RAI)

What about dividends from foreign corps? Exempt. Nonresident aliens are not
taxed worldwide.

8. Gross income from cinematographic films & similar works

25%

9. Interest on long-term deposit or investment in banks (with maturity of 5yrs/more)

exempt

Tax Rate on Capital Gains (same with RCI, and NRAIN)

2.

On sale of shares of stock of a domestic corporation NOT listed and

NOT traded thru a local stock exchange held as a capital asset,
o Capital gains not over P100,000
o Capital gains in excess of P100,000
2. On sale of real property in the Philippines held as a capital asset

5% of the net capital gains

10% of the net capital gains
6% of the gross selling price, or
the current market value at the
time of sale, whichever is higher

2. NRAI NOT ENGAGED in TRADE/BUSINESS with the PH (NRAIN) (Sec 25B)

In GENERAL: 25% of ALL income from sources WITHIN the PH
Tax Rate on Capital Gains: same with RCI & NRAIE (see table above)

3. SPECIAL ALIENS (SA) (Sec 25C)

Special Aliens
1. Employed by RAHQ & ROHQ established in the PH by multinational;

15% on gross income

2. Employed by OBUs

15% on gross income

3. Permanent resident of a foreign country but who is employed and assigned

in the Philippines by a foreign service contractor or by a foreign service
subcontractor engaged in petroleum operations in the Philippines

15%

INCOME TAX on CORPORATIONS

A. DOMESTIC CORPORATIONS
1. REGULAR Income (Sec 27A)
a. 30% of TAXABLE INCOME from all sources WITHIN and WITHOUT the PH
b. 2% of GROSS INCOME if MCIT applies
c.

15% of GROSS INCOME if the ff conditions are met:

i.
tax effort ratio of 20% of GNP
ii.
ratio of 40% of income tax collection to total tax revenues
iii.
VAT tax effort of 4% of GNP
iv.
.9% ratio of the Consolidated Public Sector Financial Position (CPSFP)
to GNP

2. PASSIVE INCOME (Sec 27D)

Tax Rate on Passive Income of Domestic Corporations

Final Tax

1. Interest under the expanded foreign currency deposit system (EFCDS)

7.5%

2. Royalty of all types within the Philippines

20%

Royalty from abroad? Enters the taxable income 30% tax rate

3. Interest on any current bank deposit, yield or other monetary benefits from deposit
substitute, trust fund & similar arrangement
4. Dividend from domestic corporations (inter-corporate dividend)

20%
exempt

3. CAPITAL GAINS
Tax Rate on Capital Gains (same as individuals)
1. On sale of shares of stock of a domestic corporation NOT listed and NOT
traded thru a local stock exchange held as a capital asset,
o

Capital gains not over P100,000

5% of the net capital gains

Capital gains in excess of P100,000

10% of the net capital gains

If shares of stock are listed and traded through the local stock exchange

of 1% (or .005%) of the gross

selling price or gross value in
money of the shares of stock

2. On sale of real property in the Philippines held as a capital asset

6% of the gross selling price, or

the current market value at the
time of sale, whichever is higher

If sale was made to the government or to GOCCs

Either 6% of the gross selling

price/current market value or
under the normal income tax
rate, taxpayers option

Tax Rate of BANKS on Income Derived under the EFCDS

Final Tax

1. Income derived by a depository BANK from foreign currency transactions with nonresidents, OBUs, etc

exempt

2. Interest income from foreign currency loans granted by a bank to residents other
than OBUs

10%

B. RESIDENT FOREIGN CORPORATIONS (RFC) (28A)

1. ORDINARY INCOME TAX
a. 30% of TAXABLE INCOME from all sources WITHIN the PH
b. 2% of GROSS INCOME if MCIT applies
c.

15% of GROSS INCOME if the ff conditions are met:

i.
tax effort ratio of 20% of GNP
ii.
ratio of 40% of income tax collection to total tax revenues
iii.
VAT tax effort of 4% of GNP
iv.
.9% ratio of the Consolidated Public Sector Financial Position (CPSFP)
to GNP

2. PASSIVE INCOME (FINAL TAX)

1. Interest under the expanded foreign currency deposit system

7.5%

2. Royalty of all types within the Philippines

20%

Royalty from abroad? Exempt. (remember, only taxed from sources within the
PH)
3. Interest on any current bank deposit, yield or other monetary benefits from deposit
substitute, trust fund & similar arrangement
o

4. Dividend from domestic corporations (inter-corporate dividend)

20%
exempt

3. CAPITAL GAINS
1. On sale of shares of stock of a domestic corporation NOT listed and NOT
traded thru a local stock exchange held as a capital asset,
o Capital gains not over P100,000
o Capital gains in excess of P100,000
2. On sale of real property in the Philippines

5% of the net capital gains

10% of the net capital gains
No provision for capital gains for
sale of realty.

C. INTERNATIONAL CARRIERS (IC)

a) ONLINE

2.5% of Gross Philippine Billings

b) OFFLINE but nonetheless earn income from

other activities in the

32% of such income

D. OFFSHORE BANKING UNITS (OBU)

1. In GENERAL

including any interest income foreign currency loans granted to residents other than OBUs- 10% final tax

2. All others - exempt

E. NON-RESIDENT FOREIGN CORPORATIONS (NRFC)

1. IN GENERAL: 30% on GROSS INCOME derived from sources WITHIN the PH
2. PASSIVE INCOME
1. Interest on foreign loans

20%

Non-resident lends to a domestic corporation

2. Dividend from domestic corporations (inter-corporate dividend)

15%

This is 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 nonresident foreign corp taxes deemed to have been paid in the Philippines
equivalent to 15%. If they dont, the dividends will be taxed at 30%.

3. CAPITAL GAINS
1. On sale of shares of stock of a domestic corporation NOT listed and NOT
traded thru a local stock exchange held as a capital asset,
o Capital gains not over P100,000
o Capital gains in excess of P100,000

5% of the net capital gains

10% of the net capital gains
No provision for capital gains for
sale of realty. Apply it to the
normal corporate tax of 30%

2. On sale of real property in the Philippines

F. SPECIAL CORPORATIONS
Non-resident owner of lessor of vessel

4.5%

Gross rentals, lease and charter

fees from the Phil

Non-resident cinematographic film owner,

lessor, or distributor

25%

Gross income from the Phil

Non-resident lessor of aircraft, machinery

and other equipment

7.5%

Gross rentals, charges and other

fees from Phil sources

Proprietary educational institution and nonprofit hospital

10%

Taxable income from all sources

Resident international carrier

2.5%

Gross Philippine billings

10%

Philippine Taxable income

Regional
operating
headquarters
multinational corporation

or