Income Tax Bir

INCOME TAX
Description
Income Tax is a tax on a person's income, emoluments, profits arising from property, practice of
profession, conduct of trade or business or on the pertinent items of gross income specified in the
Tax Code of 1997 (Tax Code), as amended, less the deductions and/or personal and additional
exemptions, if any, authorized for such types of income, by the Tax Code, as amended, or other
special laws.
Who Are Required To File Income Tax Returns
Individuals
Resident citizens receiving income from sources within or outside the Philippines
o employees deriving purely compensation income from 2 or more employers, concurrently or
successively at anytime during the taxable year
o employees deriving purely compensation income regardless of the amount, whether from a
single or several employers during the calendar year, the income tax of which has not been
withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to collectible or
refundable return
o self-employed individuals receiving income from the conduct of trade or business and/or
practice of profession
o individuals deriving mixed income, i.e., compensation income and income from the conduct of
trade or business and/or practice of profession
o individuals deriving other non-business, non-professional related income in addition to
compensation income not otherwise subject to a final tax
o individuals receiving purely compensation income from a single employer, although the
income of which has been correctly withheld, but whose spouse is not entitled to substituted
filing
o marginal income earners
Non-resident citizens receiving income from sources within the Philippines
Aliens, whether resident or not, receiving income from sources within the Philippines
Corporations, no matter how created or organized, including general professional
partnerships
Domestic corporations receiving income from sources within and outside the
Philippines
Foreign corporations receiving income from sources within the Philippines
Estates and trusts engaged in trade or business
Annual Income Tax For Individuals Earning Purely Compensation Income (Including NonBusiness/Non-Profession Related Income) and For Marginal Income Earners
Tax Form
BIR Form 1700 - Annual Income Tax Return (For Individual Earning Purely Compensation Income
Including Non-Business/Non-Profession Related Income)
Documentary Requirements
1. Certificate of Income Tax Withheld on Compensation (BIR Form 2316)
2. Waiver of the Husbands right to claim additional exemption, if applicable
3. Duly approved Tax Debit Memo, if applicable
4. Proof of Foreign Tax Credits, if applicable
5. Income Tax Return previously filed and proof of payment, if filing an amended return for the same
taxable year
Procedures
1. Fill-up BIR Form 1700 in triplicate.
2. If there is payment:
o Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you
are registered and present the duly accomplished BIR Form 1700, together with the required
attachments and your payment.
In places where there are no AABs, proceed to the Revenue Collection Officer or duly
Authorized City or Municipal Treasurer located within the Revenue District Office where you
o Receive your copy of the duly stamped and validated form from the teller of the
AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.
3. For "No Payment" Returns including refundable returns, and for tax returns qualified for second
installment:
o Proceed to the Revenue District Office where you are registered or to any Tax Filing Center
established by the BIR and present the duly accomplished BIR Form 1700, together with the
required attachments.
o
Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center
representative.
o
Deadline
On or before the 15th day of April of each year covering taxable income for the preceding taxable
year
Annual Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those
With Mixed Income,i.e., Compensation Income and Income from Business and/or Practice
of Profession )
Tax Form
BIR Form 1701 - Annual Income Tax Return (For Self-Employed Individuals, Estates and Trusts
Including Those With Both Business and Compensation Income)
1. Certificate of Income Tax Withheld on Compensation (BIR Form 2316), if applicable
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if
applicable
3. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable
4. Waiver of the Husbands right to claim additional exemption, if applicable
7. Income Tax Return previously filed and proof of payment, if filing an amended return for
the same year
8. Account Information Form (AIF) or the Certificate of the independent CPA with Audited
Financial Statements if the gross quarterly sales, earnings, receipts or output exceed P
150,000.00
9. Proof of prior years excess tax credits, if applicable
Procedures
1. Fill-up BIR Form 1701 in triplicate copies.
o In places where there are no AABs, proceed to the Revenue Collection Officer or duly
AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer
3. For "No Payment" including refundable/ creditable returns, returns with excess tax credit carry
over, and returns qualified for second installment:
o
o
Proceed to the Revenue District Office where you are registered or to any established Tax
Filing Centers established by the BIR and present the duly accomplished BIR Form 1701,
together with the required attachments.
Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center
representative.
Deadline
Final Adjustment Return or Annual Income Tax Return - On or before the 15th day of April of each
year covering income for the preceding year
Account Information Form For Self-Employed Individuals, Estates And Trusts (Including
Those With Mixed Income , I.E., Compensation Income and Income from Business and/or
Practice of Profession)
Tax Form
BIR Form 1701 AIF - Account Information Form For Self-Employed Individuals, Estates and Trusts
(Including those with Mixed Income, i.e., Compensation Income and Income from Business and/or
Practice of Profession) and Estates and Trusts (Engaged in Trade or Business)
NOTE: Pursuant to Revenue Memorandum Circular No. 6 2001, corporations, companies or
persons whose gross quarterly sales, earnings, receipts or output exceed P 150,000.00 may
not accomplish this form. In lieu thereof, they may file their annual income tax returns
accompanied by balance sheets, profit and loss statement, schedules listing incomeproducing properties and the corresponding income therefrom, and other relevant statements
duly certified by an independent CPA.
Documentary Requirements - None
Procedures
1. Accomplish BIR Form 1701 AIF in triplicate.
2. Attach the same to BIR Form 1701.
Deadline
Same deadline as BIR Form 1701 - On or before the 15th day of April of each year covering taxable
income for the preceding year
Quarterly Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those
With Mixed Income, I.E., Compensation Income and Income from Business and/or Practice
of Profession)
Tax Form
BIR Form 1701Q - Quarterly Income Tax Return For Self-Employed Individuals, Estates and Trusts
(Including those with both Business and Compensation Income)
1. Certificate of Income Tax Withheld at Source (BIR Form 2307), if applicable
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if
applicable
4. Previously filed return, if an amended return is filed for the same quarter
Procedures
1. Fill-up BIR Form 1701Q in triplicate.
registered and present the duly accomplished BIR Form 1701 Q, together with the required
In places where there are no AABs, proceed to the Revenue Collection Officer or duly
are registered and present the duly accomplished BIR Form 1701Q, together with the required
3. For "No Payment" Returns including refundable/ creditable returns with excess tax credit carry
over and returns qualified for second installment:
established by the BIR and present the duly accomplished BIR Form 1701Q, together with the
o Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center
representative.
o
Deadlines
April 15 for the first quarter
August 15 for the second quarter
November 15 for the third quarter
Annual Income Tax For Corporations And Partnerships
Tax Form
BIR Form 1702 - Annual Income Tax Return (For Corporations and Partnerships)
1. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304), if applicable
2. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable
5. Income tax return previously filed and proof of payment, if amended return is filed for the same
taxable year
6. Account Information Form (AIF) and/or the Certificate of the independent CPA with Audited
Financial Statements, if the gross quarterly sales, earnings, receipts or output exceed P150,000.00
7. Proof of prior years excess tax credits, if applicable
Procedures
are registered and present the duly accomplished BIR Form 1702 with the required
attachments and your payments.
3. For "No Payment" Returns including refundable/ creditable returns and returns with excess tax
credit carry over:
established by BIR and present the duly accomplished BIR Form 1702, together with the
o Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center
representative
Deadline
Final Adjustment Return or Annual Income Tax Return - On or before the 15th day of the fourth
month following the close of the taxpayers taxable year
Account Information Form For Corporations And Partnerships
Tax Form
BIR Form 1702 AIF - Account Information Form (For Corporations and Partnerships)
NOTE: Pursuant to Revenue Memorandum Circular No. 6 2001, corporations, companies or persons
whose gross quarterly sales, earnings, receipts or output exceed P 150,000.00 may not accomplish
this form. In lieu thereof, they may file their annual income tax returns accompanied by balance
sheets, profit and loss statement, schedules listing income-producing properties and the
corresponding income therefrom, and other relevant statements duly certified by an independent
CPA.
Documentary Requirements: None
Procedures
1. Accomplish BIR Form 1702 AIF in triplicate.
2. Attach the same to BIR Form 1702.
Deadline
Same deadline as BIR Form 1702 - On or before the 15th day of the fourth month following the close
of the taxpayers taxable year
Quarterly Income Tax For Corporations And Partnerships
Tax Form
BIR Form 1702 Q - Quarterly Income Tax Return (For Corporations and Partnerships)
1. Certificate of Income Tax Withheld at Source (BIR Form 2307), if applicable
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304), if
applicable
4. Previously filed return, if an amended return is filed for the same quarter
Procedures
1. Fill-up BIR Form 1702 Q in triplicate.
are registered and present the duly accomplished BIR Form 1702 Q, together with the
required attachments and your payment.
are registered and present the duly accomplished BIR Form 1702 Q.
3. For Refundable Returns and for those returns with second installment:
o Proceed to the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1702 Q, together with the required attachments.
o Receive your copy of the duly stamped and validated form from the RDO representative.
Deadline
Corporate Quarterly Declaration or Quarterly Income Tax Return - On or before the 60th day
following the close of each of the quarters of the taxable year
Improperly Accumulated Earnings Tax For Corporations
Tax Form
BIR Form 1704 - Improperly Accumulated Earnings Tax Return (For Corporations)
1. Photocopy of Annual Income Tax Return (BIR Form 1702) with Audited Financial Statements and/or
Account Information Form of the covered taxable year duly received by the BIR; and
2. Sworn declaration as to dividends declared taken from the covered year's earnings and the
corresponding tax withheld, if any
Procedures
are registered and present the duly accomplished BIR Form 1704
3. If there is no payment:
o Proceed to the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1704, together with the required attachments.
o Receive your copy of the duly stamped and validated form from the RDO representative
Deadline
Within fifteen (15) days after the close of the taxable year
Tax Rate
For Individuals Earning Purely Compensation Income and Individuals Engaged in Business
and Practice of Profession
Amount of Net Taxable Income Rate
Over
But Not Over
P10,000
5%
P10,000
P30,000
P500 + 10% of the Excess over P10,000
P30,000
P70,000
P2,500 + 15% of the Excess over P30,000
P70,000
P140,000
P140,000
P250,000
P250,000
P500,000
P125,000 + 32% of the Excess over P500,000 in 2000 and
P500,000
onward
Note: When the tax due exceeds P2,000.00, the taxpayer may elect to pay in two equal installments,
the first installment to be paid at the time the
return is filed and the second installment 15 of the same year at on or before July the Authorized
Agent Bank (AAB) within the jurisdiction of the
Revenue District Office (RDO) where the taxpayer is registered.
Tax Rate
Taxable Base
1. Domestic Corporations:
a. In General
30% (effective Jan. 1, Net taxable

2009)
sources
income
from
all
b. Minimum Corporate Income Tax*
2%
c. Improperly Accumulated Earnings
10%
2. Proprietary Educational Institution
10%
3. Non-stock, Non-profit Hospitals
10%
Gross Income
Improperly Accumulated Taxable
Income
Net taxable income provided that
the gross income from unrelated
trade, business or other activity
does not exceed 50% of the total
gross income
Net taxable income provided that
the gross income from unrelated
trade, business or other activity
does not exceed 50% of the total
gross income
4. GOCC, Agencies & Instrumentalities

a. In General
32%
2%
10%
Net taxable income from all

sources
Gross Income
Income
5. National Gov't. & LGUs

a. In General
32%
2%
10%

sources
Gross Income
Income
6. Taxable Partnerships
a. In General
32%
2%
10%
7. Exempt Corporation
a. On Exempt Activities
0%
b. On Taxable Activities
32%

sources
Gross Income
Income
Net taxable
sources
income
from
all
8. General Professional Partnerships
0%
Rate specified under
9. Corporation covered by Special Laws the respective special
laws
10. International Carriers
2.5%
Gross Philippine Billings
11. Regional Operating Head
10%
Taxable Income
Gross Taxable Income On Foreign
12. Offshore Banking Units (OBUs)
10%
Currency Transaction
On Taxable Income other than
32%
Foreign Currency Transaction
13. Foreign Currency Deposit Units
Gross Taxable Income On Foreign
10%
(FCDU)
Currency Transaction
On Taxable Income other than
32%
Foreign Currency Transaction
*Beginning on the 4th year immediately following the year in which such corporation commenced its
business operations, when the minimum
corporate income tax is greater than the tax computed using the normal income tax.
Passive Income
1. Interest from currency deposits, trust funds and deposit substitutes
Holding Period
- Four (4) years to less than five (5) years
- Three (3) years to less than four (4) years
- Less than three (3) years
2. Royalties (on books as well as literary & musical composition)
- In general
3. Prizes (P10,000 or less )
- In excess of P10,000
4. Winnings (except from PCSO and lotto)
5. Interest Income of Foreign Currency Deposit
6. Cash and Property Dividends
- To individuals from Domestic Corporations
- To Domestic Corporations from Another Domestic Corporations
7. On capital gains presumed to have been realized from sale, exchange or other
disposition of real property (capital asset)
8. On capital gains for shares of stock not traded in the stock exchange
- Not over P100,000
- Any amount in excess of P100,000
B. For Non-Resident Aliens Engaged in Trade or Business
1. On Certain Passive Income*
2. Interest Income from long time deposits
Holding Period
-Four (4) years to less than five (5) years
-Three (3) years to less than four (4) years
-Less than three (3) years
3. On capital gains presumed to have been realized from the sale, exchange or other
disposition of real property
4. On capital gains for shares of stock not traded in the Stock Exchange
- Not over P100,000
- Any amount in excess of P100,000
C) For Non-Resident Aliens Not Engaged in Trade or
Business
1. On the gross amount of income derived from all sources within the Philippines
2. On capital gains presumed to have been realized from the exchange or other
disposition of real property located in the Phils.
D) On the gross income in the Philippines of Aliens Employed by Regional
Headquarters (RHQ) or Area Headquarters and Regional Operating
Headquarters (ROH), Offshore Banking Units (OBUs), Petroleum Service
Contractor and Subcontractor
E) General Professional Partnerships
F) Domestic Corporations
1) a. In General on net taxable income
b. Minimum Corporate Income Tax on gross income
20%
5%
12%
20%
10%
20%
5%
20%
20%
7.5%
10 %
0%
6%
5%
10%
20%
5%
12%
20%
6%
5%
10%
25%
6%
15%
0%
30%
2%
c. Improperly Accumulated Earnings on improperly accumulated taxable income

10%
2) Proprietary Educational Institution and Non-profit Hospitals
10%
- In general (on net taxable income)
10%
- If the gross income from unrelated trade, business or other activity exceeds 50% of
30%
the total gross income from all sources
4) GOCC, Agencies & Instrumentalities
a. In General - on net taxable income
30%
2%
10%
5) Taxable Partnerships
a. In General on net taxable income
30%
2%
10%
6) Exempt Corporation
a. On Exempt Activities
0%
b. On Taxable Activities
32%
Rate
specified
8) Corporation covered by Special Laws
under
the
respective
special laws
G) Resident Foreign Corporation
1)a. In General on net taxable income
30%
2%
10%
2) International Carriers on gross Philippine billings
25%
3) Regional Operating Headquarters on gross income
10%
Rate
specified
4) Corporation Covered by Special Laws
under
the
respective
special laws
5) Offshore Banking Units (OBUs) on gross income
10%
6) Foreign Currency Deposit Units (FCDU) on gross income
10%
Related Revenue Issuances
RR No. 4-95, RR No. 4-96, RR No. 5-97, RR No. 1-98
Codal Reference
Sections 23-59, 67-73 and 74-77 of the National Internal Revenue Code
Frequently Asked Questions
1) What is income?
Income means all wealth, which flows into the taxpayer other than as a mere return of capital.
2) What is Taxable Income?
Taxable income means the pertinent items of gross income specified in the Tax Code as amended,
less the deductions and/or personal and additional exemptions, if any, authorized for such types of
income, by the Tax Code or other special laws.
3) What is Gross Income?
Gross income means all income derived from whatever source.

4) What comprises gross income?
Gross income includes, but is not limited to the following:
Compensation for services, in whatever form paid, including but not limited to fees, salaries,
wages, commissions and similar item
Gross income derived from the conduct of trade or business or the exercise of profession
Gains derived from dealings in property
Partner's distributive share from the net income of the general professional partnerships
Interest
Annuities
Rents
Prizes and winnings
Royalties
Pensions
Dividends
5) What are some of the exclusions from gross income?
Life insurance
Amount received by insured as return
of premium
Gifts, bequests and devises
Compensation for injuries or sickness
Income exempt under treaty
Retirement
benefits,
pensions,
gratuities, etc.
Miscellaneous items
income derived by foreign government
income derived by the government or

its political subdivision
prizes and awards in sport competition
prizes and awards which met the
conditions set in the Tax Code
13th month pay and other benefits
GSIS,
SSS,
Medicare
and
other
contributions
gain from the sale of bonds, debentures
or other certificate of indebtedness
gain from redemption of shares in
mutual fund
6) What are the allowable deductions from gross income?

Except for taxpayers earning compensation income arising from personal services rendered under
an employer-employee relationships where the only deduction provided that the gross family income
does not exceed P250,000 per family is the premium payment on health and/or hospitalization
insurance, a taxpayer may opt to avail any of the following allowable deductions from gross income:
a) Optional Standard Deduction - an amount not exceeding 40% of the net sales for individuals and
gross income for corporations; or
b) Itemized Deductions which include the following:
o
Expenses
o
Depletion of Oil and Gas Wells
o
Interest
and Mines
o
Charitable Contributions and
o
Taxes
Other Contributions
o
Losses
o
Research and Development
o
Bad Debts
o
Pension Trusts
o
Depreciation
In addition, individuals who are either earning compensation income, engaged in business or deriving
income from the practice of profession are entitled to personal and additional exemptions as follows:
Personal Exemptions:
For single individual or married individual judicially decreed as legally separated with no qualified
dependents; For head of family; For each married individual * P
50,000.00
Note: In case of married individuals where only one of the spouses is deriving gross income, only
such spouse will be allowed to claim the personal exemption.
Additional Exemptions:
For each qualified dependent, an P25,000 additional exemption can be claimed but only up to 4
qualified dependents
10
The additional exemption can be claimed by the following:

The husband who is deemed the head of the family unless he explicitly waives his right in favor of
his wife
The spouse who has custody of the child or children in case of legally separated spouses.
Provided, that the total amount of additional exemptions that may be claimed by both shall not
exceed the maximum additional exemptions allowed by the Tax Code.
The individuals considered as Head of the Family supporting a qualified dependent
The maximum amount of P 2,400 premium payments on health and/or hospitalization insurance can
be claimed if:
Family gross income yearly should not be more than P 250,000
For married individuals, the spouse claiming the additional exemptions for the qualified
dependents shall be entitled to this deduction
7) Who are required to file the Income Tax returns?
Individuals
Resident citizens receiving income from sources within or outside the Philippines
o employees deriving purely compensation income from 2 or more employers, concurrently
or successively at anytime during the taxable year
o employees deriving purely compensation income regardless of the amount, whether from
a single or several employers during the calendar year, the income tax of which has not
been withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to
collectible or refundable return
o self-employed individuals receiving income from the conduct of trade or business and/or
practice of profession
o individuals deriving mixed income, i.e., compensation income and income from the
conduct of trade or business and/or practice of profession
o individuals deriving other non-business, non-professional related income in addition to
compensation income not otherwise subject to a final tax
o individuals receiving purely compensation income from a single employer, although the
income of which has been correctly withheld, but whose spouse is not entitled to
substituted filing
o marginal income earners
Non-resident citizens receiving income from sources within the Philippines
Aliens, whether resident or not, receiving income from sources within the
Philippines
Corporations no matter how created or organized including partnerships
o domestic corporations receiving income from sources within and outside the Philippines
o foreign corporations receiving income from sources within the Philippines
o taxable partnerships
Estates and trusts engaged in trade or business
8) Who are not required to file Income Tax returns?
a. An individual who is a minimum wage earner
b. An individual whose gross income does not exceed his total personal and additional exemptions
c. An individual whose compensation income derived from one employer does not exceed P 60,000
and the income tax on which has been correctly withheld
d. An individual whose income has been subjected to final withholding tax (alien employee as well as
Filipino employee occupying the same position as that of the alien employee of regional
headquarters and regional operating headquarters of multinational companies, petroleum service
contractors and sub-contractors and offshore-banking units, non-resident aliens not engaged in trade
or business)
e. Those who are qualified under substituted filing. However, substituted filing applies only if all of
the following requirements are present :
o the employee received purely compensation income (regardless of amount) during the
taxable year
11
o
o
o
o
o
the employee received the income from only one employer in the Philippines during the
taxable year
the amount of tax due from the employee at the end of the year equals the amount of tax
withheld by the employer
the employees spouse also complies with all 3 conditions stated above
the employer files the annual information return (BIR Form No. 1604-CF)
the employer issues BIR Form No. 2316 (Oct 2002 ENCS version ) to each employee.
9) Who are exempt from Income Tax?

Non-resident citizen who is:
a) 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
b) 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
c) 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
d) A citizen who has been previously considered as a non-resident citizen and who arrives in
the Philippines at any time during the year to reside permanently in the Philippines will
likewise be treated as a non-resident citizen during 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.
Overseas Filipino Worker, including overseas seaman
An individual citizen of the Philippines who is working and deriving income from abroad as an
overseas Filipino worker is taxable only on income from sources within the Philippines;
provided, that a seaman who is a citizen of the Philippines and who receives compensation for
services rendered abroad as a member of the complement of a vessel engaged exclusively in
international trade will be treated as an overseas Filipino worker.
NOTE: A Filipino employed as Philippine Embassy/Consulate service personnel of the Philippine
Embassy/consulate is not treated as a non-resident citizen, hence his income is taxable.
10) What are the procedures in filing Income Tax returns (ITRs)?
For with payment ITRs (BIR Form Nos. 1700 / 1701 / 1701Q / 1702 / 1702Q / 1704)
File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with the
Authorized Agent Bank (AAB) of the place where taxpayer is registered or required to be
registered. In places where there are no AABs, the return will be filed directly with the
Revenue Collection Officer or duly Authorized Treasurer of the city or municipality in which
such person has his legal residence or principal place of business in the Philippines, or if there
is none, filing of the return will be at the Office of the Commissioner.
For no payment ITRs -- refundable, break-even, exempt and no operation/transaction,
including returns to be paid on 2nd installment and returns paid through a Tax Debit
Memo(TDM)
File the return with the concerned Revenue District Office (RDO) where the taxpayer is
registered. However, "no payment" returns filed late shall be accepted by the RDO but instead
shall be filed with an Authorized Agent Bank (AAB) or Collection Officer/Deputized Municipal
Treasurer (in places where there are no AABs), for payment of necessary penalties.
11) How is Income Tax payable of individuals (resident citizens and non-resident citizens)computed?
Gross Income
P ___________
Less: Allowable Deductions (Itemized or Optional)
___________
Net Income
P ___________
Less: Personal & Additional Exemptions
___________
Net Taxable Income
P ___________
12
Multiply by Tax Rate (5 to 32%)
____________
Income Tax Due: Tax withheld (per BIR From 2316/2304)
P ___________
Income tax payable
P____________
12) How is Income Tax paid?

Through withholding
o Generally 10% or 15% if the gross annual business or professional income exceeds
P720,000 per year
o 20% - Fees paid to directors who are not employees and 20% of professional fees paid to
non-individuals
o Other withholding tax rates
Pay the balance as you file the tax return, computed as follows:
Income Tax Due
P ___________
Less: Withholding Tax
___________
Net Income Tax Due
P ___________
13) Is the Minimum Corporate Income Tax (MCIT) an addition to the regular or normal income tax?
No, the MCIT is not an additional tax. An MCIT of 2% of the gross income as of the end of taxable
year (whether calendar or fiscal year, depending on the accounting period employed) is imposed on
a corporation taxable under Title II of the Tax Code, as amended, beginning on the 4th taxable year
immediately following the taxable year in which such corporation commenced its business operations
when the MCIT is greater than the regular income tax. The MCIT is compared with the regular
income tax, which is due from a corporation. If the regular income is higher than the MCIT, then the
corporation does not pay the MCIT but the amount of the regular income tax.
14) Who are covered by MCIT?
The MCIT covers domestic and resident foreign corporations which are subject to the regular income
tax. The term regular income tax refers to the regular income tax rates under the Tax Code. Thus,
corporations which are subject to a special corporate tax system do not fall within the coverage of
the MCIT.
For corporations whose operations or activities are partly covered by the regular income tax and
partly covered by the preferential rate under special law, the MCIT shall apply on operations by the
regular income tax rate. Newly established corporations or firms which are on their first 3 years of
operations are not covered by the MCIT.
15) When does a corporation start to be covered by the MCIT?
A corporation starts to be covered by the MCIT on the 4th year of its business operations. The period
of reckoning which is the start of its business operations is the year when the corporation was
registered with the BIR. This rule will apply regardless of whether the corporation is using the
calendar year or fiscal year as its taxable year.
16) When is the MCIT reported and paid? Is it quarterly?
The MCIT is paid on an annual basis and quarterly basis. The rules are governed by Revenue
Regulations No. 12-2007.
17) How is MCIT computed?
The MCIT is 2% of the gross income of the corporation at the end of the year.
Gross income means gross sales less sales returns, discounts and cost of goods sold. Passive
income, which have been subject to a final tax at source do not form part of gross income for
purposes of the MCIT.
Cost of goods sold includes all business expenses directly incurred to produce the merchandise to
bring them to their present location and use.
13
For trading or merchandising concern, cost of goods sold means the invoice cost of goods sold, plus
import duties, freight in transporting the goods to the place where the goods are actually sold,
including insurance while the goods are in transit.
For a manufacturing concern, cost of goods manufactured and sold means all costs of production of
finished goods such as raw materials used, direct labor and manufacturing overhead, freight cost,
insurance premiums and other costs incurred to bring the raw materials to the factory or warehouse.
For sale of services, gross income means gross receipts less sales returns, allowances, discounts and
cost of services which cover all direct costs and expenses necessarily incurred to provide the services
required by the customers and clients including:
Salaries and employees benefits of personnel, consultants and specialists directly rendering
the service;
Cost of facilities directly utilized in providing the service such as depreciation or rental of
equipment used;
Cost of supplies
Interest Expense is not included as part of cost of service, except in the case of banks and other
financial institutions.
Gross Receipts means amounts actually or constructively received during the taxable year.
However, for taxpayers employing the accrual basis of accounting, it means amounts earned as
gross income.
18) What is the carry forward provision under the MCIT?
Any excess of the MCIT over the normal income tax may be carried forward on an annual basis and
be credited against the normal income tax for 3 immediately succeeding taxable years.
19) How would the MCIT be recorded for accounting purposes?
Any amount paid as excess minimum corporate income tax should be recorded in the corporations
books as an asset under account title Deferred charges-MCIT
20) How long can we amend our income tax return?
There is no prescription period for amending the return. When the taxpayer has been issued a Letter
of Authority, he can no longer amend the return.
21) Can a benefactor of a senior citizen claim him/her as additional dependent in addition to his/her 3
qualified dependent children at P 25,000 each?
No, pursuant to Revenue Regulations 2-94, the benefactor of a senior citizen cannot claim the
additional exemption.
22) What is a tax treaty?
A tax treaty formally known as convention or agreement for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income (and on capital) could be defined in
terms of its purpose. First, a tax treaty is intended to promote international trade and investment in
several ways, the most important of which is by allocating taxing jurisdiction between the
Contracting States so as to eliminate or mitigate double taxation of income. Second, a tax treaty is
intended to permit the Contracting States to better enforce their domestic laws so as to reduce tax
evasion. These purposes are in fact incorporated in the title and the preamble.
23) What are the effective Philippine tax treaties?
The Philippines has thirty-seven (37) effective tax treaties. The following tax treaties and their dates
of effectivity as as follows:
Effective Philippine Tax Treaties (as of June 2010)
Country
Date of Effectivity
Date and Venue of Signature
1. Australia
January 1, 1980
May 11, 1979, Manila, Philippines
2. Austria
January 1, 1983
April 4, 1981, Vienna, Austria
3. Bahrain
January 1, 2004
November 7, 2001, Manila, Philippines
4. Bangladesh
January 1, 2004
September 8, 1997, Manila, Philippines
14
5. Belgium
January 1, 1981
October 2, 1976, Manila, Philippines
6. Brazil
January 1, 1992
Sept. 29, 1983, Brasilia, Brazil
7. Canada
January 1, 1977
March 11, 1976, Manila, Philippines
8. China
January 1, 2002
November 18, 1999, Beijing, China
9. Czech
January 1, 2004
10. Denmark (Renegotiated)
January 1, 1998
June 30, 1995, Copenhagen, Denmark
11. Finland
January 1, 1982
12. France
January 1, 1978
January 9, 1976, Kingston, Jamaica
13. Germany
January 1, 1985
July 22, 1983, Manila, Philippines
14. Hungary
January 1, 1998
June 13, 1997, Budapest, Hungary
15. India
January 1, 1995
February 12, 1990, Manila, Philippines
16. Indonesia
January 1, 1983
June 18, 1981, Manila, Philippines
17. Israel
January 1, 1997
18. Italy
January 1, 1990
December 5, 1980, Rome, Italy
19. Japan
January 1, 1981
February 13, 1980, Tokyo, Japan
20. Korea
January 1, 1987
February 21, 1984, Seoul, Korea
21. Malaysia
January 1, 1985
April 27, 1982, Manila, Philippines
22. Netherlands
January 1, 1992
23. New Zealand
January 1, 1981
24. Norway
January 1, 1998
25. Pakistan
January 1, 1979
February 22, 1980, Manila, Philippines
26. Poland
January 1, 1998
September 9, 1992, Manila, Philippines
27. Romania
January 1, 1998
May 18, 1994, Bucharest, Romania
28. Russia
January 1, 1998
29. Singapore
January 1, 1977
August 1, 1977, Manila, Philippines
30. Spain
January 1, 1994
31. Sweden (Renegotiated)
January 1, 2004
32. Switzerland
January 1, 2002
33. Thailand
January 1, 1983
34. United Arab Emirates
January 1, 2009
September 21, 2003, Dubai, UAE
35. United Kingdom of Great Britain

and Northern Ireland
January 1, 1979
June 10, 1976, London, United Kingdom
36. United States of America
January 1, 1983
37. Vietnam
January 1, 2004
24) What office can we inquire about the said tax treaties?
The International Tax Affairs Division (ITAD).
25) What taxes are covered b Philippine tax treaties?
Income taxes imposed by the domestic laws of the Contracting States, including substantially similar
taxes that may be imposed later, in addition to, or in place, are covered by the tax treaties. In the
15
Philippines, this is generally limited to Title II (Tax on Income) of the National Internal Revenue Code
of 1997, as amended.
26) How is business income treated under our tax treaties?
The business profits of a resident of a Contracting State shall not be taxable in the Philippines unless
that enterprise of a resident of a Contracting State carries on business in the Philippines through a
permanent establishment.
27) What is the concept of permanent establishment (PE) as used in tax treaties?
PE is defined as a fixed place of business through which the business of the enterprise is wholly or
partly carried on. The concept of permanent establishment is used to determine the rights of a
Contracting State to tax the business profits of enterprises of the other Contracting State. Under this
concept, profits of an enterprise of a Contracting State are not taxable by the other Contracting
State, unless the enterprise carries on business through a permanent establishment situated in the
other Contracting State.
A list of places, circumstances, and activities which constitute a permanent establishment is provided
under the different tax treaties which the Philippines has with other countries.
28) What is the Most-Favored-Nation clause (MFN)?
The appearance of the MFN clause in the tax treaty means that a Contracting State will grant to a
resident of the other Contracting State the same lower rate of tax or exemption the former has
granted to a resident of a third State.
29) What is the tax treatment on immovable property?
Income from an immovable property is taxable in the Contracting State where the property is
situated. This term is generally defined under the domestic laws of the Contracting States.
However, this is further defined in the tax treaties.
30) How are capital gains taxed under our tax treaties?
Gains from the alienation of immovable property or movable property forming part of the business
property of a permanent establishment or pertaining to a fixed base are taxed in the Philippines if the
immovable property or permanent establishment or fixed base is located here.
16

Income Tax Bir

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Income Tax Bir

Hochgeladen von

Copyright:

Verfügbare Formate

INCOME TAX

30% (effective Jan. 1, Net taxable

b. Minimum Corporate Income Tax*

c. Improperly Accumulated Earnings

2. Proprietary Educational Institution

3. Non-stock, Non-profit Hospitals

4. GOCC, Agencies & Instrumentalities

b. Minimum Corporate Income Tax*

c. Improperly Accumulated Earnings

Net taxable income from all

5. National Gov't. & LGUs

b. Minimum Corporate Income Tax*

c. Improperly Accumulated Earnings

Net taxable income from all

b. Minimum Corporate Income Tax*

c. Improperly Accumulated Earnings

Net taxable income from all

8. General Professional Partnerships

c. Improperly Accumulated Earnings on improperly accumulated taxable income

Gross income means all income derived from whatever source.

income derived by the government or

6) What are the allowable deductions from gross income?

The additional exemption can be claimed by the following:

9) Who are exempt from Income Tax?

Less: Allowable Deductions (Itemized or Optional)

Less: Personal & Additional Exemptions

Net Taxable Income

Multiply by Tax Rate (5 to 32%)

Income Tax Due: Tax withheld (per BIR From 2316/2304)

Income tax payable

12) How is Income Tax paid?

Less: Withholding Tax

Net Income Tax Due

Date and Venue of Signature

May 11, 1979, Manila, Philippines

April 4, 1981, Vienna, Austria

November 7, 2001, Manila, Philippines

September 8, 1997, Manila, Philippines

October 2, 1976, Manila, Philippines

Sept. 29, 1983, Brasilia, Brazil

March 11, 1976, Manila, Philippines

November 18, 1999, Beijing, China

November 13, 2000, Manila, Philippines

10. Denmark (Renegotiated)

June 30, 1995, Copenhagen, Denmark

October 13, 1978, Manila, Philippines

January 9, 1976, Kingston, Jamaica

July 22, 1983, Manila, Philippines

June 13, 1997, Budapest, Hungary

February 12, 1990, Manila, Philippines

June 18, 1981, Manila, Philippines

June 9, 1992, Manila, Philippines

December 5, 1980, Rome, Italy

February 13, 1980, Tokyo, Japan

February 21, 1984, Seoul, Korea

April 27, 1982, Manila, Philippines

March 9, 1989, Manila, Philippines

23. New Zealand

April 29, 1980, Manila, Philippines

July 9, 1987, Manila, Philippines

February 22, 1980, Manila, Philippines

September 9, 1992, Manila, Philippines

May 18, 1994, Bucharest, Romania

April 26, 1995, Manila, Philippines