INCOME TAX

INCOME- means the gain derived from capital, from labor, or from both combined,
including profit gained from dealings in property or as well as any asset clearly
realized as in weather earned or not.
EXAMPLE: bonuses, awards, and prizes.
INCOME TAX- is the tax on the net income or the entire income received or realized
in one taxable year. It is levied upon taxable corporate and individual incomes in
excess of specified amounts less certain deductions and exemptions permitted by
law.
FUNCTIONS OF INCOME TAX
1. Provide large amounts of revenues.
2. To offset regressive sales and consumption taxes and together with estate
tax.
3. To mitigate the evils arising from the inequalities in the distribution of income
and wealth which are considered deterrent to social progress by a progressive
scheme of taxation.
NATURE AND PURPOSE OF TAXATION
1. It is regarded as an excise tax, and not a tax a tax on persons, properties and
profits. It is really on the right to earn income by an individual or entity on
governmental needs.
2. It is self-assessing or self computed.
3. It is imposed primarily to raise revenue.
CLASSIFICATION OF TAX PAYERS
1. INDIVIDUALS
(a) Citizens
1.) Resident citizens
2.) Non-resident citizens
(b) ALIENS
1.) Resident aliens
2.) Non-resident aliens
a.) Those engaged in trade or business within the Philippines.
b.) Those who are not so engaged.
2. CORPORATION
(a.)
Domestic
(b.)
Foreign
1.) Resident
2.) Non-resident
3. General Partnership
(a) General professional partnership

(b) General co-partnership

4. ESTATES AND TRUSTS
RATES OF INDIVIDUAL INCOME TAXES
1. The individual income tax payable by citizens, residents, and resident aliens
is imposed at progressive or graduated rates. The theory is that a persons
ability to shoulder the tax burden more rapidly as his income becomes higher
and higher. Only resident citizens (and domestic corporations) are taxed
according to incomes derived from abroad.
2. Tax is imposed upon taxable compensation or employment income, business
income, and income derived from the practice of profession by citizens or
resident aliens ranging from 5% on the first P10, 000 up to a maximum of
32% on the excess of P50, 000.
3. The tax shall be computed in accordance and that at the rates established in
the following schedules:
NOT OVER 10,000----------- 5%
OVER 10,000 but NOT OVER 30,000-------------P500+10% of the excess over
10,000
OVER 30,000 but NOT OVER 70,000-------------P2500+15% of the excess over
30,000
OVER 70,000 but not OVER 140,000-------------P8500 +20,000 of the excess
over 70,000
OVER 140,000 but not OVER 250,000-----------P22, 500+25% of the excess
over 140,000
OVER 250,000 but not OVER 500,000-----------P 50,000+30% of the excess
over 250,000
OVER 500-----------------------------------------------P 125,000+32%of the excess over
500,000
IF THE TAXABLE INCOME IS 150,000 the income tax due is 25,000 computed
as follows:
P22, 500------------------------for 140,000
P 2,500------------------------for 10,000 (25% of the
excess)
___________
_______________________
P 25,000
P 150,000
NOTE:
1. MARRIED INDIVIDUALS should compute for their taxable income
separately. If any income cannot be definitely attributed, or identified as
income exclusively earned by either spouses, the same will be divided
equally between them for the purpose of determining their taxable
income.
2. MINIMUM WAGE EARNER should be exempted from income taxation .
Holiday, night shift and overtime payment should also be exempted from
taxation.

3. A RESIDENT ALIEN OR INDIVIDUALS ENGAGED IN TRADE AND BUSINESSES

WITHIN THE PHILIPPINES is subject from the income tax for profit gained
from sources in the Philippines.
4. NON-RESIDENT ALIEN should pay 5% of the entire gross income and 15%
of the gross income received as compensation, salaries, etc. as
accumulated from the sources within the Philippines.
5. CERTAIN PASSIVE INCOMES subject to a separate and final income tax
imposed at fix rates.