Special Rules:

1. Alien Individual Employed by Regional or Area HQs and ROHQs of MNCs

15% of gross income derived from such MNCs, provided, Filipinos occupying
the same position as those of aliens shall enjoy same tax treatment.
2. Alien Individual Employed by Offshore Banking Units 15% of gross income
derived from such OBU, provided same tax treatment is extended to Filipinos
occupying the same position.
3. Alien individual Employed by Petroleum Service Contractor and Subcontractor
15% of gross income from such contractor or subcontractor, provided same
tax treatment is extended to Filipinos occupying the same position.
4. Taxation of General Professional Partnership (GPP) Sec. 26 (same as
corporation, when computing for the distributive share)
5. Taxation of Partners/Members of GPP Sec. 26 (reported by each
partner/member, whether actually or constructively received)
Basket 1: Compensation Income
Basket 2: Passive income, subject to final withholding tax
Basket 3: All other income (other than those in Baskets 1, 2, 4 and 5)
Basket 4: Sale of real property classified as capital assets
Basket 5: Sale of shares of stocks (whether listed in the stock exchange or
otherwise)
Basket 6: Income that are exempt from tax (Sec. 32B)
Life insurance must be for life; must be paid to the heirs; beneficiary must
be irrevocable
Interest income from proceeds of life insurance?
Cash surrender value of the life insurance policy as a return of premiums
paid
Gifts received, or inheritance received (bequests for PP; devise for RP)
rationale?
Interest income arising from gifts received or inheritance received?
Proceeds from Accident Insurance or Health Insurance, on account of sickness
or injury
Income exempt under treaty with other countries
Retirement benefits (received under RA 7641 and those under reasonable
RPB Plan10/50/1)
Separation pay from employer for causes beyond the control of the employee
Social Security Benefits, retirement gratuities, pensions, similar benefits from
foreign government agencies and other institutions, public or private
Benefits received from US Veterans Administration
SSS benefits and GSIS benefits
Prizes and Awards provided: in recognition of RCSEAL or C achievement,
without action, not required to render substantial future service as condition to
receive the award
Prizes and Awards in Sports Competition provided sanctioned by national
sports association

13th month pay and other benefits up to P30,000 only (Christmas bonus,
productivity bonus..)
GSIS, SSS, Medicare and Other Contributions
Gains derived from the sale of long-term bonds or debentures (maturity of
more than 5 years)
Gains from redemption of shares in mutual funds rationale?
Identify if under Basket 2 or Basket 3: Usual variations for those in yellow highlight
above.
Allowable Deductions:
I.
Personal Exemptions (review: who are entitled? RC, NRC, RA. Who are
not entitled? NRA-NETB. Who are entitled but with condition? NRA-ETB.
See Sec. 35ASec. 24(A)35(D))
II.
Additional Exemptions limited to RC, NRC, RA (See Sec. 35B)
III.
Expenses: itemized (Sec. 34A to 34J) or optional standard deduction
(OSD) [Sec. 34L]
IV.
Premium Payments on Health and/or Hospitalization Insurance (Sec. 34M)
P2,400 per family maximum, to be claimed only by the spouse claiming
the additional exemption; gross income of the whole family should exceed
P250,000 for the year.
Itemized Deductible Expenses (Sec. 34 A to J):
A

Ordinary
Necessary
Business
Professional
Expenses

and Ordinary, necessary, paid

Trade, or incurred, attributable to
or the
development,
management, operation or
conduct
of
trade
substantiated by OR and
other records.
Examples:
Salaries,
and
fringe
benefits, provided FBT was
paid
Travel expenses
Rentals
Representation
and
Entertainment
(with
ceiling)

Interest expense

Taxes

Special Rules:
Private
Educational
Institution:
May
capitalize
capital
outlays
and
claim
depreciation, or
Make an outright expense
of such capital outlays

Paid or incurred within the Except:

year in connection with Income tax, estate and
donors tax, assessments
trade or biz.

on real property, foreign

taxes (because this is
governed by Tax Credits,
unless.)
D

Losses

Bad Debts

Depreciation

Depletion

Charitable and Other

Contributions

R&D

Pension Trust

OSD: 40% (gross sales or receipts) for individuals.