Capital Gains Tax

Gains on Sale of Asset

Capital Asset Ordinary Asset

 Personal property for personal use.  Personal Property (movable)

 Real property for personal use. o For sale in the ordinary
 Shares – to earn dividends. course of business
o If real property (inventory).
 Inside Philippines –  Real Property (Immovable)
Capital Gains Tax. o For sale in the ordinary
 Outside Philippines – course of the business.
Basic Tax.  Personal / Real Property
o If shares o Use for production /
administrative purposes of
Considered as the business.
income earned in
foreign country.  Shares (Ownership)
Foreign
Basic Tax o For sale in the ordinary
Corporation
course of the business
(inventory) / buy and sell.

Tax Rate

Use Basic Tax

o If personal property.
8%
 Basic Tax.
 Capital Gains Tax Shares Domestic Unlisted

SELLING PRICE

LESS: PURCHASE PRICE / COST

GAIN ON SHARE

X CGT RATE (15%)

CAPITAL GAINS TAX

 If there is a less no need to pay for Capital Gains Tax.

Capital Gains Tax ------ REAL PROPERTY

Selling Price
Whichever is higher
Fair Value

HIGHER PRICE

X CGT (6%)

CAPITAL GAINS TAX

 Whether it`s gain or loss (for real property), pay CGT.

Exempt: (CGT – Real Property)

1. Sold Principal Residence (house and lot).

2. Proceeds / Share Dividends – used to acquire / construct new principal.
3. Within 18 months.

NOTE: Fully Utilized = Fully Exempt

Corporation

 Artificial being created by operation of law (there is a process).

 Register at Security Exchange Commission.

According to Tax Law (NIRC/ R.A. 10963):

Corporation includes:

 Partnership (since the tax is somehow the same with corporation).

 Joint Companies
 Joint Accounts
 Association
 Insurance Company

Excludes:

 General Professional Partnership

 Joint Venture

Kinds of Corporation

1. Domestic Corporation
 Registered / incorporated in the Philippines.
 Income, inside / outside.
2. Resident Foreign Corporation
 Registered / incorporated outside the Philippines.
 Engaged in business in the Philippines.
 Income, inside the Philippines only.
3. Non-resident Corporation
 Registered / incorporated outside the Philippines.
 Not engaged in business in the Philippines (interest deposit in bank).
 Income, inside the Philippines only.

 EXEMPTED Corporation (from paying taxes).

o Non-stock Corporation (no shares)
o Non-profits
 Government Owned and Controlled Corporation (GOCC)

EXEMPTED:

o GSIS
o SSS
o Philippine Insurance Corporation
o Local Water District
BASIC TAX

NOTE: WHICHEVER IS HIGHER BETWEEN MCIT AND RCIT WILL BE FOLLOWED.

DOMESTIC CORPORATION

GROSS INCOME (INSIDE AND OUTSIDE)

LESS: EXPENSES (INSIDE AND OUTSIDE)

NET INCOME

X TAX RATE (30%)

REGULAR CORPORATION INCOME TAX

OR

GROSS INCOME

X TAX RATE (2%)

MINIMUM CORPORATE INCOME TAX

RESIDENT FOREIGN CORPORATION

OR
 NON-RESIDENT FOREIGN CORPORATION

 No deduction of expense
 No other option

FINAL TAX

1. Interest – from bank deposits and deposits substitute, trust fund.

2. Royalties
3. Dividends

DC RFC NRFC
INTEREST
BANKS 20% 20% 30%
OUTSIDE PHILIPPINES BASIC TAX
ROYALTIES
ALL KINDS 20% 20% 30%
OUTSIDE PHILIPPINES BASIC TAX
DIVIDENDS
DOMESTIC EXEMPT EXEMPT 30%
FOREIGN CORPORATION BASIC TAX

CAPITAL TAX

DC RFC NRFC
GAIN SHARES 15% FIRST Php. 100 000 GAIN 5%
SUCCEEDING GAINS 10%
REAL PROPERTY 6%