Tax Base And Tax Rates.docx

DEFINITION OF TERMS person: an individual, a trust, estate or corporation nonresident citizen: (1) 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. (2) 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. (3) 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. (4) A citizen who has been previously considered as nonresident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a nonresident citizen for 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. resident alien: an individual whose residence is within the Philippines and who is not a citizen thereof nonresident alien: an individual whose residence is not within the Philippines and who is not a citizen thereof statutory minimum wage: a rate fixed by the Regional Tripartite Wage and Productivity Board, as defined by the Bureau of Labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE) minimum wage earner: a worker in the private sector paid the statutory minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned deposit substitutes: an alternative from of obtaining funds from the public (the term 'public' means borrowing from twenty (20) or more individual or corporate lenders at any one time) like promissory notes for specific purposes long-term deposit or investment certificates: certificate of time deposit or investment with a maturity period of not less than five (5) years, and issued by banks only (not by nonbank financial intermediaries and finance companies) to individuals in denominations of Ten thousand pesos (P10,000) and other denominations as may be prescribed by the BSP royalties: payment for use of intangibles corporation: includes partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participacion), association, or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating consortium agreement under a service contract with the Government. 'General professional partnerships' are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business. domestic corporation: created or organized in the Philippines or under its laws foreign corporation: a corporation which is not domestic resident foreign corporation: a foreign corporation engaged in trade or business within the Philippines nonresident foreign corporation: a foreign corporation not engaged in trade or business within the Philippines regional or area headquarters: a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets regional operating headquarters: a branch established in the Philippines by multinational companies which are engaged in any of the following services: corporate finance advisory services; logistic services; research and development services -shares of stocks can be property dividends (vs. stock dividends) -EFCDS: a law granting local commercial banks or a local branch of foreign bank authorized by the BSP to engage in foreign currency-denominated transactions -Article 415, paragraph 1: The following are immovable property – LAND, BUILDINGS, roads and constructions of all kinds adhered to the soil -personal and additional exemptions are subsumed in the 250K tier

TAX BASE AND TAX RATES – INDIVIDUALS Individual Taxpayer

Purely Compensation Income

Purely Income from Self-employment or Practice of Profession

Mixed Income

RC (within and without) NRC (within) RA (within)

Tax Base: Taxable Income 01/01/18 to 12/31/22 250K below - - 250K-400K – 20% 250K 400K-800K 30K 25% 400K 800K-2M 130K 30% 800K 2M-8M 490K 32% 2M 8M above 2.41M 35% 8M 01/01/23 onward 250K below - - 250K-400K – 15% 250K 400K-800K 22.5K 20% 400K 800K-2M 102.5K 25% 800K 2M-8M 402.5K 30% 2M 8M above 2.2025M 35% 8M

Option 1. Graduated Tax Base: Net Income Option 2. If GS/R + NOI < 3M Tax Base: GS/R+NOI – 250K Tax Rate: 8%

a. Compensation Income – Graduated b. Income from SelfEmployment Option 1. Graduated Tax Base: Net Income added to Compensation Income Option 2. If GS/R + NOI < 3M Tax Base: GS/R+NOI Tax Rate: 8%

25%

25%

25%

NRA-ETB (within)

NRA-NETB (within)

TAX BASE AND TAX RATES – INDIVIDUALS Individual Taxpayer

Passive Income

RC (within and without) NRC (within) RA (within)

i. interest income – 20% E1: EFCDS – 15% E2: LTD >=5 years – exempt <5 years – 20% ii. royalties – 20% E1: b, lw, mc – 10% iii. prizes and other winnings – 20% E1. <= 10K prizes – added to OI subject to graduated rates E2. <= 10K from PCS and Lotto winnings – exempt E3. in recognition of R,C,S,E,A,L,or C achievements if (1)the recipient was selected to join a contest w/o any action on his part, and (2) was not required to render substantial future services as a condition of receipt – exempt E4. granted to athletes in sports contests and sanctioned by their national associations – exempt iv. cash and property dividends – 10%

NRA-ETB (within)

i. interest income – 20% E1: EFCDS – exempt E2: LTD x>=5 years – exempt 4 years<=x<5 years – 5% 3 years<=x<4 years – 12%

Capital gains on shares of stock of a domestic corporation not traded in the stock exchange TAX BASE: Net Capital Gains = Selling Price – Acquisition Cost TAX RATE: 15%

TAX BASE: Net Capital Gains = Selling Price – Acquisition Cost TAX RATE: 15%

Capital gains on real property classified as capital asset TAX BASE: Higher of Gross Selling Price of FMV (higher of zonal value determined by the BIR Commissioner and assessed value determined by the LGU assessor) = presumed gain TAX RATE: 6% E1: sale of principal residence and proceeds is fully utilized in acquiring or constructing a new principal residence within 18 calendar months from the date of disposition – exempt -the historical cost or adjusted basis of the real property disposed is carried over to the new principal residence acquired or constructed -the Commissioner is notified within 30 days from the date of disposition of his intention to avail of the tax exemption -the tax exemption can only be availed of once every 10 years -if there is no full utilization of the proceeds of disposition, taxable portion = Tax Base * unutilized portion/GSP TAX BASE: Higher of Gross Selling Price of FMV (higher of zonal value determined by the BIR Commissioner and assessed value determined by the LGU

NRA-NETB (within)

x<3 years – 20% ii. royalties – 20% E1: b, lw, mc – 10% iii. prizes and other winnings – 20% E1. <= 10K prizes – added to OI subject to graduated rates E2. from PCS and Lotto winnings – exempt iv. cash and property dividends – 20% 25%

assessor) TAX RATE: 6%

TAX BASE: Net Capital Gains = Selling Price – Acquisition Cost TAX RATE: 15%

TAX BASE: Higher of Gross Selling Price of FMV (higher of zonal value determined by the BIR Commissioner and assessed value determined by the LGU assessor) TAX RATE: 6%

Minimum Wage Earners -Tax exempt as regard the statutory minimum wage rate, holiday pay, OT pay, NSD pay, and hazard pay even if the aggregate amount is >250k -Other incomes are taxable as the case may be Members of General Professional Partnership -should only focus on one type of professions -taxed based on their individual capacities -cannot avail of the 8% income tax rate option Senior Citizens and Persons with Disability -taxed based on their individual capacities -if minimum wage, tax exempt as regard the statutory minimum wage rate, holiday pay, OT pay, NSD pay, and hazard pay even if the aggregate amount is >250k Alien individual employed by R/AHQs or ROHQs of MNCS, OBUs, Petroleum Service Contractor and Subcontractor registered with SEC before 01/01/18 - 15% of gross income

TAX BASE AND TAX RATES – CORPORATIONS Corporate Tax Payer Domestic Corporation

RCIT GR: 30% on taxable income E1: Section 30 – exempted (since they are performing government functions) E2: Non-profit (not necessarily charitable) proprietary educational institutions Case 1. Gross income from unrelated trade, business, activity <= 50% of total gross income =10% on taxable income Case 2. Gross income from unrelated trade, business, activity > 50% of total gross income =30% on taxable income E3: Non-profit (not necessarily charitable) hospital institutions Case 1. Gross income from unrelated trade, business, activity <= 50% of total gross income =10% on taxable income Case 2. Gross income from unrelated trade, business, activity > 50% of total gross income =30% on taxable income E4: GOCCs, agencies, instrumentalities Case 1. SSS, GSIS, PHIC, LWDs – exempt Case 2. Others – as the case may be

MCIT 2% on gross income Case 1. Trading or merchandising concern Gross Income = GS – SR,D,A – COGS Case 2. Manufacturing concern Gross Income = GS – SR,D,A – COGMS Case 3. Servicing Concern Gross Income = GS-SR,D,ACOS

GIT 15% on gross income Case 1. Trading or merchandising concern Gross Income = GS – SR,D,A – COGS Case 2. Manufacturing concern Gross Income = GS – SR,D,A – COGMS Case 3. Servicing Concern Gross Income = GSSR,D,A if COGS/GS&R <= 55% + other four conditions

Resident Foreign Corporation

GR: 30% on taxable income E1: International Carriers (air carrier or shipping) – 2.5% on gross PH billings E2: OBUs Case 1. FCTS to nonresidents, OBUs, commercial banks – exempt Case 2. FCLs to residents except OBUs and commercial banks – 10% E3: RAHQs – exempt (if earns

2% on gross income Case 1. Trading or merchandising concern Gross Income = GS – SR,D,A – COGS Case 2. Manufacturing concern Gross Income = GS – SR,D,A – COGMS Case 3. Servicing Concern Gross Income = GS-SR,D,ACOS

15% on gross income Case 1. Trading or merchandising concern Gross Income = GS – SR,D,A – COGS Case 2. Manufacturing concern Gross Income = GS – SR,D,A – COGMS Case 3. Servicing Concern Gross Income = GS-

Nonresident Foreign Corporation

income, at 30%) E4: ROHQs – 10% E5: Branch Profit Remittance Tax – 15% on branch profits earmarked (need not be actual) for remittance GR: 30% on gross income E1: NR Cinematographic film owner, lessor, distributor – 25% on gross income E2: NR owner or lessor of vessels chartered by PH nationals – 4.5% of gross rental, lease or charter fees from lease or charters to PH citizens or corporations as approved by the MIA E3: NR owner or lessor of aircraft, machineries, and other equipment – 2.5% of gross rental, lease or charter fees from lease or charters

Corporate Tax Payer

Passive Income

Domestic Corporation

i. interest income – 20% E1: EFCDS – 15% ii. royalties – 20% iii. intercompany dividends – exempt

Resident Foreign Corporation

i. interest income – 20% E1: EFCDS – 7.5% ii. royalties – 20% iii. intercompany dividends – exempt

Nonresident Foreign Corporation

i. interest on foreign loans – 20% ii. intercompany dividends – 15% subject to tax sparing rule

SR,D,A if COGS/GS&R <= 55% + other four conditions

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-

Capital gains on shares of stock of a domestic corporation not traded in the stock exchange TAX BASE: Net Capital Gains = Selling Price – Acquisition Cost TAX RATE: 15%

Capital gains on real property classified as capital asset

TAX BASE: Net Capital Gains = Selling Price – Acquisition Cost TAX RATE: <= 100K – 5% >100K – 10% TAX BASE: Net Capital Gains = Selling Price – Acquisition Cost TAX RATE: <= 100K – 5% >100K – 10%

TAX BASE: Higher of Gross Selling Price of FMV (higher of zonal value determined by the BIR Commissioner and assessed value determined by the LGU assessor) = presumed gain TAX RATE: 6% 30%?

30%?

Improperly Accumulated Earnings Tax TAX BASE: Improperly accumulated taxable income = taxable income + income not subject to tax/excluded from gross income + income exempt from tax + income subject to final tax + NOLCO deducted – dividends paid – income tax paid – reasonable needs