Académique Documents
Professionnel Documents
Culture Documents
1.
2.
Taxable Income
-subject to basic or normal tax 5% to 32% or to final tax
a. Compensation
b. Business Income
c. Gains from Property
d. Passive income
e. Other taxable income
Non-taxable Income
a. Life insurance proceeds
b. Return of premium
c. Gifts, bequest, devices
d. Compensation for injuries
e. Retirement benefit
f. Other non-taxable income
Taxable Income
1.
Compensation Income
-income earned thru employee-employer relationship
-employer, has the right to direct or control the employee
-employer has the right to dismiss the employee
-remuneration for services, even e-to-e relationship no longer exists at the time
a. Salary, Wage, Fee
*Salary- paid on regular interval
*Wage- per hour or day
*Fee
Tax exempt compensation:
i.
Compensation income of minimum wage earners in the private sector & others
ii.
CI of employees in the public sector with salary that does not exceed the statutory
minimum wage in the non-agricultural private sector
iii.
CI earned by minimum wage earner:
Holiday Pay
Overtime Pay
Nightshift differential Pay
Hazard Pay
ii.
iv.
Works everyday
EMR = ADR x 392.5 days
12 mos
392.5= 299 WD, 22 RH, 67 RD (52 x 130%), 3.9 SD (3 x 130%)
b. Commission
-based on %
-taxable even the employee is a minimum wage earner
c. Honoraria
-earnings from services on particular field
-taxable regardless taxpayer is a minimum wage earner
d. Allowances
-either fixed or variable
i.
Cost of Living Allowance (COLA)- not taxable
ii.
Representation & Traveling Allowance (RATA)
If received regularly- taxable
Subject for reimbursement- not taxable
For liquidation- non-taxable
iii.
Personnel Economic Relief Allowance (PERA)
-non-taxable if received by government officials & employees
e. 13th month pay & other benefits
- less than 30k- not taxable
- any amount in excess of 30k is taxable
13th month pay= total basic salary during the year / 12 mos
f.
g. Separation Pay
Taxable- if voluntary
Non-taxable- involuntary
i.
Sickness
ii.
Disability
iii.
Death
iv.
Reorganization of company
v.
Bankruptcy of company
h. Retirement Pay
GR: Taxable
XPN:
i.
ii.
i.
j.
Fringe Benefits
-granted in cash or in kind by employer to his employee in addition to basic salary
FB for supervisory or managerial position
-subject to final tax
FB for rank & file employee
- subject to basic tax for part of CI
i.
Living quarters or meals
o for exclusive benefits of the employer- not taxable
o within the business premises of the employer- taxable
o provided to military officials of the armed forces of the Phil- not taxable
ii.
iii.
iv.
v.
iv.
v.
2.
Issuance of shares of stock- basis of tax if the fair value of the stock at the time
the services are rendered by employee
Issuance of notes-basis is the FMV of the notes
o Interest bearing- MV is equal to its face value
In the year the note is received, taxable amount is = face value
At the time of collection, taxable amount is = to maturity value less
face value
Maturity value face value = interest income
*interest income- not treated as CI, but rather classified as other
income
o Non-interest bearing
-basis of tax shall be its value at the time it is received
-value of the note shall be discounted to its present value
At maturity period, taxable income is = to face value less PV
Face value Present Value = interest income
*Interest income- not treated as CI, but rather classified as other
income
Completed Contract Method- reports income only upon the completion of the work
3.
4.
Passive Income
-gain or profit earned without effort or labor exerted
-ordinarily, subject to final tax
Types of Income
a) Interest Income
In the Phil
Yields or any other monetary
benefits from deposits substitutes,
trust funds, & similar arrangement
In the Phil
II.
20%
Exempted
c) Prizes
I.
20%
b) Royalty Income
In general
On books, literary works, musical
Works in the Phil
5.
& Winnings
In general
Prize less than P10,000
From PCSO & Lotto
7.5%
NRC & NRA - exempted
20%
10%
20%
Subject to basic tax
Exempted
III.
Dividend Income
i.
Dividend received from a domestic corporation; and the recipient is:
Domestic or resident corp- dividend is tax exempt
Resident foreign corp- tax exemp
Non-resident foreign corp
GR: subject to final tax of 30%
XPN: rule of reciprocity, subject to final tax of 15%
RC, NRC, RA- subject to 10% final tax
NRAETB- subject to 20% final tax
NRA not ETB- subject to 25% final tax
ii.
iii.
Forms of Dividends
a) Cash dividend
o Received by individual & NRFC- subject to final tax
o Received by Domestic & RFC- tax exempt
b) Property dividend
o Received by individual or NRFC
-subject to final tax based on FMV of property at the time of dividend
declaration
o Received by Domestic & RFC- tax exempt
c) Tax dividend
-basic rule, not taxable
o Pure Stock Dividend- tax exempt
o Stock dividend representing distribution of earnings- taxable
d) Liquidating dividend
-represents return of capital & is not taxable
-if amount returned exceeded cost of investment, excess is subject to capital gains
tax
e) Scrip dividend
-issuance of a promissory note
-subject to final tax based on FMV of the note
IV.
Annuities
-installment amount paid for life insurance coverage returned by an insurance company
annuity received that represents interest- taxable
amount represents return of premium- not taxable
V.
VI.
VII.
Tax refund
-tax paid and later on refunded due to overpayment or erroneous computation
-basic rule: taxable
If tax paid is treated as deductible expense, tax refund is considered income, hence taxable
If tax paid cannot be deducted or classified as allowable deduction from gross income, tax
refund is not taxable
The following tax refunds are not taxable:
a) Philippine income tax, except fringe benefits tax
b) Estate or donors tax
c) Stock transaction tax
d) Income tax paid on foreign country where the taxpayer claimed it as a tax credit
e) Income tax deficiency & special assessment