INCOME TAXATION OF INDIVIDUALS: CITIZENS

CITIZENS
RESIDENT NON-RESIDENTS
Definition Sec 22 (E)
1. A citizen of the Philippines who establishes to the satisfaction of the
Commissioner that fact of his physical presences abroad with 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 non-resident citizen 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.
Tax Code Reference Sec 24 Sec 24 ( income w/in the Philippines)
Sec 23 ( income outside Philippines)
Tax Base taxable income earned from all sources taxable income from all sources within the Philippines
within and without the Philippines
Tax Rates - In general 5% - 34 % in 1998 5% - 34% in 1998 (for income w/in the Phils)
5% - 33% in 1999 5% - 33% in 1999 (for income w/in the Phils)
5% - 32% in 2000 5%- 32% in 2000 (for income w/in the Phils)
5% - 32% thereafter 5% - 32% thereafter (for income w/in the Phils)
EXEMPT (for income w/out the Phils)
Tax Rates - On Passive Incomes (subject to Final Taxes [FT])
Interest on any currency bank deposit and yield or any other 20% FT 20% FT
monetary benefit from deposit substitutes [Sec 22(Y)] and from
trust fund and similar arragements
Interest from a depository bank under the expanded foreign 7.5% FT EXEMPT [Sec 2.24 RR 10-98 ]
currency deposit system [RR 10-98]
Interest on long term deposit or investment [Sec 22(FF)] in the EXEMPT EXEMPT
form of savings, common or individual trust funds, deposit
substitutes, investment management accounts and other
investments evidenced by certificates in such form prescribed
by the BSP
Pre-terminated long term investment (should actually based on 4 yrs to < 5 years -- 5%FT 4 yrs to < 5 years -- 5%FT
expired term) 3 years to < 4 years -- 12%FT 3 years to < 4 years -- 12%FT
Less than 3 years -- 20%FT Less than 3 years -- 20%FT
Other interest income derived within the Philippines 5% - 34%, 33%, 32% 5% - 34%, 33%, 32%
Other interest income derived outside the Philippines 5% - 34%, 33%, 32% EXEMPT
Royalties - in general 20% FT 20% FT
Royalties on books, other literary works and musical 10% FT 10% FT
compositions
Prizes - more than P10,000 20% FT 20% FT
Prizes - P10,000 or less 5% - 34%, 33%, 32% 5% - 34%, 33%, 32%
Prizes - PCSO & Lotto winnings EXEMPT EXEMPT
Other prizes or winnings within the Philippines 20% FT 20% FT
Other prizes or winnings outside the Philippines 5% - 34%, 33%, 32% EXEMPT
Cash and/or Property Dividends from a domestic corp or share 6% FT beginning Jan 1, 1998 6% FT beginning January 1, 1998
in distributable net income after tax of a partnership (except 8% FT beginning Jan 1, 1999 8% FT beginning January 1, 1999
general professional partnerhip), association, joint account, or 10% FT beginning Jan 1, 2000 10% FT beginning January 1, 2000
joint venture or consortium taxable as corporation
Other Cash and/or Property Dividends (e.g. from a foreign 5% - 34%, 33%, 32% 5% - 34%, 33%, 32%
corp)
On domestic shares of stock not traded through local stock 5% / 10% FT 5% / 10% FT
exchange (based on net capital gains)
On shares of stock traded through local stock exchange 1/2 of 1% FT (Percentage Tax) 1/2 of 1% FT (Percentage Tax)
(based on gross selling price) [Sec 127(A) & (D)]
On real property (based on gross selling price or FMV 6% FT 6% FT
whichever is higher) - In general
On real property sold to the government - subj to option 6% FT or 6% FT or 5% - 34%, 33%, 32%
5% - 34% 33%, 32%
On real property sold to acquire or construct new principal EXEMPT subj to certain conditions EXEMPT subj to certain conditions
residence
Atty. Marissa O. Cabreros, CPA as of April 2016


INCOME TAXATION OF INDIVIDUALS: ALIENS

ALIENS
NON-RESIDENT ALIEN
RESIDENT ALIEN ENGAGED IN BUSINESS NOT ENGAGED IN BUSINESS

Definition Sec 22 (F) Sec 22 (G) / Sec 25 (A)(1) Sec 22 (G)

An individual whose residence is within the
Philippines and who is not a citizen thereof.
An individual whose residence is not
within the Philippines and who is not a
citizen thereof but stays in the Philippines
for an aggregate period of more than 180
days during any calendar year
An individual whose residence is not
within the Philippines and who is not a
citizen thereof but stays in the Philippines
for an aggregate period of or less than
180 days during any calendar year

Tax Code Reference Sec 24 Sec 25 (A) Sec 25 (B)

Tax Base taxable income earned from all taxable income earned from all gross income from all sources
sources within the Philippines sources within the Philippines within the Philippines

Tax Rates - In general 5% - 34 % in 1998 5% - 34 % in 1998 25%FT

5% - 33% in 1999 5% - 33% in 1999
5% - 32% in 2000 5% - 32% in 2000
5% - 32% thereafter 5% - 32% thereafter

Tax Rates - On Passive Income (subject to Final Tax [FT])

Interest on currency bank deposit and yield or any other monetary 20% FT 20% FT 25% FT
benefit from deposit substitutes and from trust fund and similar
arragements
Interest from a depository bank under the expanded foreign currency 7.5% FT EXEMPT EXEMPT
deposit system Sec 27(D)(3) Sec 27(D)(3)
Sec 2.27(c)RR 10-98 RR 10-98
Interest on long term deposit or investment [Sec 22(FF)] in the form of EXEMPT EXEMPT 25% FT
savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced
by certificates in such form prescribed by the BSP
Pre-terminated long term investment (should actually based on 4 yrs to < 5 years -- 5% 5 yrs to < 5 years -- 5% 25% FT
expired term) 3 years to < 4 years -- 12% 3 years to < 4 years -- 12%
Less than 3 years -- 20% Less than 3 years -- 20%
Other interest income derived within the Philippines 5% - 34%, 33%, 32% 20%FT 25% FT
Other interest income derived outside the Philippines EXEMPT EXEMPT EXEMPT
Royalties - in general 20% FT 20% FT 25% FT
Royalties on books, other literary works and musical compositions 10% FT 10% FT 25% FT
Royalties on cinematographic films and similar works [Sec 28(B)(2)] 20% FT 25% FT 25% FT
Prizes - more than P10,000 20% FT 20% FT 25% FT
Prizes - P10,000 or less 5% - 34%, 33%, 32% 5% - 34%, 33%, 32% 25% FT
Prizes - PCSO and Lotto winnings EXEMPT EXEMPT EXEMPT
Sec 27(D)(3)
RR 10-98
Other prizes or winnings within the Philippines 20% FT 20% FT 25% FT
Other prizes or winnings outside the Philippines EXEMPT EXEMPT EXEMPT
Cash and/or Property Dividends from a domestic corp or share in 6% FT beginning Jan 1, 1998 20% FT 25% FT
distributable net income after tax of a partnership (except a general 8% FT beginning Jan 1, 1999
professional partnership), association, joint account, or joint venture or 10% FT beginning Jan 1, 2000
consortium taxable as corporation
Other Cash and/or Property Dividends (e.g. from a foreign corp in the 5% - 34%, 33%, 32% 5% - 34%, 33%, 32% 25%FT
Philippines)
Other Cash and/or Property Dividends (e.g. from a foreign corp NOT in EXEMPT EXEMPT EXEMPT
the Philippines)
On domestic shares of stock not traded through local stock exchange 5% / 10% FT 5% / 10% FT 5% / 10% FT
(based on net capital gains)
On shares of stock traded through local stock exchange (based on 1/2 of 1% FT (Percentage Tax) 1/2 of 1% FT (Percentage Tax) 1/2 of 1% FT (Percentage Tax)
gross selling price) [Sec 127(A) & (D)]
On real property (based on gross selling price or FMV whichever is 6% FT 6% FT 6% FT
higher) - In general
On real property sold to the government - subj to option 6% FT or 6% FT or 6% FT or
5% - 34% 33%, 32% 5% - 34% 33%, 32% 5% - 34% 33%, 32%
On real property sold to acquire or construct new principal residence EXEMPT subj to certain conditions N/A N/A
RR 13-99 RR 13-99
Atty. Marissa O. Cabreros, CPA as of April 2016

 INCOME TAXATION OF CORPORATIONS

CORPORATIONS
RESIDENT NON-RESIDENT
DOMESTIC FOREIGN FOREIGN
Definition Sec 22 (B) & (C ) Sec 22 (H) Sec 22 (I)
Applies to corporation created or Applies to foreign corporation Applies to a foregin corporation
organized in the Philippines or engaged in trade or business not engaged in trade or business
under its laws within the Philippines within the Philippines

Tax Code Reference Sec 27 Sec 28 (A) Sec 28 (B)

Tax Base taxable income from all sources taxable income from all sources gross income from all sources
within and without the within the Philippines within the Philippines
Philippines
Tax Rates - In general 34% in 1998 34% in 1998 34% in 1998
33% in 1999 33% in 1999 33% in 1999
32% in 2000-2005 32% in 2000-2005 32% in 2000-2005
35 % in 2006-2008 35 % in 2006-2008 35 % in 2006-2008
30% in 2009 & thereafter 30% in 2009 & thereafter 30% in 2009 & thereafter
Tax Rates - on Passive Income (Subject to Final Tax [FT])
Interest on any currency bank deposit and yield or any other 20% FT 20% FT 34% in 1998
monetary benefit from deposit substitutes and from trust funds 33% in 1999
and similar arragements 32% in 2000-2005
35 % in 2006-2008
30% in 2009 & thereafter
Interest on foreign currency deposit system 7.5% FT 7.5% FT EXEMPT
Interest Income on Foreign Loans contracted on or after August 1, N/A N/A 20% FT
1986
Interest Income received by a FCDU (Sec 27)
Income derived by a depository bank under the expanded foreign EXEMPT [RA No. 9294] EXEMPT [RA No. 9294] N/A
currency deposit system from foreign currency transactions with
nonresidents, offshore banking units in the Philippines, local
commercial banks including branches of foreign banks that
may be authorized by the Bangko Sentral ng Pilipinas (BSP) to
transact business with foreign currency deposit system
Interest income from foreign currency loans granted by such 10% FT 10% FT N/A
depository banks under said expanded system to residents
other than offshore banking units in the Philippines or other
depository banks under the expanded system
Interest Income received by an OBU (Sec 28)
Income derived by a depository bank under the expanded foreign N/A EXEMPT [RA No. 9294] N/A
currency deposit system from foreign currency transactions with
nonresidents, offshore banking units in the Philippines, local
commercial banks including branches of foreign banks that
may be authorized by the Bangko Sentral ng Pilipinas (BSP) to
transact business with foreign currency deposit system
Interest income from foreign currency loans granted to residents N/A 10% FT N/A
other than offshore banking units or local commercial banks,
including local branches of foreign banks that may be
authorized by BSP to transact with offshore banking units
Royalties 20% FT 20% FT 34% in 1998
33% in 1999
32% in 2000-2005
35 % in 2006-2008
30% in 2009 & thereafter
Dividends EXEMPT EXEMPT 15% FT (conditional)
Tax Rates - on capital gains
On shares of stock not traded (based on net capital gains) 5% / 10% FT 5% / 10% FT 5% / 10% FT
On Land or Buildings (classified as capital assets) 6% FT 34% in 1998 34% in 1998
based on gross selling price or 33% in 1999 33% in 1999
FMV whichever is higher 32% in 2000-2005 32% in 2000-2005
35 % in 2006-2008 35 % in 2006-2008
30% in 2009 & thereafter 30% in 2009 & thereafter
Tax Rate - Minimum Corporate Income Tax (MCIT) 2% 2% N/A
Tax Rate - Branch Profit Remittance Tax (BPRT) N/A 15% N/A
Tax Rate - Improperly Accumulated Earnings Tax (Sec 29) 10% 10% N/A
Atty. Marissa O. Cabreros, CPA as of April 2016


INCOME TAXATION: SPECIAL RULES

SPECIAL RATES FOR CERTAIN ALIEN INDIVIDUALS

Alien Employed by Regional or Area Headquarters and 15% on 5% - 34%, 33%, 32% [regular tax rate]
Regional Operating Headquarters of Multinational gross income on or FT rate for
Companies [Sec 25 (C )] salaries, wages, any other income earned from all other sources within
annuities, the Philippines
Alien Individual Employed by Offshore Banking Units [Sec compensation,
25 (D)] remuneration and
other emoluments
Alien Individual Employed by Petroleum Service such as honoraria
Contractor and Subcontractor [Sec 25(E)] and allowances

SPECIAL RATES FOR CORPORATIONS

DOMESTIC CORPORATION
Proprietary Educational Institutions and Hospitals 10% on taxable income
30% on entire taxable income, if total gross income from
unrealted trade, business, or activity exceed 50% of
total income
GOCC, Agencies and Instrumentalities 30% same tax rate upon their taxable income in a similar
business, industry or activity
GSIS / SSS / PHIC / PCSO EXEMPT
Depository Banks 10% on interest income from foreign currency transactions
including interest income from foreign loans

RESIDENT FOREIGN CORPORATION

International Air Carriers 2 1/2 % on Gross Philippine Billings
International Shipping 2 1/2 % on Gross Philippine Billings
Offshore Banking Units 10% any interest income derived from foreign currency
loans granted to residents other than offshore banking
units or local commercial banks, including local
branches of foreign banks that may be authorized by
the BSP to transact business with offshore banking
units
EXEMPT income derived by offshore banking units authorized
by the Bangko Sentral ng Pilipinas (BSP), from foreign
currency transactions with nonresidents, other
offshore banking units, local commercial banks,
including branches of foreign banks that may be
authorized by the Bangko Sentral ng Pilipinas (BSP)
to transact business with offshore banking units
Regional or Area Headquarters EXEMPT
Regional Operating Headquarters 10% on taxable income

NON RESIDENT FOREIGN CORPORATION

Cinematographic Film Owner, Lessor or Distributor 25% on Gross Income
Owner or Lessor of Vessel Charted by Philippine Nationals 4.5% on Gross Rentals

Owner or Lessors of Aircraft, Machineries and Other 7.5% on Gross Rentals

Equipment
Atty. Marissa O. Cabreros, CPA as of April 2016