Income Tax Description
from sources within the Philippines
Income Tax is a tax on a person's income,
emoluments, profits arising from property,
practice of profession, conduct of trade or
business or on the pertinent items of gross
income specified in the Tax Code of 1997 (Tax
Code), as amended, less the deductions if any,
authorized for such types of income, by the Tax
Code, as amended, or other special laws.
Who are Required to File Income Tax Returns?
 Individuals
 Resident citizens receiving income from
sources within or outside the
Philippines
 Employees deriving purely
compensation income from two or
more employers, concurrently or
successively at any time during the
taxable year
 Employees deriving purely
compensation income regardless of the
amount, whether from a single or
several employers during the calendar
year, the income tax of which has not
been withheld correctly (i.e. tax due is
not equal to the tax withheld) resulting
to collectible or refundable return
 Self-employed individuals receiving
income from the conduct of trade or
business and/or practice of profession
 Individuals deriving mixed income, i.e.,
compensation income and income from
the conduct of trade or business and/or
practice of profession
 Individuals deriving other non-business,
non-professional related income in
addition to compensation income not
otherwise subject to a final tax
 Individuals receiving purely
compensation income from a single
employer, although the income of
which has been correctly withheld, but
whose spouse is not entitled to
substituted filing
 Non-resident citizens receiving income
 Aliens, whether resident or not,
receiving income from sources within
the Philippines
 Non-Individuals
 Corporations including partnerships, no
matter how created or organized.
 Domestic corporations receiving income
from sources within and outside the
Philippines
 Foreign corporations receiving income
from sources within the Philippines
 Estates and trusts engaged in trade or
business
Annual Income Tax For Individuals Earning
Purely Compensation Income (Including Non-
Business/Non-Profession Related Income)
BIR Form 1700 - Annual Income Tax For
Individuals Earning Purely Compensation
Income (Including Non-Business/Non-Profession
Related Income)
Documentary Requirements
 Certificate of Income Tax Withheld on
Compensation (BIR Form 2316)
 Duly approved Tax Debit Memo, if
applicable
 Proofs of Foreign Tax Credits, if
applicable
 Income Tax Return previously filed and
proof of payment, if filing an amended
return for the same taxable year.
On or before the 15th day of April of each year
covering taxable income for calendar year
2018 and thereafter
Annual Income Tax For Individuals, Estates,
and Trusts
BIR Form 1701 - Annual Income Tax Return
Individuals, Estates and Trusts
Documentary Requirements
  Certificate of Income Tax Withheld on Compensation Income and Income from
Compensation (BIR Form 2316), if Business and/or Practice of Profession) and
applicable Estates and Trusts (Engaged in Trade or
 Certificate of Income Payments Not Business)
Subjected to Withholding Tax (BIR Form
2304), if applicable NOTE: Pursuant to Sec. 71 of RA 10963,
 Certificate of Creditable Tax Withheld at otherwise known as Tax Reform Acceleration
Source (BIR Form 2307), if applicable and Inclusion Act, amending Sec. 232 of the Tax
Code, as amended, in relation to Revenue
 Duly approved Tax Debit Memo, if
Memorandum Circular No. 6 – 2001,
applicable
corporations, companies or persons whose
 Proof of Foreign Tax Credits, if
gross annual sales, earnings, receipts or output
applicable
exceed P3,000,000 may not accomplish this
 Income Tax Return previously filed and
form. In lieu thereof, they may file their annual
proof of payment, if filing an amended
income tax returns accompanied by balance
return for the same year
sheets, profit and loss statement, schedules
 Account Information Form (AIF) or the
listing income-producing properties and the
Certificate of the independent Certified
corresponding income therefrom, and other
Public Accountant (CPA) with Audited
relevant statements duly certified by an
Financial Statements if the gross annual
independent CPA.
sales, earnings, receipts or output
exceed three million pesos Documentary Requirements
(P3,000,000.00)
 Account Information Form or Financial  None
Statements not necessarily audited by
an independent CPA if the gross annual Deadline
sales, earnings, receipts or output do
 Same deadline as BIR Form 1701 - On or
not exceed P3,000,000.00 and is subject
before the 15th day of April of each
to graduated income tax rates under
year covering taxable income for
Section 24(A)(2)(a)
calendar year 2018 and thereafter
 Proof of prior year’s excess tax credits,
if applicable Quarterly Income Tax For Individuals, Estates
And Trusts Including Those With Mixed
Deadline Income, i.e., Compensation Income and
Final Adjustment Return or Annual Income Tax Income from Business and/or Practice of
Return - On or before the 15th day of April of Profession
each year covering income for calendar year
BIR Form 1701Q - Quarterly Income Tax Return
2018 and thereafter
For Individuals, Estates and Trusts
Account Information Form For Self-Employed
Documentary Requirements
Individuals, Estates And Trusts (Including
Those With Mixed Income, i.e., Compensation  Certificate of Creditable Tax Withheld at
Income and Income from Business and/or Source (BIR Form 2307), if applicable
Practice of Profession)  Duly approved Tax Debit Memo, if
applicable
BIR Form 1701 AIF - Account Information Form
 Proof of other payment/s made, if
for Self-Employed Individuals, Estates and
applicable
Trusts (Including those with Mixed Income, i.e.,
  Summary Alphalist of Withholding
Agents of Income Payments Subjected
to Withholding Tax at Source (SAWT), if
applicable
In places where there are no AABs, proceed to
the Revenue Collection Officer or duly
Authorized City or Municipal Treasurer located
within the Revenue District Office where you
are registered and present the duly
accomplished BIR Form 1701Q, together with
the required attachments and your payment.
Deadlines
 May 15 of the current taxable year– for
the first quarter
 August 15 of the current taxable year –
for the second quarter
 November 15 of the current taxable
year – for the third quarter
Annual Income Tax For Corporations And
Partnerships
BIR Form 1702 - Annual Income Tax Return (For
Corporations and Partnerships)
Documentary Requirements
 Certificate of Income Payments Not
Subjected to Withholding Tax (BIR Form
2304), if applicable
 Certificate of Creditable Tax Withheld at
Source (BIR Form 2307), if applicable
 Duly approved Tax Debit Memo, if
applicable
 Proof of Foreign Tax Credits, if
applicable
 Income tax return previously filed and
proof of payment, if amended return is
filed for the same taxable year
 Account Information Form (AIF) or the
Certificate of the independent CPA with
Audited Financial Statements, if the
gross annual sales, earnings, receipts or
output exceed P3,000,000.
 Proof of prior year’s excess tax credits,
if applicable
Deadline
Final Adjustment Return or Annual Income Tax
Return - On or before the 15th day of the fourth
month following the close of the taxpayer’s
taxable year
Account Information Form For Corporations
And Partnerships
BIR Form 1702 AIF - Account Information Form
(For Corporations and Partnerships)
NOTE: Pursuant to Sec. 71 of RA 10963,
otherwise known as Tax Reform Acceleration
and Inclusion Act, amending Sec. 232 of the Tax
Code, as amended, in relation toRevenue
Memorandum Circular No. 6 – 2001,
corporations, companies or persons whose
gross annual sales, earnings, receipts or output
exceed P3,000,000 may not accomplish this
form. In lieu thereof, they may file their annual
income tax returns accompanied by balance
sheets, profit and loss statement, schedules
listing income-producing properties and the
corresponding income therefrom, and other
relevant statements duly certified by an
independent CPA.
Documentary Requirements
 None
Deadline
 Same deadline as BIR Form 1702 - On or
before the 15th day of the fourth
month following the close of the
taxpayer’s taxable year
Quarterly Income Tax For Corporations And
Partnerships
BIR Form 1702Q - Quarterly Income Tax Return
(For Corporations and Partnerships)
Documentary Requirements
 Certificate of Creditable Tax Withheld at
Source (BIR Form 2307), if applicable
 Duly approved Tax Debit Memo, if
applicable
 Previously filed return, if an amended
return is filed for the same quarter
Deadline
 Corporate Quarterly Declaration or
Quarterly Income Tax Return - On or
before the 60th day following the close
of each of the quarters of the taxable
year
Improperly Accumulated Earnings Tax For
Corporations
BIR Form 1704 - Improperly Accumulated
Earnings Tax Return (For Corporations)
Documentary Requirements
 Photocopy of Annual Income Tax Return
(BIR Form 1702) with Audited Financial
Statements and/or Account Information
Form of the covered taxable year duly
received by the BIR; and
 Sworn declaration as to dividends
declared taken from the covered year's
earnings and the corresponding tax
withheld, if any.
Deadline
Within fifteen (15) days after the close of the
taxable year
Annual Income Information Form for General
Professional Partnerships
Sec. 55. Returns of General Professional
Partnership (Tax Code of 1997, as amended)
Every general professional partnership shall file,
in duplicate, a return of its income, except
income exempt under Section 32 (B) of this
Title, setting forth the items of gross income
and of deductions allowed by this Title, and the
names, Taxpayer Identification Numbers (TIN),
addresses and shares of each of the partners.
Income Tax Rates
For Individual Citizens and Resident Aliens
Earning Purely Compensation Income and
Individuals Engaged in Business and Practice of
Profession
Graduated Income Tax Rates under Section
24(A)(2) of the Tax Code of 1997, as amended
by Republic Act No. 10963
Amount of Net Taxable Income Rate
Over But Not Over
- P250,000 0%
P250,000 P400,000 20% of the
excess over P250,000
P400,000 P800,000 P30,000 + 25%
of the excess over P400,000
P800,000 P2,000,000 P130,000 + 30%
of the excess over P800,000
P2,000,000 P8,000,000 P490,000 + 32%
of the excess over P2,000,000
P8,000,000 P2,410,000 + 35% of the excess
over P8,000,000
For Purely Self-Employed Individuals and/or
Professionals Whose Gross Sales/Receipts and
Other Non-Operating Income Do Not Exceed
the VAT Threshold of P3,000,000, the tax shall
be, at the taxpayer’s option:
8% Income Tax on Gross Sales or Gross Receipts
in Excess of P250,000 in Lieu of the Graduated
Income Tax Rates and the Percentage Tax; Or
Income Tax Based on the Graduated Income
Tax Rates
For Individuals Earning Both Compensation
Income and Income from Business and/or
Practice of Profession, their income taxes shall
be:
For Income from Compensation: Based on
Graduated Income Tax Rates; and
For Income from Business and/or Practice of
Profession:
If the total Gross Sales/Receipts Do Not Exceed
VAT Threshold of P3,000,000, the Individual
Taxpayer May Opt to Avail:
8% Income Tax on Gross Sales/Receipts and
Other Non-Operating Income in Lieu of the
Graduated Income Tax Rates and the
Percentage Tax; Or
Income Tax Based on Graduated Income Tax
Rates
If the total Gross Sales/Receipts Exceed VAT
Threshold of P3,000,000
Income Tax Based on Graduated Income Tax
Rates
On Certain Passive Income of Individual Citizens
and Resident Aliens
Passive Income Tax Rate
1. Interest from currency deposits, trust funds
and deposit substitutes 20%
2. Royalties (on books as well as literary &
musical compositions) 10%
- In general 20%
3. Prizes (P10,000 or less ) Graduated
Income Tax Rates
- Over P10,000 20%
4. Winnings (except from PCSO and Lotto
amounting to P10,000 or less ) 20%
- From PCSO and Lotto amounting to P10,000
or less exempt
5. Interest Income from a Depository Bank
under the Expanded Foreign Currency Deposit
System 15%
6. Cash and/or Property Dividends received by
an individual from a domestic corporation/ joint
stock company/ insurance or mutual fund
companies/ Regional Operating Headquarter of
multinational companies 10%
7. Share of an individual in the distributable net
income after tax of a partnership (except GPPs)/
association, a joint account, a joint venture or
consortium taxable as corporation of which he
is a member or co-venture 10%
8. Capital gains from sale, exchange or other
disposition of real property located in the
Philippines, classified as capital asset 6%
9. Net Capital gains from sale of shares of stock
not traded in the stock exchange 15%
10. Interest Income from long-term deposit or
investment in the 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 Bangko Sentral ng
Pilipinas (BSP)
Upon pre-termination before the fifth year,
there should be imposed on the entire income
from the proceeds of the long-term deposit
based on the remaining maturity thereof:
Holding Period
Exempt
- Four (4) years to less than five (5) years
5%
- Three (3) years to less than four (4) years
12%
- Less than three (3) years 20%
For Non-Resident Aliens Not Engaged in Trade
or Business
A. Tax Rate in General – on taxable income from
all sources within the Philippines same
manner as individual citizen and resident alien
individual
B. Certain Passive Income Tax Rates
1. Interest from currency deposits, trust funds
and deposit substitutes 20%
2. Royalties (on books as well as literary &
musical compositions) 10%
- In general 20%
3. Prizes (P10,000 or less ) Graduated
Income Tax Rates
- Over P10,000 20%
4. Winnings (except from PCSO and Lotto)
20%
- From PCSO and Lotto exempt
5. Cash and/or Property Dividends received
from a domestic corporation/ joint stock
company/ insurance/ mutual fund companies/
Regional Operating Headquarter of
multinational companies 20%
6. Share of a non-resident alien individual in the
distributable net income after tax of a
partnership (except GPPs) of which he is a
partner or from an association, a joint account,
a joint venture or consortium taxable as
corporation of which he is a member or co-
venture 20%
7. Interest Income from long-term deposit or
investment in the 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 Bangko Sentral ng
Pilipinas (BSP)
Upon pre-termination before the fifth year,
there should be imposed on the entire income
from the proceeds of the long-term deposit
based on the remaining maturity thereof:
Holding Period
Exempt
- Four (4) years to less than five (5) years
5%
- Three (3) years to less than four (4) years
12%
- Less than three (3) years 20%
8. Capital from the sale, exchange or other
disposition of real property located in the
Philippines classified as capital asset 6%
9. Net Capital gains from sale of shares of stock
not traded in the Stock Exchange
- Not over P100,000 5%
- Any amount in excess of P100,000 10%
For Non-resident Aliens Not Engaged in Trade
or Business
1. Gross amount of income derived from all
sources within the Philippines 25%
2. Capital gains from the exchange or other
disposition of real property located in the
Philippines 6%
3. Net Capital gains from the sale of shares of
stock not traded in the Stock Exchange
- Not Over P100,000 5%
- Any amount in excess of P100,000 10%
For Alien Individuals Employed by Regional
Headquarters (RHQ) or Area Headquarters and
Regional Operating Headquarters (ROH) of
Multinational Companies, Offshore Banking
Units (OBUs), Petroleum Service Contractor and
Subcontractor
On the gross income consisting of salaries,
wages, annuities, compensation, remuneration
and other emoluments, such as honoraria and
emoluments derived from the Philippines
Graduated Income Tax Rates
For General Professional Partnerships
Net Income of the Partnerships 0%
For Domestic Corporations
Rates of Tax on Certain Passive Income of
Corporations Tax Rate
1. Interest from currency deposits, trust funds,
deposit substitutes and similar arrangements
received by domestic corporations 20%
2. Royalties from sources within the Philippines
20%
3. Interest Income from a Depository Bank
under Expanded Foreign Currency Deposit
System 15%
4. Cash and Property Dividends received by a
domestic corporation from another domestic
corporation 0%
5. Capital gains from the sale, exchange or other
disposition of lands and/or building 6%
6. Net Capital gains from sale of shares of stock
not traded in the stock exchange 15%
*Beginning on the 4th year immediately
following the year in which such corporation
commenced its business operations, when the
minimum corporate income tax is greater than
the tax computed using the normal income tax.
For Resident Foreign Corporation
1) a. In General – on taxable income derived
from sources within the Philippines 30%
b. Minimum Corporate Income Tax – on gross
income 2%
c. Improperly Accumulated Earnings – on
improperly accumulated taxable income
10%
2) International Carriers – on gross Philippine
billings 2 ½ %
3) Regional Operating Headquarters of
Multinational Companies– on taxable income
10%
4.) Regional or Area Headquarters of
Multinational Companies exempt
5) Corporation Covered by Special Laws Rate
specified under the respective special laws
6) Offshore Banking Units (OBUs) 10%
In general – Income derived by OBUs from
foreign currency transactions with non-
residents, other OBUs, local commercial banks
and branches of foreign banks authorized by
BSP Exempt
On interest income derived from foreign
currency loans granted to residents other than
offshore banking units or local commercial
banks, local branches of foreign banks
authorized by BSP to transact business with
OBUs 10%
7) Income derived under the Expanded Foreign
Currency Deposit System
Interest income derived by a depository bank
under the expanded foreign currency deposit
system. 7 ½ %
On Income derived by depository banks under
the expanded foreign currency deposit systems
from foreign currency transactions with non-
residents, OBUs in the Philippines, local
commercial banks including branches of foreign
banks that may be authorized by BSP exempt
On interest income derived from foreign
currency loans granted by depository banks
under the expanded foreign currency deposit
systems to residents other than offshore
banking units in the Philippines or other
depository banks under the expanded system
10%
8.) Branch Profit Remittances – on total profits
applied or earmarked for remittance without
any deduction for the tax component thereof
(except those activities which are registered
with the Philippines Economic Zone Authority)
15%
9.) Interest from currency deposits, trust funds,
deposit substitutes and similar arrangements
20%
10. Royalties derived from sources within the
Philippines 20%
Related Revenue Issuances
RMO No. 23-2018, RR No. 8-2018, RA No.
10963, RR No. 12-2007, RR No. 14-2002, RA No.
9337, RR No. 9-98, RR No. 1-98, RR No. 5-97, RR
No. 4-96
Frequently Asked Questions
1) What is income?
Income means all wealth which flows into the
taxpayer other than as a mere return of capital.
2) What is Taxable Income?
Taxable income means the pertinent items of
gross income specified in the Tax Code as
amended, less the deductions, if any,
authorized for such types of income, by the Tax
Code or other special laws.
3) What is Gross Income?
Gross income means all income derived from
whatever source.
4) What comprises gross income?
Gross income includes, but is not limited to the
following:
 Compensation for services, in whatever
form paid, including but not limited to
fees, salaries, wages, commissions and
similar items
 Gross income derived from the conduct
of trade or business or the exercise of
profession
 Gains derived from dealings in property
 Interest
 Rents
 Royalties
 Dividends
 Annuities
 Prizes and winnings
 Pensions
 Partner's distributive share from the net
income of the general professional
partnerships
5) What are some of the exclusions from gross
income?
 Life insurance
 Amount received by insured as return
of premium
 Gifts, bequests and devises
 Compensation for injuries or sickness
 Income exempt under treaty
 Retirement benefits, pensions,
gratuities, etc.
 Miscellaneous items
 Income derived by foreign government
 Income derived by the government or
its political subdivision
 Prizes and awards in sport competition
 Prizes and awards which met the
conditions set in the Tax Code
 13th month pay and other benefits not
exceeding P90,000
 GSIS, SSS, Medicare and other
contributions
 Gains from the sale of bonds,
debentures or other certificate of
indebtedness with a maturity of more
than five (5) years
 Gains from redemption of shares in
mutual fund
6) What are the allowable deductions from
gross income?
a) *Optional Standard Deduction - an amount
not exceeding 40% of the gross sales/receipts
for individuals and gross income for
corporations; or
b) Itemized Deductions which include the
following:
 Expenses
 Interest
 Taxes
 Losses
 Bad Debts
 Depreciation
 Depletion of Oil and Gas Wells and
Mines
 Charitable Contributions and Other
Contributions- Research and
Development
 Pension Trusts
* Not allowed to non-resident alien individual
* A General Professional Partnership (GPP) may
avail of the OSD only once, either by the GPP or
the partners comprising the partnership
7) Who are not required to file Income Tax
returns?
a. An individual earning purely compensation
income whose taxable income does not exceed
P250,000.00
b. An individual whose income tax has been
withheld correctly by his employer, provided
that such individual has only one employer for
the taxable year
c. An individual whose sole income has been
subjected to final withholding tax or who is
exempt from income tax pursuant to the Tax
Code and other special laws.
d. An individual who is a minimum wage earner
e. Those who are qualified under “substituted
filing”. However, substituted filing applies only
if all of the following requirements are present:
 the employee received purely
compensation income (regardless of
amount) during the taxable year;
 the employee received the income from
only one employer in the Philippines
during the taxable year;
 the amount of tax due from the
employee at the end of the year equals
the amount of tax withheld by the
employer;
 the employee’s spouse also complies
with all 3 conditions stated above;
 the employer files the annual
information return (BIR Form No. 1604-
CF); and
 the employer issues BIR Form No. 2316
(Oct 2002 ENCS version) to each
employee.
8.) Who are exempt from Income Tax?
a. Income from abroad of a non-resident citizen
who is:
i. 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
ii. 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
iii. 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
iv. A citizen who has been previously considered
as a non-resident citizen and who arrives in the
Philippines at any time during the year to reside
permanently in the Philippines will likewise be
treated as a non-resident citizen during 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.
b. Overseas Filipino Worker, including overseas
seaman
An individual citizen of the Philippines who is
working and deriving income from abroad as an
overseas Filipino worker is taxable only on
income from sources within the Philippines;
provided, that a seaman who is a citizen of the
Philippines and who receives compensation for
services rendered abroad as a member of the
complement of a vessel engaged exclusively in
international trade will be treated as an
overseas Filipino worker.
NOTE: A Filipino employed as Philippine
Embassy/Consulate service personnel of the
Philippine Embassy/consulate is not treated as a
non-resident citizen; hence, his income is
taxable.
c. General Professional Partnership
d. Government Service Insurance System (GSIS)
e. Social Security System (SSS)
f. Philippine Health Insurance Corporation
(PHIC)
g. Local Water Districts (LWD)
9) What are the procedures in filing Income Tax
returns (ITRs)?
a. For “with payment” ITRs (BIR Form Nos. 1700
/ 1701 / 1701Q / 1702 / 1702Q / 1704)
File the return in triplicate (two copies for the
BIR and one copy for the taxpayer) with the
Authorized Agent Bank (AAB) of the place
where taxpayer is registered or required to be
registered. In places where there are no AABs,
file the return directly with the Revenue
Collection Officer or duly Authorized Treasurer
of the city or municipality in which such person
has his legal residence or principal place of
business in the Philippines, or if there is none,
filing of the return will be at the Office of the
Commissioner.
b. For “no payment” ITRs -- refundable, break-
even, exempt and no operation/transaction,
including returns to be paid on 2nd installment
and returns paid through a Tax Debit
Memo(TDM)
File the return with the concerned Revenue
District Office (RDO) where the taxpayer is
registered. However, "no payment" returns filed
late shall not be accepted by the RDO but
instead, they shall be filed with an Authorized
Agent Bank (AAB) or Collection
Officer/Deputized Municipal Treasurer (in
places where there are no AABs), for collection
of necessary penalties.
10) How is Income Tax payable of individuals
(resident citizens and non-resident citizens)
computed?
A. Based on Graduated Income Tax Rate
Gross Income P ___________
Less: Allowable Deductions (Itemized or
Optional) ___________
Net Taxable Income P ___________
Multiply by Tax Rate (0% to 35%)
____________
Income Tax DueP ___________
Less: Tax Withheld (per BIR From 2316)
____________
Income Tax Payable P____________
B. Based on Preferential Tax Rate of 8%
i. Taxpayers source of income is purely from
self-employment
Gross Sales/Receipts P ___________
Add: Non-operating Income ____________
Gross Taxable Income P ___________
Less: Amount allowed as deduction under Sec.
24 (A)(2)(b) of NIRC, as amended
250,000.00 A. Through withholding

Net Taxable Income P ___________

Multiply by Tax Rate 8% a. Individual Payee: Rate

Income Tax DueP ___________ If the gross annual business or professional

income did not exceed P3,000,000.00 5%
Tax Withheld (per BIR From 2307)
____________ If the gross annual business or professional
income is more than P3,000,000.00 10%
Income Tax Payable P ___________
b. Non-individual Payee Rate
ii. Mixed Income Earner
If the gross annual business or professional
On Compensation income did not exceed P720,000.00 10%

Total Compensation Income P ___________ If the gross annual business or professional

income is more than P720,000.00 15%
Less: Non-taxable Income ____________
B. Pay the balance as you file the tax return,
13th month pay and other benefits (max) computed as follows:
90,000.00
Income Tax DueP ___________
Taxable Compensation Income P ----------------
Less: Withholding Tax ___________
Multiply by Tax Rate (0% to 35%)
____________ Net Income Tax Due* P ___________

Tax Due on Compensation P ___________ *Note: When the tax due exceeds P2,000.00,
the taxpayer may elect to pay in two equal
On Business Income installments, the first installment to shall be
paid at the time the return is filed and the
Gross Sales/Receipts P ___________
second installment on or before October 15
Add: Non-operating Income ____________ following the close of the calendar year to the
Authorized Agent Bank (AAB) within the
Taxable Business Income P ___________ jurisdiction of the Revenue District Office (RDO)
where the taxpayer is registered
Multiply by Tax Rate 8%
12) Is the Minimum Corporate Income Tax
Tax Due on Business Income P ___________ (MCIT) an addition to the regular or normal
income tax?
Total Income Tax Due (Compensation +
Business) P ___________ No, the MCIT is not an additional tax. An MCIT
of 2% of the gross income as of the end of
Tax Withheld (per BIR From 2316/2307)
taxable year (whether calendar or fiscal year,
____________
depending on the accounting period employed)
Income Tax Payable P ___________ is imposed on a corporation taxable under Title
II of the Tax Code, as amended, beginning on
11) How is Income Tax Paid? the 4th taxable year immediately following the
taxable year in which such corporation
commenced its business operations when the
MCIT is greater than the regular income tax.
The MCIT is compared with the regular income
tax, which is due from a corporation. If the
regular income is higher than the MCIT, then
the corporation does not pay the MCIT but the
amount of the regular income tax.
13) Who are covered by MCIT?
The MCIT covers domestic and resident foreign
corporations which are subject to the regular
income tax. The term “regular income tax”
refers to the regular income tax rates under the
Tax Code. Thus, corporations which are subject
to a special corporate tax or to preferential
rates under special laws do not fall within the
coverage of the MCIT.
For corporations whose operations or activities
are partly covered by the regular income tax
and partly covered by the preferential rate
under special law, the MCIT shall apply the
regular income tax rate on its operations not
covered by the tax incentives. Newly
established corporations or firms which are on
their first 3 years of operations are not covered
by the MCIT.
14) When does a corporation start to be
covered by the MCIT?
A corporation starts to be covered by the MCIT
on the 4th year following the year of the
commencement of its business operations. The
period of reckoning which is the start of its
business operations is the year when the
corporation was registered with the BIR. This
rule will apply regardless of whether the
corporation is using the calendar year or fiscal
year as its taxable year.
15) When is the MCIT reported and paid? Is it
quarterly?
The MCIT is paid on an annual basis and
quarterly basis. The rules are governed by
Revenue Regulations No. 12-2007.
16) How is MCIT computed?
The MCIT is 2% of the gross income of the
corporation at the end of the taxable year.
The computation and the payment of MCIT,
shall likewise apply at the time of filing the
quarterly corporate income tax as prescribed
under Section 75 and Section 77 of the Tax
Code, as amended. Thus, in the computation of
the tax due for the taxable quarter, if the
computed quarterly MCIT is higher than the
quarterly normal income tax, the tax due to be
paid for such taxable quarter at the time of
filing the quarterly income tax return shall be
the MCIT which is two percent (2%) of the gross
income as of the end of the taxable quarter.
“Gross income” means gross sales less sales
returns, discounts and cost of goods sold.
Passive income, which have been subject to a
final tax at source do not form part of gross
income for purposes of computing the MCIT.
Cost of goods sold includes all business
expenses directly incurred to produce the
merchandise to bring them to their present
location and use.
For trading or merchandising concern, cost of
goods sold means the invoice cost of goods
sold, plus import duties, freight in transporting
the goods to the place where the goods are
actually sold, including insurance while the
goods are in transit.
For a manufacturing concern, cost of goods
manufactured and sold means all costs of
production of finished goods such as raw
materials used, direct labor and manufacturing
overhead, freight cost, insurance premiums and
other costs incurred to bring the raw materials
to the factory or warehouse.
For sale of services, gross income means gross
receipts less discounts and cost of services
which cover all direct costs and expenses
necessarily incurred to provide the services
required by the customers and clients including:
Salaries and employees benefits of personnel,
consultants and specialists directly rendering
the service;
Cost of facilities directly utilized in providing the
service such as depreciation or rental of
equipment used;
No, pursuant to Revenue Regulations 2-94, the
benefactor of a senior citizen cannot claim the
additional exemption. Further, additional
exemptions of individual taxpayers are removed
under RA 10963 (Tax Reform for Acceleration
and Inclusion).

Cost of supplies

Interest Expense is not included as part of cost

of service, except in the case of banks and other
financial institutions.

“Gross Receipts” means amounts actually or

constructively received during the taxable year.
However, for taxpayers employing the accrual
basis of accounting, it means amounts earned
as gross income.

17) What is the carry forward provision under

the MCIT?

Any excess of the MCIT over the normal income

tax may be carried forward and credited against
the normal income tax for the three (3)
immediately succeeding taxable years.

18) How would the MCIT be recorded for

accounting purposes?

Any amount paid as excess minimum corporate

income tax should be recorded in the
corporation’s books as an asset under account
title “Deferred charges-MCIT”

19) How long can we amend our income tax

return?

There is no prescription period for amending

the return. When the taxpayer has been issued
a Letter of Authority, he can no longer amend
the return.

20) Can a benefactor of a senior citizen claim

him/her as additional dependent in addition to
his/her 3 qualified dependent children at
Php25,000 each?