comprehensive income taxation somera(4!29!14)

7/25/2019 Comprehensive Income Taxation Somera(4!29!14)

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1

Comprehensive

CorporateIncome Taxation

By:

Dr. Ruperto P. Somera, Ph, D., CPA

Tax Consultant, Professor/Lecturer

ormer D!rector, Bureau of "nternal Re#enueormer $em%er, Boar& of Accountancy

ello' Tax $ana(ement

ello' Tax Research



)

Income Tax

"s a tax on all yearly prof!ts ar!s!n(

from property, profess!ons, tra&es or

off!ces, or as a tax on a person*s!ncome, emoluments, prof!ts. "ncome

tax !s a &!rect.



+

KINDS OF INCOME TAX

1. Personal !ncome tax on !n&!#!&uals

). Re(ular corporate !ncome tax on

corporat!ons

+. $!n!mum corporate !ncome tax on

corporat!ons-. Cap!tal (a!ns tax on sale of shares of stocs

of a &omest!c corporat!on %y a person 'ho !s

not a &ealer !n secur!t!es



-

. Tax on pass!#e !n#estment !ncome, such as

!nterest, &!#!&en&, an& royalty

0. r!n(e %enef!ts tax

. Branch prof!t rem!ttance tax on Ph!l!pp!ne %ranches

of fore!(n corporat!ons

2. Tax on !mproperly accumulate& earn!n(s tax of

corporat!ons an&3. !nal '!thhol&!n( !ncome tax on certa!n !ncome from

sources '!th!n the Ph!l!pp!nes paya%le to res!&ent

4e.(., !nterest on %an &epos!ts5 or non6res!&ent

persons.



Requisites or Income to !e Taxa!"e

7There must %e (a!n or prof!t, 'hether !n

cash or !ts e8u!#alent.

7The (a!n must %e real!9e& or rece!#e&.

6 $ere !ncrease !n the #alue of

property !s not !ncome 4unreal!9e& !ncrease

!n cap!tal5



0

Exc"usions rom Income

15 Procee&s of l!fe !nsurance

)5 Amount rece!#e& %y the !nsure& as return of

prem!um

+5 !fs, %e8uests, an& &e#!ses-5 Compensat!on for !n;ur!es or s!cness

5 "ncome exempt un&er treaty

05 Ret!rement %enef!ts, pens!ons, (ratu!t!es, etc. an&

5 $!scellaneous !tems.



2

CRPRAT"?

Corporat!ons !nclu&es partnersh!ps, no matter ho'create& or or(an!9e&, ;o!nt stoc compan!es, ;o!nt

accounts, assoc!at!ons or !nsurance compan!es

except:

7Go!nt construct!on #enture

7eneral profess!onal partnersh!p

7Go!nt #enture for en(a(!n( !n petroleum, coal,

(eothermal an& other ener(y operat!ons pursuantto a consort!um a(reement '!th the (o#ernment.



3

nre(!stere& or re(!stere& partnersh!p H

taxa%le pro#!&e& that the follo'!n(re8u!s!tes occur:

a. A(reement, oral or 'r!t!n(, tocontr!%ute money, property or !n&ustry to

a common fun&

%. "ntent!on to &!#!&e the prof!ts.



1

!. T'o s!sters purposely create& a common

fun& '!thout %e!n( re(!stere& for the

purpose of en(a(!n( !n a ser!es oftransact!ons for prof!t H taxa%le

unre(!stere& partnersh!p !s create&

4>#an(el!sta #. Comm!ss!oner, 1) Ph!l.1-5.



11

>?>RAL PR>SS"?AL

PART?>RS"P

Are partnersh!p forme& %y persons for the

sole purpose of exerc!s!n( the!r common

profess!on, no part of the !ncome of 'h!ch !s

&er!#e& from en(a(!n( !n any tra&e or

%us!ness



PART?>RS"P

1)

Type

"ncome Tax

I!thhol&!n( Tax

=es"s the partnersh!p

!ncome earne& fromtra&!n(J

?o

C$$>RC"AL

?C"T H +E or

$C"T H )E

D!str!%ut!#e Share

!nal I!thhol&!n(

Tax 4IT5 of 1E

PR>SS"?AL

>xempt from "ncomeTax

D!str!%ut!#e Share

Cre&!ta%le I!thhol&!n( Tax

4CIT5

P), an& %elo' F 1E

$ore than P), F 1E

4RR.+6)+5

1+

TA< ? CRPRAT"?

7 Domest!c Corporat!on

H Domest!c Corporat!on

H eneral Partnersh!p H Propr!etary >&ucat!onal "nst!tut!ons an&

osp!tals

1-

TA< ? CRPRAT"?

7 ore!(n Corporat!on

a. Res!&ent fore!(n Corporat!on

%. "nternat!onal Carr!ers7 "nternat!onal A!r Carr!ers

7 "nternat!onal Sh!pp!n(

c. ff6shore Ban!n( n!t

&. Tax on Branch Prof!t Rem!ttance

e. Re(!onal Area ea&8uarters an&Re(!onal perat!n(

1

TA< ? CRPRAT"?

7 ore!(n Corporat!on

f. Tax on Certa!n "ncomes Rece!#e& %yRes!&ent ore!(n Compan!es

(. ?on6Res!&ent Corporat!on: H "n eneral

H C!nemato(raph!c !lm 'ners, Lessors orD!str!%utors

H ?on6Res!&ent o'ners of @essels Chartere& %yPh!l!pp!ne ?at!onals

H ?on6Res!&ent Lessors of A!rcraft, $ach!ne an&other e8u!pment

H "ntercorporate D!#!&en&s

10

Corporate Tax Rate

Class!f!cat!on Sources Tax Base Rate

1. Domest!cCorporat!on

All sources'/!n K '/outthe Ph!ls.

?et "ncome +E

). Res!&ent

ore!(n Corp.

All sources

'/!n the Ph!ls.only

?et "ncome +E

+. ?on6Res!&ent

ore!(n Corp.

All sources'/!n the Ph!ls.

only

ross"ncome

+E TA<'!thhel& %y

payor

-. Pr!#ate>&ucat!onal "ns.4stoc5

All sources'/!n K '/outthe Ph!ls.

?et "ncome 1E ofTaxa%le"ncome



1

Class!f!cat!on Sources Tax Base Rate

. "nternat!onalCarr!er

All sources '/!nthe Ph!ls.

ross Ph!l.B!l!n(

) E

0. ?on6Res!&entCenemato(raph!c f!lm 'ners,Lessors,D!str!%utors

All sources '/!nthe Ph!ls. !lm Rentalsan& ther"tems ofross"ncome

)E

. ?on Res!&ent'ners of@esselsChartere& %yPh!l. ?at!onals

All sources '/!nthe Ph!ls.

rossRentals KCharterees

- E

2. ?on Res!&entLessors of A!rcraft,$ach!ner!es K

ther >8u!pment

All sources'/!n the Ph!ls.

rossRental

E



12

A!rcraft,

mach!nery an&other e8u!pment

ross "ncome 61/)E

"nterest onore!(n loans

ross "ncome )E

"nter6CorporateD!#!&en&s

ross "ncome 1E



RE#EN$E RE%$&ATIONS

NO' ()*+)(+

Go!nt @enture or Consort!um orme&

for the Purpose of n&erta!n(

Construct!on Pro;ects an& $an&atory

>nrollment of Local Contractors !n the>lectron!c !l!n( Payment System

4>PS5

13



,oint #entures Not Taxa!"e As

Corporations

A ;o!nt #enture or consort!um forme& for thepurpose of un&erta!n( construct!on pro;ectsnot cons!&ere& as corporat!on shoul& %e:

1.or the un&erta!n( of a construct!on pro;ectan&

).Shoul& !n#ol#e ;o!n!n( or pool!n( of resources%y l!cense& local contractors that !s, l!cense&

as (eneral contractor %y the Ph!l!pp!neContractors Accre&!tat!on Boar& 4PCAB5 of theDepartment of Tra&e an& "n&ustry 4DT"5

)



,oint #entures Not Taxa!"e As

Corporations

+. These local contractors are en(a(e& !n

construct!on %us!ness an&

-. The Go!nt @enture !tself must l!e'!se %e

&uly l!cense& as such %y the Ph!l!pp!ne

Contractors Accre&!tat!on Boar& 4PCAB5

of the Department of Tra&e an& "n&ustry

4DT"5

)1



-RANC. /ROFIT REMITTANCES

A f!nal '!thhol&!n( tax of 1E of any prof!t rem!tte&%y the Ph!l!pp!ne %ranch of a fore!(n corporat!on to

!ts hea& off!ce %ase& on the total prof!ts appl!e& or

earmare& for rem!ttance '!thout any &e&uct!on for

the tax component thereof, except those re(!stere&'!th the follo'!n(:

a.Ph!l!pp!ne >conom!c Mone Author!ty 4P>MA5

%.Su%!c Bay $etropol!tan Author!ty 4SB$A5c.Clar De#elopment Author!ty 4CDA5

&.ther compan!es '!th!n the spec!al econom!c

9ones ))



)+

%O#ERNMENT*O0NED OR

CONTRO&&ED COR/ORATION

All (o#ernment6o'ne& an& controlle& corporat!ons,a(enc!es or !nstrumental!t!es, shall %e su%;ect to

!ncome tax on !ncome from %us!ness, !n&ustry or

act!#!ty s!m!larly taxa%le !n the han&s of pr!#ate

enterpr!ses, except the follo'!n(:

a.Soc!al Secur!ty System 4SSS5

%.o#ernment Ser#!ce "nsurance System 4S"S5

c.Ph!l!pp!ne ealth "nsurance Corporat!on 4P"C5

&.Ph!l!pp!ne Char!ty S'eepstaes ff!ce 4PCS5

e.Local 'ater &!str!cts 4LID5 4RA 1)05

T T t R "i A "i ti



Tax Treat1 Re"ie App"ication

Court 2ecisions have conirme2 that prior

app"ication is man2ator17Sect!on - of Re#enue Re(ulat!ons ?o. 62) 'h!ch

!mplements the RP6S!n(apore Tax Treaty re8u!res the f!l!n(

of an appropr!ate B"R orm for "ncome Tax Con#ent!on

'!th the "nternat!onal perat!ons D!#!s!on 4no'

"nternat!onal Tax Affa!rs D!#!s!on 4"TAD5 of the B"R. (Mirant

Philippines Corporation vs. CIR, CTA EB case 40, June 7, 00!".

74CDL otels 4Ph!ls.5 Corporat!on #s. C"R, CT A fore!(n

corporat!on '!sh!n( to a#a!l of the %enef!ts of the

tax treaty shoul& !n#oe the pro#!s!ons of the taxtreaty an& pro#e that !n&ee& the pro#!s!ons of the

tax treaty appl!es to !t, %efore the %enef!ts may %e

exten&e& to such corporat!on. (C#$ %otels (Phils." Corporation vs. CIR, CTA

EB &o. ', Au)ust *0, 00" )-



)

TAX TREAT3

Requirement or ITAD ru"in4 in avai"ment o

treat1 rates

n&er R$ 16, a#a!lment %y the taxpayer of the tax

treaty pro#!s!ons must %e prece&e& %y an appl!cat!on for

tax treaty rel!ef '!th the "TAD not later than f!fteen 415

&ays %efore the transact!ons co#ere& %y tax treat!es are

effecte&.



)0

Case5 (CB+ Poer Co-pan $i-ite/ v. CIR, CTACase &os. , 114 an/ 7*, 2e3ruar *, 00,

#eeutsche Ban vs CIR, CTA EB 4!, Ma ,00"

Due to pet!t!onerNs fa!lure to f!le an "TAD rul!n('!th respect to some of !ts transact!ons pr!or to

apply!n( the preferent!al rates un&er tax treat!es,

the refun& cla!m of taxpayer 'as re&uce&.



)

Citing Supreme Court Resolution datedFebruary 18, 2008 for Mirant (Philippines)

Operations Corporation v. Commissioner ofInternal Revenue in G.R. No. 168!1, it "as#eld t#at an $%&' ruling must be obtainedprior to a(ailing a preferential ta) rate.

Court o Tax Appea"s5



)2

E2ucationa" Institutions1. Propr!etary >&ucat!onal

"nst!tut!ons

). ?on6stoc, ?on6Prof!t

>&ucat!onal "nst!tut!ons



Spec!al Domest!c Corporat!onsC&ASSIFICATIONS A//&ICA-&E TAX

1. Propr!etory e&ucat!onal!nst!tut!ons 4>xcept those'hose (ross !ncome fromunrelate& source excee&s Eof the!r total (ross !ncome5

). ?on Stoc ?on Prof!t osp!tals

+. o#ernment o'ne& an&controlle& corporat!ons

-. >xempt (o#ernmentor(an!9at!ons 4S"S, SSS,P"C, PCS5

1E of net taxa%le !ncome

1E of net taxa%le !ncome

?ormal corporate !ncome tax

Tax exempt

)3



+

/roprietar1 E2ucationa" Institutions

Propr!etary >&ucat!on "nst!tut!ons H

Propr!etary e&ucat!onal !nst!tut!ons

shall pay a tax often percent 41E5

on the!r !ncome. Pro#!&e&, that !f the(ross !ncome from unrelate& tra&e,

%us!ness or other act!#!ty f!fty percent

4E5 of the total (ross !ncome&er!#e& %y such e&ucat!onal tax

shoul& %e +E on the net !ncome.



+1

A Propr!etary e&ucat!onal !nst!tut!on !s any

pr!#ate school ma!nta!ne& an& a&m!n!stere& %y

pr!#ate !n&!#!&uals or (roups '!th an !ssue&

perm!t to operate from the Department of>&ucat!on, Culture an& Sports 4D>CS5, or the

Comm!ss!on on !(her >&ucat!on 4C>D5, or

the Techn!cal >&ucat!onal an& S!lls

De#elopment Author!ty 4T>SDA5



+)

&IMITATIONS5

6 !f the 4ross income from theunrelate& tra&e, %us!ness or other

act!#!ty excee2s it1 67)89 of the total

(ross !ncome &er!#e& %y such

e&ucat!onal !nst!tut!ons from all

sources, the tax to %e appl!e& an& use&

shall %e +E on the entire taxa!"e

income'



KINDS OF INCOME TAX

EXEM/TION

7>xpress !ncome tax exempt!ons,

7"ntent!onal !ncome tax exempt!ons

"t coul& %e express or !mpl!es !mmun!ty, to

part!cular persons or corporat!ons, or topersons or corporat!ons of a part!cular

class.

CONSTIT$TIONA& INCOME TAX

EXEM/TIONS

Art!cle <"@ of the 132 Ph!l!pp!ne Const!tut!on

to the effect that OAll re#enues an& assets ofnon6stoc, non6prof!t e&ucat!onal !nst!tut!ons

use& actually, &!rectly, an& exclus!#ely for

e&ucat!onal purposes shall %e exempt from

taxes an& &ut!es.



+0

C. A %enef!c!ary soc!ety, or&er or

assoc!at!ons, operat!n( for the exclus!#e%enef!t of the mem%ers.

D. Cemetery company o'ne& an& operate&

exclus!#ely for the %enef!t of !ts mem%ers>. ?onstoc corporat!on or assoc!at!on

or(an!9e& an& operate& exclus!#ely for

rel!(!ous, char!ta%le, sc!ent!f!c, athlet!c, orcultural purposes.



+

>. Bus!ness lea(ue, cham%er of commerce,

or %oar& of tra&e, not or(an!9e& for prof!t

an& no part of the net !ncome of 'h!ch!nures to the %enef!t of any pr!#ate

stochol&er or !n&!#!&ual

. C!#!c lea(ue or or(an!9at!on notor(an!9e& or prof!t %ut operate&

exclus!#ely for the promot!on of soc!al

'elfare

. A nonstoc an& nonprof!t e&ucat!onal

!nst!tut!on

. o#ernment e&ucat!onal "nst!tut!on



+2

". armers* or other mutual typhoon or f!re

!nsurance company, mutual &!tch or

!rr!(at!on company, mutual or cooperat!#etelephone company, or l!e or(an!9at!on

for a purely local character, the !ncome of

'h!ch cons!sts solely of assessments,

&ues, an& fees collecte& from mem%ers

for the sole purpose of meet!n( !ts

expenses an&

G. armers* fru!t (ro'ers*, or l!e assoc!at!onor(an!9e& an& operate& as a sales a(ent

for the purpose of maret!n( the pro&ucts

of !ts mem%ers.



+3

?ot'!thstan&!n( the pro#!s!ons !n the

prece&!n( para(raphs, the !ncome of

'hate#er !n& an& character of the fore(o!n(or(an!9at!ons from any of

the!r propert!es, real or personal, or from any

of the!r act!#!t!es con&ucte& for prof!tre(ar&less of the &!spos!t!on ma&e of such

!ncome, shall %e su%;ect to tax !mpose&.



RE#EN$E RE%$&ATION

NO' +*+)((!l!n( of "ncome Tax Return an&/or

Annual "nformat!on Return %y"n&!#!&uals, !nclu&!n( >states an&

Trusts

-



Revenue Memoran2umCircu"ar No' :*+)(;

Re8u!r!n( Tax6>xempt osp!tal

to secure Re#al!&ate& Tax

>xempt!on Rul!n(s/Cert!f!cates

-1



Revenue Memoran2um

Circu"ar No' ;7*+)(+Clar!fy!n( the Taxa%!l!ty of Clu%s

r(an!9e& an& perate&>xclus!#ely for Pleasure,

Recreat!on, an& ther ?on6Prof!t

Purposes.

" T f Cl %



"ncome Tax of Clu%s

Clu%s 'h!ch are or(an!9e& an&

operate& exclus!#ely for

pleasure, recreat!on, an& other

non6prof!t purposes are su%;ectto !ncome tax



@alue A&&e& Tax of Clu%s

A non6stoc, non6prof!t or(an!9at!on

or (o#ernment ent!ty !s l!a%le to pay

@AT on the sale of (oo&s orser#!ces.



RE#EN$E MEMORAND$MORDER NO' +)*+)(;

Prescr!%!n( the Pol!c!es an& u!&el!nes !n

the "ssuance of Tax >xempt!on Rul!n(s toual!f!e& ?on6Stoc, ?on6Prof!t

Corporat!ons an& Assoc!at!ons n&er

Sect!on + of the ?at!onal "nternal Re#enueCo&e of 133, As Amen&e&

-



n&er Sect!on + of the ?at!onal

"nternal Re#enue Co&e of 133 4?"RC5, as

amen&e&, certa!n corporat!ons an&

assoc!at!ons are exempt from pay!n( on

!ncome rece!#e& %y them as such. The

Bureau of "nternal Re#enue 4Bureau5accor&s tax6exempt status to these

corporat!ons an& assoc!at!ons %y 'ay of

conf!rmatory B"R rul!n(s or cert!f!cates of taxexempt!on 'h!ch are !ssue& after &ue

e#aluat!on of &ocuments su%m!tte& %y sa!&

corporat!ons an& assoc!at!ons.-0

Applications for Tax Exemption and

Revalidation.QCorporat!ons an& assoc!at!onsenumerate& un&er Sect!on + of the ?"RC, as

amen&e&, inc"u2in4 those <hich have !een

issue2 tax exemption ru"in4s=certiicates prior

to ,une ;)> +)(+, shall f!le the!r respect!#e

Appl!cat!ons for Tax >xempt!on/Re#al!&at!on

'!th the Re#enue D!str!ct ff!ce 4RD5 'here they

are re(!stere&. nly corporat!ons or assoc!at!onsthat are &uly 8ual!f!e& un&er Sect!on + of the

?"RC, as amen&e&, shall %e !ssue& Tax >xempt!on

Rul!n(s

-



Transitory Provisions.Q Tax exempt!on

rul!n(s or cert!f!cates !ssue& to corporat!ons

or assoc!at!ons l!ste& un&er Sect!on + of

the ?"RC, as amen&e&, pr!or to Gune +,

)1) shall %e #al!& unt!l Decem%er +1, )1+.Tax exempt!on rul!n(s or cert!f!cates !ssue&

after Gune +, )1) shall cont!nue to %e

#al!& for a per!o& of three4+5 years form &ateof !ssuance, unless sooner re#oe& or

cancelle&.

-2



Revenue Memoran2um

Circu"ar No' ?*+)(;

Clari5in) the Ta6a3ilit o5 Association#ues, Me-3ership 2ees, an/ ther

Assess-ents8Char)es Collecte/ 3

%o-eoners9 Associations



Income Tax

6the amounts pa!& !n as &ues or fees %yhomeo'ner6mem%ers of a homeo'ners assoc!at!on

form part of the (ross !ncome of the latter su%;ect to

!ncome tax. Th!s !s %ecause a homeo'ners*

assoc!at!on furn!shes !ts mem%ers '!th %enef!ts,a&#anta(es, an& pr!#!le(es !n return for such

payments. or tax purpose, the assoc!at!on &ues

mem%ersh!p fees an& other assessments/char(es

collecte& %y a homeo'ners* assoc!at!on const!tute!ncome payments or compensat!on for %enef!c!al

ser#!ces !t pro#!&es to !ts mem%ers an& tenants.



#a"ue*A22e2 Tax 6#AT9 an2

/ercenta4e Tax

Assoc!at!on &ues, mem%ersh!p fees, an&

other assessments/char(es collecte& %y ahomeo'ners* assoc!at!on are su%;ect to @AT

s!nce they const!tute !ncome payment or

compensat!on for the %enef!c!al ser#!ces !tpro#!&es to !ts homeo'ner6mem%ers.

)

$"?"$$ CRPRAT> "?C$> TA< ?

D$>ST"C CRPRAT"?S

1. Imposition of Tax H A m!n!mum

corporate !ncome tax of t'o percent

4)E5 of the (ross !ncome as of the

en& of the taxa%le year, %e(!nn!n(

on the fourth taxa%le year

!mme&!ately follo'!n( the year !n'h!ch such corporat!on commence&

!ts %us!ness



+

2. Carry Forward of Excess Minimm

Tax ! Any excess of the m!n!mum

corporate !ncome tax o#er the normal

!ncome tax shall %e carr!e& for'ar& an&cre&!te& a(a!nst the normal !ncome tax

for the three 4+5 !mme&!ately succee&!n(

taxa%le years.



-

>xcept!ons H the m!n!mum corporate !ncome

tax shall not %e !mpose& upon any of thefollo'!n(:

A. Domest!c corporat!ons operat!n( aspropr!ety e&ucat!onal !nst!tut!ons

B. Domest!c corporat!ons en(a(e& !nhosp!tal operat!ons 'h!ch are non prof!t

su%;ect to tax at ten 41E5 on the!r taxa%le!ncome



C. Corporat!ons en(a(e& !n %us!nessas &epos!tory %ans un&er

expan&e& fore!(n currency &epos!ts

systemD. !rms that are taxe& un&er a spec!al

!ncome tax re(!me such as those !n

the P>MA la' an& the BasesCon#ent!on De#elopment Act

RE#EN$E RE%$&ATION (+*+))@



0

RE#EN$E RE%$&ATION (+*+))@

MINIM$M COR/ORATE INCOME TAX 6MCIT9

ON DOMESTIC COR/ORATIONS

A m!n!mum corporate !ncome tax 4$C"T5 oft'o percent 4)E5 of the (ross !ncome as ofthe en& of the taxa%le year 4'hether

calen&ar or f!scal year, &epen&!n( on theaccount!n( per!o& employe&5 !s here%y!mpose& upon any &omest!c corporat!on%e(!nn!n( on the fourth 4-th5 taxa%le year

!mme&!ately follo'!n( the taxa%le year !n'h!ch such corporat!on commence& !ts%us!ness operat!ons.

Th t t! & th t f $C"T h ll l! !



The computat!on an& the payment of $C"T, shall l!e'!seapply at the t!me of f!l!n( the 8uarterly corporate !ncome tax.

Thus, !n the computat!on of the tax &ue for the taxa%le8uarter, !f the compute& 8uarterly $C"T !s h!(her than the8uarterly normal !ncome tax, the tax &ue to %e pa!& for suchtaxa%le 8uarter at the t!me of f!l!n( the 8uarterly corporate!ncome tax return shall %e the $C"T 'h!ch !s t'o percent4)E5 of the (ross !ncome as of the en& of the taxa%le8uarter. >xpan&e& '!thhol&!n( tax, 8uarterly corporate!ncome tax payments un&er the normal !ncome tax, an& the$C"T pa!& !n the pre#!ous taxa%le 8uarter/s are allo'e& to%e appl!e& a(a!nst the 8uarterly $C"T &ue.

Exception on Minimum Corporate




Income Tax 6MCIT9 on Resi2ent

Forei4n Corporation

a5 Res!&ent fore!(n corporat!ons en(a(e& !n

%us!ness as O!nternat!onal carr!er su%;ect to tax

at t'o an& one6half percent 4) E5 of the!r

Oross Ph!l!pp!ne B!ll!n(s%5 Res!&ent fore!(n corporat!on en(a(e& !n

%us!ness as ffshore Ban!n( n!ts 4Bs5 on

the!r !ncome from fore!(n currency transact!ons

'!th local commerc!al %ans, !nclu&!n( %ranchesof fore!(n %ans, fore!(n to f!nal !ncome tax at ten

percent 41E5 of such !ncome an&

2




p p

Income Tax 6MCIT9 on Resi2ent

Forei4n Corporation

c5 Res!&ents fore!(n corporat!ons en(a(e& !n

%us!ness as re(!onal operat!n(

hea&8uarters su%;ect to tax at ten percent

41E5 of the!r taxa%le !ncome.

&5 !rms that are taxe& un&er a spec!al !ncome

tax re(!me such as those !n accor&ance '!th

RA 310 an& )) 4the P>MA la' an& theBases Con#ers!on De#elopment Act,

respect!#ely5.

3

Imposition o Improper"1



0

Imposition o Improper"1

Accumu"ate2 Earnin4s Tax

A. "n eneral H "n a&&!t!on to other taxes

!mpose&, there !s here%y !mpose& for

each taxa%le year on the !mproperly

accumulate taxa%le !ncome of eachcorporat!on, an !mproperly accumulate&

earn!n(s tax e8ual to ten percent 41E5

of the !mproperly accumulate& taxa%le!ncome.

Corporat!ons not su%;ect to "A>T



01

Corporat!ons not su%;ect to "A>T

7 Bans an& other non6%an f!nanc!al

!nterme&!ar!es7 "nsurance compan!es

7 Pu%l!cly6hel& corporat!ons

7 Taxa%le partnersh!ps

7 eneral profess!onal partnersh!ps

7 >nterpr!ses &uly re(!stere& '!th the

Ph!l!pp!ne >conom!c Mone Author!ty 4P>MA



0)

DED$CTIONS FROM

%ROSS INCOME

a. The !tem!9e& &e&uct!on

%. The opt!onal stan&ar& &e&uct!on

c. The spec!al &e&uct!ons an& !n spec!al

la's l!e the B" la' 4>.. ))05

De2uctions rom %ross Income



De2uctions rom %ross Income

De&uct!ons are !tems or amounts 'h!ch thela' allo's to %e &e&ucte& from the (ross

!ncome.

0+

Time or avai"in4 2e2uctions

A taxpayer has the r!(ht to &e&uct all

author!9e expense for the taxa%le year. ecan not &e&uct them from the !ncome of the

next or any succee&!n( year.



0-

Kin2s o 2e2uctions

1. De&uct!ons from compensat!on !ncome of!n&!#!&ual taxpayers.

). De&uct!ons from %us!ness an& / or

profess!onal !ncome of !n&!#!&ualtaxpayers.

+. De&uct!ons from corporate !ncome.

-. Spec!al &e&uct!ons.



0

RE#EN$E RE%$&ATIONS

NO' (*+))B

pt!onal Stan&ar& De&uct!on 4SD5

Allo'e& to "n&!#!&uals an& Corporat!ons!n Comput!n( the!r Taxa%le "ncome



00

/ERSONS CO#ERED5

1. "n&!#!&uals:

!. Res!&ent C!t!9en

!!. ?on6res!&ent c!t!9en

!!!. Res!&ent Al!en!#. Taxa%le estates an& trusts

). Corporat!ons:

!. Domest!c corporat!on!!. Res!&ent fore!(n corporat!on



0

DETERMINATION OF T.E AMO$NT OF

O/TIONA& STANDARD DED$CTION FOR

INDI#ID$A&S' HThe SD allo'e& to !n&!#!&ual taxpayers

shall %e a max!mum of forty percent 4-E5 of

(ross sales or (ross rece!pts &ur!n( the taxa%le

year. "f the !n&!#!&ual !s on the accrual %as!s ofaccount!n( for h!s !ncome an& &e&uct!ons, the

SD shall %e %ase& on the (ross sales &ur!n(

the taxa%le year. "n the other han&, !f the

!n&!#!&ual employs the cash %as!s of account!n(for h!s !ncome an& &e&uct!ons, the SD shall %e

%ase& on h!s (ross rece!pts &ur!n( the taxa%le

year.



02

EXAM/&ES IN DETERMININ% T.E -ASIS

OF T.E :)8 OSD FOR INDI#ID$A&S ANDCOR/ORATIONS'

Suppose a reta!ler of (oo&s, 'hose account!n(

metho& !s un&er the accrual %as!s, has a (ross

sales of P1,,. '!th a cost of sales

amount!n( to P2,.

03

!f "n&!#!&ual "f Corporat!on

ross Sales P1,, P1,,

Less: Cost of oo&s Sol& 2,

Bas!s of the SD P1,, P ),

< SD Rate 4max!mum5 .- .-

SD Amount P -, P 2,FFFFFFFFFFFFFF FFFFFFFFFFFFFF



"f "n&!#!&ual "f Corporat!on

ross Sales P1,, P1,,

Less: Cost of Sales 2,

ross Sales/ross P1,, P ),

Less: SD 4max!mum5 -, 2,

?et "ncome P 0, P 1), FFFFFFFFFFFFFF

Less Personal >xempt!on 4,5 6 A&&!t!onal >xempt!on 41,5 6

-x), Taxa%le "ncome -, 1),

FFFFFFFFFFFFFF FFFFFFFFFFFFFF"ncome Tax 12, +0,



1

RE#EN$E RE%$&ATIONS

NO' +*+)()

Amen&ment to Sect!ons 0 an& of Re#enue

Re(ulat!ons ?o. 106)2 '!th Respect to the

Determ!nat!on of the pt!onal Stan&ar&De&uct!on 4SD5 of eneral Profess!onal

Partnersh!ps 4PPs5 an& the Partners

Thereof, As Iell as the $anner an& Per!o&

for $a!n( the >lect!on to Cla!m SD !n the"ncome Tax Returns



)

RMC NO' ;*+)(+

Share in %enera" /roessiona" /artnership

?ot excee&!n( P), per year H 1E

>xcee&!n( P), per year H )E

+

-$SINESS EX/ENSES

A' Connecte2 <ith the taxpa1ers tra2e or

!usiness 6!usiness re"ate2 2e2uctions9'

1. >xpenses 0. Deprec!at!on). "nterest . Deplet!on

+. Taxes 2. Research an&

-. Losses De#elopment

. Ba& De%ts 3. Contr!%ut!ons to pens!on

trusts

- N t t 2 ith th t t 2

-

-' Not connecte2 <ith the taxpa1ers tra2e o

!usiness 6non*!usiness 2e2uctions9'

1. Char!ta%le an& other contr!%ut!ons

11. pt!onal stan&ar& &e&uct!on

1). Prem!um payment on health an&/or

hosp!tal!9at!on !nsurance.

ITEMIED DED$CTION



ITEMIED DED$CTION

There shall %e allo'e& as &e&uct!on from(ross !ncome all the or&!nary an&

necessary expenses pa!& !ncurre& &ur!n(

the taxa%le year !n carry!n( on or 'h!chare &!rectly attr!%uta%le to, the

&e#elopment, mana(ement, operat!on

an&/or con&uct of the tra&e, %us!ness or

exerc!se of a profess!on !nclu&!n( a

reasona%le allo'ance for salar!es, tra#el,

rental an& enterta!nment expenses.

-$SINESS EX/ENSES



0

-$SINESS EX/ENSES1. "t must %e or&!nary an& necessary

). "t must %e pa!& or !ncurre& &ur!n( the taxa%leyear

+. "t must %e pa!& on !ncurre& !n carry!n( on or

'h!ch are &!rectly attr!%uta%le to the&e#elopment, mana(ement, operat!on an&/or

con&uct of tra&e, %us!ness or exerc!se of

profess!on

-. "t must %e supporte& %y a&e8uate !n#o!ces orrece!pts

. The tax re8u!re& to %e '!thhel& on the

expense pa!& or paya%le.

ITEMIED DED$CTIONS



ITEMIED DED$CTIONS

Re8u!s!tes for &e&uct!%!l!ty

1. The expense must %e or&!nary an&necessary. There !s no har& an& fast rule

on the matter.

7"t &epen&s upon part!cular facts suchas, the type of %us!ness 4custom5,

!ntent!on of the taxpayer, t!me, place

an& pre#a!l!n( c!rcumstances. TheSupreme Court has ne#er attempte& to

&ef!ne '!th prec!s!on the terms or&!nary

an& necessary.

%$IDIN% /RINCI/&ES



2

%$IDIN% /RINCI/&ESr&!nary, 'hen !t !s normal 4common or usual5 !n

relat!on to the %us!ness of the taxpayer an& thesurroun&!n( c!rcumstances.

?ecessary, 'here !t !s appropr!ate an& helpful !n

the &e#elopment of the taxpayer*s %us!ness. "t !s!nten&e& to real!9e a prof!t or to m!n!m!9e a loss

4@!sayan Ce%u Term!nal Co. @. Collector, CTA

Case ?o. )2, )3 Gune 135.

7Ransom money pa!& to secure the return of an

!n&!#!&ual !s not &e&uct!%le as !t has noth!n( to

&o '!th prof!t6ma!n(

> !& & O &! &



3

7 >xpenses are cons!&ere& Oor&!nary an&

necessary !f they are &!rectly attr!%uta%le

to &e#elopment, mana(ement, operat!on,an& or con&uct of the tra&e or %us!ness of

the taxpayer, or !n the exerc!se of the

taxpayer*s profess!on.



2

The expenses must %e !ncurre&

!n tra&e or %us!ness carr!e& on %ythe taxpayer H Th!s means that

the same !s not !ncurre& !n the

tra&e or %us!ness of another.

The expenses must %e su%stant!ate& %y



21

The expenses must %e su%stant!ate& %y

proof

7 Rece!pts are the %est proof. Bur&en ofproof l!es upon the taxpayer.

7 >#en !f no recor&s/rece!pts are

a#a!la%le, the oral test!mony of a CPA,!f not contra&!cte& %y the (o#ernment

!s suff!c!ent 4Bas!lan >states #. Com.,

.R. ?o. L))-3-, Septem%er 1305.



2)

Pa!& or !ncurre& &ur!n( the taxa%le year

7 Cash %as!s metho& H &e&ucts

expenses !n the year !n 'h!ch they are

pa!&.

7 Accrual %as!s metho& H reco(n!9es

expenses !n the year they accrue.

Cost o 4oo2s so"2 in computin4 4ross



incomeCost of (oo&s sol& shall !nclu&e all %us!ness

expenses &!rectly !ncurre& to pro&uce themerchan&!se to %r!n( them to the!r present locat!on

an& use.

or a tra&!n( or merchan&!s!n( concern, !t !nclu&es

the follo'!n(:

1."n#o!ce cost of the (oo&s sol&.

)."mport &ut!es.

+.re!(ht !n transport!n( the (oo&s to the place

'here the (oo&s are actually sol&, an&

-."nsurance 'h!le the (oo&s are !n trans!t.2+

or a manufactur!n( concern, cost of (oo&s



manufacture& an& sol& shall !nclu&e the

follo'!n(:

1.All costs of pro&uct!on of f!n!she& (oo&s

such as:

a. Ra' mater!als use&

%. D!rect la%or

c. $anufactur!n( o#erhea&

).re!(ht cost+."nsurance prem!ums an&

-.ther costs !ncurre& to %r!n( the ra'

mater!als to the factory 'arehouse.2-

ormula to compute (ross !ncome:



2

ormula to compute (ross !ncome:

"n the case of seller of (oo&s:

ross sales x x

Less Sales returns 4x x5

Sales &!scounts 4x x5

Cost of (oo&s sol& 4x x5

ross "ncome x x



20

"n the case of seller of ser#!ces:

ross rece!pts x x

Less

Sales &!scounts 4x x5 Cost of ser#!ces 4x x5

ross "ncome x x

Cost of (oo& sol& H shall !nclu&e the purchase pr!ce

& h h &! & ll



2

or cost to pro&uce the merchan&!se an& all

expenses &!rectly !ncurre& !n %r!n(!n( them to the!r

present locat!on an& use.

or tra&!n( or merchan&!s!n( concern:

"n#o!ce cost of (oo&s sol& x x

A&&: "mport &ut!es

re!(ht !n transport!n( the (oo&s to the

place 'here (oo&s are actually

sol& x x

"nsurance 'h!le the (oo&s are !n trans!t x x

Cost of (oo&s sol&

x x



22

or manufactur!n( concern:

Ra' mater!als use& x x

D!rect la%or x x

$anufactur!n( o#erhea& x x

re!(ht cost x x "nsurance prem!ums x x

ther costs !ncurre& to %r!n( the ra'

mater!als to the factory or 'arehouse x x

Cost of (oo&s sol&/Cost of (oo&s

manufacture K sol& x x

! t t t ll



ross rece!pts means amounts actually or

construct!#ely rece!#e& &ur!n( the taxa%le

year. o'e#er, for taxpayers en(a(e& asseller of ser#!ces %ut employ!n( the accrual

%as!s of account!n( for the!r !ncome, the term

(ross rece!pts shall mean amounts earne&as (ross re#enue &ur!n( the taxa%le year.

23

Cost of ser#!ces means all &!rect costs an&



3

Cost of ser#!ces means all &!rect costs an&

expenses necessar!ly !ncurre& to pro#!&e the

ser#!ces re8u!re& %y the customers an& cl!ents!nclu&!n(:

15Salar!es an& employee %enef!ts of personnel,

consultants an& spec!al!sts &!rectly ren&er!n( the

ser#!ces, an&

)5Cost of fac!l!t!es &!rectly ut!l!9e& !n pro#!&!n( the

ser#!ce such as &eprec!at!on or rental of e8u!pment

use& an& cost of suppl!es.

>xpenses must not %e a(a!nst pu%l!c



31

>xpenses must not %e a(a!nst pu%l!c

pol!cy, pu%l!c moral or la'

7 !nes an& penalt!es

7 Attorney*s fee !ncurre& !n&efen&!n( c!#!l act!on %ase& on

!lle(al act H &e&uct!%le pro#!&e& !t

!s %us!ness connecte&..

RE#EN$E RE%$&ATIONS NO' ()*+))+



3)

Author!9!n( the "mpos!t!on of a Ce!l!n( on O>nterta!nment,

Amusement an& Recreat!onal >xpense

Co#era(e:

a."n&!#!&uals en(a(e& !n %us!ness, !nclu&!n( taxa%leestates an& trusts

%. "n&!#!&uals en(a(e& !n the pract!ce of profess!on

c. Domest!c corporat!ons

&. Res!&ent fore!(n corporat!ons

e. eneral profess!onal partnersh!ps, !nclu&!n( !ts

mem%ers

CEI&IN% ON ENTERTAINMENT> AM$SEMENT>



3+

AND RECREATION EX/ENSE

Actual enterta!nment, amusement an&

recreat!on expenses pa!& or !ncurre& '!th!n the

taxa%le year %y the taxpayer, %ut !n no case

shall such &e&uct!on excee& of 1E of netsales 4!.e., (ross sales less sales

returns/allo'ances an& sales &!scounts5 for

taxpayers en(a(e& !n sale of (oo&s or

propert!es or 1E of net re#enue 4".e., (rossre#enue less &!scounts5 for taxpayers en(a(e&

!n sale of ser#!ces, !nclu&!n( exerc!se of

profess!on an& use or lease of propert!es.

3-

?>T SAL>S/?>T R>@>?> < ACTAL >?S>

TTAL ?>T SAL>S A?D ?>T R>@>?>



3

I&&$STRATION5

>RA Corporat!on !s en(a(e& !n the sale of

(oo&s an& ser#!ces '!th net sales/net

re#enue of P), an& P1,,

respect!#ely. The actual enterta!nment,

amusement an& recreat!on expense for

the taxa%le 8uarter totale& to P+,.



30

Appo!ntment ormula

Sales of oo&s 4P), x .E5

Sales of Ser#!ces 4P1, x 1E5

$ax!mum Percenta(e Ce!l!n(

Sale of oo&s 4P), x .E5

Sale of Ser#!ces 4P1, x 1E5

R>"S"T>S for D>DCTAB"L"T= of

3

"?T>R>ST >?S>:

A. These must %e an !n&e%te&nessB. There shoul& %e an !nterest expense pa!& or

!ncurre& upon such !n&e%te&ness

C. The !n&e%te&ness must %e that of thetaxpayer

D. The !n&e%te&ness must %e connecte& '!th

the taxpayer*s tra&e, %us!ness or exerc!se of

profess!on>. The !nterest expense must ha#e %een pa!&

or !ncurre& &ur!n( the taxa%le year

. The !nterest must ha#e %een st!pulate&



32

p

!n 'r!t!n(

. The !nterest must %e le(ally &ue. The !nterest payment arran(ement

must not %et'een relate& taxpayers

". "n case of !nterest !ncurre& to ac8u!re

property use& !n tra&e, %us!ness or

exerc!se of profess!on, the same 'as

not treate& as a cap!tal expen&!ture.

INTEREST



33

"n eneral

The amount of !nterest pa!& or !ncurre&'!th!n the taxa%le year on !n&e%te&ness !n

connect!on '!th the taxpayer profess!on,

tra&e or %us!ness shall %e allo'e& as

&e&uct!on from (ross !ncome: Pro#!&e&,

ho'e#er, that the taxpayer*s other'!se

allo'a%le &e&uct!on for !nterest expense

shall %e re&uce& %y an amount e8ual to++E of the !nterest !ncome su%;ecte& to

f!nal tax:

>xample:

1

Assume that a taxpayer !ncurre& !n )1),

!nterest expense amount!n( to P1,. Th!s !sOT>RI"S> ALLIABL> D>DCT"? R

"?T>R>ST >?S> %ut !t '!ll %e re&uce& %y

an amount e8ual to the prescr!%e& percenta(eof !nterest !ncome su%;ecte& to the f!nal tax.

Thus, !f !n )1), the taxpayer rece!#e& P0,

!nterest !ncome on 'h!ch the f!nal tax 'as

'!thhel& an& rem!tte& to the B"R %y the payor ofsuch !ncome, then the &e&uct!%le amount of

!nterest '!ll %e compute& as follo's:

Total !nterest expense UU P1,



11

Less: ++E of P0, UU 13,2

A$?T D>DCT"BL> UU P 2,)

Exceptions

?o &e&uct!on shall %e allo'e& !n respect of

!nterest.

TA"E#



1)

All taxes are &e&uct!%le except:

1. "ncome). >state Tax

+. >ner(y Tax

-. Spec!al Assessment Tax

. @alue A&&e& Tax

0. Amnesty Tax

. 1E Penalty Tax on un&ue

accounta%!l!t!es of prof!t2. Penalty 4)E surchar(e, E

surchar(e compensat!on payment

$%##E#



1+

Re8u!s!tes for the &e&uct!%!l!ty of a loss.

1. The loss must %e !ncurre& !n tra&e, profess!on, or

%us!ness of the taxpayer, or any transact!on

entere& !nto for prof!t

). "t must %e actually susta!ne& '!th!n the taxa%le

year+. "t must %e e#!&ence& %y a close& an& complete&

transact!on

-. "t must not %e compensate& for %y !nsurance or

other form of !n&emn!ty an&. The taxpayer has f!le& a s'orn &eclarat!on of loss

'!th!n - &ays after the &ate of the occurrence of

casualty or ro%%ery, theft, or em%e99lement.

Re8u!rement for the su%stant!at!on of a loss.



1-

The taxpayer %ears the %ur&en of pro#!n( an&

su%stant!at!n( h!s cla!m for &e&uct!on for lossan& shoul& com,ply '!th the follo'!n(

su%stant!at!on re8u!rements:

1. A s'orn &eclarat!on of loss must %e f!le&

'!th!n the per!o& prescr!%e& an&

). Proof of the elements of the loss cla!me&,

such as the actual nature an& occurrence of thee#ent an& the amount of the loss

KINDS OF &OSSES



a. r&!nary losses those !ncurre& !n tra&e or

%us!ness.

%. Those !ncurre& !n any transact!on entere&

for prof!t thou(h not connecte& '!th the

tra&e, or %us!ness.c. Casualty Losses those !ncurre& %y property

connecte& '!th the tra&e or %us!ness, !f the

loss ar!ses from f!re, storm, sh!p'rec, orother casualt!es or from ro%%ery, theft or

em%e99lement.1

& C !t l l & & t!%l l t th t t



10

&. Cap!tal losses &e&uct!%le only to the extent

of cap!tal (a!ns:

6 Losses from sale or exchan(e of cap!tal

assets

6 Losses result!n( from secur!t!es

%ecom!n( 'orthless 'h!ch are cap!tal

assets.



Loss on %solescent

1. oo&s for Sale

). Suppl!es

1

Requisites or 2e2ucti!i"it1

6R R N (+ @@9



6Rev' Re4' No' (+*@@9

a. S'orn &eclarat!on of loss must %e f!le& '!th the

B"R

!. ?ature of the e#ent (!#!n( r!se to loss an&

t!me of !ts occurrence

!!. Descr!pt!on of the &ama(e& property an& !tslocat!on.

!!!. "tems nee&e& to compute the loss such as

cost or other %as!s of the property, &eprec!at!on

allo'e& !f any, #alue of the property %efore an&

after the e#ent, cost of repa!r.

!#. Amount of !nsurance or other compensat!on

rece!#e& or rece!#a%le.12

Requisites or 2e2ucti!i"it1

6Rev Re4 No (+ @@9

13

6Rev' Re4' No' (+*@@9

%. !le& throu(h the nearest RD '!th!n - &aysafter the &ate of the occurrence.

!. Casualty loss H &ocumentary proof of costs,

photo(raph sho'!n( extent of &ama(e, con&!t!on

or #alue of the property after !t 'as repa!re&,restore& or replace&.

!!. Ro%%ery, theft or em%e99lement losses H

amount of loss. Pol!ce report !s necessaryalthou(h not conclus!#e proof of the loss ar!s!n(

therefrom.

&oss <hich are not a""o<e2 !1 "a< to !e2 2 t 2 % I



11

2e2ucte2 rom %ross Income'

1.Loss on #oluntary remo#al of %u!l&!n( on lan&'!th the #!e' to erect!n( another %u!l&!n().Ia(er!n( losses not co#ere& %y 'a(er!n(

(a!ns

+.Cap!tal losses not co#ere& %y cap!tal (a!ns-.Losses from exchan(e& of property !ncorporate rea&;ustment

.Losses from !lle(al transact!ons0.Losses from exchan(es of property 'here the

property rece!#e& !s not su%stant!ally &!fferentfrom the property &!spose& of

.Losses from sales or exchan(es of property%et'een relate& taxpayers.

NET O/ERATIN% &OSS CARR3 O#ER



111

6NO&CO9

A %us!ness or enterpr!se for any taxa%le

year !mme&!ately prece&!n( the current

taxa%le year. Ih!ch ha& not %een

pre#!ously offset as &e&uct!on from (ross

!ncome shall %e carr!e& o#er as a

&e&uct!on from (ross !ncome for the next

three 4+5 consecut!#e years !mme&!atelyfollo'!n( the year of such loss.

1 5 C?D"T"?S



11)

1.5 C?D"T"?S

7 Any net loss !ncurre& !n a taxa%le year&ur!n( 'h!ch the taxpayer 'as exempt

from tax shall not %e allo'e&

7 A taxpayer: ?T >nt!tle& to &e&uct a

?>T operat!n( loss !ncurre& !n a taxa%le

year &ur!n( 'h!ch e en;oys !ncome taxexempt!on un&er !ncent!#e or spec!al

lo's

-a2 De!ts H The re8u!s!tes for &e&uct!%!l!ty of

% & & %t



11+

%a& &e%ts are:

1. There must %e an ex!st!n( !n&e%te&ness &ueto the taxpayer 'h!ch must %e #al!& an& le(ally

&eman&a%le

). The same must %e connecte& '!th thetaxpayer*s tra&e, %us!ness or pract!ce of

profess!on

+. The same must not %e susta!ne& !n

transact!on entere& !nto %et'een relate& part!es

-. The same must %e actually char(e& off the

% f t f th t f th &



11-

%oos of accounts of the taxpayer as of the en&

of the taxa%le year

. The same must %e actually char(e& off the

%oos of accounts of the taxpayer as of the en&

of the taxa%le year

De%t !s char(e&6off '!th!n the taxa%le year.

Part!al 'r!t!n(6off !s not allo'e&, !t must %e

char(e&6off !n full or not at all. 4ernan&e9ermanos. "nc. #s. Comm.)DCRA)5

DE/RECIATION



11

Re8u!s!tes that must concur the &e&uct!on or

Deprec!at!on from ross "ncome7 The allo'ance for &eprec!at!on must %e

reasona%le

7 "t must %e for property use& !n the tra&e or%us!ness

7 "t must %e char(e& off &ur!n( the taxa%le year

an&

7 A statement on the allo'ance must %eattache& to the return.

Ihy propert!es are NOT su%;ect



to Deprec!at!onJ

1. "n#entor!es or stoc !n tra&e

). Lan&, apart from the !mpro#ement or

phys!cal &e#elopment a&&e& to !t

+. Bo&!es of m!nerals 'h!ch throu(h theprocess of remo#al suffer &eplet!on

allo'ance

-. Automo%!les or other transact!on e8u!pmentuse& solely %y the taxpayer for pleasure

110

. Bu!l&!n( use& solely %y the taxpayer as h!s

!&



res!&ence

0. urn!ture or furn!sh!n(s use& !n the sa!& %u!l&!n(

. Personal effects or cloth!n( except propert!es or

customers use& exclus!#ely !n a %us!ness such

as theatr!cal %us!ness

2. "ntan(!%les the use of 'h!ch !n %us!ness or tra&e!s not of l!m!te& &urat!on an&

3. "nc!&ental repa!rs 'h!ch ne!ther mater!ally a&& to

the #alue of the property nor apprec!a%ly prolon(

the l!fe !n an or&!nary eff!c!ent operat!n(con&!t!on.

11

Revenue



Revenue

Re4u"ations No' (+*+)(+

De&uct!%!l!ty of Deprec!at!on

>xpenses as !t Relates to Purchase

of @eh!cles an& ther >xpensesRelate& Thereto, an& "nput taxes

Allo'e&112



The follo'!n( (u!&el!nes shall %e o%ser#e& !n

&eterm!n!n( 'hether &eprec!at!on expenses can%e cla!me& or not on account of @eh!cles

cap!tal!9e& %y the taxpayer or !n cla!m!n( other

expenses an& !nput taxes on account of sa!&

@eh!cle:

A. ?o &e&uct!on from (ross !ncome for &eprec!at!on

shall %e allo'e& unless the taxpayersu%stant!ates the purchase '!th suff!c!ente#!&ence, such as off!c!al rece!pts or othera&e8uate recor&s 'h!ch conta!n the follo'!n(,

amon( others:". Spec!f!c $otor @eh!cle !&ent!f!cat!on ?um%er,

Chass!s ?um%er or other re(!stra%le !&ent!f!cat!onnum%ers of the @eh!cle

113

"". The total pr!ce of the spec!f!c @eh!cle su%;ect to&eprec!at!on an&



""". The &!rect connect!on or relat!on of the @eh!cle tothe &e#elopment, mana(ement, operat!ons, an&/or

con&uct of the tra&e or %us!ness or profess!on of thetaxpayer

B. nly one @eh!cle for lan& transport !s allo'e& for theuse of an off!c!al or employee, the #alue of 'h!chshoul& not excee& T'o $!ll!on our un&re&Thousan& Pesos 4Php ),-,.5

C. ?o &eprec!at!on shall %e allo'e& for yachts,hel!copters, a!rplanes an&/or a!rcrafts, an& lan&#eh!cles 'h!ch excee& the a%o#e threshol& amount,unless the taxpayer*s ma!n l!ne of %us!ness !stransport operat!ons or lease of transportat!one8u!pment an& the #eh!cles purchase& are use& !nsa!& operat!ons

1)

D. All ma!ntenance expenses on account of

non &eprec!a%le @eh!cles for taxat!on



non6&eprec!a%le @eh!cles for taxat!on

purposes are &!sallo'e& !n !ts ent!rely

>. The !nput taxes on the purchase of non6

&eprec!a%le @eh!cles an& all !nput taxes

on ma!ntenance expenses !ncurre&

thereon are l!e'!se &!sallo'e& fortaxat!on purposes.

1)1

DE/&ETION

1))

Deplet!on H !s the exhaust!on of natural

resources l!e m!nes an& o!l an& (as 'ells as aresult of pro&uct!on or se#erance from such

m!nes or 'ells a result of pro&uct!on or

se#erance from such m!nes or 'ells.

The 2or-ula is :

R>S>ARC A?D D>@>LP$>?T

>?D"TR>S

1)+

>?D"TR>S

Met&ods of treatin' researc& and development The Taxpayer has the opt!on to treat research an&

&e#elopment expen&!tures un&er one of the

follo'!n( t'o metho&s

1. Crrently dedcti(le as ordinary and

necessary expense

Research or De#elopment expen&!tures pa!&

or !ncurre& %y a taxpayer &ur!n( the taxa%leyear !n connect!on '!th h!s tra&e, %us!ness or

profess!on an& are not char(ea%le to cap!tal

account may %e &e&ucte& as expenses

) Treatment as deferred expenses



1)-

). Treatment as deferred expenses

) Deferre& expenses are allo'a%le as

&e&uct!on rata%ly o#er a per!o& of no lessthan 0 consecut!#e months %e(!nn!n( '!th

the month !n 'h!ch the taxpayer f!rst real!9es

%enef!ts from the expen&!tures.

L"$"TAT"?S



L"$"TAT"?S

The opt!on to elect e!ther tax treatment ofresearch an& &e#elopment expen&!ture !s not

appl!ca%le to any expen&!ture.

or the ac8u!s!t!on or !mpro#ement of lan&, or

for the !mpro#ement of property to %e use& !n

connect!on '!th research an& &e#elopment of

a character 'h!ch !s su%;ect to &eprec!at!on

an& &eplet!on.

1)

CAR"TABL> A?D T>R

C?TR"BT"?



C?TR"BT"?

Corporat!on or assoc!at!on to 'homcontr!%ut!ons or (!fts may %e ma&e or pa!&

an& cla!me& as &e&uct!on, the amount of

'h!ch !s su%;ect to l!m!tat!ons.

The l!m!tat!on !s 1E for !n&!#!&ual an& E

for corporat!ons, of the taxa%le !ncome&er!#e& from tra&e, %us!ness or profess!on.

1)0

#a"uation o 2e2ucti!"e contri!utions

Th t f t !% t! f t th



The amount of contr!%ut!ons of property other

than money shall %ase& on the ac8u!s!t!on

cost of the sa!& property.

Contri!ution De2ucti!"e in Fu""

1.Donat!on to the o#ernment

).Donat!on to Certa!n ore!(n "nst!tut!ons or

"nternat!onal r(an!9at!ons

+.Donat!on to Accre&!te& ?on(o#ernment

or(an!9at!on

1)

The term ?on(o#ernment or(an!9at!on

means a nonprof!t &omest!c corporat!on



means a nonprof!t &omest!c corporat!on

a. r(an!9at!on operat!on exclus!#ely forsc!ent!f!c research, e&ucat!onal,

character6%u!l&!n( an& youth an& sports

&e#elopment. ealth, soc!al 'elfare,cultural or char!ta%le purposes,

%. The le#el of a&m!n!strat!#e expense of

'h!ch shall, no case to excee& th!rtypercent 4+E5 of the total expenses

1)2

ITEMS NOT DED$CTI-&E 6SECTION ;)9



6 9

1. Personal, l!#!n( or fam!ly expenses). Any amount pa!& out for ne' %u!l&!n( or for

permanent !mpro#ements, or %etterment

ma&e to !ncrease the #alue of any property

or estate

+. Any amount expan&e& !n restor!n( property

or !n ma!n( (oo& the exhaust!on thereof

for 'h!ch an allo'ance !s or has %eenma&e.

1)3

RE#EN$E RE%$&ATIONS

RE#EN$E RE%$&ATIONS

NO' (+*+)(;

Amen2in4 Section +'7B'7 o RevenueRe4u"ation No' +*?B' as amen2e2>

Re"atives to the Requirements or

De2ucti!i"it1 o Certain Income /a1ments6<ithout 0ithho"2in4 Tax9

1+



Re8u!rements for De&uct!%!l!ty H any !ncomepayments 'h!ch !s other'!se &e&uct!%le

un&er the Co&e shall %e allo'e& as a

&e&uct!on from the payor*s (ross !ncome

only !f !t !s sho'n that the !ncome tax

re8u!re& to %e '!thhel& has %een pa!& to the

Bureau

)E purchases of (oo&s

)E purchases of ser#!ces1+1



O?o De&uct!on '!ll also %e allo'e& not

'!th stan&!n( payment of '!thhol&!n(

tax at the t!me of the au&!t !n#est!(at!on

or re!n#est!(at!on/recons!&erat!on !n

case 'here no '!thhol&!n( of tax 'as

ma&e !n accor&ance '!th Secs. an&

2 of the Co&e.

1+)



Revenue Re4u"ationsNo' ((*+)(;

Fi"in4=Su!mission o .ar2 Cop1 o the

Certiicate o Compensation

/a1ment=Tax 0ithhe"2 6-IR Form +;(9

Coverin4 Emp"o1ees 0ho are Gua"iie2 or

Su!stitute2 Fi"in4> there!1 Amen2in4

Revenue Re4u"ations 6RR9 No' +*?B

1++



RE#EN$E RE%$&ATIONSNO' (*+)(:

Spec!f!cally on the Su%m!ss!on of

Alpha%et!cal L!st of

>mployees/Payees of "ncome

Payments

1+-

RE#EN$E RE%$&ATIONS NO' *+)(;



Re4u"ations /rescri!in4 the Ru"es on the Taxation o Sa"e>

-arter> Exchan4e or Other Disposition o Shares o StocH.e"2 as Capita" Assets

"n the case of shares of stoc not l!ste& an& tra&e& !n the

local stoc

exchan(es, the #alue of the shares of stoc at the t!me ofsale shall %e the fa!r maret #alue. "n &eterm!n!n( the #alue

of the shares, the A&;uste& ?et Asset $etho& shall %e use&

'here%y all assets an& l!a%!l!t!es are a&;uste& to fa!r maret

#alues. The net of a&;uste& asset m!nus the l!a%!l!ty #alues !sthe !n&!cate& #alue of the e8u!ty. or purposes of th!s sect!on,

the appra!se& #alue of real property at the t!me of sale shall

%e the h!(her1+

A FINA& TAX 6Capita" Assets9



7 Def!n!t!on of Cap!tal Assets VSec. +3454"5W7 Tax Rate H 0E

7 @aluat!on H SP/$@/M?AL

7 CT of 0E XSec )-4D54"5Y

7 T!me of Payment H + &ays

7Place of Payment H Locat!on of Property

1+0

Retirement -eneits = Separation /a1



1+

>xempt!ons from '!thhol&!n( tax. The follo'!n(

!ncome payments are exempte& from there8u!rement of '!thhol&!n( tax.

Remunerat!ons rece!#e& as an !nc!&ent of

employment as follo's:a5Ret!rement %enef!ts rece!#e& un&er Repu%l!c

Act un&er 0-12 an& those rece!#e& %y off!c!als

an& employees of pr!#ate f!rms, 'hether

!n&!#!&ual or corporate, un&er a reasona%le

pr!#ate %enef!ts plan ma!nta!ne& %y the employer

'h!ch meet the follo'!n( re8u!rements:

-eneits /"an



1+2

!. The plan must %e reasona%le

!!. The %enef!t plan must %e appro#e&

%y the Bureau

!!!. The ret!r!n( off!c!al or employeemust ha#e %een !n the ser#!ces of

the same employer for at least ten

415 years an& !s not less than f!fty45 years of a(e at the t!me of

ret!rement an&

-eneits /"an



1+3

!#. The ret!r!n( off!c!al or employees shoul& not ha#e

pre#!ously a#a!le& of the pr!#!le(e un&er the

ret!rement %enef!t plan of the same or another

employer term Oreasona%le pr!#ate %enef!t plan

means a pens!on, (ratu!ty, stoc %onus or prof!t6

shar!n( plan ma!nta!ne& %y an employer for the

%enef!t of some or all of h!s off!c!als or employees,'here!n contr!%ut!ons are ma&e %y such employer

for the off!c!als or employees, or %oth, the earn!n(s

an& pr!nc!pal of the fun& thus accumulate&, an&

'here!n !t !s pro#!&e& !n sa!& plan that at no t!meshall any part of the corpus or !ncome of the fun&

%e use& for, or %e &!#erte& to, any purpose other

than for the exclus!#e %enef!t of the sa!& off!c!als



%5 Any amount rece!#e& %y an off!c!al or

employee or %y h!s he!rs from s!cness orother phys!cal &!sa%!l!ty or for any cause

%eyon& the control of the sa!& off!c!al or

employee, or cessat!on of %us!ness.

The phrase Ofor any cause %eyon& the control

of the sa!& off!c!al or employee connotes

!n#oluntar!ness on the part of the off!c!al oremployee

1-

Amounts rece!#e& %y reason of !n#oluntary separat!on rema!n

from !ncome tax e#en !f the off!c!al or the employee, at the

t!me of separat!on, ha& ren&ere& less than ten 415 years of



ser#!ce an&/or !s %elo' f!fty 45 years of a(e. Any payment

ma&e %y an employer to an employee on account of

&!sm!ssal, const!tutes compensat!on re(ar&less of 'hether the

employer !s le(ally %oun& %y contract, statute or other'!se to

mae such payment.

c5 Soc!al Secur!ty %enef!ts, ret!rement (ratu!t!es, pens!ons an&

other s!m!lar %enef!ts rece!#e& %y res!&ents or non6res!&entc!t!9ens of the Ph!l!pp!nes or al!ens 'ho come to res!&e

permanently !n the Ph!l!pp!nes from fore!(n (o#ernment

a(enc!es an& other !nst!tut!ons pr!#ate or pu%l!c.

1-1

&5 Payments of %enef!ts &ue or to %ecome &ue to

any person res!&!n( !n the Ph!l!pp!nes un&er the

l f th !t & St t & ! ! t & % th



la' of the n!te& States a&m!n!stere& %y the

n!te& States @eterans A&m!n!strat!one5 Payments of %enef!ts ma&e un&er the Soc!al

Secur!ty System Act

f5 Benef!ts rece!#e& from the S"S Act of 13+, as

amen&e& an& the ret!rement (ratu!ty rece!#e&%y (o#ernment off!c!als an& employees

1-)

Pr!#ate Ret!rement Benef!t Plan



ees to %e pa!& %y the employer:

1. pon !ssuance of the cert!f!cate of 8ual!f!cat!on

a5 >mployers not ha#!n( more than P),.employees

%5 >mployers ha#!n( more than %ut +,.

not o#er 1 employees

c5 >mployers ha#!n( more than ,.1 employees

1-+

Pr!#ate Ret!rement Benef!t Plan



). pon !ssuance of an amen&atory cert!f!cate of8ual!f!cat!on

a5 >mployers not ha#!n( more than

employees P),.

%5 >mployers ha#!n( more than

%ut not o#er 1 employees +,.

c5 >mployers ha#!n( more than 1

employees ,.

Pro#!&e&, ho'e#er that employers not ha#!n( more thanf!#e 45 employees shall %e exempt from the fees

prescr!%e&

1--



Frin4e -eneits Tax

1-

RanH an2 Fi"e Emp"o1ees H means all employees 'hoa



RanH an2 Fi"e Emp"o1ees means all employees 'hoa

re hol&!n( ne!ther mana(er!al or super#!sory pos!t!on.

Mana4eria" Emp"o1ees H !s one 'ho !s #este& '!th

po'ers or prero(at!#es to lay an&/or to h!re, transfer,

suspen&, lay6off, employees. OSuper#!sory employees

are those 'ho, !n the !nterest of the employer, effect!#elyrecommen& such mana(er!al act!ons !f the exerc!se of

such author!ty !s not merely rout!nary or cler!cal !n nature

%ut re8u!res the use of !n&epen&ent ;u&(ement.

1-0

Spec!al Treatment of r!n(e Benef!t



7 Imposition o a ina" tax

of +)E effect!#e Gan.1, ) an&

thereafter

7 -asis o Computationrosse&6up monetary #alue of fr!n(e

%enef!t furn!she& or (rante& to the

employee %y the employer, 'hetheran !n&!#!&ual or a corporat!on.

1-

Computat!on of rosse&6p $onetary @alue



"n en. H D!#!&e the actual monetary #alueof the fr!n(e %enef!t %y

02E effect!#e Gan.1, ) an& thereafter

R$LA:

$onthly rental 1,

Pa!& to an execut!#e of a Co.F 1, x +) F -,2.22

1-2

r!n(e Benef!t



r!n(e %enef!t means any (oo&, ser#!ce or

other %enef!t (rante& !n cash or !n !n& %y anemployer to an !n&!#!&ual employee 4except

an& f!le employees5 such as, %ut not l!m!te&

to the ff:1.ous!n(

).>xpense Account

+.@eh!cle of any !n&

-.ousehol& personnel

1-3

r!n(e Benef!t



0. $em%ersh!p fees, &ues an& other

expenses %orn %y the employer for theemployee !n soc!al an& athlet!c clu%s

. >xpenses for fore!(n tra#el

2. ol!&ay an& #acat!on expenses

3. >&ucat!onal ass!stance to employee or

h!s &epen&ent

1.L!fe or health !nsurance an& other non6

l!fe !nsurance prem!ums.

1



0ithho"2in4 Taxes

11

/ERSON REG$IRED TO DED$CT

0IT..O&D



1)

0IT..O&D

a. "n (eneral, any ;ur!&!cal person, 'hetheror not en(a(e& !n tra&e or %us!ness

%. %. an !n&!#!&ual, '!th respect to paymentsma&e !n connect!on '!th h!s tra&e or%us!ness.

c. c. All (o#ernment off!ces !nclu&!n(

(o#ernment o'ne& or controlle&corporat!on, as 'ell as pro#!nc!al, c!ty,mun!c!pal (o#ernments an& %aran(ays.

T1pes o 0ithho"2in4 Taxes



1+

7 I!thhol&!n( Tax on ross Compensat!on

7 >xpan&e& or Cre&!ta%le I!thhol&!n( Tax H Ser#!ce >xpense H Purchases of (oo&s

7 !nal I!thhol&!n( Tax 4Pass!#e "n#estment "ncome5 H "nterest, D!#!&en&s, Royalt!es, Pr!9es, I!nn!n(s an& Cap!tal

a!n7 I!thhol&!n( Tax on o#ernment $oney Payment

H "ncome Tax H @AT H Percenta(e Tax

7 uarterly I!thhol&!n( Tax H "n&!#!&ual >n(a(e !n Bus!ness or Profess!on H Corporat!on

Duties O!"i4ations o a

0ithho"2in4 A4ent



1-

0ithho"2in4 A4ent

7 To re(!ster7 To &e&uct an& '!thhol&

7 To rem!t the tax '!thhel&7 To f!le '!thhol&!n( tax returns

7 To !ssue '!thhol&!n( taxcert!f!cate

Time o 0ithho"2in4

1

A. Or2inari"1> the o!"i4ation o the pa1or to 2e2uctan2 <ithho"2 arises5

H at the t!me an !ncome payment !s pai2 or pa1a!"e.

H !ncome payment !s accrue2 or recor2e2 as anexpense or asset>

'h!che#er !s appl!ca%le !n the payor*s %oos, 'h!che#er!s comes f!rst.

ross Compensat!on "ncome



10

7 Salar!es K Ia(es7 #ert!me Pay

7 >mer(ency Pay

7 Loyalty Pay

7 D!rector*s Pay




1

7 Allo'ances H Representat!on K Transportat!on

H Cost of L!#!n(

H Cloth!n( H ous!n(

H $e&!cal

H $eal

H Laun&ry

H thers




12

7 @acat!on Lea#e7 Bonus/"ncent!#es

H Chr!stmas Bonus

H "ncent!#e Pay

H Pro&uct!#!ty Bonus

H Ann!#ersary Bonus

7 Comm!ss!on

7 Prof!t Shar!n(

7 Ret!rement Benef!t

Tax Due F Tax I!thhel&

>xample:



13

Tax Payer A B C

"ncome Tax

4Gan. to Dec.5 +, +, +,

Less Tax

I!thhel& 4Gan. to?o#.5 )2, ++, +,

I!thhol&!n( Taxfor Decem%er

Refun& Gan. )),

?one

?one

+,

?one

?one

>xample:

R A ?7):



10

R'A' ?7):

Minimum 0a4e TaxExemption

Revenue Re4u"ations No'()*+))B

,u"1 B> +))B



101

The m!n!mum 'a(e earners as

&ef!nes !n th!s Co&e shall %e exempt from

the payment of !ncome tax on the!r taxa%le

!ncome: pro#!&e&, further, that the hol!&ay

pay, o#ert!me pay, n!(ht sh!ft &!fferent!alpay an& ha9ar& pay rece!#e& %y such

m!n!mum 'a(e earners shall l!e'!se %e

exempt from !ncome tax.

>mployee 'ho rece!#es/earns&&!t! l t! h



10)

a&&!t!onal compensat!on such ascomm!ss!ons, honorar!a, fr!n(e%enef!ts, %enef!ts !n excess of theallo'a%le statutory amount ofP+,., taxa%le allo'ances an&other taxa%le.

$I>s rece!#!n( other !ncome,

10+

$I>s rece!#!n( other !ncome,

such as !ncome from the con&uct oftra&e, %us!ness, or pract!ce ofprofess!on, except !ncome su%;ect

to f!nal tax, !n a&&!t!on tocompensat!on !ncome are notexempte& from !ncome tax on the!r

ent!re !ncome earne& &ur!n( thetaxa%le year.

A""o<ance o /ersona" Exemption or

In2ivi2ua" Taxpa1er



10-

A %as!c personal exempt!on amount!n( to

!fty thousan& pesos 4P,5 for each !n&!#!&ualtaxpayer.

"n the case or marr!e& !n&!#!&uals 'here onlyone of the spouses !s ha#!n( (ross !ncome, onlysuch spouse shall %e allo'e& the personalexempt!on.

A&&!t!onal >xempt!on for Depen&ent H there

shall %e allo'e& an a&&!t!onal exempt!on of t'enty6f!#e thousan& pesos 4P),5 for each &epen&entnot excee&!n( four 4-5.

A &epen&ent means a le(!t!mate,!ll !t! t l ll & t & h!l&



10

!lle(!t!mate, or le(ally a&opte& ch!l&

ch!efly &epen&ent upon an& l!#!n( '!ththe taxpayer !f such &epen&ent !s notmore than t'enty6one 4)15 years of a(e,

unmarr!e&, an& not (a!nfully employe&or !f such &epen&ent, re(ar&less of a(e,!s !ncapa%le of self6support.

100

;/e -ini-is< %enef!ts not su%;ect to !ncome

tax, hence, not su%;ect to '!thhol&!n( tax on



10

compensat!on !ncome of %oth mana(er!al

an& ran an& f!le employees:

a. $onet!9e& unuse& #acat!on lea#e

cre&!ts of employees not excee&!n( ten415 &ays &ur!n( the year

%. $e&!cal cash allo'ance to &epen&ents

of employees not excee&!n( P.per employee per semester of P1) per

month

c. R!ce su%s!&y of P1,. or one 415



102

c. R!ce su%s!&y of P1,. or one 415

sac of 6(. r!ce per month amount!n(to not more than P1,.&. n!forms an& cloth!n( allo'ance not

excee&!n( P-,. per annum

e. Actual yearly me&!cal %enef!ts notexcee&!n( P1,. per annum

f. Laun&ry allo'ance not excee&!n(P+. per month

( >mployees ach!e#ement a'ar&s e ( for



103

(. >mployees ach!e#ement a'ar&s, e.(.,for

len(th of ser#!ce or safety ach!e#ement,

'h!ch must %e !n the form of a tan(!%le

personal property other than cash or (!ft

cert!f!cate, '!th an annual monetary

#alue not excee&!n( P1,.

h. !fts (!#en &ur!n( Chr!stmas an& ma;or



1

( ( ;

ann!#ersary cele%rat!ons not excee&!n(P,. per employee per annum

!. Da!ly meal allo'ance for o#ert!me 'or

not excee&!n( t'enty f!#e percent 4)E5

of the %as!c m!n!mum 'a(e.

Any amount (!#en %y the

11

Any amount (!#en %y the

employer as %enef!ts to !tsemployees, 'hether class!f!e& as

;/e -ini-is< %enef!ts or fr!n(e

%enef!ts, shall const!tute as&e&uct!%le.

Re8u!s!tes of Su%st!tute& !l!n(

1)

7 The employee rece!#es pure"1 compensationincome 4re(ar&less of amount &ur!n( thetaxa%le year5

7 The employee rece!#es !ncome only from one

emp"o1er &ur!n( the taxa%le year 7 The amount o tax &ue from the employee at

the en& of the year equa"s the amount o tax<ithhe"2 !1 the emp"o1er

7 The employee*s spouse also compl!es '!th allthree con&!t!ons state& a%o#e

Persons Not ual!f!e& for

Su%st!tute& !l!n(



1+

7 "n&!#!&uals &er!#!n( compensat!on !ncomefrom t'o or more employers concurrentlyor success!#ely at any t!me &ur!n( thetaxa%le year

7 >mployees &er!#!n( compensat!on !ncomere(ar&less of the amount, 'hether from as!n(le or se#eral employees &ur!n( the

calen&ar year, the !ncome of 'h!ch hasnot %een '!thhel& correctly

Persons Not ual!f!e& for

Su%st!tute& !l!n(



1-

7 "n&!#!&uals rece!#!n( purely compensat!on!ncome from a s!n(le employer, althou(h the

!ncome tax of 'h!ch has %een correctly '!thhel&,

%ut 'hose spouse !s not ent!tle& to su%st!tute&

f!l!n(7 ?on6res!&ent al!ens en(a(e& !n tra&e or

%us!ness !n the Ph!l!pp!nes &er!#!n( purely

compensat!on !ncome or compensat!on !ncomean& other %us!ness or profess!on relate& !ncome

!nal I!thhol&!n( Tax



1

7 "nterest7 D!#!&en&

7 Pr!9es7 I!nn!n(

7 Royalty7 Cap!tal a!n

"nterest



10

7 "nterest on any currency %an &epos!tan& y!el& from &epos!t su%st!tutes,

trust fun&s an& s!m!lar arran(ements

H )E7 "ncome from &epos!tory %an un&er

CD system H 61/)E 4non6

res!&ents are exempt5

"nterest

1

7 "nterest from lon( term &epos!t or!n#estment H ><>$PT from !ncome tax.But !s preterm!nate& %efore th year,

ent!re !nterest !ncome '!ll %e su%;ect tof!nal tax %ase& on rema!n!n( matur!ty: H - years to less than years 6 E

H + years to less than - years 6 1)E

H ) years to less than + years 6 )E

D!#!&en&s



12

Cash an/8or Propert #ivi/en/s = *0>

A f!nal tax at the follo'!n( rates shall %e

!mpose& upon the cash an&/or property&!#!&en&s actually or construct!#elyrece!#e& %y an !n&!#!&ual 4except a(eneral profess!onal partnersh!p5

/RIES

>xcee&!n( P1, H 1E

Intercorporate 2ivi2en2s

"ntercorporate &!#!&en&s rece!#e& from a

&omest!c corporat!on %y another &omest!c

corporat!on an& %y a res!&ent fore!(n

corporat!on are no lon(er su%;ect to tax.

13

App"ica!"e <ithho"2in4 Tax Rates on theDivi2en2 Shares

Set forth %elo' are the appl!ca%le rates of '!thhol&!n( taxes &ue on the



D!#!&en& Shares rece!#e& %y the Rece!#!n( Sharehol&ers !n

accor&ance '!th appl!ca%le la's.

12

Shareho"2er Tax Rates

". "n&!#!&uals

Ph!l!pp!ne C!t!9ens 1E

Res!&ent Al!en 1E?onres!&ent al!en en(a(e& !n

tra&e or %us!ness !n thePh!l!pp!nes

)E

?onres!&ent al!en )E

""". Corporat!onDomest!c Corporat!ons E

Res!&ent ore!(n Corporat!ons E

?onres!&ent ore!(n Corporat!on +E

>xpan&e& I!thhol&!n( Tax

An !ncome payment !s su%;ect to the expan&e&



121

An !ncome payment !s su%;ect to the expan&e&

'!thhol&!n( tax !f the follo'!n( con&!t!ons concur:

a. An expense !s pa!& or paya%le %y the tax payer, 'h!ch !s

!ncome to

the rec!p!ent thereof su%;ect to !ncome tax

%. The !ncome !s f!xe& or &eterm!na%le at the t!me of payment

c. The !ncome !s one of the !ncome payments l!ste& !n the

re(ulat!ons that !s su%;ect to '!thhol&!n( tax

&. The !ncome rec!p!ent !s a res!&ent of the Ph!l!pp!nes l!a%le to!ncome tax

e. The payor6'!thhol&!n( a(ent !s also a res!&ent of the

Ph!l!pp!nes.

Persons exempt from cre&!ta%le'!thhol&!n( tax

Th ithh "2i 2it !" ithh "2i t h ""

12)

The <ithho"2in4 o cre2ita!"e <ithho"2in4 tax sha""

not app"1 to income pa1ments ma2e to the o""o<in45

(' Nationa" 4overnment an2 its instrumenta"ities>

inc"u2in4 provincia"> cit1 or municipa" 4overnmentsan2 !aran4a1s> except 4overnment* o<ne2 or

contro""e2 corporationsJ

+' /ersons eno1in4 exemption rom pa1ment o income

taxes pursuant to the provisions o an1 "a<> 4enera"

or specia"> such as !ut not "imite2 to the o""o<in45

a'Sa"es o rea" propert1 !1 a corporation

<hich is re4istere2 <ith an2 certiie2 !1

12+

<hich is re4istere2 <ith an2 certiie2 !1

.&$R- or .$DCC as en4a4e2 insocia"iLe2 housin4 proect <here the

se""in4 price o the house an2 "ot or on"1

the "ot 2oes not excee2 /(B)>)))')) in

Metro Mani"a an2 other hi4h"1 ur!aniLe2areas an2 /(7)>)))')) in other areasJ

!' Corporations re4istere2 <ith the -OI>

/EA> an2 S-MA> eno1in4 exemption

rom income tax un2er E'O' ++> R'A'

@?(> an2 R'A' @++@>

c. Corporat!ons, 'h!ch are exempt from !ncome tax un&er

Sect!on + of the Tax Co&e, such as S"S, SSS, an&

P"C



12-

&. eneral profess!onal partnersh!p an&

e. Go!nt #entures or consort!um forme& for the purpose of

un&erta!n( construct!on pro;ects or en(a(!n( !npetroleum, coal, (eothermal an& other ener(y operat!ons

pursuant to an operat!n( or consort!um a(reement un&er

a ser#!ce contract '!th the (o#ernment.

RE#EN$E RE%$&ATIONS NO' *+))?

AMENDIN% F$RT.ER /ERTINENT /RO#ISIONS OF



12

AMENDIN% F$RT.ER /ERTINENT /RO#ISIONS OF

RE#EN$E RE%$&ATIONS 6RR9 NO' +*?B> ASAMENDED> /RO#IDIN% FOR AN ADDITIONA&

CRITERIA IN T.E DETERMINATION OF TO/ +)>)))

/RI#ATE COR/ORATIONS> INC&$DIN% T.E

T.RES.O&D ON T.EIR /$RC.ASES OFA%RIC$&T$RA& /ROD$CTS> AND ADDITIONA&

TRANSACTIONS S$-,ECT TO CREDITA-&E

0IT..O&DIN% TAX ON INCOME /A3MENTS MADE

-3 T.E TO/ FI#E T.O$SAND 67>)))9 INDI#ID$A&

TAX/A3ERS EN%A%ED IN TRADE=-$SINESS OR

/RACTICE OF /ROFESSION

RATE OF TAX?ature of "ncome C!t!9en/Res!&ent

Al!en?on6Res!&ent Al!en>n(a(e& !n Tra&e or

Bus!ness

?on6Res!&ent Al!en ?ot>n(a(e& !n Tra&e or

Bus!ness



120

1. Pr!9es )E )E )E

). Royalt!es a. Boos, l!terary 'ors

an& mus!calcompos!t!ons

1E 1E )E

+. "nterest on Peso sa#!n(s&epos!t

)E )E )E

-. "nterest on Peso t!me&epos!t

)E )E )E

. "nterest !ncome from&epos!tory %an un&erthe ore!(n CurrencyDepos!t System

. E >xempt >xempt

0. "nterest !ncome fromlon(6term hol&!n(per!o&:

* years

+ to years ! to + years *! years

>xemptE1)E)E

>xemptE1)E)E

>xempt)E)E)E

RATE OF TAX?ature of "ncome C!t!9en/Res!&ent

Al!en?on6Res!&ent Al!en>n(a(e& !n Tra&e or

Bus!ness

?on6Res!&ent Al!en ?ot>n(a(e& !n Tra&e or

Bus!ness



12

. Share !n the net prof!tsof a partnersh!p su%;ectto corporate tax

Be(!nn!n( Gan. 1, ) 1E

2. Sale of shares of stocl!ste& an& tra&e& !n thestoc exchan(e sol&

1)E of 1E of the(ross sell!n( pr!ce of

the shares

1)E of 1E of the (rosssell!n( pr!ce of the

shares

1)E of 1E of the (rosssell!n( pr!ce of the

shares

3. ?et cap!tal (a!n on saleof shares of stoc nottra&e& !n the stoc

exchan(e * -100,000-100,000

E1E

E1E

E1E

1. Cap!tal (a!ns tax4CT5

0E 0E 0E

INCOME /A3MENTS S$-,ECT TO CREDITA-&E

0IT..O&DIN% TAX

I t 2 ! th t t t

122

Income pa1ments ma2e !1 the top t<ent1

thousan2 6+)>)))9 private corporations to their

"oca"=resi2ent supp"ier o 4oo2s an2

"oca"=resi2ent supp"ier o services other than

those covere2 !1 other rates o <ithho"2in4 tax inc"u2in4 non*resi2ent a"iens en4a4e2 in tra2e or

!usiness in the /hi"ippines' /rovi2e2> ho<ever>

that or purchases invo"vin4 a4ricu"tura"

pro2ucts in their ori4ina" state> the tax require2to !e <ithhe"2 un2er this su!*section sha"" on"1

app"1 to purchases in excess o the

Cumu"ative amount o Three .un2re2

Th 2 / 6/;)) )))9 ithi th

123

Thousan2 /esos 6/;))>)))9 <ithin the same

taxa!"e 1ear' For this purpose> a4ricu"tura"

pro2ucts in their ori4ina" state as use2 in these

re4u"ations> sha"" on"1 inc"u2e corn> coconut>

copra> pa"a1> pou"tr1 an2 "ive stocHs'

Supp"ier o 4oo2s*One percent 6(89

Supp"ier o services*T<o percent 6+89

I!thhol&!n( a(ent



13

The follo'!n( persons are const!tute& as'!thhol&!n( a(ents:

1. "n (eneral, any ;ur!&!cal person, 'hether or not en(a(e& !n tra&eor %us!ness

). An !n&!#!&ual, '!th respect to payment ma&e !n connect!on '!thh!s tra&e or %us!ness. o'e#er, !nsofar as taxa%le sale, exchan(eor transfer of real property !s concerne&, !n&!#!&ual %uyers 'hoare not en(a(e& !n tra&e or %us!ness are also const!tute& as'!thhol&!n( a(ents an&

+. All (o#ernment off!ces, !nclu&!n( (o#ernment6o'ne& or controlle&corporat!ons, as 'ell as pro#!nc!al, c!ty an& mun!c!pal (o#ernmentan& %aran(ays.

I!thhol&!n( tax %ase& on (ross !ncome

1. ross payments to contractors 6 )E

) ross amounts pa!& %y any cre&!t car& company



131

). ross amounts pa!& %y any cre&!t car& company

to any %us!ness ent!ty represent!n( saleof (oo&s or ser#!ce 6 of 1E

+. "ncome payments ma&e %y the top ),

corporat!ons to the!r re(ular local suppl!ers of

a. (oo&s 6 1E

%. ser#!ces 6 )E

-. "ncome payments %y the (o#ernment on

the!r purchases of (oo&s from local suppl!ers 6 )E

. "ncome payments ma&e %y the top ,

!n&!#!&ual

I!thhol&!n( tax %ase& on (rosssell!n( pr!ce or fa!r maret #alue,

'h!che#er !s h!(her



13)

'h!che#er !s h!(her.

a. pon the follo'!n( #alues of real property, 'here the seller/

transferor !s ha%!tually en(a(e& !n the real state %us!ness as per

proof of re(!strat!on '!th LRB or DCC:

I!th a sell!n( pr!ce of f!#e hun&re& thousan&pesos 4P,.5 oe less 61.E

I!th a sell!n( pr!ce of f!#e hun&re& thousan&

pesos 4P,.5 %ut not more than

t'o m!ll!on pesos 4P),,,5 6 +.E

I!th a sell!n( pr!ce of more than t'o m!ll!on

pesos 4P),,.5 6.E

I!th a sell!n( pr!ce of more than t'o m!ll!on

pesos 4P),,.5 6.E



13+

%. Ihere the seller/transferor !s not

ha%!tually en(a(e&

!n the real estate %us!ness 60.E

c. Ihere the seller/transferor !s exempt

from cre&!ta%le '!thhol&!n( tax !n accor&ance

'!th Sect!on ).. of Re#.Re(s. ?o. )632 6>xempt

I!thhol&!n( tax ratesThe '!thhol&!n( tax rates appl!e& on !ncome

payments l!a%le to !ncome tax are as follo's:



13-

1. Profess!onals fees for ser#!ces ren&ere& %y !n&!#!&uals:"f (ross !ncome for current year excee&s P),. 61E

or profess!onal &oes not f!le S'orn Declarat!on for f!rst

semester of the year '!th B"R, re(ar&less of (ross !ncome

"f (ross !ncome for current year &oes not P),, 61E). Profess!onal enterta!ners an& athletes, an& &!rectors:

"f (ross !ncome for current year excee&s P),. 61E

"f (ross !ncome for current year &oes not P),. 61E

"f rec!p!ent of profess!onal fees, talent fees, etc. !s a

;ur!&!cal person 61E

+. Rental !ncome

Real propert!es 6E

Personal propert!es 6E

-. "ncome payments to certa!n %roers an& a(ents 61E

"ncome payments to partners of (eneral profess!onal



13

. "ncome payments to partners of (eneral profess!onal

partnersh!ps: 61E"f (ross !ncome for current year excee&s P),. 61E


. Profess!onal fees pa!& to me&!cal pract!t!oners:

"f (ross !ncome for current year excee&s P),. 61E


2. "ncome payments ma&e %y pre6nee& compan!es to funeral

parlor 61E

3. "ncome payments to certa!n contractors 6)E

RE#EN$E RE%$&ATIONS

NO + +))



130

NO' +*+))

$an&atory Attachments of the Summary

Alphal!st of I!thhol&!n( A(ents of "ncome

Payments Su%;ecte& to Tax I!thhel& at

Source 4SAIT5 to Tax Returns '!th

Cla!me& Tax Cre&!ts

Man2ator1 Su!mission

A. Summary Alphal!st of I!thhol&!n( A(ents of"ncome Payments Su%;ecte& to I!thhol&!n(



13

y ; (

Tax 4SAIT5 an& $onthly Alphal!st of Payees4$AP5 &ef!ne&

7 Summary Alphal!st of I!thhol&!n( A(ents /Payors of "ncome Payments su%;ecte& to

Cre&!ta%le I!thhol&!n( Tax at Source4SAIT5 su%m!tte& !1 the pa1ee*recipiento income'

7 $onthly Alphal!st of Payees 4$AP5 Annex

OB !s a consol!&ate& alphal!st of !ncomeearners from 'hom taxes ha#e %een'!thhel& !1 the pa1or o income

$AP

4$onthly Alphal!st of Payees5



132

Reportin4 C0T or F0T 0IT..E&D ONINCOME /A3EES

1. $onthly return of cre&!ta%le !ncome taxes '!thhel&4orm 101>5

). $onthly return of f!nal !ncome taxes '!thhel&4orm 1015

+. $onthly return of @AT an& other percenta(e taxes'!thhel& 4orm 105

R$AT

p to 1

'!thhol&!n( a(ents

"n har& copy



133

'!thhol&!n( a(ents

or !ncome payees

Taxpayers '!th

more than 1

'!thhol&!n( a(ents

or !ncome payees

"n a +. !nch &!sette or CD !ns!&e a

seale& letter en#elope, !n excel or

o'n extract pro(rams #al!&ate&

throu(h the B"R #al!&at!on mo&ule

or us!n( the B"R &ata entry mo&ule5

>PS f!lers "n electron!c form attache& to

electron!c return



Than =ouan&

comprehensive income taxation somera(4!29!14)

Documents