How does the Philippines tax income?

Two (2) ways of taxing income:

1. Global System of income taxation - All types of income are aggregated to arrive at
gross income. This gross income is reduced by allowable deductions to arrive at a
taxable income. This taxable income is subjected to income tax rate applicable.

2. Schedular system of income taxation – specific rates are imposed on different types
of income. Ex. Passive income and capital gains.

What are the types of income?

1. Taxable Income

a. Ordinary Income
b. Passive Income
c. Capital Gains

2. Exempt Income

What are the types of Income Taxes?

1. Net Income Tax

2. Final Tax
3. Capital Gains Tax
4. Fringe Benefit Tax
5. Minimum Corporate Income Tax
6. Gross Income Tax
7. Profit Remittance Tax

What are the income tax rates?

I. For Individual Citizens and Resident Aliens Earning Purely Compensation

Income and Individuals Engaged in Business and Practice of Profession

A. Graduated Income Tax Rates

Amount of Net Taxable Rate

Income
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
B. 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:

1. 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
2. Income Tax Based on the Graduated Income Tax Rates

C. For Individuals Earning Both Compensation Income and Income from

Business and/or Practice of Profession, their income taxes shall be:

1. For Income from Compensation: Based on Graduated Income Tax

Rates; and
2. For Income from Business and/or Practice of Profession:

a. If the total Gross Sales/Receipts Do Not Exceed VAT

Threshold of P3,000,000, the Individual Taxpayer May Opt to
Avail:

i. 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
ii. Income Tax Based on Graduated Income Tax Rates

b. If the total Gross Sales/Receipts Exceed VAT Threshold of

P3,000,000

i. Income Tax Based on Graduated Income Tax Rates

D. On Certain Passive Income of Individual Citizens and Resident Aliens

Passive Income Tax Rate

1. Interest from currency deposits, trust funds and deposit 20%
substitutes
2. Royalties (on books as well as literary & musical 10%
compositions)
- 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 20%
P10,000 or less )
- From PCSO and Lotto amounting to P10,000 or less exempt
5. Interest Income from a Depository Bank under the 15%
Expanded Foreign Currency Deposit System
6. Cash and/or Property Dividends received by an 10%
individual from a domestic corporation/ joint stock
company/ insurance or mutual fund companies/ Regional
Operating Headquarter of multinational companies
7. Share of an individual in the distributable net income 10%
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
8. Capital gains from sale, exchange or other disposition of 6%
real property located in the Philippines, classified as capital
asset
9. Net Capital gains from sale of shares of stock not traded 15%
in the stock exchange
10. Interest Income from long-term deposit or investment in Exempt
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
- 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%

II. For Non-Resident Aliens Not Engaged in Trade or Business

A. Tax Rate in General – on taxable income from all same

sources within the Philippines manner as
individual
citizen
and
resident
alien
individual
B. Certain Passive Income Tax Rates
1. Interest from currency deposits, trust funds and deposit 20%
substitutes
2. Royalties (on books as well as literary & musical 10%
compositions)
- 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 20%
domestic corporation/ joint stock company/ insurance/
mutual fund companies/ Regional Operating Headquarter
of multinational companies
6. Share of a non-resident alien individual in the 20%
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
7. Interest Income from long-term deposit or investment in Exempt
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
- 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 6%
property located in the Philippines classified as capital asset
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%

III. For Non-resident Aliens Not Engaged in Trade or Business

1. Gross amount of income derived from all sources within the 25%
Philippines
2. Capital gains from the exchange or other disposition of real 6%
property located in the Philippines
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%

IV. 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, Graduated

annuities, compensation, remuneration and other Income Tax
emoluments, such as honoraria and emoluments derived Rates
from the Philippines

V. For General Professional Partnerships

Net Income of the Partnerships 0%

VI. For Domestic Corporations

Rates of Tax on Certain Passive Income of Corporations Tax Rate

1. Interest from currency deposits, trust funds, deposit 20%
substitutes and similar arrangements received by domestic
corporations
2. Royalties from sources within the Philippines 20%
3. Interest Income from a Depository Bank under Expanded 15%
Foreign Currency Deposit System
 4. Cash and Property Dividends received by a domestic 0%
corporation from another domestic corporation
5. Capital gains from the sale, exchange or other disposition 6%
of lands and/or building
6. Net Capital gains from sale of shares of stock not traded 15%
in the stock exchange

VII. 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.

VIII. For Resident Foreign Corporation

1) a. In General – on taxable income derived from sources 30%

within the Philippines
b. Minimum Corporate Income Tax – on gross income 2%
c. Improperly Accumulated Earnings – on improperly 10%
accumulated taxable income
2) International Carriers – on gross Philippine billings 2½%
3) Regional Operating Headquarters of Multinational 10%
Companies– on taxable income
4.) Regional or Area Headquarters of Multinational exempt
Companies
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 Exempt
currency transactions with non-residents, other OBUs,
local commercial banks and branches of foreign banks
authorized by BSP
On interest income derived from foreign currency loans 10%
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
7) Income derived under the Expanded Foreign Currency
Deposit System
Interest income derived by a depository bank under the 7½%
expanded foreign currency deposit system.
On Income derived by depository banks under the exempt
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
On interest income derived from foreign currency loans 10%
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
8.) Branch Profit Remittances – on total profits applied or 15%
earmarked for remittance without any deduction for the
 tax component thereof (except those activities which are
registered with the Philippines Economic Zone Authority)
9.) Interest from currency deposits, trust funds, deposit 20%
substitutes and similar arrangements
10. Royalties derived from sources within the Philippines 20%

INDIVIDUAL INCOME TAX

What are the different taxes applicable to individual taxpayers?

1. Progressive Tax on ordinary income (Graduated Tax Rates/Net Income Tax Rates,
for years 2018-2022)

Not over P250,000 Exempt

Over P250,000 but not over P400,000 20% of the excess over P250,000
Over P400,000 but not over P800,000 30,000 + 25% of the excess over
P400,000
Over P800,000 but not over P2,000,000 130,000 + 30% of the excess over
P800,000
Over P2,000,000 but not over P490,000 +32 of the excess over
P8,000,000 P2,000,000
Over P8,000,000 2,410,000 + 35% of the excess over
P8,000,000

2. Final Tax on passive income

a. Interest of yield from bank deposits or deposit substitute

b. Domestic dividends
c. Dividend income from a real investment trust
d. Share in the net income of a business partnership, taxavle ssociations, joint
venturs, joint accounts, or co-ownership
e. Royalties, in general
f. Prizes exceeding P10,000
g. Winnings
h. Informer’s tax reward
i. Interest Income on tax-free corporate covenant bonds

3. Capital Gains Tax on capital gains

a. Sale of domestic stocks not listed and traded through local stock exchange and
held as capital asset (15%)
b. Sale of real properties not used in business (6%)

4. Optional Gross Receipt Tax (8%)

5. Gross income Tax (15%)

How do you compute Net Income Tax for Individuals?

Net Income Tax Formula:

Gross Income (*excluding passive income and capital gains) XXX

 Less: Allowable deductions XXX
____
Net Taxable Income XXX
Multiply: Tax Rate Applicable (Progressive Tax) %
____
Net Income Tax Due XXX
Less: Tax Credit, if any XXX
___
Tax Still Due XXX

What is individual gross income?

All income derived from whatever source, including but not limited to the
following:

1. Compensation
2. Gross Income from profession, trade or business
3. Gains from dealings in property
4. Interests
5. Rents
6. Royalties
7. Dividends
8. Annuities
9. Prizes and winnings
10. Pensions
11. Partners share in the net income of the general professional partnership

*Note: for computation of Net Taxable Income, passive income, capital gains and
other income subject to other specific tax rates must be deducted.

What are the allowable deductions for Individual Taxpayer?

For income from business and practice of profession:

1. Itemized deductions, OR
2. Optional Standard Deduction (OSD)

*Note: Non-resident aliens not engaged in trade or business in the Philippines and
special aliens may not avail deductions from gross income.

What are the itemized deductions?

1. Ordinary and necessary expenses

2. Interest expenses
3. Taxes
4. Losses
5. Bad Debts
6. Depreciation of Property
7. Depletion of oils and gas wells and mines
8. Charitable and other Contributions
9. Research and Development
10. Pension trust contributions of employees

What is Optional Standard Deductions (OSD)?

 In case of individual taxpayers, OSD is a deduction equivalent to 40% of the gross
receipts in lieu of cost of sales and itemized deductions.

What is taxable income?

1. For employees – total compensation exceeding P250,000

2. For professionals and business owners – Gross income reduced by allowable
deduction

*The taxable income is subject to progressive tax rates.

What is optional gross receipts tax?

It is 8% tax computed on the gross sales/receipts plus non-operating income of

self-employed individuals/businessman/professionals whose gross sales or receipts and
other non-operating income does not exceed the P3,000,000 VAT threshold, and
applicable in lieu of progressive income tax rates.

CORPORATE INCOME TAX

What are the different taxes applicable to corporations?

1. Regular Income Tax (RICT) or (Normal/Net Income/Proportional) – 30%

2. Optional Corporate Income Tax or Gross Income Tax (GIT) – 15%
3. Minimum Corporate Income Tax (MCIT) – 2%
4. Improperly Accumulated Earnings Tax (IAET) – 10%
5. Final Tax
6. Capital Gains Tax
7. Profit Remittance Tax

How do you compute Regular Income Tax for Corporations (Regular Income Tax
Formula)?

Gross Income (*excluding passive income and capital gains) XXX

Less: Allowable deductions XXX
____
Net Taxable Income XXX
Multiply: Tax Rate Applicable (Normal Income Tax) %
____
Net Income Tax Due XXX
Less: Tax Credit, if any XXX
____
Tax Still Due XXX

What is corporate gross income?

All income derived from whatever source, including but not limited to the
following:

1. Gross Income trade or business

2. Gains from dealings in property
3. Interests
 4. Rents
5. Royalties
6. Dividends
7. Annuities
8. Prizes and winnings

What are the allowable deductions for Corporate Taxpayer?

1. Itemized deductions, OR
2. Optional Standard Deduction (OSD)

What are the corporate itemized deductions?

1. Ordinary and necessary expenses

2. Interest expenses
3. Taxes
4. Losses
5. Bad Debts
6. Depreciation of Property
7. Depletion of oils and gas wells and mines
8. Charitable and other Contributions
9. Research and Development
10. Pension trust contributions of employees

What is the Optional Standard Deduction for Corporations?

It is a deduction equivalent to 40% of gross income in lieu of itemized deductions.

What is Optional Corporate Income Tax or Gross Income Tax (GIT)?

It is 15% tax on gross income given to domestic and resident foreign corporate
taxpayers as an option instead of the 30% net income tax.

What is Minimum Corporate Income Tax (MCIT)?

It is 2% of gross income as of the end of taxable year imposed upon any domestic
and resident foreign corporations beginning on the fourth (4th) taxable year immediately
following the taxable year in which such corporation commenced its business operations.
MCIT is imposable whenever:

1. The corporation has ZERO taxable income; or

2. The corporation has negative taxable income; or
3. Whenever the amount of MCIT is greater than the regular corporate income tax
(RCIT) due from such corporation.

* Note: MCIT is always compared to RCIT starting on the 4th year of operations. The
higher between MCIT and RCIT should be the tax due for the taxable period. Any
excess of the minimum corporate income tax over the normal corporate income tax
shall be carried forward and credited (deducted) against the regular income tax for
the three succeeding taxable years, provided that the normal tax should be higher
than the minimum corporate tax in the year to which the excess MCIT is forwarded.

What are the special corporations?

 These are corporations which, instead of regular income tax, are subject to lower
specific tax rates on their income.

Domestic Corporations
- Proprietary educational institutions 10%
10%
- Non-profit hospital
Resident Foreign Corporations
- International Carriers 2.5% (may be
lower or even
exempt based
on treaty)

- Regional operating headquarters of 10%

multinational corporations
Non-resident Foreign Corporations
- Nonresident owner or lessor of vessel 4.5%
- Nonresident cinematographic film owner, 25%
lessor or distributor
- Nonresident lessor of aircraft, machinery and 7.5%
other equipment

What is improperly accumulated earnings tax (IAET)?

In addition to other taxes, a tax of 10% is imposed on the improperly accumulated

taxable income of corporations. Improperly accumulated earnings are the profit s of a
corporation that are left to accumulate instead of being distributed by the corporation to
its shareholders for purpose of avoiding income tax with respect to its shareholders.

What are the passive incomes of corporate taxpayers and their tax rates?

Income from sources within the Philippines:

1. Interest under expanded foreign currency deposit system - (15%)

2. Interests, yields, or other monetary benefits from deposits, deposit substitutes,
trust funds or similar arrangements - (20%)
3. Royalties - (20%)

What are the Corporate Capital Gains Tax?

1. Sale of domestic stocks not listed and traded through local stock exchange and
held as capital asset (15%)
2. Sale of real properties not used in business, held as capital asset (6%)

What is profit remittance tax?

Any profit remitted by a branch to its head office shall be subject to a final tax at
15% which shall be based on the total profit applied or earmarked for remittance, without
any deduction for the tax component thereof, except those activities which are registered
with the PEZA. Every resident corporation shall be held liable to a 15% of the total
earmarked profit remittances to a foreign country.
PARTNERSHIP INCOME TAX

What is general co-partnership “GCP” (ordinary partnership), and how is it taxed?

General Co-partnership, a business entity composed of at least two individuals, is

an entity contemplated by law as corporation for purposes of taxation.

How is general co-partnership “GCP” (ordinary partnership) taxed?

The partnership itself is subject to corporate taxations. The individual partners are
considered stockholders and therefore, profits distributed to them by the partnership are
taxable as dividends and subject to final tax as follows:

Resident Citizen, Non-Resident Citizen and Resident 10%

Alien
Non-resident Alien engaged in trade or business 20%
Non-resident alien not engaged in trade of business 25%

The taxable income for a taxable year, after deducting the corporate income tax
imposed therein, shall be deemed to have been actually or constructively received by the
partners in the same taxable year and shall be taxed to them in their individual capacity
whether actually distributed or not.

What is General Professional Partnership, and how is it taxed?

General Professional Partnership, an entity established for the exercise of certain

profession, is not subject to income tax but are required to file returns of their income for
the purpose of furnishing information as to the share of each partner in the net gain or
profit, which each partner shall include in their individual return. The partnership shall
act as the withholding agent and the income shall be subject to withholding tax of 10%

The net income (income to be distributed to partners) shall be computed in the

same manner as a corporation.

FRINGE BENEFIT TAX

What is a fringe benefit tax (FBT)?

It is a formal income tax on the employee which shall be withheld and paid by the
employer on a quarterly basis.

What is a fringe benefit?

“Fringe benefit” means any good, service, or other benefit furnished or granted by
an employer, in cash or in kind, in addition to basic salaries, to an individual employee
(except
rank and file employees) such as, but not limited to the following:

1. Housing
2. Expense Account
3. Vehicle of any kind
4. Household personnel, such as maid, driver and others
 5. Interest on loan at less than market rate to the extent of the difference between
the market rate and actual rate granted.
6. Membership fees, dues and other expenses borne by the employer for the
employee in social and athletic clubs and similar organizations
7. Expenses for foreign travel
8. Holiday and vacation expenses
9. Educational assistance to the employee or his dependents
10. Life or health insurance and other non-life insurance premiums or similar
amounts on excess of what the law allows.

Who are liable to FBT?

The EMPLOYER (as a withholding agent), whether individual, professional

partnership or a corporation, regardless of whether the corporation is taxable or not, or
the government and its instrumentalities

What are the tax rates of FBT?

The applicable rate is 35% of the Grossed up Monetary Value (GMV) of fringe
benefits.

In the case of aliens, the tax rates to be applied on fringe benefit shall be as follows:

1. NRANBTB - 25%
2. Aliens employed by regional HO - 15%
3. Aliens employed by offshore banking units - 15%
4. Aliens employed by Petroleum Service E
5. Contractors and Subcontractors

What is the tax base of FBT?

Gross Monetary Value “GMV” of the fringe benefit consists of the following:

a. the whole amount of income realized by the employee which includes the net
amount of money or net monetary value of property which has been received;
PLUS
b. the amount of fringe benefit tax thereon otherwise due form the employee but
paid by the employer for and in behalf of the employee.

“GMV” of the fringe benefit shall be determined by dividing monetary value of

the fringe benefit by the grossed-up divisor. The grossed-up divisor is the difference
between 100% and the applicable FBT rate. Except for non-residents aliens not engaged
with trade or business, aliens employed by regional head office, and special aliens, the
applicable FBT rate is 35%, hence, the grossed-up divisor is 65%.

What are fringe benefits not subject to FBT?

1. Benefits required or necessary to the business of employer;

2. Benefits given for the convenience or advantage of employer;
3. Fringe Benefits which are authorized and exempted under special laws, such
as the 13th month pay and other benefits with the ceiling of P90,000;
4. Contributions of the employer for the benefit of the employee to retirement,
insurance and hospitalization benefit plans;
 5. Benefits given to the Rank and File Employees, whether granted under a
collective bargaining agreement or not; and
6. De minimis benefits - benefits which are relatively small in value offered by the
employer as a means of promoting goodwill, contentment, efficiency of
employees.

* Rank and File Employees shall mean all employees who are holding neither
managerial nor supervisory position as defined in the Labor Code.

In the case of rank and file employees, fringe benefits other than those excluded
from gross income under the Tax Code and other special laws, are taxable under the
individual normal tax rate.

How do you treat FBT?

FBT is deductible from the taxable income of the employer. Subject to some
exception, the amount of taxable fringe benefit and the fringe benefits tax shall
constitute allowable deductions from gross income of the employer.

What are the examples of De Minimis Benefits not subject to FBT?

1. Monetized unused vacation leave credits of PRIVATE employees not exceeding

(10) days during the year and the monetized value of leave credits paid to
government officials and employees;
2. Medical cash allowance to dependents of employees not exceeding P750.00 per
employee per semester or P125 per month;
3. Rice subsidy of P1 ,500.00 or one (1) sack of 50 kg. rice per month, amounting to
not more than P1,500 00;
4. Uniform and clothing allowance not exceeding P5000 per annum;
5. Actual yearly medical benefits not exceeding P10, 000 per annum;
6. Laundry allowance not exceeding P300 per month;
7. Employees achievement awards e g. for length of service or safety achievement,
which must be in the form of tangible personal property other than the cash or
gift certificate, with an annual monetary value of not exceeding P10,000 received
by the employee under an established written plan which does not discriminate
in favor paid employees;
8. Meal allowances not exceeding 25% of daily minimum wage.
9. Customary gifts not exceeding P5,000.00.
10. Travel abroad:

a. Air fare tickets of economy and business class except First Class which
30% thereof is deemed taxable
b. Hotel accommodation of US$300/day
c. Inland travel

11. Productivity bonus not exceeding 10,000 provided there is a collective bargaining
agreement.

How to compute FBT?

Fair Market Value/Market Value ÷ Gross up Divisor x Fringe Benefit Tax Rate

TAX RETURN AND PAYMENT

What is a tax return?

It is a report prepared by the taxpayer showing to BIR officers an enumeration of

taxable amounts, description of taxable transactions, allowable deductions, amounts
subject to tax and the tax payable by the taxpayer to the government. There is a penal
sanction equivalent to perjury if the return is false. Tax return shall contain the
following:

1. Taxpayer’s profile and information;

2. Gross sales, receipts or income from compensation of services rendered, conduct
of trade or business or the exercise of a profession, except income subject to final
tax as provided under tax laws;
3. Allowable deductions;
4. Taxable income; and
5. Income tax due and payable.

Who are required to file income tax return?

1. Individual

a. Resident citizen;
b. Nonresident citizen on income from within the Philippines;
c. Resident alien on income from within the Philippines;
d. NRAETB on income from within the Philippines;
e. An individual (citizen/aliens) engaged in a business or practice of a
profession within the Philippines, regardless of the amount of gross income;
f. Individual deriving compensation income concurrently from two or more
employers at any time during the taxable year;

2. Taxable Estate and Trust

3. General Professional Partnership
4. Corporation not exempt from income tax or exempt from income tax under
Section 30 of the National Internal Revenue Code but has not shown proof of
exemption.

Who are exempt from filing income tax returns?

1. Individual whose gross income does not exceed 250,000;

2. Individual with respect to pure compensation income derived from sources
within the Philippines, the income tax on which has been correctly withheld;
3. Individual whose sole income has been subjected to final withholding income
tax;
4. Individual exempt from income tax.
5. Individual who qualifies under the substituted filing.
6. Minimum wage earners

What is substituted filing?

Substituted filing pertains to employee’s allowance on non-filing or excuse from

filing Income Tax Returns, when all the following are met:

1. The employee has only one employer;

2. The compensation tax was actually, correctly withheld and remitted to BIR; and
 3. In case of married employee his/her spouse also comply with the two foregoing
requirements.

*A certificate of withholding, filed by the employer and stamped “received” by

the BIR, shall be tantamount to the substituted filing of income tax return of the
employees, and shall be the proof thereof.

Where to file return?

1. Legal residence authorized agent bank; Revenue District Officer; Collection agent
or duly authorized treasurer
2. Principal place of business
3. With the Office of the Commissioner

When to file return?

Following the pays as you file system:

May 15 for those earning sole compensation income or solely business, practice
of profession or combination of business and compensation.

a. First quarter at the time of declaration.

b. Second quarter August 15 of current year.
c. Third quarter November 15 of current year.
d. Final quarter May 15 of the following year.

*When the tax due is in excess of P2, 000, the taxpayer may elect to pay in two (2)
equal installments:

1st installment May 15

2nd installment on or before October 15

May the filing of return extended?

The BIR Commissioner may on meritorious cases grant a reasonable extension of

time fox filing income tax return and may subject the imposition of twenty (20) percent
interest per annum from the original due date.

How does spouses file a return?

One (1) return may be filed for spouses for the taxable year if the following
requisites are complied with:

1. Married individuals (citizens, resident or nonresident aliens)

2. Do not derived income purely from compensation.

*If impracticable to file one (1) return, each spouse may file a separate return of
income but the return so filed shall be consolidated by the BIR for the process of
verification for the year.

How does unmarried minor file a return?

Income of unmarried minors derived from property received by the living parent
shall be included in the return of the parent? Except:
 1. when donor’s tax has been paid on such property, or
2. when transfer of such property is exempt from donor’s tax

How does persons under disability file a return?

If a taxpayer is unable to make his own return, it may be made by his:

1. duly authorized agents;

2. representative;
3. by guardian;
4. other person charged with the care of his person or property;

How does general professional partnerships (gpp) file a retrun?

Each GPP shall file in duplicate, a return of its income except, those income
exempt from income tax. The following shall be set forth:

1. items of gross income or deductions allowed

2. names of partners
3. TIN
4. Share of each partner

How does a corporation file a return?

Corporate return shall be filed quarterly. For the first three (3) quarters on a
strictly sixty (60) day basis and the final or adjusted return on the 15th day of the fourth
(4th) month following the close of either a fiscal or calendar year.

The return shall be filed by the president, vice-president, or other principal

officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer.

Kinds of withholding taxes?

1. Withholding Tax at Source:

a. Final Withholding Tax

b. Creditable Withholding Tax (Expanded withholding tax)
c. Withholding Tax on Compensation (Wages)
d. Withholding Tax on Creditable Value Added Tax
e. Withholding of Percentage Tax

Are employers required to withhold tax on compensation?

Yes. Every employer must withhold from compensation paid, an amount

computed in accordance with the regulations. Except:

1. Where such compensation income of an individual does not exceed the statutory
minimum wages; or
2. does not exceed P5, 000) monthly or P60, 000 annually whichever is higher

What compensation is exempt from withholding system?

1. Compensation paid for agriculture labor

2. Paid for domestic services
 3. Remunerations for casual not in the course of an employer’s trade or business
4. Compensation for services of a citizen, resident of the Philippines, for a foreign
government or an international organization
5. Damages
6. Life Insurance
7. Amount received by the insured as return of premium
8. Compensation for injuries and sickness
9. Income exempt under treaty
10. 13th month pay and other benefits
11. GSIS, SSS; Philhealth and other contributions,

Can there be any amendment of return?

The return may be amended within 3 years from the date of such return and no
notice for audit or reinvestigation of such return been served upon the taxpayer.

What is eFPS?

Electronic Filing and Payment System (eFPS) refers to system developed and
maintained by the BIR for electronically filing tax returns, including attachments, if any,
and paying taxes due thereon, specially through internet.

Who are covered by eFPS?

1. Large taxpayers
2. Top 20, 000 private corporations
3. Corporations with paid up capital of ten million pesos and above.
4. Corporations with complete computerized systems
5. Taxpayers joining public biddings for government contracts
6. Enterprises enjoying fiscal incentives granted by other government agencies, e.g.
PEZA
7. Top 5,000 individuals
8. Stock broker duly registered with the SEC and insurance companies duly
registered insurance commission
9. Licensed local contractors
10. Government Offices
11. National Government Agencies
12. Taxpayer account management program
13. Accredited importers

What are conditions to be classified as large taxpayers?

1. As to payments

a. VAT - at least 200,000 vat payable per quarter

b. Excise - at least 1 million per year
c. Income tax - at least 1 million per year
d. Withholding tax - at leat 1 million remitted per year
e. Percentage tax - at least 200, 000 per quarter
f. Documentary Stamp tax - aggregate 1 million per year

2. As to financial conditions and results of operations

 a. Gross sales/ Receipts - at least 1 billion per year
b. Net worth - at least 300 million
c. Gross purchases - at least 800 million per year
d. Top corporate taxpayer listed and published by SEC

Who are required to keep books, hire CPA and submit account information form?

All taxpayer whose annual gross sales/receipts exceeds P3,000,000 are required
to keep books, hire CPA and submit account information form.

What is eBIRFORMs?

It refers to 2 types of electronic services provided by the BIR relative to the

preparation, generation, and submission of tax returns:

1. Offline eBIRFORMs package software enabling taxpayer to prepare tax returns

2. Online eBIRFORMs package website or filing infrastructure that accepts tax
returns submitted online.

*Note: eBIRFORMs are available to all taxpayers not covered by eFPS who desires to
file online or via internet.

Who are mandatorily required to file eBIRFORMs?

1. Accredited tax agents and all its clients

2. Accredited printers of BIR receipts
3. One-Time transaction taxpayers
4. Those who file no payment return
5. GOCC
6. LGU
7. Cooperatives registered with National Electrification Administration and Local
Water Utilities Administration