INCOME TAX CREDITS

Income tax due is determined based on taxable net income of individual.

The tax computed is reduced by income tax credits to arrive at "Income tax payable" to BIR.
The filing and payment of income tax payable by the Individual to BIR is made in a quarterly basis and an
The quarterly ITR is prepared in a cumulative basis.

The Income Tax Credits are as follows:

Tax Credits 1st Quarter 2nd Quarter

1. Witholding taxes on wages

(Creditable) Not deducted/NA Not deducted/ NA

2. Witholding tax at Source Yes Yes

3. Prior Quarter payments None/NA Yes

4. Income tax paid in original return Yes Yes

5. Excess tax credit in prior year Yes Yes

6. Income tax paid abroad* Yes, if RC Yes, if RC

*Income tax paid abroad is applicable only to Resident Citizen.

*However, this tax credit is subject to limit.

NOTE: The compensation income is reported / included in the Annual ITR only,
It is not included in the Quarterly ITR of Individual.

TWO TYPES OF WITHOLDING TAXES:

1 Final Withholding tax or Non Creditable Withholding Taxes
Refers to icome tax withheld on specific or certain income type subject to final taxes.
Example, passive income subjected to Final Income Tax

FINAL WITHHOLDING TAX

- The amount of income tax withheld by the withholding agent(payor) is constituted as a
full and final payment of income tax due from the payee of the said income
- The liability for payment of tax rests primarily on the payor as a 'withholding agent.'
- Failure to withhold the tax or in case of under withholding,
the deficiency tax shall be collected from payor/withholding agent
- The payee is not required to file an income tax return for the particular income.

2 Creditable Withholding taxes

Income tax withheld on income payments which per law
is allowed to be a deduction against the basic income tax due.
 Withholding tax on wages-
Is the tax withheld from income payments to individuals
arising from an employer-employee relationship

Expanded Withholding Tax/ Withholding tax at Source / Ex

Is a kind of withholding tax which is prescribed on certain income pay
and is creditable against the income tax due of the payee for the taxable qu
in which the particular income was earned.

WITHHOLDING TAX TABLE on WAGES

REVISED WITHOLDING TAX TABLE
Effective January 1, 2018 to December 31, 2022

DAILY
Amount (just for Prescribed W/Tax
Compensation Range
example) less
1 P685 and below ₱ 600.00 ₱ -
2 P685 - P1,095 ₱ 1,000.00 ₱ 685.00
3 P1,095 - P2,191 ₱ 2,000.00 ₱ 1,096.00
4 P2,191 - P5,478 ₱ 5,000.00 ₱ 2,192.00
5 P5,478 - P21,917 ₱ 20,000.00 ₱ 5,479.00
6 P21,917 and above ₱ 30,000.00 ₱ 21,918.00

WEEKLY
Amount (just for Prescribed W/Tax
Compensation Range
example) less
1 P4,808 and below ₱ 4,000.00 ₱ -
2 P4,808 - P7,691 ₱ 7,000.00 ₱ 4,808.00
3 P7,692 - P15,384 ₱ 15,000.00 ₱ 7,692.00
4 P15,385 - P38,461 ₱ 38,000.00 ₱ 15,385.00
5 P38,462 - P153, 845 ₱ 150,000.00 ₱ 38,462.00
6 P153,846 and above ₱ 200,000.00 ₱ 21,918.00

SEMI-MONTHLY
Amount (just for Prescribed W/Tax
Compensation Range
example) less
1 P10,417 and below ₱ 10,000.00 ₱ -
2 P10,417 - P16,666 ₱ 16,000.00 ₱ 10,417.00
3 P16,667 - P33,332 ₱ 33,000.00 ₱ 16,667.00
4 P33,333 - P83,332 ₱ 83,000.00 ₱ 33,333.00
5 P83,333 - P333,332 ₱ 300,000.00 ₱ 83,333.00
6 P333,333 and above ₱ 400,000.00 ₱ 333,333.00
 MONTH
Amount (just for Prescribed W/Tax
Compensation Range
example) less
1 P20,833 and below ₱ 20,000.00 ₱ -
2 P20,833 - P33,332 ₱ 30,000.00 ₱ 20,833.00
3 P33,333 - P66,666 ₱ 39,000.00 ₱ 33,333.00
4 P66,667 - P166,666 ₱ 160,000.00 ₱ 66,667.00
5 P166,667 - P666,666 ₱ 660,000.00 ₱ 166,667.00
6 P666,667 and above ₱ 700,000.00 ₱ 666,667.00

EXPANDED WITHHOLDING TAX

The Withholding of Creditable Tax at Source or simply called Expanded Withholding Tax,
is a tax imposed and prescribed on the items of income payable to natural or juridical persons,
residing in the Philippines, by a payor-corporation/person which shall be credited against the
income tax liability of the taxpayer for the taxable year.

Example of Income payments and related w/tax rates:

Witholding Tax for Goods 1%
Witholding Tax for Services 2%
Rental Payments 5%

INCOME TAX RETURN:

BIR form to be used:
Employee Individual Only BIR form 1700
Self Employed Individual Only BIR form 1700Q and 1701
Mixed Income Earner BIR form 1700Q and 1701

*NOTE: Income tax return of Self Employed Individual and Mixed Income Earner
is filed on a quarterly basis and; filed a Annual ITR on a cumulative basis.

Illustration:
Asta, Self Employed Individual, has the following data for CY 2019:
1st Quarter 2nd Quarter
Gross Income per quarter ₱ 800,000.00 ₱ 700,000.00
Deductions (allowed) per quarter ₱ 500,000.00 ₱ 400,000.00
W/tax at source per quarter ₱ 2,000.00 ₱ 3,000.00

Compute the income tax due per quarter of Asta under the Graduated tax rate

1st Quarter 2nd Quarter

Gross Income CUMULATIVE ₱ 800,000.00 ₱ 1,500,000.00
Deductions (allowed) per quarter ₱ 500,000.00 ₱ 900,000.00
 Taxable Net Income ₱ 300,000.00 ₱ 600,000.00
Income Tax Due (based on GTR) ₱ 4,736.84 ₱ 80,000.00
Less: Tax Credit ₱ - ₱ -
Income Tax paid in previous quarter ₱ - ₱ 2,736.84
W/tax at source per quarter ₱ 2,000.00 ₱ 5,000.00
Income Tax payable/paid ₱ 2,736.84 ₱ 72,263.16

*** GRADUATED TAX RATE TABE = BASIC INCOME TAX / PIT

FROM TO INCOME
₱ - ₱ 250,000.00 ₱ -
₱ 250,000.00 ₱ 400,000.00 ₱ 273,684.21
₱ 400,000.00 ₱ 800,000.00 ₱ 600,000.00
₱ 800,000.00 ₱ 2,000,000.00 ₱ 850,000.00
₱ 2,000,000.00 ₱ 8,000,000.00 ₱ 6,000,000.00
₱ 8,000,000.00 ₱ - ₱ 9,000,000.00

₱ 1,300,000.00
 t "Income tax payable" to BIR.
IR is made in a quarterly basis and an Annual Income Tax Return (ITR) filed on or before April 15 of the following yea

3rd Quarter Annual ITR

Not deducted/ NA Yes, Deducted

Yes Yes

Yes Yes

Yes Yes

Yes Yes

Yes, if RC Yes, if RC

Annual ITR only,

ject to final taxes.

(payor) is constituted as a
said income
withholding agent.'

cular income.
payments to individuals
yee relationship

x/ Withholding tax at Source / Expanded-

ch is prescribed on certain income payments
me tax due of the payee for the taxable quarter/year

ILY
Prescribed W/Tax
Percentage Add
0% ₱ - ₱ -
20% ₱ - ₱ 63.00
25% ₱ 82.19 ₱ 308.19
30% ₱ 356.16 ₱ 1,198.56
32% ₱ 1,342.47 ₱ 5,989.19
35% ₱ 6,602.74 ₱ 9,431.44

EKLY
Prescribed W/Tax
Percentage Add
0% ₱ - ₱ -
20% ₱ - ₱ 438.40
25% ₱ 576.92 ₱ 2,403.92
30% ₱ 2,500.00 ₱ 9,284.50
32% ₱ 9,423.08 ₱ 45,115.24
35% ₱ 46,346.15 ₱ 108,674.85

ONTHLY
Prescribed W/Tax
Percentage Add
0% ₱ - ₱ -
20% ₱ - ₱ 1,116.60
25% ₱ 1,250.00 ₱ 5,333.25
30% ₱ 5,416.67 ₱ 20,316.77
32% ₱ 20,416.67 ₱ 89,750.11
35% ₱ 100,416.67 ₱ 123,750.12
NTH
Prescribed W/Tax
Percentage Add
0% ₱ - ₱ -
20% ₱ - ₱ 1,833.40
25% ₱ 2,500.00 ₱ 3,916.75
30% ₱ 10,833.33 ₱ 38,833.23
32% ₱ 40,833.33 ₱ 198,699.89
35% ₱ 200,833.33 ₱ 212,499.88

nded Withholding Tax,

natural or juridical persons,
credited against the

0Q and 1701
0Q and 1701

3rd Quarter 4th Quarter

₱ 900,000.00 ₱ 1,200,000.00
₱ 650,000.00 ₱ 750,000.00
₱ - ₱ 1,000.00

3rd Quarter 4th Quarter

₱ 2,400,000.00 ₱ 3,600,000.00
₱ 1,550,000.00 ₱ 2,300,000.00
 ₱ 850,000.00 ₱ 1,300,000.00
₱ 145,000.00 ₱ 280,000.00
₱ - ₱ -
₱ 75,000.00 ₱ 140,000.00
₱ 5,000.00 ₱ 6,000.00
₱ 65,000.00 ₱ 134,000.00

RATE TABE = BASIC INCOME TAX / PIT

LESS PERCENT ADD TAX
₱ - 0% ₱ - ₱ -
₱ 250,000.00 20% ₱ - ₱ 4,736.84
₱ 400,000.00 25% ₱ 30,000.00 ₱ 80,000.00
₱ 800,000.00 30% ₱ 130,000.00 ₱ 145,000.00
₱ 2,000,000.00 32% ₱ 490,000.00 ₱ 1,770,000.00
₱ 8,000,000.00 35% ₱ 2,410,000.00 ₱ 2,760,000.00

₱ 800,000.00 30% ₱ 130,000.00 ₱ 280,000.00

15 of the following year.
 X Rental Income, NET 260000

TNI 273684.21052632
Tax due (GTR) 4736.84
Tax Credit 13684.210526316
Payable(refund) -8947.370526316

X, RC SALE GOODS TO Y 100,000

COGS/OPEX 20000
Cash received by X (100,000*.99) 99000
Int Inc, USA 220000

TNI(basic) of X (100,000- 300,000

20,000+220,000)
Basic tax (GTR) 10000
Tax Credit (100,000-99,000) 1,000
Payable/(refund) (10,000-1,000) 9,000