INCOME TAX TABLES VERY EASY TO MEMORIZE MATRICE

ANNEX B: INCOME TAX TABLES TABLE 1

TAX RATES FOR INDIVIDUALS

GENERAL CATEGORIES

PERIOD OF STAY

SOURCES OF INCOME

NATURE OF INCOME

Compensation, Business, Trade, Profession (including casual gains, profits, income, and capital gains, prizes of P10,000 or less). Not included are items of income subject to final tax and or special tax treatment Interest from any currency bank deposit and yield or any other monetary benefit from deposit substitute and from trust funds and similar arrangements, royalties, prizes (except amounting to P10,000 or less) and other winnings except PCSO and lotto winnings) Royalties on books, as well as either  literary works and musical c omposition

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CITIZENS RESIDENTS NON-RESIDENT S PERMANENTLY STAYED STAYED OUTSIDE THE IN THE PHIL OR MAY PHIL. 183 DAYS OR HAVE STAYED OUTSIDE MORE THE PHIL. LESS THAN 183 DAYS

RESIDENTS STAYED WITHIN THE PHIL. FOR MORE THAN 12 MONTHS FROM DATE OF ARRIVAL

ALL SOURCES

WITHIN THE PHIL.

WITHIN THE PHIL.

ALIENS NRAEBT STAYED WITHIN THE PHIL. MORE THAN 180 DAYS

NRANEBT STAYED IN THE PHIL. 180 DAYS OR LESS

WITHIN THE PHIL.

WITHIN THE PHIL.

TAXABLE BASE/ TAX RATE

Taxable Income 5% - 34%(1998) 34%(1998) - 33%(1999) - 32%(2000) (Normal Tax Rate)

Gross income (within) 25% Gross income (within) 20% Final Withholding tax (FWT)

Gross income (within) 10% FWT

GENERAL CATEGORIES

CITIZENS RESIDENTS

Interest income from depository bank under the expanded foreign currency deposit system (FCDS)

Interest income from long-term deposit or deposit in the form of savings, common or individual trust funds, deposit substitute investment management accounts in denomination of P10,000 or as prescribed by the BSP.

Cash and/or property dividends actually or constructively received from a domestic corp. or from a joint stock company, insurance or mutual fund companies, or on the share of an individual in the distributable net income after tax of a taxable partnership, or on the share on the net income after tax of  an association, joint account, or a joint venture or consortium taxable as a corporation. Capital gains from shares of stock not traded in the local stock exchange

NON-RESIDENT S

Gross income (within) 7.5%  Any income from FWT (Exchange Rate to be transaction with depositary used shall be the opening banks under the expanded rate on remittance day) FCDS or OBU Exempt [Sec27(D)(3)] [Sec.28(A)(4)]

Gross income(within) 7.5% FWT

Interest on long term deposit In case of Pretermination: Remaining maturity of  4 yrs. to less than 5 yrs 3 yrs. to less than 4 yrs. less than 3 yrs.

Gross income (within) FWT 6% 8% 10% -

ALIENS NRAEBT

RESIDENTS

-

Exempt

-

5% 12% 20%

NRANEBT

 Any income from transactions with depository bank under  the expanded FCDS or ODU  – Exempt [Sec.(27)D(3)] [Sec.28(A)(4)]

Gross income (within) 25%

Year  1998 1999 2000 Gross Income (within) 20% FWT

(Tax on dividends shall apply on income earned on or after Jan. 1, 1998. Sec. 73(c) provides that dividends distributed are deemed made from most recently accumulated profits)

Net capital gains (within) Not over P100,000  – 5% In excess of P100,000 – 10%

Capital gains from sale or other  1. Gross Selling Price or FMV whichever is higher 6% Final Tax disposition of real property located in 2. If sold to the government or any of its political subdivision or agencies or to GOCC, 6% Final Tax or Normal Tax Rate, at the option of taxpayer. the Phils. 3. If proceeds is from disposition of principal residence and is fully utilized in acquiring or constructing a new principal residence within 18 months from the date of disposition, (date of notarization) the capital gain is exempt from the capital gains tax subject t o the following conditions. a. Historical cost or adjusted basis of property sold is carried over to the new principal residence.

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GENERAL CATEGORIES

CITIZENS ALIENS RESIDENTS NON-RESIDENT S RESIDENTS NRAEBT NRANEBT b. The commissioner is notified within 30 days from the date of disposition of the taxpayer’s intention to avail of the tax e xemption. c. Tax exemption can only be availed of once every 10 years. d. Unutilized portions of the proceeds is subject to capital gains tax to be computed proportionately. The tax on the unutilized portion shall be paid within 30 days after the expiration of the 18-month period.

Cinematographic film and similar works

Proprietary Hospital

educational

Individual Normal tax Rate shall apply

institution/

Fringe Benefit except on the following:

Individual Normal tax Rate shall apply

 A. Grossed up monetary value of fringe benefit furnished or granted to the employee (except rank and file)

 A. Not considered as gross income Tax Rate 1. if required or necessary to the business of employer  34% FWT 2. if for the convenience or  33% FWT advantage of employer  32% FWT

B. Fringe Benefit that is not taxable under Sec. 32 (B) Exclusions from Gross Income

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Grossed Up Divisor

Year 

66% 67% 68%

1998 1999 2000

B. Fringe Benefit include, but not be 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

Gross Income (within) 25%

Gross Income (within) 25%

N.A.

In the case of aliens, the tax rates to be applied on fringe benefit shall be as follows: 1. NRANEBT 25% 2. Aliens employed by regional HO 15 % 3. Aliens employed by OBU 15% 4. Aliens employed by Petroleum Service 5. Contractors and Subcontractors Gross up divisor is the difference between 100% and the applicable rates.

GENERAL CATEGORIES

CITIZENS RESIDENTS NON-RESIDENT S dependents; and 10. Life or health insurance and other non-lire insurance premiums or similar amounts on excess of what the law allows. C. The following fringe benefits are not taxable under Sec. 33 Fringe Benefit Tax: 1. Fringe Benefits which are authorized and exempted under special laws. The 13th month Pay and Other  Benefits with the ceiling of P30,000 may be increased through rules and regulations issued by the Secretary of Finance considering the effect on the same of the inflation rate at the end of the taxable year; 2. Contributions of the lawyer for the benefit of the employee to retirement, insurance and hospitalization benefit plans; 3. Benefits given to the Rank and File Employees, whether granted under a collective bargaining agreement or not; and 4. The De minimis benefits – benefits which are relatively small in value offered by the employer as a means of  promoting goodwill, contentment, efficiency of  Employees D. The term “Rank and File Employees” shall mean all employees who are holding neither managerial nor  supervisory position as defined in the Labor Code E.

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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.

RESIDENTS

ALIENS NRAEBT

NRANEBT

TABLE 2

PREFERENTIAL TAX TREATMENT ON CERTAIN INDIVIDUALS

GENERAL CATEGORIES SOURCE OF INCOME  A.

CITIZENS RESIDENTS ALL SOURCES

NON-RESIDEN TS WITHIN THE PHIL.

RESIDENTS WITHIN THE PHIL.

ALIENS NRAEBT WITHIN THE PHIL.

NRANEBT WITHIN THE PHIL.

15% Final  A1. A tax r ate of 15% is imposed on gross income(salaries,  A1. A tax rate is imposed on gross income (salaries, wages, annuition, compensation ,remuneration, Withholding Income wages, etc. received by every Filipino employee occupying the other emoluments such as honoraria and allowances) Tax (FWIT) same position as an alien employed by any of the following: a. Regional or area Headquarters b. Regional Operating Headquarters a. Multinational company which is foreign firm or entity c. Offshore Banking Units (OBUs) established in the Phil. engaged in international trade with an established branch d. Foreign petroleum service contractor or subcontractor engaged in Petroleum Operations in the Phil. in the Phils. as follows: i) Regional or Area Headquarters ii) Regional Operating Headquarters b. Offshore Banking Units c. Foreign petroleum service contractor or sub-contractor 

B. Partners in a general professional partnership

B.1. A general professional partnership is not subject to income tax. A partner in a general professional partnership is liable to income tax only in his separate and individual capacity 2. For purposes of computing the distributive share of the partners, the net income of the partnership is computed in the same manner as a corporation. 3. Each partner shall report as gross income his distributive share actually or constructively received in the net income of  the partnership.

C. Foreign Source Compensation. Income is not subject to income tax

C.1. Regardless of the period of stay in the Phil., foreign source (compensation income) is not taxable if received by any of the following non-resident citizen. a) Immigrant b) Foreign-based employee on a permanent basis c) Overseas Contract Worker, including overseas seaman 2. A Filipino employed as a Philippine Embassy/Consultant service personnel of the Phil. Embassy/consulate is not to be treated as a non-resident citizen, hence, his income is taxable.

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NOT TAXABLE

TABLE 3

TAX RATES FOR CORPORATIONS

GENERAL CATEGOTIES

SOURCES OF INCOME NATURE OF INCOME In General

Interest on currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements royalties

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DOMESTIC CORPORATION S IN GENERAL, INCLUDING GOCCs, AGENCIES OR INSTRUMENTALITIES (EXCEPT GSIS, SSS, PHIC, PCSO AND PAGCOR) ENGAGED IN A SIMILAR BUSINESS INDUSTRY OR  ACTIVITIES ALL SOURCES

FOREIGN CORPORATION S RESIDENT FOREIGN CORPORATIONS NON-RESIDENT CORPORATIONS (NOT (EXISTING UNDER THE LAWS OF FOREIGN ENGAGED IN TRADE OR BUSINESS IN THE COUNTRY, ENGAGED IN TRADE OR PHIL.) BUSINESS WITHIN THE PHIL.) WITHIN THE PHIL. WITHIN THE PHIL. TAXABLE BASE/RATE

TAX INCOME 35%(Normal Domestic Rate) 34% - 1998 33% - 1999 32% - 2000  A. Transition Period 1. For Corp. Adopting fiscal year accounting period, income and expenses shall be deemed to have been earned and spent equally for each month of the period. 2. Taxable Income x No. of Mos. Covered x Tax Rate 12 Mos. by the tax rate B. Optional Corporate Tax Rate of 15% of Gross Income 1. The President upon recommendation of the Secretary of  Finance, may, effective January 1, 2000 allow corporations the option to be taxed at 15% of the gross income subject to certain conditions. C. Government or its Political Subdivision. 1. Income derived from any public utility or from the exercise of  any essential government function accruing to the Government of the Phil. Or to any political subdivision thereof  is excluded from gross income[Sec. 32(B)(7)(b)]

TAXABLE INCOME Same as Normal Domestic Rate and with the same option of 15% tax on gross income effective Jan. 1,2000.

GROSS INCOME Same as Normal Domestic Rate but without option to pay the 15% tax on gross income.

Interest Income on foreign loans contracted on or after Aug. 1, 1986(20%fwt) Gross Income ( within ) 20% FWT

GENERAL CATEGOTIES

Income derived under the expanded FCDS

Inter-corporate dividends and income from a taxable partnership Capital Gains from the sale of shares of stock’s not traded in the local stock exchange. Capital Gains Realized from the Disposition of  Land and/or Buildings Minimum Corporate Income Tax (MCIT)

DOMESTIC CORPORATION S FOREIGN CORPORATION S IN GENERAL, INCLUDING GOCCs, AGENCIES OR RESIDENT FOREIGN CORPORATIONS NON-RESIDENT CORPORATIONS (NOT INSTRUMENTALITIES (EXCEPT GSIS, SSS, PHIC, PCSO AND (EXISTING UNDER THE LAWS OF FOREIGN ENGAGED IN TRADE OR BUSINESS IN THE PAGCOR) ENGAGED IN A SIMILAR BUSINESS INDUSTRY OR COUNTRY, ENGAGED IN TRADE OR PHIL.)  ACTIVITIES BUSINESS WITHIN THE PHIL.) 1. Gross interest income derived by a domestic corporation and a resident foreign corporation from a depositary 1. Any income from transaction with bank 7.5% FWT. depository banks under FCDS shall be exempt 2. Income derived by a depository bank from foreign currency transactions with local commercial banks including from income tax branches of foreign banks, other depositary banks, and residents 10% Final Tax. Dividends received by a domestic corporation from another  Dividends received from a domestic corporation Dividend received from a domestic corp. domestic corporation shall not be subject to tax. not subject to tax. 15% FWT, Provided foreign law allows taxpayer clause, otherwise it will be subject to the normal domestic rate Net Capital Gain Not over P100,000 – 5% Excess of P100,000 – 10% Gross Selling Price or FMV whatever is higher 6% Final Tax

1. Gross Income 2% MCIT beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operation. 2. Carry Forward of Excess MCIT- to be carried forward and provided against the normal income tax [as computed under Sec. 27(A) for the (three(3) succeeding taxable years 3. The Secretary of Finance is authorized to suspend MCIT on a corporation which suffers losses on account of A. Prolonged dispute; or  B. Force majeure C. Legitimate business reverses; or  4. A Gross Income = Gross Sales – Sales Returns, Discounts, and allowances – Cost of Goods (Trading or Manufacturing Concern) - “Cost of Goods” and shall include all business expenses directly incurred to produce the merchandise to bring them to their present location and use. For trading or merchandising , “cost of goods sold” shall include – a. Invoice cost b. Import duties c. Freight d. Assurance while goods are in transit

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N.A.

GENERAL CATEGOTIES

DOMESTIC CORPORATION S FOREIGN CORPORATION S IN GENERAL, INCLUDING GOCCs, AGENCIES OR RESIDENT FOREIGN CORPORATIONS NON-RESIDENT CORPORATIONS (NOT INSTRUMENTALITIES (EXCEPT GSIS, SSS, PHIC, PCSO AND (EXISTING UNDER THE LAWS OF FOREIGN ENGAGED IN TRADE OR BUSINESS IN THE PAGCOR) ENGAGED IN A SIMILAR BUSINESS INDUSTRY OR COUNTRY, ENGAGED IN TRADE OR PHIL.)  ACTIVITIES BUSINESS WITHIN THE PHIL.) For manufacturing: “cost of goods manufactured and sold” shall include all cost of production of farmer goods such as a. Raw materials used b. Direct labor  c. Manufacturing overhead d. Freight cost e. Insurance premium f. other cost to bring the raw materials to the factory or warehouse B. Gross Income = Gross Receipt – Sales Return; allowances, discount – cost of Service(Service) 1. Cost of service shall mean all direct cost and expenses necessarily incurred to provide the service including – a. Salaries and employee benefits of personnel, consultants and specials directly utilized in providing the service such as depreciation or rental of equipment used and cost of supplies. 2. In the case of banks, “ cost of service shall include interest expense

“Improperly Accumulated Taxable Income” means taxable income adjusted by: 1. Income exempt from tax 2. Income excluded from gross income 3. Income subject to final tax 4. The amount of net operating loss carryover deducted.  And reduced by the sum of: 1. Dividends actually or  constructively paid; and 2. Income tax paid for  the taxable year 

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1. Improperly Accumulated Taxable Income 10% tax in addition to other income taxes 2. The improperly accumulated earnings tax shall not apply to: a. Publicly held corporations b. Banks and other non-banks Financial intermediaries c. Insurance companies 3. The fact that any corporation is a mere holding company or investment company shall be prima facie evidence of a purpose to avoid the tax upon its shareholders or members 4. The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the tax upon its shareholders or members unless the corporation, by the clear preponderance of evidence, shall prove the contrary. 5. For corporations using the calendar basis the accumulated earnings tax shall not apply on improperly accumulated income as of Dec. 31,1997. For fiscal year basis, the tax shall not apply to the 12 month period of  fiscal year 1997-1998. Improperly accumulated earnings as of the end of a calendar or fiscal year period on or  after Dec. 31, 1998 shall be subject to the 10% tax on such improperly accumulated earnings.

N.A.

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TABLE 4

PREFERENTIAL TAX TREATMENT ON CERTAIN CORPORATION

DOMESTIC CORPORATION 1. Educational Institution 2. Hospital 1. A NON-STOCK, Non-Profit Educational Institution is exempt from Income Tax on its Revenue as educational institution and from the operation of ancillary activities located within the school premises

FOREIGN CORPORATIO NS RESIDENT FOREIGN CORPORATION NON-RESIDENT FOREIGN CORP. International Carrier (within) Gross Phil. Billings

Offshore Banking Unit (OBU) – Income derived by OBU Cafeteria/canteen from foreign currency transaction with local commercial Dormitories bankers, including branches of foreign bank, including Bookstores any interest income derived from foreign currency loans School Bus granted to residents. Hospitals 10% - Final Tax Pharmacies or Drugstores and from banks deposits subject to certain condition. Branches (Except those registered with PEZA). Any profit remitted to the head office (total profit applied or  If gross income from unrelated trade business or other activity earmarked for remittance without any deduction for the does not exceed 50% of the total gross income derived from all tax component thereof). sources – 10% of the Taxable Income will be imposed on the 15% - FWT following:

a. b. c. d. e. f.

2.

a. Proprietary/ profit – oriented educational institution b. Non-stock, non-profit hospital 3.

If gross income from unrelated trade business or other activity exceeds 50% of the total gross income derived from all sources, the Regular Domestic Rate will be imposed to the following: a. Proprietary/ profit – oriented educational institution b. Non-stock, non-profit hospital

4.

Regardless of the proportion explained in item No. 2 and 3 a profit oriented hospital will be treated as an ordinary domestic corporation , hence subject to the Normal Domestic rate.

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Non-Resident Owner or Lessor of Sea Vessel Chartered by Philippine National Gross rental lease charter 

 Any income from transaction with OBU shall be exempt from income tax

Non-resident owner or lessor of aircraft machinery and other  equipment Gross Rental or fees 7.5%

Regional or Area Headquarters not subject to Income Tax

N.A.

Regional Operating Headquarters

N.A.