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 under Section 24(A)(2) of the Tax Code of 1997, as amended by
Republic Act No. 10963 

Amount of Net Taxable Income Rate

Over But Not Over  
- P250,000 0%
P250,000 P400,000 20% of the excess over P250,000
P400,000 P800,000 P30,000 + 25% of the excess over P400,000
P800,000 P2,000,000 P130,000 + 30% of the excess over P800,000
P2,000,000 P8,000,000 P490,000 + 32% of the excess over P2,000,000
P8,000,000   P2,410,000 + 35% of the excess over P8,000,000

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 substitutes 20%
2. Royalties (on books as well as literary & musical compositions) 10%
    - In general 20%
3. Prizes (P10,000 or less ) Graduated
Income Tax
Rates
    - Over P10,000 20%
4. Winnings (except from PCSO and Lotto amounting to P10,000 or less ) 20%
-   From PCSO and Lotto amounting to P10,000 or less exempt
5. Interest Income from a Depository Bank under the Expanded Foreign 15%
Currency Deposit System
6. Cash and/or Property Dividends received by an individual from a domestic  10%
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 after tax of a 10%
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 real property 6%
located in the Philippines, classified as capital asset
9. Net Capital gains from sale of shares of stock not traded in the stock 15% 
exchange
10. Interest Income from long-term deposit or investment in the form of savings, Exempt
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 sources within the same manner as
Philippines individual
citizen and
resident alien
individual
B. Certain Passive Income Tax Rates
1. Interest from currency deposits, trust funds and deposit substitutes 20%
2. Royalties (on books as well as literary & musical compositions) 10%
    - In general 20%
3. Prizes (P10,000 or less ) Graduated
Income Tax
Rates
    - Over P10,000 20%
4. Winnings (except from PCSO and Lotto) 20%
   -  From PCSO and Lotto exempt
5. Cash and/or Property Dividends received from a domestic corporation/ joint 20%
stock company/ insurance/ mutual fund companies/ Regional Operating
Headquarter of multinational companies
6. Share of a non-resident alien individual in the distributable net income after 20%
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 the form of savings, Exempt
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 property located 6%
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 Philippines 25%
2. Capital gains from the exchange or other disposition of real property located in the 6%
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, annuities, compensation, Graduated

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

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

*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.

VII. For Resident Foreign Corporation 

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

Philippines
    b. Minimum Corporate Income Tax – on gross income 2%
    c. Improperly Accumulated Earnings – on improperly accumulated taxable 10%
income
2) International Carriers – on gross Philippine billings 2½%
3) Regional Operating Headquarters of Multinational Companies– on taxable 10%
income
4.) Regional or Area Headquarters of Multinational Companies exempt
5) Corporation Covered by Special Laws Rate specified
under the
respective
special laws
6) Offshore Banking Units (OBUs) 10%
In general – Income derived by OBUs from foreign currency transactions with Exempt
non-residents, other OBUs, local commercial banks and branches of foreign
banks authorized by BSP
    On interest income derived from foreign currency loans granted to residents 10%
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 expanded foreign 7½%
currency deposit system.
   On Income derived by depository banks under the expanded foreign exempt
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 granted by 10%
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 earmarked for 15%
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 substitutes and similar 20%
arrangements
10. Royalties derived from sources within the Philippines 20%

 Related Revenue Issuances

RMO No. 23-2018, RR No. 8-2018, RA No. 10963, RR No. 12-2007, RR No. 14-2002, RA No. 9337, RR No. 9-98,
RR No. 1-98, RR No. 5-97, RR No. 4-96
 How is Income Tax payable of individuals
(resident citizens and non-resident citizens) computed?

A. Based on Graduated Income Tax Rate

Gross Income P ___________

Less: Allowable Deductions (Itemized or Optional) ___________
Net Taxable Income P ___________
Multiply by Tax Rate (0% to 35%) ____________
Income Tax Due P ___________
Less: Tax Withheld (per BIR From 2316) ____________
Income Tax Payable P____________

B. Based on Preferential Tax Rate of 8%

i. Taxpayers source of income is purely from self-employment

Gross Sales/Receipts P ___________

Add: Non-operating Income ____________
Gross Taxable Income P ___________
Less: Amount allowed as deduction under Sec. 24 (A)(2)(b) of NIRC, as amended      250,000.00
Net Taxable Income P ___________
Multiply by Tax Rate                   8%
Income Tax Due P ___________
Tax Withheld (per BIR From 2307) ____________
Income Tax Payable P ___________

 ii. Mixed Income Earner

On Compensation  
Total Compensation Income P ___________
Less: Non-taxable Income ____________ 
th
          13  month pay and other benefits (max)         90,000.00
Taxable Compensation Income P ----------------
Multiply by Tax Rate (0% to 35%) ____________ 
Tax Due on Compensation P ___________
   
On Business Income  
Gross Sales/Receipts P ___________
Add: Non-operating Income ____________
Taxable Business Income P ___________
Multiply by Tax Rate                   8%
Tax Due on Business Income P ___________
   
Total Income Tax Due (Compensation + Business) P ___________
Tax Withheld (per BIR From 2316/2307) ____________
Income Tax Payable P ___________

 How is Income Tax Paid?

A. Through withholding 
 a. Individual Payee: Rate
If the gross annual business or professional income did not exceed 5%
P3,000,000.00
If the gross annual business or professional income is more than P3,000,000.00 10%
b. Non-individual Payee Rate
If the gross annual business or professional income did not exceed P720,000.00 10%
If the gross annual business or professional income is more than P720,000.00 15%

B. Pay the balance as you file the tax return, computed as follows:

Income Tax Due P ___________

Less: Withholding Tax ___________
Net Income Tax Due* P ___________

*Note: When the tax due exceeds P2,000.00, the taxpayer may elect to pay in two equal installments, the first installment to
shall be paid at the time the return is filed and the second installment on or before October 15 following the close of the calendar
year to the Authorized Agent Bank (AAB) within the jurisdiction of the Revenue District Office (RDO) where the taxpayer is
registered