This document outlines various types of passive income subject to final taxation in the Philippines, including:
1. Interest from bank deposits, dividends, royalties, prizes over 10,000 pesos, winnings, and tax informer rewards.
2. It also discusses the tax rates applied to these types of passive income for individual and corporate taxpayers as well as non-resident aliens.
3. Capital gains tax is discussed including the classification of assets as ordinary or capital and the different tax schemes applied based on asset type.
This document outlines various types of passive income subject to final taxation in the Philippines, including:
1. Interest from bank deposits, dividends, royalties, prizes over 10,000 pesos, winnings, and tax informer rewards.
2. It also discusses the tax rates applied to these types of passive income for individual and corporate taxpayers as well as non-resident aliens.
3. Capital gains tax is discussed including the classification of assets as ordinary or capital and the different tax schemes applied based on asset type.
This document outlines various types of passive income subject to final taxation in the Philippines, including:
1. Interest from bank deposits, dividends, royalties, prizes over 10,000 pesos, winnings, and tax informer rewards.
2. It also discusses the tax rates applied to these types of passive income for individual and corporate taxpayers as well as non-resident aliens.
3. Capital gains tax is discussed including the classification of assets as ordinary or capital and the different tax schemes applied based on asset type.
This document outlines various types of passive income subject to final taxation in the Philippines, including:
1. Interest from bank deposits, dividends, royalties, prizes over 10,000 pesos, winnings, and tax informer rewards.
2. It also discusses the tax rates applied to these types of passive income for individual and corporate taxpayers as well as non-resident aliens.
3. Capital gains tax is discussed including the classification of assets as ordinary or capital and the different tax schemes applied based on asset type.
F. Dauz Jr. PASSIVE INCOME SUBJECT TO FINAL TAX 1. Interest or yield from bank deposits or deposit substitutes. 2. Domestic dividends, in general 3. Dividend income from a Real Estate Investment Trust 4. Share in the net income of business partnership, taxable associations, joint ventures, joint accounts, or co-ownership. 5. Royalties, in general 6. Prizes exceeding P10,000 7. Winnings 8. Informer’s tax reward 9. Interest income on tax-free corporate covenant bonds. 1. Interest or yield from bank deposits or deposit substitutes. NRA-NETB 25% NRFC 30%
Interest Income from: Individual Corporation
Short-term deposits (less than 5yrs) 20% 20% Long-term deposits (5yrs or more) Exempt 20% Tax on pre-termination of long-term deposits of Individuals
Savings or time deposits with cooperatives are not subject to final tax. Interest or yield from bank deposits or deposit substitutes. Other applications of the final tax on interest 1. Deposit substitute 2. Government securities 3. Money market placements 4. Trust funds 5. Other investments evidenced by certificates prescribed by the BSP. Interest or yield from bank deposits or deposit substitutes. Foreign currency deposit with foreign currency depository banks. Taxpayer Individuals Corporations Residents 15% 15% Non-residents Exempt Exempt
Joint account on forex deposit of Resident and non-resident:
Resident 50% share in interest subject to 15% final tax Non-resident 50% share is exempt DIVIDENDS DIVIDENDS – distributions to shareholders from earnings from corporations. Exempt Dividends: Stock dividends Liquidating dividends
Source of dividends: Individual Corporation NRA-ETB NRA-NETB NRFC
Exempt Dividends 1. Inter-corporate dividends (Domestic to Domestic; Domestic to RFC) 2. Dividends from cooperatives ENTITIES TAXABLE AS CORPORATIONS :SUBJECT TO 10% FINAL TAX The 10% Withholding tax (WHT) shall be applied to dividends from: 1. Real Estate Investment Trusts (REIT) 2. Business Partnerships 3. Taxable Associations 4. Taxable joint ventures, joint accounts or consortia 5. Taxable co-ownership
Real Estate Investment Trusts (REIT) is a publicly listed corporation established for owning income-generating real estate assets. The following REIT dividends are exempt from final tax: a. Non-resident alien individuals or NRFC under applicable tax treaty. b. Domestic corporations or RFC. c. Overseas Filipino Investors – Until Aug.12, 2018
Business Partnerships profits (not a professional partnership)
- Share in partnership profits must not be declared as operating expenses (Salaries Exp.) - If amount received by partner is declared as operating expenses, subject to regular tax. Royalties from sources within the Philippines
Source of passive Royalty* income Individuals Corporations
Printed Books**, literary works, musical composition 10% 20% Other sources 20% 20% *active royalties are subject to regular income tax **e-copy books are subject to 20% final tax.
Royalties (passive or active) from sources abroad are subject to regular income tax. PRIZES Amount of Taxable Prizes Individuals Corporations Not Exceeding P10,000 Regular Regular Exceeding P10,000 20% Regular Exempt Prizes – 1. Prizes by recipient who did not join a contest; not required to render future service. 2. Prizes from sports competitions sanctioned by national sports organizations. WINNINGS received from sources within the Philippines Types of winnings Individual Corporation PCSO/ Lotto not exceeding P10,000 Exempt Exempt PCSO/ Lotto exceeding P10,000 20% 20% Other winnings 20% Regular tax
TAX INFORMERS REWARD – for giving information in tax evasions or violation of BIR or BOC rules: * 10% Final Tax on cash reward (10% of Tax collections) but not to exceed P1M. Disqualified informer: BIR or government employees and relatives up to 6th degree of consanguinity.
TAX-FREE CORPORATE COVENANT BONDS
Individual Corporations Tax on interest income on tax-free Regular Income corporate covenant bonds 30% tax Deadline and Place of manual filing On or before the 10th of the following month which withholding was made. Authorized agent bank, Revenue Officer, Municipal treasures of the Revenue District Office (RDO)of the withholding agent’s place of business
ENTITIES EXEMPT FROM FINAL INCOME TAX
1. Foreign governments and foreign government-owned and controlled corporations 2. International missions or organizations with tax immunity 3. General Professional partnership 4. Qualified employee trust fund Capital Gains Tax Classification of properties 1. Ordinary Assets – Assets used in business. a. Assets held for sale – Inventories b. Assets held for use – PPE
2. Capital Assets – any asset other than ordinary assets
a. Personal Assets of individual taxpayer b. Business assets classified as Financial Assets – Cash, Receivables, Prepaid expenses and investment Intangible Assets – Patent, Copyright, Leasehold and Franchise Capital Gains Tax CAPITAL ASSETS ORDINARY ASSETS Individual Taxpayer 1. Stocks - trading Company Personal Assets 2. Real property as a. for sale in the ordianry Individual/ Corporate Taxpayer: course of business b. PPE/ used in business Business assets classifies as operation a. Financial Assets - AR, Investment b. Intangible Assets Types of Gains Tax Scheme Ordinary Gain Regular Income Tax
Regular income Tax;
Capital Gain Exception:Capital Gains Tax (CGT)
CAPITAL ASSET Capital Gains Tax (CGT)
Gain on Sale of Domestic 15% of Capital Gains
Stock to Direct Buyer
Sale of Real property 6% of Selling Price of Fair Value
