—----Tina—------

…taxpayer basta yung situs niya within, therefore diba lahat ng tax payer natin kapag within the
philippine lahat sila subject diba, ang subject lang outside is resident citizen and domestic
corporation for CGT related to stocks pero kung yung CGT (capital gain stocks) related sa
real estate, applicable lang siya to all individual taxpayer and domestic corporation. With
that hindi kasama si non resident foreign corporation, hindi rin subject sa capital gain stock
sale of real property si resident foreign corporation. Therefore yung shortcut is si resident
foreign corporation and si foreign corporation hindi subject sa capital gain stock of 6%

Note: quiz sa final tax and capital gain stocks

Regular income Taxation

- Sa final taxation meron lang specific items subject to final tax and per tax payers iba iba
rin yung rate.
- Capital gain stocks naman 15% kapag PSE and kapag real estate property 6%
- Sa regular income tax dito natin malalaman ang computation ng sahod kapag mga
empleyado na at ibang ibang income subject to regular income tax.

- Sale of ordinary asset usually regular income stocks, sale of capital assets which is
sales - cost of sales, usually subject to regular income tax, pero may mga exemptions,
yun nga kapag nag benta ka ng domestic stocks through PSE and nag benta ka ng real
estate property within the philippines ano nga ulit yung rate ng stock transaction tax
kapag binili directly to buyer? Pag directly, yung CGT is 15%, yung through PSE 60%
of 1%

- Residual definition, lahat ng hindi subject sa final tax at capital gain stocks, regular
income tax.

Regular income tax - 5 characteristics of regular income tax

 1. General in coverage - general talaga, hindi siya specifically like final tax and capital gain
stocks. Kpaga yung transaction mo hindi pasok sa final tax and capital gain stocks dapat
its either exempted siya or subject to regular income tax
2. Kinocompute yung regular income tax on a basis of net income, meaning Sales - Cost -
Expenses = net income. So net income yung basis ng regular income tax
3. Annual tax. Meron tayong binabayaran sa BIR every april 15 na income tax, lahat diyan
kasama yung final tax, capital gain stock or regular income tax pero bakit annual income
tax yung characteristics niya? Usually kasi yung regular income applied siya on yearly
profits and gains, meaning, kung ano yung net income ni company for the year, doon
applicable yung income tax
4. Creditable withholding tax. Usually si company meron silang yearly profits, yearly net
income. Sometimes merong nangyayari na nag aadvance payment ang company so
therefore, kung mag cocompute ka ng income tax mo based on net income, compute mo
muna siya using the regular income tax table and ileless mo yung creditable withholding
tax dahil advance payment siya so in effect, idededuct mo siya sa income tax due.

Regular income tax model

Gross income - allowable deduction = taxable income (heto yung imumultiply sa regular income
tax rate.)

Gross income coverage = all items of income that are neither excluded or exempted. Kapag
exempt income, lahat ng mga nasabi na exempted yun yon like foreign corporation sa CGT 6%
exempt siya so yung income niya from sale of capital asset exempted, yung mga exclusion sa
gross income, listed siya ni NIRC so in effect all excluded income are exempt income pero yung
excluded income may listahan si NIRC.
1. Exclusion of gross income. Ano yung mga exempted or excluded sa gross income na
dapat hindi subject sa regular income tax
2. inclusion in gross income. Ano talaga yung included sa gross income line item na subject
sa regular income tax
3. Exempt in gross income
Allowable deduction - as defined by NIRC deductions or allowable deductions are expenses
conducted by the business or exercise of profession therefore business expenses, kung personal
expenses siya hindi siya isasama as allowable deduction, basta dapat kung allowable deduction
as a summary, dapat business expense siya.

Kailangan differentiate yung Business expenses sa personal expenses, yung mga business
expenses na yan, nakalist yan sa NIRC as part of the allowable deduction pero yung personal
expense hindi siya part ng allowable deduction. So ngayon, merong mga individual that are not
engage in business na hindi pweding mag claim ng allowable deduction and gross income, ano
yung mga yon? Diba nga yung regular income tax model natin is Gross income - allowable
deduction = taxable income subject to regular income tax pero merong mga individuals that are
not engaged in business, cannot claim reduction from gross income. Ano yung mga yon?
Compensation income earner Pure business or professional income earner, mixed income earner.

Bakit hindi sila allowed mag claim ng deduction from gross income. Pure compensation income
earner, wala kang business, therefore wala kang business expenses so ang taxable income mo
subject to regular income is the gross income - allowable personal deduction - expenses, taxable
income. So kapag compensation earner ka, hindi ka pweding mag less ng allowable personal
deduction kasi nga hindi siya business expense.

Pure business or professional income earner. Basta hindi related sa business expenses at personal
expenses lang usually yung kineclaim mo as allowable personal reduction, hindi allowed, dapat
business expenses.

Kapag naman mixed income earner, kailangan alamin natin yung compensation income at
business income kasi nga diba mixed income earner therefore, meron kang compensation sa
employment mo at business income sa business mo so in general, pwedi ka lang mag avail ng
allowable personal deduction sa business income mo hindi sa personal income kasi wala siyang
kinalaman don. Kapag mixed earner ka, compensation earner ka, walang kinalaman yung mga
business expenses mo sa compensation income mo kaya dinededuct mo lang yung allowable
deduction sa business income.
Kailangan i determine yung…

Yung list of gross income kasi, marami yan. Pero importante na alam natin yung compensation
income sa business income. Technically sa problem basta sahod mo sa trabaho, compensation
income yon. Kapag naman sahod mo sab business, business income yon.

Compensation income - as defined by NIRC, income arises from employer and employee
relationship

Business income - arises from selling goods or rendering services for a profit

Residual definition ulit, kapag hindi siya pasok sa definition ni compensation income and hindi
siya pasok sa definition ni business income, part siya ng other income. Therefor with that tatlo
ang gross income natin. Compensation income which is from employer and employee
relationship, business income arising from selling of goods or rendering services for a profit and
other income. Residual definition.

- As a general rule, alamin muna yung formula is a compensation income earner. Yung
examples are kanina in general. Gross income - allowable deduction = taxable income.

- Pero kung purely compensation owner ka lang ang formula mo dapat ay gross
compensation income - non taxable compensation = taxable compensation.

- For business naman, gross income from business or profession + non operating
income = total gross income mo as business or professional income earner -
allowable deduction = taxable income subject to regular tax. With that formula pwedi
lang talaga yung allowable deduction sa business income earner at hindi pwede sa gross
compensation owner.
Kapag tinatanong kayo, how much is the allowable deduction for compensation income earner,
laging 0

COMPENSATION INCOME 400,000

BUSINESS INCOME 500,000

OTHER INCOME 10,000

ALLOWABLE DEDUCTION 100,000

NON TAXABLE COMPENSATION 50,000

INCOME

Taxable income (general)

- Gross income - allowable deduction = taxable income

Compensation income
- Gross compensation income - non taxable compensation income = taxable compensation
income

Formula for taxable income of compensation income

- Compensation income - non taxable compensation income = total compensation income
+ other income = taxable income

Business Income earner

- Gross income from business or profession + non operating income = total gross income
as business or profession - allowable deduction = taxable income subject to regular tax
Taxable compensation income = 400,000 - 50,000 = 350,000
Taxable income = 400,000 - 50,000 = 350,000 + 10,000 = taxable income 360,000

Kapag tinanong sa problem na how much is the taxable income add compensation income and
other income - diba sinabi ko kanina ttalo yung gross income natin. Compensation income,
business income and other income so therefore kapag tinanong total taxable income, lahat ng
income mo, kapag tinanong compensation income, apply the formula of gross compensation
income - taxable income.

Business income earner, how much is the gross income = 500,000 + 10,000 = 510,000 - 100,000
= 410,000

Total taxable income = 500,000 +10,000 = 560,000 - 100,000 = 410,000

Kapag business income earner ka total gross income or business income + other income = gross
income - allowable deduction = taxable income subject to regular tax.

—------ Gwyne—------

42:22

Kanina alam na natin yung pag identify ng taxable compensation income and taxable income
kapag compensation earner, alam na rin natin yung gross income ni business income earner at
taxable income niya. Ngayon what if mixed income earner siya? Ang gagawin mo lang, pag
dugtungin mo lang yung formula.( Compensation Income less Non-Taxable income = Total
Compensation income.) (42:58) another —-- ka ngayon. (Gross Income from business Add other
income, total gross income less allowable deduction, taxable net income add taxable
compensation income and taxable net income, Yun yung total income subject to regular tax ni
mixed income earner.) So definitely pinagdugtong mo lang yung formula, i aadd mo lang yung
taxable income ni compensation earner at taxable income ni business income earner.
Problem:

Compensation Income 400,000

Business Income 500,000
Other Income 10,000
Allowable Deductions 600,000

Non-Taxable Compensation Income 50,000

Q1: How much is the taxable income for business income earner?

Answer: Kung business income earner ka ang formula is (Business Income plus(+) Other
Income, Gross Income less (-) allowable deduction, taxable net income. Ang tanong ko, How
much is the taxable net income kapag business income earner, 0. Bakit? (Business Income
500,000 + Other Income 10,000 total gross income yon, 510,000. Less (-) allowable deduction
600,000 bali -90,000 ka pa. Ang sama naman ni government kung lugi ka na nga subject ka pa sa
tax, kung lugi ka hindi ka na subject sa regular income tax. Therefore ang sagot is 0 zero.

Q2: What if mixed income earner, how much is the taxable income subject to regular tax?

Answer: 360,000. Bakit? Mixed income earner ka. Yung business income mo hindi subject sa
regular income tax kasi loss and hindi mo pwedeng i offset yung loss mo sa compensation
income mo ksi wala siyang kinalaman sa business mo. so kapag negative yung business income
mo, hindi mo siya pwedeng i offset sa compensation income mo. and another way is kapag yung
compensation income mo negative, yung business income mo positive, hindi mo pwedeng ipag
offset kasi wala silang kinalaman sa isa’t isa kaya kapag mixed income earner tong sa problem
natin. Ang subject lang na taxable income to regular income tax is yung income sa compensation
income which is 400,000 + 10,000 - 50,000 = 360,000.

Q3: How much is the total gross income if mixed income earner siya? Hindi taxable income,
gross income.
Answer: 510,000. Bakit? Total Gross income ang tanong. So Business Income + Other income ni
business income. Yung business income mo is related sa business isama mo yung 10,000 ni other
income = total gross income.

Q4: How much is the taxable compensation income kapag mixed income earner siya?

- Ulitin ko, compensation income, gross compensation income less (-) Non-taxable, total
taxable compensation income. Kapag business income ka, gross income at other income,
total gross income less (-) allowable deduction, taxable net income.
- Sinabi kanina na kapag Mixed Income Earner, ipag ADD mo lang yung dalawa, yun
yung taxable income. Therefore ang sagot ay 560,000. Ang total income mo dahil yung
other income hindi naka breakdown sometimes yung other income malalaman kung…
diba tatlo, compensation income, business income, and other income. I ADD yang tatlo,
pero ang presentation niyan ganito. Compensation Income 400,000 less (-) Non-Taxable
Income 50,000, Total taxable compensation income is 350,000. Next, business income
naman tayo, business income na 500,000 less (-) allowable deduction 200,000, ngayon
ano na ang total na income natin? 350,000 na total compensation income and gross
income na 200,000 therefore 550,000 na. PLUS other income na 10,000, 560,000 na.
Total taxable income kapag mixed income earner ka 560,000.

Ngayon sa business yung binigay kong formula yun yung Basic Formula. Pero meron tayong
iba’t ibang klase ng computation for gross income sa business. Una kapag yung business mo
nagbebenta ka ng goods, ignore muna natin yung compensation income ha. Yung formula natin
kanina sa business income in general. Pero depende talaga sa nature ng business mo yung gross
income mo kapag selling ng goods, Sales less (-) Cost of sales, gross income. Kapag nagbebenta
ka ng goods. Ang gross income mo is equals to sales less (-) cost of sales = gross income.

Note: selling of goods sales less (-) cost of sales = gross income.
- Yung cost of sales hindi siya katulad ng domestic stock na nag fi- FIFO, moving average,
hindi. Merong formula yung cost of sales, ano yon? Familiar ba kayo sa beginning
 inventory + purchases + freight - purchase return and allowances + total goods for sale,
ending inventory cost of sales, sinong familiar don? Wala. SAHHS

- Paano makukuha ang cost of sales kapag regular income tax purposes na tayo, hindi na
yung domestic stock na directly to buyer yung may fifo moving average, may formula na
talaga yung cost of sales. Beginning inventory + purchases + freight - purchase return and
allowances = Cost of sales.

- So kapag ang business is selling goods, sales - cost of sales = gross income.

Q1: Paano naman kung ang business is service at hindi nag bebenta ng goods?

Formula: revenue or gross receipts - cost of services = gross income.

- Yung cost of services wala siyang formula, let’s say for example inutusan ka service, na
magpa notary ngayon yung pamasahi mo or gas expense nung papunta ka sa notary yun
yung cost of service. Basta related yung cost sa service na pinrovide mo, yun yung i
leless mo. basta yung cost service all direct cost of rendering the service, example
inutusan si gab bumili sa palengke, bumili ng fish eh binili niya baboy, isasama ba yon sa
cost of services? Hindi. Kasi hindi siya related sa services na pinapa provide ko. Basta
dapat related siya.

Problem:
- Example si andrei magpapa audit sakin, ang service fee ko 500,000, ngayon meron
akong ginamit na supplies for audit purposes, 10,000. Ang service fee ko 500,000 and
supplies na ginamit ko is 10,000. Ang sahod ng mga audit staff ko 50,000. Yung rent
expense na ginamit ko for audit purposes is 30,000.

Q1: how much is the gross income?

Answer: 440,000. Ignore the rent expense, bakit? Pwede ka namang mag audit sa bahay mo.
bakit ka pa mag rerent. Walang kinalaman doon si andrei kung bakit ka nag renta. Therefore
lahat ng cost related sa pinrovide mo yun yung cost of services mo.

1:03:00

Question:

Individual taxpayer tagged as non resident alien not engaged in trade or business subject to
Regular Income tax or not?

Answer: No, because NRANETB is subject to 25% Final tax and not Regular income tax.

Example Question:

How much is the total gross income subject to Regular Income Tax?

Given:

Business income 500,000

Compensation income 500,000

Interest income from deposit 10,000

Answer: 1,000,000 (1Million), the 10,000 from Interest income from deposit is not included
since it is subject to Final Tax and not Regular Income tax. So just add business income 500,000
and compensation income 500,000 to get = 1,000,000 Regular income tax
NOTE!: Kailangan alam niyo ang list of income subject to Final Tax & list of income subject to
Capital Gains Tax.

Capital Gains tax : Consist of 2

● Domestic stock directly to buyer

● Sale of Real property

REGULAR INCOME TAX RATE PER INDIVIDUAL

TAXABLE INCOME PER YEAR INCOME TAX RATE

250,000 and below 0%

Above 250,000 to 400,000 15% of the excess over 250,000

Above 400,000 to 800,000 22,500 + 20% of the excess over 400,000

Above 800,000 to 2,000,000 102,500 +25% of the excess over 800,000

Above 2,000,000 to 8,000,000 402,500 +30% of the excess over 2,000,000

Above 8,000,000 2,202,500 +35% of the excess over 8,000,000

Question: What if Individual’s taxable compensation income is 350,000, based on the table
above, how much is the Regular Income Tax (RIT) ?

Solution:

350,000 (given) subtract it to 250,000 (given in income tax rate table above) = 100,000, then
multiply the 100,000 to .15 (15% which is given in income tax rate table above)

350,000 - 250,000 = 100,000 x .15 (15%) = 15,000

Final answer: 15,000 Regular Income Tax

Question 2: How much taxable income if Salary is 950,000?

Solution:

950,000 (given) subtract it to 800,000 (given in income tax rate table above) = 150,000, then
multiply the 150,000 to .25 (25% which is given in income tax rate table above) = 37,500.

Then add the 37,500 to the additional unit that is needed to be add ( 102,500) so 37,500 +
102,500 = 140,000

/
950,000 - 800,000 = 150,000 x .25(25%) = 37,500 + 102,500 = 140,000

TIP! First subtract the given to the given formula, then multiply it to the percentage given and
lastly, add the extra number needed to be added (depends on the table)

*To compute kapag individual sya, memorize:

Compensation income - Non taxable compensation income = Taxable Compensation income

*Self employed

: Under New train law, they can choose which tax to be subjected to

● The progressive income tax under individual tax table

● 8% of sales or receipt + other income

Ex: Si individual pinili mag 8% tax, how to compute?

Hindi natin ileless yung allowable deduction & hindi natin ileless yung non taxable
compensation. Kase based sya sa gross sales or receipt, so kung ano ang income mo na nareceive
then yun na yung subject sa 8%. Wala kang ileless na allowable deduction or expense (If you are
under Self employed)
!but if NRANETB, then hinde kase its under 25%.

!but if Resident citizen sya or other individual not NRANETB and pinili nya 8% then kung
anong income na nareceive mo multiply it to 8%. Pero if pinili nya ang progressive tax rate,
gamitin nya ang income tax table at iless ang mga expenses at allowable deductions.

Corporation: Flat rate of 25%

Ex: may income na 2,000,000 then 2,000,000 x .25(25%) = yun na yung Regular Income Tax

*Usually, business income lagi pag corporation.

So kung ano yung taxable net income nya which is gross income from sales less cost of sales less
allowable deductions = yun young taxable income, and then times mo ito sa .25%.

*But if MSME (micro, small and medium enterprises) kapag corporation sila but tagged as
MSME= Subject to 20% not 25%

SUMMARY:

INDIVIDUAL: Progressive tax table

SELF EMPLOYED: Progressive tax table / 8%

CORPORATION: 25% Flat Rate

MSME: 20%
Corporation: In corporation, there is what we call (MCIT) Minimum Corporate Income Tax

The MCIT

During pre pandemic= 2% MCIT

(feb 2020)

Under train law

June 30,2020 = 2% MCIT

Under train law

Starting july 1,2020 - June 30, 2023 = 1% MCIT

Example: Income of corporation as of june 30, 2020 is 300,000 then it is under the 2% rule of the
train law since it is during June 30,2020.

!Kapag tinanong ng problem, kunin lang ang Gross Income.

Total Gross Income (Business) = hindi naka less ang allowable deductions so, get the total gross
income then multiply it to the MCIT
FINAL INCOME TAXATION

FINAL TAX
NRANETB : 25%
NRFC: 30%

INTEREST FROM BANKS INDIV CORP

INTEREST FROM BANKS 20% 20% EXEMPT NRFC
SHORT TERM: 20% 20%
LONG TERM: Exempted RIT

FOREIGN BANKS 15% 15%

RESIDENT
(RES CORP,
RES ALIEN, RES FOR CORP,
DOMESTIC CORP)

NON RESIDENT Exempted Exempted

(NRANEIB, NRC, NRFC)

DOMESTIC DIVIDENDS
SOURCE DIVIDEND :
● DOMESTIC CORP 10% Exempted
● FOREIGN CORP RIT RIT

ROYALTIES
BOOK,LITERARY WORKS, 10% 20%
MUSICAL COMPOSITIONS

OTHER SOURCES 20% 20%

CAPITAL GAINS TAX

Gain on sale of Domestic Stocks 15% CGT

Directly to Buyer

Gain on sale of Real property 6% CGT

REGULAR INCOME TAX

INDIVIDUAL PROGRESSIVE TAX TABLE

CORPORATION 25% FLAT RATE
SELF EMPLOYED PROGRESSIVE TAX TABLE OR 8%
MSME 20%

MCIT
FEB 2020, JUNE 30,2020 2% MCIT
JULY 1,2020 - JUNE 30, 2023 1% MCIT