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Final Tax

The document discusses various types of income that are subject to Philippine taxes, including interest, royalties, prizes, winnings, dividends, and capital gains. It provides details on tax rates, exemptions, deductions, and compliance requirements for individuals and corporations.

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23 views5 pages

Final Tax

The document discusses various types of income that are subject to Philippine taxes, including interest, royalties, prizes, winnings, dividends, and capital gains. It provides details on tax rates, exemptions, deductions, and compliance requirements for individuals and corporations.

Uploaded by

t9hfzytbqp
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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FINAL TAX

IS Your Relative Playing With Dota & Strike?


Royalties
NRA- IF SILENT (ENGAGED IN TRADE)
- General: (20%)
- If from LITERARY PIECES (10%)
RC, RA, NRC Non-Resident Alien ET
 Whether Resident alien / Citizen (SAME)

INTEREST

YIELD Prizes

ROYALTIES - Exerted EFFORT


- 10K or LESS  INCOME TAX (8%)
PRIZES

WINNINGS

Winnings
DIVIDENDS
- Pure LUCK
- PCSO
 10K or LESS  EXEMPTED
 IF NRA (Engaged)
SHARE in P/L
 Exempted (ANY AMOUNT)

DIVIDENDS
INTEREST -
- Include only those ARISING FROM DEPOSITS
- Bank Investment (20%)  already Deducted

YIELDS
SHARE in NI
- SHORT TERM (20%)
- 3YRS Less than 4yrs (12%)
- 4YRS Less than 5yrs (5%)
- 5YRS or MORE – EXEMPT
 Foreign Currency Deposit SYSTEM
 Non- Resident Citizen & Alien
 TAX is EXEMPT
 IF (Resident) Citizen & Alien
(15%)
FINAL TAX

- Income subjected to FINAL INCOME TAX


 NO LONGER subjected to NET INCOME
TAX.
 Payor (one who gives income)
 Withholding Agent
 Has liability to remit.
 PAYEE (receiver of income)
 NOT required to file ITR for
income subject to FINAL TAX.
 DEDUCTIONS IS NOT ALLOWED

CAPITAL GAINS TAX

Ordinary Assets

- Assets USED in Business


a. Held for Trading srocks
b. Property (Inventory)
c. Property (Used in Business)
 Subj to depreciation

STILL ORDINARY EVEN IF

a. Purchased for future use


b. Use is discontinued.
c. Property is fully depreciated.
- GAINS from sale/other disposition of
ORDINARY ASSET
- GR: Subject to INCOME TAX
CAPITAL ASSETS

- Personal Assets GAINS from SALE/Other Disposition of CAPITAL


 ALL ARE CAPITAL ASSET ASSETS
- Financial Assets
GR: Income Tax
- Intangible Assets
EXCEPT: CAPITAL GAINS TAX
CAPITAL IF
Gain from (SALE, DISPOSITION)
a. Previously classified as ORDINARY
but has proof that property HAS a. of DOMESTIC stock Directly to buyer
NOT BEEN USED for More than
2YRS from acquisition.
 (15%)
b. Property is USED BY EXEMPT CORP b. of REAL PROPERTY NOT used in business.
in its EXEMPT OPERATION.  (6%)

Domestic Stock
 Classification of Property transferred thru
a. Sale
- Regardless whether ( Preferred, common )
b. Transfer - OTHER DISPOSITION / Exchange / Transfer
c. Barter a. Foreclosure (settlement of debt)
d. Donation b. Sale w/buy back Agreement
e. Dividends  (pacto de recto)
 Depends on how it will be used by the c. Conditional Sales
acquirer. d. Voluntary buy back.
 Involuntary transfer has NO EFFECT
 Change from REAL ESTATE to NON- REAL Modes of Disposing DOMESTIC STOCK
ESTATE shall NOT change classification of
1. Thru PSE (NOT subject to CGT)
ORDINARY ASSET
2. DIRECT TO BUYER

 Imposed on ANNUAL NET GAIN of stocks


sold directly to buyer.

FORMULA:
 LOSS IS CARRIED OVER TO NEXT
FORMULA TRANSACTION
SELLING PRICE
 INTER-PERIOD CARRY OVER (LOSSES)
Cash Sale – TOTAL Consideration

1. Partly Money / Partly Property  NOT ALLOWED in tax code


- Sum of Money + FV of Property.
EXEMPTED
2. Exchange
- FV of property Received. 1. Security Dealers
2. Investors in a Mutual Fund
TAX BASE
3. Tax exempt
- Excess of amount realized on sale OVER THE a. Foreign Government
BASIS or Adjusted Basis. b. Foreign GOCC
- Adjusted Basis: shares sold + Expenses of c. Qualified employee trust fund
Disposition.

COMPLIANCE

1. Stock are Registered w/SEC, needs BIR tax


clearance for TRANSFER OF OWNERSHIP.
 Filing of Tax Return – Pre Condition
 Capital Gains/Loss – Required to be
reported AFTER EACH ( Sale, Ex, Dispo)

2. CAPITAL GAINS TAX


- PAID WITHIN (30days) of EACH TRANSACTION
- An ANNUAL TAX
 Recomputed on ANNUAL NET GAIN
 Reported through FINAL CONSOLIDATION
RETURN (BIR 1707A)
 on the 15th DAY of the FOURTH MONTH
following the Close of the taxable year
 NO CGT payable if all transaction resulted
to a gain.
 IF WITH LOSS: Offset first with subsequent
gains.
 No tax payment should be made until
same return into gain.
REAL PROPERTY  Acquisition of new residence must be
WITHIN (18months)
- (6%) of SELLING PRICE or FAIR VALUE  exception only availed after every 10yrs
 HIGHER  Historical Cost or Adjusted Basis of
principal residence is carried over to new
FAIR VALUE principal residence acquired.
HIGHER OF 

a. ZONAL VALUE
 Value Prescribed by
commissioner.
b. FAIR MARKET VALUE
 IF LAND
HIGHER OF
a. SP
b. ZONAL VALUE
c. PROVINCIAL/CITY ASSESORS FV
 BASIS IS THE SELLING PRICE or FV
(HIGHER) NOT ACTUAL GAIN
 Applies even if sale is INVOLUNTARY
 CGT is WITHELD BY BUYER & REMIT to BIR
 Applied to real property ONLY WITHIN PH
 Individual: ALL
 Corporation: Domestic ONLY
- If they realize GAIN, subject to
INCOME TAX (NOT CGT)

EXEMPTION

- If PRINCIPAL residence
 EXEMPT from CGT
 Seller must be CITIZEN or RESIDENT ALIEN.
 Principal residence
 Proceeds is utilized to ACQUIRE NEW
PRINCIPAL RESIDENCE.
 BIR is informed intention to avail
Exemption WITHIN (30 days)
 W/ BIR FORM 1706
 Sworn Declaration of Intent

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