REMINDERS PARA SA EXAM AT SA TOTOONG BUHAY:

- BASAHIN ang tanong. Wag ugaliing basta nalang applyan ng formula ang mga
nakikitang amount. Intindihin po ang itinatanong. Hindi po pwedeng lagi nalang na
kapag nakakita ng amount ee gagamitin agad sa formula ng di tinitingnan yung problem.
- IBIGAY ANG HINIHINGI SA QUESTION, kaya nagkakamali minsan kasi di yung
hinihingi ko ang ibinibigay. Kapag nakuha na ang hinihingi sa question, stop na, wag
magbigay ng sobra para di malito.
- Wag kalimutang lagyan ng LABEL PARA DI MALITO

General Information (Philippine set-up)

As Taxable individuals
● Resident Citizen - Citizen ng Pilipinas at naninirahan sa sariling bansa
● Non-Resident Citizen - Ipinanganak sa Pilipinas pero naninirahan sa ibang
bansa(lugar) (may other info dito pero stick muna tayo sa basics)
● Resident Alien - Citizen ng ibang bansa na naninirahan sa ating bansa (foreigners sa
PH)
● NOTE: (Same Rate Overall ang Resident Citizen, Non-Resident Citizen & Resident
Alien)
● Non Resident Alien Engaged in Business Trade
○ Citizen ng ibang bansa at naninirahan sa ibang bansa pero may business or
engaged sa mga business dito
○ Same Rate in almost all of Tax Rates na inaapply sa Resident Citizen,
Non-Resident Citizen & Resident Alien maliban lang sa Passive Income since
generally, 20% po ang i-apply (unlike sa RC, NRC & RA na 10% kapag
dividends).
● Non-Resident Alien not Engaged in Business Trade
○ Citizen at resident sa ibang bansa na usually, temporary lang (hindi tumatagal ng
3 months or 180 days) ang pag-stay dito (For Example; International Performers)
○ Aside sa Capital Gains Tax; both Shares of Stocks at Sale of Real Property, 25%
Tax Rates in General (di pa po tayo napunta sa specifics)
● Graduated Rate - Paggamit ng tax rates na nakabase sa tier (range) ng kinikita ng
isang individual o business. Refer sa Graduated tax table para tier (range) ng taxable
income
● 8% of Gross Sales and/or Receipts in excess over 250,000 - another option sa mga
individuals na kumikita ng pera from self-employment and/or practice ng profession
aside sa graduated rate. Binibigay lang na option kung hindi lumalagpas sa 3 million ang
kinikita ni individual.
● Taxable Income - Income na subject for tax payments, ito po ang gagamitan natin ng
tax rates para makuha ang tax due.
● Tax Due - Amount na babayaran sa government, ito po yung nakukuha nating amount
after nating maapply ang tax rates.
● Ang Compensation Income po ay composed of Basic Income (Taxable) at Additional
Payments (Non Taxable Pays; Holiday Pay, OT Pay, Night Shift Differential Pay and
Hazard Pay).
 ● Iba po and Additional Payments sa Non-Taxable Benefits like mga 13th month pay kasi
ito po ay mga special benefits na usually binibigay yearly. Wag pong malilito, Non
Taxable Benefits po ay ileless sa Compensation Income while additional payment po
(although Non-Taxable) ay i-aadd sa compensation income.
____________________________________________________________________________

PAANO KUMUHA NG TAX DUE BASED SA TAXABLE

INCOME
➔ After makuha ang Taxable Income, tingnan ang GRADUATED RATE TIER TABLE natin
➔ Alamin kung saang tier papasok ang Taxable Income na nakuha.
◆ (pwede pong kahit alin ang unahin)
● Bawasan ng Excess Over amount ang nakuhang Taxable Income
(according sa tier table) then applyan ng additional rate.
● I-add ang base or basic amount para makuha ang TOTAL TAX DUE.

Tax Due Computation

Base Amount (magbase sa graduated rate
tiers)
From Php xxx - xxx xxx
Add: On Excess Over Php xxx
xxx xxx
Total Income Tax Due xxx

SAMPLE (Application and Illustration)

Ako po ay may Taxable Income na Php 500,000. Magkano po ang aking Tax Due? (Tingnan ang
Graduated Rate Tax Table)

Tax Due Computation

Base Amount (tingnan ang Tax Table)
From Tier 400,000 - 800,000 ₱22,500.00
Add: On Excess Over Php 400,000
500,000 - 400,000 ₱100,000.00
Mutiply sa Rate 20% ₱20,000.00
Total Income Tax Due ₱42,500.00

____________________________________________________________________________
MIXED INCOME (hindi na po ako naglagay ng sample for 8%, basta aralin po itong
para sa graduated rate)
- Pinaghalong Compensation at Business Income
- Kapag graduated rate, pag-addin po ang Compensation Income, Business Income at
Non-Operating Income before applyan ng Tax Rates based sa Graduated Rate Table.

COMPENSATION INCOME
Total Compensation Income xxx
Less: Total Mandatory Contributions xxx
Non-Taxable Benefits xxx
Total MC and NTB >>>> xxx
Taxable Compensation Income xxx

BUSINESS INCOME
Gross Sales/Receipts xxx
Less: Cost of Saes xxx
Gross Income xxx
Less: Operating Expenses xxx
Net Taxable Income from Operations xxx
Add: Non-Operating Income xxx
Taxable Business Income >>>> xxx
Net Taxable Income xxxx

Tax Due Computation

Base Amount (magbase sa graduated rate tiers)

From Php xxx - xxx xxx
Add: On Excess Over Php xxx
xxx xxx
Total Income Tax Due xxx

SAMPLE (Application and Illustration)

Gon, an auditor of a popular auditing firm, earned annual compensation in 2023 of P555,000,
inclusive of the benefits such as 13th month and his mandatory contributions for SSS, Pag-IBIG
and PhilHealth amounting to Php 14,700, Php 7,600 and Php 6,500. Aside from employment
income, he runs a small business offering bookkeeping services with gross sales of 3,400,000.
His cost of sales and operating expenses are P1,750,000 and P765,000, respectively, and with
non-operating income of P85,000. How much is total income tax due?
 COMPENSATION INCOME
Total Compensation Income ₱555,000.00
SSS ₱14,700.00
HDMF (Pag-IBIG) ₱7,600.00
PhilHealth ₱6,500.00
Total Mandatory Contributions ₱28,800.00
Non-Taxable Benefits (13th Month Pay) ₱46,250.00
Less: Total MC and NTB ₱75,050.00
Taxable Compensation Income ₱479,950.00

BUSINESS INCOME
Gross Sales/Receipts ₱3,400,000.00
Less: Cost of Saes ₱1,750,000.00
Gross Income ₱1,650,000.00
Less: Operating Expenses ₱765,000.00
Net Taxable Income from Operations ₱885,000.00
Add: Non-Operating Income ₱85,000.00
Taxable Business Income ₱970,000.00
Net Taxable Income ₱1,449,950.00

TAX DUE
Base Amount
From Php 800,000 to Php 2,000,000 ₱102,500.00
On Excess Over Php 800,000
(1,449,950 - 800,000) x 25% ₱162,487.50
Total Income Tax Due ₱264,987.50

➔ Una ko pong kinuha ang Taxable Compensation Income. Para magawa po yun, ganito
po ang ginawa ko
◆ Nagbased sa binigay na Basic Compensation.
◆ Dahil inclusive po, ile-less padin po ang total Mandatory Contributions (SSS,
Pag-IBIG at PhilHealth) sa Total Compensation.
◆ Hindi man po given ang 13th month, dahil given naman po ang compensation,
dinivide ko po sa 12 para makuha ko po ang value. After makuha, niless ko din
po sa Compensation Income para magkatotal amount na po ako sa Taxable
Compensation Income.
 ➔ Sinunod ko pong kunin ang Taxable Business Income.
◆ Likewise, dahil given na po ang Gross Sales/Receipts, binawas ko po ang Cost
of Sales para magka-Gross Income.
◆ Yung Gross Income po, niless ko naman po ang Operating Expenses para
magcome up sa Taxable Business Income.
◆ Dahil po may Non-Operating Income, ini-add ko po iyon sa Taxable Business
Income.
➔ Pinag-add ko po ang Taxable Compensation Income at Taxable Business Income
then inapply ang process sa pag-kuha ng Tax Due based sa Graduated Rate
computation.
____________________________________________________________________________

PASSIVE INCOME
❖ Ito po yung mga income na kinikita ni individual mainly by investing ng pera para
mag-gain ng interest and/or mga other things na hindi mo usually kinikita regularly.

Tandaan ang Formula

Passive Income Types Income/Earnings Multiply by Tax Rates Final Tax
Interest xxx x xxx = ___________
Royalties xxx x xxx = ___________
Prizes xxx x xxx = ___________
Dividends xxx X xxx = ___________
TOTAL FINAL TAX

- Kapag Final Tax ang given at Earnings ang hinihingi, i-divide ang Final Tax sa Rate
para makuha ang Earnings
- Para hindi malito, ugaliing isulat as formula and LAGYAN NG LABEL.
- Pare-parehas lang ang Tax Rates ng Resident Citizen, Non-Resident Citizen at Resident
Alien.
- Interests, Royalties at Prize; 20%
- Dividends; 10%
- Kapag Non-Resident Alien Engaged in Business Trade, in general, 20%
- Kapag Non-Resident Alien Not Engaged in Business Trade, in general, 25%
SAMPLE (Application and Illustration)
In 2023, Harry, Hermione and Ron are friends who are citizens of the United Kingdom. Their
friend, Beyonce, invited them to relocate and live in the Philippines by the year 2024. Part of
their preparations for living in the country is having vacations and competing with different music
related contests representing Beyonce’s Company. More so, they entrusted their financial
stability to Beyonce by investing in her recording studios. Altogether, they managed to become
residents of the country by the year 2024

A. In 2023, if Harry is expected to pay Php 10,500 final tax from prizes and Php 13,700 for his
dividends, how much is his total earnings?

Final Tax Rates (÷) Rates = Harry's Earnings

Prizes ₱10,500.00 (÷) 20% = ₱52,500.00
Dividends ₱13,700.00 (÷) 20% = ₱68,500.00
Total Earnings ₱121,000.00

➔ Kung babasahin nyo po ng mabuti yung scenario, malalaman nyo pong sila ay Non
Resident Alien Engaged in Business Trade, bakit po?
◆ Kasi po, unang una, citizens po sila ng United Kingdom kaya considered po sila
as Alien;
◆ Pangalawa, 2023 po ang set up, in short nasa UK pa po sila nakareside ng time
na yan. In short, sila po ay non resident;
◆ Pangatlo, dahil po sa pakikipagnegotiate nila kay Beyonce, we can consider
them na po na engaged po sila in Business Trade here in the Philippines.
◆ Dahil po dyan, subject po sila to pay 20% Passive Income Final Tax rates
➔ Dahil final tax na po ang ating given at earning naman po ang hinahanap, need lang
pong ireverse ang equation para mag come up with the earnings and finally, have the
Php 121,000 earnings.

B. If Hermione is said to be liable for paying 16% higher earnings than Harry in terms of prizes
and 23% lower than Harry's dividends, how much is her total earnings?

Harry's Earnings Percentage Increase Hermione's Earnings

Prizes ₱52,500.00 116% ₱60,900.00
Dividends ₱68,500.00 77% ₱52,745.00
Total Earnings ₱113,645.00

➔ Dahil Earnings din po ang hanap kay Hermione and comparable po ito kay Harry, need
lang po nating lagyan ng increase o decrease accordingly (ang ruling po natin pag may
increase or decrease ay add/deduct lang po sa 100%). Dahil po dyan, nagcome up po
tayo sa earnings ni Hermione na Php 113,645.
C. If Ron is required to pay a final tax that is 12% lower than Hermione's taxes related to prizes
and 9% higher than Hermione's taxes related to dividends, how much is his final taxes?

Hermione's Hermione's Percentage

Earnings Final Tax Rates Final Tax Increase Ron's Final Tax
Prizes ₱60,900.00 20% ₱12,180.00 88% ₱10,718.40
Dividends ₱52,745.00 20% ₱10,549.00 109% ₱11,498.41
Total Final
Tax ₱22,216.81

➔ Dahil naman daw po we’re asking for Ron’s Final Tax na based naman po sa final tax ni
Hermione, kinuha po muna natin ang final tax ni Hermione.
➔ After pong makuha, tyaka na po natin nilagyan ng percentage increase o decrease at
nag come up tayo sa final tax ni Ron na Php 22,216.81.

D. In 2024, they all managed to earn at least a 7% increase compared to their passive income
in 2023. After comparing their Final Taxes, which of them will be the highest tax payer?

Harry's 2023 Harry's 2024 Final Tax Harry's 2024 Final

Earnings 2024 Increase Earnings Rates Tax
Prizes ₱52,500.00 107% ₱56,175.00 20% ₱11,235.00
Dividends ₱68,500.00 107% ₱73,295.00 10% ₱7,329.50
Total
Final Tax ₱18,564.50

Hermione's 2023 Hermione's 2024 Final Tax Hermione's 2024

Earnings 2024 Increase Earnings Rates Final Tax
Prizes ₱60,900.00 107% ₱65,163.00 20% ₱13,032.60
Dividends ₱52,745.00 107% ₱56,437.15 10% ₱5,643.72
Total
Final Tax ₱18,676.32

Ron's 2023 Final Ron's

Tax Rates (÷) Rates = Earnings
Prizes ₱10,718.40 (÷) 20% = ₱53,592.00
Dividends ₱11,498.41 (÷) 20% = ₱57,492.05
Total Earnings ₱111,084.05
 Ron's 2023 Ron's 2024 Final Tax Ron's 2024 Final
Earnings 2024 Increase Earnings Rates Tax
Prizes ₱53,592.00 107% ₱57,343.44 20% ₱11,468.69
Dividends ₱57,492.05 107% ₱61,516.49 10% ₱6,151.65
Total
Final Tax ₱17,620.34

➔ Sinabi na po agad sa scenario na sila po ay resident na by 2024, dahil po dyan sila ay

matatawag na nating Resident Alien and 10% nalang po ang tax rates nila for
dividends.
➔ Although informally, inaask po sa letter D ang kinita nila sa year 2024 at based daw po
ito sa 2023 earnings pero 7% higher. Dahil dyan kunin lang po natin ang earnings nila
ng 2023 at applyan ng increase.
◆ Special case po si Ron dahil di po natin agad nakuha ang Earnings nya noong
2023. Dahil po dyan, kinuha po muna natin (refer to the 3rd table for letter D)
before po tayo mag-apply ng increase for earnings.
➔ Afterwards po, inapplyan na po natin ng taxes 20% po sa prizes at 10% nalang po sa
dividends kasi sila po ay resident na.
➔ Upon comparing, si Hermione po ang ating highest tax payer.
____________________________________________________________________________

CAPITAL GAINS - SALE OF REAL PROPERTY

❖ Taxes na kinukuha sa Selling Price o Fair Market Value, kung alin ang MAS MATAAS
❖ Ang Mas mataas na amount po ang subject for 6% Tax Rate para makuha ang Capital
Gains Tax
❖ Wag malilito sa REAL PROPERTY at SHARES OF STOCKS, magkaiba po talaga sila
ng formula

Formula
Selling Price or Fair Market Value (Whichever is Higher) x Tax Rate (6%) = Capital Gains
Tax
COMPARE WHICHEVER IS HIGHER
Selling Price or Fair Market Value
____________ ____________

➔ Kahit lituhin ko kayo at magbigay ng percentage increase or decrease (either be Selling

Price or Fair Market Value) back to the concept, sundin kung alin ang MAS MATAAS

Apply the Formula for Capital Gains from the Sale of Real Property
 Selling Price or Fair Market Value(YUNG MAS MATAAS SA DALAWA) xxx
Tax Rate 6%
Capital Gains Tax xxx

➔ I-apply ang 6% tax rate sa SP o FMV (KUNG ALIN ANG MAS MATAAS) para makuha
ang Capital Gains Tax

SAMPLE (Application and Illustration)

Gord, a non-resident citizen, sold his property to Eudora. The cost of the property 7 years ago
when he bought it was Php 84,000 and they closed the deal for Php 93,200.

A. If the fair market value of the property is 11% higher than its cost, how much is the capital
gains tax on sale of real property?

Compute for the Fair Market Value

84,000 x 111% = ₱93,240.00

➔ Dahil di pa given ang Fair Market Value, need muna nating malaman dahil sya po ay
need i-compare sa selling price to know kung alin po ang mas mataas sa kanila
➔ Paano ko po kinuha? Dahil sabi po sa situation na higher po ng 11% ang Fair Market
Value compared sa cost, nagmultiply po ako ng 111% sa 84,000 (Ang 111% po ay
nanggaling sa 11% increase plus base percentage rate natin na 100%. Gawin na po
natin itong standard process para di na po mahirapan sa increase or decrease)

Compare whichever is Higher

Selling Price Fair Market Value
₱93,200.00 ₱93,240.00

➔ Compare kung aling po ang MAS MATAAS, sa case po natin, mas mataas ang FMV

Apply the Formula for Capital Gains from the Sale of Real Property

Fair Market Value ₱93,240.00

Tax Rate 6%
Final Tax ₱5,594.40

➔ Gamitan po ng formula ang MAS MATAAS na amount para mag come up sa Final Tax
(Capital Gains Tax)
B. If they closed the deal but in an amount that is 9% lower than the Selling Price, how much is
the capital gains tax on sale of real property?

Compute for the Selling Price

93,200 x 91% = ₱84,812.00

➔ Dahil sabi po ay clinose ang deal or nabenta ang property ng 9% lower, kinompute ko po
ang bagong selling price
➔ Nakuha ko po ang 91% dahil 9% lower daw po sa inask na selling price. Dahil dyan,
100%-9% is 91%
➔ Inapply ko po sa Given na selling Price para makuha ang bagong amount

Compare whichever is Higher

Selling Price Fair Market Value
₱84,812.00 ₱93,240.00

➔ Nagcompare po ulit ako kung alin po ang mas mataas and again, FMV po ang higher
amount

Apply the Formula for Capital Gains from the Sale of Real Property

Fair Market Value ₱93,240.00

Tax Rate 6%
Final Tax ₱5,594.40

➔ Para hindi ko po kayo mauto, uulitin ko for the nth time, piliin po ang MAS MATAAS.
Wag nyo pong gamitin sakin yung idea na “ito po ang kinompute ko”. Back to basics po
tayo, kahit kinompute nyo po yan, kung di po yan ang hinihingi or kailangan, wag po yan
ang ibibigay nyo sakin. Kaya ko po kayo nauuto ee hindi nyo po inaabsorb ang concept.
➔ Gamitan po ng formula ang MAS MATAAS na amount para mag come up sa Final Tax
(Capital Gains Tax).

____________________________________________________________________________

COMPARISON OF 8% AND GRADUATED RATE

❖ Pagcocompare ng 8% rate sa Gross Sales and/or Receipts over Php 250,000 at
Graduated Rates.
❖ Goal is malaman kung alin ang better option sa kanilang dalawa kasi may instances na
pwedeng mas mababa ang babayaran ni 8% or Graduated rate depende sa
performance ng business.
❖ Gagamitin po both ng formula
➢ 8% GSR in excess over Php 250,000.00 Formula
 Tax Due in 8% Gross Sales/Receipts
Gross Sales Receipts ₱ xxx
Less: Excess Over Amount 250,000
Taxable Income xxx
8% Income Tax Rate 8%
Tax Due ₱ xxx

➢ Graduated Rate
Annual Amount
Gross Sales/Receipts ₱ xxx
Less: Cost of Sales xxx
Gross Income xxx
Less: Operating Expenses xxx
Taxable Income xxx
Less: Of excess Over xxx
Excess Amount xxx
Additional Rate Application xxx
Amount Payable After percentage Application xxx
Basic Amount Payable xxx
Tax Due ₱ xxx

- After magamit ng formula at makuha ang tax due, icompare ang TAX DUE nilang
dalawa.
- Under normal circumstances, kung ano ang mas mababa, yung ang mas favorable dahil
tax due po ang kinocompare at its obvious na kung ano ang mas mababa ang
babayaran, yun ang mas okay for the benefit ng magbabayad.
____________________________________________________________________________

SAMPLE (Application and Illustration)

In 2023, Vernon, a self-employed individual, is trying to figure out the difference between
graduated rates and the 8% income tax rate. He tried to figure out which will be the better option
in coming up with a more favorable income tax due. With the given information that contains the
summary of his forecasted Annual Operation, which will be a more favorable option?
 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
Gross Sales/Receipts ₱400,000.00 ₱500,000.00 ₱700,000.00 ₱1,000,000.00
Less: Cost of Sales ₱300,000.00 ₱300,000.00 ₱420,000.00 ₱600,000.00
Gross Income ₱100,000.00 ₱200,000.00 ₱280,000.00 ₱400,000.00
Less: Operating Expenses ₱40,000.00 ₱42,000.00 ₱120,000.00 ₱200,000.00
Taxable Income ₱60,000.00 ₱158,000.00 ₱160,000.00 ₱200,000.00

➢ Graduated Rate
Annual Amount
Gross Sales/Receipts ₱2,600,000.00
Less: Cost of Sales ₱1,620,000.00
Gross Income ₱980,000.00
Less: Operating Expenses ₱402,000.00
Taxable Income ₱578,000.00
Less: Of excess Over 400,000
Excess Amount ₱178,000.00
Additional Rate Application 20%
Amount Payable After percentage Application ₱35,600.00
Basic Amount Payable ₱22,500.00
Tax Due ₱58,100.00

➔ Para makuha po ang graduated rate, inapply ko po ang ating process sa pagkuha ng
Taxable Income. Nagstart po ako sa pagtabulate ng given na Php 2,600,000 GSR
(based po sa annual performance ng company) at binawasan ko po ng given na
COGS/COS amounting to Php 1,620,000. Nagcome up na po ako sa GI afterwards
which is Php 980,000
➔ Since may given nadin pong amounts for OpEx which is Php 402,000 overall, niless ko
po sya kaya I immediately ended up with Taxable Income na Php 578,000.
➔ Ang Php 578,000 po ay pasok sa tier ng Php 400,000 to Php 800,000 based po sa ating
graduated rate tier table. So, binawas ko po ang allowable deduction (excess over) nya
na Php 400,000 para sa excess amount.
➔ Ang amount po na ito ay subject na para sa additional rate (refer padin po tayo sa
graduated rate table) na 20% kaya we had Php 35,600
➔ Since meron na po tayong computed amount, iadd naman po natin ang base amount
(which is 22,500 based po sa ating graduated rate tier table) para mag come up with the
TAX DUE.

➢ 8% GSR in excess over Php 250,000.00 Formula

Tax Due in 8% Gross Sales/Receipts
 Total Sales Receipts ₱2,600,000.00
Less: Amount Allowed as Deduction ₱250,000.00
Taxable Income ₱2,350,000.00
8% Income Tax Rate 8%
Tax Due ₱188,000.00

➔ Kinuha ko po muna ang Gross Sales or Receipts based po sa given sa scenario. Bakit
po? Kasi nga po, GRS po ang gagamitin sa 8%, hindi po taxable income. Ang taxable
income po ng 8% rate option ay makukuha mo after mong ibawas ang Php 250,0000 na
excess over. Kaya po nagkameron tayo ng Taxable Income na Php 2,350,000.
➔ Inapplyan ko po ng 8% rate ang nakuhang Taxable Income para makuha ang Tax Due
na Php 188,000

★ Since the situation asks po sa better option, icocompare lang po natin ang tax due nila.
Again, dahil ang tax due po ay amount na babayaran, mas favorable po ang mas
mababang tax due.
____________________________________________________________________________

SHIFTING FROM 8% TO GRADUATED RATE

❖ About po ito sa paglipat ng isang business from 8% rate to Grauated rate, bakit po?
Kasi according po sa ruling natin, kung isa ka pong self-earning individual o
nagpra-practice ng profesion, ikaw po ay allowed na mamili kung 8% rate o
Graduated rate ang iaaply mo sa business mo. PERO kung ang pinili mo ay 8% at
lumagpas ang kinikita mo annually (isang taon) ng 3 million, kailangan mo pong lumipat
sa Graduated rate.

➢ Graduated Rate
Annual Amount
Gross Sales/Receipts ₱ xxx
Less: Cost of Sales xxx
Gross Income xxx
Less: Operating Expenses xxx
Taxable Income xxx
Less: Of excess Over xxx
Excess Amount xxx
Additional Rate Application xxx
Amount Payable After percentage Application xxx
Basic Amount Payable xxx
Tax Due ₱ xxx
 ■ Gamitin ang Graduated Rate formula para makuha ang Tax Due sa
buong taon

➢ 8% GSR in excess over Php 250,000

Tax Due in 8% Gross Sales/Receipts
Gross Sales Receipts ₱ 3,000,000
Less: Amount Allowed as Deduction 250,000
Taxable Income 2,750,000
8% Income Tax Rate 8%
Tax Due ₱ 220,000

■ Gamitin ang 8% GSR rate sa 3 million vat threshold para makuha ang
total amount na naging subject sa 8% tax payments (let’s say na standard
na po muna ito, ngayon lang po hehe, since ang effectivity naman ng po
8% is until hindi mo pa narereach ang 3 million VAT Threshold)

❖ SHIFTING PROCESS

Tax Due after shifting to Graduated Rates

Total Tax Due for the Year (refer sa graduated rate computation) ₱ xxx
Less: 8% Income Tax Payable
(3,000,000 - 250,000) x 8% ₱220,000.00
Annual Income Tax Payable ₱ xxx

➢ Ibawas ang nakuhang tax due sa 8% GSR sa nakuhang tax due ng graduated
rate computation para malaman ang total tax due after madisregard ang 8%
rate.

SAMPLE (Application and Illustration)

In 2023, Apollo signified his intention to be taxed at 8% income tax rate on gross sales in his 1st
Quarter Income tax Return. He has no other source of income. His total sales for the first three
(3) quarters amounted to P3,000,000 with 4th quarter sales of 3,500,000.
 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
(8% Rate) (8% Rate) (8% Rate)
Gross Sales/Receipts ₱500,000.00 ₱500,000.00 ₱2,000,000.00 ₱3,500,000.00
Less: Cost of Sales ₱300,000.00 ₱300,000.00 ₱1,200,000.00 ₱1,200,000.00
Gross Income ₱200,000.00 ₱200,000.00 ₱800,000.00 ₱2,300,000.00
Less: Operating Expenses ₱120,000.00 ₱120,000.00 ₱480,000.00 ₱720,000.00
Taxable Income ₱80,000.00 ₱80,000.00 ₱320,000.00 ₱1,580,000.00

➢ Graduated Rate Application

Annual Amount
Gross Sales/Receipts ₱6,500,000.00
Less: Cost of Sales ₱3,000,000.00
Gross Income ₱3,500,000.00
Less: Operating Expenses ₱1,440,000.00
Taxable Income ₱2,060,000.00
Less: Of excess Over ₱2,000,000.00
Excess Amount ₱60,000.00
Additional Rate Application 30%
Amount Payable After percentage Application ₱18,000.00
Basic Amount Payable ₱402,500.00
Tax Due ₱420,500.00

➔ Same process lang po muna tayo, need po muna nating malaman ang TAX DUE based
po sa given.
➔ Kinuha po ang amount ng Gross Sales/Receipts which is Php 6,500,000 then niless po
sa COS which is 3 million para mag come up sa Gross Income na Php 3,500,000.
➔ Yung Php 3,500,000 po natin ay babawasan po ng nakuha nating Total Annual Value ng
Operating Expense na Php 402,000 para magcome up po tayo sa Taxable Income na
Php 2,060,000.
➔ Yung Taxable Income po natin, aapplyan na po natin ng tax rates based po sa graduated
tax table.
➔ Ang Php 2,060,000 ay pasok sa tier na Php 2,000,000 to Php 8,000,000 kaya ang
Excess Over amount nya po (in reference po sa tier) ay 2,000,000. Ang naging Excess
amount po afterwards ay Php 60,000
➔ Subject na po sya sa 30% tax rates (again, for the nth time, balik po tayo sa graduate
rate tax table) kaya Php 60,000 time 30% is Php 18,000,
➔ Iadd po natin ang basic amount na Php 402,500 para sa tax due na Php 420,500
★ Kung di po nagets, Php 3,000,000 po ang VAT Threshold. Dahil po dyan, cocomputin po
natin ang payable amount in POV of 8%.

Tax Due in 8% Gross Sales/Receipts

Gross Sales Receipts ₱ 3,000,000
Less: Amount Allowed as Deduction 250,000
Taxable Income 2,750,000
8% Income Tax Rate 8%
Tax Due ₱ 220,000

➔ Gamitin ang 8% GSR rate sa 3 million vat threshold para makuha ang total amount na
naging subject sa 8% tax payments (let’s say na standard na po muna ito, ngayon lang
po hehe, since ang effectivity naman ng po 8% is until hindi mo pa narereach ang 3
million VAT Threshold)

❖ SHIFTING PROCESS

Tax Due Under Graduated Rates

(402,500 + (60,000 x 30%)) ₱420,500.00
Less: 8% Income Tax Previously Paid (Q1 to Q3)
(3,000,000 - 250,000) x 8% ₱220,000.00
Annual Income Tax Payable ₱200,500.00

➔ Ibawas ang nakuhang amount for 8% sa nakuhang amount for Graduated rate. Bakit
po? Kasi po we are talking about shifting. Ibig sabihin, kailangan pong macover ang total
tax due ng isang business as if napapractice po ang paggamit ng Graduated rate from
the start of the Year.
◆ Kung hindi po malinaw, diba po magkaiba naman ang binabayaran ng isang
business sa POV ng 8% at Graduated Rate (pwede nyo pong gamiting reference
ang comparison problems natin). Bayad nadin po ang quarters na nagdaan kaya
di na po pwedeng basta maghabol ng bayad o magbawas ng naibayad for the
past quarters. So to cover po yung payment na dapat sa POV ng Graduated rate,
isu-subtract po natin ang nabayaran na ng quarters na gumagamit ng 8% and
masabing clear po ang tax liability.