TAXPAYERS

AND TAX BASE

 GENERAL PRINCIPLES OF INCOME TAXATION IN THE
PHILIPPINES

A. A citizen of the Philippines residing therein is taxable on all

income derived from sources within and without the Philippines;
B. A nonresident citizen is taxable only on income derived from
sources within the Philippines;
C. An individual citizen of the Philippines who is working and
deriving income from abroad as an overseas contract worker is
taxable only on income derived from sources within the
Philippines: Provided, That a seaman who is a citizen of the
Philippines and who receives compensation for services rendered
abroad as a member of the complement of a vessel engaged
exclusively in international trade shall be treated as an overseas
contract worker;
D. An alien individual, whether a resident or not of the
Philippines, is taxable only on income derived from sources
within the Philippines;
E. A domestic corporation is taxable on all income derived from
sources within and without the Philippines; and
F. A foreign corporation, whether engaged or not in trade or
business in the Philippines, is taxable only on income derived
from sources within the Philippines.
INCOME TAX
a tax on a person's income, emoluments, profits arising from
property, practice of profession, conduct of trade or business or on
the pertinent items of gross income specified in the Tax Code of 1997
(Tax Code), as amended, less the deductions and/or personal and
additional exemptions, if any, authorized for such types of income, by
the Tax Code, as amended,or other special laws.

INCOME
all wealth, which flows into the taxpayer other than as a mere return
of capital.

CAPITAL
resource of person, which can be used in producing goods and
services.
REQUISITES FOR INCOME TO BE
TAXABLE
1. There must be a gain or profit.
2. The gain must be realized or
received.
3. The gain must not be excluded
by law or treaty from taxation.
TESTS ON TAXABILITY OF INCOME
1. Flow of Wealth Test The determining factor for the
imposition of income tax is whether any gain was
derived from the transaction.
2. Realization Test - unless the income is deemed
"realized," there is no taxable income.
3. Economic-Benefit Principle Test - flow of wealth
realized is taxable only to the extent that the taxpayer is
economically benefited.
CRITERIA IN IMPOSING INCOME TAX
1.Citizenship Principle A citizen of the Philippines is subject to
Philippine income tax
a. on his worldwide income, if he resides in the Philippines, or
b. only on his income from sources within the Philippines, if he
qualifies as nonresident citizen.
2.Residence Principle resident alien is liable to pay income tax on
his income from sources within the Philippines but exempt from tax
on his income from sources outside the Philippines.
3.Source Principle An alien is subject to Philippine income tax
because he derives income from sources within the Philippines.
Thus, a nonresident alien is liable to pay Philippine income tax on
his income from sources within the Philippines such as dividend,
interest, rent, or royalty, despite the fact that he has not set foot in
the Philippines.
CLASSIFICATION OF
TAXPAYERS
1. Individuals
2. Corporations CORPORATIONS
3. Estates and trusts a. Domestic
b. Foreign
1. resident foreign corporation
INDIVIDUAL INCOME TAXPAYERS: 2. non-resident foreign
a. citizens corporation
1. resident citizens
2. non-resident citizens
b. aliens
1. resident aliens
2. non-resident aliens
i. engaged in trade or business within the
Philippines
INDIVIDUALS

CITIZENS:
1. Those who are citizens of the Philippines at the time of the
adoption of this Constitution (February 2, 1987);
2. Those whose fathers or mothers are citizens of the Philippines;
3. Those born before January 17, 1973, of Filipino mothers, who
elect Philippine citizenship upon reaching the age of majority;
and
4. Those who are naturalized in accordance with law.
NON-RESIDENT CITIZEN a Filipino citizen:
a. who establishes to the satisfaction of the Commissioner the
fact of his physical presence abroad with a definite intention
to reside therein;
b. who leaves the Philippines during the taxable year to reside
abroad, either as an immigrant or for employment on a
permanent basis;
c. who works and derives income from abroad and whose
employment thereat requires him to be physically present
abroad most of the time during the taxable year;
d. who is previously considered as a non-resident and who
arrives in the Philippines at anytime during the taxable year to
reside thereat permanently shall be considered non-resident
for the taxable year in which he arrives in the Philippines with
respect to his income derived from sources abroad until the
RESIDENT ALIEN an individual whose
residence is within the Philippines and who
is not a citizen thereof.

NON-RESIDENT ALIEN an individual whose

residence is not within the Philippines and
who is not a citizen thereof.

TRADE OR BUSINESS includes the performance of the

functions of the public office but shall not include the
performance of service by the taxpayer as an employee

A non-resident alien individual who shall come to the

Philippines and stay therein for an aggregate period of more
than 180 days during any calendar year shall be deemed a
non-resident alien doing business in the Philippines
CORPORATIONS

DOMESTIC - created or organized in the Philippines or under

its laws.

RESIDENT FOREIGN - a foreign corporation engaged in trade

or business within the Philippines

NON-RESIDENT - a foreign corporation not engaged in trade

or business within the Philippines.
CORPORATION
INCLUDES:
1. partnerships, no matter how created or organized,
2. joint-stock companies,
3. joint accounts (cuentas en participacion),
4. association, or
5. insurance companies,
BUT DOES NOT INCLUDE
6. general professional partnerships and
7. a joint venture or consortium formed for the purpose of
undertaking construction projects or engaging in petroleum, coal,
geothermal and other energy operations pursuant to an operating
consortium agreement under a service contract with the
Government.
'General professional partnerships' are partnerships formed by
persons for the sole purpose of exercising their common profession,
no part of the income of which is derived from engaging in any trade
UNINCORPORATED JV FOR CONSTRUCTION NOT TAXABLE
According to the BIR, a joint venture (JV) formed for undertaking
construction projects is not taxable as a corporation if it complies
with the conditions set in RR No. 10-2012. The JV partners must be
licensed local contractors and/or foreign contractors with a special
license as a contractor by PCAB with the construction project being
certified by the appropriate government office as a foreign-
financed/internationally-funded project. Further, the JV itself must
be duly licensed by PCAB. Such qualified JV shall not be subject to
corporate income tax and 2% CWT, and will not be required to file
quarterly and final adjustment returns.
Instead, the co-venturers are the ones separately subject to tax
and are required to enroll under eFPS. The JV shall withhold the tax
based on the net income of its co-venturers.
(BIR Ruling Nos. 37-2016 and 38-2016 dated 15 January 2016)
CORPORATIONS EXEMPT FROM INCOME TAXATION
(FOR INCOME REALIZED AS SUCH) UNDER NIRC

1. Those enumerated under section 30

A. Labor, agricultural or horticultural organization not organized
principally for profit;
B. Mutual savings bank not having a capital stock represented by
shares, and cooperative bank without capital stock organized and
operated for mutual purposes and without profit;
C. A beneficiary society, order or association, operating for the exclusive
benefit of the members such as a fraternal organization operating
under the lodge system, or mutual aid association or a nonstock
corporation organized by employees providing for the payment of
life, sickness, accident, or other benefits exclusively to the members
of such society, order, or association, or nonstock corporation or their
D. Cemetery company owned and operated exclusively for the benefit of
its members;
E. Nonstock corporation or association organized and operated
exclusively for religious, charitable, scientific, athletic, or cultural
purposes, or for the rehabilitation of veterans, no part of its net
income or asset shall belong to or inure to the benefit of any member,
organizer, officer or any specific person;
F. Business league chamber of commerce, or board of trade, not
organized for profit and no part of the net income of which inures to
the benefit of any private stock-holder, or individual;
G. Civic league or organization not organized for profit but operated
exclusively for the promotion of social welfare;
H. A nonstock and nonprofit educational institution;
I. Government educational institution;
J. Farmers' or other mutual typhoon or fire insurance company, mutual
ditch or irrigation company, mutual or cooperative telephone company,
or like organization of a purely local character, the income of which
consists solely of assessments, dues, and fees collected from members
for the sole purpose of meeting its expenses; and
K. Farmers', fruit growers', or like association organized and operated as a
sales agent for the purpose of marketing the products of its members
and turning back to them the proceeds of sales, less the necessary
selling expenses on the basis of the quantity of produce finished by
them;
L. Notwithstanding the provisions in the preceding paragraphs, the income
of whatever kind and character of the foregoing organizations from any
of their properties, real or personal, or from any of their activities
conducted for profit regardless of the disposition made of such income,
shall be subject to tax imposed under this Code
2. With respect to GOCCs, the general rule is that these corporations are
taxable as any other corporation except:
a. GSIS
b. SSS
c. PHIC
d. Local Water Districts
e. PCSO
f. PAGCOR [Sec. 27 (C)]
3. Regional or Area Headquarters under Sec. 22 (DD) not subject to
income tax
Regional operating headquarters under Sec. 22(EE) shall pay a tax of
10% of their taxable income.
4.Philippine Red Cross (Sec 5 RA 10072
5.Any child-caring or child-placing institution licensed and accredited by
DSWD to implement the Foster Care Program (on income derived by it as
The term 'regional or area headquarters' shall mean a branch
established in the Philippines by multinational companies and which
headquarters do not earn or derive income from the Philippines and
which act as supervisory, communications and coordinating center for
their affiliates, subsidiaries, or branches in the Asia-Pacific Region and
other foreign markets.
The term 'regional operating headquarters' shall mean a branch
established in the Philippines by multinational companies which are
engaged in any of the following services: general administration and
planning; business planning and coordination; sourcing and
procurement of raw materials and components; corporate finance
advisory services; marketing control and sales promotion; training and
personnel management; logistic services; research and development
services and product development; technical support and maintenance;
data processing and communications; and business development.
INDIVIDUALS EXEMPT FROM INCOME TAX

1. A minimum wage earner as defined in section 22 (HH) of

this Codeor an individual who is exempt from income tax
pursuant to the provisions of this Code and other laws,
general or special; the holiday pay, overtime pay, night
shift differential pay and hazard pay received by minimum
wage earners shall likewise be exempt from income tax.

The term 'minimum wage earner' shall refer to a worker

in the private sector paid the statutory minimum wage
or to an employee in the public sector with
compensation income of not more than the statutory
minimum wage in the non-agricultural sector where
he/she is assigned
2. Non-resident citizen who is:
a. A citizen of the Philippines who establishes to the satisfaction of
the Commissioner the fact of his physical presence abroad with
a definite intention to reside therein
b. A citizen of the Philippines who leaves the Philippines during the
taxable year to reside abroad, either as an immigrant or for
employment on a permanent basis
c. A citizen of the Philippines who works and derives income from
abroad and whose employment thereat requires him to be
physically present abroad most of the time during the taxable
year
d. A citizen who has been previously considered as a non-resident
citizen and who arrives in the Philippines at any time during the
year to reside permanently in the Philippines will likewise be
treated as a non-resident citizen during the taxable year in
which he arrives in the Philippines, with respect to his income
3. OverseasFilipino Worker, including overseas seaman
An individual citizen of the Philippines who is working and
deriving income from abroad as an overseas Filipino worker
is taxable only on income from sources within the
Philippines; provided, that a seaman who is a citizen of the
Philippines and who receives compensation for services
rendered abroad as a member of the complement of a
vessel engaged exclusively in international trade will be
treated as an overseas Filipino worker.
NOTE: A Filipino employed as Philippine Embassy/Consulate
service personnel of the Philippine Embassy/consulate is not
treated as a non-resident citizen, hence his income is
taxable.
ESTATES AND TRUSTS

ESTATE refers to the mass of properties left by a deceased

person.
RULES ON TAXABILITY OF ESTATE

When a person who owns property dies, the following taxes

are payable under the provisions of the income tax law:
1. Income tax for individual under Sec. 24 and 25 (to cover
the period beginning January to the time of death);
2. Estate income tax under Sec. 60 if the estate is under
administration or judicial settlement.
ESTATES UNDER JUDICIAL SETTLEMENT
General Rule:
An estate under judicial settlement is subject to income tax in the
same manner as individuals. Its status is the same as the status of
the decedent prior to his death.
Exceptions:
1. The entitlement to personal exemption is limited only to P20,000.
2. No additional exemption is allowed.
3. The distribution to the heirs during the taxable year of estate
income is deductible from the taxable income of the estate. Such
distributed income shall form part of the respective heirs taxable
income.
Where no such distribution to the heirs is made during the taxable
year that the income is earned, and such income is subjected to
income tax payment by the estate, the subsequent distribution
ESTATES NOT UNDER JUDICIAL SETTLEMENT

Pending the extrajudicial settlement, either of the following

situations may arise:
1. If the heirs contribute money, property, or industry to the estate
with the intention of dividing the profits between/among
themselves, an unregistered partnership is created and the
estate becomes liable for the payment of corporate income tax;
or
2. If the heirs, without contributing money, property or industry to
the estate, simply divide the fruits thereof between/among
themselves, a co-ownership is created and income tax is
imposed on the income received by each of the heirs, payable in
their separate and individual capacity.
TRUSTS

A right to the property, whether real or personal, held by one

person for the benefit of another

WHEN TRUSTS ARE TAXABLE ENTITIES

1. A trust, the income of which is to be accumulated
2. 2. A trust in which the fiduciary may, at his discretion,
either distribute or accumulate the income
RULES ON TAXABILITY OF THE INCOME OF A TRUST

1. The income of the trust for the taxable year which is to be distributed
to the beneficiaries filing and payment of tax lie on the
beneficiaries.
2. The income of the trust which is to be accumulated or held for future
distribution whether consisting of ordinary income or gain from the
sale of assets included in the "corpus" of the estate filing of return
and payment of tax become the burden of the trustee or fiduciary.
Exceptions:
a. In the case of a revocable trust, the income of the trust will be
returned by the grantor.
b. In a trust where the income is held for the benefit of the grantor,
the income of the trust becomes income to the grantor.
c. In the case of trust administered in a foreign country, the income
of the trust; undiminished by any amount distributed to the
beneficiaries shall be taxed to the trustee.
IRREVOCABLE TRUSTS (irrevocable both as to corpus and as to
income)

Trust itself, through the trustee or fiduciary, is liable for the

payment of income tax.
Taxed exactly in the same way as estates under judicial
settlement and its status as an individual is that of the trustor.
It is entitled to the personal exemption (P20,000) and
Distribution of trust income during the taxable year to the
beneficiaries is deductible from the trusts taxable income.

REVOCABLE TRUSTS
the trustor, not the trust itself, is subject to the payment of
income tax on the trust income.
EXEMPTION OF EMPLOYEES TRUST

The tax imposed by this Title shall not apply to employee's trust
PROVIDED:
1. the employees trust must be part of a pension, stock bonus or
profit sharing plan of the employer for the benefit of some or all of
his employees;
2. contributions are made to the trust by such employer, or such
employees, or both;
3. such contributions are made for the purpose of distributing to such
employees both the earnings and principal of the fund
accumulated by the trust, and
4. that the trust instrument makes it impossible for any part of the
trust corpus or income to be used for, or diverted to, purposes
other than the exclusive benefit of such employees. (Sec. 60B,
NIRC)
Tax exemption is likewise to be enjoyed by the income
of the pension trust; otherwise, taxation of those
earnings would result in a diminution of accumulated
income and reduce whatever the trust beneficiaries
would receive out of the trust fund. (Commissioner vs.
Court of Appeals, Court of Tax Appeals and GCL
Retirement Plans, GR No. 95022, March 23, 1992)
PARTNERSHIPS

KINDS OF PARTNERSHIP FOR TAX PURPOSES UNDER THE NIRC

1. General Professional Partnerships (GPP) - formed by persons for:
a. the sole purpose of exercising a common profession and
b. no part of the income of which is derived from engaging in any
trade or business. [Sec. 22(B), NIRC].
2. Taxable or Business Partnership All other partnerships except
general professional partnerships no matter, how created or
organized. It includes unregistered joint ventures and business
partnerships
However, joint ventures are not taxable as corporations when it is:
(a) undertaking construction projects
(b)engaged in petroleum, coal and other energy operation under a
 General co-partnerships (GCP) are partnerships, which are by law
assimilated to be within the context of, and so legally
contemplated as, corporations.
The partnership itself is subject to corporate taxation.
The individual partners are considered stockholders and,
therefore, profits distributed to them by the partnership are
taxable as dividends. (Subject to final tax of 10%)
The taxable income for a taxable year, after deducting the
corporate income tax imposed therein, shall be deemed to have
been actually or constructively received by the partners in the
same taxable year and shall be taxed to them in their individual
capacity whether actually distributed or not. [Sec. 73(D), NIRC]
LIABILITY OF A PARTNERSHIP

1. General Professional Partnerships .-

o.They are not subject to income tax, but are required to file
returns of their income for the purpose of furnishing
information as to the share of each partner in the net gain or
profit, which each partner shall include in his individual return.
o.The partnership shall act as the withholding agent.
o.The net income (income for distribution) shall be computed in
the same manner as a corporation.
o.Date of filing of the return is April 15 of each year.
2. Taxable or Business Partnership
o.The income tax of this type of Partnership is
computed and taxed like that of a corporation.
o.This kind of partnership, like a regular corporation, is
also required to file a quarterly corporate income tax
return.
o.Filing and payment of quarterly return is within 60
days after the end of each quarter while the annual
return is on or before April 15 of the following year.
RULES ON THE LIABILITY OF A PARTNER

1. SHARE OF A PARTNER IN GENERAL PROFESSIONAL PARTNERSHIP

a. Each partner shall report as gross income (business income) his
distributed share actually or constructively received in the net
income of the partnership. (Sec. 26, NIRC) [The same share shall
be subject to creditable withholding tax of 10%.] They are liable in
their separate and individual capacity.
b. Share of a partner in the loss of a general professional partnership
may be taken by the individual partner in his return of income.
c. Each partner in a general professional partnership shall, report as
gross income his distributed share in the net income of the GPP,
based on his agreed ratio, whether he, avails of itemized or
optional standard deduction.
d. Payments made to a partner of a GPP for services rendered shall
be considered as ordinary business income subject to Sec. 24A
2. SHARE OF A PARTNER IN TAXABLE OR BUSINESS PARTNERSHIP
a. Share of a partner in the net income of a taxable or business
partnership (dividend) shall be subject to a final tax as follows.
a. Resident Citizen, Non-resident Citizen and Resident Alien
10% (Sec. 24B2)
b. Non-resident Alien engaged in trade or business 20% (Sec.
25 A2)
c. Non-resident alien not engaged in trade or business 25%
(Sec. 25B)
b. Share of a partner in the loss of a taxable or business
partnership maybe taken by the individual partner in his return
of income.
c. Payments made to a partner of a business or taxable
partnership for services rendered shall be considered as
compensation income subject to sec. 24A.
CO-OWNERSHIP

o Not subject to income tax if the co-owners are

limited to the preservation of the property and
the collection of the income therefrom
o Such being the case, it is the co-owners who
are taxed individually on their distributive
share in the income of the co-ownership.
o Should the co-owners invest the income in the
business for profit, they would be constituting
themselves into a partnership and as such
shall be taxable as a corporation.
CATEGORIES OF INCOME:

1. compensation remuneration for services performed by an

employee under an employer-employee relationship
2. business income arises from self-employment or practice of
profession
3. passive income
a.interest, royalties and other winnings
b.cash and/or property dividends
4. capital gains
a.sale of shares of stocks not traded in the stock exchange
b.sale of real property
5. fringe benefits goods or services or other benefits furnished or
granted by an employer in cash or in kind in addition to basic
salaries to an individual employee (except rank-and-file employee)
 INDIVIDUAL CORPORATI ESTATES &
ON TRUSTS
COMPENSATION
BUSINESS INCOME
PASSIVE INCOME
CAPITAL GAINS
FRINGE BENEFITS
TAX BASE

COMPENSATION AND BUSINESS INCOME -

Net
FORMULA

Entire Income
Less: Exclusions and Income subject to Final Tax (e.g. Passive
Income)
Gross Income
Less: Deductions (and/or additional exemptions, if applicable)
Net Taxable Income
Multiply by: Tax Rate (%)
Net Income Tax Due
Less: Tax Credit, if any
Tax Still due, if any
PASSIVE INCOME Gross

CAPITAL GAINS
a. Sale of Shares of Stock not Traded in the Stock Exchange
net
FORMULA: Selling price or FMV, whichever is higher, less
acquisition cost of shares of stocks sold/transferred and
incidental selling expenses
b. Sale of Real Property - gross
FRINGE BENEFITS Grossed up monetary
value
FORMULA FOR COMPUTING THE GROSSED UP MONETARY
VALUE OF FRINGE BENEFITS:

FOR CITIZENS AND RESIDENT

ALIENS
actual monetary value of the fringe benefit divided by
sixty-six percent (66%) effective January 1, 1998;
sixty-seven percent (67%) effective January 1, 1999; and
sixty-eight percent (68%) effective January 1, 2000 and
thereafter
FOR NON-RESIDENT ALIENS

the actual monetary value of the fringe benefit divided by

the difference between one hundred percent (100%) and the
applicable rates of income tax under Subsections (B), (C),
(D), and (E) of Section 25 of the NIRC [25%, 15%, 15% and
15%, respectively]
TAX RATES

A. For Individuals Earning Purely Compensation Income and Individuals

Engaged in Business and Practice of Profession

Amount of Net Taxable

Rate
Income
Over But Not Over
P10,000 5%
P10,000 P30,000 P500 + 10% of the Excess over P10,000
P30,000 P70,000 P2,500 + 15% of the Excess over P30,000
P70,000 P140,000 P8,500 + 20% of the Excess over P70,000
P140,000 P250,000 P22,500 + 25% of the Excess over P140,000
P250,000 P500,000 P50,000 + 30% of the Excess over P250,000
P500,000 P125,000 + 32% of the Excess over P500,000
B. For Non-Resident Aliens Engaged in Trade or Business
1. Interest from currency deposits, trust funds and deposit substitutes 20%
2. Interest Income from long-term deposit or investment in the form of
savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced by Exem
certificates Upon pre-termination before the fifth year, there should be pt
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%
3. On capital gains presumed to have been realized from the sale,
6%
exchange or other disposition of real property
4. On capital gains for shares of stock not traded in the Stock Exchange
Not over P100,000 5%
Any amount in excess of P100,000 10%
 C. For Non-Resident Aliens Not Engaged in Trade or Business

1. On the gross amount of income derived from all sources within

25%
the Philippines
2. On capital gains presumed to have been realized from the
exchange or other disposition of real property located in the 6%
Phils.
3. On capital gains for shares of stock not traded in the Stock

Exchange
NotOverP100,000 5%
Any amount in excess of P100,000 10%
 D. On the gross income in the Philippines of Aliens Employed by
Regional Headquarters (RHQ) or Area Headquarters and
Regional Operating Headquarters (ROH), Offshore Banking Units
(OBUs), Petroleum Service Contractor and Subcontractor - 15%

E. General Professional Partnerships - 0%

 F. Domestic Corporations

1) a. In General on net taxable income 30%

b. Minimum Corporate Income Tax on gross income 2%
c. Improperly Accumulated Earnings on improperly
10%
accumulated taxable income
2) Proprietary Educational Institution and Non-profit Hospitals 10%
in general (on net taxable income) 10%
If the gross income from unrelated trade, business or other
activity exceeds 50% of the total gross income from all sources 30%

3) GOCC, Agencies & Instrumentalities

a. In General - on net taxable income 30%
b. Minimum Corporate Income Tax on gross income 2%
c. Improperly Accumulated Earnings on improperly
10%
accumulated taxable income
4) Taxable Partnerships
a. In General on net taxable income 30%
b. Minimum Corporate Income Tax on gross income 2%
c. Improperly Accumulated Earnings on improperly
10%
accumulated taxable income
5) Exempt Corporation
a. On Exempt Activities 0%
b. On Taxable Activities 30%
6) Corporation covered by Special Laws Rate
specified
under the
respective
special laws
 G) Resident Foreign Corporation

1) a. In General on net taxable income 30%

b. Minimum Corporate Income Tax on gross income 2%
c. Improperly Accumulated Earnings on improperly
10%
accumulated taxable income
2) International Carriers on gross Philippine billings 2.50%
3) Regional Operating Headquarters on gross income 10%
4) Corporation Covered by Special Laws Rate specified
under the
respective
special laws
5) Offshore Banking Units (OBUs) on gross income 10%
6) Foreign Currency Deposit Units (FCDU)on gross income 10%
 Tax Rate Taxable Base
1. Domestic Corporations:

a. In General 30% (effective Net taxable income from all sources

Jan. 1, 2009)
b. Minimum Corporate Income 2% Gross Income
Tax*
c. Improperly Accumulated 10% Improperly Accumulated Taxable
Earnings Income
2. Proprietary Educational 10% Net taxable income provided that the
Institution gross income from unrelated trade,
business or other activity does not
exceed 50% of the total gross income
3. Non-stock, Non-profit Hospitals 10% Net taxable income provided that the
gross income from unrelated trade,
business or other activity does not
exceed 50% of the total gross income
4. GOCC, Agencies &
Instrumentalities
a. In General 30% Net taxable income from all
sources
b. Minimum Corporate Income Tax* 2% Gross Income

c. Improperly Accumulated Earnings 10% Improperly Accumulated

Taxable Income
5. National Gov't. & LGUs
a. In General 30% Net taxable income from all
sources
b. Minimum Corporate Income Tax* 2% Gross Income

c. Improperly Accumulated Earnings 10% Improperly Accumulated

Taxable Income
6. Taxable Partnerships
a. In General 30% Net taxable income from
all sources
b. Minimum Corporate Income Tax* 2% Gross Income
c. Improperly Accumulated Earnings 10% Improperly Accumulated
Taxable Income
7. Exempt Corporation
a.On Exempt Activities 0%
b. On Taxable Activities 30% Net taxable income from
all sources
8. General Professional Partnerships 0%
9. Corporation covered by Special Rate specified
Laws under the
respective
special laws
10. International Carriers 2.5% Gross Philippine Billings
11. Regional Operating Head 10% Taxable Income
12. Offshore Banking Units (OBUs) 10% Gross Taxable Income On
Foreign Currency Transaction

30% On Taxable Income other than

Foreign Currency Transaction

13. Foreign Currency Deposit Units 10% Gross Taxable Income On

(FCDU) Foreign Currency Transaction

30% On Taxable Income other than

Foreign Currency Transaction
 Passive Income
1. Interest from currency deposits, trust funds and deposit
20%
substitutes
2. Royalties (on books as well as literary & musical
10%
composition)
In general 20%
3. Prizes (P10,000 or less ) 5%
In excess of P10,000 20%
4. Winnings (except from PCSO and lotto) 20%
5. Interest Income of Foreign Currency Deposit 7.5%
6. Cash and Property Dividends
To individuals from Domestic Corporations 10 %
To Domestic Corporations from Another Domestic
0%
Corporations
7. On capital gains presumed to have been realized from sale,
6%
exchange or other disposition of real property (capital asset)
8. On capital gains for shares of stock not traded in the stock

exchange
Not over P100,000 5%
Any amount in excess of P100,000 10%
9. Interest Income from long-term deposit or investment in the form
of savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments
evidenced by certificates
Exempt
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%