Taxation On Individuals

TAXATION ON
INDIVIDUALS
JBCG
Classification of Individuals
■ Citizens
– Resident Citizen
– Non-Resident Citizen
■ Aliens
– Resident Alien
– Non-Resident Alien
■ Engaged in Trade or Business in the Philippines
■ Not Engaged in Trade or Business in the Philippines
Earning Purely Compensation Income
■ Individuals earning purely compensation income

shall be taxed based on the graduated income tax
rates.
Self-Employed Individuals and/or Professionals
Self-employed individuals and/or professionals shall

have the options to be taxed at:
a. graduated income tax rate on taxable income or
b. an eight percent (8%) tax on gross sales or gross
receipts and other non-operating income in excess of
Two hundred fifty thousand pesos (P250,000) in lieu of
the graduated income tax rates and the percentage tax.
Mixed Income Earners
■ All income from compensation
■ All income from business or practice of profession
– If total Gross Sales and/or gross receipts and other
non-operating income do not exceed the VAT
Threshold.
– If total Gross Sales and/or gross receipts and other
non-operating income exceed the VAT Threshold.
Optional Standard Deductions
(OSD) for Individual Taxpayers
■ In lieu of the deductions allowed (itemized), an
individual subject to tax under Section 24, other than
a nonresident alien, may elect a standard deduction in
an amount not exceeding forty percent (40%) of his
gross sales or gross receipts, as the case may be.
■ Unless the taxpayer signifies in his return his
intention to elect the optional standard deduction, he
shall be considered as having availed himself of the
itemized deductions allowed.
■ An individual who is entitled to and claimed for the
optional standard deduction shall not be required to
submit with his tax return such financial statements
otherwise required under the Tax Code.
■ The said individual shall keep such records
pertaining to his gross sales or gross receipts.
Illustration
■ Mr. JBCG signified he is going to be taxed at 8% income tax rate
on gross sales in his 1st quarter filing of ITR. However, his gross
sales during the taxable year 2022 has exceeding Php3,000,000.
Q1 Q2 Q3 Q4
Total Sales Php 500,000 Php 500,000 Php 2,000,000 Php 3,000,000
Less: Cost of 300,000 300,000 1,200,000 1,200,000

Sales
Operating 120,000 120,000 480,000.00 720,000
Expenses
Requirements:
■ Compute the quarterly income tax payable and show
the due dates.
■ Compute the income tax due when the final or
adjusted return is filed and show the due date.
■ Compute the percentage tax, if any.
■ Compute the VAT, if any.
Illustration
A resident alien individual supports two (2) qualified dependent adopted children and a foster
child. He asks you to assist him in the preparation of his tax return for his income in 2018. He
provides you the following information:
■ Gross business income, Philippines (gross sales, P3,000,000) P 1,000,000
■ Gross business income, Japan (gross sales, P7,000,000) 5,000,000
■ Business expenses, Philippines 200,000
■ Business expenses, Japan 800,000
■ Philippine Charity Sweepstakes winnings 500,000
■ Japanese Sweepstakes winnings 400,000
■ Interest income, Bank of Tokyo, Japan 100,000
■ Interest income received from a depository bank under EFCDS, Philippines 300,000
■ Interest on peso bank deposit, Philippines 100,000
■ Income taxes paid for the first three (3) quarters 50,000
Questions
■ Can the taxpayer avail of the 8% income tax rate?
■ How much was the taxable net income and income
tax due if he avails of the 8% income tax rate?
■ How much was the final tax on passive income?
■ Assuming the taxpayer failed to avail of the 8%
income tax, how much is his taxable income and the
income tax due?
DE MINIMIS BENEFITS
■ Providing de minimis benefits to employees regardless of
their job position is also a common strategy to retain talent.
■ By definition, these are facilities or privileges furnished or
offered by an employer to the employees that are relatively
of small value merely as means of promoting health,
goodwill, contentment, and efficiency.
■ These benefits, which are minor perks and rewards with set
thresholds on value, are tax-exempt and therefore excluded
from the employee’s taxable income.
DE MINIMIS BENEFITS
The following are considered as de minimis benefits
based on Revenue Regulations No. 11-2018, the
implementing regulations of the TRAIN Law, which
became effective on January 1, 2018:
■ Monetized unused vacation leave credits of private
employees not exceeding 10 days during the year.
■ Monetized value of vacation and sick leave credits
paid to government officials and employees.
DE MINIMIS BENEFITS
■ Medical cash allowance to dependents of employees, not
exceeding P1,500 per employee per semester, or P250 per month.
■ Rice subsidy of P2,000 or one 50-kilogram sack of rice per month
amounting to not more than P2,000.
■ Uniform and clothing allowance not exceeding P6,000 per annum.
■ Actual medical assistance, e.g., medical allowance to cover
medical and health needs, annual medical/executive check-up,
maternity assistance, and routine consultations, not exceeding
P10,000 per annum.
■ Laundry allowance not exceeding P300 per month.
DE MINIMIS BENEFITS
■ Employee achievement awards under an established written
plan, e.g., for length of service or safety achievement,
which must be in the form of tangible personal property
other than cash or gift certificates, with an annual monetary
value not exceeding P10,000.
■ Gifts given during Christmas and major anniversary
celebrations not exceeding P5,000 per annum.
DE MINIMIS BENEFITS
■ Daily meal allowances for overtime work and
night/graveyard shifts not exceeding 25% of the basic
minimum wage on a per region basis.
■ Benefits by virtue of a collective bargaining agreement
(CBA) and productive incentive schemes, provided that the
total monetary value received from both CBA and
productivity schemes combined does not exceed P10,000
per employee per year.
DE MINIMIS BENEFITS
■ The thresholds set under the rules should be taken into
consideration to qualify for the tax exemption. Any excess
amount over the ceilings will form part of other benefits
which are tax-exempt up to P90,000. Anything in excess of
the P90,000 limitation is subject to income tax and,
therefore, subject to withholding tax on compensation in
the case of a rank-and-file employees or fringe benefits tax
(FBT) in the case of supervisors and managers.
THANK YOU!

Taxation On Individuals

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TAXATION ON

■ Individuals earning purely compensation income

Self-employed individuals and/or professionals shall

Less: Cost of 300,000 300,000 1,200,000 1,200,000

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