INCOME TAXATION OF INDIVIDUALS: CITIZENS

CITIZENSRESIDENT NON-RESIDENTS

Definition Sec 22 (E)

Tax Code Reference Sec 24

Tax Base

Tax Rates - In general

Tax Rates - On Passive Incomes (subject to Final Taxes [FT])

20% FT 20% FT

7.5% FT EXEMPT [Sec 2.24 RR 10-98 ]

EXEMPT EXEMPT

Other interest income derived within the Philippines 5% - 34%, 33%, 32% 5% - 34%, 33%, 32%Other interest income derived outside the Philippines 5% - 34%, 33%, 32% EXEMPTRoyalties - in general 20% FT 20% FT

10% FT 10% FT

Prizes - more than P10,000 20% FT 20% FTPrizes - P10,000 or less 5% - 34%, 33%, 32% 5% - 34%, 33%, 32%Prizes - PCSO & Lotto winnings EXEMPT EXEMPT

Other prizes or winnings within the Philippines 20% FT 20% FTOther prizes or winnings outside the Philippines 5% - 34%, 33%, 32% EXEMPT

5% - 34%, 33%, 32% 5% - 34%, 33%, 32%

5% / 10% FT 5% / 10% FT

1/2 of 1% FT (Percentage Tax) 1/2 of 1% FT (Percentage Tax)

6% FT 6% FT

On real property sold to the government - subj to option 6% FT or 5% - 34%, 33%, 32%

EXEMPT subj to certain conditions EXEMPT subj to certain conditions

Atty. Marissa O. Cabreros (Ateneo School of Law) January 2011

1. A citizen of the Philippines who establishes to the satisfaction of the Commissioner that fact of his physical presences abroad with definite intention to reside therein.

2. 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.

3. 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.

4. A citizen who has been previously considered as non-resident citizen who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a nonresident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines.

Sec 24 ( income w/in the Philippines) Sec 23 ( income outside Philippines)

taxable income earned from all sources within and without the Philippines

taxable income from all sources within the Philippines

5% - 34 % in 1998 5% - 33% in 1999 5% - 32% in 2000 5% - 32%

thereafter

5% - 34% in 1998 (for income w/in the Phils) 5% - 33% in 1999 (for income w/in the Phils)

5%- 32% in 2000 (for income w/in the Phils) 5% - 32% thereafter (for income w/in the Phils)

Interest on any currency bank deposit and yield or any other monetary benefit from deposit substitutes [Sec 22(Y)] and from trust fund and similar arragementsInterest from a depository bank under the expanded foreign currency deposit system [RR 10-98]Interest on long term deposit or investment [Sec 22(FF)] in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the BSP

Pre-terminated long term investment (should actually based on expired term)

4 yrs to < 5 years -- 5%FT 3 years to < 4 years -- 12%FT

Less than 3 years -- 20%FT

4 yrs to < 5 years -- 5%FT 3 years to < 4 years -- 12%FT

Less than 3 years -- 20%FT

Royalties on books, other literary works and musical compositions

Cash and/or Property Dividends from a domestic corp or share in distributable net income after tax of a partnership (except general professional partnerhip), association, joint account, or joint venture or consortium taxable as corporation

6% FT beginning Jan 1, 1998 8% FT beginning

Jan 1, 1999 10% FT beginning Jan 1, 2000

6% FT beginning January 1, 1998 8% FT beginning January 1, 1999

10% FT beginning January 1, 2000

Other Cash and/or Property Dividends (e.g. from a foreign corp)On domestic shares of stock not traded through local stock exchange (based on net capital gains)On shares of stock traded through local stock exchange (based on gross selling price) [Sec 127(A) & (D)]On real property (based on gross selling price or FMV whichever is higher) - In general

6% FT or 5% - 34% 33%, 32%

On real property sold to acquire or construct new principal residence

INCOME TAXATION OF INDIVIDUALS: ALIENS

ALIENSNON-RESIDENT ALIEN

RESIDENT ALIEN ENGAGED IN BUSINESS

Definition Sec 22 (F) Sec 22 (G) / Sec 25 (A)(1) Sec 22 (G)

Tax Code Reference Sec 24 Sec 25 (A) Sec 25 (B)

Tax Base

Tax Rates - In general 25%FT

Tax Rates - On Passive Income (subject to Final Tax [FT])

20% FT 20% FT 25% FT

7.5% FT

EXEMPT EXEMPT 25% FT

25% FT

Other interest income derived within the Philippines 5% - 34%, 33%, 32% 20%FT 25% FTOther interest income derived outside the Philippines EXEMPT EXEMPT EXEMPTRoyalties - in general 20% FT 20% FT 25% FTRoyalties on books, other literary works and musical compositions 10% FT 10% FT 25% FT

20% FT 25% FT 25% FTPrizes - more than P10,000 20% FT 20% FT 25% FTPrizes - P10,000 or less 5% - 34%, 33%, 32% 5% - 34%, 33%, 32% 25% FTPrizes - PCSO and Lotto winnings EXEMPT EXEMPT

Other prizes or winnings within the Philippines 20% FT 20% FT 25% FTOther prizes or winnings outside the Philippines EXEMPT EXEMPT EXEMPT

20% FT 25% FT

5% - 34%, 33%, 32% 5% - 34%, 33%, 32% 25%FT

EXEMPT EXEMPT EXEMPT

5% / 10% FT 5% / 10% FT 5% / 10% FT

1/2 of 1% FT (Percentage Tax) 1/2 of 1% FT (Percentage Tax) 1/2 of 1% FT (Percentage Tax)

6% FT 6% FT 6% FT

On real property sold to the government - subj to option

EXEMPT subj to certain conditions

Atty. Marissa O. Cabreors (Ateneo School of Law) January 2011

NOT ENGAGED IN BUSINESS

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

An individual whose residence is not within the Philippines and who is not a citizen thereof but stays in the Philippines for an aggregate period of more than 180 days during any calendar year

An individual whose residence is not within the Philippines and who is not a citizen thereof but stays in the Philippines for an aggregate period of or less than 180 days during any calendar year

taxable income earned from all sources within the Philippines

taxable income earned from all sources within the

Philippines

gross income from all sources within the Philippines

5% - 34 % in 1998 5% - 33% in 1999

5% - 32% in 2000 5% - 32% thereafter

5% - 34 % in 1998 5% - 33% in 1999 5% - 32% in 2000 5% - 32%

thereafter

Interest on currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arragements

Interest from a depository bank under the expanded foreign currency deposit system

EXEMPT Sec 27(D)(3)

Sec 2.27(c)RR 10-98

EXEMPT Sec 27(D)(3)

RR 10-98Interest on long term deposit or investment [Sec 22(FF)] in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the BSP Pre-terminated long term investment (should actually based on expired term)

4 yrs to < 5 years -- 5% 3 years to < 4 years -- 12% Less than 3 years

-- 20%

5 yrs to < 5 years -- 5% 3 years to < 4 years --

12% Less than 3 years -- 20%

Royalties on cinematographic films and similar works [Sec 28(B)(2)]

EXEMPT Sec 27(D)(3)

RR 10-98

Cash and/or Property Dividends from a domestic corp or share in distributable net income after tax of a partnership (except a general professional partnership), association, joint account, or joint venture or consortium taxable as corporation

6% FT beginning Jan 1, 1998 8% FT

beginning Jan 1, 1999 10% FT beginning Jan 1, 2000

Other Cash and/or Property Dividends (e.g. from a foreign corp in the Philippines)Other Cash and/or Property Dividends (e.g. from a foreign corp NOT in the Philippines)On domestic shares of stock not traded through local stock exchange (based on net capital gains)On shares of stock traded through local stock exchange (based on gross selling price) [Sec 127(A) & (D)]On real property (based on gross selling price or FMV whichever is higher) - In general

6% FT or 5% - 34% 33%, 32%

6% FT or 5% - 34% 33%, 32%

6% FT or 5% - 34% 33%, 32%

On real property sold to acquire or construct new principal residence

N/A RR 13-99

N/A RR 13-99

INCOME TAXATION OF CORPORATIONS

CORPORATIONSRESIDENT NON-RESIDENT

DOMESTIC FOREIGN FOREIGNDefinition Sec 22 (B) & (C ) Sec 22 (H) Sec 22 (I)

Tax Code Reference Sec 27 Sec 28 (A) Sec 28 (B)Tax Base

Tax Rates - In general

Tax Rates - on Passive Income (Subject to Final Tax [FT])20% FT 20% FT

Interest on foreign currency deposit system 7.5% FT 7.5% FT EXEMPTN/A N/A 20% FT

Interest Income received by a FCDUEXEMPT [RA No. 9294] EXEMPT [RA No. 9294] N/A

10% FT 10% FT N/A

Interest Income received by an OBUN/A EXEMPT [RA No. 9294] N/A

N/A 10% FT N/A

Royalties 20% FT 20% FT

Dividends EXEMPT EXEMPT 15% FT (conditional)Tax Rates - on capital gainsOn shares of stock not traded (based on net capital gains) 5% / 10% FT 5% / 10% FT 5% / 10% FTOn Land or Buildings (classified as capital assets)

Tax Rate - Minimum Corporate Income Tax (MCIT) 2% 2% N/ATax Rate - Branch Profit Remittance Tax (BPRT) N/A 15% N/ATax Rate - Improperly Accumulated Earnings Tax (Sec 29) 10% 10% N/AAtty. Marissa O. Cabreros (Ateneo School of Law) January 2011

Applies to corporation created or organized in the Philippines or under its laws

Applies to foreign corporation engaged in trade or business within the Philippines

Applies to a foregin corporation not engaged in trade or business within the Philippines

taxable income from all sources within and without

the Philippines

taxable income from all sources within the Philippines

gross income from all sources within the Philippines

34% in 1998 33% in 1999 32% in 2000-2005

35 % in 2006-2008

30% in 2009 & thereafter

34% in 1998 33% in 1999 32% in 2000-2005

35 % in 2006-2008

30% in 2009 & thereafter

34% in 1998 33% in 1999 32% in 2000-2005

35 % in 2006-2008

30% in 2009 & thereafter

Interest on any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arragements

34% in 1998 33% in 1999 32% in 2000-2005

35 % in 2006-2008

30% in 2009 & thereafter

Interest Income on Foreign Loans contracted on or after August 1, 1986

Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with nonresidents, offshore banking units in the Philippines, local commercial banks including branches of foreign banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with foreign currency deposit systemInterest income from foreign currency loans granted by such depository banks under said expanded system to residents other than offshore banking units in the Philippines or other depository banks under the expanded system

Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with nonresidents, offshore banking units in the Philippines, local commercial banks including branches of foreign banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with foreign currency deposit systemInterest income from foreign currency loans granted to residents other than offshore banking units or local commercial banks, including local branches of foreign banks that may be authorized by BSP to transact with offshore banking units 34% in 1998

33% in 1999 32% in 2000-2005

35 % in 2006-2008

30% in 2009 & thereafter

6% FT based on gross selling price

or FMV whichever is higher

34% in 1998 33% in 1999 32% in 2000-2005

35 % in 2006-2008

30% in 2009 & thereafter

34% in 1998 33% in 1999 32% in 2000-2005

35 % in 2006-2008

30% in 2009 & thereafter

INCOME TAXATION: SPECIAL RULES

SPECIAL RATES FOR CERTAIN ALIEN INDIVIDUALS

SPECIAL RATES FOR CORPORATIONSDOMESTIC CORPORATION

10% on taxable income35%

GOCC, Agencies and Instrumentalities 32%

GSIS / SSS / PHIC / PCSO EXEMPTDepository Banks 10%

RESIDENT FOREIGN CORPORATIONInternational Air Carriers 2 1/2 % on Gross Philippine BillingsInternational Shipping 2 1/2 % on Gross Philippine BillingsOffshore Banking Units 10%

EXEMPT

Regional or Area Headquarters EXEMPTRegional Operating Headquarters 10% on taxable income

NON RESIDENT FOREIGN CORPORATIONCinematographic Film Owner, Lessor or Distributor 25% on Gross Income

4.5% on Gross Rentals

7.5% on Gross Rentals

Atty. Marissa O. Cabreros (Ateneo School of Law) January 2011

Alien Employed by Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies [Sec 25 (C )]

15% on gross income on salaries, wages,

annuities, compensation,

remuneration and other emoluments such as honoraria and allowances

5% - 34%, 33%, 32% [regular tax rate] or FT rate for any other income earned from all other

sources within the Philippines

Alien Individual Employed by Offshore Banking Units [Sec 25 (D)]

Alien Individual Employed by Petroleum Service Contractor and Subcontractor [Sec 25(E)]

Proprietary Educational Institutions and Hospitals on entire taxable income, if total gross income from

unrealted trade, business, or activity exceed 50% of total incomesame tax rate upon their taxable income in a similar business, industry or activity

on interest income from foreign currency transactions including interest income from foreign loans

any interest income derived from foreign currency loans granted to residents other than offshore banking units or local commercial banks, including local branches of foreign banks that may be authorized by the BSP to transact business with offshore banking units

income derived by offshore banking units authorized by the Bangko Sentral ng Pilipinas (BSP), from foreign currency transactions with nonresidents, other offshore banking units, local commercial banks, including branches of foreign banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with offshore banking units

Owner or Lessor of Vessel Charted by Philippine NationalsOwner or Lessors of Aircraft, Machineries and Other Equipment