TAXES PAID BY INDIVIDUALS:

1. Taxable income (Sec. 31) - pertinent items of gross income less the deductions, and/or additional and personal exemptions, if any authorized by the NIRC.

2. Gross income tax (Sec. 32, A) – All incomes derived from whatever sourcesIt includes: CDPIRRDAPPP

Compensation from services rendered Derived from business or the exercise of profession Properties Interest Rent Royalties Dividends Annuities Prizes and Winnings Pension Partner’s share in the net income of a general professional partnership

It excludes: LAGCIRM Life insurance- Proceeds of insurance paid to the heirs or beneficiaries upon the death of the insured Amounts received by the insured- Amounts received as a return of premiums paid by him Gifts- Generally: The values of such property would be excluded—Except: In cases of transfers of dividend

interest, then such income would be included Compensation for injuries- Received through accident or health insurance Income exempt by treaties- Any kind, so long as it is required by any treaty of obligation, binding in the

Philippines Retirement benefits-Received by officials or employees not less than 50 years of age, for at least 10 years of

service to the same employer Miscellaneous Items- Incomes derived by the government, pries (only if the winner was selected without

any action on his part to join the contest and he is not required to render substantial services to receive the price.), benefits (provided it shall not exceed 30,000)

3. Final Income Tax/ Passive Incomes (Sec. 24, B)Imposed on: ICCC

Interests, Royalties, Prizes, and other winnings- I (20%), R (10%), P – EXCEPT those amounting to 10,000 or less (20%)

Cash and/or property dividends- 10% as of January 1, 2000 Capital gains from sale of shares of stocks not traded in stock exchange- Not over 100,000 (5%), for stocks

over 100,000 (10%) Capital gains from sale of real property- 6% of the selling price or market value, whichever is higher.

EXCEPT: sale of principal residence of natural persons, but if there is no full utilization of the proceeds of such sale, then it will be subject to final tax

CORPORATE INCOME TAX PAYERS:

1. Domestic corporations (Sec. 27)NORMAL INCOME TAX FOR DOMESTIC CORPORATIONS: Imposed with 35%-- But effective January 1, 2009, 30% of income tax, from all sources within & without the Philippines. Granted with the option to be taxed at 15% of gross income- Such option is only available to corporations whose ratio of cost of sale does not exceed 55%. If chosen, such

election shall be irrevocable for 3 consecutive years

MINIMUM CORPORATE INCOME TAX ON DOMESTIC CORPORATIONS: 2% of the total gross income at the end of every taxable year. - Sec. of Finance is authorized to suspend the imposition of the minimum income tax on any corporation which

SUFFERS LOSSES on account of prolonged labor dispute or because of force majeure.

Section 27 definitions:o Gross income- gross sales, less returns, discount and allowances and cost of goods sold (in case of

manufacturing)/ cost of service (in case of corporations engaged in sale of service)o Cost of goods sold- expenses directly incurred to produce the merchandise to their present location

a. Proprietary educational institution and hospital (Any private school maintained & administered by private individuals with permit to operate from Dept. of Education, Culture and Sports or DECS, Commission on Higher Education or CHED, of Technical Education and Skills Development Authority or TESDA) - Shall pay 10% of taxable income EXCEPT when the income derived from unrelated trade (conduct of which is not related to the exercise of the institution’s primary function) exceeds 50% of the total gross income

b. Government-owned and controlled corporations (Includes all corporations and instrumentalities controlled by the government, except GSIS, SSS PHIC and PCSO)- Shall pay such rate of tax upon their taxable income as are imposed by this Section upon corporation with similar activities

c. Intercorporate dividends (dividends received from another domestic corporation)- Not subject to any tax imposition.

2. Foreign corporations (Sec. 28)NORMAL INCOME TAX FOR RESIDENT FOREIGN CORPORATIONS: Subject to 35%-- But effective January 1, 2009, 30% of income tax, from all sources within the Philippines. Granted with the option to be taxed at 15% of gross incomeMINIMUM CORPORATE INCOME TAX ON FOREIGN CORPORATIONS: 2% of the total gross income at the end of every taxable year.

a. International carrier - Shall pay tax of 2 and ½ % on its Gross Philippine Billings (revenue derived from carriage of passenger, baggage, cargo, and mails, originating from the Philippines in a continuous flight, up to the final destination)

b. Offshore banking units - Shall be subject to the regular income tax payable by banks, provided that interests derived from foreign currency shall be subject for a final tax of 10%.

c. Branch profit remittance - Shall be subject to a tax of 15% based on the total profits applied for remittance.d. Intercorporate dividends- (from domestic corporation) Shall be subject to a final tax at the rate of 10%

NORMAL INCOME TAX FOR NON-RESIDENT FOREIGN CORPORATIONS: Subject to 35%-- But effective January 1, 2009, 30% of income tax, from all sources within the Philippines

a. Non-resident cinematographic owner, lessor or distributor- 25% of gross income from all sources within the Philippines.

b. Non-resident owner or lessor of vessels - Shall be subject to a tax of four and 1/2 % of the gross rentals and fees of the vessel

c. Non-resident owner or lessor of an aircraft- Subject to 7 and 1/2 % of gross rentals or fee.d. Interest on foreign loan- Final tax at the rate of 20% of the amount of interest.