Taxes on Individuals

Non-resident Citizen (NRC)- 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§ Leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis§ 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 (183 days and above)§ Has been previously considered as NRC and who arrives in the Philippines at any time during the taxable year to reside permanently in the PhilippinesL NRC 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- The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be

Resident Alien- An individual whose residence is within the Philippines and who is not a citizen

Non-resident Alien- An individual whose residence is not in the Philippines and is not a citizen

Non-resident Alien Engaged in Trade or Business- A non-resident alien individual who come to the Philippines and stay therein for an aggregate period of more than 180 days

Ordinary income- Includes any gain from sale or exchange of property which is not capital asset or property

Ordinary loss- Includes any loss from sale or exchange of property which is not capital asset or property

TAXES ON INDIVIDUALS

Taxable Sources of IncomeTax RateTax Base

Resident CitizenWithin and outside the Philippines5 – 32%Taxable IncomeNon-resident CitizenWithin the Philippines5 – 32%Taxable IncomeOCWWithin the Philippines5 – 32%Taxable IncomeResident AlienWithin the Philippines5 – 32%Taxable IncomeNon-resident Alien Engaged in Trade or BusinessWithin the Philippines5 – 32%Taxable IncomeNon-resident Alien Not Engaged in Trade or BusinessWithin the Philippines25% Final TaxGross IncomeAlien individual employed by regional or area headquarters and regional operating headquarters of multinational companies*Within the Philippines15% Final TaxGross IncomeAlien individual employed by Offshore Banking Units* Within the Philippines15% Final TaxGross IncomeAlien individual employed by petroleum service contractor and subcontractor*Within the Philippines15% Final TaxGross Income

* - Rule on reciprocity applies

Rule on Reciprocity

- The same tax treatment shall apply to Filipinos employed and occupying the same positions as those of aliens

Tax Rates on Passive Income- Tax rates on passive income are final taxes- Passive income not included in the gross income for the purpose of computing the taxable income

Resident Citizen, Non-resident Citizen, Resident Alien, Non-resident alien engaged in trade or businessNon-resident alien not engaged in trade or businessInterest on bank deposits (peso accounts)Less than 3 years – 20%3 years to less than 4 years – 12%4 years to less than 5 years – 5%5 years or more – exempt25%Royalties, except on books, other literary works and musical composition10%25%Prizes and winnings of more than 10,00020%25%Prizes and winnings of 10,000 or lessIncluded in the gross income25%Interest on foreign currency depositary units (FCDU)7.5%25%Cash and/or property dividends10%25%

Capital Gains from Sale of Shares of Stock- Net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the Philippine Stock Exchange

Tax on Capital Gains from Sale of Shares of Stock

Resident Citizen, Non-resident Citizen, Resident Alien, Non-resident alien engaged in trade or businessNon-resident alien not engaged in trade or businessNot over 100,0005%25%On any amount in excess of 100,00010%25%

Capital Gains from Sale of Real Property- Capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts- Exception:§ Capital gains presumed to have been realized from the sale or disposition of principal residence by natural persons, the proceeds of which is fully utilized in acquiring or constructing a new principal residence within eighteen (18) calendar months from the date of sale or dispositionL Historical cost or adjusted basis of real property sold or disposed of shall be carried over to the new principal residence built or acquiredL The Commissioner should be duly notified by the taxpayer within 30 days from the date of sale or disposition through a prescribed return of his intention to avail of the tax exemptionL Tax exemption can only availed of once every 10 years§ If there is no full utilization of the proceeds of the sale or disposition, the portion of the gain presumed to have been realized from the sale or disposition shall be subject to capital gains taxL The higher of FMV at the time of sale or selling price, shall be multiplied by a fraction which the unutilized amount bears to the gross selling price in order to determine the taxable portion and the capital gains tax- Capital gains tax shall be final tax of 6%, based on the higher of, gross selling price or fair market value at the time of sale