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    Income Tax On Individual Taxpayers

    Uploaded by

    Yoite Miharu
    This document discusses income tax for individual taxpayers in the Philippines. It defines different types of individual taxpayers, including resident citizens, non-resident citizens, resident aliens, and non-resident aliens engaged or not engaged in trade or business. It also outlines the sources of taxable income for each type of taxpayer. There are several types of income taxes discussed, including final withholding tax on passive income, capital gains tax, and basic tax calculated using a graduated tax table. Passive income sources like interest, royalties, dividends, prizes, and winnings are outlined along with their applicable tax rates.

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    Income Tax On Individual Taxpayers

    Uploaded by

    Yoite Miharu
    1K views7 pages
    This document discusses income tax for individual taxpayers in the Philippines. It defines different types of individual taxpayers, including resident citizens, non-resident citizens, resident aliens, and non-resident aliens engaged or not engaged in trade or business. It also outlines the sources of taxable income for each type of taxpayer. There are several types of income taxes discussed, including final withholding tax on passive income, capital gains tax, and basic tax calculated using a graduated tax table. Passive income sources like interest, royalties, dividends, prizes, and winnings are outlined along with their applicable tax rates.

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    Individual Taxation

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    This document discusses income tax for individual taxpayers in the Philippines. It defines different types of individual taxpayers, including resident citizens, non-resident citizens, resident aliens, and non-resident aliens engaged or not engaged in trade or business. It also outlines the sources of taxable income for each type of taxpayer. There are several types of income taxes discussed, including final withholding tax on passive income, capital gains tax, and basic tax calculated using a graduated tax table. Passive income sources like interest, royalties, dividends, prizes, and winnings are outlined along with their applicable tax rates.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    1K views7 pages

    Income Tax On Individual Taxpayers

    Uploaded by

    Yoite Miharu
    This document discusses income tax for individual taxpayers in the Philippines. It defines different types of individual taxpayers, including resident citizens, non-resident citizens, resident aliens, and non-resident aliens engaged or not engaged in trade or business. It also outlines the sources of taxable income for each type of taxpayer. There are several types of income taxes discussed, including final withholding tax on passive income, capital gains tax, and basic tax calculated using a graduated tax table. Passive income sources like interest, royalties, dividends, prizes, and winnings are outlined along with their applicable tax rates.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 7

    Income Tax on Individual

    Taxpayers
    Person:
     Individual
     Income from Estate and Trusts

    Judicial Person:
     Partnership
     Corporation

    CLASSIFICATION OF INDIVIDUAL TAXPAYERS


    1. Resident Citizen (RC)
     Filipino
    2. Non-Resident Citizen (NRC)
     Citizens who:
    1. Establishes to the satisfaction of the CIR the fact of his physical presence abroad with a definite
    intention to reside therein; or
    2. Leaves the Ph during the taxable year to reside abroad
    o As an immigrant or
    o For employment on a permanent basis or
    o For work and derives income from abroad and whose employment thereat requires him to be
    physically abroad most of the time during the taxable year.
    3. Stayed outside the Ph for one hundred eighty-three days (183) or more by the end of the year.
    (183 and more/ half a year/ 6 months)
    4. Was previously a non-resident citizen and who arrives in the Ph at any time of the taxable year to
    reside permanently in the Ph
    5. He shall be considered a nonresident citizen for the taxable year in which he arrives in the Ph with
    respect to income derived from sources abroad until the date of his arrival in the Ph

    3. Resident Alien (RA)


    • Individual whose residence is within the Ph and who is not a citizen thereof.
    • Who lives in the Ph with no definite intention as to his stay
    • Who comes to the Ph for the purpose that requires extended stay for its accomplishment, regardless of
    his intention to return to his residence abroad

    4. Non-Resident Alien (NRA)


    a) Engaged in trade or business (ETB)
    o Aliens na may business sa Philippines (meaning may basic tax sila na ifafile sa ITR)
    o Aliens who stayed in the Ph for an aggregate period of more than 180 days during the taxable
    year and/or aliens who have business income in the Ph
    b) Not engaged in trade or business (NETB)
    o Aliens who stayed in the Ph for a period of 180 days or less during the taxable year.
    o NOT deriving business income in the Ph (final tax lang meron based on GROSS INCOME)

    SOURCE OF TAXABLE INCOME (always take note of this)

    Type of Individual Source


    Resident Citizen WITHIN AND OUTSIDE PH
    Non Resident Citizen
    Resident Alien
    WITHIN THE PHILIPPINES
    NRA-ETB
    NRA-NETB

    TYPES OF INCOME TAX


    1. Final Withholding Tax (FWT) On Passive Income
    2. Capital Gains Tax (CGT)
    3. Fringe Benefit Tax (FBT)
    4. Basic Tax
    FINAL withholding (FWT) tax on PASSIVE INCOME

    GENERAL PRINCIPLES
     Applicable only to passive income from sources within the Philippines.
     It is constituted as the full and final payment of the income tax due.

    NOTE: PASSIVE INCOME ABROAD IS BASIC TAX FOR RESIDENT CITIZEN

    Computation:

    Passive Income x rate = FWT

    KINDS OF PASSIVE INCOME

    Interest Income

    Taxpayer RATE

    Interest income from: RC 20%


    a) Bank deposit NRC
    b) Deposit substitute RA
    c) Trust funds NRA-ETB
    Taxpayer RATE
    Interest from a depositary bank under FCDU RC 15%* TRAIN
    * NIRC of 1997 RC and RA – 7.5% RA LAW
    NRC 0%
    NRA-ETB
    NRA-NETB
    SAE
    Taxpayer RATE
    Interest income from long-term deposit or RC 0%
    investment (at least 5 years maturity) NRC
    RA
    NRA-ETB
    In case of pre-termination of the above, depending RC
    on the holding period: NRC
    RA
    - 5 years or more (long-term) 0%
    NRA-ETB
    - 4 years to less than 5 years 5%
    - 3 years to less than 4 years 12%
    - Less than 3 years 20%

    NOTE: Other Income not included = BASIC TAX

    Royalties

    Taxpayer RATE
    Royalties from: RC 10%
    a) Books NRC
    b) Literary works RA
    c) Musical compositions NRA-ETB
    Other Royalties 20%

    Dividend Income
    Taxpayer RATE
    Dividend income from: RC 10%
    a) Domestic Corporation NRC
    b) Joint Stock Company RA
    c) Insurance or mutual fund companies
    d) Share in the distributable net income after tax of a NRA-ETB 20%
    partnership (except GPP)
    e) Share in the net income after tax of:
    1. Association
    2. Joint Account
    3. Taxable Joint Venture or Consortium

    Prizes

    Taxpayer RATE
    Amount is more than P10,000. RC 20%
    NRC
    NOTE: If the amount of the prize does not exceed P10,000, RA
    the same is subject to BASIC TAX. NRA-ETB

    Winnings

    Taxpayer RATE
    Philippine Charity Sweepstakes RC 20% in
    Lotto (PCSO) NRC excess of
    *NIRC of 1997 - 0% RA Php 10,
    NRA-ETB 000
    *TRAIN
    Law
    Other Winnings 20%

    CAPITAL GAINS TAX (CGT)

    KINDS OF CGT

    1. CGT on sale of shares of stock not traded in the stock exchange Capital asset
    2. CGT on sale of real property classified as capital asset. - Not related in
    NOTE: This is applicable to all INDIVIDUAL taxpayers. business

    CGT on Shares CGT on Real Property TAX BASE


    Selling Price Tax Base Gross Selling Price vs
    (Cost) X 6% Fair Market Value
    (Selling Expense) CGTax (higher)
    Net Gain
    X 15%
    CGTax
    BASIC TAX

    AMOUNT OF TAX (RC,NRC, RA, NRA-ETB)

    Gross Income
    (Allowable Deductions)
    Taxable Income
    Use Graduated Tax table
    to compute for income tax
    due

    Personal Income Tax for Compensation Income Earners

    (a) Taxable Compensation Income = Gross Compensation Income less Non-Taxable Income
    o Non Taxable Income includes:
    i. SMW, holiday pay, overtime pay, night shift differential and hazard pay of MWE
    ii. First 90,000 of 13mont pay and other benefits
    iii. De minimis fringe benefits
    Deductions to
    iv. Employee’s share of SSS, GSIS, Philhealth, PAG-IBIG and
    compensation
    v. Union Dues
    income

    Personal Income Tax for Purely Self Employed & Professionals (may sariling business)

    I. If gross sales or receipts & other non-operating income < PHP 3M VAT threshold

    OPTION 1

    OPTION 2

    OR
    I. If gross sales or receipts & other non-operating income > PHP 3M VAT threshold

    Personal Income Tax for Mixed Income Earners

    COMPENSATION (same method) ADD TO BUSINESS INCOME

    Computation for Business Income:


    < PHP 3M VAT threshold

    > PHP 3M VAT threshold

    INCOME TAX APPLICABLE TO NRA-NETB (FINAL TAX)


    Gross Income, Phils. PXXX
    Rate 25%
    FWT PXXX
    Problem1
    Soobin, resident citizen, single had the following during the year
    Gross compensation income Php 350, 000
    Deductions from compensation income:
    i. SSS contribution 3, 600
    ii. Pag-ibig Contribution 1, 200
    iii. Philhealth Contribution 1, 800
    iv. Union dues 2, 400
    v. PHHI (Php 250/month) 3, 000
    th
    13 month pay 50,000
    Christmas bonus 30, 000
    Productivity bonus 15, 000
    Other income
    i. Prizes and awards received as best athlete
    in the Palarong Pambansa 10, 000
    ii. Prizes and awards received for the silver medal
    in the South East Asian Games 25, 000
    iii. Prize won in a Supermarket raffle 10, 000
    iv. Prize won as a Lucky Home Viewer 20, 000
    v. Interest on bank deposit (net of 20% fwt) 16, 000
    vi. Interest on foreign currency deposit (net of 15% fwt) 12,750
    How much is the income tax due for the taxable year?

    Problem 2
    Mr. Choi (RC), Advertising Director of Binah Corporation has the folowing records for his income from
    employment and souvenir shop business in 2018:
    Annual Compensation Income, including 13th Month Pay and Other Benefits of P170,000.00, but net of
    mandatory contributions to SSS, Philhealth and HDMF P2,400,000.00 Gross Sales - Souvenir Shop
    1,700,000.00 Non-operating Income 85,000.00 Cost of Sales 700,000.00 Operating Expenses 300,000.00

    A. Mr. Adrien opted to be taxed at 8% income tax rate on his gross sales for his income from business.
    Determine Mr. Adrien's income tax due for 2018?
    B. Assume that Mr. Adrien did not signify his intention to be taxed at the 89% income tax rate based on
    gross sales and other non-operating income. Compute for Mr. Adrien's income tax due for the year.

    C. Mr. Adrien filed his resignation from employment in March 2019. Up to that month, his total
    compensation income totalled P480,000.00 inclusive of P80,000.00 benefits. Assume that his
    business operations for 2019 were the same as last year. For 2019, he opted for the 8% income tax
    rate. What will be the total income tax due of Mr. Adrien for the year 2019?

    Problem 3
    RF Refozar had the following data for the taxable year 2019; (Exchange rate
    $1– Php50)
    Philippines Abroad
    Salaries Php 165, 000 $ 2, 000
    Income from business 450, 000 6, 000
    Business expense 120, 000 1,500
    Interest income:
    Personal receivable 10, 000
    From expanded FCDS $ 2, 500
    On bank deposits (20% long-term) 25, 000 3, 000
    Royalty income (20% from books) 22, 000 1, 000
    Prize won in contest 10, 000
    Dividend income from domestic corporation 7, 000 Winnings from
    Charity Sweepstakes 80, 000

    RF Refozar is married with five (5) children as dependents


    1. How much is RF Refozar’s total taxable income?
    2. How much is RF Refozar’s total tax due/payable?
    3. How much was the final withholding taxes payable?
    4. If he is a Non-resident citizen, how much is his total final withholding tax on passive income?
    5. If he is a Resident Alien, how much is RF Refozar’s Total taxable income?
    6. If he is a Non-Resident Alien – engaged in trade or business, how much is his total creditable withholding tax?
    7. If he is a Non-Resident Alien not engaged in trade of business, how much is the creditable withholding tax?
    8. If he is a Non-Resident Alien not engaged in trade of business, how much is the final withholding tax?

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