PART1:

INDIVIDUAL
TAXPAYER
Cuadro, Justine Mae
Gensaya, Sheehan Kim V.
Teope, Emerliza D.
BSA-2
 LEARNING OBJECTIVES
● To be able to identify the classification of
the tax payer.
● To be able to know how the graduated tax
table is used.
● Expected to know the tax options
● To know the items subjected to final
withholding tax and its percentages.
 INDIVIDUAL TAXPAYER
● CLASSIFICATION OF TAX PAYER
● Resident Citizen
● Nonresident citizen
● Compensation income
● Resident Alien
● Tax on individual with
● Nonresident Alien
business
● Engage in Trade and
● Mixed income earners
Business ● Capital Gains Tax
● Not Engage in Trade and
Business
● Special Employees
● Individual Taxpayer Exempt
● Situs of taxation
● Passive income
 CLASSIFICATION OF INDIVIDUAL
INCOME TAXPAYERS
TAXPAYER TAX BASE TAX RATE TAXABLE SOURCE

Resident Citizen Net Income Graduated Within or without the PH

Non-Resident Citizen Net Income Graduated Within only

Resident Alien Net Income Graduated Within only

Non-Resident Alien - ETB Net Income Graduated Within only

Non-Resident Alien - NETB Gross Income Final Tax (25%) Within only

Special Employees

Reporter: Teope, Emerliza

 CITIZEN
 Citizen of the Philippines at the time of adoption
of the February 2, 1987 constitution .
 Those whose fathers or mothers are citizen of
the Philippines.
 Those born before January 17, 1973 of Filipino
mothers, who elect Philippine citizenship .
 Those who are naturalized in accordance with
law.
Reporter: Teope, Emerliza
 NON-RESIDENT CITIZEN
 A citizen of the PH who establishes, to the satisfaction of the Commissioner of
Internal Revenue the fact of his/her physical presence abroad with a definite
intention to reside therein
 A citizen of the PH who leaves the Philippines during the taxable year to reside
abroad either as an immigrant; or for employment on a permanent basis
 A citizen of the PH who works and derives income from abroad and whose
employment there act requires him/her to be physically present abroad most of
the time during the taxable year.
 A citizen who has been previously considered as non-resident citizen and who
arrives in the PH at any time of the taxable year to reside permanently in the PH
shall likewise be treated as non-resident citizen for the taxable year in which
he/she arrives in the PH with respect to his/her income derived from sources
abroad until the date of his/her arrival in the PH.
 The taxpayer shall submit proof to the commissioner to show his/her intention of
leaving the PH to reside permanently abroad or to return to and reside in the PH,
as the case may be. Reporter: Teope, Emerliza
 RESIDENT ALIEN
 An individual whose residence is within the Philippines
and who is not a citizen thereof.
 He/she is one who is actually present in the Philippines
and who is not mere transient or sojourner.
 He/she is one who lives in the Philippines with no definite
intention as to his/her stay.
 He/she is one who comes to the Philippines for the
purpose that requires extended stay for its
accomplishment so he/she makes his/her home
temporarily in the Philippines.
Reporter: Teope, Emerliza
 NON-RESIDENT ALIEN
 An individual whose residence is not within the
PH and who is not a citizen thereof.
 He/she is one who comes to the PH for a definite
purpose which in its nature may be promptly
accomplished.
 He/she is one who is mere transient or sojourner.

Reporter: Teope, Emerliza

 NON-RESIDENT ALIEN - ETB
 Aliens who have business income in the Philippines.
 Aliens who stayed in the Philippines for an aggregate
period of more than 180 days during the taxable
year.
NON-RESIDENT ALIEN - NETB
 Aliens who don’t have business income in the
Philippines.
 Aliens who stayed in the PH for an aggregate period
of 180 days or less during the Reporter:
taxable year.
Teope, Emerliza
 SPECIAL EMPLOYEES
 Regional Headquarters (RHQ’s)and Regional
Operating Headquarters (ROHQ’s) of
multinational entities in the Philippines that are
engaged in international trade with affiliates and
subsidiary branch offices in the Asia-Pacific
region.
 Offshore banking units
 Petroleum contractors and sub-contractors .
Reporter: Teope, Emerliza
INDIVIDUALS EXEMPT FROM INCOME
TAX
1. Non-Resident Citizen
2. Overseas Contract Workers (OFW), including Overseas
Seaman
3. Barangay Micro Business Enterprise (BMBE)
4. Personal Equity and Retirement Account (PERA)
5. Philippine nationals and alien individuals employed by
foreign governments, embassies, diplomatic missions,
and international organizations situated in the Philippines
6. Minimum Wage Earners
7. Senior Citizen????
Reporter: Teope, Emerliza
BMBE -any enterprise engaged in the production, processing, or
manufacturing of products or commodities, including agro-processing,
trading and services, whose assets including those arising from loans but
exclusive of the land on which the particular business entity’s office plant
and equipment are situated, should not be more than PHP 3,000,000.

PERA -an individual’s voluntary retirement account established from

his/her PERA contribution and/or his/her employer contributions, for the
purpose of being invested solely in an eligible PERA investment product
(e.g. unit investment trust fund, mutual fund, annuity contract, pension
plan, share of stocks traded in local stock exchange, exchange traded
bonds, government securities) duly approved by the concerned regulatory
authority (i.e. BSP, SEC, Office of the Insurance Commission)

COLA -Cost of Living Allowance

Reporter: Teope, Emerliza
 CATEGORIES OF INCOME
Compensation Income Income Tax

Business Income Income Tax

Mixed Income Income Tax

Passive Income Final Tax
Capital Gains from Sale of Share
of Stocks, not traded thru Local Capital Gains Tax
Stock Exchange
Capital Gains from Sale of Real Capital Gains Tax
Properties
Fringe Benefit Fringe Benefit Tax
Reporter: Teope, Emerliza
 CATEGORIES OF INCOME
INCOME

ACTIVE PASSIVE CAPITAL

GAINS

 COMPENSATION  INTEREST  SHARES

 BUSINESS  WINNINGS  LANDS
 PROFESSIONAL

INCOME TAX FINAL TAX CAPITAL GAINS TAX

 PASSIVE INCOME
PASSIVE INCOME -earned with very minimal involvement
form the taxpayer and is generally irregular in timing and
amount.
“Their existence can be difficult to predict while their actual
amount may be difficult to determine. Thus, the final
withholding at source is the most favored scheme in taxing
items of passive income.”

FINAL TAX -tax withheld at source. The amount of income

tax that is withheld by a withholding agent is constituted as
full and final payment of the income tax due from the payee
on said income. Reporter: Teope, Emerliza
 PASSIVE INCOME

PASSIVE
INCOME
FINAL TAX REMIT

WITHHOLDING
PAYEE AGENT/ PAYOR BIR

Reporter: Teope, Emerliza

 PASSIVE INCOME
RC/RA/NRC NRA-ETB
Interest
Yields
Royalties
Prizes
20% 20%
Winnings
Dividends
Share in Net Income
 Partnership
 Association 10% 20%
 Joint Account
 Joint Venture

Reporter: Teope, Emerliza

 PASSIVE INCOME
It is subject to final withholding taxes are certain passive income from sources within the
Philippines as enumerated under Section 24(B) of the tax code.

Note!
This passive income are not subject to graduated tax rate or basic income tax but to be subject
to withholding tax rate.

Passive income : Philippines Sale of capital asset: SUBJECT TO

• Interest income CAPITAL GAINS TAX
• Dividend income • Capital gains from sale of share of
• Royalties domestic corporation not traded in
• Prizes; and the local stock exchange [Sec. 24(C)
• Other winnings NIRC];
• Capital Gains from sale of real
Type of Income Applicable tax
property in the Philippines.
Basic income Graduated Tax
Passive, PH FWT
Capital gain (CGT) CGT
Reporter: Cuadro, Justine Mae
 SELF- EMPLOYED/ PROFESSIONAL (SEP)
SEP amounting to more than P250,00 in a taxable year but with a gross sales/receipts and
other non-operating income not exceeding the revised VAT threshold of P3,000,000 shall
have the option to avail of 8% tax on gross sales or receipts and other operating income in
LIEU of the graduated income tax rate and business tax under Section 116 of the tax
code.
Formula:
Gross sale/ receipt xx
+ Non operating income xx
Net taxable income xx

PURELY SEP WITH GROSS SALES/RECEIPT:

Equal or below P3,000,000

* Graduated Income tax
* 8% tax on Gross Sales/ Receipt and other operating income excess of P250,000
Above P3,000,000
* Regular Income Tax

Reporter: Cuadro, Justine Mae

 INDIVIDUAL TAX PAYER
Persons required to file income tax return
1.With business
2.Self-employed
3.Practice of profession

Tax rates options:

1.Graduated rates
2.8% tax on GSRONOI in excess of 250,000

Reporter: Gensaya, Sheehan

GRADUATED RATES
Gross Sales/Receipts XXX
Cost of Sales (XXX)
Gross Income XXX
Operating Expense (XXX)
Taxable Income XXX

8% RATE
Gross Sales/Receipts XXX
Less: Allowed Deduction (250,000)
Taxable Income XXX

Reporter: Gensaya, Sheehan

 REMEMBER THIS!
8% tax rate not applicable:
•GSRONOI exceeds 3M VAT threshold
•VAT-registered taxpayer
•Taxpayer who is subject to Other Percentage
Taxes under Title V of the Tax Code, as amended,
except those subject under Section 116 of the
same Title
•Partners of General Professional Partnership
(GPP) by virtue of their distributive share from
GPP
Dapat first Quarter palang sinisignify na ng taxpayer kung ano ang gagamitin nya. Reporter: Gensaya, Sheehan
 Income Tax Table: Graduated Tax
Table
Effective January 1, 2018 until December 31, 2022 (Note: Follow this table if the question is year
2018 to 2022)
Net Taxable Income
Over But not over Rate
1 - P250,000 0%
2 P250,000 P400,000 20% of the excess over P250,000
3 P400,000 P800,000 P30,000 + 25% of the excess over P400,000
4 P800,000 P2,000,000 P130,000 + 30% of the excess over P800,000
5 P2,000,000 P8,000,000 P490,000 + 32% of the excess over P2,000,000
6 P8,000,000 - P2,410,000 + 35% of the excess over P8,000,000

Tax code: https://www.bir.gov.ph/index.php/tax-code Reporter: Cuadro, Justine Mae

 Income Tax Table: Graduated Tax
Table
Effective January 1, 2023 onwards (Note: Follow this table if the question is year 2023 onwards)

Net Taxable Income

Over But not over Rate
1 - P250,000 0%
2 P250,000 P400,000 15% of the excess over P250,000
3 P400,000 P800,000 P22,500 + 20% of the excess over P400,000
4 P800,000 P2,000,000 P102,500 + 25% of the excess over P800,000
5 P2,000,000 P8,000,000 P402,500 + 30% of the excess over P2,000,000
6 P8,000,000 - P2,202,500 + 35% of the excess over P8,000,000

Tax code: https://www.bir.gov.ph/index.php/tax-code Reporter: Cuadro, Justine Mae

 ILLUSTRATION

Net Taxable Income

Over But not over Rate
1 - P250,000 0%
2 P250,000 P400,000 20% of the excess over P250,000
3 P400,000 P800,000 P30,000 + 25% of the excess over P400,000
4 P800,000 P2,000,000 P130,000 + 30% of the excess over P800,000
5 P2,000,000 P8,000,000 P490,000 + 32% of the excess over P2,000,000
6 P8,000,000 - P2,410,000 + 35% of the excess over P8,000,000
Reporter: Cuadro, Justine Mae
ILLUSTRATION

Reporter: Cuadro, Justine Mae

 MIXED INCOME EARNER
•Compensation Income
•Business

Tax Rates
•On Compensation- graduated rates
•On Business- options
> graduated rates
> 8% rate

Note: if the taxpayer chooses 8% rate, deduction of 250,000 is not available for it is
already incorporated on the first tier (compensation income)

Reporter: Gensaya, Sheehan

 INTEREST
Interest RC NRC RA NRAETB NRANETB
Interest on Philippine currency bank deposit, 20% 20% 20% 20% 25%
yield or other monetary benefit from deposit
substitute, trust fund and similar arrangement

Interest on foreign currency deposit under 15% Exempt 15% Exempt Exempt
the expanded foreign currency deposit
system (FCDS)

Proceeds of pre-terminated long-term Exempt Exempt Exempt Exempt 25%

deposit or investments, with holding period of:

RC NRC RA NRAETB NRANETB

More than 5 years Exempt Exempt Exempt Exempt 25%

4 years to less than 5 years 5% 5% 5% 5% 25%

3 years to less than 4 years 12% 12% 12% 12% 25%

Less than 3 years 20% 20% 20% 20% 25%

Reporter: Cuadro, Justine Mae

 ROYALTIES
Royalties RC NRC RA NRAETB NRANETB
Royalties from books, literary works 10% 10% 10% 10% 25%
and musical compositions

Royalties (others) (if silent) 20% 20% 20% 20% 25%

PRIZES
Prizes RC NRC RA NRAETB NRANETB
Prizes of P10,000 or less tax tax tax tax table 25%
table table table
Prizes over P10,000 20% 20% 20% 20% 25%

Reporter: Cuadro, Justine Mae

 WINNINGS
Winnings RC NRC RA NRAETB NRANETB

PCSO and Lotto winnings of P10,000 Exempt Exempt Exempt Exempt 25%
or less
PCSO and Lotto winnings over 20% 20% 20% 20% 25%
P10,000

Winnings (others than PCSO and lotto) 20% 20% 20% 20% 25%

DIVIDENDS

Reporter: Cuadro, Justine Mae

 SHARE IN NET INCOME
Share in Net Income RC NRC RA NRAETB NRANETB
Share in the distributable net 10% 10% 10% 20% 25%
income after tax of
a partnership (except GPPs),
associations, joint accounts,
taxable joint ventures and
consortiums

Reporter: Cuadro, Justine Mae

ILLUSTRATION

Reporter: Cuadro, Justine Mae

 TAX INFORMERS REWARD

Tax Informer’s Reward- a cash reward may be

given to any person instrumental into the
discovery of violation of the national internal
revenue code or discovery and seizure of
smuggled good.

Reporter: Teope, Emerliza

REQUISITES OF THE TAX INFORMERS REWARD
1. Definite sworn information which is not yet in possession of
the BIR.
2. The information furnished lead to the discovery of fraud upon
internal revenue loss or probation thereof.
3. Enforcement results and recovery of revenue, surcharges,
and fees, and/or conviction of the guilty party or imposition of
any fine or penalty.
4. The informer must not be a
a) BIR official or employee
b) Other public official or employee
c) Relative within the 6th degree of consanguinity of those officials
are employed in a or b.
Reporter: Teope, Emerliza
 AMOUNT CASH REWARD

Amount of cash reward is whichever the

lower of the following per case:
1. 10% of revenues, surcharges, or fees
recovered and/or fine penalty imposed
and collected.
2. 1 million pesos.
Reporter: Teope, Emerliza
ILLUSTRATION:
Ms. Kirsten provided information to the BIR leading to
the recovery of P12, 000,000 unpaid taxes. The cash
reward shall be computed as follows:
10% Cash Reward (P12, 000,000 x P 1,200,000
10%)
Cash Reward Limit P 1,000,000

Cash Reward (whichever is lower) P 1,000,000

Less: 10% Final Withholding Tax (100,000)
Net amount to be released to tax P 900,000
informer Reporter: Teope, Emerliza
 GAIN ON SALE OF ASSETS
For income taxation purposes, assets are classified either as ordinary or capital assets:
Under the tax code, the following are ordinary assets:

1. Stock in traded of the taxpayer or other property of a kind which would properly be included in the
inventory of the taxpayer if on hand at the close of taxable year.
2. Property used in business or trade subject to depreciation.
3. Real property held by the tax payer primarily for sale to customers in ordinary course of trade or
business.
4. Real property used in trade and business of the taxpayer.
Gain on sale of ordinary asset are subject to the graduated tax rate.

Meaning, an asset to be considered as Capital asset, whether or not

connected in the business of the taxpayer, as long as it is not included in the
definition of ordinary asset above.

GAIN: CLASSIFIED AS CAPITAL GAINS

Reporter: Cuadro, Justine Mae
Subject to capital gain tax if pertain to
Citizen & NRAETB NRANETB
sale of residents
Capital gains from sale of shares of stock of domestic
corporation not traded in the local stock exchange

Prior to 2018 5% 5% 5%
• 1st P100,000 of capital gain 10% 10% 10%
• In excess of P100,000 capital gain

Beginning Jan. 1, 2018

• Basic capital gain 15% 15% 15%

There is no capital gain tax if the transaction resulted to capital loss

Sale of real property located in the Philippines

Tax Base: Selling Price or Fair Market Value, whichever

is higher 6% 6% 6%
Reporter: Cuadro, Justine Mae
 SALE OF REAL PROPERTY
LOCATED IN THE PHILIPPINES
Capital Gain Tax = 6% x the higher between Gross
selling price and Fair market value
Fair market value refers to which ever is higher
between

• FMV provided by municipal or provincial assessors

• Zonal value provided by the Commissioner of Internal
Revenue.
Reporter: Cuadro, Justine Mae
 SALE OF REAL PROPERTY TO THE
GOVERNMENT
If real property is sold to the government, the taxpayer
shall have the option to be taxed at 6% CGT or basic
income tax using graduated tax rate

SALE OF PRINCIPAL RESIDENCE

If the real property is classified as PRINCIPAL
RESIDENCE, it may be exempt from CGT provided the
requisites for exemption as provided under Tax code
are met.
Reporter: Cuadro, Justine Mae
 OTHER PERCENTAGES TAX
Not an income tax but business tax. Sale of share of stock of
domestic corporation listed in the local stock exchange is not
subject to income tax but to OPT as provided under Sec. 127(A) of
the tax code. The applicable business tax for this type of
transaction is known as “stock transaction tax”.
Stock transaction Tax (STT)

Prior to 2018: ½ of 1% of Gross selling price

Beginning 2018: 6/10 of 1% of Gross selling price

Since the tax based on gross selling price, stock transaction is

computed regardless of whether the transaction resulted to gain or
loss.
Reporter: Cuadro, Justine Mae
 SUBJECT TO BASIC TAX
Capital gains not subject to capital gains tax and stock transaction tax are
subject to basic tax or graduated tax rate under section 124 (A) of the tax code
(as amended)

Example : subject to basic income tax

• Sale of Share of foreign corporation
• Sale of real properties located in abroad
• Sale of other personal assets other than share of stock of domestic corporation
such as cars, jewelries, and the like.

Capital gains subject to basic tax are subject to additional tax rules such as holding period and net
capital loss carry over

Reporter: Cuadro, Justine Mae

 SUMMARY OF APPLICABLE INCOME TAC ON SALE/ BARTER/
EXCHANGE OF ASSET
ORDINARY ASSET CAPITAL ASSETS

REAL PROPERTY SHARES OF STOCKS OTHER ASSETS

Basic tax including • 6% CGT • 15% CGT if shares of * Basic tax, apply rules
sale of real property • May be exempt if closely-held domestic on holding period and
by real estate pertaining to sale of corporation net capital loss carry
dealer and sale of principal • 6/10 of 1% STT if shares over.
shares/ securities by residence of publicly listed
dealer in securities • 6% CGT or basic domestic corporation.
income tax if sold • Basic tax if shares of
to the government foreign corporation
• Basic tax if situated
abroad

Reporter: Cuadro, Justine Mae

 REQUISITES FOR TAX EXEMPTION
1. The proceeds is fully utilized in acquiring or constructing a new
principal residence within eighteen (18) calendar months from the date
of disposition.
2. The historical cost or adjusted basis of the real property sold or
disposed shall be carried over to the new principal residence built or
acquired.
3. The BIR shall have been 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 exemption.
4. The tax exemption can only be availed of once every 10 years.

Reporter: Gensaya, Sheehan

 ILLUSTRATION: SHARES OF STOCK
Answer: 0
It is not subject to 6/10 of 1% STT, and not CGT

Answer: 10,000
Solution:

Selling Price (2000 shares * 180) P360,000

Cost (2,000 shares * 105) (210,000)
Capital Gain P150,000
CGT rate (Train Law) 15%
CGT 22,500
Solution:

Selling Price (2000 shares * 100) P200,000

Cost (2,000 shares * 105) (210,000)
Capital Gain (P10,000)

Answer: 0
There is no capital gain tax if the transaction resulted to capital loss
Reporter: Cuadro, Justine Mae