Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Description
Income Tax is a tax on a person's income, emoluments, profits arising from property, practice of profession,
conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax
Code), as amended, less the deductions and/or personal and additional exemptions, if any, authorized for such
types of income, by the Tax Code, as amended, or other special laws.
Individuals
Resident citizens receiving income from sources within or outside the Philippines
o employees deriving purely compensation income from 2 or more employers, concurrently or successively
at anytime during the taxable year
o employees deriving purely compensation income regardless of the amount, whether from a single or
several employers during the calendar year, the income tax of which has not been withheld correctly (i.e.
tax due is not equal to the tax withheld) resulting to collectible or refundable return
o self-employed individuals receiving income from the conduct of trade or business and/or practice of
profession
o individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or
business and/or practice of profession
o individuals deriving other non-business, non-professional related income in addition to compensation
income not otherwise subject to a final tax
o individuals receiving purely compensation income from a single employer, although the income of which
has been correctly withheld, but whose spouse is not entitled to substituted filing
o marginal income earners
Non-resident citizens receiving income from sources within the Philippines
Aliens, whether resident or not, receiving income from sources within the Philippines
Corporation shall include partnerships, no matter how created or organized.
Domestic corporations receiving income from sources within and outside the Philippines
Foreign corporations receiving income from sources within the Philippines
Estates and trusts engaged in trade or business
Annual Income Tax For Individuals Earning Purely Compensation Income (Including Non-
Business/Non-Profession Related Income) and For Marginal Income Earners
Tax Form
BIR Form 1700 - Annual Income Tax Return (For Individual Earning Purely Compensation Income Including
Non-Business/Non-Profession Related Income)
Documentary Requirements
5. Income Tax Return previously filed and proof of payment, if filing an amended return for the same taxable
year
Procedures
2. If there is payment:
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are
registered and present the duly accomplished BIR Form 1700, together with the required attachments and your
payment.
In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or
Municipal Treasurer located within the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1700, together with the required attachments and your payment.
Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer.
3. For "No Payment" Returns including refundable returns, and for tax returns qualified for second installment:
Proceed to the Revenue District Office where you are registered or to any Tax Filing Center established by
the BIR and present the duly accomplished BIR Form 1700, together with the required attachments.
Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative.
Deadline
On or before the 15th day of April of each year covering taxable income for the preceding taxable year
Annual Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those With Mixed
Income,i.e., Compensation Income and Income from Business and/or Practice of Profession )
Tax Form
BIR Form 1701 - Annual Income Tax Return (For Self-Employed Individuals, Estates and Trusts Including
Those With Both Business and Compensation Income)
Documentary Requirements
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable
7. Income Tax Return previously filed and proof of payment, if filing an amended return for the same year
8. Account Information Form (AIF) or the Certificate of the independent CPA with Audited Financial
Statements if the gross quarterly sales, earnings, receipts or output exceed P 150,000.00
Procedures
2. If there is payment:
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are
registered and present the duly accomplished BIR Form 1701, together with the required attachments and your
payment.
In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or
Municipal Treasurer located within the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1701, together with the required attachments and your payment.
Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer
3. For "No Payment" including refundable/ creditable returns, returns with excess tax credit carry over,
and returns qualified for second installment:
Proceed to the Revenue District Office where you are registered or to any established Tax Filing Centers
established by the BIR and present the duly accomplished BIR Form 1701, together with the required
attachments.
Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative.
Deadline
Final Adjustment Return or Annual Income Tax Return - On or before the 15th day of April of each year
covering income for the preceding year
Account Information Form For Self-Employed Individuals, Estates And Trusts (Including Those With
Mixed Income , I.E., Compensation Income and Income from Business and/or Practice of Profession)
Tax Form
BIR Form 1701 AIF - Account Information Form For Self-Employed Individuals, Estates and Trusts (Including
those with Mixed Income, i.e., Compensation Income and Income from Business and/or Practice of Profession)
and Estates and Trusts (Engaged in Trade or Business)
NOTE: Pursuant to Revenue Memorandum Circular No. 6 2001, corporations, companies or persons whose
gross quarterly sales, earnings, receipts or output exceed P 150,000.00 may not accomplish this form. In lieu
thereof, they may file their annual income tax returns accompanied by balance sheets, profit and loss
statement, schedules listing income-producing properties and the corresponding income therefrom, and other
relevant statements duly certified by an independent CPA.
Documentary Requirements
None
Procedures
Deadline
Same deadline as BIR Form 1701 - On or before the 15th day of April of each year covering taxable income for
the preceding year
Quarterly Income Tax For Self-Employed Individuals, Estates And Trusts (Including Those With Mixed
Income, I.E., Compensation Income and Income from Business and/or Practice of Profession)
Tax Form
BIR Form 1701Q - Quarterly Income Tax Return For Self-Employed Individuals, Estates and Trusts (Including
those with both Business and Compensation Income)
Documentary Requirements
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable
4. Previously filed return, if an amended return is filed for the same quarter
Procedures
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you registered
and present the duly accomplished BIR Form 1701 Q, together with the required attachments and your
payment.
In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or
Municipal Treasurer located within the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1701Q, together with the required attachments and your payment.
Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer.
3. For "No Payment" Returns including refundable/ creditable returns with excess tax credit carry over and
returns qualified for second installment:
Proceed to the Revenue District Office where you are registered or to any Tax Filing Center established by
the BIR and present the duly accomplished BIR Form 1701Q, together with the required attachments.
Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative.
Deadlines
Tax Form
BIR Form 1702 - Annual Income Tax Return (For Corporations and Partnerships)
Documentary Requirements
1. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304), if applicable
5. Income tax return previously filed and proof of payment, if amended return is filed for the same taxable year
6. Account Information Form (AIF) and/or the Certificate of the independent CPA with Audited Financial
Statements, if the gross quarterly sales, earnings, receipts or output exceed P150,000.00
Procedures
2. If there is payment:
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are
registered and present the duly accomplished BIR Form 1702, together with the required attachments and your
payment.
In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or
Municipal Treasurer located within the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1702 with the required attachments and your payments.
Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer.
3. For "No Payment" Returns including refundable/ creditable returns and returns with excess tax credit carry
over:
Proceed to the Revenue District Office where you are registered or to any Tax Filing Center established by
BIR and present the duly accomplished BIR Form 1702, together with the required attachments.
Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative
Deadline
Final Adjustment Return or Annual Income Tax Return - On or before the 15th day of the fourth month
following the close of the taxpayers taxable year
Tax Form
BIR Form 1702 AIF - Account Information Form (For Corporations and Partnerships)
NOTE: Pursuant to Revenue Memorandum Circular No. 6 2001, corporations, companies or persons whose
gross quarterly sales, earnings, receipts or output exceed P 150,000.00 may not accomplish this form. In lieu
thereof, they may file their annual income tax returns accompanied by balance sheets, profit and loss
statement, schedules listing income-producing properties and the corresponding income therefrom, and other
relevant statements duly certified by an independent CPA.
Documentary Requirements
None
Procedures
Deadline
Same deadline as BIR Form 1702 - On or before the 15th day of the fourth month following the close of the
taxpayers taxable year
Tax Form
BIR Form 1702 Q - Quarterly Income Tax Return (For Corporations and Partnerships)
Documentary Requirements
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304), if applicable
4. Previously filed return, if an amended return is filed for the same quarter
Procedures
2. If there is payment:
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are
registered and present the duly accomplished BIR Form 1702 Q, together with the required attachments and
your payment.
In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or
Municipal Treasurer located within the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1702 Q.
Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer.
3. For Refundable Returns and for those returns with second installment:
Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR
Form 1702 Q, together with the required attachments.
Receive your copy of the duly stamped and validated form from the RDO representative.
Deadline
Corporate Quarterly Declaration or Quarterly Income Tax Return - On or before the 60th day following the
close of each of the quarters of the taxable year
Tax Form
BIR Form 1704 - Improperly Accumulated Earnings Tax Return (For Corporations)
Documentary Requirements
1. Photocopy of Annual Income Tax Return (BIR Form 1702) with Audited Financial Statements and/or
Account Information Form of the covered taxable year duly received by the BIR; and
2. Sworn declaration as to dividends declared taken from the covered year's earnings and the corresponding
tax withheld, if any
Procedures
2. If there is payment:
Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are
registered and present the duly accomplished BIR Form 1704, together with the required attachments and your
payment.
In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or
Municipal Treasurer located within the Revenue District Office where you are registered and present the duly
accomplished BIR Form 1704
Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer.
3. If there is no payment:
Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR
Form 1704, together with the required attachments.
Receive your copy of the duly stamped and validated form from the RDO representative
Deadline
Within fifteen (15) days after the close of the taxable year
Annual Income Information Form for General Professional Partnerships
Sec. 55. Returns of General Professional Partnership (Tax Code of 1997, as amended)
Every general professional partnership shall file, in duplicate, a return of its income, except income exempt
under Section 32 (B) of this Title, setting forth the items of gross income and of deductions allowed by this
Title, and the names, Taxpayer Identification Numbers (TIN),addresses and shares of each of the partners.
Tax Rate
A. For Individuals Earning Purely Compensation Income and Individuals Engaged in Business and
Practice of Profession
Note: When the tax due exceeds P2,000.00, the taxpayer may elect to pay in two equal installments, the first
installment to be paid at the time the return is filed and the second installment 15 of the same year at on or
before July the Authorized Agent Bank (AAB) within the jurisdiction of the Revenue District Office (RDO) where
the taxpayer is registered.
*Beginning on the 4th year immediately following the year in which such corporation commenced its business
operations, when the minimum corporate income tax is greater than the tax computed using the normal income
tax.
Passive Income
1. Interest from currency deposits, trust funds and deposit substitutes 20%
2. Royalties (on books as well as literary & musical composition) 10%
- In general 20%
3. Prizes (P10,000 or less ) 5%
- In excess of P10,000 20%
4. Winnings (except from PCSO and lotto) 20%
5. Interest Income of Foreign Currency Deposit 7.5%
6. Cash and Property Dividends
- To individuals from Domestic Corporations 10 %
- To Domestic Corporations from Another Domestic Corporations 0%
7. On capital gains presumed to have been realized from sale,
6%
exchange or other disposition of real property (capital asset)
8. On capital gains for shares of stock not traded in the stock
exchange
- Not over P100,000 5%
- Any amount in excess of P100,000 10%
9. Interest Income from long-term deposit or investment in the form of
savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced
by certificates
Exempt
Upon pretermination before the fifth year , there should be imposed
on the entire income from the proceeds of the long-term deposit
based on the remaining maturity thereof:
Holding Period
- Four (4) years to less than five (5) years 5%
- Three (3) years to less than four (4) years 12%
- Less than three (3) years 20%
1. Interest from currency deposits, trust funds and deposit substitutes 20%
2. Interest Income from long-term deposit or investment in the form of
savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced
Exempt
by certificatesUpon pretermination before the fifth year, there should
be imposed on the entire income from the proceeds of the long-term
deposit based on the remaining maturity thereof:Holding Period:
-Four (4) years to less than five (5) years 5%
-Three (3) years to less than four (4) years 12%
-Less than three (3) years 20%
3. On capital gains presumed to have been realized from the sale,
6%
exchange or other disposition of real property
4. On capital gains for shares of stock not traded in the Stock
Exchange
- Not over P100,000 5%
- Any amount in excess of P100,000 10%
1. On the gross amount of income derived from all sources within the
25%
Philippines
2. On capital gains presumed to have been realized from the
6%
exchange or other disposition of real property located in the Phils.
3. On capital gains for shares of stock not traded in the Stock
Exchange
- Not Over P100,000 5%
- Any amount in excess of P100,000 10%
D) On the gross income in the Philippines of Aliens Employed by Regional Headquarters (RHQ) or Area
Headquarters and Regional Operating Headquarters (ROH), Offshore Banking Units (OBUs), Petroleum
Service Contractor and Subcontractor
F) Domestic Corporations
RR No. 4-95, RR No. 4-96, RR No. 5-97, RR No. 1-98, RA 9337, RR 14-2002, RR 12-2007
Codal Reference
Sections 23-59, 67-73 and 74-77 of the National Internal Revenue Code
1) What is income?
Income means all wealth, which flows into the taxpayer other than as a mere return of capital.
Taxable income means the pertinent items of gross income specified in the Tax Code as amended, less the
deductions and/or personal and additional exemptions, if any, authorized for such types of income, by the Tax
Code or other special laws.
Compensation for services, in whatever form paid, including but not limited to fees, salaries, wages,
commissions and similar item
Gross income derived from the conduct of trade or business or the exercise of profession
Gains derived from dealings in property
Interest
Rents
Royalties
Dividends
Annuities
Prizes and winnings
Pensions
Partner's distributive share from the net income of the general professional partnerships
Life insurance
Amount received by insured as return of premium
Gifts, bequests and devises
Compensation for injuries or sickness
Income exempt under treaty
Retirement benefits, pensions, gratuities, etc.
Miscellaneous items
o
o income derived by foreign government
o income derived by the government or its political subdivision
o prizes and awards in sport competition
o prizes and awards which met the conditions set in the Tax Code
o 13th month pay and other benefits
o GSIS, SSS, Medicare and other contributions
o gain from the sale of bonds, debentures or other certificate of indebtedness
o gain from redemption of shares in mutual fund
Except for taxpayers earning compensation income arising from personal services rendered under an
employer-employee relationships where the only deduction provided that the gross family income does not
exceed P250,000 per family is the premium payment on health and/or hospitalization insurance, a taxpayer
may opt to avail any of the following allowable deductions from gross income:
a)Optional Standard Deduction - an amount not exceeding 40% of the net sales for individuals and gross
income for corporations; or
b) Itemized Deductions which include the following:
Expenses
Interest
Taxes
Losses
Bad Debts
Depreciation
Depletion of Oil and Gas Wells and Mines
Charitable Contributions and Other Contributions
Research and Development
Pension Trusts
In addition, individuals who are either earning compensation income, engaged in business or deriving income
from the practice of profession are entitled to personal and additional exemptions as follows:
Personal Exemptions:
For single individual or married individual judicially decreed as legally separated with no qualified
dependentsP 50,000.00
Note: In case of married individuals where only one of the spouses is deriving gross income, only such spouse
will be allowed to claim the personal exemption.
Additional Exemptions:
For each qualified dependent, an P25,000 additional exemption can be claimed but only up to 4 qualified
dependents
The husband who is deemed the head of the family unless he explicitly waives his right in favor of his
wife
The spouse who has custody of the child or children in case of legally separated spouses. Provided, that
the total amount of additional exemptions that may be claimed by both shall not exceed the maximum
additional exemptions allowed by the Tax Code.
The individuals considered as Head of the Family supporting a qualified dependent
The maximum amount of P 2,400 premium payments on health and/or hospitalization insurance can be
claimed if:
Individuals
Resident citizens receiving income from sources within or outside the Philippines
o employees deriving purely compensation income from 2 or more employers, concurrently or
successively at anytime during the taxable year
o employees deriving purely compensation income regardless of the amount, whether from a single or
several employers during the calendar year, the income tax of which has not been withheld correctly
(i.e. tax due is not equal to the tax withheld) resulting to collectible or refundable return
o self-employed individuals receiving income from the conduct of trade or business and/or practice of
profession
o individuals deriving mixed income, i.e., compensation income and income from the conduct of trade
or business and/or practice of profession
o individuals deriving other non-business, non-professional related income in addition to
compensation income not otherwise subject to a final tax
o individuals receiving purely compensation income from a single employer, although the income of
which has been correctly withheld, but whose spouse is not entitled to substituted filing
o marginal income earners
Non-resident citizens receiving income from sources within the Philippines
Aliens, whether resident or not, receiving income from sources within the Philippines
Corporations no matter how created or organized including partnerships
o domestic corporations receiving income from sources within and outside the Philippines
o foreign corporations receiving income from sources within the Philippines
o taxable partnerships
Estates and trusts engaged in trade or business
b. An individual whose gross income does not exceed his total personal and additional exemptions
c. An individual whose compensation income derived from one employer does not exceed P 60,000 and the
income tax on which has been correctly withheld
d. An individual whose income has been subjected to final withholding tax (alien employee as well as Filipino
employee occupying the same position as that of the alien employee of regional headquarters and regional
operating headquarters of multinational companies, petroleum service contractors and sub-contractors and
offshore-banking units, non-resident aliens not engaged in trade or business)
e. Those who are qualified under substituted filing. However, substituted filing applies only if all of the
following requirements are present :
the employee received purely compensation income (regardless of amount) during the taxable year
the employee received the income from only one employer in the Philippines during the taxable year
the amount of tax due from the employee at the end of the year equals the amount of tax withheld by the
employer
the employees spouse also complies with all 3 conditions stated above
the employer files the annual information return (BIR Form No. 1604-CF)
the employer issues BIR Form No. 2316 (Oct 2002 ENCS version ) to each employee.
a) 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
b) 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
c) 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
d) A citizen who has been previously considered as a non-resident citizen and who arrives in the Philippines at
any time during the year to reside permanently in the Philippines will likewise be treated as a non-resident
citizen during 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.
10) What are the procedures in filing Income Tax returns (ITRs)?
For with payment ITRs (BIR Form Nos. 1700 / 1701 / 1701Q / 1702 / 1702Q / 1704)
File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with the Authorized Agent
Bank (AAB) of the place where taxpayer is registered or required to be registered. In places where there are no
AABs, the return will be filed directly with the Revenue Collection Officer or duly Authorized Treasurer of the
city or municipality in which such person has his legal residence or principal place of business in the
Philippines, or if there is none, filing of the return will be at the Office of the Commissioner.
File the return with the concerned Revenue District Office (RDO) where the taxpayer is registered. However,
"no payment" returns filed late shall be accepted by the RDO but instead shall be filed with an Authorized
Agent Bank (AAB) or Collection Officer/Deputized Municipal Treasurer (in places where there are no AABs),
for payment of necessary penalties.
11) How is Income Tax payable of individuals (resident citizens and non-resident citizens)computed?
Through withholding
o Generally 10% or 15% if the gross annual business or professional income exceeds P720,000 per
year
o 20% - Fees paid to directors who are not employees and 20% of professional fees paid to non-
individuals
o Other withholding tax rates
Pay the balance as you file the tax return, computed as follows:
13) Is the Minimum Corporate Income Tax (MCIT) an addition to the regular or normal income tax?
No, the MCIT is not an additional tax. An MCIT of 2% of the gross income as of the end of taxable year
(whether calendar or fiscal year, depending on the accounting period employed) is imposed on a corporation
taxable under Title II of the Tax Code, as amended, beginning on the 4th taxable year immediately following
the taxable year in which such corporation commenced its business operations when the MCIT is greater than
the regular income tax. The MCIT is compared with the regular income tax, which is due from a corporation. If
the regular income is higher than the MCIT, then the corporation does not pay the MCIT but the amount of the
regular income tax.
Notwithstanding the above provision, however, the computation and the payment of MCIT, shall likewise apply
at the time of filing the quarterly corporate income tax as prescribed under Section 75 and Section 77 of the
Tax Code, as amended. Thus, in the computation of the tax due for the taxable quarter, if the computed
quarterly MCIT is higher than that quarterly normal income tax, the tax due to be paid for such taxable quarter
at the time of filing the quarterly income tax return shall be the MCIT which is two percent (2%) of the gross
income as of the end of the taxable quarter. In the payment of said quarterly MCIT, excess MCIT from the
previous taxable year/s shall not be allowed to be credited. Expanded withholding tax, quarterly corporate
income tax payments under the normal income tax, and the MCIT paid in the previous taxable quarter/s are
allowed to be applied against the quarterly MCIT due.
The MCIT covers domestic and resident foreign corporations which are subject to the regular income tax. The
term regular income tax refers to the regular income tax rates under the Tax Code. Thus, corporations which
are subject to a special corporate tax system do not fall within the coverage of the MCIT.
For corporations whose operations or activities are partly covered by the regular income tax and partly covered
by the preferential rate under special law, the MCIT shall apply on operations by the regular income tax
rate. Newly established corporations or firms which are on their first 3 years of operations are not covered by
the MCIT.
A corporation starts to be covered by the MCIT on the 4th year of its business operations. The period of
reckoning which is the start of its business operations is the year when the corporation was registered with the
BIR. This rule will apply regardless of whether the corporation is using the calendar year or fiscal year as its
taxable year.
The MCIT is paid on an annual basis and quarterly basis. The rules are governed by Revenue Regulations No.
12-2007.
The MCIT is 2% of the gross income of the corporation at the end of the year.
Gross income means gross sales less sales returns, discounts and cost of goods sold. Passive income,
which have been subject to a final tax at source do not form part of gross income for purposes of the MCIT.
Cost of goods sold includes all business expenses directly incurred to produce the merchandise to bring them
to their present location and use.
For trading or merchandising concern, cost of goods sold means the invoice cost of goods sold, plus import
duties, freight in transporting the goods to the place where the goods are actually sold, including insurance
while the goods are in transit.
For a manufacturing concern, cost of goods manufactured and sold means all costs of production of finished
goods such as raw materials used, direct labor and manufacturing overhead, freight cost, insurance premiums
and other costs incurred to bring the raw materials to the factory or warehouse.
For sale of services, gross income means gross receipts less sales returns, allowances, discounts and cost of
services which cover all direct costs and expenses necessarily incurred to provide the services required by the
customers and clients including:
Salaries and employees benefits of personnel, consultants and specialists directly rendering the service;
Cost of facilities directly utilized in providing the service such as depreciation or rental of equipment
used;
Cost of supplies
Interest Expense is not included as part of cost of service, except in the case of banks and other financial
institutions.
Gross Receipts means amounts actually or constructively received during the taxable year. However, for
taxpayers employing the accrual basis of accounting, it means amounts earned as gross income.
Any excess of the MCIT over the normal income tax may be carried forward on an annual basis and be
credited against the normal income tax for 3 immediately succeeding taxable years.
Any amount paid as excess minimum corporate income tax should be recorded in the corporations books as
an asset under account title Deferred charges-MCIT
There is no prescription period for amending the return. When the taxpayer has been issued a Letter of
Authority, he can no longer amend the return.
21) Can a benefactor of a senior citizen claim him/her as additional dependent in addition to his/her 3 qualified
dependent children at P 25,000 each?
No, pursuant to Revenue Regulations 2-94, the benefactor of a senior citizen cannot claim the additional
exemption.
A tax treaty formally known as convention or agreement for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income (and on capital) could be defined in terms of its
purpose. First, a tax treaty is intended to promote international trade and investment in several ways, the most
important of which is by allocating taxing jurisdiction between the Contracting States so as to eliminate or
mitigate double taxation of income. Second, a tax treaty is intended to permit the Contracting States to better
enforce their domestic laws so as to reduce tax evasion. These purposes are in fact incorporated in the title
and the preamble.
The Philippines has thirty-seven (37) effective tax treaties. The following tax treaties and their dates of
effectivity as as follows:
24) What office can we inquire about the said tax treaties?
Income taxes imposed by the domestic laws of the Contracting States, including substantially similar taxes that
may be imposed later, in addition to, or in place, are covered by the tax treaties. In the Philippines, this is
generally limited to Title II (Tax on Income) of the National Internal Revenue Code of 1997, as amended.
The business profits of a resident of a Contracting State shall not be taxable in the Philippines unless that
enterprise of a resident of a Contracting State carries on business in the Philippines through a permanent
establishment.
27) What is the concept of permanent establishment (PE) as used in tax treaties?
PE is defined as a fixed place of business through which the business of the enterprise is wholly or partly
carried on. The concept of permanent establishment is used to determine the rights of a Contracting State to
tax the business profits of enterprises of the other Contracting State. Under this concept, profits of an
enterprise of a Contracting State are not taxable by the other Contracting State, unless the enterprise carries
on business through a permanent establishment situated in the other Contracting State.
A list of places, circumstances, and activities which constitute a permanent establishment is provided under the
different tax treaties which the Philippines has with other countries.
The appearance of the MFN clause in the tax treaty means that a Contracting State will grant to a resident of
the other Contracting State the same lower rate of tax or exemption the former has granted to a resident of a
third State.
Income from an immovable property is taxable in the Contracting State where the property is situated. This
term is generally defined under the domestic laws of the Contracting States. However, this is further defined in
the tax treaties.
30) How are capital gains taxed under our tax treaties?
Gains from the alienation of immovable property or movable property forming part of the business property of a
permanent establishment or pertaining to a fixed base are taxed in the Philippines if the immovable property or
permanent establishment or fixed base is located here.
Source: https://www.bir.gov.ph/index.php/tax-information/income-tax.html