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- Incremental wealth coming to a person, whether natural or juridical, other than as a return of
investment
- Main sources: payment for services or interest/ profit from investment and gains from dealings in
property
- Other sources: damages
- Need not necessarily be in the form of cash
- Not all receipts constitute income
Sources of income
- Compensation- remuneration for services performed by an employee for his employer unless
specifically excluded by the code
- principal form: salaries, wages, commissions, fee
- supplemental form: allowances (usually of a fixed amount), fringe benefits received by rank and
file employees, hazard pay, 13th month pay, bonuses
- worker in the private sector paid the statutory minimum wage or an employee in the public sector
with compensation income not more than the statutory minimum wage in the agricultural sector
- Income exempt from payment of income tax on their taxable income, including holiday pay,
overtime pay, night shift differential and hazard pay
Those required by the nature of or necessary to the trade and business and those granted for the
convenience or advantage of the employer
Those required by the nature of or necessary to the trade and business and those granted for the
convenience or advantage of the employer
- Not taxable to the employee
- Deductible as a business expense to the employer
De minimis benefits
- Monetized leave credits of government employees; monetized VL not exceeding 10 days during
the year for private sector employees
- Rice subsidy of P1,500 or one sack of rice per month amounting to not more than P1,500
Excess shall be lumped with other benefits which are taxable if the total exceeds P30,000
pursuant to – Sec. 32 (B)(7)(e) of the NIRC
Fringe Benefits
Goods, services or other benefits furnished or granted, in cash or in kind, by an employer to an individual
employee (except rank and file) such as:
Housing
Expense account
Vehicle of any kind
Services of Household personnel
Interest-free loans/lower than market rate interest
Membership fees
Expenses for foreign travel
Holiday & vacation expenses
Educational assistance
Life or health insurance in excess of what the law allows
Exclusions:
-grossed up monetary value (“GMV”) of fringe benefit (actual monetary value/(1-applicable FBT rate)) x
FBT rate
Exceptionally: 25%
Individual
Corporatons
Stock in trade of the taxpayer or other property of a kind which would properly be included in the
inventory of the taxpayer in on hand at the close of the taxable year
Property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or
business
Property used in the trade or business of a character which is subject to the allwance for
depreciation provided in Subsection (F) of Sec 34
Real property used in trade or business of the taxpayer
Ordinary assets: those used in trade or business