PLEASE

SHUTOFF
YOUR
CELL PHONES

OPENING PRAYERS
*
*
*

Our Father
Hail Mary
Glory Be

EXCLUSIONS

GROSS
INCOME

FINAL TAXES
Passive
income
Capital Gains
Trans.Tax

GROSS INCOME
Passive income
- Final tax
- Concept

Other income
- Schedular tax

PASSIVE INCOME
Interests
Royalties
Prizes and other winnings
Capital gains
Dividends

INTERESTS
Phil. Currency
EFCD
Yield
- Deposit substitutes
- Trust funds, similar
arrangements

DEPOSIT
SUBSTITUTES
Bankers acceptances
Promissory notes
REPOs, Reverse REPOs
Cert. of assignment or
participation

Continuation

Others with recourse

RATES

Peso deposits
- Citizens, res. aliens = 20%
- Non-res. aliens, NET=25%

EFCD
- Citizens, res. Aliens =71/2%
- Non-res. Aliens, NET=25%

Continuation .

Corps. not depository banks

o Domestic, resident
foreign = 7 1/2%

Corps. depository banks

o Domestic, resident
foreign = 10%

Continuation .

Corporations
- Domestic, foreign
resident = 20%
- Foreign non-resident =
32%

EXEMPT
INTEREST
Long-term deposit or
investment certificates
- Savings, common or
individual trust funds, IMA,
deposit substitutes

CERTIFICATES
Maturity not less than five
years
BSP Form
Bank Individual
Not less than P 10,000.00

ROYALTIES
Rate = 20%
- Citizens,

resident aliens,
aliens ETs
- EXCEPT Books, literary
and musical = 10%

non-resident

Continuation.

- Domestic and resident

foreign corporations
Non-res. Foreign corp
NET = 32%

PRIZES
More than P10,000
Not PCSO or LOTTO
Derived within Phils.
Tax treatment if less
than P10,000

DIVIDENDS
Concept
Kinds
- Liquidating
- Cash
- Stock
- Property

DIVIDENDS

SOURCE From within

- Domestic corporation
- Foreign corporations
not less than 50% for
3 years

RECEIVED BY
INDIVIDUALS
Cash or property
dividends
- Domestic Corporation
- Joint stock company
- Insurance company

Continuation .

- Mutual fund company

- Regional operating hqs
of multinational cos

Share in prtnrshp income

Share in assn, joint acct.
joint venture, consortium

CORPORATIONS
Domestic/Domestic
Foreign Resident/
Domestic
Nonresident/Domestic
15% subject to tax credit

IMPROPERLY
ACCUMULATED
EARNINGS
Concept - reasonable
TAX
needs of business
The tax = 10% of IAE

Continuation ...

Who are liable

- Corp. form to avoid tax
- By not dividing profits
- Only domestic corps.

IAET not applicable

CORPS IAET NOT

APPLICABLE
Banks and other nonbank financial
intermediaries
Insurance companies

Continuation .

Publicly-held corps.
- Not public, closely held
50% of outstanding or
total combined voting
owned not more than 20
individuals

Continuation .

Taxable partnerships
General professional
partnerships
Non-taxable joint ventures

Continuation .

PEZA and Bases

Conversion registrants or
SEZs enjoying special tax
rate

TESTS FOR
REASONABLE
ACCUMULATION

Immediacy test
2 to 1 rule
Bardahl formula = optg
cycle concept

REASONABLE
ACCUMULATION
Increase up to 100% paidup
Definite board approved
corporate expansion

Continuation .

Buildings, plants or equipt.

acquisition approved by Board
Compliance with any loan
covenant or pre-existing
obligation

Continuation .

Required by law or regltns. to be

retained or legally prohibited from
distributing
Subsidiaries of foreign corporations,
if intended or reserved for
investments within Phils.

PRIMA FACIE
UNREASONABLE

Investments of substantial
earnings in unrelated
business
Investment in bonds and
other long-term securities

Continuation .

Accumulation of earnings
in excess of 100% paid-up
unless for reasonable
needs

TAXPAYERS
WHY
CLASSIFIED ?

WHY CLASSIFY?
Income taxable
Deductions
Exemptions
Taxable rates

TAXPAYERS
Individuals
Trusts
Estates
Corporations

INDIVIDUALS
Citizenship
Residency
Civil status
Employment

CITIZENSHIP
Citizens
Aliens

RESIDENCY
Citizens

Aliens

Resident
Resident
Nonresident Nonresident

RESIDENT
CITIZEN
Stays in the
Philippines
No intention to transfer

NONRESIDENT
BIR satisfaction
CITIZEN

Physical presence abroad

Definite intention to reside
abroad

Continuation .

Leaves Phil. during taxable year

To reside abroad
Works and derives

income from abroad

Physical presence abroad
required

Continuation .

Previous nonresident
Arrives during taxable year
Reside permanently in
Phil.

RESIDENT ALIEN
Not mere transient or
sojourner
No definite intention to
Definite purpose extended
stay

NONRESIDENT
ALIEN
Mere transient or
sojourner
Definite purpose
accomplished

CITIZENS
Locally employed
Overseas contract
workers
Seamen

ALIENS
RESIDENTS
Locally employed
Employed by regnl or
area hgs., and regnl optg
hqs. of multintls, OBUs,
petroleum svc. contractrs

CIVIL STATUS
Single, unmarried,
legally separated
Head of family
Married

TRUSTS
Revocability
Place of administration
Distribution of benefits

CORPORATIONS
Domestic
Foreign
Resident
Nonresident

CORPORATIONS

CORPORATIONS
Partnerships
Joint stock companies
Joint accounts
Associations

NOT CORPORATIONS
General professional
Joint venture or
consortium
Construction, energy
Service contract

G.P.P.

Not taxable entity

Partners taxed on
their distributive
share in net income

INCOME TAX
EXEMPT

TAX EXEMPT
INCOME
Labor, agricultural or
horticultural organization
not organized principally
for profit

Continuation .

Mutual savings bank and

coop banks w/o capital stock
Beneficiary society, order or
association for exclusive
benefit of members

Continuation .

Mutual aid association or

nonstock corp organized
by employees providing
for the payment of life,
sickness, accident, etc.

Continuation .

Cemetery company owned and

operated exclusively for the members
Nonstock organized for religious,
charitable, scientific, athletic or
cultural purposes, rehab of veterans

Continuation .

Business league, chamber of

commerce, board of trade
Civic league or org.not for profit
promotion of social welfare
Nonstock and nonprofit educational
institution

Continuation .

Farmers; or other mutual

typhoon or fire insurance, mutua
ditch or irrigation, mutual or coo
telephone company of purely
local character

Continuation .

Farmers, fruit growers,

etc. as sales agents
Government
- GSIS
- SSS
- Phil. Health Insurance

Continuation .

- PCSO / PAGCOR
- Govt. educational
institutions

CORPORATIONS

Rates
Gross taxation
MCIT
IAET
Branch profits taxes
Other % taxes

CORPORATIONS
Domestic = 32%
Educational institutions
= 10%

Foreign
Resident = 32%
Nonresident = 32% gross

MINIMUM CORP.
INCOME TAX
2% of gross income or
32% reduced rate
whichever is higher
Beg. on 4th tax year

GROSS INCOME
Gross sales
Less: Sales Returns and
Allowances
COGS

COST OF GOODS
SOLD
MERCHANDISING
Invoice COGS
Import duties
Freight
Insurance

COST OF GOODS
MFG. AND SOLD
MANUFACTURING
All costs of prodctn, r.m.
d.l. and mfg. OH
Freight cost, ins. & other
costs to bring r.m.

COST OF SERVICES

ALL DIRECT COSTS

Salaries and benefits

Cost of facilities, deprcn,
rental, cost of supplies
Banks + interest expense

SUSPENSION

Losses
Prolonged labor
Force majeure
Legitimate business
reverses

REDUCED RATES
FOR FISCAL YR.
No. of mos. using
reduced rate x taxable
income divided by 12

GROSS INCOME
TAXATION
SOF recommends to
the President
January 1, 2000
Optional

CONDITIONS
Tax effort ratio of 20%
to G.N.P.
Ratio of 40% income
tax to total tax revenues

Continuation

VAT effort of 4% of
G.N.P.
9% Ratio of CPSFP to
G.N.P.

RES. CITIZENS

Within/Without
Schedular
Optional standard
Itemized
Personal/additional

NONRES. CITIZENS
Within
Schedular
Itemized
Personal and
additional

RES. ALIENS

Within
Same as resident
citizens

NONRES. ALIEN
E.T.B.
Within
Schedular
Itemized
P.A.E. - reciprocity

NONRES. ALIEN

N.E.T.B.
Within
No deductions
Taxed on gross

NEXT TOPIC
CAPITAL GAINS
and DEDUCTIONS