INCOME TAXATION OF INDIVIDUALS: CITIZENS

CITIZENS
RESIDENT
Definition

NON-RESIDENTS
Sec 22 (E)
1. A citizen of the Philippines who establishes to the satisfaction of the
Commissioner that fact of his physical presences abroad with definite
intention to reside therein.
2. 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.
3. 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.
4. A citizen who has been previously considered as non-resident
citizen who arrives in the Philippines at any time during the taxable
year to reside permanently in the Philippines shall likewise be treated
as a nonresident citizen for 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.

Tax Code Reference

Sec 24

Sec 24 ( income w/in the Philippines)

Sec 23 ( income outside Philippines)
Tax Base
taxable income earned from all sources taxable income from all sources within the Philippines
within and without the Philippines
Tax Rates - In general
5% - 34 % in 1998
5% - 34% in 1998 (for income w/in the Phils)
5% - 33% in 1999
5% - 33% in 1999
(for income w/in the Phils)
5% - 32% in 2000
5% - 32%
5%- 32% in 2000 (for income w/in
thereafter
the Phils)
5% - 32% thereafter (for income w/in the Phils)
Tax Rates - On Passive Incomes (subject to Final Taxes [FT])
Interest on any currency bank deposit and yield or any
other monetary benefit from deposit substitutes [Sec 22(Y)]
and from trust fund and similar arragements
Interest from a depository bank under the expanded
foreign currency deposit system [RR 10-98]
Interest on long term deposit or investment [Sec 22(FF)] in
the form of savings, common or individual trust funds,
deposit substitutes, investment management accounts and
other investments evidenced by certificates in such form
prescribed by the BSP

20% FT

20% FT

7.5% FT

EXEMPT [Sec 2.24 RR 10-98 ]

EXEMPT

EXEMPT

Pre-terminated long term investment (should actually

based on expired term)

4 yrs to < 5 years -- 5%FT

3 years to < 4 years -- 12%FT
Less than 3 years -20%FT
5% - 34%,
33%, 32%
5% - 34%, 33%, 32%
20% FT
10% FT

4 yrs to < 5 years -- 5%FT

3 years to < 4 years -- 12%FT
Less than 3 years -- 20%FT
5% - 34%, 33%, 32%
EXEMPT
20% FT
10% FT

Other interest income derived within the Philippines

Other interest income derived outside the Philippines
Royalties - in general
Royalties on books, other literary works and musical
compositions
Prizes - more than P10,000
20% FT
20% FT
Prizes - P10,000 or less
5% - 34%, 33%, 32%
5% - 34%, 33%, 32%
EXEMPT
EXEMPT
Prizes - PCSO & Lotto winnings
Other prizes or winnings within the Philippines
20% FT
20% FT
Other prizes or winnings outside the Philippines
5% - 34%, 33%, 32%
EXEMPT
Cash and/or Property Dividends from a domestic corp or
6% FT beginning Jan 1, 1998
6% FT beginning January 1, 1998
share in distributable net income after tax of a partnership
8% FT beginning
8% FT beginning January 1, 1999
(except general professional partnerhip), association, joint Jan 1, 1999
10% FT beginning January
account, or joint venture or consortium taxable as
10% FT beginning Jan 1, 2000
1, 2000
corporation
Other
Cash and/or Property Dividends (e.g. from a foreign
5% - 34%, 33%, 32%
5% - 34%, 33%, 32%
corp)
On domestic shares of stock not traded through local stock
5% / 10% FT
5% / 10% FT
exchange (based on net capital gains)
On shares of stock traded through local stock exchange
1/2 of 1% FT (Percentage Tax)
1/2 of 1% FT (Percentage Tax)
(based on gross selling price) [Sec 127(A) & (D)]
On real property (based on gross selling price or FMV
6% FT
6% FT
whichever is higher) - In general
On real property sold to the government - subj to option
6% FT or
6% FT or 5% - 34%, 33%, 32%
5% - 34% 33%, 32%
On real property sold to acquire or construct new principal
EXEMPT subj to certain conditions
EXEMPT subj to certain conditions
residence
Atty. Marissa O. Cabreros (Ateneo School of Law)

January 2011

INCOME TAXATION OF INDIVIDUALS: ALIENS

ALIENS
RESIDENT ALIEN
Definition

Sec 22 (F)

NON-RESIDENT ALIEN
ENGAGED IN BUSINESS
NOT ENGAGED IN
BUSINESS
Sec 22 (G) / Sec 25 (A)(1)

An individual whose residence is within the An individual whose residence is not

Philippines and who is not a citizen thereof. within the Philippines and who is not a
citizen thereof but stays in the
Philippines for an aggregate period of
more than 180 days during any
calendar year

Tax Code Reference

Tax Base

Tax Rates - In general

Sec 24
taxable income earned from all
sources within the Philippines

Sec 25 (A)

Sec 22 (G)
An individual whose residence is not
within the Philippines and who is not a
citizen thereof but stays in the
Philippines for an aggregate period of
or less than 180 days during any
calendar year

Sec 25 (B)

taxable income earned from gross income from all sources

all sources within the
within the Philippines
Philippines

5% - 34 % in 1998
5% - 34 % in 1998
5% - 33% in 1999
5% - 33% in 1999
5% - 32% in
5% - 32% in 2000
2000
5% - 32%
5% - 32% thereafter
thereafter

25%FT

Tax Rates - On Passive Income (subject to Final Tax [FT])

Interest on currency bank deposit and yield or any other monetary
benefit from deposit substitutes and from trust fund and similar
arragements

20% FT

20% FT

Interest from a depository bank under the expanded foreign

currency deposit system

7.5% FT

Interest on long term deposit or investment [Sec 22(FF)] in the

form of savings, common or individual trust funds, deposit
substitutes, investment management accounts and other
investments evidenced by certificates in such form prescribed by
the BSP
Pre-terminated
long term investment (should actually based on
expired term)

EXEMPT

EXEMPT
Sec 27(D)(3)
Sec 2.27(c)RR 10-98
EXEMPT

25% FT

EXEMPT
Sec 27(D)(3)
RR 10-98
25% FT

4 yrs to < 5 years -- 5%

5 yrs to < 5 years -- 5%
25% FT
3 years to < 4 years -- 12%
3 years to < 4 years -Less than 3 years 12%
Less
-- 20%
than 320%FT
years -- 20%
Other interest income derived within the Philippines
5% - 34%,
33%, 32%
25% FT
Other interest income derived outside the Philippines
EXEMPT
EXEMPT
EXEMPT
Royalties - in general
20% FT
20% FT
25% FT
Royalties on books, other literary works and musical compositions
10% FT
10% FT
25% FT
20% FT
25% FT
25% FT
Royalties on cinematographic films and similar works [Sec 28(B)
(2)]
Prizes - more than P10,000
20% FT
20% FT
25% FT
Prizes - P10,000 or less
5% - 34%, 33%, 32%
5% - 34%, 33%, 32%
25% FT
Prizes - PCSO and Lotto winnings
EXEMPT
EXEMPT
EXEMPT
Sec 27(D)(3)
RR 10-98
Other prizes or winnings within the Philippines
20% FT
20% FT
25% FT
Other prizes or winnings outside the Philippines
EXEMPT
EXEMPT
EXEMPT
Cash and/or Property Dividends from a domestic corp or share in 6% FT beginning Jan 1, 1998
20% FT
25% FT
distributable net income after tax of a partnership (except a
8% FT
general professional partnership), association, joint account, or
beginning Jan 1, 1999
joint venture or consortium taxable as corporation
10% FT beginning Jan 1, 2000
Other Cash and/or Property Dividends (e.g. from a foreign corp in
5% - 34%, 33%, 32%
5% - 34%, 33%, 32%
25%FT
the Philippines)
Other Cash and/or Property Dividends (e.g. from a foreign corp
EXEMPT
EXEMPT
EXEMPT
NOT in the Philippines)
On domestic shares of stock not traded through local stock
5% / 10% FT
5% / 10% FT
5% / 10% FT
exchange (based on net capital gains)
On shares of stock traded through local stock exchange (based on 1/2 of 1% FT (Percentage Tax)
1/2 of 1% FT (Percentage Tax) 1/2 of 1% FT (Percentage Tax)
gross selling price) [Sec 127(A) & (D)]
On real property (based on gross selling price or FMV whichever
6% FT
6% FT
6% FT
is higher) - In general
On real property sold to the government - subj to option
6% FT or
6% FT or
6% FT or
5% - 34% 33%, 32%
5% - 34% 33%, 32%
5% - 34% 33%, 32%
On real property sold to acquire or construct new principal
EXEMPT subj to certain conditions N/A
N/A
residence
RR 13-99
RR 13-99
Atty. Marissa O. Cabreors (Ateneo School of Law)

January 2011

INCOME TAXATION OF CORPORATIONS

Definition

Tax Code Reference

Tax Base

Tax Rates - In general

Tax Rates - on Passive Income (Subject to Final Tax [FT])

Interest on any currency bank deposit and yield or any other
monetary benefit from deposit substitutes and from trust
funds and similar arragements

Interest on foreign currency deposit system

Interest Income on Foreign Loans contracted on or after
August 1, 1986
Interest Income received by a FCDU
Income derived by a depository bank under the expanded
foreign currency deposit system from foreign currency
transactions with nonresidents, offshore banking units in
the Philippines, local commercial banks including
branches of foreign banks that may be authorized by the
Bangko Sentral ng Pilipinas (BSP) to transact business with
foreign
deposit
system
Interestcurrency
income from
foreign
currency loans granted by such

CORPORATIONS
RESIDENT
DOMESTIC
FOREIGN
Sec 22 (B) & (C )
Sec 22 (H)
Applies to corporation created Applies to foreign corporation
or organized in the Philippines engaged in trade or business
or under its laws
within the Philippines
Sec 27
taxable income from all
sources within and without
the Philippines

NON-RESIDENT
FOREIGN
Sec 22 (I)
Applies to a foregin corporation
not engaged in trade or
business within the Philippines

Sec 28 (A)
Sec 28 (B)
taxable income from all
gross income from all sources
sources within the Philippines
within the Philippines

34% in 1998
34% in 1998
33% in 1999
33% in 1999
32% in 2000-2005
32% in 2000-2005
35 % in
35 % in
2006-2008
2006-2008
30% in 2009 & thereafter
30% in 2009 & thereafter

34% in 1998
33% in 1999
32% in 2000-2005
35 % in
2006-2008
30% in 2009 & thereafter

20% FT

20% FT

34% in 1998
33% in 1999
32% in 2000-2005
35 % in
2006-2008
30% in 2009
& thereafter
EXEMPT
20% FT

7.5% FT
N/A

7.5% FT
N/A

EXEMPT [RA No. 9294]

EXEMPT [RA No. 9294]

N/A

10% FT

10% FT

N/A

N/A

EXEMPT [RA No. 9294]

N/A

N/A

10% FT

N/A

20% FT

20% FT

EXEMPT

EXEMPT

depository banks under said expanded system to residents

other than offshore banking units in the Philippines or
other depository banks under the expanded system
Interest Income received by an OBU
Income derived by a depository bank under the expanded
foreign currency deposit system from foreign currency
transactions with nonresidents, offshore banking units in
the Philippines, local commercial banks including
branches of foreign banks that may be authorized by the
Bangko Sentral ng Pilipinas (BSP) to transact business with
foreign
deposit
system
Interestcurrency
income from
foreign
currency loans granted to
residents other than offshore banking units or local
commercial banks, including local branches of foreign
banks that may be authorized by BSP to transact with
offshore
Royalties banking units

Dividends
Tax Rates - on capital gains
On shares of stock not traded (based on net capital gains)
On Land or Buildings (classified as capital assets)

Tax Rate - Minimum Corporate Income Tax (MCIT)

Tax Rate - Branch Profit Remittance Tax (BPRT)
Tax Rate - Improperly Accumulated Earnings Tax (Sec 29)
Atty. Marissa O. Cabreros (Ateneo School of Law)

5% / 10% FT
5% / 10% FT
6% FT
34% in 1998
based on gross selling price
33% in 1999
or FMV whichever is higher
32% in 2000-2005
35 % in
2006-2008
30% in 2009
2%
2%& thereafter
N/A
10%

15%
10%

34% in 1998
33% in 1999
32% in 2000-2005
35 % in
2006-2008
30%
in FT
2009
& thereafter
15%
(conditional)
5% / 10% FT
34% in 1998
33% in 1999
32% in 2000-2005
35 % in
2006-2008
30% in 2009
& thereafter
N/A
N/A
N/A
January 2011

INCOME TAXATION: SPECIAL RULES

SPECIAL RATES FOR CERTAIN ALIEN INDIVIDUALS
Alien Employed by Regional or Area Headquarters and 15%
5% - 34%, 33%, 32% [regular tax rate]
Regional Operating Headquarters of Multinational
on gross income
or
Companies [Sec 25 (C )]
on salaries, wages, FT rate for any other income earned from all other
annuities,
sources within the Philippines
compensation,
Alien Individual Employed by Offshore Banking Units
remuneration and
[Sec 25 (D)]
other emoluments
such as honoraria
Alien Individual Employed by Petroleum Service
and allowances
Contractor and Subcontractor [Sec 25(E)]

SPECIAL RATES FOR CORPORATIONS

DOMESTIC CORPORATION
Proprietary Educational Institutions and
Hospitals

10%
35%

GOCC, Agencies and Instrumentalities

32%

on taxable income
on entire taxable income, if total gross income from
unrealted trade, business, or activity exceed 50%
of total income
same tax rate upon their taxable income in a
similar business, industry or activity

GSIS / SSS / PHIC / PCSO

Depository Banks

EXEMPT
10%

RESIDENT FOREIGN CORPORATION

International Air Carriers
International Shipping
Offshore Banking Units

2 1/2 %
2 1/2 %
10%

on Gross Philippine Billings

on Gross Philippine Billings
any interest income derived from foreign currency
loans granted to residents other than offshore
banking units or local commercial banks, including
local branches of foreign banks that may be
authorized by the BSP to transact business with
offshore banking units

EXEMPT

income derived by offshore banking units

authorized by the Bangko Sentral ng Pilipinas
(BSP), from foreign currency transactions with
nonresidents, other offshore banking units, local
commercial banks, including branches of foreign
banks that may be authorized by the Bangko
Sentral ng Pilipinas (BSP) to transact business with
offshore banking units

Regional or Area Headquarters

Regional Operating Headquarters
NON RESIDENT FOREIGN CORPORATION
Cinematographic Film Owner, Lessor or Distributor
Owner or Lessor of Vessel Charted by Philippine
Nationals
Owner or Lessors of Aircraft, Machineries and Other
Equipment
Atty. Marissa O. Cabreros (Ateneo School of Law)

EXEMPT
10%

on interest income from foreign currency

transactions including interest income from foreign
loans

on taxable income

25%
4.5%

on Gross Income
on Gross Rentals

7.5%

on Gross Rentals
January 2011