Income Tax - Bureau of Internal Revenue

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Income Tax - Bureau of Internal Revenue

Index for Income Tax:
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.
[return to index]
Who Are Required To File Income Tax Returns
Individuals
Resident citizens receiving income from sources within or outside the Philippines
employees deriving purely compensation income from 2 or more employers, concurrently or
successively at anytime during the taxable year
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
self-employed individuals receiving income from the conduct of trade or business and/or practice of
profession
individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or
business and/or practice of profession
individuals deriving other non-business, non-professional related income in addition to compensation
income not otherwise subject to a final tax
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
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
[return to index]
Annual Income Tax For Individuals Earning Purely Compensation Income (Including Non-Business/NonProfession Related Income) and For Marginal Income Earners
Tax Form
BIR Form 1700 - Annual Income Tax Return (For Individual Earning Purely Compensation Income Including NonBusiness/Non-Profession Related Income)
Documentary Requirements
1. Certificate of Income Tax Withheld on Compensation (BIR Form 2316)
2. Waiver of the Husbands right to claim additional exemption, if applicable
3. Duly approved Tax Debit Memo, if applicable
4. Proof of Foreign Tax Credits, if applicable
5. Income Tax Return previously filed and proof of payment, if filing an amended return for the same taxable year
Procedures
1. Fill-up BIR Form 1700 in triplicate.
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
[return to index]
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)
1. Certificate of Income Tax Withheld on Compensation (BIR Form 2316), if applicable
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304) if applicable
3. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if applicable
4. Waiver of the Husbands right to claim additional exemption, 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
9. Proof of prior years excess tax credits, if applicable
Procedures
1. Fill-up BIR Form 1701 in triplicate copies.
Form 1701, together with the required attachments and your payment.
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.
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
[return to index]
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.
None
Procedures
1. Accomplish BIR Form 1701 AIF in triplicate.
2. Attach the same to BIR Form 1701.
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
[return to index]
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)
1. Certificate of Income Tax Withheld at Source (BIR Form 2307), if applicable
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
1. Fill-up BIR Form 1701Q in triplicate.
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.
Form 1701Q, together with the required attachments and your payment.
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.
Deadlines
April 15 for the first quarter
August 15 for the second quarter
November 15 for the third quarter
[return to index]
Annual Income Tax For Corporations And Partnerships
Tax Form
BIR Form 1702 - Annual Income Tax Return (For Corporations and Partnerships)
1. Certificate of Income Payments not Subjected to Withholding Tax (BIR Form 2304), if applicable
2. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), 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
7. Proof of prior years excess tax credits, if applicable
Procedures
Form 1702 with the required attachments and your payments.
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
[return to index]
Account Information Form For Corporations And Partnerships
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.
None
Procedures
1. Accomplish BIR Form 1702 AIF in triplicate.
2. Attach the same to BIR Form 1702.
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
[return to index]
Quarterly Income Tax For Corporations And Partnerships
Tax Form
BIR Form 1702 Q - Quarterly Income Tax Return (For Corporations and Partnerships)
1. Certificate of Income Tax Withheld at Source (BIR Form 2307), if applicable
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
1. Fill-up BIR Form 1702 Q in triplicate.
present the duly accomplished BIR Form 1702 Q, together with the required attachments and your payment.
Form 1702 Q.
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
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Improperly Accumulated Earnings Tax For Corporations
Tax Form
BIR Form 1704 - Improperly Accumulated Earnings Tax Return (For Corporations)
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
Form 1704
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
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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.
[return to index]
Tax Rate
A. For Individuals Earning Purely Compensation Income and Individuals Engaged in Business and Practice of
Profession
Amount of Net Taxable Income
Over
Rate
But Not Over

P10,000
5%
P10,000
P30,000
P500 + 10% of the Excess over P10,000
P30,000
P70,000
P2,500 + 15% of the Excess over P30,000
P70,000
P140,000
P140,000
P250,000
P250,000
P500,000
P500,000
P125,000 + 32% of the Excess over P500,000 in 2000 and onward
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.
Tax Rate
Taxable Base
a. In General
30% (effective Jan. 1,

2009)
Net taxable income from all sources
b. Minimum
Corporate Income
Tax*
2%
Gross Income
c. Improperly
Accumulated
Earnings
10%
Improperly Accumulated Taxable Income
2. Proprietary
Educational
Institution
10%
Net taxable income provided that the gross income from unrelated
trade, business or other activity does not exceed 50% of the total
gross income
3. Non-stock, Nonprofit Hospitals
10%
Net taxable income provided that the gross income from unrelated
trade, business or other activity does not exceed 50% of the total
gross income
a. In General
30%
b. Minimum
Corporate Income
Tax*
2%
Gross Income
c. Improperly
Accumulated
Earnings
10%
a. In General
30%
b. Minimum
Corporate Income
Tax*
2%
Gross Income
1. Domestic
Corporations:
4. GOCC, Agencies
& Instrumentalities
5. National Gov't. &

LGUs
c. Improperly
Accumulated
Earnings
10%
a. In General
30%
b. Minimum
Corporate Income
Tax*
2%
Gross Income
c. Improperly
Accumulated
Earnings
10%
6. Taxable
Partnerships
7. Exempt
Corporation
a. On Exempt
Activities
0%
b. On Taxable
Activities
30%
8. General
Professional
Partnerships
0%
9. Corporation
covered by Special
Laws
Rate specified under

the respective special
laws
10. International
Carriers
2.5%
Gross Philippine Billings
11. Regional
Operating Head
10%
Taxable Income
12. Offshore
Banking Units
(OBUs)
10%
Gross Taxable Income On Foreign Currency Transaction
30%
On Taxable Income other than Foreign Currency Transaction
13. Foreign
Currency Deposit
Units (FCDU)
10%
Gross Taxable Income On Foreign Currency Transaction
30%
On Taxable Income other than Foreign Currency Transaction
*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, exchange or other disposition of real
property (capital asset)
6%
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%
B. For Non-Resident Aliens Engaged in Trade or Business

1. Interest from currency deposits, trust funds and deposit substitutes
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 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:
20%
Exempt
-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, exchange or other disposition of real
property
6%
4. On capital gains for shares of stock not traded in the Stock Exchange
- Not over P100,000
5%
10%
C) For Non-Resident Aliens Not Engaged in Trade or Business

1. On the gross amount of income derived from all sources within the Philippines
25%
2. On capital gains presumed to have been realized from the exchange or other disposition of real property
located in the Phils.
6%
3. On capital gains for shares of stock not traded in the Stock Exchange
- Not Over P100,000
5%
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
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
E) General Professional Partnerships
General Professional Partnerships
0%
F) Domestic Corporations
1) a. In General on net taxable income
b. Minimum Corporate Income Tax on gross income
30%
2%
c. Improperly Accumulated Earnings on improperly accumulated taxable

income
10%
2) Proprietary Educational Institution and Non-profit Hospitals
10%
- In general (on net taxable income)

- If the gross income from unrelated trade, business or other activity exceeds
50% of the total gross income from all sources
10%
30%
4) GOCC, Agencies & Instrumentalities

a. In General - on net taxable income
30%
2%

income
10%
5) Taxable Partnerships
a. In General on net taxable income
30%
15%
2%

income
10%
6) Exempt Corporation
a. On Exempt Activities
0%
b. On Taxable Activities
30%
8) Corporation covered by Special Laws
Rate specified under the

respective special laws
G) Resident Foreign Corporation

1) a. In General on net taxable income
30%
2%
c. Improperly Accumulated Earnings on improperly accumulated

taxable income
10%
2) International Carriers on gross Philippine billings
2.50%
3) Regional Operating Headquarters on gross income
10%
4) Corporation Covered by Special Laws
Rate specified under the respective

special laws
5) Offshore Banking Units (OBUs) on gross income
10%
6) Foreign Currency Deposit Units (FCDU) on gross income
10%
[return to index]
Related Revenue Issuances
RR No. 4-95, RR No. 4-96, RR No. 5-97, RR No. 1-98, RA 9337, RR 14-2002, RR 12-2007
[return to index]
Codal Reference
Sections 23-59, 67-73 and 74-77 of the National Internal Revenue Code
[return to index]
Frequently Asked Questions
1) What is income?
Income means all wealth, which flows into the taxpayer other than as a mere return of capital.
2) What is Taxable Income?
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.
3) What is Gross Income?
Gross income means all income derived from whatever source.
4) What comprises gross income?
Gross income includes, but is not limited to the following:
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
5) What are some of the exclusions from gross income?
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
income derived by foreign government

income derived by the government or its political subdivision
prizes and awards in sport competition
prizes and awards which met the conditions set in the Tax Code
13th month pay and other benefits
GSIS, SSS, Medicare and other contributions
gain from the sale of bonds, debentures or other certificate of indebtedness
gain from redemption of shares in mutual fund
6) What are the allowable deductions from gross income?
Except for taxpayers earning compensation income arising from personal services rendered under an employeremployee 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
For head of familyP 50,000.00
For each married individual *P 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 additional exemption can be claimed by the following:
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:
Family gross income yearly should not be more than P 250,000

For married individuals, the spouse claiming the additional exemptions for the qualified dependents shall
be entitled to this deduction
7) Who are required to file the Income Tax returns?
Individuals
Resident citizens receiving income from sources within or outside the Philippines
employees deriving purely compensation income from 2 or more employers, concurrently or

successively at anytime during the taxable year
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
self-employed individuals receiving income from the conduct of trade or business and/or practice of
profession
individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or
business and/or practice of profession
individuals deriving other non-business, non-professional related income in addition to compensation
income not otherwise subject to a final tax
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
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
domestic corporations receiving income from sources within and outside the Philippines
foreign corporations receiving income from sources within the Philippines
taxable partnerships
Estates and trusts engaged in trade or business

8) Who are not required to file Income Tax returns?
a. An individual who is a minimum wage earner
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.
9) Who are exempt from Income Tax?
Non-resident citizen who is:
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.
Overseas Filipino Worker, including overseas seaman
An individual citizen of the Philippines who is working and deriving income from abroad as an overseas Filipino worker
is taxable only on income from sources within the Philippines; provided, that a seaman who is a citizen of the
Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel
engaged exclusively in international trade will be treated as an overseas Filipino worker.
NOTE: A Filipino employed as Philippine Embassy/Consulate service personnel of the Philippine Embassy/consulate
is not treated as a non-resident citizen, hence his income is taxable.
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.
For no payment ITRs -- refundable, break-even, exempt and no operation/transaction, including returns to be
paid on 2nd installment and returns paid through a Tax Debit Memo(TDM)
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?
Gross Income
P ___________
Less: Allowable Deductions (Itemized or Optional)
___________
Net Income
P ___________
Less: Personal & Additional Exemptions
___________
Net Taxable Income
P ___________
Multiply by Tax Rate (5 to 32%)
____________
Income Tax Due: Tax withheld (per BIR From 2316/2304)
P ___________
Income tax payable
P____________
12) How is Income Tax paid?
Through withholding
Generally 10% or 15% if the gross annual business or professional income exceeds P720,000
per year
20% - Fees paid to directors who are not employees and 20% of professional fees paid to nonindividuals
Other withholding tax rates
Pay the balance as you file the tax return, computed as follows:
Income Tax Due
P ___________
Less: Withholding Tax
___________
Net Income Tax Due
P ___________
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.
14) Who are covered by MCIT?
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.
15) When does a corporation start to be 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.
16) When is the MCIT reported and paid? Is it quarterly?
The MCIT is paid on an annual basis and quarterly basis. The rules are governed by Revenue Regulations No. 122007.
17) How is MCIT computed?
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.
18) What is the carry forward provision under the MCIT?
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.
19) How would the MCIT be recorded for accounting purposes?
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
20) How long can we amend our income tax return?
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.
22) What is a tax treaty?
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.
23) What are the effective Philippine tax treaties?
The Philippines has thirty-seven (37) effective tax treaties. The following tax treaties and their dates of effectivity as
as follows:
Effective Philippine Tax Treaties (as of June 2010)
Country
Date of
Effectivity
Date and Venue of Signature
1. Australia
January 1, 1980
May 11, 1979, Manila, Philippines
2. Austria
January 1, 1983
April 4, 1981, Vienna, Austria
3. Bahrain
January 1, 2004
November 7, 2001, Manila,

Philippines
4. Bangladesh
January 1, 2004
September 8, 1997, Manila,

Philippines
5. Belgium
January 1, 1981
October 2, 1976, Manila, Philippines
6. Brazil
January 1, 1992
Sept. 29, 1983, Brasilia, Brazil
7. Canada
January 1, 1977
March 11, 1976, Manila, Philippines
8. China
January 1, 2002
November 18, 1999, Beijing, China
9. Czech
January 1, 2004

Philippines
10. Denmark (Renegotiated)
January 1, 1998
June 30, 1995, Copenhagen,

Denmark
11. Finland
January 1, 1982
12. France
January 1, 1978
January 9, 1976, Kingston, Jamaica
13. Germany
January 1, 1985
July 22, 1983, Manila, Philippines
14. Hungary
January 1, 1998
June 13, 1997, Budapest, Hungary
15. India
January 1, 1995
February 12, 1990, Manila,

Philippines
16. Indonesia
January 1, 1983
June 18, 1981, Manila, Philippines
17. Israel
January 1, 1997
18. Italy
January 1, 1990
December 5, 1980, Rome, Italy
19. Japan
January 1, 1981
February 13, 1980, Tokyo, Japan
20. Korea
January 1, 1987
February 21, 1984, Seoul, Korea
21. Malaysia
January 1, 1985
April 27, 1982, Manila, Philippines
22. Netherlands
January 1, 1992
23. New Zealand
January 1, 1981
24. Norway
January 1, 1998
25. Pakistan
January 1, 1979
February 22, 1980, Manila,

Philippines
26. Poland
January 1, 1998
September 9, 1992, Manila,

Philippines
27. Romania
January 1, 1998
May 18, 1994, Bucharest, Romania
28. Russia
January 1, 1998
29. Singapore
January 1, 1977
August 1, 1977, Manila, Philippines
30. Spain
January 1, 1994
31. Sweden (Renegotiated)
January 1, 2004
32. Switzerland
January 1, 2002
33. Thailand
January 1, 1983
34. United Arab Emirates
January 1, 2009
September 21, 2003, Dubai, UAE
35. United Kingdom of Great Britain and Northern

Ireland
January 1, 1979
June 10, 1976, London, United

Kingdom
36. United States of America
January 1, 1983
37. Vietnam
January 1, 2004

Philippines
24) What office can we inquire about the said tax treaties?
The International Tax Affairs Division (ITAD).
25) What taxes are covered by Philippine 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.
26) How is business income treated under our tax treaties?
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.
28) What is the Most-Favored-Nation clause (MFN)?
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.
29) What is the tax treatment on immovable property?
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.
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Income Tax - Bureau of Internal Revenue

But Not Over

P500 + 10% of the Excess over P10,000

P2,500 + 15% of the Excess over P30,000

P8,500 + 20% of the Excess over P70,000

P22,500 + 25% of the Excess over P140,000

P50,000 + 30% of the Excess over P250,000

P125,000 + 32% of the Excess over P500,000 in 2000 and onward

30% (effective Jan. 1,

Net taxable income from all sources

Improperly Accumulated Taxable Income

3. Non-stock, Nonprofit Hospitals

Net taxable income from all sources

Improperly Accumulated Taxable Income

Net taxable income from all sources

5. National Gov't. &

Improperly Accumulated Taxable Income

Net taxable income from all sources

Improperly Accumulated Taxable Income

Rate specified under

Gross Philippine Billings

Gross Taxable Income On Foreign Currency Transaction

On Taxable Income other than Foreign Currency Transaction

Gross Taxable Income On Foreign Currency Transaction

On Taxable Income other than Foreign Currency Transaction

Net taxable income from all sources

2. Royalties (on books as well as literary & musical composition)

3. Prizes (P10,000 or less )

4. Winnings (except from PCSO and lotto)

5. Interest Income of Foreign Currency Deposit

6. Cash and Property Dividends

- To Domestic Corporations from Another Domestic Corporations

- Any amount in excess of P100,000

- Three (3) years to less than four (4) years

- Less than three (3) years

B. For Non-Resident Aliens Engaged in Trade or Business

-Four (4) years to less than five (5) years

-Three (3) years to less than four (4) years

-Less than three (3) years

- Any amount in excess of P100,000

C) For Non-Resident Aliens Not Engaged in Trade or Business

- Any amount in excess of P100,000

c. Improperly Accumulated Earnings on improperly accumulated taxable

2) Proprietary Educational Institution and Non-profit Hospitals

- In general (on net taxable income)

4) GOCC, Agencies & Instrumentalities

b. Minimum Corporate Income Tax on gross income

c. Improperly Accumulated Earnings on improperly accumulated taxable

b. Minimum Corporate Income Tax on gross income

c. Improperly Accumulated Earnings on improperly accumulated taxable

8) Corporation covered by Special Laws

Rate specified under the

G) Resident Foreign Corporation

b. Minimum Corporate Income Tax on gross income

c. Improperly Accumulated Earnings on improperly accumulated

2) International Carriers on gross Philippine billings

3) Regional Operating Headquarters on gross income

4) Corporation Covered by Special Laws

Rate specified under the respective

5) Offshore Banking Units (OBUs) on gross income

6) Foreign Currency Deposit Units (FCDU) on gross income

income derived by foreign government

Family gross income yearly should not be more than P 250,000