Philippine Income Tax Compilation by Jaydee V2014.1

Philippine Taxation
Philippine Income Tax pg.2

Capital Gains Tax pg. 16
Estate Tax pg. 25
Donors Tax pg. 37
VAT pg. 43
Excise Tax pg. 59
Percentage Tax pg. 63
Taxation for Non Residents pg. 67
Taxation for Non Resident Foreign Corp pg. 69
Taxation of Foreign Source Income pg. 71

Philippine Income Tax (BIR.Gov.Ph) August 8, 2014
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.
Who Are Required To File Income Tax Returns
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

Tax Rate
A. For Individuals Earning Purely Compensation Income and Individuals Engaged in
Business and Practice of Profession
Amount of Net Taxable
Income
Rate
Over 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
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) wit hin
the jurisdiction of the Revenue District Office (RDO) where the taxpayer is registered.
Tax Rate Taxable Base
1. Domestic Corporations:
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, Non-profit
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
4. GOCC, Agencies &
Instrumentalities

a. In General 30% Net taxable income from all sources
Tax*
2% Gross Income
Earnings
5. National Gov't. & LGUs
Tax*
2% Gross Income
Earnings
6. Taxable Partnerships
Tax*
2% Gross Income
Earnings
7. Exempt Corporation
a. On Exempt Activities 0%
b. On Taxable Activities 30% Net taxable income from all sources
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
13. Foreign Currency
Deposit Units (FCDU)
10% Gross Taxable Income On Foreign
30% On Taxable Income other than Foreign
*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
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
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%

B. For Non-Resident Aliens Engaged in Trade or Business
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 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:
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%
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%
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
15%
E) General Professional Partnerships
General Professional Partnerships 0%

F) Domestic Corporations
1) a. In General on net taxable income 30%
b. Minimum Corporate Income Tax on gross income 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) 10%
- If the gross income from unrelated trade, business or other activity
exceeds 50% of the total gross income from all sources
30%
4) GOCC, Agencies & Instrumentalities
a. In General - on net taxable income 30%
taxable income
10%
5) Taxable Partnerships
a. In General on net taxable income 30%
taxable 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%
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%

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
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 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
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 derivi ng 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 non-individuals
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. 12-2007.
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 November 13, 2000, Manila, Philippines
10. Denmark (Renegotiated) January 1, 1998 June 30, 1995, Copenhagen, Denmark
11. Finland January 1, 1982 October 13, 1978, Manila, Philippines
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 June 9, 1992, Manila, Philippines
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 March 9, 1989, Manila, Philippines
23. New Zealand January 1, 1981 April 29, 1980, Manila, Philippines
24. Norway January 1, 1998 July 9, 1987, Manila, Philippines
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 April 26, 1995, Manila, Philippines
29. Singapore January 1, 1977 August 1, 1977, Manila, Philippines
30. Spain January 1, 1994 March 14, 1989, Manila, Philippines
31. Sweden (Renegotiated) January 1, 2004 June 24, 1998, Manila, Philippines
32. Switzerland January 1, 2002 June 24, 1998, Manila, Philippines
33. Thailand January 1, 1983 July 14, 1982, Manila, Philippines
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 October 1, 1976, Manila, Philippines
37. Vietnam January 1, 2004 November 14, 2001, Manila, 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.

Capital Gains Tax

Description
Capital Gains Tax is a tax imposed on the gains presumed to have been realized by the seller
from the sale, exchange, or other disposition of capital assets located in the Philippines,
including pacto de retro sales and other forms of conditional sale.

Final Capital Gains Tax for Onerous Transfer of Real Property Classified as Capital
Assets (Taxable and Exempt)

Tax Form

BIR Form 1706 Final Capital Gains Tax Return (For Onerous Transfer of Real Property
Classified as Capital Assets -Taxable and Exempt)

Documentary Requirements

1) One original copy and one photocopy of the Notarized Deed of Sale or Exchange
2) Photocopy of the Original Certificate of Title; Transfer Certificate of Title; or Condomi nium
Certificate of Title in case of a condo unit
3) Certified True Copy of the tax declaration on the lot and/or improvement during nearest time
of sale
4) Certificate of No Improvement issued by the Assessors office where the property has no
declared improvement, if applicable or Sworn Declaration/Affidavit of No Improvement by at
least one (1) of the transferees
5) Copy of BIR Ruling for tax exemption confirmed by BIR, if applicable
6) Duly approved Tax Debit Memo, if applicable
7) Sworn Declaration of Intent as prescribed under Revenue Regulations 13-99, if the
transaction is tax-exempt
8) Documents supporting the exemption
Additional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures.

Procedures

File the Capital Gains Tax return in triplicate (two copies for the BIR and one copy for the
taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where the property is
located. In places where there are no AAB, the return will be filed directly with the Revenue
Collection Officer or Authorized City or Municipal Treasurer.

Tax Rates
For real property - 6%.

Deadline
Within 30 days after each sale, exchange, transfer or other disposition of real property.

Capital Gains Tax for Onerous Transfer of Shares of Stocks Not Traded Through the
Local Stock Exchange

Tax Form

BIR Form 1707 - Capital Gains Tax Return (For Onerous Transfer of Shares of Stocks Not
Traded Through the Local Stock Exchange)


1) One original copy and one photocopy of the Notarized Deed of Sale/ Exchange of shares of
stock
2) Photocopy of the Deed of Acquisition or proof of cost/ fair market value of the stocks at the
time of acquisition
3) Photocopy of certificate of shares of stock
4) Photocopy of evidences of expenses related to sale
5) Proof of valuation of shares of stocks In determining the value of the shares, the Adjusted Net
Asset Method shall be used whereby all assets and liabilities are adjusted to fair market values.
The net of adjusted asset minus the adjusted liability value is the indicated value of the equity.
For purposes of this item, the appraised value of real property at the time of sale shall be the
highest among the following:
(a) The fair market value as determined by the Commissioner, or
(b) The fair market value as shown in the schedule of valued fixed by the Provincial and
City Assessors, or
(c) The fair market value as determined by Independent Appraiser. (RR NO. 6-
2013)
6) Duly approved Tax Debit Memo, if applicable

Procedures

taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where the seller or
transferor of stocks is registered. In places where there are no AAB, the return will be filed
directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer.

Tax Rates

For Shares of Stocks Not Traded in the Stock Exchange
- Not over P100,000 - 5%
- Any amount in excess of P100,000 - 10%

Deadline

Within 30 days after each sale or disposition of shares of stocks or real property. In case of
installment sale, the return shall be filed within 30 days following the receipt of the first down
payment and within 30 days following the subsequent installment payments. Only one return
shall be filed for multiple transactions within the day.

Annual Capital Gains Tax for Onerous Transfer of Shares of Stocks Not Traded Through
the Local Stock Exchange

Tax Form
BIR Form 1707A - Annual Capital Gains Tax Return (For Onerous Transfer of Shares of Stocks
Not Traded Through the Local Stock Exchange)

Procedures

transferor of stocks is registered. In places where there are no AAB, the return will be filed
directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer.

Tax Rates

For Shares of Stocks Not Traded in the Stock Exchange
- Not over P100,000 - 5%

Deadline

Individual Taxpayers On or before April 15 of each year covering all stock transactions of the
preceding taxable year
Corporate Taxpayers On or before the fifteenth (15) day of the fourth (4) month following the
close of the taxable year covering all transactions of the preceding taxable year
Note: For onerous transfer of real property other than capital asset (including taxable and
exempt), a creditable withholding tax based on the gross selling price/total amount of
consideration or the fair market value determined in accordance with Section 6(E) of the Code,
whichever is higher, paid to the seller/owner for the sale, transfer or exchange of real property,
other than capital asset, shall be imposed upon the withholding agent/buyer. (sec. 3 (j), RR NO.
6-2001)


1) What is meant by capital asset?

Capital asset means property held by the taxpayer (whether or not connected with his trade or
business), but does not include
a) stock in trade of the taxpayer or other property of a kind which would properly be included in
the inventory of the taxpayer if on hand at the close of the taxable year; or
b) property held by the taxpayer primarily for sale to customers in the ordinary course of his
trade or business; or
c) property used in the trade or business of a character which is subject to the allowance for
depreciation provided in subsection (F) of Sec. 34 of the Code; or
d) real property used in trade or business of the taxpayer.

2) What is meant by ordinary asset?

Ordinary asset refers to all properties specifically excluded from the definition of capital assets
under Sec. 39 (A)(1) of the NIRC.

3.) What is meant by "Stock classified as Capital Asset"? (Sec 2(a) of RR 6-2008)

This refers to stocks and securities held by taxpayers other than dealers in securities.

4.) What is meant by "Dealer in Securities"? (Sec 2(b) of RR 6-2008)

Dealer in Securities refers to a merchant of stocks or securities, whether an individual,
partnership or corporation, with an established place of business, regularly engaged in the
purchase of securities and the resale thereof to customers; that is one, who as merchant buys
securities and re-sells them to customers with a view to the gains and profits that may be derived
therefrom. "Dealer in securities" means any person who buys and sells securities for his/her own
account in the ordinary course of business (Sec. 3.4, SRC).

5.) What is meant by real property?

Real property shall have the same meaning attributed to that term under Article 415 of Republic
Act No. 386, otherwise known as the Civil Code of the Philippines.

6.) What does a real estate dealer refer to?

A real estate dealer refers to any person engaged in the business of buying and selling or
exchanging real properties on his own account as a principal and holding himself out as a full or
part-time dealer in real estate.

7.) What does a real estate developer refer to?

Real estate developer refers to any person engaged in the business of developing real properties
into subdivisions, or building houses on subdivided lots, or constructing residential or
commercial units, townhouses and other similar units for his own account and offering them for
sale or lease.

8.)What does a real estate lessor refer to?

Real estate lessor refers to any person engaged in the business of leasing or renting real
properties on his own account as a principal and holding himself out as a lessor of real properties
being rented out or offered for rent.

9.) Who are considered engaged in the real estate business?

Taxpayers who are considered engaged in the real estate business refer collectively to real estate
dealers, real estate developers and/or real estate lessors. A taxpayer whose primary purpose of
engaging in business, or whose Articles of Incorporation states that its primary purpose is to
engage in the real estate business shall be deemed to be engaged in the real estate business.

10.) Who are considered not engaged in the real estate business?

Taxpayers who are considered not engaged in the real estate business refer to persons other than
real estate dealers, real estate developers and/or real estate lessors.

11.) Who are considered habitually engaged in the real estate business?

Real estate dealers or real estate developers who are registered with the Housing and Land Use
Regulatory Board (HULRB) or HUDCC

12.) How can you determine whether a particular real property is a capital asset or an ordinary
asset?

a) Real properties shall be classified with respect to taxpayers engaged in the real estate business
as follows:
i) All real properties acquired by the real estate dealer shall be considered as ordinary assets.

ii) All real properties acquired by the real estate developer, whether developed or
undeveloped as of the time of acquisition, and all real properties which are held by the real
estate developer primarily for sale or for lease to customers in the ordinary course of his
trade or business or which would properly be included in the inventory of the taxpayer if on
hand at the close of the taxable year and all real properties used in the trade or business,
whether in the form of land, building, or other improvements, shall be considered as
ordinary assets.

iii) All real properties of the real estate lessor, whether land, building and/or improvements,
which are for lease/rent or being offered for lease/rent, or otherwise for use or being used in
the trade or business shall likewise be considered as ordinary assets.

iv) All real properties acquired in the course of trade or business by a taxpayer habitually
engaged in the sale of real property shall be considered as ordinary assets.

Note: Registration with the HLURB or HUDCC as a real estate dealer or developer shall be
sufficient for a taxpayer to be considered as habitually engaged in the sale of real estate.

If the taxpayer is not registered with the HLURB or HUDCC as a real estate dealer or developer,
he/it may nevertheless be deemed to be engaged in the real estate business through the
establishment of substantial relevant evidence (such as consummation during the preceding year
of at least six (6) taxable real estate sale transactions, regardless of amount; registration as
habitually engaged in real estate business with the Local Government Unit or the Bureau of
Internal Revenue, etc.

A property purchased for future use in the business, even though this purpose is later thwarted by
circumstances beyond the taxpayers control, does not lose its character as an ordinary asset. Nor
does a mere discontinuance of the active use of the property change its character previously
established as a business property. (Sec 3(a)(4)of RR 7-2003)

b) In the case of taxpayer not engaged in the real estate business, real properties, whether land,
building, or other improvements, which are used or being used or have been previously used in
trade or business of the taxpayer shall be considered as ordinary assets.

c) In the case of taxpayers who changed its real estate business to a non-real estate business, real
properties held by these taxpayer shall remain to be treated as ordinary assets.

d) In the case of taxpayers who originally registered to be engaged in the real estate business but
failed to subsequently operate, all real properties acquired by them shall continue to be treated as
ordinary assets.

e) Real properties formerly forming part of the stock in trade of a taxpayer engaged in the real
estate business, or formerly being used in the trade or business of a taxpayer engaged or not
engaged in the real estate business, which were later on abandoned and became idle, shall
continue to be treated as ordinary assets. Provided however, that properties classified as ordinary
assets for being used in business by a taxpayer engaged in business other than real estate
business are automatically converted into capital assets upon showing proof that the same have
not been used in business for more than two years prior to the consummation of the taxable
transactions involving said properties

f) Real properties classified as capital or ordinary asset in the hands of the seller/transferor may
change their character in the hands of the buyer/transferee. The classification of such property in
the hands of the buyer/transferee shall be determined in accordance with the following rules:

i) Real property transferred through succession or donation to the heir or donee who is not
engaged in the real estate business with respect to the real property inherited or donated, and
who does not subsequently use such property in trade or business, shall be considered as a
capital asset in the hands of the heir or donee.
ii) Real property received as dividend by the stockholders who are not engaged in the real
estate business and who do not subsequently use such property in trade or business, shall be
considered as a capital asset in the hands of the recipients even if the corporation which
declared the real property dividends is engaged in real estate business.
iii) The real property received in an exchange shall be treated as ordinary asset in the hands
of the case of a tax-free exchange by taxpayer not engaged in real estate business to a
taxpayer who is engaged in real estate business, or to a taxpayer who, even if not engaged in
real estate business, will use in business the property received in exchange.

g) In the case of involuntary transfers of real properties, including expropriations or foreclosure
sale, the involuntariness of such sale shall have no effect on the classification of such real
property in the hands of the involuntary seller, either as capital asset or ordinary asset as the case
may be.

13.) What is the basis in the valuation of property?

The value of the real property will be based on the selling price, fair market value as determined
by the Commissioner (zonal value) or the fair market value as shown in the schedule of values of
the Provincial or City Assessor, whichever is higher.

If there is no zonal value, the taxable base is whichever is higher of the gross selling price per
sales documents or the fair market value that appears in the latest tax declaration.

If there is an improvement, the FMV per latest tax declaration at the time of the sale or
disposition, duly certified by the City/Municipal Assessor shall be used. No adjustments shall be
added on the said value, provided that the tax declaration bears the upgraded fair market value of
the said property pursuant to Section 219 of R.A. No. 7160, otherwise known as the Local
Government Code of 1991 and the last paragraph of the Local Assessment Regulations No. 1-92
dated October 6, 1992.

In case the tax declaration being presented was issued three (3) or more years prior to the date of
sale or disposition of the real property, the seller/transferor shall be required to submit a
certification from the City/Municipal Assessor whether or not the same is still the latest tax
declaration covering the said real property. Otherwise, the taxpayer shall secure its latest tax
declaration and shall submit a copy thereof duly certified by the said Assessor. (RAMO 1-2001)
For shares of stocks, it will be based on the net capital gains realized from the sale, barter,
exchange or other disposition of shares of stocks in a domestic corporation, considered as capital
assets not traded through the local stock exchange.
14.) What is meant by "Net Capital Gains"? (Sec 2(o) of RR 6-2008)

"Net Capital Gain" means the excess of the gains from sales or exchanges of capital assets over
the losses from such sales or exchanges.

15.)What are the rules for the determination of amount and recognition of gain or loss in the sale,
barter, or exchange of shares of stock not traded through the Local Stock exchange? (Sec 7(c ) of
RR 6-2008)

(A.) Determination of Selling Price. In determining the selling price, the following rules
shall apply:
(a.1) In the case of cash sale, the selling price shall be the total consideration per deed of sale.
(a.2) If the total consideration of the sale or disposition consists partly in money and partly i n
kind, the selling price shall be sum of money and the fair market value of the property received.
(a.3) In the case of exchange, the selling price shall be the fair market value of the property
received.
(a.4) In case the fair market value of the shares of stock sold, bartered, or exchanged is greater
than the amount of money and/or fair market value of the property received, the excess of the fair
market value of the shares of stock sold, bartered or exchanged over the amount of money and
the fair market value of the property, if any, received as consideration shall be deemed a gift
subject to the donor's tax under sec. 100 of the Tax Code, as amended.
(B.) Definition of "fair market value" of the Shares of Stock.
(b.1) In the case of listed shares which were sold, transferred or exchanged outside of the trading
system and/or facilities of the Local Stock Exchange, the closing price on the day when the
shares are sold, transferred, or exchanged. When no sale is made in the Local Stock Exchange on
the day when the Listed shares are sold, transferred, or exchanged, the closing price on the day
nearest to the date of sale, transfer or exchange of the shares shall be the fair market value. Sec 2
of RR 6-2013
(b.2) In the case of shares of stock not listed and traded in the local stock exchanges, the value of
the shares of stock at the time of sale shall be the fair market value. In determining the value of
the shares, the Adjusted Net Asset Method shall be used whereby all assets and liabilities are
adjusted to fair market values. The net of adjusted asset minus the liability values is the indicated
value of the equity.
The appraised value of real property at the time of sale shall be the higher of
(1) The fair market value as determined by the Commissioner, or
(2) The fair market value as shown in the schedule of valued fixed by the
Provincial and City Assessors, or
(3) The fair market value as determined by Independent Appraiser.
(b.3) In the case of a unit of participation in any association, recreation or amusement club (such
as golf, polo, or similar clubs), the fair market value thereof shall be its selling price or the bid
price nearest published in any newspaper or publication of general circulation, whichever is
higher.
(C.) Determination of Gain or Loss from Sale or Disposition of Shares of Stock. The gain
from the sale or other disposition Stock. The gain from the sale or other disposition of shares
of stock shall be the excess of the amount realized therefrom over the basis or adjusted basis for
determining gain, and the loss shall be the excess of the basis or adjusted basis for determining
loss over the amount realized. The amount realized from the sale or other disposition of property
shall be the sum of money received plus the fair market value of the property (other than money)
received, if any.

16.) What are the applicable tax rates of Capital Gains Tax under the National Internal Revenue
Code of 1997?

a) Real Properties - 6 %
b) For Shares of Stocks not Traded in the Stock Exchange, on the net Capital Gains
- Not over P100,000 - 5%

17.) Who are required to file the Final Capital Gains Tax return?

Every person, whether natural or juridical, resident or non-resident, including estates and trusts,
who sells, transfers, exchanges or disposes real properties located in the Philippines classified as
capital assets, including pacto de retro sales and other forms of conditional sales or shares of
stocks in domestic corporations not traded through the local stock exchange classified as capital
assets.
18.) What is the procedure in the filing of Final Capital Gains Tax return?

File the Final Capital Gains Tax return in triplicate (two copies for the BIR and one copy for the
transferor is registered, for shares of stocks or where the property is located, for real property. In
places where there are no AAB, the return will be filed directly with the Revenue Collection
Officer or Authorized City or Municipal Treasurer.

19.) Who/what are considered exempt from the payment of Final Capital Gains Tax?

Dealer in securities, regularly engaged in the buying and selling of securities
An entity exempt from the payment of income tax under existing investment incentives
and other special laws
An individual or non-individual exchanging real property solely for shares of stocks
resulting in corporate control
A government entity or government-owned or controlled corporation selling real property
If the disposition of the real property is gratuitous in nature
Where the disposition is pursuant to the CARP law
The proceeds of the sale of the principal residence have been fully utilized in acquiring or
constructing new principal residence within eighteen (18) calendar months from the date
of sale or disposition;
The historical cost or adjusted basis of the real property sold or disposed will be carried
over to the new principal residence built or acquired;
The Commissioner has been duly notified, through a prescribed return, within thirty (30)
days from the date of sale or disposition of the persons intention to avail of the tax
exemption;
Exemption was availed only once every ten (10) years; and
There is no full utilization of the proceeds of sale or disposition. The portion of the gain
presumed to have been realized from the sale or disposition will be subject to Capital
Gains Tax.
In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from
the seller and shall deduct from the agreed selling price/consideration the 6% capital
gains tax which shall be deposited in cash or managers check in interest-bearing account
with an Authorized Agent Bank (AAB) under an Escrow Agreement between the
concerned Revenue District Officer, the Seller and the Transferee, and the AAB to the
effect that the amount so deposited, including its interest yield, shall only be released to
such Transferor upon certification by the said RDO that the proceeds of the
sale/disposition thereof has, in fact, been utilized in the acquisition or construction of the
Seller/Transferors new principal residence within eighteen (18) calendar months from
date of the said sale or disposition. The date of sale or disposition of a property refers to
the date of notarization of the document evidencing the transfer of said property. In
general, the term Escrow means a scroll, writing or deed, delivered by the grantor,
promisor or obligor into the hands of a third person, to be held by the latter until the
happening of a contingency or performance of a condition, and then by him delivered to
the grantee, promise or obligee.
20.) Who are conditionally exempt from the payment of Final Capital Gains Tax?
Natural persons who dispose their principal residence, provided that the following criteria are
met:

The proceeds of the sale of the principal residence have been fully utilized in acquiring or
constructing new principal residence within eighteen (18) calendar months from the date
of sale or disposition;
The historical cost or adjusted basis of the real property sold or disposed will be carried
over to the new principal residence built or acquired;
The Commissioner has been duly notified, through a prescribed return, within thirty (30)
days from the date of sale or disposition of the persons intention to avail of the tax
exemption;
Exemption was availed only once every ten (10) years; and
There is no full utilization of the proceeds of sale or disposition. The portion of the gain
presumed to have been realized from the sale or disposition will be subject to Capital
Gains Tax.
In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from
the seller and shall deduct from the agreed selling price/consideration the 6% capital
gains tax which shall be deposited in cash or managers check in interest-bearing account
with an Authorized Agent Bank (AAB) under an Escrow Agreement between the
concerned Revenue District Officer, the Seller and the Transferee, and the AAB to the
effect that the amount so deposited, including its interest yield, shall only be released to
such Transferor upon certification by the said RDO that the proceeds of the
sale/disposition thereof has, in fact, been utilized in the acquisition or construction of the
Seller/Transferors new principal residence within eighteen (18) calendar months from
date of the said sale or disposition. The date of sale or disposition of a property refers to
the date of notarization of the document evidencing the transfer of said property. In
general, the term Escrow means a scroll, writing or deed, delivered by the grantor,
promisor or obligor into the hands of a third person, to be held by the latter until the
happening of a contingency or performance of a condition, and then by him delivered to
the grantee, promise or obligee.

21.) What is a Certificate Authorizing Registration?

Certificate Authorizing Registration (CAR) is a certification issued by the Commissioner or his
duly authorized representative attesting that the transfer and conveyance of land,
buildings/improvements or shares of stock arising from sale, barter or exchange have been
reported and the taxes due inclusive of the documentary stamp tax, have been fully paid.
With the implementation of the Electronic Certificate Authorizing Registration (eCAR) System,
the CAR shall now be electronically generated.

22.) What is eCAR System?

eCAR stands for Electronic Certificate Authorizing Registration. A web-based facility that
automates the generation of CAR with barcode, eCAR will also enable electronic linkage
between the BIR and the Land Registration Authority. (Participant Guide)
eCARs shall have a validity of one (1) year from date of issue. For other manually issued CARs
that are outstanding and not yet presented to the Register of Deeds, i.e., CARs more than one (1)
year from the date of issuance which are due for revalidation and expired CARs which are more
than two (2) years from the date of issuance, are not anymore valid for presentation to the
Registry of Deeds. The said CARs shall be replaced with an eCAR by the concerned Revenue
District Offices or Large Taxpayers Divisions. A certification fee shall be charged for each
released eCAR issued/reprinted after affixture of P15.00 Documentary Stamp Tax on Certificates
(Sec 188 of the NIRC of 1997) and the prescribed Certification Fee of One Hundred Pesos
(P100.00) under Executive Order No. 197 to the taxpayer/authorized representative.
Estate Tax
Description
Estate Tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful
heirs and beneficiaries at the time of death and on certain transfers, which are made by law as
equivalent to testamentary disposition. It is not a tax on property. It is a tax imposed on the
privilege of transmitting property upon the death of the owner. The Estate Tax is based on the
laws in force at the time of death notwithstanding the postponement of the actual possession or
enjoyment of the estate by the beneficiary.
Tax Form
BIR Form 1801 - Estate Tax Return
1. Notice of Death duly received by the BIR, if gross estate exceeds P20,000 for deaths occurring
on or after Jan. 1, 1998; or if the gross estate exceeds P3,000 for deaths occurring prior to
January 1, 1998
2. Certified true copy of the Death Certificate
3. Deed of Extra-Judicial Settlement of the Estate, if the estate is settled extra judicially
4. Court Orders/Decision, if the estate is settled judicially;
5. Affidavit of Self-Adjudication and Sworn Declaration of all properties of the Estate
6. A certified true copy of the schedule of partition of the estate and the order of the court
approving the same, if applicable
7. Certified true copy(ies) of the Transfer/Original/Condominium Certificate of Title(s) of real
property(ies) (front and back pages), if applicable
8. Certified true copy of the latest Tax Declaration of real properties at the time of death, if
applicable
9. "Certificate of No Improvement" issued by the Assessor's Office declared properties have no
declared improvement or Sworn Declaration/Affidavit of No Improvement by at least one (1) of
the transferees
10. Certificate of Deposit/Investment/Indebtedness owned by the decedent and the surviving
spouse, if applicable
11. Photo copy of Certificate of Registration of vehicles and other proofs showing the correct
value of the same, if applicable
12. Photo copy of certificate of stocks, if applicable
13. Proof of valuation of shares of stocks at the time of death, if applicable
For listed stocks - newspaper clippings or certification from the Stock Exchange
For unlisted stocks - In determining the value of the shares, the Adjusted Net Asset
Method shall be used whereby all assets and liabilities are adjusted to fair market values.
The net of adjusted asset minus the adjusted liability value is the indicated value of the
equity.

City Assessors, or
(c) The fair market value as determined by Independent Appraiser.
14. Proof of valuation of other types of personal property, if applicable
15. Proof of claimed tax credit, if applicable
16. CPA Statement on the itemized assets of the decedent, itemized deductions from gross estate
and the amount due if the gross value of the estate exceeds two million pesos, if applicable
17. Certification of Barangay Captain for claimed Family Home
18. Duly notarized Promissory Note for "Claims against the Estate" arising from Contract of
Loan
19. Accounting of the proceeds of loan contracted within three (3) years prior to death of the
decedent
20. Proof of the claimed "Property Previously Taxed"
21. Proof of claimed "Transfer for Public Use"
22. Copy of Tax Debit Memo used as payment, if applicable

Tax Rates
Effective January 1, 1998 up to Present
If the Net Estate is
Over But not Over The Tax
Shall be
Plus Of the
Excess Over
P 200,000.00 Exempt
P 200,000.00 500,000.00 0 5 % P 200,000.00
500,000.00 2,000,000.00 P 15,000.00 8 % 500,000.00
2,000,000.00 5,000,000.00 135,000.00 11 % 2,000,000.00
5,000,000.00 10,000,000.00 465,000.00 15 % 5,000,000.00
10,000,000.00 1,215,000.00 20 % 10,000,000.00
Effective July 28, 1992 up to December 31, 1997 (Section 77 of the NIRC, as
amended(Republic Act No. 7499)
Shall be
Plus Of the
Excess Over
P 200,000.00 Exempt
P 200,000.00 500,000.00 5 % P 200,000.00
500,000.00 2,000,000.00 P 15,000.00 8 % 500,000.00
2,000,000.00 5,000,000.00 135,000.00 12 % 2,000,000.00
5,000,000.00 10,000,000.00 495,000.00 21% 5,000,000.00
10,000,000.00 1,545,000.00 35 % 10,000,000.00

Effective January 1, 1973 to July 27, 1992 (Section 85 of the NIRC, as amended
(Presidential Decree No. 69)
Shall be
Plus Of the
Excess Over
P 10,000.00 Exempt - -
P 10,000.00 50,000.00 3% - P 10,000.00
50,000.00 75,000.00 P 1,200.00 4 % 50,000.00
75,000.00 100,000.00 2,200.00 5 % 75,000.00
100,000.00 150,000.00 3,450.00 10% 100,000.00
150,000.00 200,000.00 8,450.00 15 % 150,000.00
200,000.00 300,000.00 15,950.00 20% 200,000.00
300,000.00 400,000.00 35,950.00 25% 300,000.00
400,000.00 500,000.00 60,950.00 30% 400,000.00
500,000.00 625,000.00 90,950.00 35% 500,000.00
625,000.00 750,000.00 134,700.00 40% 625,000.00
750,000.00 875,000.00 184,700.00 45% 750,000.00
875,000.00 1,000,000.00 240,950.00 50% 875,000.00
1,000,000.00 2,000,000.00 303,450.00 53% 1,000,000.00
2,000,000.00 3,000,000.00 833,450.00 56% 2,000,000.00
3,000,000.00 - 1,393,450.00 60% 3,000,000.00
Effective September 15, 1950 to December 31, 1972 (Section 85 of the NIRC, as amended
(Republic Act No. 579)
Estate and Inheritance Tax
Over But not Over ESTATE INHERITANCE
0 5,000.00 Exempt Exempt
5,000.00 12,000.00 1.0% 2%
12,000.00 30,000.00 2.0% 4%
30,000.00 50,000.00 2.5% 6%
50,000.00 70,000.00 3.0% 8%
70,000.00 100,000.00 5.0% 12%
100,000.00 150,000.00 7.0% 14%
150,000.00 250,000.00 9.0% 16%
250,000.00 500,000.00 11.0% 18%
500,000.00 1,000,000.00 13% 20%
1,000,000.00 15% 22%

Effective July 1, 1939 to September 14, 1950 (Section 85 of the NIRC, as amended
(Commonwealth Act No. 466)
Estate and Inheritance Tax
Over But not Over ESTATE INHERITANCE
0 3000.00 Exempt 1.0%
3,000.00 10,000.00 1.0%
10,000.00 30,000.00 1.5% 2.0%
30,000.00 50,000.00 2.0% 3.0%
50,000.00 80,000.00 2.5% 4.0%
80,000.00 110,000.00 3.0% 5.0%
110,000.00 150,000.00 3.5% 6.0%
150,000.00 190,000.00 4.0% 7.0%
190,000.00 240,000.00 4.5% 8.0%
240,000.00 290,000.00 5.0% 9.0%
290,000.00 350,000.00 5.5% 10.0%
350,000.00 420,000.00 6.0% 11.0%
420,000.00 500,000.00 6.5% 12.0%
500,000.00 600,000.00 7.0% 13.0%
600,000.00 720,000.00 7.5% 14.0%
720,000.00 850,000.00 8.0% 15.0%
850,000.00 1,000,000.00 8.5% 16.0%
1,000,000.00 1,200,000.00 9.0% 17.0%
1,200,000.00 1,500,000.00 9.5% 17.0%
1,500,000.00 10.0% 17.0%

Procedures
The heirs/authorized representative/administrator/executor shall file the estate tax return (BIR
Form 1801) and pay the corresponding estate tax with the Authorized Agent Bank (AAB),
Revenue Collection Officer (RCO) or duly authorized Treasurer of the city or municipality in the
Revenue District Office having jurisdiction over the place of domicile of the decedent at the time
of his death, pursuant to Section 90(D) of the Tax Code, as amended.
In case of a non-resident decedent, with executor or administrator in the Philippines, the estate
tax return shall be filed with the AAB of the RDO where such executor/administrator is
registered or is domiciled if not yet registered with the BIR.
For non-resident decedent with no executor or administrator in the Philippines, the estate tax
return shall be filed with the AAB under the jurisdiction of RDO No. 39 South Quezon City.
The heir/authorized representative/administrator/executor shall submit all the applicable
documentary requirements as prescribed in Annexes A-6 and A-6.1 of Revenue Memorandum
Order (RMO) No. 15-2003 and proof of payment to the RDO having jurisdiction over the place
of residence of the decedent or the RDO where the executor or administrator is registered, or
RDO No. 39 South, Quezon City, whichever is applicable. (part II, par.(4)of RMC No. 34-
2013)

Payment of Estate Tax by installment - In case the available cash of the estate is not sufficient to
pay its total estate tax liability, the estate may be allowed to pay the tax by installment and a
clearance shall be released only with respect to the property, the corresponding/computed tax on
which has been paid. (Section 9(F) of RR 2-2003)
Please note that the time of payment will vary depending on the law applicable at the time of the
decedents death.

Deadlines
File the return within six (6) months from decedent's death. However, the Commissioner may, in
meritorious cases, grant extension not exceeding thirty (30) days.
The Estate Tax imposed shall be paid at the time the return is filed by the executor or
administrator or the heirs. However, when the Commissioner finds that payment on the due date
of the Estate Tax or of any part thereof would impose undue hardship upon the estate or any of
the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five
(5) years, in case the estate is settled through the courts or two (2) years in case the estate is
settled extra-judicially.
In all cases of transfers subject to tax, or where, though exempt from tax, the gross value of the
estate exceeds Twenty Thousand Pesos (P 20,000), Section 89 of the National Internal Revenue
Code of 1997 (Tax Code), as amended, provides that the executor, administrator or any of the
legal heirs, shall send a written notice of death to the Commissioner within two (2) months after
the decedents death or within a like period after an executor or administrator qualify as such.
(part II, par.(1)of RMC No. 34-2013)
Please note that the time of filing will vary depending on the law applicable at the time of the
decedents death.
Extension of Time of Filing:
When the Commissioner finds that the payment of the estate tax or of any part thereof would
imposed undue hardship upon the estate or any of the heirs, he may extend the time for payment
of such tax or any part thereof not to exceed five (5) years in case the estate is settled through the
courts, or two (2) years in case it settled extra-judicially.
Where the request for extension is by reason of negligence, intentional disregard of rules and
regulations, or fraud on the part of the taxpayer, no extension will be granted by the
Commissioner.
If an extension is granted, the Commissioner or his duly authorized representative may require
the executor, or administrator, or beneficiary, as the case may be, to furnish a bond in such
amount, not exceeding double the amount, not exceeding double the amount of tax and with such
sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in
accordance in the terms of extension.
The request for extension shall be filed with the Revenue District Officer (RDO) where the
estate is required to secure its TIN and file the estate tax return. The application shall be
approved by the Commissioner or his duly authorized representative.

1. Who are required to file the Estate Tax return?
a) The executor or administrator or any of the legal heirs of the decedent or non-resident of the
Philippines under any of the following situation:
- In all cases of transfer subject to Estate Tax;
- Where though exempt from Estate Tax, the gross value of the estate exceeds two hundred
thousand P 200,000.00; and
- Where regardless of the gross value, the estate consists of registered or registrable property
such as real property, motor vehicle, share of stocks or other similar property for which a
clearance from the Bureau of Internal Revenue (BIR) is required as a prerequisite for the transfer
of ownership thereof in the name of the transferee. (part I I par.(1.#3) of RMC No. 34-2013)
b) Where there is no executor or administrator appointed, qualified and acting within the
Philippines, then any person in actual or constructive possession of any property of the decedent
must file the return.
c) The Estate Tax imposed under the Tax Code shall be paid by the executor or administrator
before the delivery of the distributive share in the inheritance to any heir or beneficiary. Where
there are two or more executors or administrators, all of them are severally liable for the payment
of the tax. The estate tax clearance issued by the Commissioner or the Revenue District Officer
(RDO) having jurisdiction over the estate, will serve as the authority to distribute the
remaining/distributable properties/share in the inheritance to the heir or beneficiary.
d) The executor or administrator of an estate has the primary obligation to pay the estate tax but
the heir or beneficiary has subsidiary liability for the payment of that portion of the estate which
his distributive share bears to the value of the total net estate. The extent of his liability, however,
shall in no case exceed the value of his share in the inheritance.
2. What are included in gross estate?
For resident alien decedents/citizens:
For non-resident decedent/non-citizens:
a) Real or immovable property, wherever located
b) Tangible personal property, wherever located
c) Intangible personal property, wherever located
a) Real or immovable property located in the Philippines
b) Tangible personal property located in the Philippines
c) Intangible personal property - with a situs in the Philippines such as:
- Franchise which must be exercised in the Philippines
- Shares, obligations or bonds issued by corporations organized or constituted in
the Philippines
- Shares, obligations or bonds issued by a foreign corporation 85% of the business
of which is located in the Philippines
- Shares, obligations or bonds issued by a foreign corporation if such shares,
obligations or bonds have acquired a business situs in the Philippines ( i. e. they
are used in the furtherance of its business in the Philippines)
- Shares, rights in any partnership, business or industry established in the
Philippines

3. What are excluded from gross estate?
GSIS proceeds/ benefits
Accruals from SSS
Proceeds of life insurance where the beneficiary is irrevocably appointed
Proceeds of life insurance under a group insurance taken by employer (not taken out upon
his life)
War damage payments
Transfer by way of bona fide sales
Transfer of property to the National Government or to any of its political subdivisions
Separate property of the surviving spouse
Merger of usufruct in the owner of the naked title
Properties held in trust by the decedent
Acquisition and/or transfer expressly declared as not taxable
The properties subject to Estate Tax shall be appraised based on its fair market value at
the time of the decedent's death.
The appraised value of the real estate shall be whichever is higher of the fair market
value, as determined by the Commissioner (zonal value) or the fair market value, as
shown in the schedule of values fixed by the Provincial or City Assessor.
If there is no zonal value, the taxable base is the fair market value that appears in the
latest tax declaration.
If there is an improvement, the value of improvement is the construction cost per building
permit or the fair market value per latest tax declaration.
4. What will be used as basis in the valuation of property?
The properties subject to Estate Tax shall be appraised based on its fair market value at
the time of the decedent's death.
The appraised value of the real estate shall be whichever is higher of the fair market
value, as determined by the Commissioner (zonal value) or the fair market value, as
shown in the schedule of values fixed by the Provincial or City Assessor.
If there is no zonal value, the taxable base is the fair market value that appears in the
If there is an improvement, the value of improvement is the construction cost per building
permit or the fair market value per latest tax declaration.
5. What are the allowable deductions for Estate Tax Purposes?
Applicable for deaths occurring after the effectivity of RA 8424 which is January 1, 1998
For a citizen or resident alien
A. Expenses, losses, indebtedness and taxes
(1) Actual funeral expenses (whether paid or unpaid) up to the time of interment, or an
amount equal to five percent (5%) of the gross estate, whichever is lower, but in no case
to exceed P200,000.
(2) Judicial expenses of the testamentary or intestate proceedings.
(3) Claims against the estate.
(4) Claims of the deceased against insolvent persons where the value of the decedents
interest therein is included in the value of the gross estate; and,
(5) Unpaid mortgages, taxes and casualty losses

B. Property previously taxed (Vanishing Deduction) (Section 86(2) of the NIRC as amended by
Republic Act No. 8424)
An amount equal to the value specified below of any property forming a part of the gross
estate situated in the Philippines of any person who died within five (5) years prior to the death
of the decedent, or transferred to the decedent by gift within five (5) years prior to his death,
where such property can be identified as having been received by the decedent from the donor by
gift, or from such prior decedent by gift, bequest, devise or inheritance, or which can be
identified as having been acquired in exchange for property so received:
One hundred percent (100%) of the value, if the prior decedent died within one (1) year
prior to the death of the decedent, or if the property was transferred to him by gift within the
same period prior to his death;
Eighty percent (80%) of the value, if the prior decedent died more than one (1) year but
not more than two (2) years prior to the death of the decedent, or if the property was transferred
to him by gift within the same period prior to his death;
Sixty percent (60%) of the value, if the prior decedent died more than two (2) years but
not more than three (3) years prior to the death of the decedent, or if the property was transferred
to him by gift within the same period prior to his death;
Forty percent (40%) of the value, if the prior decedent died more than three (3) years but
not more than four (4) years prior to the death of the decedent, or if the property was transferred
to him by gift within the same period prior to his death; and
Twenty percent (20%) of the value, if the prior decedent died more than four (4) years
but not more than five (5) years prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to his death;
These deductions shall be allowed only where a donors tax or estate tax imposed was
finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as
the case may be, and only in the amount finally determined as the value of such property in
determining the value of the gift, or the gross estate of such prior decedent, and only to the extent
that the value of such property is included in the decedents gross estate, and only if in
determining the value of the estate of the prior decedent, no Property Previously Taxed or
Vanishing Deduction was allowable in respect of the property or properties given in exchange
therefor. (Section 6 & 7 of RR 2-2003)
C. Transfers for public use
D. The family home - fair market value but not to exceed P1,000,000.00
The family home refers to the dwelling house, including the land on which it is
situated, where the husband and wife, or a head of the family, and members of their
family reside, as certified to by the Barangay Captain of the locality. The family home is
deemed constituted on the house and lot from the time it is actually occupied as a family
residence and is considered as such for as long as any of its beneficiaries actually resides
therein. (Arts. 152 and 153, Family Code)
E. Standard deduction A deduction in the amount of One Million Pesos (P1,000,000.00) shall
be allowed as an additional deduction without need of substantiation.
F. Medical expenses All medical expenses (cost of medicines, hospital bills, doctors
fees, etc.) incurred (whether paid or unpaid) within one (1) year before the death of the
decedent shall be allowed as a deduction provided that the same are duly substantiated
with official receipts. For services rendered by the decedents attending physicians,
invoices, statements of account duly certified by the hospital, and such other documents
in support thereof and provided, further, that the total amount thereof, whether paid or
unpaid, does not exceed Five Hundred Thousand Pesos (P500,000).

G. Amount received by heirs under Republic Act No. 4917-Any amount received by the
heirs from the decedents employer as a consequence of the death of the decedent -
employee in accordance with Republic Act No. 4917 is allowed as a deduction provided
that the amount of the separation benefit is included as part of the gross estate of the
decedent.
H. Net share of the surviving spouse in the conjugal partnership or community property
For a non-resident alien
A. Expenses, losses, indebtedness and taxes
B. Property previously taxed
C. Transfers for public use
D. Net share of the surviving spouse in the conjugal partnership or community property
No deduction shall be allowed in the case of a non-resident decedent not a citizen of the
Philippines, unless the executor, administrator, or anyone of the heirs, as the case may be,
includes in the return required to be filed in the Section 90 of the Code the value at the time of
the decedents death of that part of his gross estate not situated in the Philippines.
Please note that the allowable deductions will vary depending on the law applicable at the time
of the decedents death.
6. What does the term "Funeral Expenses" include? (Sec 6 (A)(1) of RR 2-2003)
The term "FUNERAL EXPENSES" is not confined to its ordinary or usual meaning. They
include:

(a) The mourning apparel of the surviving spouse and unmarried minor children of the deceased
bought and used on the occasion of the burial;
(b) Expenses for the deceaseds wake, including food and drinks;
(c) Publication charges for death notices;
(d) Telecommunication expenses incurred in informing relatives of the deceased;
(e) Cost of burial plot, tombstones, monument or mausoleum but not their upkeep. In case the
deceased owns a family estate or several burial lots, only the value corresponding to the plot
where he is buried is deductible;
(f) Interment and/or cremation fees and charges; and
(g) All other expenses incurred for the performance of the rites and ceremonies incident to
interment. Expenses incurred after the interment, such as for prayers, masses, entertainment, or
the like are not deductible. Any portion of the funeral and burial expenses borne or defrayed by
relatives and friends of the deceased are not deductible.Actual funeral expenses shall mean those
which are actually incurred in connection with the interment or burial of the deceased. The
expenses must be duly supported by official receipts or invoices or other evidence to show that
they were actually incurred.

7. What does the term "Judicial Expenses" include? (Sec 6 (A)(2) of RR 2-2003)

Expenses allowed as deduction under this category are those incurred in the inventory-taking of a
assets comprising the gross estate, their administration, the payment of debts of the estate, as
well as the distribution of the estate among the heirs. In short, these deductible items are
expenses incurred during the settlement of the estate but not beyond the last day prescribed by
law, or the extension thereof, for the filing of the estate tax return. Judicial expenses may
include:
(a) Fees of executor or administrator;
(b) Attorneys fees;
(c) Court fees;
(d) Accountants fees;
(e) Appraisers fees;
(f) Clerk hire;
(g) Costs of preserving and distributing the estate;
(h) Costs of storing or maintaining property of the estate; and
(i) Brokerage fees for selling property of the estate.

Any unpaid amount for the aforementioned cost and expenses claimed under
Judicial Expenses should be supported by a sworn statement of account issued and
signed by the creditor.

8. What are the requisites for deductibility of claims against the Estate? (Sec 6(A)(3) of RR 2-
2003)

(a) The liability represents a personal obligation of the deceased existing at the time of his death
except unpaid obligations incurred incident to his death such as unpaid funeral expenses (i.e.,
expenses incurred up to the time of interment) and unpaid medical expenses which are classified
under a different category of deductions pursuant to these Regulations;
(b) The liability was contracted in good faith and for adequate and full consideration in money
or moneys worth;
(c) The claim must be a debt or claim which is valid in law and enforceable in
court;
(d) The indebtedness must not have been condoned by the creditor or the action to collect from
the decedent must not have prescribed.

Donors Tax
Description
Donors Tax is a tax on a donation or gift, and is imposed on the gratuitous transfer of property
between two or more persons who are living at the time of the transfer. It shall apply whether the
transfer is in trust or otherwise, whether the gift is direct or indirect andwhether the property is
real or personal, tangible or intangible.
Tax Form
BIR Form 1800 Donors Tax Return
The following requirements must be submitted upon field or office audit of the tax case before
the Tax Clearance Certificate/Certificate Authorizing Registration can be released:
1. Deed of Donation
2. Sworn Statement of the relationship of the donor to the donee
3. Proof of tax credit, if applicable
4. Certified true copy(ies) of the Original/Transfer/Condominium Certificate of Title (front and
back ) of lot and/or improvement donated, if applicable
5. Certified true copy(ies) of the latest Tax Declaration (front and back pages) of lot and/or
improvement, if applicable
6. Certificate of No Improvement issued by the Assessors office where the properties have no
declared improvement, if applicable
7. Proof of valuation of shares of stocks at the time of donation, if applicable
For listed stocks - newspaper clippings or certification issued by the Stock Exchange as to the
par value per share
For unlisted stocks - In determining the value of the shares, the Adjusted Net Asset Method
shall be used whereby all assets and liabilities are adjusted to fair market values. The net of
adjusted asset minus the adjusted liability value is the indicated value of the equity.
City Assessors, or
(c) The fair market value as determined by Independent Appraiser.

Tax Rates
Effective January 1, 1998 to present (Republic Act No. 8424)
Net Gift Over But not Over The Tax Shall be Plus Of the Excess Over
100,000.00 exempt
100,000.00 200,000.00 0 2% 100,000.00
200,000.00 500,000.00 P 2,000.00 4% 200,000.00
500,000.00 1,000,000.00 14,000.00 6% 500,000.00
1,000,000.00 3,000,000.00 44,000.00 8% 1,000,000.00
3,000,000.00 5,000,000.00 204,000.00 10% 3,000,000.00
5,000,000.00 10,000,000.00 404,000.00 12% 5,000,000.00
10,000,000.00 and over 1,004,000.00 15% 10,000,000.00

Notes:
1. Rate applicable shall be based on the law prevailing at the time of donation.
2. When the gifts are made during the same calendar year but on different dates, the donor's tax
shall be computed based on the total net gifts during the year.
Donation made to a stranger is subject to 30% of the net gift. A stranger is a person who is not a:
brother, sister (whether by whole or half blood), spouse, ancestor and lineal descendants; or
relative by consanguinity in the collateral line within the fourth degree of relationship.
Effective July 28, 1992 to December 31, 1997 (Republic Act No. 7499)
Net Gift Over But not Over The Tax Shall be Plus Of the Excess Over
50,000.00 exempt
50,000.00 100,000.00 1.5% 50,000.00
100,000.00 200,000.00 P 750.00 3% 100,000.00
200,000.00 500,000.00 3,750.00 5% 200,000.00
500,000.00 1,000,000.00 18,750.00 8% 500,000.00
1,000,000.00 3,000,000.00 58,750.00 10% 1,000,000.00
3,000,000.00 5,000,000.00 258,750.00 15% 3,000,000.00
5,000,000.00 and over 558,750.00 20% 5,000,000.00

Donation made to a stranger is subject to 10% of the net gift. A stranger is a person who is not a:
brother, sister (whether by whole or half blood), spouse, ancestor and lineal descendants; or

Effective January 16, 1981 to July 27, 1992 (Presidential Decree No. 1773)
Net Gift Over But not Over
The Tax
Shall be
Plus Of the Excess Over
1,000.00 exempt
1,000.00 50,000.00 1.5% 1,000.00
50,000.00 75,000.00 P 735.00 2.5% 50,000.00
75,000.00 100,000.00 1,360.00 3% 75,000.00
100,000.00 150,000.00 2,110.00 6% 100,000.00
150,000.00 200,000.00 5,110.00 9% 150,000.00
200,000.00 300,000.00 9,610.00 12% 200,000.00
300,000.00 400,000.00 21,610.00 15% 300,000.00
400,000.00 500,000.00 36,610.00 18% 400,000.00
500,000.00 625,000.00 54,610.00 21% 500,000.00
625,000.00 750,000.00 80,860.00 24% 625,000.00
750,000.00 875,000.00 110,860.00 28% 750,000.00
875,000.00 1,000,000.00 145,860.00 32% 875,000.00
1,000,000.00 2,000,000.00 185,860.00 36% 1,000,000.00
2,000,000.00 3,000,000.00 545,860.00 38% 2,000,000.00
3,000,000.00 925,860.00 40% 3,000,000.00

Donation made to a stranger shall be either the amount computed in accordance with the
preceding schedule or twenty percent (20%) of the net gifts, whichever is higher. A stranger is a
person who is not a:
brother, sister (whether by whole or half blood), spouse, ancestor and lineal descendant; or

Please note that the donors tax rates will vary depending on the law applicable at the time of the
gift. The pertinent laws are as follow:
Commonwealth Act. No. 466 effective July 1, 1939 to September 14, 1950
Republic Act No. 579 effective September 15, 1950 to August 3, 1969
Republic Act No. 6110 effective August 4, 1969 to December 31, 1972
Presidential Decree No. 69 effective January 1, 1973 to January 15, 1981
Presidential Decree No. 1773 effective January 16, 1981 to July 27, 1992
Republic Act No. 7499 effective July 28, 1992 to December 31, 1997
Republic Act No. 8424 effective January 1, 1998 to present

Procedures
File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with any
Authorized Agent Bank (AAB) of the RDO having jurisdiction over the place of the domicile of
the donor at the time of the transfer. In places where there are no AAB, the return will be filed
directly with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer
where the donor was domiciled at the time of the transfer, or if there is no legal residence in the
Philippines, with Revenue District No. 39 - South Quezon City.
In the case of gifts made by a non-resident alien, the return may be filed with Revenue District
No. 39 - South Quezon City, or with the Philippine Embassy or Consulate in the country where
donor is domiciled at the time of the transfer.
Submit all documentary requirements and proof of payment to the Revenue District Office
having jurisdiction over the place of residence of the donor.
Please note that the time of filing and payment will vary depending on the law applicable at the
time of gift.

Deadlines
Within thirty days (30) after the date the gift (donation) is made. A separate return will be filed
for each gift (donation) made on the different dates during the year reflecting therein any
previous net gifts made during the same calendar year.
If the gift (donation) involves conjugal/community/property, each spouse will file separate
returns corresponding to his/ her respective share in the conjugal/community property. This rule
will also apply in the case of co-ownership over the property.

1. Who are required to file the Donors Tax Return?
Every person, whether natural or juridical, resident or non-resident, who transfers or causes to
transfer property by gift, whether in trust or otherwise, whether the gift is direct or indirect and
whether the property is real or personal, tangible or intangible.
2. What donations are tax exempt?
A. In the Case of Gifts made by a Resident
Dowries or donations made on account of marriage before its celebration or within one year
thereafter, by parents to each of their legitimate, recognized natural, or adopted children to the
extent of the first P10,000
Gifts made to or for the use of the National Government or any entity created by any of its
agencies which is not conducted for profit, or to any political subdivision of the said Government
Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited non-government organization, trust or philantrophic
organization or research institution or organization, provided not more than 30% of said gifts
will be used by such donee for administration purposes
B. In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines

Gifts made to or for the use of the National Government or any entity created by any
of its agencies which is not conducted for profit, or to any political subdivision of the
said Government
Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited non-government organization, trust or
philantrophic organization or research institution or organization, provided not more
than 30% of said gifts will be used by such donee for administration purposes

C. Tax Credit for Donor's Taxes Paid to a Foreign Country (Sec. 101 (C), NIRC as
amended)

In General. - The tax imposed by this Title upon a donor who was a citizen or a
resident at the time of donation shall be credited with the amount of any donor's tax of
any character and description imposed by the authority of a foreign country.

Limitations on Credit. - The amount of the credit taken under this Section shall be
subject to each of the following limitations:

- The amount of the credit in respect to the tax paid to any country shall not exceed the
same proportion of the tax against which such credit is taken, which the net gifts
situated within such country taxable under this Title bears to his entire net gifts; and
- The total amount of the credit shall not exceed the same proportion of the tax
against which such credit is taken, which the donor's net gifts situated outside the
Philippines taxable under this title bears to his entire net gifts.

3. What are the bases in the valuation of property?
If the gift is made in property, the fair market value at that time will be considered the amount of
gift
In case of real property, the taxable base is the fair market value as determined by the
Commissioner of Internal Revenue (Zonal Value) or fair market value as shown in the latest
schedule of values fixed by the provincial and city assessor (MV per Tax Declaration),
whichever is higher If there is no zonal value, the taxable base is the fair market value that
appears in the latest tax declaration
If there is an improvement, the value of improvement is the construction cost per building permit
and or occupancy permit plus 10% per year after year of construction, or the market value per
4. For purposes of Donors Tax, what does the term Net Gift mean?
For purposes of the donors tax, NET GIFT shall mean the net economic benefit from the
transfer that accrues to the donee. Accordingly, if a mortgaged property is transferred as a gift,
but imposing upon the donee the obligation to pay the mortgage liability, then the net gift is
measured by deducting from the fair market value of the property the amount of mortgage
assumed. (sec. 11, RR No. 2-2003)

5. Under R.A. No. 7166, any contribution in cash or in kind to any candidate or political party or
coalition of parties for campaign purposes shall not be subject to the payment of any gift tax.
What instance will it be subject to Donors Tax?
Those contributions in cash or in kind NOT duly reported to the Commission on Elections
(COMELEC) shall not be subject to donors tax.
Section 99 (C) of the Tax Code, as amended, provides that any contribution in cash or in kind for
campaign purposes shall be governed by R.A. No. 7166 or the Election Code.
Section 13 of the R.A. No. 7166 specifically states that any provision of law to the contrary
notwithstanding any contribution in cash or kind to any candidate or political party or coalition
of parties for campaign purposes, duly reported to the Commission shall not be subject to the
payment of any gift tax (donors tax). Accordingly, the BIR can impose donors tax on
contributions of this nature. (Q-14, RMC No. 63-2009)
6. For purposes of Donors Tax, is a legally adopted child considered stranger?
A legally adopted child is entitled to all the rights and obligations provided by law to legitimate
children, and therefore, donation to him shall not be considered as donation made to stranger.
(sec. 10, RR No. 2-2003)

7. For purposes of Donors Tax, are donations between businesses considered donations made
between strangers?

Donation made between business organizations and those made between an individual and a
business organization shall be considered as donation made to a stranger. (sec. 10, RR No. 2-
2003)

8. Are gratuitous donations to Homeowners Associations subject to Donors Tax?

Gifts, donations, and other contributions received by the Homeowners Associations
(Associations) are subject to the payment of donors tax pursuant to Section 98 and 99 of the Tax
Code, as amended. Endowment or gifts received by such associations are not exempt from
donors tax considering that gifts to Associations are not qualified for exemption under Section
101(A)(3) of the Tax Code. (II, RMC No. 53-2013)

9. Is an onerous donation or donation in exchange for goods, services or use or lease of
properties to Homeowners Association subject to Donors Tax?

Pursuant to RMC No. 9-2013, Associations are subject to the corresponding internal revenue
taxes imposed under the Tax Code of 1997 on their income of whatever kind and character. In
this regard, contributions to associations in exchange for goods, services and use of properties
constitute as other assessments/charges from activity in exchange for the performance of a
service, use of properties or delivery of an object. As such, these fees are income on the part of
the associations that are subject to income tax under Section 27 of the Tax Code, as
amended. (III, RMC No. 53-2013)

10. What is the proper treatment for transactions involving transfer of property other than real
property referred to in Section 24 (D) for less than adequate and full consideration?

Where property, other than real property referred to in Section 24 (D) of the NIRC, as amended,
is transferred for less than adequate and full consideration in money or moneys worth, then the
amount by which the fair market value of the property exceeded the value of the consideration
shall, for the purpose of Donors Tax, be deemed a gift, and shall be included in computing the
amount of gifts made during the calendar year. (Sec. 101, NIRC, as amended)

11. What entities are considered exempted from Donors Tax under special laws?

The list below consists of entities considered Donors Tax exempt under special laws
including, but not limited to the following:

Rural Farm School (Sec. 14, R.A. No. 10618)
Peoples Television Network, Incorporated (Sec. 15, R.A. No. 10390)
Peoples Survival Fund (Sec. 13, R.A. No. 10174)
Aurora Pacific Economic Zone and Freeport Authority (Sec. 7, R.A. No. 10083)
Girl Scouts of the Philippines (Sec. 11, R.A. No. 10073)
Philippine Red Cross (Sec. 5, R.A. No. 10072)
Tubbataha Reefs Natural Park (Sec. 17, R.A. No. 10067)
National Commission for Culture and the Arts (Sec. 35, R.A. No. 10066)
Philippine Normal University (Sec. 7, R.A. No. 9647)
University of the Philippines (Sec. 25, R.A. No. 9500)
National Water Quality Management Fund (Sec. 9, R.A. No. 9275)
Philippine Investors Commission (Sec. 9, R.A. No. 3850)
Ramon Magsaysay Award Foundation (Sec. 2, R.A. 3676)
Philippine-American Cultural Foundation (Sec. 4, P.D. 3062)
International Rice Research Institute (Art. 5(2), PD 1620)
Task Force on Human Settlements (Sec. 3(b)(8), E.O. 419)
National Social Action Council (Sec. 4, P.D. 294)
Aquaculture Department of the Southeast Asian Fisheries Development Center (Sec. 2,
P.D. 292)
Development Academy of the Philippines (Sec. 12, PD 205)
Integrated Bar of the Philippines (Sec. 3, PD 181)

Value Added Tax VAT
DESCRIPTION
Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale, barter,
exchange or lease of goods or properties and services in the Philippines and on importation of
goods into the Philippines. It is an indirect tax, which may be shifted or passed on to the buyer,
transferee or lessee of goods, properties or services.
WHO ARE REQUIRED TO FILE VAT RETURNS
Any person or entity who, in the course of his trade or business, sells, barters, exchanges,
leases goods or properties and renders services subject to VAT, if the aggregate amount of actual
gross sales or receipts exceed One Million Nine Hundred Nineteen Thousand Five Hundred
Pesos (P1,919,500.00).
A person required to register as VAT taxpayer but failed to register
Any person, whether or not made in the course of his trade or business, who imports goods
MONTHLY VAT DECLARATIONS
Tax Form
BIR Form 2550M - Monthly Value-Added Tax Declaration (February 2007 ENCS)
Deadline
Manual Filing
Not later than the 20th day following the end of each month
Through Electronic Filing and Payment System (eFPS):

Business Industry Period for filing Monthly VAT
Declarations
Group A
Insurance and Pension
Funding
25 days following the end of the
month
Activities Auxiliary to Financial Intermediation
Construction
Water Transport
Hotels and Restaurants
Land Transport

Group B
Manufacture and Repair of Furniture 24 days following the end of the
month Manufacture of Basic Metals
Manufacture of Chemicals and Chemical Products
Manufacture of Coke, Refined Petroleum & Fuel
Products
Manufacture of Electrical Machinery & Apparatus
N.E.C.
Manufacture of Fabricated Metal Products
Manufacture of Food, Products & Beverages
Manufacture of Machinery & Equipment NEC
Manufacture of Medical, Precision, Optical Instruments
Manufacture of Motor Vehicles, Trailer & Semi-Trailers
Manufacture of Office, Accounting & Computing
Machinery
Manufacture of Other Non-Metallic Mineral Products
Manufacture of Other Transport Equipment
Manufacture of Other Wearing Apparel
Manufacture of Paper and Paper Products
Manufacture of Radio, TV & Communication
Equipment/ Apparatus
Manufacture of Rubber & Plastic Products
Manufacture of Textiles
Manufacture of Tobacco Products
Manufacture of Wood & Wood Products
Manufacturing N.E.C.
Metallic Ore Mining
Non-Metallic Mining & Quarrying

Group C
Retail Sale 23 days following the end of the
month Wholesale Trade and Commission Trade
Sale, Maintenance, Repair of Motor Vehicle, Sale of
Automotive Fuel
Collection, Purification and Distribution of Water
Computer and Related Activities
Real Estate Activities

Group D
Air Transport 22 days following the end of the
month Electricity, Gas, Steam & Hot Water Supply
Postal & Telecommunications
Publishing, Printing & Reproduction of Recorded Media
Recreational, Cultural & Sporting Activities
Recycling
Renting of Goods & Equipment
Supporting & Auxiliary Transport Services

Group E
Activities of Membership Organizations, Inc. 21 days following the end of the
month Health and Social Work
Public Admin & Defense Compulsory Social Security
Research and Development
Agricultural, Hunting, and Forestry
Farming of Animals
Fishing
Other Service Activities
Miscellaneous Business Activities
Unclassified

QUARTERLY VALUE-ADDED TAX RETURN
Tax Form
BIR Form No. 2550Q - Quarterly Value-Added Tax Return (February 2007 ENCS)
Deadline
Within twenty five (25) days following the close of taxable quarter.

TAX RATES
On sale of goods and properties - twelve percent (12%) of the gross selling price or gross value
in money of the goods or properties sold, bartered or exchanged
On sale of services and use or lease of properties - twelve percent (12%) of gross receipts
derived from the sale or exchange of services, including the use or lease of properties
On importation of goods - twelve percent (12%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and
other charges, such as tax to be paid by the importer prior to the release of such goods from
customs custody; provided, that where the customs duties are determined on the basis of quantity
or volume of the goods, the VAT shall be based on the landed cost plus excise taxes, if any.
On export sales and other zero-rated sales - 0%

FREQUENTLY ASKED QUESTIONS
I. General VAT Queries
Who are liable to register as VAT taxpayers?
Any person who, in the course of trade or business, sells, barters or exchanges goods or
properties or engages in the sale or exchange of services shall be liable to register if:
a. His gross sales or receipts for the past twelve (12) months, other than those that are exempt
under Section 109 (A) to (U), have exceeded One Million Five Hundred Thousand Pesos
(P1,500,000.00): or
b. There are reasonable grounds to believe that his gross sales or receipts for the next twelve
(12) months, other than those that are exempt under Section 109 (A) to (U), will exceed One
Million Five Hundred Thousand Pesos (P1,500,000.00).
When is a new VAT taxpayer required to apply for registration and pay the registration
fee?
New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the corresponding
registration fee of five hundred pesos (P500.00) using BIR Form No. 0605 for every separate or
distinct establishment or place of business before the start of their business following existing
issuances on registration.
Thereafter, taxpayers are required to pay the annual registration fee of five hundred pesos
(P500.00) not later than January 31, every year.
What compliance activities should a VAT taxpayer, after registration as such, do promptly
or periodically?
The following compliance activities must be performed by a VAT-registered taxpayer:
a. Pay the annual registration fee of P500.00 for every place of business or establishment that
generates sales;
b. Register the books of accounts of the business/occupation/calling, including practice of
profession, before using the same;
c. Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for
use on transactions subject to VAT. (If there are other transaction not subject to VAT, a separate
set of non-VAT invoices or non-VAT official receipts need to be registered for use on
transactions not subject to VAT);
d. Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the
end of the taxable month (for manual filers)/on or before the prescribed due dates enunciated in
RR No. 16-2005 (for e-filers) using BIR Form No. 2550M and of the Quarterly VAT Return on
or before the 25th day following the end of the taxable quarter using BIR Form No. 2550Q,
reflecting therein gross receipts (for seller of service)/ gross sales (for seller of goods) and output
tax (VAT on sales); purchases of goods and services made in the course of trade or
business/exercise of profession and input tax (VAT on purchases), other allowable tax credits as
in the case of advance VAT payment and VAT withheld by government payors, and VAT
payable or excess input VAT, whichever is applicable, with the accredited agent banks (AABs)
of the BIR or Revenue Collection Officers (RCOs) of the BIR (in areas without AAB), for
returns with payment, or with the RDO/LTDO having jurisdiction over the taxpayer (home
RDO/LTDO), for returns without payment. (The monthly VAT Declaration and the Quarterly
VAT Return shall reflect the consolidated total for all the taxable lines of activity and all the
establishments - head office and branches);
e. Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline
set in the filing of the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly
Sales and Output Tax (if the quarterly sales exceed P2,500,000.00), and the soft copy of the
Quarterly Schedule of Monthly Domestic Purchases and Input Tax/ the soft copy of the Schedule
of Transactional/Individual Importation ( if the quarterly total purchases exceed P1,000,000.00),
reflecting therein the required data prescribed under existing revenue issuances.
How do we determine the main or principal business of a taxpayer who is engaged in mixed
business activities?
In determining the main or principal business of a taxpayer, we apply the predominance test.
Under this test, if more than fifty (50%) of its gross sales and/or gross receipts comes from its
business/es subject to VAT, its main/principal business falls within the VAT system making its
status as a VAT person. Otherwise, he can not be considered as a VAT person eligible for the
election provided for under Section 109(2) of the Tax Code.
What is the liability of a taxpayer becoming liable to VAT and did not register as such?
Any person who becomes liable to VAT and fails to register as such shall be liable to pay the
output tax as if he is a VAT-registered person, but without the benefit of input tax credits for the
period in which he was not properly registered.
Who may opt to register as VAT and what will be his liability?
1. Any person who is VAT-exempt under Sec. 4.109-1 (B) (1) (V) not required to register for
VAT may, in relation to Sec. 4.109-2, elect to be VAT-registered by registering with the RDO
that has jurisdiction over the head office of that person, and pay the annual registration fee of
P500.00 for every separate and distinct establishment.
2. Any person who is VAT-registered but enters into transactions which are exempt from VAT
(mixed transactions) may opt that the VAT apply to his transactions which would have been
exempt under Section 109(1) of the Tax Code, as amended [Sec. 109(2)].
3. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the
preceding year do not exceed ten million pesos (P10,000,000.00) derived from the business
covered by the law granting the franchise may opt for VAT registration. This option, once
exercised, shall be irrevocable. (Sec. 119, Tax Code).
4. Any person who elects to register under optional registration shall not be allowed to cancel his
registration for the next three (3) years.
The above-stated taxpayers may apply for VAT registration not later than ten (10) days before
the beginning of the calendar quarter and shall pay the registration fee unless they have already
paid at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for
administrative reason deny any application for registration. Once registered as a VAT person, the
taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the first day
of the month following registration.
What are the instances when a VAT-registered person may cancel his VAT registration?
1. If he makes a written application and can demonstrate to the commissioner's satisfaction that
his gross sales or receipts for the following twelve (12) months, other than those that are exempt
under Section 109 (A) to (U), will not exceed one million five hundred thousand pesos
(P1,500,000.00); or
2. If he has ceased to carry on his trade or business, and does not expect to recommence any
trade or business within the next twelve (12) months.

When will the cancellation for registration be effective?
The cancellation for registration will be effective from the first day of the following month the
cancellation was approved.
What is the invoicing/ receipt requirement of a VAT-registered person?
A VAT registered person shall issue :
1. A VAT invoice for every sale, barter or exchange of goods or properties; and
2. A VAT official receipt for every lease of goods or properties and for every sale, barter or
exchange of services.
May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT
transactions?
Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions provided
that the invoice or receipt shall clearly indicate the break-down of the sales price between its
taxable, exempt and zero-rated components and the calculation of the Value-Added Tax on each
portion of the sale shall be shown on the invoice or receipt.
May a VAT- registered person issue separate invoices/ receipts involving VAT and Non-
VAT transactions?
Yes. A VAT registered person may issue separate invoices/ receipts for the taxable, exempt, and
zero-rated component of its sales provided that if the sales is exempt from value-added tax, the
term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt
and if the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be
written or printed prominently on the invoice or receipt.
How is the Value-Added Tax presented in the receipt/ invoice?
The amount of the tax shall be shown as a separate item in the invoice or receipt.
Sample:
Sales Price P 100,000.00
VAT 12,000.00
Invoice Amount 112,000.00
What is the information that must be contained in the VAT invoice or VAT official receipt?
1. Name of Seller
2. Business Style of the Seller
3. Business Address of the Seller
4. Statement that the seller is a VAT-registered person, followed by his TIN
5. Name of Buyer
6. Business Style of Buyer
7. Address of Buyer
8. TIN of buyer, if VAT- registered and amount exceed P1,000.00
9. Date of transaction
10. Quantity
11. Unit cost
12. Description of the goods or properties or nature of the service

13. Purchase price plus the VAT, provided that:
The amount of tax shall be shown as a separate item in the invoice or receipt;
If the sale is exempt from VAT, the term "VAT-EXEMPT SALE" shall be written or printed
prominently on the invoice or receipt;
If the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be
written or printed prominently on the invoice receipt; and
If the sale involves goods, properties or services some of which are subject to and some of
which are zero-rated or exempt from VAT, the invoice or receipt shall clearly indicate the
breakdown of the sales price between its taxable, exempt and zero-rated components, and the
calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt.
14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt.
What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/ receipt?
The non-VAT registered person shall, in addition to paying the percentage tax applicable to his
transactions, be liable to VAT imposed in Section 106 or 108 of the Tax Code without the
benefit of any input tax credit plus 50% surcharge on the VAT payable (output tax). If the
invoice/ receipts contain the required information, purchaser shall be allowed to recognize an
input tax credit.
What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt
for VAT-exempt transactions?
If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt
transaction but fails to display prominently on the invoice or receipt the words "VAT-EXEMPT
SALE", the transaction shall become taxable and the issuer shall be liable to pay the VAT
thereon. The purchaser shall be entitled to claim an input tax credit on his purchase.
What is "output tax"?
Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or
services by any person registered or required to register under Section 236 of the Tax Code.
What is "input tax"?
Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local
purchase of goods, properties or services, including lease or use of property in the course of his
trade or business. It shall also include the transitional input tax determined in accordance with
Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period.
What comprises "goods or properties"?
The term "goods or properties" shall mean all tangible and intangible objects, which are capable
of pecuniary estimation and shall include, among others:
a. Real properties held primarily for sale to customers or held for lease in the ordinary course of
trade or business;
b. The right or the privilege to use patent, copyright, design or model, plan, secret formula or
process, goodwill, trademark, trade brand or other like property or right;
c. The right or privilege to use in the Philippines of any industrial, commercial or scientific
equipment;
d. The right or the privilege to use motion picture films, films, tapes and discs; and
e. Radio, television, satellite transmission and cable television time.

What comprises "sale or exchange of services"?
The term "sale or exchange of services" means the performance of all kinds of services in the
Philippines for others for a fee, remuneration or consideration, whether in kind or in cash,
including those performed or rendered by the following:
a. Construction and service contractors;
b. Stock, real estate, commercial, customs and immigration brokers;
c. Lessors of property, whether personal or real;
d. Persons engaged in warehousing services;
e. Lessors or distributors of cinematographic films;
f. Persons engaged in milling, processing, manufacturing or repacking goods for others;
g. Proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts,
theatres, and movie houses;
h. Proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places,
including clubs and caterers;
i. Dealers in securities;
j. Lending investors;
k. Transportation contractors on their transport of goods or cargoes, including persons who
transport goods or cargoes for hire and other domestic common carriers by land relative to their
transport of goods or cargoes;
l. Common carriers by air and sea relative to their transport of passengers, goods or cargoes
from one place in the Philippines to another place in the Philippines;
m. Sales of electricity by generation, transmission, and/or distribution companies;
n. Franchise grantees of electric utilities, telephone and telegraph, radio and/or television
broadcasting and all other franchise grantees, except franchise grantees of radio and/or television
broadcasting whose annual gross receipts of the preceding year do not exceed Ten Million Pesos
(P10,000,000.00), and franchise grantees of gas and water utilities;
o. Non-life insurance companies (except their crop insurances), including surety, fidelity,
indemnity and bonding companies; and
p. Similar services regardless of whether or not the performance thereof calls for the exercise of
use of the physical or mental faculties.
The phrase "sale or exchange of services" shall likewise include:
a. The lease of use of or the right or privilege to use any copyright, patent, design or model,
plan, secret formula or process, goodwill, trademark, trade brand or other like property or right;
b. The lease or the use of, or the right to use of any industrial, commercial or scientific
equipment;
c. The supply of scientific, technical, industrial or commercial knowledge or information;
d. The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of
enabling the application or enjoyment of any such property, or right or any such knowledge or
information;
e. The supply of services by a nonresident person or his employee in connection with the use of
property or rights belonging to, or the installation or operation of any brand, machinery or other
apparatus purchased from such non-resident person;
f. The supply of technical advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or commercial undertaking, venture,
project or scheme;
g. The lease of motion picture films, films, tapes and discs; and
h. The lease or the use of or the right to use radio, television, satellite transmission and cable
television time.
What is a zero-rated sale?
It is a sale, barter or exchange of goods, properties and/or services subject to 0% VAT pursuant
to Sections 106 (A) (2) and 108 (B) of the Tax Code. It is a taxable transaction for VAT
purposes, but shall not result in any output tax. However, the input tax on purchases of goods,
properties or services, related to such zero-rated sales, shall be available as tax credit or refund in
accordance with RR No. 16-2005.
What transactions are considered as zero-rated sales?
The following services performed in the Philippines by VAT-registered person shall be subject
to zero percent (0%) rate:
a. Processing, manufacturing or repacking goods for other persons doing business outside the
Philippines which goods are subsequently exported where the services are paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);
b. Services other than processing, manufacturing or repacking rendered to a person engaged in
business conducted outside the Philippines or to a non-resident person engaged in business who
is outside the Philippines when the services are performed, the consideration for which is paid
for in acceptable foreign currency and accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);
c. Services rendered to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects the supply of such
services to zero percent (0%) rate;
d. Services rendered to persons engaged in international shipping or air transport operations,
including leases of property for use thereof; Provided, however, that the services referred to
herein shall not pertain to those made to common carriers by air and sea relative to their transport
of passengers, goods or cargoes from one place in the Philippines to another place in the
Philippines, the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax
Code starting Feb. 1, 2006;
e. Services performed by subcontractors and/or contractors in processing, converting, or
manufacturing goods for an enterprise whose export sales exceeds seventy percent (70%) of total
annual production;
f. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a
foreign country. Gross receipts of international air carriers doing business in the Philippines and
international sea carriers doing business in the Philippines are still liable to a percentage tax of
three percent (3%) based on their gross receipts as provided for in Sec. 118 of the Tax Code but
shall not be liable to VAT; and
g. Sale of power or fuel generated through renewable sources of energy such as, but not limited
to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other shipping
sources using technologies such as fuel cells and hydrogen fuels; Provided, however that zero-
rating shall apply strictly to the sale of power or fuel generated through renewable sources of
energy, and shall not extend to the sale of services related to the maintenance or operation of
plants generating said power .
The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
a. Export sales
The sale and actual shipment of goods from the Philippines to a foreign country, irrespective
of any shipping arrangement that may be agreed upon which may influence or determine the
transfer of ownership of the goods so exported, paid in acceptable foreign currency or its
equivalent in goods or services, and accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP);
The sale of raw materials or packaging materials to a non-resident buyer for delivery to as
resident local export-oriented enterprise to be used in manufacturing, processing, packing or
repacking in the Philippines of the said buyer's goods, paid for in acceptable foreign currency,
and accounted for in accordance with the rules and regulations of the BSP;
The sale of raw materials or packaging materials to an export-oriented enterprise whose export
sales exceed seventy percent (70%) of total annual production;
Sale of gold to the BSP;
Transactions considered export sales under Executive Order No. 226, otherwise known as the
Omnibus Investments Code of 1987, and other special laws;
and
The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or
international air transport operations; Provided, that the same is limited to goods, supplies,
equipment and fuel pertaining to or attributable to the transport of goods and passengers from a
port in the Philippines directly to a foreign port, or vice-versa without docking or stopping at any
other port in the Philippines unless the docking or stopping at any other Philippine port is for the
purpose of unloading passengers and/or cargoes that originated from abroad, or to load
passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel,
goods or supplies is used for purposes other than the mentioned in this paragraph, such portion of
fuel, goods and supplies shall be subject to twelve percent (12%) output VAT.
b. Foreign Currency Denominated Sales
The sale to a non-resident of goods, except those mentioned in Sections 149 and 150 of the Tax
Code, assembled or manufactured in the Philippines for delivery to a resident in the Philippines,
paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the BSP.
c. Sales to Persons or Entities Deemed Tax-exempt under Special Law or International
Agreement
Sale of goods or property to persons or entities who are tax-exempt under special laws or
international agreements to which the Philippines is a signatory, such as, Asian Development
Bank (ADB), International Rice Research Institute (IRRI), etc.
Where will taxpayers file their applications for VAT zero-rating?
Taxpayers shall file their application directly with the Audit Information, Tax Exemption and
Incentives Division (AITEID) under the Assessment Service, or with the LTAID I and II, BIR
National Office, as the case may be.
What is a Contractor's Final Payment Release Certificate and where should taxpayers file
their application for this?
The Contractor's Final Payment Release Certificate is issued by the BIR before a government
contractor is fully paid for his contract with the government. Taxpayers may file their application
at the BIR National Office at the Audit Information, Tax Exemption and Incentives Division
(AITEID)
What transactions are considered deemed sales?
The following transactions are considered as deemed sales:
a. Transfer, use or consumption, not in the course of business, of goods or properties originally
intended for sale or for use in the course of business. Transfer of goods or properties not in the
course of business can take place when VAT-registered person withdraws goods from his
business for his personal use;
b. Distribution or transfer to:
Shareholders or investors as share in the profits of the VAT-registered person; or
Creditors in payment of debt or obligation
c. Consignment of goods if actual sale is not made within sixty (60) days following the date
such goods were consigned. Consigned goods returned by the consignee within the 60-day
period are not deemed sold;
d. Retirement from or cessation of business, with respect to all goods on hand, whether capital
goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation,
whether or not the business is continued by the new owner or successor. The following
circumstances shall, among others, give rise to transactions "deemed sale";
Change of ownership of the business. There is a change in the ownership of the business when
a single proprietorship incorporated; or the proprietor of a single proprietorship sells his entire
business.
Dissolution of a partnership and creation of a new partnership which takes over the business.
What is VAT-exempt sale?
It is a sale of goods, properties or service and the use or lease of properties which is not subject
to output tax and whereby the buyer is not allowed any tax credit or input tax related to such
exempt sale.
What are the VAT-exempt transactions?
a. Sale or importation of agricultural and marine food products in their original state, livestock
and poultry of a kind generally used as, or yielding or producing foods for human consumption;
and breeding stock and genetic materials therefore;
b. Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and
poultry feeds, including ingredients, whether locally produced or imported, used in the
manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium
fish, zoo animals and other animals considered as pets);
c. Importation of personal and household effects belonging to residents of the Philippines
returning from abroad and non-resident citizens coming to resettle in the Philippines; Provided,
that such goods are exempt from custom duties under the Tariff and Customs Code of the
Philippines;
d. Importation of professional instruments and implements, wearing apparel, domestic animals,
and personal household effects (except any vehicle, vessel, aircraft, machinery and other goods
for use in the manufacture and merchandise of any kind in commercial quantity) belonging to
persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange,
accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon
the production of evidence satisfactory to the Commissioner of Internal Revenue, that such
persons are actually coming to settle in the Philippines and that the change of residence is
bonafide;
e. Services subject to percentage tax under Title V of the Code, as amended;
f. Services by agricultural contract growers and milling for others of palay into rice, corn into
grits, and sugar cane into raw sugar;
g. Medical, dental, hospital and veterinary services except those rendered by professionals;
h. Educational services rendered by private educational institutions duly accredited by the
Department of Education (DepED), the Commission on Higher Education (CHED) and the
Technical Education and Skills Development Authority (TESDA) and those rendered by the
government educational institutions;
i. Services rendered by individuals pursuant to an employer-employee relationship;
j. Services rendered by regional or area headquarters established in the Philippines by
multinational corporations which act as supervisory, communications and coordinating centers
for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive
income from the Philippines;
k. Transactions which are exempt under international agreements to which the Philippines is a
signatory or under special laws except those granted under P.D. No. 529 - Petroleum Exploration
Concessionaires under the Petroleum Act of 1949;
l. Sales by agricultural cooperatives duly registered and in good standing with the Cooperative
Development Authority (CDA) to their members, as well as of their produce, whether in its
original state or processed form, to non-members, their importation of direct farm inputs,
machineries and equipment, including spare parts thereof, to be used directly and exclusively in
the production and/or processing of their produce;
m. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered
and in good standing with the Cooperative Development Authority;
n. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in
good standing with CDA; Provided, that the share capital contribution of each member does not
exceed Fifteen Thousand Pesos (P15,000.00) and regardless of the aggregate capital and net
surplus ratably distributed among the members;
o. Export sales by persons who are not VAT-registered;
p. The following sales of real properties are exempt from VAT, namely:
1. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary
course of trade or business;
2. Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise
known as the "Urban Development and Housing Act of 1992" and other related laws, such as RA
No. 7835 and RA No. 8763;
3. Sale of real properties utilized for specialized housing as defined under RA No. 7279, and
other related laws, such as RA No. 7835 and RA No. 8763, wherein price ceiling per unit is
P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and
other related laws;
4. Sale of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00)
and below, or house and lot and other residential dwellings valued at Two Million Five Hundred
Thousand Pesos (P2,500,000.00) and below where the instrument of sale/ transfer/ disposition
was executed on or after July 1, 2005; Provided, that not later than January 31, 2009 and every
three (3) years thereafter, the amounts stated herein shall be adjusted to its present value using
the Consumer Price Index, as published by the National Statistics Office (NSO); Provided,
further, that such adjustment shall be published through revenue regulations to be issued not later
than March 31 of each year.
q. Lease of residential units with a monthly rental per unit not exceeding Ten Thousand Pesos
(P10,000.00), regardless of the amount of aggregate rentals received by the lessor during the
year; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the
amount of P10,000.00 shall be adjusted to its present value using the Consumer Price Index, as
published by the NSO;
r. Sale, importation, printing or publication of books and any newspaper, magazine, review or
bulletin which appears at regular intervals with fixed prices for subscription and sale and which
is not devoted principally to the publication of paid advertisements;
s. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine
equipment and spare parts thereof for domestic or international transport operations; Provided,
that the exemption from VAT on the importation and local purchase of passenger and/or cargo
vessels shall be limited to those of one hundred fifty (150) tons and above, including engine and
spare parts of said vessels; Provided, further, that the vessels to be imported shall comply with
the age limit requirement, at the time of acquisition counted from the date of the vessel's original
commissioning, as follows: (a) for passenger and/or cargo vessel, the age limit is fifteen (15)
years old, (b) for tankers, the age limit is ten (10) year old, and (c) for high-speed passengers
crafts, the age limit is five (5) years old; Provided, finally, that exemption shall be subject to the
provisions of Section 4 of Republic Act No. 9295, otherwise known as "The Domestic Shipping
Development Act of 2004";
t. Importation of life-saving equipment, safety and rescue equipment and communication and
navigational safety equipment, steel plates and other metal plates including marine-grade
aluminum plates, used for shipping transport operations; Provided, that the exemption shall be
subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as "The
Domestic Shipping Development Act of 2004".
u. Importation of capital equipment, machinery, spare parts, life-saving and navigational
equipment, steel plates and other metal plates including marine-grade aluminum plates to be used
in the construction, repair, renovation or alteration of any merchant marine vessel operated or to
be operated in the domestic trade. Provided, that the exemption shall be subject to the provisions
of Section 19 of Republic Act No. 9295, otherwise known as the "The Domestic Shipping
Development Act of 2004".
v. Importation of fuel, goods and supplies engaged in international shipping or air transport
operations; Provided, that the said fuel, goods and supplies shall be used exclusively or shall
pertain to the transport of goods and/or passenger from a port in the Philippines directly to a
foreign port, or vice-versa, without docking or stopping at any other port in the Philippines
unless the docking or stopping at any other Philippine port is for the purpose of unloading
passengers and/or cargoes that originated form abroad, or to load passengers and/or cargoes
bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for
purposes other that the mentioned in the paragraph, such portion of fuel, goods and supplies shall
be subject to 12% VAT;
w. Services of banks, non-bank financial intermediaries performing quasi-banking functions,
and other non-bank financial intermediaries, such as money changers and pawnshops, subject to
percentage tax under Sections 121 and 122, respectively of the Tax Code; and
x. Sale or lease of goods or properties or the performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the
amount of One Million Five Hundred Thousand Pesos (P1,500,000.00). Provided, that not later
than January 31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shall be
adjusted to its present value after using the Consumer Price Index, as published by the NSO.

What are the previously exempt transactions that are now subject to VAT?
Medical services such as dental & veterinary services rendered by professionals;
Legal services;
Non-food agricultural products;
Marine and forest products;
Cotton and cotton seeds;
Coal and natural gas;
Petroleum products;
Passenger cargo vessels of more than 5,000 tons;
Work of art, literary works, musical composition;
Generation, transmission and distribution of electricity including that of electric cooperatives;
Sale of residential lot valued at more than P1,500,000.00;
Sale of residential house & lot/dwellings valued at more than P2,500,000.00;
Lease of residential unit with a monthly rental of more than P10,000;
II. RELIEF-Related Queries
What is "RELIEF"?
RELIEF means Reconciliation of Listing for Enforcement. It supports the third party information
program of the Bureau through the cross referencing of third party information from the
taxpayers' Summary Lists of Sales and Purchases prescribed to be submitted on a quarterly basis.
Who are required to submit Summary List of Sales?
VAT taxpayers with quarterly total sales/receipts (net of VAT), exceeding Two Million Five
Hundred Thousand Pesos (P2,500,000.00) are required to submit a Summary List of Sales.
Who are required to submit Summary List of Purchases?
VAT taxpayers with quarterly total purchases (net of VAT) of goods and services, including
importation exceeding One Million Pesos (P1,000,000.00) are required to submit Summary List
of Purchases.
What are the Summary Lists required to be submitted?
Quarterly Summary List of Sales to Regular Buyers/ Customers Casual Buyers/ Customers and
Output Tax
Quarterly Summary of List of Local Purchases and Input tax; and
Quarterly Summary List of Importation.

When is the deadline for submission of the above Summary Lists?
The Summary List of Sales/Purchases, whichever is applicable, shall be submitted on or before
the twney-fifth (25th) day of the month following the close of the taxable quarter -- calendar
quarter or fiscal quarter.
What are the penalties for failure to submit the Summary Lists?
For failure to file, keep or supply a statement, list or information required on t he date
prescribed shall pay and administrative penalty of One Thousand Pesos (P1,000.00) for each
such failure, unless it is shown that such failure is due to reasonable cause and not to willful
neglect; and
An aggregate amount to be imposed for all such failures during a taxable year shall not exceed
Twenty-Five Thousand Pesos (P25,000.00).
III. What is the treatment for Withholding of VAT on Government Money Payments?
The goverment or any of its political subdivisions, instrumentalities or agencies, including
government-owned or controlled corporations (GOCCs) shall, before making payment on
account of each purchase of goods and/or services taxed at twelve percent (12%) VAT pursuant
to Sections 106 and 108 of the Tax Code, deduct and withhold a Final VAT due at the rate of
five percent (5%) of the gross payment.
The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the
seller. The remaining seven percent (7%) effectively accounts for the standard input VAT for
sales of goods or services to government or any of its political subdivisions, instrumentalities or
agencies including GOCCs in lieu of the actual input VAT directly attributable or ratably
apportioned to such sales. Should actual input VAT attributable to sales to government exceeds
seven percent (7%) of gross payments, the excess may form part of the sellers' expense or cost.
On the other hand, if actual input VAT attributable to sale to government is less than seven
percent (7%) of gross payment, the difference must be closed to expense or cost.
The government or any of its political subdivisions, instrumentalities or agencies including
GOCCs, as well as private corporation, individuals, estates and trusts, whether large or non-large
taxpayers, shall withhold twelve percent (12%) VAT with respect to the following payments:
1. Lease or use of properties or property rights owned by non-residents; and
2. Other services rendered in the Philippines by non-residents.
IV. In what grounds can the Commissioner of Internal Revenue suspend the business
operations of a taxpayer?
The Commissioner or his authorized representative is empowered to suspend the business
operations and temporarily close the business establishment of any person for any of the
following violations:
(a) In the case of a VAT-registered Person:
Failure to issue receipts or invoices;
Failure to file a value-added-tax return as required under Section 114; or
Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct
taxable sales or receipts for the taxable quarter.
(b) Failure to any Person to Register as Required under Section 236
The temporary closure of the establishment shall be for the duration of not less than five (5)
days and shall be lifted only upon compliance with whatever requirements prescribed by the
Commissioner in the closure order.
Excise Tax
BASIC CONCEPT:
Excise Tax is a tax on the production, sale or consumption of a commodity in a country.
APPLICABILITY:
On goods manufactured or produced in the Philippines for domestic sale or consumption or
for any other disposition; and
On goods imported.

TYPES OF EXCISE TAX:
Specific Tax refers to the excise tax imposed which is based on weight or
volume capacity or any other physical unit of measurement
Ad Valorem Tax refers to the excise tax which is based on selling price or other
specified value of the goods/articles

MANNER OF COMPUTATION:
Specific Tax = No. of Units/other measurements x Specific Tax Rate
Ad Valorem Tax = No. of Units/other measurements x Selling Price of any specific
value per unit x Ad Valorem Tax Rate

MAJOR CLASSIFICATION OF EXCISABLE ARTICLES AND RELATED CODAL
SECTION:

1. Alcohol Products (Sections 141-143)
a. Distilled Spirits (Section 141)
b. Wines (Section 142)
c. Fermented Liquors (Section 143)

2. Tobacco Products (Sections 144-146)
a. Tobacco Products (Section 144)
b. Cigars & Cigarettes (Section 145)
c. Inspection Fee (Section 146)
3. Petroleum Products (Section 148)

4. Miscellaneous Articles (Section 149-
150)
a. Automobiles (Section 149)
b. Non-essential Goods (Section 150)

5. Mineral Products (Sections 151)

PERSONS LIABLE TO EXCISE TAX:
In General:
a. On Domestic or Local Articles
Manufacturer
Producer
Owner or person having possession of articles removed from the
place of production without the payment of the tax

b. On Imported Articles
Importer
Owner
Person who is found in possession of articles which are exempt
from excise taxes other than those legally entitled to exemption
Others:
On Indigenous Petroleum
Local Sale, Barter or Transfer
o First buyer, purchaser or transferee
Exportation
o Owner, lessee, concessionaire or operator of the
mining claim
TIME OF PAYMENT:
In General
On domestic products
o Before removal from the place of production
On imported products
o Before release from the customs custody

EXCISE TAX RATES:
A. ALCOHOL PRODUCTS
NEW TAX RATES based on Republic Act No. 10351 Remarks
2018
PARTICULARS 2013 2014 2015 2016 2017 onwards
A. DISTILLED SPIRITS, AD VALOREM & SPECIFIC TAX
AD
VALOREM TAX RATE
- Based on the Net Retail
Price (NRP) per proof
(excluding the excise and
value-added taxes);and
15% 15% 20% 20% 20% 20%
2) SPECIFIC TAX -
Per proof liter
Php20 Php20 Php20 Php20.80 Php21.63
Effective
1/1/2016,
the
specific
tax rate
shall be
increased
by
4% every
year
thereafter
B. WINES, per liter of volume capacity
1) Sparkling wines/
champagnes, where the
NRP (excluding the
excise and VAT) per
bottle of 750ml volume
capacity, regardless of
proof is:

Effective
1/1/2014,
the
specific
tax rate
shall be
increased
by
4% every
year
thereafter

Php500.00 or less Php250 Php260 Php270.40 Php281.22 Php292.47
More than Php500.00 Php700 Php728 Php757.12 Php787.40 Php818.90
2) Still wines and
carbonated
winescontaining 14% of
alcohol by volume or less
Php30.00 Php31.20 Php32.45 Php33.75 Php35.10
3) Still wines and
carbonated
winescontaining more
than 14% (of alcohol by
volume) but not more
25% of alcohol by volume
4) Fortified wines
containing more than 25%
of alcohol by volume
Taxed as distilled spirits
C. FERMENTED LIQUORS , per liter of volume capacity
1) If the NRP
(excluding excise and
VAT) per liter of volume
capacity is:

Effective
1/1/2018,
the
specific
tax rate
shall be
increased
by
4% every
year
thereafter
Php 50.60 and below Php15.00 Php17.00 Php19.00 Php21.00 Php23.50
More than Php 50.60 Php20.00 Php21.00 Php22.00 Php23.00 Php23.50
2) If brewed and sold at
microbreweries or small
establishments such as
pubs and restaurants,
regardless of the NRP
Effective
1/1/2014,
the
specific
tax rate
shall be
increased
by
4% every
year
thereafter
NOTE: IN CASE OF FERMENTED LIQUORS AFFECTED BY THE "NO
DOWNWARD RECLASSIFICATION " PROVISION, THE 4% INCREASE SHALL APPLY TO
THEIR RESPECTIVE APPLICABLE TAX RATES
B. TOBACCO PRODUCTS

NEW TAX RATES based on Republic Act No.
10351
Remarks
2018
PARTICULARS 2013 2014 2015 2016 2017 onwards
A. TOBACCO PRODUCTS, per kilogram
1. Tobacco Products
(a) Tobacco twisted
by hand or reduced into
a condition to be
consumed in any
manner other than the
ordinary mode of
drying and curing;
Effective 1/1/2014,
the specific tax rate
shall be increased by
4% every year
thereafter
(b) Tobacco prepared
or partially prepared
with or without the use
of any machine or
instrument or without
being pressed or
sweetened; and
(c) Fine-cut shorts and
refuse, scraps,
clippings, cuttings,
stems, midribs and
sweepings of tobacco;
2. Chewing tobacco
unsuitable for use in
any other manner
B. CIGARS, per cigar
3. Cigars
Effective 1/1/2014,
4% every year
thereafter
(a) Based on the NRP
per cigar (excluding the
excise and value-added
taxes), and
20% 20% 20% 20% 20%
(b) Per cigar Php5.00 Php5.20 Php5.41 Php5.62 Php5.85
C. CIGARETTES , per pack
1. Cigarettes packed
by hand
Php12.0
0
Php15.00
Php18.0
0
Php21.0
0
Php30.0
0
Effective 1/1/2018,
4% every year
thereafter
2. Cigarettes packed
by machine, where the
NRP (excluding excise
and VAT) per pack is:

(a) Php11.50 and
below
Php12.0
0 Php17.00
Php21.0
0
Php25.0
0
Php30.0
0

(b) More than
Php11.50
Php25.0
0 Php27.00
Php28.0
0
Php29.0
0
Php30.0
0

INSPECTION FEE - There shall be collected inspection fees on leaf tobacco, scrap, cigars,
Cigarettes and other manufactured tobacco and tobacco products as follows:

PRODUCT TYPE INSPECTION FEE
(1) Cigars P 0.50 per thousand pieces or fraction thereof
(2) Cigarettes P 0.10 per thousand sticks or fraction thereof
(3) Leaf Tobacco P 0.02 per kilogram or fraction thereof
(4) Scrap and other manufactured tobacco P 0.03 per kilogram or fraction thereof
C. PETROLEUM PRODUCTS
PRODUCT TYPE TAX RATES
Lubricating oils and greases, including but not limited
to base stock for lube oils and greases, high vacuum
distillates, aromatic extracts and other similar
preparations, and additives for lubricating oils and
greases, whether such additives are petroleum
based or not
P 4.50 per liter
Processed gas P 0.05 per liter
Waxes and petrolatum P 3.50 per kilogram
Denatured alcohol, if used for motive power [i.e. one
hundred eighty (180) proof ninety percent (90%) absolute
alcohol]. Provided, that unless otherwise provided by
special laws, if the denatured alcohol is mixed with
gasoline, the excise tax which has already been paid,
only the alcohol content shall be subject to tax
P 0.05 per liter
Naphtha, regular gasoline and other similar products of
distillation
P 4.35 per liter
Naphtha used as raw material in the production of
petrochemical products or as replacement fuel for natural
gas-fired combined cycle power plant, in lieu of locally-
extracted natural gas during the non-availability thereof
P 0.00 per liter
Leaded premium gasoline P 5.35 per liter
Unleaded premium gasoline P 4.35 per liter
Aviation turbo jet fuel P 3.67 per liter
Kerosene P 0.00 per liter
Kerosene used as aviation fuel P 3.67 per liter
Diesel fuel oil, and on similar fuel oils having more or
less the same generating power
P 0.00 per liter
Liquefied Petroleum Gas ; Provided, that if used for
motive power, it shall be taxed at the equivalent rate as
the Excise Tax on diesel fuel oil
P 0.00 per liter
Asphalt P 0.56 per kilogram
Bunker fuel oil, and on similar fuel oils having more or
less the same generating power
P 0.00 per liter
D. MINERALS AND MINERAL PRODUCTS
PRODUCT TYPE TAX RATES
On coal and coke Ten Pesos (P10.00) per metric ton
All mineral and mineral products (non-
metallic), quarry resources
Two percent (2%) bases on the actual market
value, in the case of those locally-extracted or
produced; and, in the case of importation or
the value used by the Bureau of Customs in
determining tariff and customs duties, net of
Excise Tax and Value-Added Tax.
On locally-extracted natural gas and liquefied
natural gas
P0.00
On indigenous petroleum Three percent (3%) of the fair international
market price thereof

Note:
In the case of mineral concentrates not traded in commodity exchanges in the
Philippines or abroad, such as copper concentrate, the actual market value shall be
the world price quotations of the refined mineral products content thereof
prevailing in the said commodity exchanges, after deducting the smelting, refining
and other charges incurred in the process of converting the mineral concentrates
into refined metal traded in those commodity exchanges.
On minerals and mineral products sold or consigned abroad, the actual cost of
ocean freight and insurance shall be deducted from the tax base.
E. AUTOMOBILES AND OTHER MOTOR VEHICLES
OVER UP TO RATE
0 P 600,000 2%
P600,000 P 1,100,000 P 12,000 + 20% in excess of P 600,000
P1,100,000 P2,100,000 P112,000+ 40% in excess of P1,100,000
P2,100,000 over P512,000 + 60% in excess of P2,100,000
F. NON-ESSENTIAL GOODS
o Twenty percent (20%) based on the wholesale price or the value of importation
used by the Bureau of Customs in determining Tariff and Customs Duties, net of
Excise and Value-Added taxes

Percentage Tax
Percentage tax is a business tax imposed on persons or entities who sell or lease goods,
properties or services in the course of trade or business whose gross annual sales and/or receipts
do not exceed P750,000 and who are not VAT-registered.
Who Are Required To File Percentage Tax Returns
Any person who is not a VAT-registered person (persons exempt from VAT under Sec. 109z
of the Tax Code)
Domestic carriers and keepers of garages, except owners of bancas and owners of animal
drawn two- wheeled vehicle
Operators of international air and shipping carriers doing business in the Philippines
Franchise grantees of electric, gas or water utilities
Franchise grantees of radio and/or television broadcasting companies whose gross annual
receipts for the preceding year do not exceed Ten Million Pesos (P 10,000,000.00) and did not
opt to register as VAT taxpayers
Operators of communication equipment sending overseas dispatch, messages, or conversations
from the Philippines, except on services involving the following:
o Government of the Philippines - for messages transmitted by the Government of the
Republic of the Philippines or any of its political subdivisions and instrumentalities
o Diplomatic services - for messages transmitted by any embassy and consular offices of
a foreign government
o International organizations - for messages transmitted by a public international
organization or any of its agencies based in the Philippines enjoying privileges,
exemptions and immunities which the government of the Philippine is committed to
recognize pursuant to an international agreement
o News Services - for messages from any newspaper, press association, radio or
television newspaper broadcasting agency, or newsticker services to any other
newspaper, press association, radio or television, newspaper, broadcasting agency or
newsticker services, or to bonafide correspondents, which messages deal exclusively with
the collection of news items for, or the dissemination of news items through public press,
radio or television broadcasting or a newsticker service furnishing a general news service
similar to that of the public press
Banks and non-bank financial intermediaries and finance companies
Life insurance premiums
Agents of foreign insurance companies
Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs, boxing exhibitions,
professional basketball games, jai-alai and race tracks
Every stock broker who effected a sale, barter, exchange or other disposition of shares of stock
listed and traded through the Local Stock Exchange (LSE) other than the sale by a dealer in
securities
Corporate issuer / stock broker, whether domestic of foreign, engaged in the sale, barter,
exchange or other disposition through Initial Public Offering (IPO) seller in secondary public
offering of shares of stock in closely held corporations
Monthly Percentage Tax
Tax Form
BIR Form 2551 M - Monthly Percentage Tax Return
Deadline
Manual Filing
Not later than 20th day following the end of each month
Filing Through Electronic Filing and Payment System (eFPS)
Group A - Twenty-Five (25) days following the end of the month
Group B - Twenty-Four (24) days following the end of the month
Group C - Twenty-Three (23) days following the end of the month
Group D - Twenty-Two (22) days following the end of the month
Group E - Twenty-One (21) days following the end of the month
Quarterly Percentage Tax
Tax Form
BIR Form 2551 Q - Quarterly Percentage Tax Return
Deadline
Manual Filing
Not later than 20th day following the end of each quarter
Filing Through Electronic Filing and Payment System (eFPS)
Not later than the 20th day following the end of the quarter
Percentage Tax For Transactions Involving Shares of Stocks Listed and Traded Through
the Local Stock Exchange or Through Initial and/or Secondary Offering
Tax Form
BIR Form 2552 - Percentage Tax Return (For Transactions Involving Shares of Stocks Listed
and Traded Through the Local Stock Exchange or Through Initial and/or Secondary Offering)
Deadline
For tax on sale of shares of stocks listed and traded through the local stock exchange (LSE)
within five (5) banking days from the date of collection
For tax on shares of stocks sold or exchanged through primary offering - within 30 days from
the date of listing in the LSE
For tax on shares of stocks sold or exchanged through secondary public offering - within five
(5) banking days from the date of collection

Tax Rates
Coverage Basis Tax
Rate
Persons exempt from VAT under
Sec. 116
Gross Sales or Receipts 3%
Domestic carriers and keepers of
garages
Gross Receipts 3%
International Carriers:
International air/shipping carriers
doing business in the Philippines
Gross Receipts 3%
Franchise Grantees:
Electric , gas and water utilities Gross Receipts 2%
Radio and television broadcasting
companies whose annual gross
receipts of the preceding year do not
exceed P 10,000,000 and did not opt
to register asVAT taxpayer
Gross Receipts 3%
Banks and non-bank financing
intermediaries
Interest, commissions and discounts from
lending activities as well as income from
leasing on the basis of remaining maturities
of instruments:

Short term maturity (not over 2 years) 5%
Medium term (over 2 years but not over
4 years)
3%
Long Term Maturity
Over 4 years but not over 7 years 1%
Over 7 years 0%
On Dividends 0%
On royalties, rentals of properties, real or
personal, profits from exchange and all
other items treated as gross income under
Sec. 32 of the Code
5%
Finance Companies On interest, discounts and other items of
gross income paid to finance companies
and other financial intermediaries not
performing quasi banking functions
5%
Interest, commissions and discounts paid
from their loan transactions from finance
companies as well as income from
financial leasing shall be taxed based on
the remaining maturities of instruments:

Short term maturity (not over 2
years)
5%
Medium term (over 2 years but not over
4 years)
3%
Long Term Maturity
Over 4 years but not over 7 years 1%
Over 7 years 0%
Life Insurance Companies (except
purely cooperative companies or
associations)
Total premiums collected 5%
Agents of foreign insurance
companies: (except reinsurance
premium)

Total premium collected 10%
Total premium collected 5%
Proprietors, lessee or operator of the
following:

Cockpits Gross receipts 18%
Cabarets, Night or Day Clubs Gross receipts 18%
Boxing exhibitions Gross receipts 10%
Professional basketball games Gross receipts 15%
Jai-alai and race track (operators
shall withheld tax on winnings)
Gross receipts 30%
Every stock broker who effected a
sale, barter, exchange or other
disposition of shares of stock listed
and traded through the Local Stock
Exchange (LSE) other than the sale
by a dealer in securities
Gross selling price or gross value in money
of shares of stocks sold, bartered,
exchanged or otherwise disposed
of 1%
A corporate issuer/stock broker,
whether domestic of foreign, engaged
in the sale, barter, exchange or other
disposition through Initial Public
Offering (IPO)/secondary public
offering of shares of stock in closely
held corporations
Gross selling price or gross value of in
money of shares of stocks sold, bartered,
exchanged or otherwise disposed in
accordance with the proportion of stocks
sold, bartered or exchanged or after listing
in the stock exchange

Up to 25 % 4%
Over 25% but not over 33 1/3% 2%
Over 33 1/3 % 1%

TAXATION OF NONRESIDENTS
Non-resident individual are classified into two categories: those engaged in trade
or business in the Philippines and those who are not engaged in trade in the
Philippines.

A. Nonresident individual engaged in trade or business (NRIETB) is one who stays in the
Philippines for more than 180 days during the calendar year. The taxable income of NRIETB is
defined as gross compensation and net business income less personal allowances.

Tax Rates:
Tax at their gross income subject to the graduated rates ranging from 5 to 32%

B. Nonresident individual not engaged in trade or business (NRINETB) individual stays in the
Philippines for less than 180 days

Taxation of Foreign Source Income

Philippine Income Tax Compilation by Jaydee V2014.1

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Philippine Income Tax Compilation by Jaydee V2014.1

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Philippine Taxation

Philippine Income Tax pg.2

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