TAX ON PASSIVE INCOME

INTEREST INCOME
RESIDENT CITIZEN/RESIDENT ALIEN
Particulars Tax Base Tax Rate Legal Basis Remarks
Bank Deposit/Deposit
Gross amount of interest 20% Sec. 24 (B)(1) Final Tax
Substitute/Trust Funds
From EFCDU Gross amount of interest 7.5% Sec. 24 (B)(1) Final Tax
Long term Instruments 0%
(More than 5 years)

If pre-terminated: Gross amount of interest Sec. 24 (B)(1) Final Tax

4 to less than 5 yrs 5%
3 to less than 4 yrs 12%
Less than 3 yrs 20%
DOMESTIC CORPORATION
Bank Deposit/Deposit Gross amount of interest
20% Sec. 27 (D)(1); Final Tax
Substitute/Trust Funds
From EFCDU Gross amount of interest 7.5% Sec. 27 (D)(1) Final Tax
RESIDENT FOREIGN CORPORATION
Bank Deposit/Deposit Gross amount of interest
20% Sec. 27 (D)(1) Final Tax
Substitute/Trust Funds
From EFCDU Gross amount of interest 7.5% Sec. 28 (A)(7)(a) Final Tax
From foreign currency loans Gross amount of interest
under said EFCDU to
residents other than offshore 10% Sec. 28 (A)(7)(b) Final Tax
banking units in the
Philippines or other
depository banks under the
expanded system
NON-RESIDENT CITIZEN INDIVIDUAL
Bank Deposit/Deposit Gross amount of interest 20% Sec. 24 (B)(1) Final Tax
Substitute/Trust Funds
From EFCDU Gross amount of interest Exempt Sec. 24 (B)(1) Final Tax
From OBUs Gross amount of interest Exempt Sec. 27 (D)(3) par. 2. Final Tax
(Any income of Sec. 28 (A)(4) par. 2
nonresidents, whether
individuals or
corporations, from
transactions with
depository banks under the
expanded system shall be
exempt from income tax.)
Long term Instruments Gross amount of interest Exempt Sec. 24 (B)(1) Final Tax
(More than 5 years)
Long term Instruments 0%
(More than 5 years)

If pre-terminated: Gross amount of interest Sec. 24 (B)(1) Final Tax

4 to less than 5 yrs 5%
3 to less than 4 yrs 12%
Less than 3 yrs 20%
NON-RESIDENT ALIEN INDIVIDUAL (ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES)
Bank Deposit/Deposit Gross amount of interest 20% Sec.25 (A)(2) Final Tax
Substitute/Trust Funds
From EFCDU Gross amount of interest Exempt Sec. 24 (B)(1) Final Tax
From OBUs Gross amount of interest Exempt Sec. 27 (D)(3) par. 2. Final Tax
(Any income of Sec. 28 (A)(4) par. 2
nonresidents, whether
individuals or
 corporations, from
transactions with
depository banks under the
expanded system shall be
exempt from income tax.)
Long term Instruments Gross amount of interest Exempt Sec.25 (A)(2) Final Tax
(More than 5 years)

If pre-terminated:
4 to less than 5 yrs 5%
3 to less than 4 yrs 12%
Less than 3 yrs 20%
NON-RESIDENT ALIEN INDIVIDUAL (NOT ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES)
Amount received as Gross Amount 25% Sec.25(B) Final Tax
interests
From OBUs Gross Amount Exempt Sec. 27 (D)(3) par. 2. Final Tax
(Any income of Sec. 28 (A)(4) par. 2
nonresidents, whether
individuals or
corporations, from
transactions with
depository banks under the
expanded system shall be
exempt from income tax.)
NON-RESIDENT FOREIGN CORPORATION – APPLIES TO A FOREIGN CORPORATION NOT ENGAGED IN TRADE OR
BUSINESS WITHIN THE PHILIPPINES [SEC. 22(I)]
Bank Deposit/Deposit Gross amount of interest 30% Sec. 28(B)(1) Final Tax
Substitute/Trust Funds
Interest on foreign loans Gross amount of interest 20% Sec.28(B)(5)(a) Final Tax
contracted on or after
August 1, 1986
From EFCDU Gross amount of interest Exempt Sec.28(A)(7)(b) Final Tax
From OBUs Gross amount of interest Exempt Sec. 27 (D)(3) par. 2. Final Tax
Sec. 28 (A)(4) par. 2
(Any income of
nonresidents, whether
individuals or
corporations, from
transactions with
depository banks under the
expanded system shall be
exempt from income tax.)
 DIVIDENDS

RESIDENT CITIZEN/RESIDENT ALIEN

Particulars Tax Base Tax Rate Legal Basis Remarks
Cash and/or property
dividends actually or
constructively received by
an individual

or

Share of an individual in the

distributable net income
after tax of a partnership
Cash and/or Property
(except a general 10% Sec. 24 (B)(2) Final Tax
Dividends
professional partnership)

or

Share of an individual in the

net income after tax of an
association, a joint account,
or a joint venture or
consortium taxable as a
corporation
DOMESTIC CORPORATION
Cash and/or Property
--- --- --- ---
Dividends
Intercorporate dividends --- Exempt Sec. 27(D)(4) ---
RESIDENT FOREIGN CORPORATION
 Cash and/or Property
--- --- --- ---
Dividends
Intercorporate dividends --- Exempt Sec. 28(A)(7)(d) ---
NON-RESIDENT CITIZEN INDIVIDUAL
Cash and/or property
dividends actually or
constructively received by
an individual

or

Share of an individual in
the distributable net
income after tax of a
Cash and/or property partnership (except a
10% Sec. 24(B)(2) Final Tax
dividends general professional
partnership)

or

Share of an individual in
the net income after tax of
an association, a joint
account, or a joint venture
or consortium taxable as a
corporation
NON-RESIDENT ALIEN INDIVIDUAL (ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES)
Cash and/or property
dividends actually or
Cash and/or property
constructively received by 20% Sec.25(A)(2) Final Tax
dividends
an individual
 or

Share of an individual in
the distributable net
income after tax of a
partnership (except a
general professional
partnership)

or

Share of an individual in
the net income after tax of
an association, a joint
account, or a joint venture
or consortium taxable as a
corporation
NON-RESIDENT ALIEN INDIVIDUAL (NOT Engaged in Trade or Business Within the Philippines)
Cash and/or property
Upon the entire income 25% Sec.25(B) Final Tax
dividends
NON-RESIDENT FOREIGN CORPORATION – APPLIES TO A FOREIGN CORPORATION NOT ENGAGED IN TRADE OR
BUSINESS WITHIN THE PHILIPPINES [SEC. 22(I)]
Cash and/or property Gross income received as
30% Sec. 28(B)(1) Final Tax
dividends dividends
Amount of cash and/or
property dividends
Cash and/or property
received from a domestic 15% Sec.28(B)(5)(b) Creditable
dividends
corporation
(Intercorporate dividends)
 CAPITAL GAINS

RESIDENT CITIZEN/ALIEN
Particulars Tax Base Tax Rate Legal Basis Remarks
Gross selling price
or
Gross value in money of the
Listed 1/2 of 1% Sec. 127 (A)
shares of stock sold,
bartered, exchanged or
otherwise disposed
Net Capital Gains
Capital Gains from Sale of (From sale, barter, exchange Not over P 100,000 = 5%
Shares of Stock not Traded or other disposition of Sec. 24 (C) Final Tax
in the Stock Exchange shares of stock in a domestic On any amount in excess of
corporation) P 100,000 = 10%
Capital Gains from Sale of
Real Property classified as
6%
capital assets
Gross selling price
or
Sec. 24 (D) Final Tax
Gains from sales or other Current fair market value
dispositions of real property whichever is higher
Section 24 (A) or 6% at the
to the government or any of
option of the taxpayer
its political subdivisions or
agencies or to GOCCs
DOMESTIC CORPORATION
Gross selling price
or
Listed 1/2 of 1% Sec. 127 (A)
Gross value in money of the
shares of stock sold,
 bartered, exchanged or
otherwise disposed
Net Capital Gains
Capital Gains from Sale of
(From sale, barter, exchange Not over P 100,000 = 5%
Shares of Stock not Traded
or other disposition of Sec. 27 (D)(2) Final Tax
in the Stock Exchange
shares of stock in a domestic On any amount in excess of
corporation) P 100,000 = 10%
Capital Gains Realized from
the Sale, Exchange or
Gross selling price of fair
Disposition of Lands and/or 6% Sec. 27(D)(5) Final Tax
market value
Buildings treated as capital
asset.

Up to twenty-five percent
(25%) – 4%
Gross selling price
or Over twenty-five percent
Gross value in money of the (25%) but not over thirty-
IPO Sec. 127 (B)
shares of stock sold, three and one third percent
bartered, exchanged or (33 1/3%) – 2%
otherwise disposed
Over thirty-three and one
third percent (33 1/3%) –
1%
RESIDENT FOREIGN CORPORATION
Net Capital Gains
Capital Gains from Sale of (from sale, barter, exchange Not over P 100,000 = 5%
Shares of Stock Not Traded or other disposition of Sec. 28 A(7)(c) Final Tax
in the Stock Exchange shares of stock in a domestic On any amount in excess of
corporation) P 100,000 = 10%
 NON-RESIDENT CITIZEN INDIVIDUAL
Net Capital Gains
(from the sale, barter,
Capital Gains from Sale of exchange or other
Not over P 100,000 = 5%
Shares of Stock Not disposition of shares of
Sec. 24(C) Final Tax
Traded in the Stock stock in domestic
On any amount in excess of
Exchange corporations not traded
P 100,000 = 10%
through the local stock
exchange)
Capital Gains Realized
Gross selling price
from the Sale, Exchange
or
or Disposition of Lands 6% Sec. 24(D)(1) Final Tax
current fair market value,
and/or Buildings treated
whichever is higher
as capital asset.
NON-RESIDENT ALIEN INDIVIDUAL (ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES)
Net Capital Gains
(from the sale, barter,
Sec.25(A)(3),
Capital Gains from Sale of exchange or other Not over P 100,000 = 5%
Sec.24(C),
Shares of Stock Not disposition of shares of
Final tax
Traded in the Stock stock in domestic On any amount in excess of
Exchange corporations not traded P 100,000 = 10%
through the local stock
exchange)
Capital Gains Realized
Gross selling price
from the Sale, Exchange
or
or Disposition of Lands 6% Sec.25(A)(3), Final Tax
current fair market value,
and/or Buildings treated Sec.24(D)(1)
whichever is higher
as capital asset.
NON-RESIDENT ALIEN INDIVIDUAL (NOT ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES)
Net Capital Gains Sec. 25(B)
Capital Gains from Sale of Not over P 100,000 = 5%
(from the sale, barter, Sec.24(C) Final tax
Shares of Stock Not
exchange or other
 Traded in the Stock disposition of shares of On any amount in excess of
Exchange stock in domestic P 100,000 = 10%
corporations not traded
through the local stock
exchange)
Capital Gains Realized Final Tax
Gross selling price
from the Sale, Exchange
or
or Disposition of Lands 6% Sec. 25(B),
Current fair market value,
and/or Buildings treated Sec.24(D)(1)
whichever is higher
as capital asset.
Other fixed or
Amount of gain, profit and Sec. 25(B)
determinable gains, profit 25%
income
and income
NON-RESIDENT FOREIGN CORPORATION – APPLIES TO A FOREIGN CORPORATION NOT ENGAGED IN TRADE OR
BUSINESS WITHIN THE PHILIPPINES [SEC. 22(I)]
Capital gains except from
sales of shares of stock
Gross Income 30% Sec. 28(B)(1)
not Traded in the Stock
Exchange
Net capital gains from
sale, barter, exchange or Sec. 28(B)(1),
Capital Gains from Sale of Not over P 100,000 = 5%
other disposition of shares Sec.28(B)(5)(c)
Shares of Stock Not
of stock in domestic Final Tax
Traded in the Stock On any amount in excess of
corporations not traded
Exchange P 100,000 = 10%
through the local stock
exchange
 ROYALTIES

RESIDENT CITIZEN/ALIEN
Particulars Tax Base Tax Rate Legal Basis Remarks
In General 20%
Books, literary works and Gross amount Sec. 24 (B) (1) Final Tax
10%
musical compositions
DOMESTIC CORPORATION
In General Gross amount 20% Sec. 27 (D) (1) Final Tax
RESIDENT FOREIGN CORPORATION
In General Gross amount 20% Sec. 27 (D) (1) Final Tax
NON-RESIDENT CITIZEN INDIVIDUAL
In General 20%
Books, other literary
Gross amount Sec. 24(B)(1) Final Tax
works, and musical 10%
compositions
NON-RESIDENT ALIEN INDIVIDUAL (ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES)
On the amount of royalties
In General 20% Sec.25(A)(2) Final Tax
(in any form)
Books, other literary Amount of books, other
works, and musical literary works, and musical 10% Sec.25(A)(2) Final Tax
compositions compositions
Cinematographic films Amount of cinematographic Sec.25(A)(2), Sec.
25% Final Tax
and similar works films and similar works 28(B)(2)
NON-RESIDENT ALIEN INDIVIDUAL (NOT ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES)
In General/ Books, other
literary works, and (not specifically mentioned) 25% Sec.25(B) Final Tax
musical compositions
NON-RESIDENT FOREIGN CORPORATION – APPLIES TO A FOREIGN CORPORATION NOT ENGAGED IN TRADE OR
BUSINESS WITHIN THE PHILIPPINES [SEC. 22(I)]
 Gross income received as
In General 30% Sec. 28(B)(1) Final Tax
royalties
 PASSIVE INCOME - banks and non-bank financial intermediaries performing quasi- banking functions

Particulars Tax Base Tax Rate Legal Basis Remarks

Interest on Currency
Amount of interest 20% Sec. 27(D)(1)
Deposits
Interest on Foreign
Amount of interest 7½% Sec. 27(D)(1)
Currency Deposits
Income under EFCDU
from nonresidents, OBUs,
Sec. 27 (D)(3)
local commercial bans --- Exempt
Sec. 28 (A)(7)(b)
including branches of
foreign banks
Interest income from
foreign currency LOANS
Sec. 27 (D)(3)
to residents other than Gross amount 10%
Sec. 28 (A)(7)(b)
OBUs and depository
banks
Sec. 121 Sec. 122
Maturity Maturity
On interest, commissions
period is five period is five
and discounts from lending
years or less - years or less -
activities as well as income
5% 5%
from financial leasing, on Sec. 122, par.
Gross receipt Sec. 121(a)
the basis of remaining 1
Maturity Maturity
maturities of instruments
period is more period is more
from which such receipts
than five years than five years
are derived:
- 1% - 1%
 On dividends and equity
shares and net income of Gross receipt 0% --- Sec. 121(b) ---
subsidiaries
On royalties, rentals of
property, real or personal,
profits from exchange and
Gross receipt 7% 5% Sec. 121(c) Sec. 122
all other items treated as
gross income under Section
32 of this Code
TRADING GAINS
Tax Rate
Particulars Tax Base Legal Basis Remarks
Sec. 121 Sec. 122
On net trading gains within
the taxable year on foreign
currency, debt securities,
Gross receipt 7% --- Sec 121(d) ---
derivatives, and other
similar financial
instruments