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EXCLUSIONS
GROSS
INCOME

FINAL TAXES
Passive
income
Capital Gains
Trans.Tax
Passive income
- Final tax
- Concept
Other income
- Schedular tax
GROSS INCOME
Interests
Royalties
Prizes and other winnings
Capital gains
Dividends
PASSIVE INCOME
Phil. Currency
EFCD
Yield
- Deposit substitutes
- Trust funds, similar
arrangements
INTERESTS
Bankers acceptances
Promissory notes
REPOs, Reverse REPOs
Cert. of assignment or
participation

DEPOSIT
SUBSTITUTES
Others with recourse
Continuation
Peso deposits
- Citizens, res. aliens = 20%
- Non-res. aliens, NET=25%
EFCD
- Citizens, res. Aliens =71/2%
- Non-res. Aliens, NET=25%
RATES
- Corps. not depository banks
o Domestic, resident
foreign = 7 1/2%
- Corps. depository banks
o Domestic, resident
foreign = 10%
Continuation .
Corporations
- Domestic, foreign
resident = 20%
- Foreign non-resident =
32%
Continuation .
Long-term deposit or
investment certificates
- Savings, common or
individual trust funds,
IMA, deposit substitutes

EXEMPT
INTEREST
Maturity not less than five
years
BSP Form
Bank Individual
Not less than P 10,000.00
CERTIFICATES
Rate = 20%
- Citizens, resident aliens,
non-resident aliens ETs
- EXCEPT Books, literary
and musical = 10%


ROYALTIES
Continuation.
- Domestic and resident
foreign corporations
Non-res. Foreign corp
NET = 32%
More than P10,000
Not PCSO or LOTTO
Derived within Phils.
Tax treatment if less
than P10,000
PRIZES
Concept
Kinds
- Liquidating
- Cash
- Stock
- Property
DIVIDENDS
SOURCE From within
- Domestic corporation
- Foreign corporations
not less than 50% for
3 years
DIVIDENDS

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


Continuation .
- Mutual fund company
- Regional operating hqs
of multinational cos
Share in prtnrshp income
Share in assn, joint acct.
joint venture, consortium


Domestic/Domestic
Foreign Resident/
Domestic
Nonresident/Domestic
15% subject to tax credit
CORPORATIONS
Concept - reasonable
needs of business
The tax = 10% of IAE
IMPROPERLY
ACCUMULATED
EARNINGS TAX
Continuation ...
Who are liable
- Corp. form to avoid tax
- By not dividing profits
- Only domestic corps.
IAET not applicable

CORPS IAET NOT
APPLICABLE
Banks and other non-
bank financial
intermediaries
Insurance companies
Continuation .
Publicly-held corps.
- Not public, closely held
50% of outstanding or
total combined voting
owned not more than 20
individuals
Continuation .
Taxable partnerships
General professional
partnerships
Non-taxable joint ventures
Continuation .
PEZA and Bases
Conversion registrants or
SEZs enjoying special tax
rate
TESTS FOR
REASONABLE
ACCUMULATION
Immediacy test
2 to 1 rule
Bardahl formula = optg
cycle concept
REASONABLE
ACCUMULATION
Increase up to 100% paid-
up
Definite board approved
corporate expansion
Continuation .
Buildings, plants or equipt.
acquisition approved by
Board
Compliance with any loan
covenant or pre-existing
obligation

Continuation .
Required by law or regltns.
to be retained or legally
prohibited from distributing
Subsidiaries of foreign
corporations, if intended or
reserved for investments
within Phils.
PRIMA FACIE
UNREASONABLE
Investments of substantial
earnings in unrelated
business
Investment in bonds and
other long-term securities
Continuation .
Accumulation of earnings
in excess of 100% paid-up
unless for reasonable
needs
TAXPAYERS
WHY
CLASSIFIED ?
Income taxable
Deductions
Exemptions
Taxable rates
WHY CLASSIFY?
Individuals
Trusts
Estates
Corporations
TAXPAYERS
Citizenship
Residency
Civil status
Employment
INDIVIDUALS
Citizens

Aliens
CITIZENSHIP
Citizens
Resident
Nonresident

Aliens
Resident
Nonresident
RESIDENCY
Stays in the
Philippines
No intention to transfer
RESIDENT
CITIZEN
BIR satisfaction
Physical presence abroad
Definite intention to reside
abroad
NONRESIDENT
CITIZEN
Leaves Phil. during taxable
year
To reside abroad
Works and derives
income from abroad
Physical presence abroad
required
Continuation .
Previous nonresident
Arrives during taxable
year
Reside permanently in
Phil.
Continuation .
Not mere transient or
sojourner
No definite intention to
Definite purpose extended
stay
RESIDENT ALIEN
Mere transient or
sojourner
Definite purpose
accomplished
NONRESIDENT
ALIEN
Locally employed
Overseas contract
workers
Seamen
CITIZENS
RESIDENTS
Locally employed
Employed by regnl or
area hgs., and regnl optg
hqs. of multintls, OBUs,
petroleum svc. contractrs

ALIENS
Single, unmarried,
legally separated
Head of family
Married
CIVIL STATUS
Revocability
Place of administration
Distribution of benefits
TRUSTS
Domestic
Foreign
Resident
Nonresident
CORPORATIONS
CORPORATIONS
Partnerships
Joint stock companies
Joint accounts
Associations
CORPORATIONS
General professional
Joint venture or
consortium
Construction, energy
Service contract
NOT CORPORATIONS
Not taxable entity
Partners taxed on
their distributive
share in net income
G.P.P.
INCOME TAX
EXEMPT
TAX EXEMPT
INCOME
Labor, agricultural or
horticultural organization
not organized principally
for profit
Continuation .
Mutual savings bank and
coop banks w/o capital
stock
Beneficiary society, order
or association for
exclusive benefit of
members

Continuation .
Mutual aid association or
nonstock corp organized
by employees providing
for the payment of life,
sickness, accident, etc.

Continuation .
Cemetery company owned
and operated exclusively for
the members
Nonstock organized for
religious, charitable,
scientific, athletic or cultural
purposes, rehab of veterans

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

Continuation .
Farmers; or other mutual
typhoon or fire insurance,
mutual ditch or irrigation,
mutual or coop telephone
company of purely local
character
Continuation .
Farmers, fruit growers,
etc. as sales agents
Government
- GSIS
- SSS
- Phil. Health Insurance

Continuation .
- PCSO / PAGCOR
- Govt. educational
institutions
Rates
Gross taxation
MCIT
IAET
Branch profits taxes
Other % taxes
CORPORATIONS
Domestic = 32%
Educational institutions
= 10%
Foreign
Resident = 32%
Nonresident = 32% gross
CORPORATIONS
2% of gross income or
32% reduced rate
whichever is higher
Beg. on 4th tax year
MINIMUM CORP.
INCOME TAX
Gross sales
Less: Sales Returns and
Allowances
COGS
GROSS INCOME
MERCHANDISING
Invoice COGS
Import duties
Freight
Insurance
COST OF GOODS
SOLD
MANUFACTURING
All costs of prodctn, r.m.
d.l. and mfg. OH
Freight cost, ins. & other
costs to bring r.m.
COST OF GOODS
MFG. AND SOLD
ALL DIRECT COSTS
Salaries and benefits
Cost of facilities, deprcn,
rental, cost of supplies
Banks + interest expense

COST OF SERVICES
Losses
Prolonged labor
Force majeure
Legitimate business
reverses
SUSPENSION
No. of mos. using
reduced rate x taxable
income divided by 12
REDUCED RATES
FOR FISCAL YR.
SOF recommends to
the President
January 1, 2000
Optional
GROSS INCOME
TAXATION
Tax effort ratio of 20%
to G.N.P.
Ratio of 40% income
tax to total tax revenues

CONDITIONS
Continuation
VAT effort of 4% of
G.N.P.
9% Ratio of CPSFP to
G.N.P.
Within/Without
Schedular
Optional standard
Itemized
Personal/additional
RES. CITIZENS
Within
Schedular
Itemized
Personal and
additional
NONRES. CITIZENS
Within
Same as resident
citizens
RES. ALIENS
E.T.B.
Within
Schedular
Itemized
P.A.E. - reciprocity
NONRES. ALIEN
N.E.T.B.
Within
No deductions
Taxed on gross
NONRES. ALIEN
CAPITAL GAINS
and DEDUCTIONS
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