TAX ON INDIVIDUALS

INDIVIDUAL TAXPAYERS
RESIDENT
CITIZENS OF
THE PHIL

NONRESIDENT
CITIZENS OF
THE PHIL

RESIDENT
ALIENS

NONRESIDENT
ALIENS
ENGAGED IN
BUSINESS IN
THE PHILS

NONRESIDENT
ALIEN NOT
ENGAGED IN
BUSINESS IN
THE PHIL

Born and
living in the
Philippines

Leaves the
Phil as
immigrant,
works
permanently
or derives
income from
abroad
Have stayed
outside the
Phil for more
than 183
days

Lives in the
Phil but is not
a citizen of
the Phil
Comes to the
Phil for a
definite
purpose,mak
es a
temporary
home in the
Phil for more
than one
year by the
end of the

Not living in
the Phil and
is not a
citizen of the
Phil
More than
180 days in
the Phil

Not living in
the Phil and
is not a
citizen of the
Phil
Comes to the
Phil for a
definite
purpose and
may be
promptly
accomplished

ILLUSTRATIONS

Mr. B was a non-resident citizen in 2007.

He returned to the Philippines on June 5,
2008 to reside permanently in the
Philippines. He had income from January 1
to June 4, 2008 from Philippine sources of
P300,000 and foreign sources of P200,000.
He had income from June 6 to December
31 of the same year of P600,000 from
Philippine sources and of P400,000 from
foreign sources. How can he be considered
a resident tax payer and a non-resident
tax payer?

ILLUSTRATIONS

Mr. C, a citizen of the Philippines left

the Philippines on February 10, 2006
and returned only on January 1, 2008.
What will he be between the years
2006 and 2007?
Mr. D, an alien, came to the Philippines
on June 5, 2006. He stayed in the
Philippines until February 2, 2008. For
the year 2006, what will be the status
of Mr. D as tax payer? For the year
2007?

ILLUSTRATIONS

Mr. E, an alien, came to the Philippines on

January1, 2008 and stayed up to February 1,
2008. During his stay in the Philippines he
was actively in commerce with gross income
of P1,000,000 and expenses related to
income of P200,000. What type of taxpayer
will Mr. E Be?
Mr. F, an alien, came to the Philippines on
January 1, 2008 as a tourist. He stayed up to
September 2008. During his stay in the
Philippines, he spends until in August where
he sold his camera for P40,000 gaining an
excess of P5,000 from the cost. What will he
be as a taxpayer?

COMPUTATION OF CAPITAL GAIN TAX

ON SALE OF SHARES OF STOCK HELD AS

CAPITAL ASSET (Domestic stock not listed and
traded thru local stock exchange)
On net capital gain:
Not over P100,000
Final tax of 5%
In excess of P100,000 Final tax of 10%

ON SALE OF REAL PROPERTY IN THE

PHILIPPINES HELD AS CAPITAL ASSET
SP VS. FMV
whichever is higher
Final tax of
6%

CAPITAL GAIN TAX ON SHARES OF STOCK

CAPITAL ASSET- asset not used in the

business.
NET CAPITAL GAIN = SP Cost
SELLING PRICE amount in
consideration of the sale (SP or FMV
whichever is higher)
COST purchase price + expense
upon purchase

SOLVE

Mr. P sold his shares of stock from a

Selling
price
P250,000
Selling
price
P250,000
domestic
corporation
which
was
held
Less:
175,000
Less:Cost
Cost
175,000
as capital
asset to Mr. T for
P250,000.
Net
PP 75,000
Netgain
gain
75,000
tax
5%
His costFinal
is P175,000.
How much
Final
tax
5% is the
CAPITAL
GAIN
TAX
PP 3,750
CAPITAL
GAIN
TAX
3,750
capital gain tax to be charged
to him?

Mr. S sold his shares of stock from a

Market
P300,000
Fair
Marketvalue
valuewhich was
P300,000
domesticFair
corporation
held as
Less:
150,000
Less:Cost
Cost
150,000
capital asset
to
Mr.
T
for
P250,000
where
Net
gain
P150,000
Net gain
P150,000
the Fair market
at the time
of sale is
Final
5%
PP 5,000
Finaltax
tax value
5% 100,000
100,000
5,000
P300,000.
His @
cost
is 50,000
P150,000. How
Excess
5,000
Excess
@10%
10%
50,000
5,000much
CAPITAL
TAX
is the capital gain
tax toGAIN
be charged
CAPITAL
GAIN
TAX PP to
10,000
10,000
him?

SOLVE

Mr. P sold his shares of stock from a

domestic corporation which was held as
capital asset to Mr. T for P350,000, a
commission of P15,000 was given to the
agent who negotiated the transaction. His
value
P350,000
Fair Market
Market
value purchased
P350,000
share Fair
was
originally
at
Less:
Commission
15,000
Less:and
Commission
15,000
P250,000
paid a commission
of
Net
SP
P335,000
Net
SP
P335,000
P25,000
to
the
broker
.
How
much is the
Less
Cost
250,000
Less Cost
250,000
capital Add
gain tax to be charged
to him?
Add Commission
Commission 25,000
25,000 275,000
275,000
Net
NetCapital
CapitalGain
Gain
60,000
60,000
Final
Finaltax
tax

5%
5% 60,000
60,000

PP

3,000
3,000

CAPITAL GAIN TAX ON REAL PROPERTY

REAL PROPERTY land, building or

anything attached to the soil with
permanence.
CAPITAL GAIN TAX Selling Price or
Fair Market Value whichever is higher.
TAX IS ON A PER TRANSACTION
BASIS ONLY

SOLVE

Mr. X sold his land in the Philippines

for P10,000,000 when the FMV is
P9,000,000. He acquired the lot in
2000 with a cost of 5,000,000. The
sale has gained him P5,000,000. How
much is his capital gain tax on real
property?
Selling
Selling Price
Price
Final
Finaltax
tax

CAPITAL
CAPITALGAIN
GAINTAX
TAXPP

P10,000,000
P10,000,000
6%
6%

600,000
600,000

#17

The tax payer is a citizen of the Philippines,

residing in the Philippines.

Selling price of land and building in the Philippines

held as capital asset
4,500,000 Fair market value at the time of sale
5,000,000 Cost of the land and building
4,000,000

How much is the capital gain tax?

SOLUTION FOR #17

Fair Market Value

5,000,000
X Final Tax
CAPITAL GAIN TAX

6%
300,000

INCOME SUBJECT TO TAX FOR A RESIDENT

CITIZEN
CATEGORY A CATEGORY B CATEGORY C
Capital Gain
Passive Income
with Capital
with final
gain tax of
tax of
a)
5% & 10% a) 7 %
b)
6%
b)
10%
c)
20%
a)

b)

Tax due
within 30
days
Tax
withheld at
source

Tax is withheld
at source.
Income
received is net
of tax

Other Income
Graduated tax
of 5% to 32%

Annual Income
Tax Return
Quarterly ITR

SOLVE #22
The
The taxpayer
taxpayer is
is aa resident
resident citizen
citizen of
of the
the
Philippines
Philippines with
with the
the following
following data
data in
in aa calendar
calendar
year:
year:
Net Income from business
2,500,000
Net Income from business
2,500,000
Interest
40,000
Interest on
on BPI-Savings
BPI-Savings Account
Account
40,000
Interest
50,000
Interest on
on Allied
Allied Bank
Bank TD
TD
50,000
Interest
30,000
Interest on
on Bonds
Bonds BSP
BSP
30,000
Interest
100,000
Interest in
in foreign
foreign currency
currency
100,000
Dividend
40,000
Dividend from
from aa domestic
domestic corp
corp
40,000
Dividend
Dividend from
from aa foreign
foreign corp
corp 20,000
20,000 Royalties
Royalties
from
100,000
from books
books authored
authored
100,000
Compute for the final tax of each passive income.
Compute for the final tax of each passive income.
How much is the passive income for the year, net
How much is the passive income for the year, net
of
of withholding
withholding income
income tax?
tax?

SOLVE #22
The
The taxpayer
taxpayer is
is aa resident
resident citizen
citizen of
of the
the
Philippines
Philippines with
with the
the following
following data
data in
in aa
calendar
calendar year:
year:
FINAL TAX ON PASSIVE INCOME
FINAL TAX ON PASSIVE INCOME
Interest on BPI-Savings Account
8,000
Interest on BPI-Savings Account
8,000
Interest
Interest in
in foreign
foreign currency
currency
7,500
7,500 Dividend
Dividend from
from aa domestic
domestic corp
corp
4,000
4,000 Royalties
Royalties from
from books
books authored
authored
10,000
10,000

TOTAL
TOTAL FINAL
FINAL TAX
TAX ON
ON PASSIVE
PASSIVE INCOME
INCOME

31,500
31,500

SOLVE #22

The
The taxpayer
taxpayer is
is aa resident
resident citizen
citizen of
of the
the
Philippines
Philippines with
with the
the following
following data
data in
in aa calendar
calendar
year:
year:

Interest
32,000
Interest on
on BPI-Savings
BPI-Savings Account
Account
32,000
Interest
40,000
Interest on
on Allied
Allied Bank
Bank TD
TD
40,000
Interest
30,000
Interest on
on Bonds
Bonds BSP
BSP
30,000
Interest
92,500
Interest in
in foreign
foreign currency
currency
92,500
Dividend
36,000
Dividend from
from aa domestic
domestic corp
corp
36,000
Dividend
Dividend from
from aa foreign
foreign corp
corp 18,000
18,000 Royalties
Royalties
from
90,000
from books
books authored
authored
90,000

TOTAL
TOTAL PASSIVE
PASSIVE INCOME
INCOME

338,500
338,500

OTHER INCOME

COMPENSATION INCOME Employeremployee relationship

BUSINESS or PROFESSION
SALE or EXCHANGE OF PROPERTY
(not subject to the capital gain tax)
INCIDENTAL SOURCES interest or
dividend (not subject to final tax)

COMPUTATION
COMPENSATION INCOME

Gross Compensation Income

Less: Deductions
Personal Exemptions
Equals : Taxable Compensation Income
Graduated rate applies 5% to 32%

NOTES:
1. SSS, Philhealth and Pag-ibig contribution are
deducted from gross compensation income.
2. Exclusions ceiling amount P30,000
3. Paid premiums on hospitalization/health
insurance-deducted from gross compensation

EXEMPTIONS
Taxpayer (regardless of status) P50,000
Each dependent (max of 4)
25,000 each

SOLVE

Mr. A is an employee of XYZ Company

with annual income of P200,000 net
of exclusions and receives an
allowance of P5,000 a month. How
much will his taxable income be
considering his status as married with
4 children ages 16, 18, 20 and 22?

Net
Net Salaries
Salaries 200,000
200,000 Add:
Add: Allowances
Allowances
60,000
60,000 Gross
Gross Compensation
Compensation Income
Income
260,000
260,000 Less
Less Personal
Personal Exemption
Exemption
125,000
135,000
125,000 Taxable
Taxable Income
Income
135,000

Tax
Tax Due
Due @
@ 70,000
70,000
Excess
Excess of
of 70,000
70,000 (65,000x20%)
(65,000x20%)
13,000
13,000 TAX
TAX DUE
DUE FROM
FROM MR.
MR. AA
21,500
21,500

8,500
8,500

SOLVE

Mr. B is a resident citizen who is married. He

is employed and had the following data in a
taxable year:
Salaries, before deduction
335,615
Allowances
20,598
Payroll deductions:
SSS
Contribution 5,325 Philhealth
2,950
Pag-ibig Contribution
1,950 Labor
Union dues
2,000 Payment of loan to
employer
25,000
How much is the taxable income?

Salaries
Salaries
Add:
Add: Allowances
Allowances
20,598
20,598 Gross
Gross Compensation
Compensation
356,213
356,213 Less:
Less: Payroll
Payroll deductions
deductions
SSS
SSS Contribution
Contribution
5,325
Philhealth
5,325
Philhealth
2,950
Labor
2,950
Labor Dues
Dues
2,000
Pag-ibig
2,000
Pag-ibig Contribution
Contribution
1,950
1,950 Total
Total
12,225
12,225
Net
Net Compensation
Compensation Income
Income
343,988
343,988 Less:
Less: Personal
Personal Exemption
Exemption
50,000
50,000 Taxable
Taxable Income
Income

335,615
335,615

COMPUTATION
SELF-EMPLOYED OR PRACTICE
OF PROFESSION

Gross Income
Less: Deductions for expenses and
losses
Personal Exemption
Equals : Taxable Income
(Graduated Income Tax applied
5% to 32%)

SOLVE

Data from the record of Mr. Z are as

follows:
Sales
581,605
Sales Return
2%
Cost of Goods sold
397,600
Business Expenses
114,200
Civil Status : Married,
Compute for taxable Income
Compute the Income Tax due

Sales
581,605 Less Sales Discount
11,632.10 Net Sales
569,972.90 Less Cost of Good Sold
397,600.00 Gross Profit
172,372.90 Less: Expenses
114,200.00 Net Income
58,172.90
Less
Personal Exemption
50,000.00
Taxable Income
Income Tax Due
Not over 10,000 X 5%
408.65

8,172.00

SOLVE

Mr. L, a resident citizen, single, had

income from within and outside the
Philippines, Data for the year are as
follows:
Gross Income within 120,872.94 Gross
Income outside 190,425.30
Deductible Expense within
58,924.65 Deductible Expense outside
158,539.41
How much was the income tax at the
end of the year?

Gross
120,872.94
Gross Income
Income within
within
120,872.94
Gross
Gross Income
Income outside
outside
190,425.30
Total
190,425.30
Total Income
Income
311,298.24
Less:
311,298.24
Less: Deductible
Deductible
Expense
Expense
Within
58,924.65
Within
58,924.65
Outside
Outside 158,539.41
158,539.41

217,464.06
217,464.06

Net
93,834.18
Net Income
Income
93,834.18
Less
Less Personal
Personal Exemption
Exemption 50,000.00
50,000.00
Taxable
Taxable Income
Income
43,834.18
43,834.18

COMPUTATION
MIXED INCOME

Gross Compensation Income

Add: Net
Income from Business or Profession (Gross
Income Expenses & Losses)
Less:
Personal Exemption
Equals :
Taxable Income
(Graduated Income Tax applied 5% to 32%)

SOLVE

Mr, X is a resident of the Philippines, married

with 2 children ages 3,5, with income from
business and a practicing accountant as
well. He is receiving a monthly retainers fee
from Guzman and Associates of P12,000 per
month, with deductions totaling P37,875 for
the year. He earns an income of P600,000
with expenses at P250,000.
How much is the taxable income of Mr. X?
Compute for income tax at the end of the
year.

Gross Income
600,000
Less: Expenses
250,000
Net Income from business
350,000 Add: Compensation Income 144,000
Less Deductions
37,875
106,125 Income before exemption
456,125 Less: Personal Exemption
Basic
Dependent
Income
Due

50,000
50,000 100,000 Taxable
356,125
Tax

Over 250,000
50,000
Excess (356,125-250,000 X 30%)
31,837.5 Income Tax
81,837.5

INCOME TAX ON THE NONRESIDENT CITIZEN

Sources of Income within the Philippines

Capital Gain Tax on sale within the
Philippines 5% - 10%
Real Property Tax on property within the
Philippines 6%
Passive Income from Foreign sources
Exempt
Passive Income within the Philippines
10%; 20%; 10%

SOLVE

Ms. P, is a citizen of the Philippines, resides

and operates a business in Singapore. Her
income in Singapore totals P1,680,000 with
expenses totaling P975,000.
Ms. P receives P20,000 dividend from PLDT.
Ms. P has sold her property in Batangas for
P350,000, receiving a gain of P95,000.
How much is the taxable income of Ms. P?

Working
Working and
and living
living in
in Singapore
Singapore Ms.
Ms. P.
P. is
is
not
not subject
subject to
to Business
Business tax.
tax.
Final
Final Tax
Tax on
on passive
passive income
income
P2,000
P2,000 Capital
Capital Gain
Gain tax
tax on
on sale
sale of
of real
real
property P21,000

SOLVE

Mr. X is a Filipino citizen, married with six

underage children, engage in business both in the
Philippines and Thailand. He has been managing
the business in Thailand for three years now.
The details are as follows:
Gross Income-Philippine branch
1,850,000
Gross Income-Thailand branch
2,000,000
Expenses in Philippines 950,600 Expenses in
Thailand
1,180,600 Cash deposited in a
Thailand bank
700,000 Winnings in a
lottery in Thailand
50,000

COMPUTE FOR THE TAXABLE INCOME OF MR. X

COMPUTE FOR INCOME TAX DUE FOR THE YEAR?

Gross
Gross Income
Income Phil
Phil
1,850,000
1,850,000 Less
Less Expenses
Expenses Phil
Phil
950,600
950,600 Net
Net Income
Income
899,400
899,400 Less:
Less:
Personal
Personal Exemption
Exemption
Basic
50,000
Basic
50,000
Dependent
(4)
Dependent
(4) 100,000
100,000
150,000
150,000 Taxable
Taxable Income
Income
749,400
749,400
Income
Income Tax
Tax Due
Due
Over
Over 500,000
500,000
125,000
125,000 Excess
Excess of
of 500,000
500,000 XX 32%
32%

INCOME TAX ON THE RESIDENT ALIEN

Sources of Income within the Philippines

Capital Gain Tax on sale within the Philippines

Real Property Tax on property within the Philippines 6%

Passive Income from Foreign sources

Exempt

Passive Income on interest from foreign deposit

7.5%

Passive Income within the Philippines 10%; 20%; 10%

5%/10%

SOLVE

Mr. Y is a Canadian citizen but living in the

Philippines for more than two years. He is married
and have 3 dependents.
His income includes the following:
Dividends from domestic corporation
50,000
Gain on real property sold in Canada
3,500,000
Business Income-Philippines
2,500,000
Expenses
1,950,000
How much is the taxable income?
How much is the income tax due?

SOLUTION
Business income-Phil 2,500,000 Less
Expenses
1,950,000 Net Income
550,000 Less Personal Exemption
Basic
50,000
Additional
75,000
125,000
Taxable Income
425,000
Income Tax due
Over 250,000
50,000 In excess of 250,000 X 30%
52,500
Total
102,500

SOLVE

Mr. S is a citizen of a foreign country, married a

Filipina, residing in the Philippines with 3 children.
Data for the taxable year:
Deposit from a foreign bank 25,000 Dividend from
a foreign corporation
15,000 Capital gain
on sale of stock-domestic
SFT 48,000 Capital
gain on sale of the wifes real
SFT property
not considered conjugal with SP
of 5,000,000 and FMV of 6,000,000
1,200,000 Net Income from the business in the
Phil 450,000 Net Income from business outside
the Phil 650,000
How much is the taxable income?
How much is the income taxes due from Mr. S?

SOLUTION

Dividend from a foreign corporation

Capital gain on sale of stock-foreign
Net Income
Exemption
Basic
50,000
Dependent 75,000
Income
325,000
Income tax Due on income
In excess
22,500
Income Tax
72,500

exempt
exempt

450,000 Less: Personal

125,000 Taxable
50,000

INCOME TAX ON THE

NON-RESIDENT ALIEN ENGAGED IN
BUSINESS

Sources of Income within the Philippines

Capital Gain Tax on sale within the Philippines
5% - 10%
Real Property Tax on property within the
Philippines 6%
Passive Income from Foreign sources Exempt
Passive Income within the Philippines 10%;
20%; 10%
EXEMPTION-The Income tax law on exemption or
the NIRC law on taxation whichever is LOWER.
No additional exemption is allowed.

SOLVE

Mr. V, married, a citizen and

businessman in country X, engaged in
business in the Philippines for twelve
months in a calendar year. The
following data on his income follows:
Gross Income-Phil
700,000 Capital gain-sale of stock
from Domestic Corporation
15,000 Gross Income-Country X
680,000 Business Expense-Country
X
250,000 Business Expense-Phil
550,000 Interest on savings-Country
15,000 Interest on savings-Phil
7,000

TAXPAY COU
ER
NTRY
X

NIRC

SINGLE

30,00
0

50,00
0

HEAD
OF THE
FAMILY

18,00
0

50,00
0

MARRIE
D

55,00
0

50,00
0

ALLO
WED
P/E

50,00
0

SOLUTION

Gross Income-Phil 700,000 Business

Expense-Phil 550,000 Net Income 150,000
Less Personal Exemption
50,000
Taxable Income
100,000 Income Tax Due
70,000
8,500 In excess of
70,000
6,000 Income tax due
14,500

Capital gain tax

Interest on savings-Phil

750
1,400

INCOME TAX ON THE

NON-RESIDENT ALIEN NOT ENGAGED IN
BUSINESS

Sources of Income within the Philippines

FINAL TAX OF 25%
Capital Gain Tax on sale within the
Philippines
FINAL TAX OF 5% - 10%
Real Property Tax on property within the
Philippines FINAL TAX OF 6%
NO PERSONAL EXEMPTION IS ALLOWED

SOLVE

Mr. Y is a subject and resident of a foreign country.

He is married with a qualified dependent child. His
income is from Philippine and foreign sources.
Income, Philippines 95,742 Income, foreign
country of which subject
45,978 Dividend from a
non-resident corporation 20,000

How much is the income tax expense for the year:

If he is a non-resident alien engage in business in
the Philippines and the given income is net income.
(Assume full reciprocity on personal exemption)?
If he is a non-resident alien not engage in business
in the Philippines, the given income is gross
income?

SOLUTION

Mr. Y is a non-resident engage in business in the

Philippines:
Income from the Phil
95,742
Less: Personal exemption
Basic
50,000
Additional
25,000
Taxable Income
Income tax due
10,000
500
In excess of 10,000 X10%
1,074.20
Income tax due
1,574.20

75,000
20,742

Mr. Y is a non-resident not engage in business

Gross Income
95,742
X Final Tax
25%
Final Tax
23,935.50

QUARTERLY INCOME TAX OF

INDIVIDUALS

First quarterly return

Second quarterly return
Third quarterly return
Final or annual return

April 15 CY
August 15 CY
November 15 CY
April 15 SY

ILLUSTRATION

Mr. A, a resident citizen, married, with 5 qualified

dependent children, had as of September 30, 2007,
a taxable income from business of P680,000 and
income tax payment thereon of P182,600. For 2007,
he had a gross income of P320,000 from which there
was a withholding income of P51,800. The following
were the cumulative data on business for each of the
first three quarters, and end, of the year:
First Q

Gross Inc

400,000

SecondQ
780,000

CG-sale of
stock-domestic
Interest-PhCur

10,000

Expenses/Loss

200,000

Third Q
1,300,000

Year
1,800,000

50,000

50,000

20,000

30,000

40,000

410,000

620,000

730,000

FIRST Q
Mr.

SECOND
THIRD Q
YEAR
Q married, with 5 qualified
citizen,

A, a resident
dependent
children,
as of September
2007, a
Gross
Income
400,000had 780,000
1,300,00030, 1,800,000
taxable income from business of P680,000 and
income tax payment thereon of P182,000. For 2007,
Less Exp/Loss
620,000
he had a gross200,000
income of410,000
P320,000 from
which 730,000
there
Balance
was a withholding income of P51,800. The following
1,070,000
were the cumulative data on business for each
of the
three
Addfirst
Comp
Inc quarters, and end, of the year:
320,000
Total
1,390,000
- Personal Exem

First Q
SecondQ Third Q
200,000 370,000
680,000 1,300,000
1,240,000
400,000
780,000

Taxable
Year
Income
Gross Inc
Income Tax 1,800,000
37,500
LessCG-sale
IT paid of stock-domestic
1st Quarter
50,000
nd
2 Quarter
Interest-Ph Cur
40,000
3rd Quarter

150,000

86,000

(37,500)
10,000

182,000

50,000
(37,500)

361,800

(37,500)

(48,500)30,000
(48,500)
20,000
(96,600)

SOLVE

PROBLEM #31 PAGE 48