Taxation is the exercise of the sovereign power to raise revenues for the expenses

of the government.
GR: Taxation is presumed
XPN: Tax exemption is strictly construed against taxpayer

CHARACTERISTICS AND NATURE: STAGES/COVERAGE OF TAXATION: HIERARCHIES OF LAW (LEGISLATIVE) JUDICIARY: (tax-related)
1. Inherent—plenary, comprehensive, awesome power 1. Levying or imposition of tax 1. The 1987 Constitution: made by the people 1. Supreme Court
to destroy  Passage of tax laws, a legislative act 2. Statute: RA made by the legislature 2. Court of Tax Appeals
2. Ledged with legislature (law-making body—  By whom: Congress 3. Executive Order: by the President 3. BIR
Congress) 4. Jurisprudence: interpretation of the SC (1) Commissioner
Lower House 250 House of Representatives 2. Assessment 5. Administrative Interpretation: not a law, but giv- (6) Deputies
Upper House 24 Senators  Determination of the correct amount of tax en the weight of law because it’s issued by a per- Regional Directors
3. Subject to limitations (Constitutional, Contractual, due son in authority; e.g. BIR revenue regulations RDO
and Inherent)  Executive or administrative in nature Revenue Officer
 By whom: BIR EXECUTIVES: (tax-related)
Non-impairment Clause: laws must be given future 1. President
applications because it may impair existing obliga- 3. Collection and payment 2. Cabinet Secretary—Department of Finance Chooses:
tions arising from consummated contracts  Act of compliance w/ tax law by the taxpay- 3. BIR Commissioner ✓ BIR Commissioner
er 4. Deputies ✓ Governor of BSP
Taxation is unlimited, while tax (result of taxation) is  Executive or administrative in nature 5. Regional Directors ✓ Commissioner of Bureau of
limited  By whom: BIR 6. Revenue District Officers/Revenue Officers Customers

3 INHERENT POWERS TAXATION POLICE POWER EMINENT DOMAIN

Raise revenue for the expenses of the State Promote the general welfare thru regulations To facilitate the State’s need of property for public
1. Purpose
use
No limit Limited to cost of regulation, issuance of the license, No exaction but private property is taken for public
2. Amount of Exaction
and/or surveillance use
General benefit of protection of person, property, and Healthy economic standard of society (indirect) Form of just compensation to the property owner
3. Benefits received
the promotion of general welfare (indirect) (direct)
Tax exemptions bilaterally agreed upon between the Obligations in contracts may be impaired by the gov’t. Obligations in contracts may be impaired by the
4. Non-impairment of con-
gov’t and taxpayer cannot be withdrawn (obligations gov’t.
tracts
may not be impaired by the state)
Taxes paid become part of public funds No transfer, but only restraints in the exercise of proper- Transfer is effected in favor of the State
5. Transfer of Property Rights
ty rights
6. Scope All persons, property, rights and privileges All persons, property. Rights, privileges, and liberties Only upon specific properties
7. Authority w/c exercises the Government of its political subdivision Government of its political subdivision Public service corporations OR private entities oper-
power ating public utilities, if granted by law
CONSTITUTIONAL LIMITATIONS: INHERENT LIMITATIONS: BASIC PRINCIPLES OF A SOUND TAX SYSTEM
1. Equal Protection of the law 1. Territoriality 1. Fiscal Adequacy: revenue ≥ expenditures
2. Progressive tax system (uniform and equitable) 2. Must be for a public purpose 2. Equality or Theoretical Justice: tax imposed must
3. No imprisonment for non payment of debt or poll tax 3. Non-taxability of the government, except GOCCs (performing be proportionate to taxpayer’s ability to pay
4. Exemption to Real Property Tax for properties used exclusively purely governmental functions) 3. Administrative Feasibility: tax laws are capable of
and directly for charitable, education, and religious purposes XPN: GSIS, SSS, HDMF, PhilHealth, Local Water Districts are convenient, just, and effective administration
5. Majority vote of all members of the Congress to grant tax exemp- exempt from income tax even though performing activities
tions proprietary in character. THEORY OR BASIS OF TAXATION
6. Non-impairment clause for tax exemptions w/ bilateral agreement 4. Non-delegability of taxing power 1. Life-blood Theory: Importance of taxation
7. Free exercise of religion XPN: President’s power to fix duties and imposts 2. Necessity Theory: Theory of taxation
8. Appropriation, revenue, or tariff bills shall originate exclusively in LGU’s power to levy taxes, fees, and charges (e.g. RPT) 3. Benefits-protection/Symbiotic Relationship: Basis
the house of representatives (senate can only propose or concur w/ Delegation to admin agencies for implementation of of taxation
amendments) tax laws, and collection of the tax to BIR
9. Authority of the President to fix tariff rates and export/import quo- 5. International Comity—PH gov’t can’t tax foreign ambassadors ESSENTIAL ELEMENTS/CHARACTERISTICS OF TAX:
tas (subject to limitation) nor impose real property taxes upon foreign embassies 1. Enforced contribution
10. Powers of SC to review, revise, reverse, modify or affirm on appeal 6. Double Taxation 2. Exacted pursuant to legislative authority
or Certiorari as the law or Rules of Court has provide Direct Double Taxation—ALL are same 3. For raising revenue for public needs
11. Exemption from taxes and duties: all revenue and assets of non- Indirect Double Taxation—lacks one or more elements of 4. Proportionate in character or uniform
stock., non-profit educational institutions DDT 5. Payable in money
12. Power of president to veto Note: There is no constitutional prohibition against double taxation 6. Imposed within the state’s jurisdiction
13. Money collected for special purpose shall be treated as special fund in the PH, though it is not favored. IDT is also permissible. 7. Personal to the taxpayer
used only for that purpose

CLASSIFICATION OF TAXES:
A. ACCORDING TO SCOPE OR EXERCISING AUTHORITY C. ACCORDING TO WHO BEARS THE BURDEN OF THE TAX
NATIONAL TAX MUNICIPAL OR LOCAL TAX DIRECT TAX INDIRECT TAX
Imposed by the National government Imposed by LGU Liability for the tax (impact) and the burden there- Impact falls on the original taxpayer, but
of (incidence) fall on the same taxpayer the burden is shifted to another
Income tax, Estate tax, donor’s tax, VAT, OPT, Occupation Tax, real property tax
DST, Excise Tax Income tax VAT, excise tax, custom duties

B. ACCORDING TO SUBJECT MATTER OR OBJECT D. ACCORDING TO PURPOSE

GENERAL/REVENUE TAX SPECIAL TAX

PERSONAL, CAPITATION, OR PROPERTY TAX EXCISE TAX
Levied w/o specific or pre-determined purpose Levied for special purpose
Fixed amount imposed upon Imposed on Imposed upon performance of an act;
persons w/o regard to any- property exercise of right; engaging in business Income tax, VAT, etc. Protective tariffs, special assessments
thing or profession
Community tax RPT VAT, Donor’s tax, estate tax. Income
tax, occupation tax, excise tax
E. ACCORDING TO THE RATE APPLIED F. ACCORDING TO MEASUREMENT OF THE AMOUNT DUE

PROPORTIONAL PROGRESSIVE REGRESSIVE SPECIFIC AD VALOREM

Fixed percentage of the tax Rate increases, as tax base Tax rate decreases, as tax base Measured by number, or based on weight or Based on value of the property ; may req. the
base increases increases physical measurement intervention of assessors and appraisers
RPT, VAT, Donor’s tax, estate Income tax on individuals— None Excise tax on lubricating oils, waxes, petrole- RPT, excise tax on liquors, cigarettes packed
tax graduates rates um, etc. by machine and automobiles

NATURE OR CONSTRUCTION OF TAX LAWS Special Assessment defined: in the nature of tax upon proper- 4. Power to obtain information from any person other than the
1. Tax laws are prospective, generally, but can have retrospec- ty levied accdg. to benefits conferred on the property person whose internal revenue tax liability is subject to audit
tive application (if expressly declared by tax laws or necessari- or investigation or from any office or officer of the national
ly implied from the language used). Characteristics of Special Assessment: or local governments, government agencies and
Payment of tax civil liability 1. Can be levied on land only instrumentalities
Nonpayment of tax criminal liability 2. Cannot be made a personal liability of the person assessed 5. Power to summon the person liable for tax or required to file
3. Based wholly on benefits a return, or any officer or employee of such person, or any
2. A statute will not be construed as imposing a tax unless it 4. Exceptional both as to time and locality. person having possession, custody, or care of the books of
does so clearly, and unambiguously. accounts and other accounting record
 In case of doubt, statutes imposing a tax are construed most 6. Power to take such testimony of the person concerned,
strongly against the government, and liberally in fa- vor of
citizen.
TAX ADMINISTRATION under oath, as may be relevant or material to such inquiry
7. Power to make assessments
It is the system involving assessment, collection, and enforce- 8. Power to prescribe real property values by dividing the
3. Tax exemptions are to be construed strictly against the tax- ment of taxes, including the execution of judgment in all taxes country into different zones and determining the FMV of real
payer. decided in favor of the BIR by the courts properties located in each zone
9. Authorized to inquire into the bank deposits and other re-
4. Revenue laws are not political in nature. POWERS AND DUTIES OF THE BIR: lated information held by financial institutions of:
1. Assessment and collection of all NIR taxes, fees, & charges (a) A decedent to determine his gross estate;
5. Legislative intention must be considered. 2. Enforcement of all forfeitures, penalties, and fines connect- (b) Applicant for compromise of tax liability due to
ed therewith financial incapacity
6. Tax laws are special laws, and prevail over general laws. 3. Execution of judgments in all cases decided in its favor by (c) A taxpayer who is subject of a request for the supply
the Court of Tax Appeals, and the ordinary courts of tax information from a foreign tax authority
FORMS OF ESCAPE FROM TAXATION: 4. Giving effect to and the administering of the supervisory pursuant to an international agreement or treaty.
1. Shifting the burden of tax. and police power conferred to it by the Tax Code or other laws 10. Authority to accredit and register individuals and general
2. Capitalization: by not selling property which has increased professional partnerships (GPPs) and their representatives
in value, the owner avoids income tax to be paid on gain if POWERS OF THE CIR: who prepare and file tax returns, statements, reports and
the same is sold 1. Power to interpret tax laws subject to review by the Secre- other papers, or who appear before the BIR, for taxpayers
3. Transformation: manufacturer or producer pays the tax; to tary of Finance; 11. Power to prescribe additional procedural or documentary
recoup the tax paid by making his production more effi- 2. Power to decide disputed assessments, refunds of internal requirements in connection with the submission or prepa-
cient and lowering cost of production. revenue taxes, fees and other charges, penalties imposed ration of financial statements accompanying the tax re-
4. Tax Exemption: freedom from burden of paying tax in relation thereto turns.
5. Tax Avoidance: legal means to minimize taxes 3. Power to examine any book, paper, record, or other data
6. Tax Evasion: connotes fraud thru the use of pretenses and which may be relevant or material to a tax inquiry
forbidden devices to lessen or defeat taxes
 TAX LICENSE
Purpose Raise revenue Regulate action, businesses, industries,
professions

Limitations on taxation Constitutional and inherent limitations Not subject to limitations on taxation
Amount Unlimited Limited to cost of regulation
Effects of non-payment Does not make the business illegal Makes the business illegal

TAX SPECIAL ASSESSMENT

Imposed on all properties (real or personal) in a prescribed Imposed only on properties which benefit from improvement
area

TAX DEBT
Source of Obligation Law Contract
Obligee Government in its sovereign capacity Obligee under a contract; may be a gov’t in its
corporate capacity
Form of payment Money Money, property, service
Interest No interest, except in cases of delinquency IF stipulated or if the payment is in delay
Assignability Not assignable Generally assignable
Compensation/Set-off No Yes
Incarceration for non- Yes, except for non-payment of poll tax No person can be imprisoned for non-payment
payment of debts (constitution)

TAX TOLL
Demand for sovereignty Demand of ownership or proprietorship
Imposed by the government May be imposed by private persons or entities
May be based on income or on the value of the property Largely based on the cost of the property used, or on the
cost of the improvement used
Forced contribution Compensation charged by the owner for the voluntary use of
the property/improvements
 FILING: Individual Return

INDIVIDUALS REQUIRED TO FILE INCOME TAX RETURN:

1. Filipino resident citizen
2. Filipino nonresident citizen on his income from sources within the PH
3. Resident alien on income derived from sources within the PH
4. Non-resident alien engaged in trade or business or in the exercise of a profession in the PH

INDIVIDUALS NOT REQUIRED TO FILE INCOME TAX RETURN

1. Individual w/ taxable income of ≤ P250,000 under graduated rates
XPN: Individual engaged in business or practice of profession within PH, regardless of gross income

2. Individuals receiving purely compensation income (regardless of amount), w/ only one employer for the
calendar year, and income tax has been withheld correctly by employer (substituted filing)
XPN: If there are two ore more employers concurrently or successively at any time during the year
All requisites are present but the spouse does not qualify for substituted filing

3. Individual whose sole income has been subjected to FWT

4. Minimum wage earners or any individual exempt from income tax

RULES ON HUSBAND AND WIFE

GR: Married individuals shall file a joint return to include the income of both spouses
XPN: it is impracticable for the spouses to file one return, each spouse may file a separate return of income
but the returns so filed shall be consolidated by the BIR for purposes of verification for the taxable year

Return of Parent to Include Income of Children

GR: Income of unmarried minors derived from property received from a living parent shall be included in the
return of the parent
XPN: (1) Donor’s tax has been paid
(2) Transfer is exempt from donor’s tax

REQUIRED ATTACHMENTS:
1. BIR Form No. 2316 (Certificate of Compensation Payment/Tax Withheld) – for individuals earning com-
pensation income.
2. BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source) – for self-employed individuals, es-
tates and trusts
3. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax at Source
(“SAWT”)
4. Audited Financial Statements which must be attached to the Annual Income Tax Return upon filing
IF gross sales, earnings, receipts, or output from business for the year >3M:
(1) Balance Sheet and Profit and Loss Statement certified by an independent CPA.
(2) Comparative profit and loss statements for the current and preceding taxable years.
(3) Schedule of income producing properties and corresponding incomes therefrom
Note: If TP claims the OSD or avails of the 8% income tax rate options, FS in not required to be attached.
IF TP is using Graduated rates and itemized deductions
Gross sales/receipts ≤3M Required audited or not FS
Gross sales/receipts >3M Required audited FS

WHERE TO FILE RETURN: (also applicable to corporation)

1. Authorized Agent Bank (AAB) within the territorial jurisdiction of the RDO, where TP is registered.
2. RDO, Collection agent, or duly authorized Treasurer of the city/municipality

WHEN TO FILE RETURN:

1. Annual Return on or before April 15
2. Self-employed or employed individuals or both (income not subject to final taxes)
1st Quarter on or before May 15
2nd Quarter on or before August 15
3rd Quarter on or before November 15
Final Adj. Return on or before April 15 (next year)
Note: 45 days after end of the quarter
3. Individual subject to capital gains tax 30 days after each transaction and sale/disposition
OPTION OF TP WHEN THERE IS AN OVERPAYMENT IN THE FINAL ADJ. RETURN (ANNUAL RETURN): applicable
to corporations
1. Refund
2. Issuance of Tax Credit Certificate
3. Carry over as a tax credit against his income tax liabilities for the qtrs. of succeeding taxable years
(default choice)

INSTALLMENT PAYMENT
IF tax due >2,000, may elect to pay in 2 equal installments (not applicable to corpo)
1st installment at the time the return is filed
2nd installment on or before October 15
Note: in case of nonpayment, the whole amount becomes due and payable w/ delinquency penalties

FILING AN AMENDED RETURN (applicable to corporations)

When: Within 3 years from the date of filing, provided no notice for audit or investigation for such return

FILING: Corporate Return

QUARTERLY AND FINAL ADJUSTED RETURNS
GR: All corporations shall file quarterly income tax return and final adjusted return
XPN: Foreign corporations not engaged in trade or business in the PH (NRFCs)

1st to 3rd Quarter not later than 60 days from the close of the quarter
Final Adjusted Return not later than April 15 following the close of the taxable year
Note: GPP may, but not required to file quarterly income tax returns or quarterly information returns. It is
required however to file an annual income tax return of annual information return.

REQUIRED ATTACHMENTS:
1. BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source)
2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax at Source
(“SAWT”)
3. Financial Statements which must be attached to the Annual Income Tax Return upon filing
IF gross sales, earnings, receipts, or output from business for the year >3M:
(1) Balance Sheet and Profit and Loss Statement certified by an independent CPA.
(2) Comparative profit and loss statements for the current and preceding taxable years.
(3) Schedule of income producing properties and corresponding incomes therefrom

ANNUAL TAX INCENTIVES REPORT UNDER RA. 10708: TAX INCENTIVES MANAGEMENT AND TRANSPARENCY
ACT (TIMTA) — NEW
 Registered Business Entities (RBEs) availing incentives of Investment Promotion Agencies (IPA) shall file:
 What: Annual Tax Incentives Report and Annual Benefits Report
 When: within 30 days from statutory deadline of filing of annual ITR

CERTIFICATE OF ENTITLEMENT TO TAX INCENTIVES (CETI) ISSUED BY THE CONCERNED IPA — NEW
 CETI is required for all RBEs to avail of the Income Tax Holiday or preferential tax rate granted by law
 Attached to the Annual ITR

FILING: Preservation of Books of Accounts and Other Acctg. Records

How long: 3 years from the last entry in each book (Sec. 235, NIRC)
RR No. 17-2013, as amended by RR 5-2014
The retention period is 10 years from the deadline of filing, or date of filing, whichever is later.
First 5 years hard copies
From 6th to 10th year softcopies allowed
XPN: If there is pending protest or claim, until the case is resolved.

FILING: Electronic Filing and Payments System (eFPS)

 System developed and maintained by the BIR for electronically filing tax returns, including attachments,
if any, and paying taxes due thereon
Who are covered?
1. Taxpayer Account Management Program (TAMP) TP identified as the top taxpayers in the tax region
2. Accredited Importers required to secure BIR-Importer Clearance Certificates (“ICCs”) and BIR-Customs
Broker Clearance Certificates (“BCCs”)
3. National Government Agencies (“NGAs”)
4. Licensed local contractors
5. TP who enjoys fiscal incentives granted by other gov’t agencies (PEZA, BOI, TIEZA, etc.)
6. Top 5,000 individual TP engaged in trade or business or practice of profession
7. Corporations with paid-up capital of >10M
8. Corporations with complete computerized systems.
9. Government Offices insofar as remittance of withheld VAT and business tax is concerned
10. Government bidders
11. Large Taxpayers
12. Top 20,000 private corporations
13. Stock brokers duly registered with the SEC, and insurance companies duly registered with the SEC and
licensed by the Insurance Commission

TIME OF E-FILING OF RETURN

1. Available 24/day, 7 days/week (to ensure timely filing, must be paid on or before 10PM of the due date)
2. Staggered Filing
A. Monthly Withholding Tax returns (except withholding of VAT) 11-15 days ff. end of the month
B. Monthly VAT Declarations and Monthly Percentage Tax Returns 21-25 days ff. end of the month

Time and Place of Submitting Required Attachments:

Place: RDO/Division
When: within 15 days from date of filing

FILING: Electronic BIR Forms (eBIRFORMs)

TYPES OF E-SERVICES
1. Offline eBIRForms Package—tax preparation software that allows to accomplish tax forms offline
2. Online eBIRForms Package—filing infrastructure that accepts tax return submitted online and automati-
cally computes penalties for tax returns submitted beyond due date

WHO ARE COVERED:

1. all non-eFPS filers
2. Those who are mandatory
- Accredited Tax Agents (ATAs)/Practitioners
- Accredited Printers of Principal and Supplementary Receipts or Invoices
- One-Time Transaction (“ONETT”) taxpayers who are classified as real estate dealers/developers
- Those who shall file a “No Payment” Return
- GOCCs
- LGUs, except barangay
- Cooperatives registered with the National Electrification Administration (“NEA”) and Local Water
Utilities Administration (“LWUA”)

PENALTIES—FAILED TO USE EFPS OR EBIRFORMS (MANDATORY)

1. Penalty P1,000 per return
2. Civil Penalty 25% of tax due for filing a return in the wrong venue
3. Inclusion of the non-compliant TP in the BIR’s priority audit program

PENALTIES: Civil Penalties

SURCHARGE: percentage of the amount of tax due
25% SURCHARGE 50% SURCHARGE
• Failure to file return and pay the tax within due date; • Willful neglect to file return within prescribed
or voluntarily filing after deadline before any notice period (files return after notice).
from BIR. • False or fraudulent return willfully made
• Wrong venue *understatement of sales/receipts and overstate-
• Failure to pay the deficiency tax within due date pre- ment of deductions by >30% is a prima facie evi-
scribed for its payment in the notice of assessment dence of fraud

INTEREST: 12% per annum on any unpaid amount of tax

Note: deficiency and delinquency interest shall not be imposed simultaneously.
 12% interest per annum for extended payments is imposed based on the diminishing balance of unpaid
amount

OTHER PENALTIES:
For failure to file an information return, statement, list, or any re- P1,000 per failure
quired attachment Max: P25,000 per year
For failure of a withholding agent to collect and remit the tax Equal to amount of tax not withheld
For failure of a withholding agent to refund excess withholding tax Equal to amount not refunded
 REMEDIES: Remedies of the State
ASSESSMENT
 Notice given to TP that correct taxes have not been paid. To be valid:
(a) State the facts and the law on which its conclusion is based;
(b) Include or contain a computation of the tax liabilities, and
(c) Contain a demand for payment within a specified period.

Time of Assessment
GR: 3 years from deadline of filing or from date of filing, whichever is later
XPN: 1. False of fraudulent return 10 years after discovery of fraud or falsity
2. Failure or omission to file return 10 years after discovery of failure or omission
3. Any period agreed upon by TP and CIR (entered into before expiration of 3-year period

COLLECTION
1. By distraint (seizure) of personal property
2. By levy of real property May be pursued simultaneously
3. By court action
(a) Civil action—collection of taxes filed within 5 years of assessment
Regular courts principal amount (exc. of penalties) <P1M
Court of Tax Appeals principal amount (exc. of penalties) ≥ P1M
(b) Criminal action—enforcement of penal provisions

Time of Collection
1. 5 years following the assessment
2. Period agreed upon by the TP and CIR before expiration of 5-year period
3. Within 10 years after the discovery of fraud, falsity, or omission in filing a return even without assess-
ment thru a proceeding in court

Tax Lien: legal claim placed by the BIR on properties of the TP w/ unpaid taxes
Notice of Tax Lien: prevents the TP from disposing properties to other parties other than the BIR

SUSPENSION OF RUNNING OF STATUTE OF LIMITATIONS:

(a) For the period during which the Commissioner is prohibited from making the assessment or beginning
distraint or levy or proceeding in court and for sixty (60) days thereafter;
(b) When the taxpayer requests for a reinvestigation which is granted by the Commissioner;
(c) When the taxpayer cannot be located in the address given by him in the return filed upon which a tax is
being assessed or collected.
(d) When the warrant of distraint or levy is duly served upon the taxpayer, his authorized representative, or a
member of his household with sufficient discretion, and no property could be located
(e) When the taxpayer is out of the Philippines

GR: No court shall have the authority to grant an injunction to restrain the collection of any national internal
revenue tax, fee, or charge imposed by the Tax Code
XPN: The CTA can grant a Temporary Restraining Order (TRO)/Injunction when:
(1) The collection of the tax may jeopardize the interest of the government or of the taxpayer, or both;
(2) The amount claimed is deposited with the court, or a surety bond for not more than double the amount
of the tax is filed with the court;
(3) The appeal is not frivolous nor dilatory

REMEDIES: Remedies of the Taxpayers

LETTER OF AUTHORITY (LOA): empowers or enables said revenue officer to examine the books of accounts and
other accounting records

NOTICE OF DISCREPANCY (formerly known as Notice for Informal Conference): written notice informing a
taxpayer that the findings of the audit conducted on his books of accounts and accounting records indicate
that additional taxes or deficiency assessments have to be paid.
*TP has 30 days from receipt of NOD to explain his side (Discussion of Discrepancy)

PRELIMINARY ASSESSMENT NOTICE (PAN): shows in detail the facts and the law or jurisprudence on which
the proposed assessment is made; mandatory requirement for the issuance of Formal Letter of Demand or
Final Assessment Notice (FLD/FAN)
*TP is given 15 days from receipt of PAN

FINAL ASSESSMENT NOTICE (FAN): state the facts, the law, rules and regulations, or jurisprudence on which
the assessment is based; otherwise, the assessment shall be void.
REMEDIES AGAINST ASSESSMENT
1. Where Tax Has Not Been Paid

Receipt of FLD/FAN

Within 30 days

Protest by Filing with the CIR [Note (a)]

Request for Request for

OR
Reconsideration Reinvestigation

Within 60 days

Within 180 days

Submission of all relevant
supporting documents

Within 180 days

Protest is denied OR Not acted upon

Within 30 days
Within 30 days

Request for Reconsideration Await the decision; Protest is

with the CIR (Administrative eventually denied by the CIR
Appeal) [Note (b)] Within 30 days

Within 30 days

Appeal to the CTA

[Note (b)] Appeal to the CTA

Notes:
(a) Contents of the Protest (must all be present, otherwise void)
- Nature of the protest, whether it is a request for reconsideration or reinvestigation
- Newly discovered or additional evidence the taxpayer intends to present if it is a request for
reinvestigation
- Date of the assessment notice or letter of demand
- The applicable law, rules and regulations, or jurisprudence on which the protest is based

(b) The Motion for Reconsideration (administrative appeal) shall not toll the 30-day period to appeal to the
CTA.

2. Where Tax Has Been Paid

Remedy: Claim for refund

Date of payment of tax

Within 2 years

File claim for refund with the

Commissioner
Within 2 years

Denial of Claim

Within 30 days

Appeal to the CTA

Notes:
a) The filing of the claim for refund with the Commissioner and the institution of judicial action with the Court
of Tax Appeals to recover the tax can be done either simultaneously or one after the other within the 2-
year period to protect the interest of the taxpayer.
Note: However, the claim for refund with the Commissioner must be filed first before any institution of judi-
cial action with the CTA.

b) If the tax is paid in installments, the 2-year prescriptive period within which to file both administrative and
judicial claims for refund shall be counted from the date of the final payment

c) No interest is paid by the government in tax refunds unless directed by law.

d) Even without a claim for refund, the Commissioner of the BIR may award a refund or credit if on the face
of the return the payment was erroneous.

3. File a criminal action against the erring or abusive BIR official

4. Apply for a TRO or injunction with the CTA.

REMEDIES: Remedies Available to the State and Taxpayer

A. COMPROMISE: mutual concession or settlement; called a compromise penalty if paid in lieu of criminal
prosecution
Grounds for Compromise:
1. Reasonable doubt as to the validity of the claim against the taxpayer
Min.: 10% of the basic tax assessed
2. Financial inability of the taxpayer to pay (accompanied by a waiver—Secrecy of Bank Deposit Law)
Min.: 40% of the basic tax assessed
Approval of the Compromise:
1. Basic tax involved >1M
2. Settlement offered is less than prescribed minimum rates—subject to approval of the National Evalua-
tion Board (composed of Commissioner and 4 deputies)
Cases Which May Not Be Compromised:
1. Withholding taxes, in general
2. Criminal tax fraud cases confirmed
3. Criminal violations already filed in court
4. Delinquent accounts with duly approved schedule of installment payments
5. Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in
the original assessment, and the taxpayer is agreeable to such decision by signing the required agree -
ment form for the purpose
6. In general, (a) cases which have become final and executory (except where compromise is requested on
the ground of financial incapacity) and (b) estate tax cases (except where compromise is requested on the
ground of doubtful validity of the assessment).

B. ABATEMENT OR CANCELLATION OF A TAX LIABILITY

Grounds:
1. The tax or any portion thereof appears to be unjustly or excessively assessed
2. The administration and collection costs involved do not justify the collection of the amount due
CHARACTERISTICS OF PH INCOME TAX:
1. National Tax 5. Progressive Tax for individual taxpayers
2. General Tax 6. Income tax system is a comprehensive system
3. Excise Tax 7. Semi-global or semi-scheduler
4. Direct Tax (a) Global tax system/Net income tax system
(b) Schedular tax system/Gross income tax system

REQUISITES FOR TAXABILITY OF INCOME

1. Gain or profit (cash or its equivalent)
2. Gain must be realized or received
3. Gain must not be excluded by law or international treaty from taxation

HOW TO DERTERMINE INCOME WITHIN AND INCOME WITHOUT

INCOME TEST SOURCE OF INCOME
1. Interest Income Residence of the debtor
2. Service income Place of Performance
3. Rent Location of property
4. Royalty Place of use of intangible
5. Gain on sale of real property Location of property
6. Gain on sale of personal property Place of sale
7. Dividend—Domestic Corp Income within
Foreign Corp Income without
XPN: If >50% of gross income for preceding 3
years was derived within PH, then part of
dividend is income within
8. Sale of domestic share Income within
9. Sale of foreign shares Income without
10. Income from transpo and other services rendered Partly within and partly without
partly within and partly without

TYPES OF TAXABLE INCOME

Returnable Income Passive Income (Final Tax) Capital Gains (Capital Gains Tax)
1. Compensation income from em- Earned without any further action Arise from the sale of 2 types of
ployment on the part of the taxpayer. capital assets, namely:
2. Income from trade, business, or Ex. dividends, interest income on a) Real property in the Philip-
practice of profession bank deposits pines classified as capital
3. Gain from sale of ordinary assets asset; and
4. Net capital gain from sale of b) Shares of domestic corpora-
“other capital assets” tions (provided the seller or
5. Other taxable income not subject taxpayer is not a dealer in
to FT or CGT securities)
Income Tax Return (ITR) Final Tax Final Tax (CGT)

GENERAL CATEGORIES OF INDIVIDUAL TAXPAYERS

Resident Citizen • Citizen at time of adoption of 1987 Constitution; or
• Fathers and mothers are citizen; or
• Born before January 17, 1973 of Filipino mothers, and who elect PH citizenship upon
reaching 18
• Naturalized in accordance w/ law
AND
• Residence is within the PH
Non-Resident • Citizen who has physical presence abroad with definite intention to reside therein
Citizen • Citizen who leaves for abroad (as immigrant/employment) on a permanent basis
• Citizen who derives income from abroad which requires him to be physically present
abroad most of the time (≥ 183 days) during the year
OCW/OFW • Citizen working or deriving income from abroad (registered with POEA)
• Seaman who is a citizen and works as a member of the complement of a vessel en-
gaged exclusively in international trade
 Non-resident • Not a citizen, not a resident of the PH
alien
A. ETB • Stay in the PH for >180 days during the year
B. NETB • Stay in the PH for ≤ 180 days during the year
Special • NRA cinematographic film owner, lessor, or distributor
Individual • Subcontractors, of service contractors engaged in petroleum operations (exc. NRA-
Taxpayers NETB)
• Alien individual employed by offshore gaming licensees or their service providers
• Qualified individuals availing of the Income Tax Holiday under special laws or under
Section 294 of the Tax Code
• Qualified individuals availing of the 5% gross income tax (GIT) incentive under special
laws or under Section 294 of the Tax Code
• Individual registered as a BMBE
MWEs • Worker, whether in the public or private sector, who is paid not more than the statuto-
ry minimum wage

I. RETURNABLE INCOME
Source of Taxable Type of Returnable
Individual Taxpayer Tax Base Tax Rate
Income Income

1. Resident Citizen Within and Without Taxable

Graduated
Compensation
Compensation Rates
2. Non-resident citizen Within Income (a)
Income

3. OCWs/OFWs Within Taxable Net

Graduated rates
Income (b)
Income from
OR
4. Resident Alien Within Business, Trade, or
Gross Sales/
Practice of
5. Non-resident alien Receipts + Non-Op
Within Profession 8%
ETB Income (c), (d)

6. Non-resident alien
Within Gross Income 25% FT
NETB (e)
Notes:
(a) Taxable Compensation Income = Gross Compensation Income — Non-taxable/Exempt Income

1. SMW, holiday pay, OT pay, NSD, hazard pay of an MWE

2. First P90,000 of 13th Month Pay and other benefits
3. De minimis fringe benefits
4. Employee’s share of SSS, GSIS, Philhealth, and PAG-IBIG contri
5. Union Dues
(b) Sales Receipts (net of returns, allowances, discount) xx
Less: COS xx
Gross Income from operations xx
Less: Itemized Deductions or OSD xx
Net Income for Operations xx
Add: Non-operating income/Share in GPP net income xx
Taxable Net Income xx

(c) Purely self-employed and mixed earners can avail of the 8% income tax rate if gross sales/receipts + non op-
erating income <P3M. It is lieu of (1) graduated tax rates and (2) the OPT under Section 116 of the Tax Code.

However, this option is not available to the following individual taxpayers:

(1) VAT-registered taxpayers;
(2) Taxpayer subject to OPT other than the 3% OPT under Section 116
(3) Partners of GPPs
(4) Individuals enjoying income tax exemption (e.g., those registered as BMBEs)
(5) Taxpayers who fail to signify their intention to avail of the 8% income tax rate in the First (1st) Quarter ITR or
in the First (1st) Quarter Percentage Tax Return, or in the initial quarterly return of the taxable year upon the
commencement of a new business or practice of profession

(d) Net of ₱250,000 if individual taxpayer is a self-employed individual earning income purely from self employ-
ment or practice of profession. Mixed income earners are not allowed this ₱250,000 deduction.

(e) ) The NRANETB does not have to file a PH ITR because the tax on the income received is considered paid,
said tax having been deducted by the payor of the income (withholding agent).
7. Special Individual Taxpayers Type of Income Tax Base Tax Rates
a) NRA cinematographic film owner, lessor or Income from film leasing and
distributor distribution within PH Gross Income 25% FT
(including royalties)

b) Subcontractor, whether citizen, resident Income from contract with a

alien, or NRAETB, of service contractors en- service contractor engaged in Gross Income 8% FT
gaged in petroleum operations petroleum operations in PH
c) Alien individual employed by offshore gam- Income received from off- Gross
ing licensees (POGOs), or their service provid- shore gaming licensee or ser- compensation 25% FT
ers vice provider income
d) Qualified individuals availing of the Income Income from registered
Tax Holiday (“ITH”) under special laws and activities Exempt
Section 294 of the Tax Code
f) Qualified individuals availing of 5% gross Income from registered activ-
income tax (GIT) incentive under special laws ities Gross Income 5%
and Section 294 of the Tax Code
h) Individual registered as a BMBE Income arising purely from
Exempt
its operations as a BMBE
8. MWEs SMW inc. holiday pay, OT
Exempt
pay, NSD pay, and hazard pay

SPECIAL INDIVIDUAL TAXPAYERS:

1. BOI-Registered Filipinos Availing of ITH—engaged in a preferred area of investment
PERIOD OF AVAILMENT: New-registered pioneer firms 6 years from commercial operation
New-registered non-pioneer firms 4 years from commercial operation
Expending firms 3 years from commercial operation
*Additional period of availment: max of 8 years for pioneer firms
2. PEZA-registered enterprises in ECOZONEs
(a) ITH
(b) 5% on Gross Income Tax (GIT): avail upon expiry of ITH; paid and remitted as follows
- 3% to the National Government
- 2% to the Treasurer’s Office of municipality where it’s located

Tax Incentive Regime Prior to

Transition Period After Transition Period
April 11, 2021
ITH for period specified in
ITH only RCIT
registration
ITH but entitled to 5% GIT ITH for period specified in registra-
RCIT
after ITH expires tion; then 5% SCIT for 10 years
5% GIT for 10 years; then 5% SCIT
5% GIT for 10 years (for exporters) RCIT

3. Registered individuals subject to ITH under Sec. 294 of Tax Code (NEW)
DURATION: 4 to 7 years depending on location and industry priorities

4. Registered individual taxpayers subject to the 5% GIT under Sec. 294 of Tax Code (NEW)
Registered Export 5% SCIT or EDs for
ITH for 4-7 years Then Then RCIT
Enterprises (REEs) 10 years
Domestic Market En- Enhanced deduction
ITH for 4-7 years then then RCIT
terprises (DMEs) (EDs) for 5 years

5. Alien Individuals Employed by Offshore Gaming Licensees (POGOs) and Service Providers (NEW)
MINIMUM: P12,500

6. Individuals registered as Barangay Micro Business Enterprises (BMBEs)

TOTAL ASSESTS (EXC. LAND): not more than P3M
FISCAL INCENTIVES: (a) Income tax exemption from income arising from operation
(b) Exemption from the coverage of the Minimum Wage Law
(c) Priority to a special credit window
(d) Tech, transfer, production, mngt. training and mktg. assistance programs

7. Minimum Wage Earners (MWEs)

 II. PASSIVE INCOME SUBJECT TO FINAL WITHHOLDING TAX (FWT)
Passive Income Citizen and RA NRA-ETB NRA-NETB

a) Interest from any currency bank deposit in ₱ 20% 20%

b) Yield or monetary benefit from deposit substitutes, trust
funds, and similar arrangements (Note 1) 20% 20%

c) Royalties 20% 20%

Except royalties on books, literary works, and musical com- 10% 10%
position Generally, 25%
of gross in-
d) Prizes of more than ₱10,000 20% 20% come received
from all
Except prizes of ₱10,000 or less Basic tax Basic tax sources within
e) Winnings 20% 20% the Philippines
Philippine Charity Sweepstakes and Lotto winnings Exempt <10k Exempt <10k as interest,
dividends,
f) Interest from a depositary bank under the expanded for- 15% rents, salaries,
Exempt
eign currency deposit system (NRC exempt) premiums, an-
g) Interest income from long term deposit or investment of nuities, com-
Exempt Exempt
5 years or more (Note 2) pensation etc.
h) Cash or property dividend received from a domestic cor-
10% 20%
poration, or regional operating headquarter of an MNC
i) Share of an individual partner in the after-tax net income
of a business partnership, or an organization, JV, or consor- 10% 20%
tium taxable as a corporation
NOTES:
1. Deposit substitutes—alternative form of obtaining funds from the public (20 or more lenders at any one
time)

2. Long-term deposit or investment certificate (maturity of/held for at least 5 years issued by a bank)
PRE-TERMINATION OF INVESTMENT:
Less than 3 years 20%
3 years to less than 4 years 12%
4 years to less than 5 years 5%

DIVIDENDS RECEIVED FROM A FOREIGN CORPORATION

If received by:
RC NRC, RA, NRA-ETB NRA-NETB
GR: Such dividend is income without Basic tax Exempt Exempt
XPN: When dividend is sourced partly 100% included in ITR Part without—exempt Part without—exempt
within and partly without Part within—ITR Part within—25% FT

III. CAPITAL GAINS SUBJECT TO FINAL TAX (CAPITAL GAINS TAX)

A. SALE OF DOMESTIC SHARES OF STOCK
1. Not traded in the stock exchange
TAX BASE: Net capital gain (Selling Price minus basis or adjusted basis of the share)
TAX RATE: 15%

2. Listed and traded thru local stock exchange

TAX BASE: Gross Selling price or gross value in money
TAX RATE: 6/10 of 1%
KIND OF TAX: business tax (Stock Transaction Tax)
FILING: Within 5 banking days from date of collection

B. SALE OF REAL PROPERTY CLASSIFIED AS CAPITAL ASSETS

TRANSACTION SUBJECT: Sale/transfer of real property located in PH, classified as capital assets, including
pacto de retro sales and other forms of conditional sales
TAX BASE: Gross selling price or current fair market value, whichever is higher
TAX RATE: 6%
FORCED SALE TO THE STATE UNDER EMINENT DOMAIN: Option of either taxed in ITR or CGT
 EXEMPTIONS FROM CGT:
1. Sale of raw lands used for socialized housing project or sold under Community Mortgage Program
2. Land transfers under the Comprehensive Agrarian Reform Law of 1988
3. Sale of principal residence, and subsequent acquisition or construction of another PR
REQUISITES:
1. Sale by natural individual of his PR in the PH
2. Proceeds fully utilized in acquiring/constructing a new PR within 18 calendar months
3. Historical cost or adjusted basis of real property sold shall be carried over to new PR
4. Notify the Commissioner within 30 days from sale of his intention to avail tax exemption
5. Available only once every 10 years
PROCEEDS NOT FULLY UTILIZED
Taxable = Unutilized Amount x Higher of GSP or FMV
Portion Gross Selling Price

FINAL TAX ON INFORMER’S REWARD

Reward = LOWER of
(a) 10% of the revenues, surcharge, or fees recovered, or value of confiscated goods
(b) 1,000,000 per case
Final tax = 10% of the reward

GRADUATED TAX RATES

Effective January 1, 2018 to December 31, 2022

Over Not over Basic amount Addt’l Rate Of excess over
- 250,000 - -
250,000 400,000 - 20% 250,000
400,000 800,000 30,000 25% 400,000
800,000 2,000,000 130,000 30% 800,000
2,000,000 8,000,000 490,000 32% 2,000,000
8,000,000 - 2,410,000 35% 8,000,000

Effective January 1, 2023 onwards

Over Not over Basic amount Addt’l Rate Of excess over
- 250,000 - -
250,000 400,000 - 15% 250,000
400,000 800,000 22,500 20% 400,000
800,000 2,000,000 102,500 25% 800,000
2,000,000 8,000,000 402,500 30% 2,000,000
8,000,000 - 2,202,500 35% 8,000,000
 OVERVIEW OF CORPORATE TAXES
1. Net Income Tax (on Ordinary Income)
2. Final Withholding Tax (on Passive Income) Standard Income Tax
3. Capital Gains Tax (on Capital Gains)
4. Minimum Corporate Income Tax (MCIT) Penalty Income Tax
5. Branch Profits Remittance Tax (BPRT) Special Income Tax

DEFINITION: Shall include Does not include:

a) One-person corporations; a) GPPs
b) partnerships, no matter how created or organized; b) Joint venture/consortium formed for the
c) joint stock companies; purpose of
d) joint accounts (cuentas en participacion); - undertaking construction project
e) associations; or - engaging in energy operations under
f) insurance companies. a service contract with the government

CLASSIFICATION OF CORPORATIONS:
1. Domestic Corporation
(a) In general
(b) GOCCs EXC: SSS, GSIS, HDMF (Pag-Ibig), PHIC, LWDs
(c) Taxable partnerships
(d) Proprietary educational institutions/Non-profit hospitals;
(e) FCDUs of domestic banks
(f) Service contractors/subcontractors engaged in petroleum operations
(g) Ecozone enterprises and Enterprises qualified for the 5% SCIT
(h) Microfinance NGOs
(i) Philippine-Based Offshore Gaming Licensees

2. Resident Foreign Corporations

(a) In general
(b) Resident international carriers
(c) RHQs of MNCs
(d) Service contractors/subcontractors engaged in petroleum operations
(e) Ecozone enterprises / Enterprises qualified for the 5% SCIT
(f) Foreign-Based Offshore Gaming Licensees

3. Non-resident Foreign Corporations

(a) In general
(b) Non-resident owners/lessors of vessels chartered by Philippine nationals;
(c) Non-resident owners/lessors of aircraft, machineries, and other equipment;
(d) Non-resident cinematographic film owner, lessor, or distributor;

4. Exempt Corporations

ORDINARY INCOME (in ITR)

Corporate TP Source of Income Tax Base Tax Rates
Domestic Within & Without Net Income (a) 25%/20% beg. July 1, 2020 (b)
RFC Within Net Income (a) 25% beg July 1, 2020
NRFC Within Gross income FWT of 25% beg Jan. 1, 2021

Notes:
(a) Format in the ITR
Sales xx
Less: COGS/COS xx
Gross Income from Operations xx
Add: Taxable income not subject to FT xx
Total Gross Income xx
Less: Itemized Deductions or OSD xx
Net Taxable Income xx
X Rate 25%/20%
Regular Corporate Income Tax (RCIT) xx
(b) Effective July 1, 2020

TOTAL NET ASSETS (EXC. LAND) NET TAXABLE INCOME TAX RATE
P100M and below P5M and below 20%
ALL OTHER DOMESTIC CORPORATIONS 25%

PASSIVE INCOME
DC and RFC NRFC
Interest on currency bank deposit 20% 25%
Yield or any other monetary benefit from deposit sub-
20% 25%
stitutes, trust funds, and similar arrangements
Royalties 20% 25%
Interest from a depositary bank under the expanded
15% Exempt
foreign currency deposit system
Prizes/Winnings ITR 25%

INTERCORPORATE DIVIDEND
PAYOR RECIPIENT TAX
Domestic Corporation DC Not Taxable
Domestic Corporation RFC Not Taxable
Domestic Corporation NRFC 25% FWT
Foreign Corporation DC ITR, except if all req. of Sec 27(D)(4) are met
GR: Not taxable
EXC: If part of the dividend is sourced within the
Foreign Corporation RFC
Philippines, such part shall be taxable and shall
be included in the ITR of the recipient
GR: Not taxable
EXC: If part of the dividend is sourced within the
Foreign Corporation NRFC
Philippines, such part shall be taxable and shall
be subject to a 25% FT.

CAPITAL GAINS TAX ON CAPITAL GAINS

1. Sale, exchange, or other disposition of domestic shares of stock
NOT TRADED AT THE STOCK EXCHANGE
Net Capital Gain 15%
SHARES LISTED AND TRADED AT THE STOCK EXCHANGE
Gross Selling Price 6/10 of 1% (0.006)
Note: FT on capital gains on the sale of shares of stock applies to all corporate taxpayers.

2. Sale of Real Property Classified as Capital Asset

SELLER IS:
A. DC 6% of higher bet. Gross selling price or FMV (Commissioner or assessor’s value
B. RFC 25% normal tax rate (returnable)
C. NRFC 25% FT

DOMESTIC COMPANIES SUBJECT TO SPECIAL TAX RATES

PROPRIETARY EDUCATIONAL INSTITUTIONS
TAX RATE: 10%
1% (July 1, 2020 to June 30, 2023)
TAX BASE: Taxable net income within and without PH
REQ.: Gross income from unrelated business < 50% of total gross income from all sources
Otherwise, subject to normal tax rate, applied on the entire taxable income

NON-PROFIT HOSPITALS
TAX RATE: 10%
1% (July 1, 2020 to June 30, 2023)
TAX BASE: Taxable net income within and without PH

NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTIONS

TAX RATE: 10%
1% (July 1, 2020 to June 30, 2023)
TAX BASE: Taxable net income within and without PH
Note: This 3rd type of institution is not included in Section 27(B) of Tax Code, but is added by RR. No. 3-
2022.
FT ON INCOME OF A FOREIGN CURRENCY DEPOSIT UNIT (FCDU) OF LOCAL BANK UNDER EXPANDED FOR-
EIGN CURRENCY DEPOSIT SYSTEM (FCDS)
Foreign currency loans granted to PH residents 10% FT
Interest income from foreign currency interbank deposits 10% FT
Income from foreign currency transaction w/ non-residents, Exempt
OBUs, local commercial banks, branches of foreign banks
Authorized to transact business under the FCDS

SERVICE CONTRACTORS/SUBCONTRACTORS ENGAGED IN PETROLEUM OPERATIONS

TAX RATE 8%
TAX BASE Gross income derived from petroleum operations

ECOZONE ENTERPRISES
TAX RATE 5%
TAX BASE Gross income on registered activities
REMITTANCE 3% to National Government
2% to city/municipality where it is located

TOURISM ENTERPRISES REGISTERED WITH THE TOURISM INFRASTRUCTURE AND ENTERPRISE ZONE AU-
THORITY (TIEZA)
TAX RATE 5% (in lieu of all national and local taxes except real estate taxes)
TAX BASE Gross income on registered activities
REMITTANCE 1/3 proportionately allocated among affected cities/municipalities
1/3 to National Government
1/3 TIEZA

CORPORATIONS SUBJECT TO SPECIAL CORPORATE INCOME TAX (SCIT) UNDER SEC. 294 OF TAX CODE
(NEW): Effective July 1, 2020
TAX RATE 5% (in lieu of all national and local taxes)
TAX BASE Gross income
REQS. Comply with reqs. Of Section 304 of Tax Code; must be export enterprises

MICROFINANCE NGO
TAX RATE: 2%
TAX BASE Gross receipts from microfinance operations

PHILIPPINE-BASED OFFSHORE GAMING LICENSEE (NEW)

TAX RATE 5% Gaming Tax
TAX BASE higher bet. gross gaming revenue or receipts (gross wagers less payout), or the
agreed pre-determined minimum monthly gaming revenue or receipts
Note: Non-gaming revenue subject to 25% of taxable income (within and without PH)

RESIDENT FOREIGN CORPORATIONS SUBJECT TO SPECIAL TAX RATES

INTERNATIONAL CARRIERS DOING BUSINESS IN THE PH
TAX RATE 2.5%
TAX BASE Gross PH billings (originating from PH; continuous and uninterrupted flight)

OFFSHORE BANKING UNITS (OBU)

BEFORE APRIL 11, 2021
Income from foreign currency loans granted to PH residents 10% FT
Interest income from foreign currency interbank deposits 10% FT
Income from foreign currency transaction w/ non-residents, Exempt
OBUs, local commercial banks, branches of foreign banks
Authorized to transact business under the FCDS
Note: Effective April 11, 2021, taxed as any other RFC.

REGIONAL OR AREA HQS AND REGIONAL OPERATING HQ OF MULTINATIONALS

RHQS Exempt IT
ROHQs—before Jan 1, 2022 10%
Beg. Jan. 1, 2022 25% RCIT

SERVICE CONTRACTORS/SUBCONTRACTORS ENGAGED IN PETROLEUM OPERATIONS

TAX RATE 8%
TAX BASE Gross income derived from petroleum operations

TOURISM ENTERPRISES REGISTERED WITH THE TOURISM INFRASTRUCTURE AND ENTERPRISE ZONE AU-
THORITY (TIEZA)
TAX RATE 5% (in lieu of all national and local taxes except real estate taxes)
TAX BASE Gross income on registered activities
REMITTANCE 1/3 proportionately allocated among affected cities/municipalities
1/3 to National Government
1/3 TIEZA
CORPORATIONS SUBJECT TO SPECIAL CORPORATE INCOME TAX (SCIT) UNDER SEC. 294 OF TAX CODE
(NEW): Effective July 1, 2020
TAX RATE 5% (in lieu of all national and local taxes)
TAX BASE Gross income
REQS. Comply with reqs. Of Section 304 of Tax Code; must be export enterprises

FOREIGN-BASED OFFSHORE GAMING LICENSEE

TAX RATE 5% Gaming Tax
TAX BASE higher bet. gross gaming revenue or receipts (gross wagers less payout), or the
agreed pre-determined minimum monthly gaming revenue or receipts
Note: Non-gaming revenue subject to 25% of taxable income (within PH)

NON-RESIDENT FOREIGN CORPORATIONS SUBJECT TO SPECIAL TAX RATES

IN GENERAL, a non-resident foreign corporation is subject to a FWT of 25% (beginning January 1, 2021)
based on enumerated gross income from all sources within the Philippines, except:

RATE AND BASE

Non-resident cinematographic film owner, lessor, or 25% FT on its gross income from all sources within
distributor
Non-resident owner or lessor of vessels chartered by 4.5% FT on gross rentals or charter fees from leases
PH nationals or charters
Non-resident owner or lessor of aircraft, machineries, 7.5% Ft on gross rentals or fees
and other equipment
Interest on foreign loans contracted on or after Au- 20% FT on the amount of interest
gust 1, 1986

PENALTY TAXES IMPOSED ON CORPORATIONS

MINIMUM CORPORATE INCOME TAX (MCIT)

SUBJECT DC and RFC subject to RCIT

RATE 2%
BASE Gross Income
Note: 1% MCIT effective July 1, 2020 to June 30, 2023.
EFFECTIVITY 4th taxable year ff. the year of commencement
CARRY FORWARD OF EXCESS MIN. TAX credited against RCIT for 3 immediately succeeding years
RELIEF FROM MCIT Prolonged labor dispute due to force majeure or legitimate
business reverses
Rules in Computation
1. Excess MCIT, computed annually in the annual return.
2. Quarterly tax shall be higher of the RCIT or MCIT
3. IF quarterly tax due is MCIT, excess MCIT from prev. taxable years not allowed to be credited. The ff. are
allowed credits against the quarterly MCIT due
- CWT
- Quarterly income tax payments paid in the prev. quarters
- Excess tax credits of the prior year
4. IF quarterly tax due is the RCIT, the ff. are allowed credits
- excess MCIT from previous taxable years
- CWT
- Quarterly income tax payments paid in the prev. quarters
- Excess tax credits of the prior year

IMPROPERLY ACCUMULATED EARNINGS TAX (REPEALED BY RA NO. 11524 EFFECTIVE APRIL 11, 2021)
- Additional tax to the RCIT; starting Jan. 1, 1998
SUBJECT Closely-held DC (at least 50% in value or voting power is owned directly and
indirectly by or for not more than 20 individuals)
RATE and BASE 10% of Improperly accumulated taxable income
FORMULA:
Current Year’s Taxable income (ITR) xx
Add: Final Taxes (income) xx
Excluded in gross income xx
NOLCO deducted xx
CGT (income) xx
Exempted income xx
Less: Retention for reasonable needs, or 100% of paid up capital (higher) xx
Dividends actually/constructively paid xx
Income tax paid xx
Improperly Accumulated Earnings xx
 ENTITIES EXEMPTED FROM IAET: (PIPE JoB)
• Publicly-held corporations
• Insurance companies
• Partnerships
• Enterprises registered with PEZA/BCDA/TIEZA
• Joint ventures that are exempted
• Banks and other financial intermediaries

SPECIAL INCOME TAXES

BRANCH PROFITS REMITTANCE TAX (BPRT)
SUBJECT profit remitted by a branch of a foreign corporation to its head office
RATE 15%
BASE Total profits applied or earmarked for remittance, except activities registered with
PEZA, SBMA, CDA, TIEZA

GROSS INCOME TAX (GIT) (REPEALED BY RA. 11534 EFFECTIVE APRIL 11, 2021)
CORP GIVEN THE OPTION DC and RFC
REQUISITE CONDITIONS:
1. Tax ratio effort of 20% of GNP
2. Income tax collection to total tax revenues ratio of 40%
3. VAT tax effort of 4% of GNP
4. 0.9% ratio of the Consolidated Public Sector Financial Position (CPSFP) to GNP
5. COGS to Gross sales/receipt ratio of <55%
PERIOD OF IRREVOCABILITY 3 consecutive taxable years
RATE 15%
BASE Gross income

SUMMARY OF CHANGES IN THE CORPORATE INCOME TAX RATES UNDER CREATE LAW
REGULAR TAX RATES MCIT
RATE EFFECTIVITY RATE EFFECTIVITY
DOMESTIC CORPORATIONS
DC, in general 1% July 1, 2020 to
June 30, 2023
25% July 1, 2020
2% July 1, 2023
DCs with net taxable income 1% July 1, 2020 to
≤ ₱5 Million AND total assets ≤ ₱100 Mil- June 30, 2023
20% July 1, 2020
lion (excluding land on which the office,
plant, equipment are situated) 2% July 1, 2023
Proprietary educational institutions and non 1% July 1, 2020 to
-profit hospitals June 30, 2023
Not Applicable
10% July 1, 2023
FOREIGN CORPORATIONS
RFC, in general 25% July 1, 2020 1% July 1, 2020 to
June 30, 2023

2% July 1, 2023
OBUs 25% Upon effectivity of 1% April 11, 2021 to
CREATE (April 11, June 30, 2023
2021)
2% July 1, 2023
ROHQs 25% January 1, 2022 1% January 1, 2022 to
June 30, 2023

2% July 1, 2023
NRFCs 25% January 1, 2021 Not Applicable