Income Tax for Individuals

Tabag - pages 59 onwards

Who are individual taxpayers?

Individual taxpayers are natural persons with income derived from within the territorial jurisdiction of a taxing authority.

Under RA8424, individual taxpayers are classified as follows:

1. Resident citizens

2. Nonresident citizens

3. Resident aliens

4. Nonresident aliens

   4.1. Engaged in Trade (NRAET)

   4.2. Nonresident aliens not engaged in Trade or Business (NRANET)

   4.3. Alien Individuals employed by POGOs and or OGLs

What is RA 11976?

EOPTA - Ease of Paying Taxes

Under RA11976, the following are the classification of taxes?

Answer:

1. Small

2. Micro

3. Medium

4. Large

Who are the citizens of the Philippines?

Answer:

1. Those are citizens of the Philippines at the time of the adoption of the 1987 Philippine Constitution;

2. Those whose fathers or mothers are citizens of the Philippines;

3. Those born before January 17, 1973, of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority;

4. Those who are naturalized in accordance with law.

Who are the nonresident citizen of the Philippines?

SEC. 22. Definitions.

(E) The term 'nonresident citizen' means;

(1) A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein.

(2) A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis.

(3) A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year.

(4) A citizen who has been previously considered as nonresident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a nonresident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines.

(5) The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be for purpose of this Section.

Note: A citizen of the Philippines who shall have stayed outside the Philippines for 183 or more by the end of the year (aggregate).

Note: For taxation purposes, Individual taxpayers are only allowed to use calendar year period.

→ OCWs are Filipino citizens employed in foreign countries, commonly referred to as OFWs, who are physically present in a foreign country as a consequence of their employment thereat.

→ To be considered as an OCW or OFW, they must be duly registered as such with the Philippine Overseas Employment Administration (POEA) with a valid Overseas Employment Certificate (OEC).

Who is a seafarer or seamen?

Seafarer or seamen are Filipino citizens who receive compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively for international trade. To be considered as an OCW or OFW, they must be duly registered as such with the Philippine Overseas Employment Authority (POEA) with a valid Overseas Employment Certificate (OEC) with Seafarers Identification Record Book (SIRB) or Seaman’s Book issued by the Maritime Industry Authority (MARINA).

Define “alien“?

An alien is a foreign-born person who is not qualified to acquire Philippine citizenship by birth or after birth.

Who is a resident alien?

page 62 Tabag

Section 22(F) of the Tax Code defines resident alien as an individual whose residence is within the Philippines and who is not a citizen thereof.

1. Aliens who are actually present in the Philippines and who are not mere transients or sojourners are classified as resident aliens.

2. An alien who lives in the Philippines with no definite intention as to his stay is also a resident alien.

   1. Likewise, an alien who comes to the Philippines for the purpose that requires extended stay for its accomplishment, so he makes his home temporarily in the Philippines, is a resident, regardless of his intention to return to his residence abroad.

Who are non-resident aliens?

Answer: The term nonresident alien under Section 22(G) of the Tax Code means an individual whose residence is not in the Philippines and who is not a citizen thereof. They are aliens who come to the Philippines for a definite purpose, which in its nature may be promptly accomplished. They are alien who are mere transients or non-residents, hence, classified as nonresident alien.

***Note: Aliens who stayed in the Philippines for an aggregate period of more than 180 days during the taxable year and or aliens who have business income in the Philippines are considered as nonresident aliens engaged in trade or business (NRAET).

versus.. if an alien stay in the Philippines for only 180 days or less, or he is not deriving business income in the Philippines, he is considered as a nonresident alien not engaged in trade or business.

Important: A nonresident alien not engaged in trade or business NRA-NETB is subject to 25% income tax based on gross income from all sources within the Philippines (ordinary income or passive income except for income subject to capital gains tax) as interest, cash and or property dividends, rents, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual or periodic or casual gains, profits and capital gains.

Note: page 64, Tabag

→ it is important to properly classify individual taxpayers bc resident citizens are taxable on their income derived from sources within and without the Philippines while all other individual taxpayers are taxable only on their income derived from Philippine sources.

→ Moreover, individual taxpayers classified as nonresident aliens not engaged in trade or business (NRANETB) are taxable based on their “gross income“ while others are taxable based on “net income“.

What are the applicable income taxes and tax rates?

Generally, there are only 3 types of income tax, namely:

1. Basic income tax or regular tax,

2. Final withholding tax FWT on certain passive incomes,

3. Capital gains tax CGT on sale of certain capital assets.

Types of income: [ORDINARY OR REGULAR INCOME]

ORDINARY OR REGULAR INCOME

→ Refers to income as compensation income (salaries or wages),

→ Business income,

→ Income from practice of profession

→ Income from sale and or dealings of property and miscellaneous income and passive income other than those subject to final taxes and capital gains tax of the Tax Code as amended.

Question: What are the specific passive incomes derived from Philippine sources that are subject to final withholding taxes are as follows:

Answer:

1. Interest income

2. Dividend income

3. Royalties

4. Prizes; and

5. Other winnings.

Define “self-employed“? [SPINCO][Cows-Hows-WD]

Page 70, Tabag SELF-EMPLOYED is defined under RA10963 (TRAIN Law) as a “sole proprietor or an independent contractor who report income earned from self-employment.“ She or he controls who he or she works for, how the work is done and when it is done. It includes professionals whose income derived purely from the practice of profession and not under an employer - employee relationship.

Define “professional“?

Professional is defined as a person formally certified by a professional body belonging to a specific profession by virtue of having completed a required course of studies and or practice, whose competence can usually be measured against an established set of standards.

How to classify income derived from self-employment?

Ans.: Income derived from self-employment is considered income derived from the conduct of trade or business, hence, classified as regular or ordinary income. As such it is subject to the graduated tax rate.

What is the 8% preferential tax rate for self-employed and professionals? (SEP)

page 71, Tabag → Beginning taxable year 2018 or upon the effectivity of Tax Reform for Acceleration and Inclusion Law (TRAIN Law),

→ Regular income of SEP amounting to more than P 250,000 in a taxable year

→ But with a gross sales/receipts and other non-operating income not exceeding the vat threshold of P 3,000,000.00

—> shall have the option to avail of 8% tax on gross sales or receipts and other non-operating income in excess of P250,000 in lieu of the graduated income tax rate and business tax under Section 116 of the Tax Code, as amended.

Question: What are the requisites to avail the 8% preferential tax rate?

Answer: In order to avail to 8% preferential tax, the SEP shall satisfy all the ff conditions:

1. The gross sales/ receipts and other non-operating income does not exceed the vat threshold of P3,000.000;

2. The SEP shall be non-vat registered;

3. The gross sales/receipts were not derived from vat-exempt sales and transactions;

4. The SEP is not subject to Percentage Tax other than under Section 116 of the Tax Code, as amended; and

5. The SEP signifies his or her intention to elect the 8% income tax.

Question: When is the taxpayer cannot elect the option to choose the 8% preferential tax? page 75, Tabag

Answer: The option to choose 8% Preferential Tax is not applicable to vat registered and or SEPs whose annual gross sales and or receipts exceed the P 3,000,000 threshold.

Question: When to signify the election of 8% preferential tax rate?

Answer: An election of 8% Preferential Tax is irrevocable during the year

RR 8-2018 provides that unless the taxpayer signifies in his or her 1st Quarter return of the taxable year the intention to elect the 8% income tax, he or she shall be considered as having availed of the graduated rates under Section 24(A) of the Tax Code, as amended, and such election shall be irrevocable for the taxable year.

SEP’s Gross Sales and or receipts exceeded the VAT Threshold during the year

RR 8-2018 provides that, if at any time during a given taxable year, a taxpayer’s gross sales and or receipts exceeded the VAT threshold of P 3,000,000.00, he or she shall automatically be subjected to the graduated rates under Section 24(A)(2)(a) of the Tax Code, as amended, with the ff rules and guidelines:

1. The taxpayer shall be allowed an income tax credit of quarterly payments initially made under the 8% income tax option.

2. Taxpayer is likewise liable for business taxes, in addition to income tax.

3. for this purpose, the taxpayer is required to update his registration from non-vat to vat taxpayer, within the 30 days from the close of the month the vat threshold was breached.

4. Percentage tax under Section 116 shall still be imposed from the beginning of the year until taxpayer is liable to VAT.

   1. the percentage tax pursuant to the Section 116 of the Tax Code, as amended, shall be imposed on the first P3,000,000.00

   2. the excess of the threshold shall be subject to VAT.

   3. thus, for this purpose, vat shall be imposed prospectively

      —> No. 5. Percentage tax due on the P 3,000,000 shall be collected without penalty, if timely paid on the due date immediately following the month the threshold was breached.

Page 79-80, Tabag

Page 80, Tabag

The 8% tax of a mixed income earner shall be based on gross sales or receipts and other non-operating income is not deducted mixed income.

The first 250,000 of gross sales or receipts and other non-operating is not deducted for mixed income earners bc of the assumption that such exemption was already applied in computing the tax of income derived from employment, regardless of the actual amount of compensation income.

Note: Compensation income, regardless of amount is subject is subject to graduated income tax rate. Likewise, it is not subject to a business tax.

Passive Incomes subject to final withholding taxes are certain passive incomes from sources within the Philippines as enumerated under the Tax Code. These passive incomes are not subject to graduated tax rate or basic tax presented in Table 2-3 but to specific final withholding tax (FWT) rates.

page 83, Tabag

What are those five passive incomes derived from Philippine sources subject to final withholding taxes? [IDR-POT]

Answer:

1. Interest Income

2. Dividend Income

3. Royalties

4. Prizes; and

5. Other winnings

INTEREST

(A) What is the interest from any currency bank deposit?

• citizens and residents

• NRA-ETB

• NRA-NETB

Citizens → 20%

NRA-ETB → 20%

NRA-NETB → 25%

INTEREST

(B) Yield or any other monetary benefit from deposit substitutes —> refer also to page 80

• citizens and residents

• NRA-ETB

• NRA-NETB

Citizens → 20%

NRA-ETB → 20%

NRA-NETB → 25%

INTEREST

(C) Yield or any other monetary benefit from trust funds and similar arrangements

• citizens and residents

• NRA-ETB

• NRA-NETB

Citizens → 20%

NRA-ETB → 20%

NRA-NETB → 25%

(5) Cash and or property dividend

a. Cash and or property dividends actually/constructively received from a domestic corporation or from a joint stock company, insurance or mutual fund companies and ROHQ of multinational companies.

Citizens → 10%

NRA-ETB → 20%

NRA-NETB → 25%

(5) Cash and or property dividend

B. Share of an individual in the distributable net income after tax of a partnership [other than a General Professional Partnership(GPP)]

Citizens → 10%

NRA-ETB → 20%

NRA-NETB → 25%

(5) Cash and or property dividend

C. 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, which he is a member or a co-venturer.

Citizens → 10%

NRA-ETB → 20%

NRA-NETB → 25%

A final withholding tax is a kind of tax which is prescribed on “certain income“ (interest income, dividends, royalties, prizes and winnings) derived from Philippine sources and is not creditable against the income tax due of the payee on income subject to regular taxes of tax (graduated) for the taxable year.

***However, passive incomes derived abroad are subject to basic income tax. Consequently, income abroad shall be included in the income tax return of resident citizen taxpayers (taxable on their income within and without the Philippines).

Under the final withholding tax system, payee received the income net of the applicable tax. The amount of tax withheld by the withholding agent (payor) if constituted as a full and final payment of the income tax due from the payee on the said income.

Page 87, Tabag

Note: In case of the payor’s failure to withhold the tax or in case of under withholding, the deficiency tax shall be collected from the payor/ withholding agent.

What is deposit substitute? IEA

RR14-2012 defines “deposit substitute“ as an alternative form of obtaining funds from the public other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower’s own account, for the purpose of re-lending or purchasing of receivables and other obligations, or financing their own needs or the needs of their agent or dealer.

What is public?

Public is defined as borrowing from 20 or more individual or corporate lenders at any one time.

The mere issuance of govt debt instruments or securities is deemed as falling within the coverage of deposit substitutes irrespective of the number of lenders at the time of origination, and therefore interest income derived therefrom shall be subject to applicable final tax rate.

Government debt instruments and securities including Bureau of Treasury issued instruments and securities such as Treasury Bonds (T-Bonds), Treasury bills (T-Bills) and Treasury notes are classified as deposit substitutes if such instruments or securities are to be traded or exchanged in the secondary markets.

Note: Long-term deposit or investment certificate refers to certificate of time deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments with a maturity period of not less than 5 years, the form of which shall be prescribed by the Bangko Sentral ng Pilipinas (BSP) and issued by banks only to individuals (should not be under the name of a corporation or a bank or a trust department of a bank) in denominations of P10,000 and other denominations as prescribed by BSP RR 14-2012.

Page 89, Tabag. What are the requisites or conditions for exemption:

1. The depositor or investor is an individual citizen, a resident alien or a nonresident alien engaged in trade or business in the Philippines.

2. The long-term deposits or investment certificates should be under the name of the individual and not under the name of the corporation or the bank or the trust department or unit of the bank.

3. The long-term deposits or investments must be in the form or savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the BSP.

4. ***The long term deposits or investments must be issued by the banks only and not by other financial institutions.

5. The long-term deposits or investments must have a maturity period of not less than 5 years.

6. The long-term deposits or investments must be in denominations of 10,000 and other denominations as may be prescribed by the BSP.

7. The long-term deposits or investments should not be terminated by the original investor before the 5th year, otherwise they shall be subjected to final tax rates of 5%, 12% or 20% on interest income earnings as shown in Table 2-8.

8. Except those specifically exempted by law or regulations, any other income such as gains from trading, foreign exchange gain shall not be covered by income tax exemption.

PRE-TERMINATION OF LONG-TERM DEPOSIT RR 14-201

PAGE 90, Tabag

Interest income from long-term deposit or investment that is pre-terminated by the depositor or the investor before the 5th year shall be subject to the ff graduated rates of final withholding tax on the entire income and shall be withheld by the depository bank from the proceeds of the long-term deposit or investment certificate based on the remaining maturity (holding period).

RMC 7-2015 dates March 6, 2015 provides that, for interest income derived by individuals investing in common or individual trust funds or investment management accounts to be exempt from income tax, the ff additional characteristics or conditions must ALL be present:

Answer: [page 89 Tabag]

1. The investment of the individual investor in the common or individual trust fund or investment management account must be actually held/managed by the bank for the named individual at least 5 years without interruption. The term “bank“ referred to herein are banks duly licensed as such by the Bangko Sentral ng Pilipinas;

2. The underlying investments of the common or individual trust account or investment management accounts must comply with the requirements of Section 22(FF) of the NIRC of 1997, as amended, as well as the requirements mentioned above;

3. The common or individual trust account or investment management account must hold on to such underlying investment in continuous and uninterrupted period of at least 5 years.

Income from sale of capital assets, specifically from sale of shares of stocks of a closely held corporation (shares of domestic corporation not listed in the local stock exchange) and real properties located in the Philippines are subject to capital gains tax.

ORDINARY ASSET vs CAPITAL ASSET. For taxation purposes, assets are classified ether as ordinary or capital assets. Under Section 39 of the Tax Code, as amended, the ff are ordinary assets":

Code: [SiT][DepSaT/B]

1. Stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of taxable year.

2. Property used in trade or business subject to depreciation.

3. Real property held by the taxpayer primarily for sale to customer in the ordinary course of trade of business.

4. Real property used in trade or business of the taxpayer.

Capital assets include all other property held by the taxpayer (whether or not connected with his trade or business) not included in the definition of ordinary assets above. Generally, assets not used or held for sale in the ordinary course of business are classified as capital assets.

Generally, assets not used or held for sale in the ordinary course of business are classified as capital assets.

Note:

• Classification of an asset, either as capital or ordinary is important bc of the special tax rules on gains and losses from sale or exchanges of capital assets which do not apply to gains and losses from sale or exchanges of ordinary assets.

• Gain on sale of ordinary assets are commonly known as ordinary or regular income that are subject to basic income tax or graduated tax rate as provided for under Section 124(A) of the Tax Code.

  • On the other hand, gain on sale of capital assets are classified as capital gains subject to the ff taxes:

Capital Gain Tax (CGT) pertains to the ff:

1. Capital gain on sales of shares of stocks of a closely-held domestic corporation is subject to a capital gains tax of 15%.

Tax Base:

Selling Price Pxx

Cost (xx)

Capital Gain P xx

Rate (Beginning Jan. 1, 2018) 15%

CGT Pxx

2. Sales of real properties classified as capital assets located in the Philippines is subject to 6% capital gains tax (CGT) imposed under Section 124(D) of the Tax Code.

1. Capital gain on sales of shares of stocks of a closely-held domestic corporation is subject to a capital gains tax of 15%.

Question: What are the requisites?

Answer:

1. SS-SBE [The shares of stock sold, bartered, exchanged must be from a domestic corporation.]

2. The transaction must be not through the local stock exchange (the shares are not listed and traded in the local stock exchange. Hence, the sale is made directly to the buyer.

3. The seller should not be a dealer in securities (the shares are held as capital asset.)

2. Sales of real properties classified as capital assets located in the Philippines is subject to 6% capital gains tax (CGT) imposed under Section 124(D) of the Tax Code.

Question: What are the requisites?

Answer: REQUISITES

Regardless of whether the transaction resulted to a gain or loss

1. The land and or building must be a capital asset; and

2. It must be located in the Philippines.

Formula:

Tax Base (Selling Price or FMV, whichever is higher) Pxxx

Rate 6%

Capital Gains Tax (CGT) Pxxx

Tax base: Selling price or fair market value (FMV), whichever is higher.

Tax base: Selling price or fair market value (FMV), whichever is higher.

Question: What is a Fair Market Value?

Answer:

Fair Market Value (FMV) of real property shall refer to the higher between:

1. Fair market value as provided by City or Provincial assessors (also known as assessed value or FMV for real property tax declaration purposes.); and

2. Zonal value as provided by the Commissioner of Internal Revenue.

Question: Which one is subject to Percentage Tax?

Answer:

• Shares of stock sold or disposed of through the local stock exchange exempt from income tax.

• It is not subject to capital gains tax but to a percentage tax of 6/10 of 1% of gross selling price [also known as Stock Transaction (STT)] imposed under Section 127 of the Tax Code, as amended.

• It is a business tax known as Stock Transaction Tax and the basis is the gross selling price.

Summary of Capital Gains Subject to CGT

(1) Capital gain from sale of shares of stock of a corporation not traded in the local stock exchange (Beginning Jan. 1, 2018)

How much are the imposable tax per classification of the ff:

a. Citizens and residents

b. NRA-ETB

c. NRA-NETB

How much are the imposable tax per classification of the ff:

a. Citizens and residents → 15%

b. NRA-ETB → 15%

c. NRA-NETB → 15%

Summary of Capital Gains Subject to CGT

(2) Sale of real property located in the Philippines

How much are the imposable tax per classification of the ff:

a. Citizens and residents

b. NRA-ETB

c. NRA-NETB

How much are the imposable tax per classification of the ff:

a. Citizens and residents → 6%

b. NRA-ETB → 6%

c. NRA-NETB → 6%

Question: What is the taxation consequence if the shares of stock was sold to a foreign corporation?

Note: CGT on shares of stock is applicable only to sale of shares of domestic corporations. Gain on sale of shares of foreign corporations sold directly to a buyer is subject to basic tax using the graduated tax rate.

Note: Under RA 10936 (TRAIN LAW), no deduction is allowed for pure compensation income earners beginning Jan. 1, 2018.

What is creditable withholding tax?

Ans.: Creditable withholding tax (CWT) is not an internal revenue tax but a method of collecting income tax in advance from the recipient of income through the payor thereof, which is constituted by law as the withholding agent of government.

Who has the duty to withhold and remit CWT?

Ans.: The duty to withhold and remit income taxes arises only on instances required by law or regulation. Creditable withholding taxes shall be filed and the applicable tax paid not later than the last day of the month following the close of the quarter.

The obligation to withhold is imposed upon the buyer-payor of income although the burden of tax is really upon the seller-income earner/payee; hence, unjustifiable refusal of the latter to be subjected to withholding shall be ground for the mandatory audit of all internal revenue tax liabilities, as well as imposition of penalties pursuant to Sec. 275 of the Tax Code.

Q: What is the responsibility of a payor, every payor?

Answer: Every payor required to deduct and withhold taxes shall furnish each payee, a withholding tax statement, in triplicate within 20 days from the close of the quarter.

The prescribed form BIR Form 2307 for creditable withholding tax and BIR Form 2306 for final withholding tax on passive income) shall be used, showing the monthly income payments made, the quarterly total, and the amount of taxes withheld.

Provided, however, that upon request of the payee, the payor must furnish such statement, simultaneously with the income payment.

INCOME TAX DUE OF MARRIED TAXPAYERS

Section 24(A)(2) of the Tax Code as amended by RA 10963 (TRAIN law) provides that husband and wife, shall compute separately their individual income tax based on their respective total taxable income: Provided, that if any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of the spouses, the same shall be divided equally between the spouses for the purpose of determining their respective taxable income.

Question: Define “Statutory Minimum Wage Earner“?

The term “Statutory minimum wage earner (SMW)“ or minimum wage earner under the RA 9504 shall refer to a worker in the private sector paid the statutory minimum wage or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where she or he is assigned.

Minimum wage earners are exempt from income tax on:

1. Minimum wage

2. Holiday pay

3. Overtime pay

4. Night shift differential

5. hazard pay

Hazard pay given to minimum wage earners

Given to those on working on hazardous workplaces where primary duty performed under circumstances in which an accident could result in serious injury or death, such as a duty performed on a high structure where protective facilities are not used, or on an open structure where adverse conditions such as darkness, lightning, fumes or gases, steady rain, or high wind velocity exist, work were primarily health-related that may result to radiation/ contamination/ communicable/ infectious.

Under RA 10-2008, what are those considered as “hazardous workplaces“?

Answer:

1. Where the nature of work exposes the workers to dangerous environmental elements, contaminants or work conditions including ionizing radiation, chemicals, fire, flammable substances, noxious components ant eh like.

2. Where the workers are engaged in construction work, logging, fire-fighting, mining, quarrying, blasting, stevedoring, dock work, deep-sea fishing and mechanized farming.

3. Where the workers are engaged in the manufacture or handling of explosives and other pyrotechnic products.

4. Where the workers use or are exposed to power driven or explosive powder actuated tools.

5. Where the workers are exposed to biologic agents such as bacteria, fungi, viruses, protozoa, and other parasites.

Are senior citizens, persons with disabilities (pwds), and solo parents subject to income tax?

Answer: Generally, Senior Citizens, PWDs and Solo Parents are subject to income tax in the same manner as an ordinary individual taxpayer. Hence, qualified Senior Citizens, PWDs and Solo Parents deriving returnable income during the taxable year, whether from compensation or otherwise, are required to file their income tax returns and pay the tax as they file the return.

Note: However, if the returnable income of a senior citizen, PWD, or Solo Parent is in the nature of compensation income but she or he qualifies as a minimum wage earner under RA No. 9504, she or he shall be exempt from income tax on the said compensation income subject to the rules provided under RR 10-2008 applicable to minimum wage earners.

Note: Likewise, if the aggregate amount of gross income earned by the Senior Citizen, PWD, or Solo Parent during the taxable year does not exceed P 250,000, she or he shall be exempt from income tax and shall not be required to file income tax return.

What are the tax benefits for senior citizens and PWDs?

Senior Citizens, PWDs and Solo Parents are entitled to certain tax benefits such as:

1. Exemption from VAT on their purchase of specified goods and services

2. 20% discount on their purchase of specified goods and services

3. 5% discount on basic and prime commodities

What are the tax benefits for solo parents?

Answer:

• Exemption from VAT on their purchase of specified goods

• 10% discount on their purchase of specified goods

Define Gross Sales under RA 11976 or the Ease of Paying Taxes Act (EOPTA)

Gross sales under these categories shall refer to:

• Total Sales Revenue, net of vat, if applicable, during the taxable year, without any other deductions; and

• Business income, excluding compensation income earned under the employer-employee relationship, passive income under Sections 24, 25, 27 and 28, and income excluded under Section 32(B), all of the Tax Code, as amended.

• *Business income shall include income from the conduct of trade and business or the exercise of a profession.

What is the definition of ATSPs?

Authorized Tax Software Providers

When to file and pay income tax return?

Ans.: Once a year only, on or before April 15 of the ff year using BIR Form No. 1700.

BIR Form 1700

This form shall be filed annually by individuals earning purely compensation income (income arising from employer-employee relationship) including those individual taxpayers with non-business income.

BIR Form 1701

This form shall be filed annually by individuals who are engaged in trade or business or the practice of profession including those with mixed income.

BIR Form 1701A

This form shall be filed annually by individuals earning purely from business or profession subject to graduated income tax rates with optional standard deduction (OSD) as mode of deduction; and

→ Those who opted to avail of the 8% income tax rate.

BIR Form 1701Q

This form shall be filed quarterly by the ff:

1. resident citizens engaged in trade, business, or practice of profession with and without the Philippines;

2. A resident alien, nonresident citizen or nonresident alien individual engaged in trade, business or practice of profession within the Philippines.

3. A trustee of a trust, guardian or a minor, executor/administrator of an estate, or any person acting in any fiduciary capacity for any person, where such trust, estate, minor, or a person is engaged in trade or business.

INCOME TAX EXPENSE = BASIC INCOME TAX + FWT ON PASSIVE INCOME + CGT

Page 128 Tabag