ReSA The Review School of Accountancy @Tel. No. 735-9807 & 734-3989 TAMAYO/LIM/CAIGA/MANUEL TX 502: TAX RATES FOR INDIVIDUAL TAXPAYERS, ESTATES AND TRUSTS A. See. 24 (A) — The tax shall be computed on taxable income in accordance with and at the rates established in the following schedule (resident citizens, non-resident citizens, resident alien, estate and trust): TAXATION a. Effective January 1, 2018. the taxable income &: Over 250,000 oon 000 2,000,000 8,000,000 b. Effective January 1, 2023 If the taxable income i Over But not over e000 @ 380,000 400901 490,000 | aon. 300.000 Zo00.000 4 2,000,000 _| 8,000,005 “402,500 0001009 220% 500 2. Final Tax Rates on Certain Passive Income from Philippine Sources. ‘a. Rates of Tax Certain Passive Income 1) Sec. 24(B) For residents or citizens; 2) Sec. 25 (A) (2) ~ For non-resident atiens engaged in trade or business. Interest from any currency bank depos — — 'b. Yield or any other monetary benefit from dapost substitute (obtained trom 20 or more ‘nctividual or corporate fenders) c__ Yield of any other monetary benefit from trust sir ar ‘3. Royalties (except royalties on books and other ‘terary works and musical composions) | Prizes [except pnzes amounting to PL,000 or less whiz shall be subject to tax under Sec. | 24 (A) ants a rc Winnings (except Philippine Charity Sweepstakes and Lotto winnings amounting to P10,000 or | ‘which shall be exempt) and musical compositions 53) Sec. 25 (8) ~ For non-resident aliens not engaged in trade or business [a interest rom any curency bank deposi = Bi Ye or any cther monetary benefit from: depost subst (obtained fom tndwedal or corporate lenders) 1 &_Weld or any other monetary B Royalties, 19 gene [ [ | a Interest income received by individual taxnayer i | resident indidual) from a depostary bank under expanded | ' |___foreign currency deposit system __ _______ | 15% (new) _,__Exempt® | Exempt @ Interest income from long-term depot or investinert va the Form | i ' j ipfagungs, common or indwdual rst fund, devest substtutes, | Exempt | -Exempt 25% investment management accounts and oer invesrents I | Gudenced by certificates n such form presinbed by Gangko | | g__ Sentral ng Pinas (BSP) _ if pre-termineted before fifth year, a final tax shall be iiposed based fon remaining matunty: ___. oo . | | | a yaae has tans yeas t [se tm | 3 years but less than 4 years i [ize 25% | 120% TT 20% 25% Less than 3yeas | tao applies to nonesdentctizens TX-502ReSA: The Review School of Accountancy Page 20f5 4) Cash and/or Property Dividends Jee sl { ‘8. Cath andjor property dividends actually or constructively i recewed from a DOMESTIC CORP. or from JOINT STOCK CO., | INSURANCE oF MUTUAL FUND COMPANIES and REGIONAL "| OPERATING HEADQUARTERS of mutnaticnals (beginning | January 1, 2000) Lt _ . Share of an individual in the distributable net income after tax of | parmerso) Of which he 1s a partner (beginning January 1,) 10% |} 20% | 259% 2000) { Share of an individual in the net income afer tax of an 1 ASSOCIATION, a JOINT ACCOUNT, or a JOINT VENTURE or | \ CONSORTIUM taxable as a corporation of which he 1s a member (or co-venturer (beginning Janu ary 1, 2000; ne earned on or after January 1, 1998. ‘not, even if declared or distributed on or after | Provided, however, that the tax on dividends shall apply only Income forming part of retained earnings as of December 31, 1997 shal January 2, 1998, be subject to this tax. 5) Exercises: ‘2. Identify whether the following are subject to final tax or not (year 2018). Taxpayer is RESIDENT CITIZEN unless fr Interest from peso interest from Japanese yen bank deposit, Sumitomo Bank, Japan Ses nom Ga lar bank depost, First USA Bank, New '4) Interest income from a debt instrument no: within the coverage of deposit substitute, Philippines ("3)_Interest income f 6) Interest on government | 9) Royalties, books published in Mar 10) Prize amounting to P30,000, Philippines _ {711 Prize amounting to P10,000, Philippines (712) Prize amounting to P40,000, USA '3) Winnings amounting to P30,000, Philippines 4 winnings aneurin to PLOOOD, Pipes, 715) USA Sweepstakes winnings = 16) Philippine Lotto winnings Le 17) Interest received from depository bank under expanded foreign currency deposit system (Gointy in the name of a non-resident citizen and his spouse who is a resident ctizen) 78) Interest income from long-term depost or investment evidenced by certificates issued by BSP. ™_ {issued by 2 financial insbtuton other than 2 bank sn denomination of P10,000 119) Interest income from long-term depost ‘eadenced by certificates issued by BSP {({ssued by a bank to an individual in denomination of P0,000) _ {20} Dividend from a domestic corporat Jon Apel 15, 2008 [21 Share in distributive net income of koxal business parmership received on May 15, 2006 22) Share inrnet income after tax of an association, a joint account, o a joint venture or Consortium received on August 15,2006 ‘Share inthe net income of a general professional partnership [724) Dividend from a foreign corporation 25) Interest nce trom fng-tm dpost or nvesiment evidenced by crates ised by BSP __recerved by a NONRESIDENT ALIEN GED IN an. 16) Interest income from long-term received by a NONRESIDENT ALIEN NOT ENGAGED IN TRADE OR BUSINESS 1-23) interest income received by NONRESIDENT ALIEN individual from a depository bank under expa urtency depost system 78) Interest income received by a NON-RESIDENT CITIZEN indiadual from a depository bank ___under expanded foreign currency deposit system __ aa 23) Omndend received by a NONRESIDENT ALIEN not engaged in business in |x. 2 domestic corporation. a —— 30) Dividend received by @ NONRESIDENT ALIEN engaged in trade inthe Philippines from & | domestic corporation a es from FAXATION - Tax Rates for Individual Taxpayers, Estate and Trusts (Batch 37)ReSA: The Review Schoo! of Accountancy Page 3 of 5 An instrument with a maturity period of 16 year: war veld by Mr. X (a resident ctizen) for 2 years and was transferred to Mr Y (a resident alien) who, im turn, hed st for & year" Hoy. much ts Final withholding tax due? Mex. My © An nstrument with matunty penod of 10 years was held by Mr. X (a non-resident citizen) for 3 years and transferred it to Mr. ¥ (a resident alien). Mr. ¥ held it for 2 years before subsequently transferring it to Mr. 2 (a resident citizen), who hold it until the day of matunty or for $ years. How muct 1s the final withholding tax due? Mex MY Mrz, 1 Any nstrument wth maturity peniod of 10 year's was held hy Mr. X (a non-resident alien engaged in trade of business in the Philippines) for 3 years and transferted tt to Mr. Y (a resident atizen), Mr. Y held it for 2 years before subsequently uansterning it to Mr. Z (a non-resident alien not engaged in trade or business), who pre-terminated i after 4 years. How much is the final withholding tax due? Mex Mey 3. Capital Gains Tax 'a, Sec. 24 (C) ~ Capital Gains from Sale of | Tax base: Net capital gains ‘Shares of Stock not Traded in the Stock | Tax rates (old) 5% - not over P100,000 Exchange | 10% - excess of P100,000 Sale, barter, transfer and/or assignment of shares of stock of publicly-listed companies, not compliant with mandatory minimum — | Tax rate (new): 15% public ownership (10% of the publicty- listed companies’ issued and outstanding shares, exclusive of any treasury shares) (RR No. 16-2012) 'b. Sec. 24 (D) — Capital Gains from Sale of | Tex base: Gross selling pnce or fax market Real Property Classified as Capital Asset value whichever 1s higher _(Located in the Philippines) =, Tax rate: 6% final tax - _ © Disposition of real property dlassified as | The tax to be imposed shall be determined exther under Section 24 capital asset by individual to the (A) for the nocinal rate of income tax for indnaidual citizens OF government or any of its political resdents or under Section 24 (0) (1) for the final tax on the Ztodivisions or agencies or to GOCCs presumed capstai gains of property at 6%, at the option of the | __ | aspayer-setie: - 1d. Exemption from 6% capital gains tax on | 1) Exempt proceeds sale/transfer of principal residence Capital gains presumed to have been reakzed from the sale-or ‘disposition of their pnnopal residence by natural persons, the ; proceeds of which i fully utized im acquiring or constructing. a ew principal residence within 18 calendar months from the |__ date of sale oF disposition shall be exempt from capital gains tax. 2) Escrow agreement ‘The tuyer/tansterce shall wathhold from the seller and shall | deduct from the agreed seling price/consxteration the 6% capital {gains tax which shall be deposited im cash or manager's check in interest bearing account with an Authorized Agent Bank (AB) unger an Fscrow Agreement between the concerned Revenue Doistnct Officer, the Seller and the Transferee, and the AAB. “The Commoner sna have been duly notified by the taxpayer within 30 days {rom the nate Of sale or ispostion through a prescnibed return of his intention to es _ avai ofthe tax exemption a i Exemption once every 10 The tax exemption can only be avaed of once every 10.vears ‘portion if no full | If there 1S no full utitzation of the proceeds of sale or disposition of principal Taiisaton of proceeds | restence, the parhon of the gain presumed to have been reaized from the sale oF | éespostion shall be subject to capsal gains tax |g Camy-over of istarca cot or adjusted |The hstncal costo agus bass f the rel property sold [pasts | casposed shat be cared over to the new prinapal readence Dui oF __ : maured ~ Compu for the basis | Hictoncal cost of oid prinaipai residence 06 ~ OF Gree pancpal | Add. Addons! cos to acque new prnapa resience a fesidence ‘apes eos bass ofthe new prinopalreadence = | | «cost to acourre new principal residence 0x | | Less, Gross sciing pce of cid principal residence wx | Aacionps! 6.7 wo ature new prnapalreadence a TAXATION = Tas Rates fs teamvide Taxpayers, Estate TX-502ReSA: The Review School of Accountancy Page 4 of 5 The xable-wortian 's computed as follows: tion x Tax base | ores seling price i | Computavon of adjusted cost basis ofthe new principal residence: oe Uulzed portion x Histone cost | __ Grose soting price | filing of Final Capital Gains | 1) After deposting the amount representing the 6% capital gan tax he (Tax Return on sate of BuyerTransferee and the Seller, sha onl ie, win tty (30) days from the | | principal residence | date of sale or disposition of the principal residence, with the RDO having | Junsdiction over tne property, in duplicate, the Final Capital Gains Tax Return | Covering the property Bought with no computed tax due stating thatthe Supposed toy ceamount so wihineld by the Buyer is maintained in an escrow | | account wc amount wil be used to sais future tax ably, f any, on the | “uty transaction | | 2) Fe purposes of capt gan tax otherwise due on the sale, exchenge oF Lispostion of the sad Principal Residence, the execition of the Escrow | _| Agreement shall be considered suficent. ‘2. An indvidval taxpayer holds shares of stock as investment. During the current year, he sells the shares he Bought for | 100,000 for P180,000 directly to a buyer. How much isthe capital gains tax on the sale if any? b. An indvidual taxpayer holds shares of stock as investment which he bought from a publicly-listed company for 500,000. The shares are listed aud traged in the !2cal stock exchange. He sells them for P750,000. Question 1 - How much is the percentage tax. if any? 2~How much is the capital gauss tax on the sale assuming the corporation from which the shares are ‘bought are not compliant with the mandatory minimum public Ownership? cA individual taxpayer invested P300,000 in the common shares of SMC Corp. During the current year, he sold these | shares to a buyer not through the local stock exchange for P250,000. | ‘Question 1 - How much was the capital gains tax on the sal, if any? 2— Assuming the shares are listed and traded inthe local stock exchange, how much was the percentage tax? 4. During the year 2014, Ms Kat Anton sot er vacation house for ?500,000. She acquired tor 700,000 two (2) | © Years 90, “he fie market value ofthe vacation nouse atthe tme of sale was P8OO,000. Ms. Antonio was going to | (eet proceeds to tuid her new pinconreenc hn geen (18) months after fring BIR win thy (G0) days of such intention. How much the capa gat ay, any? e.-Mr.C. Avenido acquired his principal residence in 2012 at a cost of P1,000,000. He sold the said property on January 1, 2014, with a fair market value of P5,000,000 for a consideration of P4,000,000. Within the 18:month reglementary period he purchased his new principal residence at cost of P7,000,000, 2 How much 1s the basis of the new prinuipal residence? f.Using the same data in letter df for example, Mr. Avenido acquired his new principal residence within the 18:month | reglementary period but did not utlize the entire proceeds of the sale in acquinng his new principal residence because he only used P3,000,000 thereof in acquiring is new prinapal residence. ‘Question 1 - How much is the capital gains tax? | | | Queston t= How much the captl gins a due? | | | Se ena tee | — | ‘Tax Rates for Special Aliens and their Filipino Counterparts 2. Thepronsiononthe preferentalincome'axateafffteen percent (15%) or qualfiedemployees of Regional Headquarters, Regional Opera | | Headquarters, shore Banking Unts, and Petoleum Service ContractorsandSubcontractorshas ben vetoed. | by. ThepreterertalacometarteoquafedenployesaRagaral Heater, Regonal Operating Headquarters, shore Banking Uns, and |” petroleum Serece Contractors ad Subcetrators shana lamer be pocable without preuticetotheappkcaton of preferential taxraes | __underenstrg international taxtreabes. 15 of grass ncome within the Phispnes (same tax weaiment shal apply to” Employed by Reginal_| Filipinos emplayed and occupying the same postion as those of aliens employed | | or Ares Headquarters | by these mutational companies) | | | and Regonal Operating | i | Headquarters of Under the TRAIN, subject to regular income tx rate under Secton 24(AK2Ka)ofthe Tax | mutinatona Co Code, asamerded, wthoxterewudicetatheappicatonof preferential taxrates under existing | mtemetionaltaxtreses. Tax Rates for Individual Taxpayers, and Trusts (Batch 37)ReSA: Tho Review School of Accountancy Page Sof 5 Sec. 25 (0) | Alen tndivedut { 15% 0! goss income within the Phikupines (same tax treatment to Fiipinos Employed by Offshore | employed and ceccpying managenal and technical postions sanar to those occupied | Banking Units by abens employed by these offshore banking units), | Uae the TRA, subject to regu income ox ate under Seton 24/A2 Ya) TaxCone a5 | nerd tha rjadertatappkatonl pectevesiatarrtesunerexeaingnternatioalax | | trates | sec. 25 ¢€) | Aten twit 13% of ros income within the Pitopnes (ame tax treatment to Filipinos | Employed by Foreign | cmployed and neupying the same postion a those ales who ae permane | Petroleum Service| residents a fovegn country but who are employed by petroleum service contractor | | Contractor and _and subcontiactor in the Philippines). | Subcontractor | | | Le the TRAE, suet toregula ce to ature Section 2A? Ko} Tax Codes | nen tharpreicettteappcabonot yeferenahanrotesundereastingnternabonaltax | Exercises 4. A the start ofthe year, Adriano Santos, a Filipino Holding a managerial position in an RHQ, receives @ monthly salary and cost of living allowance in the amount of P70,000 nnd P7,000 respective. Hs employment contract alsa states that Be may receive 2 performance bonus at the end ofthe year which amount 1S not presently determinable but his annual gross taxable CCompertsation income will exceed the compensation thiesnold test when received. How mudh fs his income tax payable? Ms CCF, an alnempoyedn CUD Corporation, Fatale Serve Conta tr tecelvedcompentation income of5,000,000.00" 2018, ncusweot | + 400,000.00 13!" month pay and othe benefits, ow muct# te taxable net ncome and the income tax de? 5. Integrative Cases 4. A marned resident ctizen supports thtee (3) quaiied depereksit cies) and a brother Hs law who Hs & FD, unmaried and not gainfully employed. He has the Toloweng data on icone an expenses forthe year 2018, Salary, Phippnies 560,000 Gross business cone, Pitippines (gros sles, 1,200,000) 500,000 Business expenses, Piippines 180,000 ‘Grr busses income, USA (gros sates, 1,500,000) 900,000 Business expenses, USA 300,000, Interest income trom bank depnst, Pippin "50,000 Trterest income frm bank deposit, USA 70,000 Interest meome trom domestic degenstory bank under FFCDS 80,000 Interest ncome from 3 debt instrurnen: not witnn the coverage of depart substitute, Piippimes, gros of 20% reaitabie withholding tax 50,000 Interest come from a debt instrument with the coverage of a deposit substitute, Plipoines 60,000 Royalty on book published in the Phippines 100,000 Prize ma contest he joned in the Phippines 5,000 Philippine Chanty Sweepstakes winnings 1,00,000 Gain from sale of shares of stock not traded through the local stock exchange 150,000 Divider rected fom «domestic corporation . ao Tax payments fst Uwee (3) quarters 100,000 (Question 1 How much the foal inal tw 2 How much isthe captal gas tx? 5 How much the tavable net ncorne and come tae ve the taxpayer fled to ava of the 89%; tax option? . A resident alien individual supports two (2) qualfind dependent adopted chikren and a toster child. He asks you to assist hin the ‘reparation of hs tax retu for Is income in 2018, Me provides you the flows woul “Gross snes Income, Philippines (ross sales, P 7,000,000) © 1,000,000 ‘Gross ures income, Japan (grass sales, P7,00,000) soon o0e Business expenses, Piippines 200,000 ‘Business expenses, Japan 00:00 Phitppane Chanty Sweepstakes winnings 500,000 Japanese Sweepstakes winnings 400000 Interest income, Bank of Tokyo, Japan 100,000 Interest income recewed from a depostery bank under EFC, hulppines 300,000 Interest on peso bank depos, Piles 100,000 Tce taxes pad for the fst tree (3) cartes, aoa (Question 1 Can the taxpayer aval af the 8% ancome te rate? 2. Mow much was the rable net corr and come tax due he ava of 3 How much was the fina tax on passive come? 4 Assuming the taxpayer fased to aval ofthe 89 micome tax, how much hs taxable incume and the income tax due? 8% tacome TAXATION - Tax Rates fc and Truss (eatcns7y wee TN BQ ftw )