Income Tax Description

         Income Tax is a tax on a person's income,

emoluments, profits arising from property, practice
of profession, conduct of trade or business or on
the pertinent items of gross income specified in the
Tax Code of 1997 (Tax Code), as amended, less
the deductions if any, authorized for such types of
income, by the Tax Code, as amended, or other
special laws.

Who are Required to File Income Tax Returns?

Individuals

 Resident citizens receiving income from

sources within or outside the Philippines
o Employees deriving purely
compensation income from two or
more employers, concurrently or
successively at any time during the
taxable year
o Employees deriving purely
compensation income regardless of
the amount, whether from a single or
several employers during the
calendar year, the income tax of
which has not been withheld
correctly (i.e. tax due is not equal to
the tax withheld) resulting to
collectible or refundable return
o Self-employed individuals receiving
income from the conduct of trade or
 business and/or practice of
profession
o Individuals deriving mixed income,
i.e., compensation income and
income from the conduct of trade or
business and/or practice of
profession
o Individuals deriving other non-
business, non-professional related
income in addition to compensation
income not otherwise subject to a
final tax
o Individuals receiving purely
compensation income from a single
employer, although the income of
which has been correctly withheld,
but whose spouse is not entitled to
substituted filing
 Non-resident citizens receiving income from
sources within the Philippines
 Aliens, whether resident or not, receiving
income from sources within the Philippines

Non-Individuals

 Corporations including partnerships, no

matter how created or organized.
 Domestic corporations receiving income
from sources within and outside the
Philippines
 Foreign corporations receiving income from
sources within the Philippines
 Estates and trusts engaged in trade or
business
 Annual Income Tax For Individuals Earning
Purely Compensation Income (Including Non-
Business/Non-Profession Related Income)

BIR Form 1700 - Annual Income Tax For

Individuals Earning Purely Compensation Income
(Including Non-Business/Non-Profession Related
Income)

Documentary Requirements

1. Certificate of Income Tax Withheld on

Compensation (BIR Form 2316)
2. Duly approved Tax Debit Memo, if
applicable
3. Proofs of Foreign Tax Credits, if applicable
4. Income Tax Return previously filed and
proof of payment, if filing an amended return
for the same taxable year.

Procedures

1. For Electronic Filing and Payment System

(eFPS) Filer
a. Fill-up applicable fields in the BIR
Form No. 1700
b. Pay electronically by clicking the
"Proceed to Payment" button and fill-
up the required fields in the "eFPS
Payment Form" click "Submit"
button.
c. Receive payment confirmation from
eFPS-AABs for successful e-filing
and e-payment.
2. For Non-eFPS Filer
a. Fill-up applicable fields in the BIR
Form No. 1700 in the downloaded
Electronic Bureau of Internal
Revenue Form (eBIRForm) Package
b. Print the duly accomplished BIR
Form No. 1700
c. Proceed to the nearest Authorized
Agent Bank (AAB) under the
jurisdiction of the Revenue District
Office where you are registered and
present the duly accomplished BIR
Form 1700, together with the
required attachments and your
payment.
d. In places where there are no AABs,
proceed to the Revenue Collection
Officer or duly Authorized City or
Municipal Treasurer located within
the Revenue District Office where
you are registered and present the
duly accomplished BIR Form 1700,
together with the required
attachments and your payment.
e. Receive your copy of the duly
stamped and validated form from the
teller of the AABs/Revenue
Collection Officer/duly Authorized
City or Municipal Treasurer.
3. For Manual Filer
a. Fill-up the BIR Form No. 1700 in
triplicate copies.
b. Proceed to the Revenue District
Office where you are registered or to
any Tax Filing Center established by
the BIR and present the duly
 accomplished BIR Form 1700,
together with the required
attachments.
c. Receive your copy of the duly
stamped and validated form from the
RDO/Tax Filing Center
representative.

Deadline

On or before the 15th day of April of each year

covering taxable income for calendar year 2018
and thereafter

 Annual Income Tax For Individuals, Estates,

and Trusts

BIR Form 1701 - Annual Income Tax Return

Individuals, Estates and Trusts

Documentary Requirements

1. Certificate of Income Tax Withheld on

Compensation (BIR Form 2316), if
applicable
2. Certificate of Income Payments Not
Subjected to Withholding Tax (BIR Form
2304), if applicable
3. Certificate of Creditable Tax Withheld at
Source (BIR Form 2307), if applicable
 4. Duly approved Tax Debit Memo, if
applicable
5. Proof of Foreign Tax Credits, if applicable
6. Income Tax Return previously filed and
proof of payment, if filing an amended return
for the same year
7. Account Information Form (AIF) or the
Certificate of the independent Certified
Public Accountant (CPA) with Audited
Financial Statements if the gross annual
sales, earnings, receipts or output exceed
three million pesos (P3,000,000.00)
8. Account Information Form or Financial
Statements not necessarily audited by an
independent CPA if the gross annual sales,
earnings, receipts or output do not exceed
P3,000,000.00 and is subject to graduated
income tax rates under Section 24(A)(2)(a)
9. Proof of prior year’s excess tax credits, if
applicable

Procedures

1. For eFPS Filer

a. Fill-up applicable fields in the BIR
Form No. 1701
b. Pay electronically by clicking the
“Proceed to Payment” button and fill-
up the required fields in the “eFPS
Payment Form” then click “Submit”
button.
c. Receive payment confirmation from
eFPS-AABs for successful e-filing
and e-payment.
2. For Non-eFPS Filer
 a. Fill-up fields in the BIR Form No.
1701 in the downloaded Electronic
Bureau of Internal Revenue Form
(eBIRForm) Package
b. Print the duly accomplished BIR
Form No. 1701
c. Proceed to the nearest Authorized
Agent Bank (AAB) under the
jurisdiction of the Revenue District
Office where you are registered and
present the duly accomplished BIR
Form 1701, together with the
required attachments and your
payment.
d. In places where there are no AABs,
proceed to the Revenue Collection
Officer or duly Authorized City or
Municipal Treasurer located within
the Revenue District Office where
you are registered and present the
duly accomplished BIR Form 1701,
together with the required
attachments and your payment.
e. Receive your copy of the duly
stamped and validated form from the
teller of the AABs/Revenue
Collection Officer/duly Authorized
City or Municipal Treasurer.
3. For Manual Filer
a. Fill-up the BIR Form No. 1701 in
triplicate copies.
b. Proceed to the Revenue District
Office where you are registered or to
any Tax Filing Center established by
the BIR and present the duly
accomplished BIR Form 1701,
 together with the required
attachments.
c. Receive your copy of the duly
stamped and validated form from the
RDO/Tax Filing Center
representative.

Deadline

Final Adjustment Return or Annual Income Tax

Return - On or before the 15th day of April of each
year covering income for calendar year 2018 and
thereafter

Account Information Form For Self-Employed

Individuals, Estates And Trusts (Including
Those With Mixed Income, i.e., Compensation
Income and Income from Business and/or
Practice of Profession)

BIR Form 1701 AIF - Account Information Form for

Self-Employed Individuals, Estates and Trusts
(Including those with Mixed Income, i.e.,
Compensation Income and Income from Business
and/or Practice of Profession) and Estates and
Trusts (Engaged in Trade or Business)

NOTE: Pursuant to Sec. 71 of RA 10963, otherwise

known as Tax Reform Acceleration and Inclusion
Act, amending Sec. 232 of the Tax Code, as
amended, in relation to Revenue Memorandum
Circular No. 6 – 2001, corporations, companies or
persons whose gross annual sales, earnings,
receipts or output exceed P3,000,000 may not
accomplish this form. In lieu thereof, they may file
their annual income tax returns accompanied by
balance sheets, profit and loss statement,
schedules listing income-producing properties and
the corresponding income therefrom, and other
relevant statements duly certified by an
independent CPA.

Documentary Requirements

None

Procedures

1. Accomplish BIR Form 1701 AIF in triplicate.

2. Attach the same to BIR Form 1701.

Deadline

Same deadline as BIR Form 1701 - On or before

the 15th day of April of each year covering taxable
income for calendar year 2018 and thereafter

Quarterly Income Tax For Individuals, Estates

And Trusts Including Those With Mixed Income,
i.e., Compensation Income and Income from
Business and/or Practice of Profession
BIR Form 1701Q - Quarterly Income Tax Return
For Individuals, Estates and Trusts

Documentary Requirements

1. Certificate of Creditable Tax Withheld at

Source (BIR Form 2307), if applicable
2. Duly approved Tax Debit Memo, if
applicable
3. Proof of other payment/s made, if applicable
4. Summary Alphalist of Withholding Agents of
Income Payments Subjected to Withholding
Tax at Source (SAWT), if applicable

Procedures

1. For eFPS Filer

a. Fill-up applicable fields in the BIR
Form No. 1701Q
b. Pay electronically by clicking the
“Proceed to Payment” button and fill-
up the required fields in the “eFPS
Payment Form” then click “Submit”
button.
c. Receive payment confirmation from
eFPS-AABs for successful e-filing
and e-payment.
2. For Non-eFPS Filer
a. Fill-up applicable fields in the BIR
Form No. 1701Q in the downloaded
Electronic Bureau of Internal
Revenue Form (eBIRForm) Package
b. Print the duly accomplished BIR
Form No. 1701Q
c. Proceed to the nearest Authorized
Agent Bank (AAB) under the
 jurisdiction of the Revenue District
Office where you are registered and
present the duly accomplished BIR
Form 1701Q, together with the
required attachments and your
payment.
d. In places where there are no AABs,
proceed to the Revenue Collection
Officer or duly Authorized City or
Municipal Treasurer located within
the Revenue District Office where
you are registered and present the
duly accomplished BIR Form 1701Q,
together with the required
attachments and your payment.
e. Receive your copy of the duly
stamped and validated tax return
and BIR prescribed deposit slip from
the teller of the AABs or Electronic
Revenue Official Receipt (eROR)
from the Revenue Collection
Officer/duly Authorized City or
Municipal Treasurer.
3. For Manual Filer
a. Fill-up the BIR Form No. 1701Q in
triplicate copies (Compensation
Income need not be reported in the
Quarterly Income Tax Return and is
to be declared only on the Annual
Income Tax Return).
b. Proceed to the Revenue District
Office where you are registered or to
any Tax Filing Center established by
the BIR and present the duly
accomplished BIR Form 1701Q,
 together with the required
attachments.
c. Receive your copy of the duly
stamped and validated form from the
RDO.

Deadlines

 May 15 of the current taxable year– for the

first quarter
 August 15 of the current taxable year – for
the second quarter
 November 15 of the current taxable year –
for the third quarter

Annual Income Tax For Corporations And

Partnerships

BIR Form 1702 - Annual Income Tax Return (For

Corporations and Partnerships)

Documentary Requirements

1. Certificate of Income Payments Not

Subjected to Withholding Tax (BIR Form
2304), if applicable
2. Certificate of Creditable Tax Withheld at
Source (BIR Form 2307), if applicable
3. Duly approved Tax Debit Memo, if
applicable
4. Proof of Foreign Tax Credits, if applicable
 5. Income tax return previously filed and proof
of payment, if amended return is filed for the
same taxable year
6. Account Information Form (AIF) or the
Certificate of the independent CPA with
Audited Financial Statements, if the gross
annual sales, earnings, receipts or output
exceed P3,000,000.
7. Proof of prior year’s excess tax credits, if
applicable

Procedures

1. For eFPS Filer

a. Fill-up applicable fields in the BIR
Form No. 1702
b. Pay electronically by clicking the
“Proceed to Payment” button and fill-
up the required fields in the “eFPS
Payment Form” then click “Submit”
button.
c. Receive payment confirmation from
eFPS-AABs for successful e-filing
and e-payment.
2. For Non-eFPS Filer
a. Fill-up fields in the BIR Form No.
1702 in the downloaded Electronic
Bureau of Internal Revenue Form
(eBIRForm) Package
b. Print the duly accomplished BIR
Form No. 1702
c. Proceed to the nearest Authorized
Agent Bank (AAB) under the
jurisdiction of the Revenue District
Office where you are registered and
present the duly accomplished BIR
 Form 1702, together with the
required attachments and your
payment.
d. In places where there are no AABs,
proceed to the Revenue Collection
Officer or duly Authorized City or
Municipal Treasurer located within
the Revenue District Office where
you are registered and present the
duly accomplished BIR Form 1702,
together with the required
attachments and your payment.
e. Receive your copy of the duly
stamped and validated form from the
teller of the AABs/Revenue
Collection Officer/duly Authorized
City or Municipal Treasurer.
3. For Manual Filer
a. Fill-up the BIR Form No. 1702 in
triplicate copies.
b. Proceed to the Revenue District
Office where you are registered or to
any Tax Filing Center established by
the BIR and present the duly
accomplished BIR Form 1702,
together with the required
attachments.
c. Receive your copy of the duly
stamped and validated form from the
RDO/Tax Filing Center
representative.

Deadline

Final Adjustment Return or Annual Income Tax

Return - On or before the 15th day of the fourth
month following the close of the taxpayer’s taxable
year

Account Information Form For Corporations

And Partnerships

BIR Form 1702 AIF - Account Information Form

(For Corporations and Partnerships)

NOTE: Pursuant to Sec. 71 of RA 10963, otherwise

known as Tax Reform Acceleration and Inclusion
Act, amending Sec. 232 of the Tax Code, as
amended, in relation toRevenue Memorandum
Circular No. 6 – 2001, corporations, companies or
persons whose gross annual sales, earnings,
receipts or output exceed P3,000,000 may not
accomplish this form. In lieu thereof, they may file
their annual income tax returns accompanied by
balance sheets, profit and loss statement,
schedules listing income-producing properties and
the corresponding income therefrom, and other
relevant statements duly certified by an
independent CPA.

Documentary Requirements

None

Procedures

1. Accomplish BIR Form 1702 AIF in triplicate.

 2. Attach the same to BIR Form 1702.

Deadline

Same deadline as BIR Form 1702 - On or before

the 15th day of the fourth month following the close
of the taxpayer’s taxable year

Quarterly Income Tax For Corporations And

Partnerships

BIR Form 1702Q - Quarterly Income Tax Return

(For Corporations and Partnerships)

Documentary Requirements

1. Certificate of Creditable Tax Withheld at

Source (BIR Form 2307), if applicable
2. Duly approved Tax Debit Memo, if
applicable
3. Previously filed return, if an amended return
is filed for the same quarter

Procedures

1. For eFPS Filer

a. Fill-up applicable fields in the BIR
Form No. 1702Q
b. Pay electronically by clicking the
“Proceed to Payment” button and fill-
up the required fields in the “eFPS
 Payment Form” then click “Submit”
button.
c. Receive payment confirmation from
eFPS-AABs for successful e-filing
and e-payment.
2. For Non-eFPS Filer
a. Fill-up applicable fields in the BIR
Form No. 1702Q in the downloaded
Electronic Bureau of Internal
Revenue Form (eBIRForm) Package
b. Print the duly accomplished BIR
Form No. 1702Q
c. Proceed to the nearest Authorized
Agent Bank (AAB) under the
jurisdiction of the Revenue District
Office where you are registered and
present the duly accomplished BIR
Form 1702Q, together with the
required attachments and your
payment.
d. In places where there are no AABs,
proceed to the Revenue Collection
Officer or duly Authorized City or
Municipal Treasurer located within
the Revenue District Office where
you are registered and present the
duly accomplished BIR Form 1702Q,
together with the required
attachments and your payment.
e. Receive your copy of the duly
stamped and validated tax return
and BIR prescribed deposit slip from
the teller of the AABs or Electronic
Revenue Official Receipt (eROR)
from the Revenue Collection
 Officer/duly Authorized City or
Municipal Treasurer.
3. For Manual Filer
a. Fill-up the BIR Form No. 1702Q in
triplicate copies.
b. Proceed to the Revenue District
Office where you are registered or to
any Tax Filing Center established by
the BIR and present the duly
accomplished BIR Form 1702Q,
together with the required
attachments.
c. Receive your copy of the duly
stamped and validated form from the
RDO.

Deadline

Corporate Quarterly Declaration or Quarterly

Income Tax Return - On or before the 60th day
following the close of each of the quarters of the
taxable year

Improperly Accumulated Earnings Tax For

Corporations

BIR Form 1704 - Improperly Accumulated Earnings

Tax Return (For Corporations)

Documentary Requirements
 1. Photocopy of Annual Income Tax Return
(BIR Form 1702) with Audited Financial
Statements and/or Account Information
Form of the covered taxable year duly
received by the BIR; and
2. Sworn declaration as to dividends declared
taken from the covered year's earnings and
the corresponding tax withheld, if any.

Procedures

1. Fill-up BIR Form 1704 in triplicate.

2. If there is payment:
o Proceed to the nearest Authorized
Agent Bank (AAB) of the Revenue
District Office where you are
registered and present the duly
accomplished BIR Form 1704,
together with the required
attachments and your payment.
o In places where there are no AABs,
proceed to the Revenue Collection
Officer or duly Authorized City or
Municipal Treasurer located within
the Revenue District Office where
you are registered and present the
duly accomplished BIR Form 1704.
o Receive your copy of the duly
stamped and validated form from the
teller of the AABs/Revenue
Collection Officer/duly Authorized
City or Municipal Treasurer.
3. If there is no payment:
o Proceed to the Revenue District
Office where you are registered and
present the duly accomplished BIR
 Form 1704, together with the
required attachments.
o Receive your copy of the duly
stamped and validated form from the
RDO representative

Deadline

Within fifteen (15) days after the close of the

taxable year

Annual Income Information Form for General

Professional Partnerships

Sec. 55. Returns of General Professional

Partnership (Tax Code of 1997, as amended)

Every general professional partnership shall file, in

duplicate, a return of its income, except income
exempt under Section 32 (B) of this Title, setting
forth the items of gross income and of deductions
allowed by this Title, and the names, Taxpayer
Identification Numbers (TIN), addresses and shares
of each of the partners.

  Income Tax Rates
I. For Individual Citizens and Resident Aliens
Earning Purely Compensation Income and
Individuals Engaged in Business and
Practice of Profession
A. Graduated Income Tax Rates under
Section 24(A)(2) of the Tax Code of
1997, as amended by Republic Act
No. 10963 

Amount of Net Taxable Rate

Income
Over But Not  
Over
- P250,000 0%
P250,000 P400,000 20% of the excess over
P250,000
P400,000 P800,000 P30,000 + 25% of the
excess over P400,000
P800,000 P2,000,000 P130,000 + 30% of the
excess over P800,000
P2,000,000 P8,000,000 P490,000 + 32% of the
excess over P2,000,000
P8,000,000   P2,410,000 + 35% of the
excess over P8,000,000

B. For Purely Self-Employed

Individuals and/or Professionals
Whose Gross Sales/Receipts and
Other Non-Operating Income Do Not
Exceed the VAT Threshold of
P3,000,000, the tax shall be, at the
taxpayer’s option:
1. 8% Income Tax on Gross
Sales or Gross Receipts in
Excess of P250,000 in Lieu
of the Graduated Income Tax
Rates and the Percentage
Tax; Or
 2. Income Tax Based on the
Graduated Income Tax
Rates
C. For Individuals Earning Both
Compensation Income and Income
from Business and/or Practice of
Profession, their income taxes shall
be:
1. For Income from
Compensation: Based on
Graduated Income Tax
Rates; and
2. For Income from Business
and/or Practice of
Profession:
a. If the total Gross
Sales/Receipts Do
Not Exceed VAT
Threshold of
P3,000,000, the
Individual Taxpayer
May Opt to Avail:
i. 8% Income
Tax on Gross
Sales/Receipt
s and Other
Non-
Operating
Income in Lieu
of the
Graduated
Income Tax
Rates and the
Percentage
Tax; Or
 ii.
Income Tax
Based on
Graduated
Income Tax
Rates
b. If the total Gross
Sales/Receipts
Exceed VAT
Threshold of
P3,000,000
i. Income Tax
Based on
Graduated
Income Tax
Rates
D. On Certain Passive Income of
Individual Citizens and Resident
Aliens

Passive Income Tax Rate

1. Interest from currency deposits, 20%
trust funds and deposit substitutes
2. Royalties (on books as well as 10%
literary & musical compositions)
    - In general 20%
3. Prizes (P10,000 or less ) Graduated Income
Tax Rates
    - Over P10,000 20%
4. Winnings (except from PCSO 20%
and Lotto amounting to P10,000 or
less )
-   From PCSO and Lotto amounting exempt
to P10,000 or less
5. Interest Income from a 15%
Depository Bank under the
Expanded Foreign Currency
Deposit System
6. Cash and/or Property Dividends  10%
received by an individual from a
domestic corporation/ joint stock
company/ insurance or mutual fund
 companies/ Regional Operating
Headquarter of multinational
companies
7. Share of an individual in the 10%
distributable net income after tax of
a partnership (except GPPs)/
association, a joint account, a joint
venture or consortium taxable as
corporation of which he is a
member or co-venture
8. Capital gains from sale, 6%
exchange or other disposition of
real property located in the
Philippines, classified as capital
asset
9. Net Capital gains from sale of 15% 
shares of stock not traded in the
stock exchange
10. Interest Income from long-term Exempt
deposit or investment in the form of
savings, common or individual trust
funds, deposit substitutes,
investment management accounts
and other investments evidenced by
certificates in such form prescribed
by the Bangko Sentral ng Pilipinas
(BSP)
Upon pre-termination before the
fifth year, there should be imposed
on the entire income from the
proceeds of the long-term deposit
based on the remaining maturity
thereof:
Holding Period
- Four (4) years to less than five (5) 5%
years
- Three (3) years to less than four 12%
(4) years
- Less than three (3) years 20%

II. For Non-Resident Aliens Not Engaged in

Trade or Business 

A. Tax Rate in General – on taxable same manner as

income from all sources within the individual citizen
Philippines and resident alien
individual
B. Certain Passive Income Tax Rates
1. Interest from currency deposits, trust 20%
funds and deposit substitutes
2. Royalties (on books as well as literary 10%
& musical compositions)
    - In general 20%
3. Prizes (P10,000 or less ) Graduated Income
Tax Rates
    - Over P10,000 20%
4. Winnings (except from PCSO and 20%
Lotto)
   -  From PCSO and Lotto exempt
5. Cash and/or Property Dividends 20%
received from a domestic corporation/
joint stock company/ insurance/ mutual
fund companies/ Regional Operating
Headquarter of multinational companies
6. Share of a non-resident alien individual 20%
in the distributable net income after tax of
a partnership (except GPPs) of which he
is a partner or from an association, a joint
account, a joint venture or consortium
taxable as corporation of which he is a
member or co-venture
7. Interest Income from long-term deposit Exempt
or investment in the form of savings,
common or individual trust funds, deposit
substitutes, investment management
accounts and other investments
evidenced by certificates in such form
prescribed by the Bangko Sentral ng
Pilipinas (BSP)
Upon pre-termination before the fifth
year, there should be imposed on the
entire income from the proceeds of the
long-term deposit based on the remaining
maturity thereof:
Holding Period
  - Four (4) years to less than five (5) 5%
years
  - Three (3) years to less than four (4) 12%
years
  - Less than three (3) years 20%
8. Capital from the sale, exchange or 6%
other disposition of real property located
in the Philippines classified as capital
asset
9. Net Capital gains from sale of shares of  
stock not traded in the Stock Exchange
   - Not over P100,000 5%
   - Any amount in excess of P100,000 10%
III. For Non-resident Aliens Not Engaged in
Trade or Business 

1. Gross amount of income 25%

derived from all sources within the
Philippines
2. Capital gains from the exchange 6%
or other disposition of real property
located in the Philippines
3. Net Capital gains from the sale  
of shares of stock not traded in the
Stock Exchange
- Not  Over  P100,000 5%
- Any amount in excess of 10%
P100,000

IV. For Alien Individuals Employed by Regional

Headquarters (RHQ) or Area Headquarters
and Regional Operating Headquarters
(ROH) of Multinational Companies, Offshore
Banking Units (OBUs), Petroleum Service
Contractor and Subcontractor  

On the gross income consisting of Graduated

salaries, wages, annuities, Income Tax
compensation, remuneration and Rates
other emoluments, such as
honoraria and emoluments derived
from the Philippines

V. For General Professional Partnerships 

Net Income of the Partnerships 0%

 VI. For Domestic Corporations 

Rates of Tax on Certain Passive Tax Rate

Income of Corporations
1. Interest from currency deposits, 20%
trust funds, deposit substitutes and
similar arrangements received by
domestic corporations
2. Royalties from sources within 20%
the Philippines
3. Interest Income from a 15%
Depository Bank under Expanded
Foreign Currency Deposit System
4. Cash and Property Dividends 0%
received by a domestic corporation
from another domestic corporation
5. Capital gains from the sale, 6%
exchange or other disposition of
lands and/or building
6. Net Capital gains from sale of 15% 
shares of stock not traded in the
stock exchange

VII. *Beginning on the 4th year immediately

following the year in which such corporation
commenced its business operations, when
the minimum corporate income tax is
greater than the tax computed using the
normal income tax.
VIII. For Resident Foreign Corporation 

1) a. In General – on taxable 30%

income derived from sources
within the Philippines
    b. Minimum Corporate Income 2%
Tax – on gross income
    c. Improperly Accumulated 10%
Earnings – on improperly
accumulated taxable income
2) International Carriers – on 2½%
gross Philippine billings
3) Regional Operating 10%
Headquarters of Multinational
Companies– on taxable income
4.) Regional or Area exempt
Headquarters of Multinational
Companies
5) Corporation Covered by Rate specified
Special Laws under the
respective
special laws
6) Offshore Banking Units 10%
(OBUs)
In general – Income derived by Exempt
OBUs from foreign currency
transactions with non-residents,
other OBUs, local commercial
banks and branches of foreign
banks authorized by BSP
    On interest income derived 10%
from foreign currency loans
granted to residents other than
offshore banking units or local
commercial banks, local
branches of foreign banks
authorized by BSP to transact
business with OBUs
7) Income derived under the  
Expanded Foreign Currency
Deposit System
   Interest income derived by a 7½%
depository bank under the
expanded foreign currency
deposit system.
   On Income derived by exempt
depository banks under the
expanded foreign currency
deposit systems from foreign
currency transactions with non-
residents, OBUs in the
Philippines, local commercial
banks including branches of
foreign banks that may be
authorized by BSP
    On interest income derived 10%
from foreign currency loans
granted by depository banks
under the expanded foreign
currency deposit systems to
residents other than offshore
banking units in the Philippines or
other depository banks under the
expanded system
8.) Branch Profit Remittances – 15%
on total profits applied or
earmarked for remittance without
any deduction for the tax
component thereof (except those
activities which are registered
with the Philippines Economic
Zone Authority)
9.) Interest from currency 20%
deposits, trust funds, deposit
substitutes and similar
 arrangements
10. Royalties derived from 20%
sources within the Philippines

 Related Revenue Issuances

RMO No. 23-2018, RR No. 8-2018, RA No. 10963,

RR No. 12-2007, RR No. 14-2002, RA No. 9337,
RR No. 9-98, RR No. 1-98, RR No. 5-97, RR No. 4-
96

 Frequently Asked Questions

1) What is income?

Income means all wealth which flows into the

taxpayer other than as a mere return of capital.

2) What is Taxable Income?

Taxable income means the pertinent items of gross

income specified in the Tax Code as amended, less
the deductions, if any, authorized for such types of
income, by the Tax Code or other special laws.

3) What is Gross Income?

Gross income means all income derived from

whatever source.

4) What comprises gross income?

Gross income includes, but is not limited to the
following:

 Compensation for services, in whatever

form paid, including but not limited to fees,
salaries, wages, commissions and similar
items
 Gross income derived from the conduct of
trade or business or the exercise of
profession
 Gains derived from dealings in property
 Interest
 Rents
 Royalties
 Dividends
 Annuities
 Prizes and winnings
 Pensions
 Partner's distributive share from the net
income of the general professional
partnerships

5) What are some of the exclusions from gross

income?

o Life insurance
o Amount received by insured as
return of premium
o Gifts, bequests and devises
o Compensation for injuries or
sickness
o Income exempt under treaty
o Retirement benefits, pensions,
gratuities, etc.
o Miscellaneous items
 Income derived by foreign government
  Income derived by the government or its
political subdivision
 Prizes and awards in sport competition
 Prizes and awards which met the conditions
set in the Tax Code
 13th month pay and other benefits not
exceeding P90,000
 GSIS, SSS, Medicare and other
contributions
 Gains from the sale of bonds, debentures or
other certificate of indebtedness with a
maturity of more than five (5) years
 Gains from redemption of shares in mutual
fund

6) What are the allowable deductions from gross

income?

a)  *Optional Standard Deduction - an amount not

exceeding 40% of the gross sales/receipts for
individuals and gross income for corporations; or

b)  Itemized Deductions which include the following:

- Expenses
- Interest
- Taxes
- Losses
- Bad Debts
- Depreciation
- Depletion of Oil and Gas Wells and Mines
- Charitable Contributions and Other
Contributions- Research and Development
- Pension Trusts
* Not allowed to non-resident alien individual
* A General Professional Partnership (GPP) may
avail of the OSD only once, either by the GPP or
the partners comprising the partnership

7) Who are not required to file Income Tax returns?

a. An individual earning purely compensation

income whose taxable income does not exceed
P250,000.00

b. An individual whose income tax has been

withheld correctly by his employer, provided that
such individual has only one employer for the
taxable year

c. An individual whose sole income has been

subjected to final withholding tax or who is exempt
from income tax pursuant to the Tax Code and
other special laws.

d. An individual who is a minimum wage earner

e. Those who are qualified under “substituted

filing”. However, substituted filing applies only if all
of the following requirements are present:

- the employee received purely compensation

income (regardless of amount) during the
taxable year;
- the employee received the income from only
one employer in the Philippines during the
taxable year;
- the amount of tax due from the employee at
the end of the year equals the amount of tax
withheld by the employer;
- the employee’s spouse also complies with all
3 conditions stated above;
- the employer files the annual information
return (BIR Form No. 1604-CF); and
- the employer issues BIR Form No. 2316 (Oct
2002 ENCS version) to each employee.

8.) Who are exempt from Income Tax?

a. Income from abroad of a non-resident citizen

who is:

i. 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

ii. 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

iii. 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

iv. A citizen who has been previously considered as

a non-resident citizen and who arrives in the
Philippines at any time during the year to reside
permanently in the Philippines will likewise be
treated as a non-resident citizen during 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.
b. Overseas Filipino Worker, including overseas
seaman

An individual citizen of the Philippines who is

working and deriving income from abroad as an
overseas Filipino worker is taxable only on income
from sources within the Philippines; provided, that a
seaman who is a citizen of the Philippines and who
receives compensation for services rendered
abroad as a member of the complement of a vessel
engaged exclusively in international trade will be
treated as an overseas Filipino worker.

NOTE: A Filipino employed as Philippine

Embassy/Consulate service personnel of the
Philippine Embassy/consulate is not treated as a
non-resident citizen; hence, his income is taxable.

c. General Professional Partnership

d. Government Service Insurance System (GSIS)

e. Social Security System (SSS)

f. Philippine Health Insurance Corporation (PHIC)

g. Local Water Districts (LWD)

9) What are the procedures in filing Income Tax

returns (ITRs)?

a. For “with payment” ITRs (BIR Form Nos. 1700 /

1701 / 1701Q / 1702 / 1702Q / 1704)
File the return in triplicate (two copies for the BIR
and one copy for the taxpayer) with the Authorized
Agent Bank (AAB) of the place where taxpayer is
registered or required to be registered. In places
where there are no AABs, file the return directly
with the Revenue Collection Officer or duly
Authorized Treasurer of the city or municipality in
which such person has his legal residence or
principal place of business in the Philippines, or if
there is none, filing of the return will be at the Office
of the Commissioner.

b. For “no payment” ITRs -- refundable, break-

even, exempt and no operation/transaction,
including returns to be paid on 2nd installment and
returns paid through a Tax Debit Memo(TDM)

File the return with the concerned Revenue District

Office (RDO) where the taxpayer is registered.
However, "no payment" returns filed late shall not
be accepted by the RDO but instead, they shall be
filed with an Authorized Agent Bank (AAB) or
Collection Officer/Deputized Municipal Treasurer (in
places where there are no AABs), for collection of
necessary penalties.

10) How is Income Tax payable of individuals

(resident citizens and non-resident citizens)
computed?

A. Based on Graduated Income Tax Rate

Gross Income P ___________

Less: Allowable Deductions (Itemized
___________
or Optional)
Net Taxable Income P ___________
Multiply by Tax Rate (0% to 35%) ____________
Income Tax Due P ___________
Less: Tax Withheld (per BIR From
____________
2316)
Income Tax Payable P____________

B. Based on Preferential Tax Rate of 8%

i. Taxpayers source of income is purely from self-

employment

Gross Sales/Receipts P ___________

Add: Non-operating Income ____________
Gross Taxable Income P ___________
Less: Amount allowed as deduction
under Sec. 24 (A)(2)(b) of NIRC, as      250,000.00
amended
Net Taxable Income P ___________
Multiply by Tax Rate                   8%
Income Tax Due P ___________
Tax Withheld (per BIR From 2307) ____________
Income Tax Payable P ___________

 ii. Mixed Income Earner

On Compensation  
Total Compensation Income P ___________
Less: Non-taxable Income ____________ 
          13th month pay and other
        90,000.00
benefits (max)
Taxable Compensation Income P ----------------
Multiply by Tax Rate (0% to 35%) ____________ 
Tax Due on Compensation P ___________
   
On Business Income  
Gross Sales/Receipts P ___________
Add: Non-operating Income ____________
Taxable Business Income P ___________
Multiply by Tax Rate                   8%
Tax Due on Business Income P ___________
   
Total Income Tax Due (Compensation
P ___________
+ Business)
Tax Withheld (per BIR From
____________
2316/2307)
Income Tax Payable P ___________

11) How is Income Tax Paid?

A. Through withholding 

a. Individual Payee: Rate

If the gross annual business or 5%
professional income did not exceed
P3,000,000.00
 If the gross annual business or 10%
professional income is more than
P3,000,000.00
b. Non-individual Payee Rate
If the gross annual business or 10%
professional income did not exceed
P720,000.00
If the gross annual business or 15%
professional income is more than
P720,000.00

B. Pay the balance as you file the tax return,

computed as follows:

Income Tax Due P ___________

Less: Withholding Tax ___________
Net Income Tax Due* P ___________

*Note: When the tax due exceeds P2,000.00, the

taxpayer may elect to pay in two equal installments,
the first installment to shall be paid at the time
the return is filed and the second installment on or
before October 15 following the close of the
calendar year to the Authorized Agent Bank (AAB)
within the jurisdiction of the Revenue District Office
(RDO) where the taxpayer is registered

12) Is the Minimum Corporate Income Tax (MCIT)

an addition to the regular or normal income tax?

No, the MCIT is not an additional tax. An MCIT of

2% of the gross income as of the end of taxable
year (whether calendar or fiscal year, depending on
the accounting period employed) is imposed on a
corporation taxable under Title II of the Tax Code,
as amended, beginning on the 4th taxable year
immediately following the taxable year in which
such corporation commenced its business
operations when the MCIT is greater than the
regular income tax.  The MCIT is compared with
the regular income tax, which is due from a
corporation. If the regular income is higher than the
MCIT, then the corporation does not pay the MCIT
but the amount of the regular income tax.

13) Who are covered by MCIT?

The MCIT covers domestic and resident foreign

corporations which are subject to the regular
income tax. The term “regular income tax” refers to
the regular income tax rates under the Tax Code.
Thus, corporations which are subject to a special
corporate tax or to preferential rates under special
laws do not fall within the coverage of the MCIT.

For corporations whose operations or activities are

partly covered by the regular income tax and partly
covered by the preferential rate under special law,
the MCIT shall apply the regular income tax rate on
its operations not covered by the tax
incentives. Newly established corporations or firms
which are on their first 3 years of operations are not
covered by the MCIT.

14) When does a corporation start to be covered by

the MCIT?

A corporation starts to be covered by the MCIT on

the 4th year following the year of the
commencement of its business operations. The
period of reckoning which is the start of its business
operations is the year when the corporation was
registered with the BIR. This rule will apply
regardless of whether the corporation is using the
calendar year or fiscal year as its taxable year.

15) When is the MCIT reported and paid? Is it

quarterly?

The MCIT is paid on an annual basis and quarterly

basis. The rules are governed by Revenue
Regulations No. 12-2007.

16) How is MCIT computed?

The MCIT is 2% of the gross income of the

corporation at the end of the taxable year.

The computation and the payment of MCIT, shall

likewise apply at the time of filing the quarterly
corporate income tax as prescribed under Section
75 and Section 77 of the Tax Code, as amended. 
Thus, in the computation of the tax due for the
taxable quarter, if the computed quarterly MCIT is
higher than the quarterly normal income tax, the tax
due to be paid for such taxable quarter at the time
of filing the quarterly income tax return shall be the
MCIT which is two percent (2%) of the gross
income as of the end of the taxable quarter.

“Gross income” means gross sales less sales

returns, discounts and cost of goods sold. Passive
income, which have been subject to a final tax at
source do not form part of gross income for
purposes of computing the MCIT.
Cost of goods sold includes all business expenses
directly incurred to produce the merchandise to
bring them to their present location and use.

For trading or merchandising concern, cost of

goods sold means the invoice cost of goods sold,
plus import duties, freight in transporting the goods
to the place where the goods are actually sold,
including insurance while the goods are in transit.

For a manufacturing concern, cost of goods

manufactured and sold means all costs of
production of finished goods such as raw materials
used, direct labor and manufacturing overhead,
freight cost, insurance premiums and other costs
incurred to bring the raw materials to the factory or
warehouse.

For sale of services, gross income means gross

receipts less discounts and cost of services which
cover all direct costs and expenses necessarily
incurred to provide the services required by the
customers and clients including:

o Salaries and employees benefits of

personnel, consultants and
specialists directly rendering the
service;
o Cost of facilities directly utilized in
providing the service such as
depreciation or rental of equipment
used;
o Cost of supplies
Interest Expense is not included as part of cost of
service, except in the case of banks and other
financial institutions.

“Gross Receipts” means amounts actually or

constructively received during the taxable year.
However, for taxpayers employing the accrual basis
of accounting, it means amounts earned as gross
income.

17) What is the carry forward provision under the

MCIT?

Any excess of the MCIT over the normal income

tax may be carried forward and credited against the
normal income tax for the three (3) immediately
succeeding taxable years.

18) How would the MCIT be recorded for

accounting purposes?

Any amount paid as excess minimum corporate

income tax should be recorded in the corporation’s
books as an asset under account title “Deferred
charges-MCIT”

19) How long can we amend our income tax

return?

There is no prescription period for amending the

return. When the taxpayer has been issued a Letter
of Authority, he can no longer amend the return.

20) Can a benefactor of a senior citizen claim

him/her as additional dependent in addition to
his/her 3 qualified dependent children at Php25,000
each?

No, pursuant to Revenue Regulations 2-94, the

benefactor of a senior citizen cannot claim the
additional exemption. Further, additional
exemptions of individual taxpayers are removed
under RA 10963 (Tax Reform for Acceleration and
Inclusion).