Tax 100 Chapter 5 - Final Income Taxation PDF

INCOME TAXATION CHAPTER 5: FINAL INCOME TAXATION FEATURES OF FINAL INCOME TAXATION (FIT)  1. Final tax  2. Tax withholding at source  3. Territorial imposition  4. Imposed on certain passive income and persons not engaged in business in the Philippines ...

INCOME TAXATION CHAPTER 5: FINAL INCOME TAXATION FEATURES OF FINAL INCOME TAXATION (FIT)  1. Final tax  2. Tax withholding at source  3. Territorial imposition  4. Imposed on certain passive income and persons not engaged in business in the Philippines  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA-ETB NRA- DC RFC NRFC NETB A. INTEREST INCOME/YIELD- BANK DEPOSITS A1. Short term deposits to bank 20% 20% 20% 20% 25% 20% 20% 25% A2. Long term deposits to bank Exempt Exempt Exempt Exempt 25% RIT RIT 25% A3. Short term deposits to non-bank RIT RIT RIT RIT 25% RIT RIT 25% A4. Long term deposits to non-bank RIT RIT RIT RIT 25% RIT RIT 25% Examples % Put ✓ if subject to Final Amount of Situation Tax, x if otherwise Final Tax 20% A domestic corporation earned P20,000.00 1 interest income from RCBC Bank for a 3-year ✓ P4,000.00 time deposit - A resident citizen earned P30,000.00 interest 2 x (Exempt) - income from BDO for a 5-year time deposit - A resident alien earned P20,000.00 interest 3 income from a Lending Cooperative for a 1- x (RIT) - year time deposit  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA- NRA- DC RFC NRFC ETB NETB B. INTEREST INCOME/YIELD- DEPOSIT SUBSTITUTE (at least 20 lenders except for government securities) B1. Short term - bank 20% 20% 20% 20% 25% 20% 20% 25% B2. Long term - bank Exempt Exempt Exempt Exempt 25% RIT RIT 25% B3. Short term - non-bank 20% 20% 20% 20% 25% 20% 20% 25% B4. Long term - non-bank 20% 20% 20% 20% 25% RIT RIT 25% Examples Put ✓ if subject to Final % Amount of Situation Tax, x if otherwise Final Tax A domestic corporation earned - P20,000.00 interest income from 1 x (RIT) - government securities (15 lenders) with 5- year term A resident citizen earned P30,000.00 20% 2 interest income from BSP treasury bills (20 ✓ P6,000.00 lenders) with 3-year term  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA-ETB NRA- DC RFC NRFC NETB C. PRETERMINATION OF LONG-TERM INVESTMENT Holding Period Less than 3 years 20% 20% 20% 20% 25% RIT RIT 25% 3 years to less than 4 years 12% 12% 12% 12% 25% RIT RIT 25% 4 years to less than 5 years 5% 5% 5% 5% 25% RIT RIT 25% 5 years or more 0% 0% 0% 0% 25% RIT RIT 25% D. FOREIGN CURRENCY 15% Exempt 15% Exempt 25% 15% 15% 25% DEPOSITS TO FOREIGN CURRENCY DEPOSITORY BANK Examples  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA- NRA- DC RFC NRFC ETB NETB E. DOMESTIC DIVIDEND E1. Cash Dividend 10% 10% 10% 20% 25% Exempt Exempt 25%/15 % E2. Property Dividend 10% 10% 10% 20% 25% Exempt Exempt 25%/15 % E3. Scrip Dividend 10% 10% 10% 20% 25% Exempt Exempt 25%/15 % E4. Stock Dividend Exempt Exempt Exempt Exempt Exempt Exempt Exempt Exempt E.5 Liquidating Dividend Exempt Exempt Exempt Exempt Exempt Exempt Exempt Exempt Examples Put ✓ if subject to % Amount of Situation Final Tax, x if Final Tax otherwise 10% A domestic corporation declared a 1 P1,000,000 cash dividend to Resident ✓ P100,000 Citizen and Alien Shareholders A domestic corporation declared a 20% P1,000,000 property dividend to NRA- 2 ✓ P200,000 ETB Shareholders A domestic corporation declared a 25% P1,000,000 cash dividend to NRA-NETB 3 ✓ P250,000 Shareholders  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA- NRA- DC RFC NRFC ETB NETB F. FOREIGN CORPORATION RIT RIT RIT RIT RIT RIT RIT RIT DIVIDEND G. INTERCORPORATE DIVIDEND Exempt Exempt Exempt Exempt Exempt Exempt Exempt Exempt H. DIVIDEND FROM Exempt Exempt Exempt Exempt Exempt Exempt Exempt Exempt COOPERATIVE I. QUALIFIED FOREIGN SOURCE Exempt Exempt Exempt Exempt Exempt Exempt Exempt Exempt DIVIDENDS J. REAL ESTATE INVESTMENT 10% 10% Exempt Exempt Exempt Exempt Exempt Exempt TRUST (REIT) K. Share in the net income of 10% 10% 10% 20% 25% Exempt Exempt 25% business partnership, taxable associations, joint ventures, joint accounts, or co- ownership  Examples Put ✓ if subject to Final % Amount of Situation Tax, x if otherwise Final Tax A resident citizen venture earned P30,000.00 10% 1 ✓ P3,000.00 from profit sharing. A NRA-NETB partner earned P30,000.00 from 25% 3 profit sharing. ✓ P7,500.00 A resident alien partner earned P30,000.00 as - salary which was expensed in the books of the 4 X (RIT) - partnership  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA NRA- DC RFC NRFC -ETB NETB L. ROYALTIES L1. Printed Books, 10% 10% 10% 25% 25% 20% 20% 25% Literary Works and Musical Composition L2. Other sources 20% 20% 20% 25% 25% 20% 20% 25% L3. Active royalties RIT RIT RIT RIT 25% RIT RIT 25% Examples Put ✓ if subject to Final % Amount of Situation Tax, x if otherwise Final Tax 10% A resident citizen earned P30,000.00 royalties 1 from his printed books and literary works and ✓ P3,000.00 musical composition 20% A resident foreign corporation earned 2 P30,000.00 royalties from their books, literary ✓ P6,000.00 works and musical composition  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA- NRA- DC RFC NRFC ETB NETB M. PRIZES M1. Prizes received without Exempt Exempt Exempt Exempt Exempt Exempt Exempt Exempt effort (e.g. Nobel Prize, Most Outstanding Citizen) M2. Prizes from sports Exempt Exempt Exempt Exempt Exempt Exempt Exempt Exempt competition sanctioned by the national sport organization. M3. Prizes exceeding P10,000 20% 20% 20% 20% 25% RIT RIT 25% M4. Prizes not exceeding RIT RIT RIT RIT 25% RIT RIT 25% P10,000 Examples Put ✓ if subject to % Amount of Situation Final Tax, x if Final Tax otherwise - A resident citizen won P20,000.00 prize for 1 being the most outstanding citizen of the X (Exempt) - year - A resident alien won P20,000.00 prize 2 X (Exempt) - from national sports organization. 3 A NRA-NETB won P30,000.00 prize ✓ 25% P7,500.00  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA- NRA- DC RFC NRFC ETB NETB N. WINNINGS N1. PCSO Winnings not Exempt Exempt Exempt Exempt 25% Exempt Exempt 25% exceeding P10,000 (per ticket) N2. PCSO Winnings exceeding 20% 20% 20% 20% 25% 20% 20% 25% P10,000(per ticket) N3. Other domestic winning 20% 20% 20% 20% 25% RIT RIT 25% N4. Winnings from foreign RIT RIT RIT RIT 25% RIT RIT 25% sources Examples Put ✓ if subject to % Amount of Situation Final Tax, x if Final Tax otherwise - A resident citizen won P10,000.00 prize 1 X (Exempt) - from PCSO 20% A resident foreign corporation won 2 ✓ P6,000.00 P30,000.00 prize from PCSO A NRA-NETB won P30,000.00 prize from a 25% 3 singing contest ✓ P7,500.00  FINAL TAX PERCENTAGE PASSIVE INCOME RC NRC RA NRA- NRA- DC RFC NRFC ETB NETB O. TAX INFORMER’S 10% 10% 10% 10% 10% N/A N/A N/A REWARD P. TAX FREE CORPORATE 30% 30% 30% 30% 30% RIT RIT 30% COVENANT BONDS Q. FRINGE BENEFIT OF 35% 35% 35% 35% 25% N/A N/A N/A MANAGERIAL AND SUPERVISORY EMPLOYEES Q. INTEREST AND OTHER 10% 10% 10% 10% 10% 10% 10% 10% INCOME PAYMENTS TO DEPOSITORY BANK UNDER THE EXPANDED FOREIGN CURRENCY DEPOSIT Q. INCOME PAYMENTS TO 8% 8% 8% 8% 8% 8% 8% 8% SUBCONTRACTOR OR PETROLEUM SERVICE CONTRACTOR Examples Put ✓ if subject to % Amount of Situation Final Tax, x if Final Tax otherwise - A government employee provided 1 information to the BIR which led to X (N/A) - the recovery of P1,000,000 tax due 10% Gezell provided information to the 2 BIR which led to the recovery of ✓ P10,000.00 P1,000,000 tax due END OF LESSON THANK YOU!