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Partner in a
general
Individual Income Taxpayers Employee Self-employed Estates and trust
professional
partnership
Gross Income xxx xxx xxx xxx
Less: Allowable Deductions
Optional Standard Deduction or xxx xxx xxx
Itemized Deduction xxx xxx xxx xxx xxx xxx
Net Income xxx xxx xxx
Less: Personal Exemption 50K 50K 50K 20k
Additional Exemption 25k/child 25k/child 25k/child
Health Insurance Premiums 2400 xxx 2400 xxx 2400 xxx
Net Taxable Income xxx xxx xxx
Multiply by: Apply Tax Rates 02-32% 02-32% 02-32% 02-32%
Tax Due xxx xxx xxx xxx
Less: Tax Credits
Quarterly Income Tax Payments Xxx Xxx Xxx
Creditable Withholding Tax xxx xxx xxx xxx xxx xxx xxx
Tax Payable or (Refundable) xxx xxx xxx xxx
General Principles of Income Taxation in the Philippines
R. A. No, 8424, Sec 23.
- General Principles of Income Taxation in the Philippines
Exception of R.A. No. 8424
1. Filipino citizen residing here in the Philippines
- All income derived within or without the Philippine are TAXABLE.
2. A non-resident citizen
- Income derived within the Philippines are the ONLY TAXABLE.
3. A citizen of the Philippines who are overseas contract worker (OFW, Seaman, etc.)
- Income derived within the Philippines are ONLY TAXABLE.
4. An alien individual (Resident or not of the Philippines)
- Income derived within the country are the ONLY TAXABLE.
GROSS INCOME = ALL INCOME, from whatever source legal or illegal – EXCLUSIONS from Gross Income
How are Illegal Income Taxed when they are not filed with the BIR?
Illegal Income
- taxed using Net Worth Method.
What is the Legal Basis for the use of the Net Worth in computing the Taxable Income of the Individual Taxpayer?
Net Worth Method
- its use is founded on the 1997 Tax Code, under Section 43.
What is an exclusion from gross income?
Deduction
- is a subtraction from gross income to arrive at taxable income.
Exclusion
- not the same as deduction, does not even count as gross income. Exclusion may seem increases wealth.
Gross Income
- means all income derived from whatever source. It includes, but is not limited to, Compensation for services, in
whatever form paid.
- derived from the conduct of trade or business or the exercise of profession.
a. Gains derived from dealings in property.
b. Interests
c. Rent
d. Royalties
e. Dividends
f. Annuities
g. Prizes and winnings
h. Pensions
i. Partner’s distributive share from the net income of the general professional partnerships.
Classification of Income
1. Compensation Income
- refers to all kinds of items of remunerations/emoluments earned or received in return for services
rendered in an employer-employee relationship.
2. Business Income
- these earnings resulting or derived from its main line of commercial business activity, such as gross profit
from sales of goods or services.
- this refers to the income, profit or gain earned and derived from the conduct or pursuit of trade, business
or the exercise of a profession.
3. Passive Income
- means, gains or income items obtained from activities in which the taxpayer does not participate on a
regular and continuing basis.
Computation of Tax Payable or Refundable Compensation Income Business Income Passive Income