Documente Academic
Documente Profesional
Documente Cultură
RA 10963
HIGHLIGHTS
• Lowering of graduated income tax rates for
individuals
• Option of 8% in lieu of graduated income tax and
percentage tax under Section 116 for Non-VAT TP
• Repeal of Section on personal/additional exemptions
• Exemption from tax of 1st P250,000 compensation
income and purely self-employed income
• Gross Benefits Exclusions from P82,000 to P90,000
HIGHLIGHTS
• Increase of the VAT Threshold to P3,000,000
• 7. Exempting Condo and HA Association dues
from VAT
• 8. Exempting hypertension/diabetes medicines
from. VAT
• 9. Increase of exempt residential rental to
P15,000
• 10. Residential lot reduced from P1,919,200 to
P1.5M
• 11. Residential H & L reduced from P3,919,200 to
P2.5M
HIGHLIGHTS
• Excise Tax on Sweetened Beverages
• Excise Tax on Invasive Procedure
• Quarterly payment of Percentage Taxes
• Change filing of 1st Quarterly ITR from Apr 15 to
May 15
• Interest at double the legal interest rate for loans
• Increasing of Threshold for audit to P3,000,000
• EWT for Professionals with P3M or less Gross PF
reduced to 5% or 10% as the case may be
• 16. Reduction of Estate Tax from graduated to 6%
• 17. Reduction of Donor’s Tax from graduated to 6%
• 18. Increase of Standard Deduction for estate to P5M
• 19. Increase of family home for estate tax to P10M
• 20. 12-page ITR has been reduced to only 4 pages.
INCOME TAXATION
INCOME TAX SYSTEM IN THE PHILS.
GLOBAL SCHEDULAR
o Business Income o Interest Income
o Professional Income o Sale of Shares of Stocks
o Rental of properties o Sale of Real properties
o Compensation Income o Dividend Income
o Commission o Royalties
o Transportation Allowance o Prizes
o Representation o Winnings
Allowance o Pensions
o Director’s Fees o Fringe Benefits
o All income subject to o All Income subject to
Creditable Withholding Final Withholding
Tax Tax(FWT)
o All income not subjected
to CWT and FWT
CLASSIFICATION OF INDIVIDUALS
EMPLOYEE – under an employer-employee relationship
• B. RANK-AND-FILE
• C. SUPERVISORY OR MANAGERIAL
CLASSIFICATION OF SEL-EMPLOYED
• I.
• With Sales or Gross Receipts of 3M and below
• II.
• Opting to pay 8% tax in lieu of IT and Percentage Tax
• Income tax based on the graduated income tax rates for individuals
under Sec 24
Rules on Income
Tax for Self-Employed
• Professional Fee is subject to Creditable Withholding -
Tax (CWT) of 8% if paid by W-Tax Agents.
• Files Form 1701Q during the 1st three quarters and final
ITR Form 1701 for the entire year.
Formula
For 8% Self-employed P3M or <
• Gross Sales/Receipts Less: P250,000
• Equals: Net Amount Taxable
• Multiply by 8% Equals: Tax Due
• Less: Creditable W-Tax
• Equals: Payable or Refundable
Formula for Graduated Rates Self-
Employed > P3M
• Gross Sales/Receipts
• Less: Cost of Sales/Service
• Equals: Gross income
• Less: Allowable Deductions
• Equals: Net taxable income
• Multiplied by applicable rate (graduated)
• Equals: Income tax due
• Less: Creditable W-Tax
• Equals: Payable or Refundable
Rules on Income Tax
for Mixed Income
• The compensation income shall be subject to the tax
rates prescribed under Section 24(A)(2)(a) of the Tax
Code, as amended;
AND
• The income from business or practice of profession shall
be subject to either 8% income tax or graduated rates,
depending on the amount of Gross Receipts
Rules on Income Tax
for Mixed Income 3M Up
• If the gross professional fee and other non-operating
income exceeds P3M there is no option:
• Answer:
1. The option to avail of the 8% income tax rate must be
signified annually, on or before May 15;
• Ans: Yes.
Q &A
RMC 50-2018
• Q: What are the applicable withholding taxes for
individual under a contract of service or job order
arrangement considered self-employed?
• Answer:
• Hired by Public or Gov’t Sector – withhold income and
business tax. However, if earning P250,000 from one
single payee – exempt from income tax upon submission
of Annex B-2 under Rr 11-2018 together with the copy of
the COR and percentage tax if employee signified the
option to avail of 8% income tax regime
Q &A
RMC 50-2018
• Q 28 What are the applicable withholding taxes for
individual under a contract of service or job order
arrangement considered self-employed?
• Answer:
• Hired by Private Sector – withhold income tax only.
However, if earning P250,000 from one single payee –
exempt from income tax upon submission of Annex B-2
under RR 11-2018 together with the copy of the COR
Q &A
RMC 50-2018
• Q : Are those availing of 8% income tax rate required to
file Financial Statements when filing ITR?
• Answer: NO
Q &A
RMC 50-2018
• Q: If a professional or self-employed did not avail
of 8% and opt for the graduated rates table but
claimed OSD, can he be exempt form FS
submission?
• Answer: YES
BUSINESS TAXATION
(TRAIN LAW)
Classification of Taxpayers For Business
Tax Purposes
SELF-EMPLOYED
VAT TP NON-VAT TP