Individual income tax.feb.2011

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Individual Income Tax

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Individual income tax.feb.2011

  1. 2. Kinds of Individual Taxpayers <ul><li>Resident citizen (RC) </li></ul><ul><li>Non-resident citizen (NRC) </li></ul><ul><li>Resident alien (RA) </li></ul><ul><li>Non-resident alien engaged in trade or business (NRA-ETB) </li></ul><ul><li>Non-resident alien not engaged in trade or business (NRA-not ETB) </li></ul><ul><li>Special Alien Employees </li></ul><ul><li>Estates and Trust </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  2. 3. Importance of classification <ul><li>Classification greatly affects taxability </li></ul><ul><ul><li>Tax situs </li></ul></ul><ul><ul><li>Manner of computing taxes </li></ul></ul><ul><ul><li>Treatment on certain items </li></ul></ul><ul><ul><li>Allowable deductions </li></ul></ul><ul><ul><li>Special treatments on certain instances </li></ul></ul><ul><ul><li>References in the Tax Code </li></ul></ul>(Courtesy: www.philtaxation.blogspot.com )
  3. 4. Individual vs. Corporate <ul><li>Common to both </li></ul><ul><ul><li>Passive income </li></ul></ul><ul><ul><li>Capital gains tax </li></ul></ul><ul><ul><li>Stock transaction tax (1/2 of 1% on listed shares) </li></ul></ul><ul><ul><li>Allowable deductions </li></ul></ul><ul><ul><li>NOLCO applications </li></ul></ul><ul><ul><li>OSD, except as to base </li></ul></ul><ul><ul><li>Capital gains & losses, except on holding periods & carry-over </li></ul></ul>(Courtesy: www.philtaxation.blogspot.com )
  4. 5. Individual vs. Corporate <ul><li>Not in Corporate taxpayers </li></ul><ul><ul><li>Natural persons, except Estate & trusts </li></ul></ul><ul><ul><li>Personal Exemptions (Basic & Additional) </li></ul></ul><ul><ul><li>Health & hosp. insurance premium </li></ul></ul><ul><ul><li>Withholding tax on compensation </li></ul></ul><ul><ul><li>Holding period in CGT (50%/100%) </li></ul></ul><ul><ul><li>Senior citizens </li></ul></ul><ul><ul><li>Minimum wage income earner </li></ul></ul>(Courtesy: www.philtaxation.blogspot.com )
  5. 6. Individual vs. Corporate <ul><li>Not in Individual taxpayers </li></ul><ul><ul><li>Improperly Accumulated earnings Tax (IAET) </li></ul></ul><ul><ul><li>Minimum Corporate Income Tax (MCIT) </li></ul></ul><ul><ul><li>15% Gross income taxation system (GITS), upon President’s option </li></ul></ul>(Courtesy: www.philtaxation.blogspot.com )
  6. 7. Filipino Citizen (Section I, Art. III Constitution) <ul><li>Born w/ Filipino father and/or mother </li></ul><ul><li>Born before Jan.17, 1973 of Fil. Mother who elects Philippine citizenship upon age of majority </li></ul><ul><li>Acquired Philippine citizenship </li></ul><ul><ul><li>By naturalization; or </li></ul></ul><ul><ul><li>By repatriation </li></ul></ul>(Courtesy: www.philtaxation.blogspot.com )
  7. 8. Alien Individual Taxpayers <ul><li>Foreign-born person who is not qualified to acquire Philippine Citizenship by birth or after birth; </li></ul><ul><li>If qualified, have not yet been considered a Filipino taxpayer during the taxable year </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  8. 9. Resident Citizen <ul><li>Domiciled or residing in the Philippines during the taxable year; </li></ul><ul><li>Have not traveled outside the Philippines for more that 183 days during the taxable year; </li></ul><ul><li>Taxable on income from within and without the Philippines (Sec. 23(A), NIRC) </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  9. 10. Non-resident Citizen <ul><li>Citizen having physical presence abroad with definite intention to reside therein </li></ul><ul><li>Citizen who leaves Phils. to reside abroad either as immigrant or for employment on a permanent basis </li></ul><ul><li>Citizen working and deriving income abroad and whose employment requires physical presence abroad most of the time (183 days or more); </li></ul><ul><li>NRC who returned to Phils. to reside permanently - for taxable year of arrival in Phils. </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  10. 11. Non-resident Citizen <ul><li>Codal Reference-Sec. 22(E), NIRC </li></ul><ul><li>Taxable on income from within the Philippines only (Sec. 23(B), NIRC); </li></ul><ul><li>Examples of NRC: </li></ul><ul><ul><li>OFWs/OCW </li></ul></ul><ul><ul><li>Seaman : member of complement of vessel engaged exclusively in int’l trading. (BIR Ruling No. 12-99) </li></ul></ul><ul><ul><li>TNT’s abroad </li></ul></ul>(Courtesy: www.philtaxation.blogspot.com )
  11. 12. Resident Alien <ul><li>Alien residing or domiciled in the Philippines (Sec. 22(F)) </li></ul><ul><li>Factors: intention of stay and duration </li></ul><ul><li>Taxable on income from within the Philippines only (Sec. 23(D), NIRC); </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  12. 13. Non-Resident Alien (NRA) <ul><li>Alien not residing or domiciled in the Philippines (Sec. 22(G), NIRC) </li></ul><ul><li>Further classifications </li></ul><ul><ul><li>Engaged in trade or business (NRA-ETB); or </li></ul></ul><ul><ul><li>Not engaged in trade or business(NRA not ETB) </li></ul></ul>(Courtesy: www.philtaxation.blogspot.com )
  13. 14. NRA Engaged in trade or business (NRA-ETB) <ul><li>Aliens engaged in trade or business in the Philippines, though not a resident in the country; </li></ul><ul><li>Stayed in the Philippines for more than 180 days on aggregate </li></ul><ul><li>Length of stay presupposes doing business </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  14. 15. NRA not Engaged in trade or business (NRA-ETB) <ul><li>Aliens not engaged in trade or business in the Philippines; </li></ul><ul><li>Stayed in the Philippines for not more than 180 days on aggregate; </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  15. 16. Estates and Trusts (Sec. 60-66, NIRC) <ul><li>Estates – taxable during the period when title to properties are not yet finally transferred to the successors </li></ul><ul><li>Trusts – an obligation imposed on a right to administer over a property given to a person for the benefit of the other; </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  16. 17. Kinds of taxable income <ul><li>Passive income subject to final taxes (IRWDD) </li></ul><ul><li>Capital gains subject to capital gains taxes (CGT: shares/real property) </li></ul><ul><li>Ordinary income subject to schedular rates (NIRC Tax table) </li></ul><ul><li>Special income subject to special rates (e.g. PEZA 5% special tax regime) </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  17. 18. Types of individual income tax <ul><li>Ordinary income tax </li></ul><ul><li>Capital gains tax (CGT)on shares of stocks and real properties </li></ul><ul><li>Final income tax on passive income </li></ul><ul><li>Stock transaction tax (though under OPT in the Tax Code) </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  18. 19. Formula: Pure compensation <ul><li>Gross compensation income P xxx </li></ul><ul><li>Less: Personal exemptions </li></ul><ul><li>Basic Personal exemption xxx </li></ul><ul><li>Additional personal exemption xxx </li></ul><ul><li>Health & hospitalization xxx xxx </li></ul><ul><li>Taxable net income P xxx </li></ul><ul><li>Tax table (5-32%) P xxx </li></ul><ul><li>Less: W/holding tax on compensation xxx </li></ul><ul><li>Tax due & payable P xxx </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  19. 20. Formula: Trade/bus./profession <ul><li>Gross sales/receipts P xxx </li></ul><ul><li>Less: Cost of sales xxx </li></ul><ul><li>Gross profit P xxx </li></ul><ul><li>Less: Allowable deductions xxx </li></ul><ul><li>Net income before PE P xxx </li></ul><ul><li>Less: Personal exemptions </li></ul><ul><li>Basic Personal exemption P xxx </li></ul><ul><li>Additional personal exemp. xxx </li></ul><ul><li>Health & hospitalization xxx P xxx </li></ul><ul><li>Taxable net income P xxx </li></ul><ul><li>Tax table (5-32%) P xxx </li></ul><ul><li>Less: Creditable w/holding taxes xxx </li></ul><ul><li>Tax due & payable P xxx </li></ul>(Courtesy: www.philtaxation.blogspot.com )
  20. 21. Summary of individual applications (Courtesy: www.philtaxation.blogspot.com ) Income RC RA NRC NRA-ETB NRA-nETB SAE Taxable W/in & W/out Within Within Within Within Within GCI 5-32% 5-32% 5-32% 5-32% 25% 15% GBI/GPI 5-32% 5-32% 5-32% 5-32% n/a 5-32% COS-AD Yes Yes Yes Yes n/a RA/NRA BPE Yes Yes Yes Yes, cond. n/a RA/NRA APE Yes Yes, cond. Yes n/a n/a RA/NRA HHIP Yes Yes Yes Yes n/a Variable Foreign tax credits Yes n/a n/a n/a n/a n/a
  21. 22. Summary of individual applications (Courtesy: www.philxaation.blogspot.com ) Summary continued… Income RC RA NRC NRA-ETB NRA-nETB SAE CGT-share 5/10% 5/10% 5/10% 5/10% 5/10% RA/NRA CGT-RP 6% 6% 6% 6% 6% RA/NRA Cap. Gains 5-32% 5-32% 5-32% 5-32% 25% RA/NRA Cap. losses Yes Yes Yes Yes Yes RA/NRA Interest 20% 20% 20% 20% 25% RA/NRA <ul><li>EFCDS </li></ul>7.5% 7.5% Exempt Exempt Exempt RA/NRA <ul><li>Term </li></ul>0%/5%/12%/20% 0%/5%/12%/20% 0%/5%/12%/20% 0%/5%/12%/20% 25% RA/NRA
  22. 23. (Courtesy: www.pihiltaxation.blogspot.com) Summary continued… Income RC RA NRC NRA-ETB NRA-nETB SAE Royalties 20% 20% 20% 20% 25% RA/NRA - books 10% 10% 10% 10% 25% RA/NRA Prizes/Winnings 20% 20% 20% 20% 25% RA/NRA - P10k 5-32% 5-32% 5-32% 5-32% 25% RA/NRA - PCSO/Lotto Exempt Exempt Exempt Exempt Exempt RA/NRA Info. reward 10% 10% 10% 10% 10% RA/NRA Partnership - GPP 5-32% n/a 5-32% n/a n/a RA/NRA - OP 6/8/10% 6/8/10% 6/8/10% 6/8/10% n/a RA/NRA
  23. 24. Summary continued… (Courtesy: www.philtaxaation.blogspot.com.com ) Income RC RA NRC NRA-ETB NRA-nETB SAE Dividend - Dom. Corp 6/8/10% 6/8/10% 6/8/10% 6/8/10% 25% RA/NRA - For. Corp. 5-32% Exempt Exempt Exempt Exempt Exempt - Stock div. Exempt Exempt Exempt Exempt Exempt Exempt FBT /68%*32% /68%*32% /68%*32% /68%*32% /75%*25% /85%*15%
  24. 25. <ul><li>“ Taxes affects lives, care for taxes and save lives” </li></ul><ul><li>(Courtesy: philtaxation.blogspot.com) </li></ul><ul><li>End of slides </li></ul><ul><li>Thank you! </li></ul>

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