We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Philippines Income Tax Rates Essay Sample

essay
  • Pages: 5
  • Word count: 1,173
  • Rewriting Possibility: 99% (excellent)
  • Category: income Tax

Get Full Essay

Get access to this section to get all help you need with your essay and educational issues.

Get Access

Introduction of TOPIC

The above rates also apply to individuals who derive income from business (including capital gains from the sale transfer or exchange of shares in a foreign corporation) or from the practice of a profession. Individuals occupying managerial and highly technical positions employed by RHQs, ROHQs, multinational companies, offshore business units and petroleum service contractors/subcontractors are taxed at 15% on their gross income. Income is divided into the following three categories which are taxed separately, as summarized below. Compensation employment income: This income is taxed at progressive rates on gross income after deduction of personal and additional exemptions but without deductions for expenses. Passive income: This income (i.e. dividends, certain interest, royalties, etc.) is subject to final withholding tax only. Business income and professional income: This income is taxed at progressive rates on net business income, or income from the practice of a profession, i.e. after deduction of certain specified expenses and any excess of personal and additional exemptions over compensation income.

TAXABLE INCOME
RESIDENT CITIZENS
Resident citizens of the Philippines are taxed on all their net income derived from sources within and without the Philippines.

ALIEN INDIVIDUALS
An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines. Resident aliens are taxed in the same manner as resident citizens on income sourced within the Philippines. Tax is generally withheld in sufficient amounts from salary and wages to satisfy the final tax liability. If not, then the balance must be paid when filing the return, which is required on or before 15 April of the year following the year of income. In some cases, income tax liability may be paid in two equal installments.

OPTIONAL STANDARD DEDUCTION (OSD)
Except for individuals earning compensation income, resident citizens, non-resident citizens, and resident aliens shall be allowed to claim OSD in lieu of the itemized deductions of ordinary and necessary expenses paid or incurred during the year. The OSD allowed shall be a maximum of 40% of gross sales or gross receipts without deduction of the cost of sales or cost of services. The computation and the payment using the OSD shall likewise apply at the time of filing of the quarterly income tax return.

Basis – Resident citizens are taxed on worldwide income; resident aliens and nonresidents pay tax only on Philippine source income. However, foreign individuals can avail themselves of preferential tax treatment or may be exempt from income tax under applicable tax treaties, subject to a confirmatory ruling from the BIR.

Residence – All citizens are ordinarily considered resident unless they meet the requirements to be deemed

nonresident. The residence of foreign workers is generally established when the aggregate length of

Sorry, but full essay samples are available only for registered users

Choose a Membership Plan
stay in any calendar year exceeds 180 days.

Tax Filing status – Married couples in the Philippines who do not derive income purely from compensation always must file a joint income tax return.

Taxable income – Taxable personal income is all income less allowable deductions and personal exemptions. It includes compensation, business income, capital gains (arising from the sale of real property and share transactions), dividends, interest, rents, royalties, annuities, pensions and a partner’s distributive share of the net income of general professional partnerships. Minimum wage earners (MWEs) are exempt from the payment of income tax on their taxable income. Holiday pay, overtime pay, night shift differential pay and hazard pay received by such MWEs also is exempt. However, an employee who receives/earns additional compensation, such as commissions, honoraria, fringe benefits, benefits in excess of the non-taxable ceiling of PHP 30,000 taxable allowances and taxable income other than the exempt remuneration mentioned above do not qualify as an MWE and, therefore, his/her entire earnings are not exempt from income tax. In lieu of itemized deductions, an individual may elect to use the optional standard deduction (OSD), which may not exceed 40% of the total gross income, in computing taxable income for the taxable quarter/year. However, once an election is made to use the OSD, it is irrevocable for the taxable year for which the return is made.

Capital gains – An individual is subject to capital gains tax on the sale of real property at a rate of 6% of the gross sales price or current fair market value, whichever is higher. An individual is also subject to capital gains tax on the sale of shares not traded on the stock exchange at a rate of 5% of the net gain not exceeding PHP 100,000, and 10% on the excess. Gains derived from the sale of shares listed and traded on the stock exchange are taxed at one-half of 1% of the gross sales price.

Tax Deductions and tax allowances – Subject to certain restrictions, deductions are granted for premium payments on health and/or hospitalization insurance. Personal allowances are available to the taxpayer and his/her spouse, and qualified dependent children.

Other taxes on individuals:
Capital duty – No
Stamp duty – Various rates of duty apply depending on the type of document. Capital acquisitions tax – No
Real property tax – A property tax is imposed on real property at a rate that depends on the property’s location. The tax should not exceed 3% of the assessed value per the tax declaration. Inheritance/estate tax – Tax is imposed on the net estate of both residents and nonresidents at rates between 5% and 20%. Net wealth/net worth tax – No

Social security contributions – The employee is required to pay monthly contributions (ranging from PHP 33.30 to PHP 500) to the social security system based on his/her salary bracket.

Administration and compliance:
Philippines Tax year – Philippines tax year is the calendar year Tax Filing and payment of tax – Tax returns are due on or before 15 April after the close of the tax year. Tax on compensation income is withheld monthly by the employer either manually or through the Electronic Filing and Payment System on or before the 10th day of the month following the month in which withholding was made for the months of January to November, and on or before 15 January of the following year for the month of December.

Individuals receiving only compensation income from one employer during the taxable year may qualify for substituted filing provided the amount of tax due equals the amount of tax withheld by the employer at the end of the taxable calendar year. In case of married individuals, the same requirements must be met to qualify for substituted filing. Penalties – Late payments incur a penalty equal to 25% of the amount due. Annual interest of 20% is assessed on the unpaid amount from the due date until fully paid. A compromise penalty will be based on the tax due exclusive of the 25% surcharge and 20% interest.

We can write a custom essay on

Philippines Income Tax Rates Essay Sample ...
According to Your Specific Requirements.

Order an essay

You May Also Find These Documents Helpful

Consumption and distribution of income Economic

Through the study of production, consumption and distribution of income Economics enables me to learn the more pressing matters which happens in society which is the misallocation of resources. By studying Economics I wish to explore the subject deeper which would enable me to fully grasp how Economics can be harnessed to reduce inequality and to increase employment. Reading further into the subject enabled me to explore more into the behavioural economic through various ways such as classical theories like ‘The Wealth of Nations’ Smith delivers quite the persuasive argument as to why countries should engage with free trade as the benefits from that would be the economy would have an increased purchasing power and it would improve the economic growth of the economy. The most intriguing part of the book would be the idea of the ‘invisible hand’, which specifies that when the economy is left to the free...

A Study on Budget and Budgetary Control

The best method to monitor variance between actual and budgeted performance is “Budgetary control”. According to Brown & Howard, “Budgetary control” is “a system of cost control based on comparing actual performance with the budgeted and acting upon results to achieve maximum profitability”. Monitoring the organization’s performance by continuously comparing the actual results with the budgeted figures is of vital importance in any manager’s role. The main objective of this comparison is to identify discrepancies, which are known as “variances”. (Definitions: http://www.yourarticlelibrary.com/organization/budgetary-control/budgetary-control-meaning-objectives-and-essentials/53355/). A “budget variance” can be defined as “a periodic measure to quantify the difference between budgeted and actual figures”. A “favorable budget variance” is a “positive variance that happens when revenues come in higher than budgeted or expenses are higher than predicted”. An “unfavorable budget variance” is “a negative variance that happens when revenues are lower than budgeted or expenses are higher than predicted” (Definitions http://www.investopedia.com/terms/b/budget-variance.asp & http://www.investopedia.com/terms/u/unfavorable-variance.asp)....

Accounting Assignment: Clubs

1. A major part of the club’s income is Membership fees. This is a fee paid by members. It is paid annually at R120 for juniors and R450 for adults. The Membership fees is a fixed amount so that along with additional income it covers the clubs expenses. There are usually Membership fees outstanding as well as people who pay in advance. Entrance fees is also a part of the clubs income. This is paid by new members who join the club. This fee is only paid once and stands at R200 for juniors and R400 for adults. The club also has a tuck-shop that sells refreshments as well as a coffee bar. The club also has a shop that sells jerseys and socks. The club also gets money if they win a tournament. 2. As the club enters tournaments it has to pay Affiliation fees. The club has to...

Popular Essays

logo

Emma Taylor

online

Hi there!
Would you like to get such a paper?
How about getting a customized one?