Income Tax for Individuals

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What is Gross Income?

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Gross Income includes all items of income that are neither excluded in gross income nor subjected to final tax or capital gains tax.

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What are Allowable Deductions?

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Allowable Deductions are deductions from gross income that are allowed by law, commonly comprised of business expenses.

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What types of passive income are subject to Final Withholding Tax in the Philippines?

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Passive income subject to Final Withholding Tax includes interest from deposits, royalties, prizes over P10,000, winnings over P10,000, dividends from domestic corporations, and certain interest incomes.

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What is the tax treatment for Non-Resident Aliens not engaged in trade or business (NRA-NETB)?

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NRA-NETBs are subject to a 25% final tax.

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What is the Graduated Income Tax Table?

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The Graduated Income Tax Table applies to purely compensation income earners, who earn income purely from employment.

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What is the four-fold test to establish an employer-employee relationship?

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The four-fold test includes: 1) Selection and engagement of the employee, 2) Payment of wages/salaries, 3) Power of dismissal, 4) Power to control employee’s conduct.

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What constitutes Regular Compensation?

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Regular Compensation includes basic salary, employee allowances (except de minimis), and other taxable regular compensation.

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What are Non-taxable Compensation items?

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Non-taxable Compensation includes exempt retirement benefits, exempt separation benefits, de minimis benefits, mandatory contributions, and compensation of minimum wage earners.

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What are De Minimis Benefits?

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De Minimis Benefits are non-taxable allowances and perks of small value given to employees, not subject to income tax unless exceeding limits set by regulations.

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What is the 13th Month Pay?

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The 13th Month Pay is a mandatory annual benefit calculated by dividing the total basic salary for the year by 12.