Article 10p. 10

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

(1) An income tax is hereby imposed:

(a) On the taxable income defined in Section 31 of this

Code,

other

than

income

subject

to

tax

under

Subsections (B), (C), and (D) of this Section, derived for

each taxable year from all sources within and without the

Philippines by every individual citizen of the Philippines

residing therein;

(b) On the taxable income defined in Section 31 of this

Code,

other

than

income

subject

to

tax

under

Subsections (B), (C), and (D) of this Section, derived for

each taxable year from all sources within the Philippines

by an individual citizen of the Philippines who is residing

outside of the Philippines including overseas contract

workers referred to in Subsection (C) of Section 23 hereof;

and

(c) On the taxable income defined in Section 31 of this

Code,

other

than

income

subject

to

tax

under

Subsections (B), (C), and (D) of this Section, derived for

each taxable year from all sources within the Philippines

by an individual alien who is a resident of the Philippines.

(2) Rates of Tax on Taxable Income of Individuals.

— The tax shall be computed in accordance with and at

the rates established in the following schedule:

(a)

Tax

Schedule

Effective

January

1,

2018

until

December 31, 2022:

Not over P250,000

0%

Over P250,000 but not over

P400,000

20% of the excess

over P250,000

Over P400,000 but not over

P800,000

P30,000 + 25% of the

excess over P400,000

Over P800,000 but not over

P2,000,000

P130,000 + 30% of the

excess over P800,000

Over P2,000,000 but not

over P8,000,000

P490,000 + 32% of

the excess over

P2,000,000

Over P8,000,000

P2,410,000 + 35% of

the excess over

P8,000,000

Tax Schedule Effective January 1, 2023 and onwards:

Not over P250,000

0%

Over P250,000 but not over

P400,000

15% of the excess over

P250,000

Over P400,000 but not over

P800,000

P22,500 + 20% of the

excess over P400,000

Over P800,000 but not over

P2,000,000

P102,500 + 25% of the

excess over P800,000

Over P2,000,000 but not

over P8,000,000

P402,500 + 30% of

the excess over

P2,000,000

Over P8,000,000

P2,202,500 + 35% of

the excess over

P8,000,000

For

married

individuals,

the

husband

and

wife,

subject to the provision of Section 51(D) hereof, shall

compute separately their individual income tax based on

their respective total taxable income: Provided , That if any

income cannot be definitely attributed to or identified as

income exclusively earned or realized by either of the

spouses, the same shall be divided equally between the

spouses for the purpose of determining their respective

taxable income.

Provided , That minimum wage earners as defined in

Section 22(HH) of this Code shall be exempt from the

payment of income tax on their taxable income: Provided,

further , That the holiday pay, overtime pay, night shift

differential

pay

and

hazard

pay

received

by

such

minimum wage earners shall likewise be exempt from

income tax.

(b) Rate of Tax on Income of Purely Self-employed

Individuals and/or Professionals Whose Gross Sales or

Gross Receipts and Other Non-operating Income Does

Not Exceed the Value-added Tax (VAT) Threshold as

Provided

in

Section

109(BB) .

—

Self-employed

individuals and/or professionals shall have the option to

avail of an eight percent (8%) tax on gross sales or gross

receipts and other non-operating income in excess of

Two hundred fifty thousand pesos (P250,000) in lieu of

the

graduated

income

tax

rates

under

Subsection

(A)(2)(a) of this Section and the percentage tax under

Section 116 of this Code.

(c)

Rate

of Tax for Mixed Income Earners. —

Taxpayers

earning

both

compensation

income

and

income from business or practice of profession shall be

subject to the following taxes:

(1)

All

Income

from

Compensation — The rates

prescribed under Subsection (A)(2)(a) of this Section.

(2) All Income from Business or Practice of Profession

—

(a) If Total Gross Sales and/or Gross Receipts and

Other Non-operating Income Do Not Exceed the VAT

Threshold as Provided in Section 109(BB) of this Code. —

The rates prescribed under Subsection (A)(2)(a) of this

Section on taxable income, or eight percent (8%) income

tax based on gross sales or gross receipts and other

non-operating income in lieu of the graduated income

tax rates under Subsection (A)(2)(a) of this Section and

the percentage tax under Section 116 of this Code.

(b) If Total Gross Sales and/or Gross Receipts and

Other Non-operating Income Exceeds the VAT Threshold

as Provided in Section 109(BB) of this Code. — The rates

prescribed under Subsection (A)(2)(a) of this Section.

(B) Rate of Tax on Certain Passive Income: —

(1) Interests, Royalties, Prizes, and Other Winnings .

— A final tax at the rate of twenty percent (20%) is hereby

imposed upon the amount of interest from any currency

bank deposit and yield or any other monetary benefit

from deposit substitutes and from trust funds and similar

arrangements; royalties, except on books, as well as other

literary works and musical compositions, which shall be

imposed a final tax of ten percent (10%); prizes (except

prizes amounting to Ten thousand pesos (P10,000) or less

which shall be subject to tax under Subsection (A) of

Section

24;

and

other

winnings

(except

winnings

amounting to Ten thousand pesos (P10,000) or less from

Philippine Charity Sweepstakes and Lotto which shall be

exempt), derived from sources within the Philippines:

Provided, however , That interest income received by an

individual taxpayer (except a nonresident individual) from

a depository bank under the expanded foreign currency

deposit system shall be subject to a final income tax at

the rate of fifteen percent (15%) of such interest income:

Provided, further , That interest income from long-term

deposit or investment in the form of savings, common or

individual trust funds, deposit substitutes, investment

management accounts and other investments evidenced

by certificates in such form prescribed by the Bangko

Sentral ng Pilipinas (BSP) shall be exempt from the tax

imposed under this Subsection: Provided, finally , That

should the holder of the certificate pre-terminate the

deposit or investment before the fifth (5th) year, a final

tax shall be imposed on the entire income and shall be

deducted and withheld by the depository bank from the

proceeds

of

the

long-term

deposit

or

investment

certificate based on the remaining maturity thereof:

Four (4) years to less than five (5) years - 5%;

Three (3) years to less than (4) years - 12%; and

Less than three (3) years - 20%

(2) Cash and/or Property Dividends . — A final tax at

the rate of ten percent (10%) shall be imposed upon the

cash and/or property dividends actually or constructively

received by an individual from a domestic corporation or

from a joint stock company, insurance or mutual fund

companies

and

regional

operating

headquarters

of

© Compiled by RGL

10 of 201