👤Individual Income Tax (TRAIN Law)
Tax Rates (Effective 2023 onwards)
| Taxable Income (PHP) | Tax Rate |
|---|---|
| 0 - 250,000 | 0% |
| 250,001 - 400,000 | 15% of excess over 250,000 |
| 400,001 - 800,000 | 22,500 + 20% of excess over 400,000 |
| 800,001 - 2,000,000 | 102,500 + 25% of excess over 800,000 |
| 2,000,001 - 8,000,000 | 402,500 + 30% of excess over 2,000,000 |
| Over 8,000,000 | 2,202,500 + 35% of excess over 8,000,000 |
Optional Standard Deduction (OSD)
- Individual: 40% of gross sales/receipts
- Corporation: 40% of gross income
8% Flat Tax Option
Self-employed/professionals with gross sales/receipts not exceeding P3M may opt for 8% on gross sales in lieu of graduated rates and percentage tax.
🏢Corporate Income Tax (CREATE Law)
Regular Corporate Income Tax (RCIT)
| Type | Rate | Condition |
|---|---|---|
| Regular Domestic Corp | 25% | General rate |
| Small Corporation | 20% | Net income ≤ P5M AND Total assets ≤ P100M |
| Proprietary Educational | 1% | Until June 30, 2023 (then 10%) |
Minimum Corporate Income Tax (MCIT)
Rate: 2% of gross income (was 1% during pandemic relief)
Applicable beginning 4th taxable year. Pay the higher of RCIT or MCIT.
Excess MCIT: Creditable against RCIT for 3 succeeding years.
Improperly Accumulated Earnings Tax (IAET)
Rate: 10% on improperly accumulated taxable income
Does not apply to publicly-held corporations, banks, insurance companies, and other exempt entities.
📦Value-Added Tax (VAT)
VAT Basics
Rate & Threshold
- Rate: 12%
- Threshold: Gross sales/receipts exceed P3,000,000
- Below threshold: Subject to 3% OPT (percentage tax)
VAT Formula
VAT Payable = Output VAT - Input VAT
Output = VAT on sales
Input = VAT on purchases (creditable)
VAT Classifications
Vatable (12%)
Sale of goods, properties, and services in the ordinary course of business
Zero-Rated (0%)
Export sales, services to non-residents (foreign currency), international shipping/air transport
Input VAT is creditable/refundable
VAT Exempt
Agricultural products (original state), educational services, medical/dental/hospital services, lease of residential units ≤P15K/month
Input VAT is NOT creditable
🏠Transfer Taxes
Estate Tax
Rate: 6% of net estate
Deductions:
- Standard Deduction: P5,000,000
- Family Home: Up to P10,000,000
- Claims against estate
- Claims against insolvent persons
- Transfers for public use
Donor's Tax
Rate: 6% of total gifts exceeding P250,000
Exempt Donations:
- Gifts to government
- Gifts to educational/charitable institutions
- Donations between spouses (legal)
- First P250,000 per year
✂️Withholding Taxes
| Type | Rate |
|---|---|
| Final Tax on Interest (Banks) | 20% |
| Final Tax on Dividends (Domestic) | 10% |
| Capital Gains Tax (Real Property) | 6% of selling price or FMV (higher) |
| Capital Gains Tax (Shares - unlisted) | 15% of net capital gains |
| Stock Transaction Tax (listed) | 6/10 of 1% of gross selling price |
Key Reminders
Individual
- First P250K = Tax-free
- 8% option: Gross ≤ P3M
- OSD = 40% of gross
Corporate
- Regular = 25%
- Small Corp = 20%
- MCIT = 2% of gross income