Provided, That Minimum Wage Earners As Defined in Section 22 (HH) of This Code Shall
Provided, That Minimum Wage Earners As Defined in Section 22 (HH) of This Code Shall
Provided, That Minimum Wage Earners As Defined in Section 22 (HH) of This Code Shall
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, pay received by such minimum wage earners shall likewise be EXEMPT
from income tax.
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 (₱250,000) 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.
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 (₱10,000) or less which shall be
subject to tax under Subsection (A) of Section 24; and
other winnings (EXCEPT winnings amounting to Ten thousand pesos (₱10,000) 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 multinational companies, or on the share of an individual in the distributable
net income after tax of a partnership (EXCEPT a general professional partnership) of which he is a
partner, or on the share of an individual in the net income after tax of an association, a joint account, or
a joint venture or consortium taxable as a corporation of which he is a member or co-venturer.
C. Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange. - The provisions of Section
39(B) notwithstanding, a final tax at the rate of fifteen percent (15%) is hereby imposed upon the net capital
gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in
a domestic corporation, except shares sold, or disposed of through the stock exchange.
D. Capital Gains from Sale of Real Property. –
1. In General. - The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based
on the gross selling price or current fair market value as determined in accordance with Section 6(E) of
this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized
from the sale, exchange, or other disposition of real property located in the Philippines, classified as
capital assets, including pacto de retro sales and other forms of conditional sales, by individuals,
including estates and trusts: Provided, That the tax liability, if any, on gains from sales or other
dispositions of real property to the government or any of its political subdivisions or agencies or to
government-owned or controlled corporations shall be determined either under Section 24 (A) or
under this Subsection, at the option of the taxpayer.
2. Exception. - The provisions of paragraph (1) of this Subsection to the contrary notwithstanding, capital
gains presumed to have been realized from the sale or disposition of their principal residence by
natural persons, the proceeds of which is fully utilized in acquiring or constructing a new
principal residence within eighteen (18) calendar months from the date of sale or disposition, shall
be EXEMPT from the capital gains tax imposed under this Subsection:
Provided, That the historical cost or adjusted basis of the real property sold or disposed shall be
carried over to the new principal residence built or acquired:
Provided, further, That the Commissioner shall have been duly notified by the taxpayer within
thirty (30) days from the date of sale or disposition through a prescribed return of his intention to
avail of the tax exemption herein mentioned:
Provided, still further, That the said tax exemption can only be availed of once every ten (10) years:
Provided, finally, that if there is no full utilization of the proceeds of sale or disposition, the portion of
the gain presumed to have been realized from the sale or disposition shall be subject to capital gains
tax. For this purpose, the gross selling price or fair market value at the time of sale, whichever is
higher, shall be multiplied by a fraction which the unutilized amount bears to the gross selling price in
order to determine the taxable portion and the tax prescribed under paragraph (1) of this Subsection
shall be imposed thereon.