TRAIN I

BRIEFER

Atty. Eufrocina M. Sacdalan-Casasola

Au , Profess and BAR Reviewer of
Taxation Law
INCOME TAX
 SEC. 24(A)(2)(a). Rates of Income Tax
on Individual Citizen and Resident
Alien of the Phils. Effective Jan. 1, 2018
– Dec. 31, 2022
Not over P250,000 0%
Over P250,000 but not over P400,000 20% of the excess over
P250,000
P30,000 + 25% of the excess
Over P400,000 but not over P800,000 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
P2,410,000 + 35% of the
Over P8,000,000 excess over P8,000,000
Tax Schedule Effective Jan. 1, 2023 and
onwards
Not over P250,000 0%
Over P250,000 but not over 15% of the excess over
P250,000
P400,000
Over P400,000 but not over P22,500 + 20% of the
P800,000 excess over P400,000

Over P800,000 but not over P102,500 + 25% of the

excess over P800,000
P2,000,000
Over P2,000,000 but not over P402,500 + 30% of the
excess over P2,000,000
P8,000,000
P2,202,500 + 35% of excess
Over P8,000,000 over P8,000,000
 Tax Treatment of Income of
Pure Compensation Income Earners
• Pure compensation income earners – individuals
whose source of income is purely derived under an
employer-employee relationship.
• Income Tax Rates - graduated income tax rates under
Sec. 24(A)(2)(a) based on the taxable compensation
income.
• Taxable Compensation Income – gross compensation
income less mandatory deductions.
 Other income of employee subject to
WHT on compensation
• All income given to an employee in addition to
the regular compensation received from the
same employer
• Considered as SUPPLEMENTAL
COMPENSATION subject to WHT on
compensation.
• Tax withheld shall be filed monthly and remitted
using BIR Form 1601-C.
 What are the mandatory deductions
from the gross compensation income?
The allowed deductions to arrive at the taxable
compensation income are the EMPLOYEE’s
SHARE in the
• (1) SSS/GSIS,
• (2) Philhealth,
• (3) Pag-Ibig contributions (limited to
compulsory contributions), and
• (4) Union dues
 Tax Treatment of Income of
Minimum Wage Earners
• MWEs shall be EXEMPT from income tax:
• On their
• (1) SMW
• (2) holiday pay,
• (3) overtime pay,
• (4) night shift differential pay and
• (5) hazard pay
• This exemption is not applicable to those whose basic
pay is more than the SMW even if their annual taxable
income does not exceed P250,000.
 Taxable income of MWEs

• Income other than those enumerated shall be taxable

• The taxable income shall be computed by DEDUCTING
the NONTAXABLE/EXEMPT portion and other
mandatory deductions from the gross compensation
income.
• The resulting taxable income shall be multiplied by the
applicable income tax rate using the tax table to get the
amount of income tax due.
 Tax Treatment of Income of Purely Self-
Employed and/or Professionals with GS/GR of
NOT EXEEDING P3Million
• OPTION to avail:
• (1) 8% FLAT INCOME TAX RATE based on GS/GR and other non-operating
income
• in excess of P250,000,
• But IN LIEU OF the graduated income tax rates and the 3% percentage tax,
• (but TP should SIGNIFY INTENTION TO ELECT the 8% FLAT INCOME TAX
RATE in the 1 st quarter return;
• No need to report the cost of sales and the operating expenses deductible from
the GI.
• No need to attach FS in filing the final ITR.
• This will avoid costly and time-consuming tax audits and investigations from the
BIR.
• OR
• (2) The graduated income tax rates
based on the TAXABLE INCOME
(for income tax)
• PLUS
• 3% (for percentage tax)
 Who are NOT QUALIFIED to avail the
8% FLAT INCOME TAX RATE
• Pure compensation income earners
• VAT-registered taxpayer, regardless of GS/GR,
• NonVAT taxpayers whose GS/GS exceeded P3M
• Other nonVAT taxpayers under Title V, NIRC.
• Partners of GPP on their distributive share from GPP which is
already net of cost and expenses.
• Those enjoying exemption under the BMBE
• When the GS/GR and other non-operating income EXCEEDED
P3,000,000, TP shall AUTOMATICALLY be subject to the
graduated income tax rates even if the FLAT 8% income tax
rate as option if was initially selected,
• a tax credit, however, for the previous quarter/s income tax
payment/s under the 8% IT rate option shall be allowed
 Option to avail the 8% tax regime
MUST be signified ANNUALLY
• On or before May 15
• Election shall be IRREVOCABLE
• No amendment or option shall be made for the
said TY
• EXCEPTION:
• Unless the GS/GR and other non operating
income exceeded P3M
• In which case TP shall AUTOMATICALLY BE
SUBJECT TO THE graduated tax rate.
 For filing of the quarterly ITR, how
can the P250,000 be deducted?
• No need to divide P250,000 into 4

• Said amount was considered in the

design of the revised Form 1701Q which
reflect a cumulative quarterly
computation.
 Tax Treatment of Income Derived by
Mixed Income Earners (MIEs)
MIEs shall be subject to the ff. taxes:
(A) TP Opted to Avail the 8% FLAT INCOME TAX RATE
• (1) For COMPENSATION INCOME - the graduated
income tax rates.
• (2) For INCOME FR BUSINESS or PRACTICE OF
PROFESSION - 8% FLAT income tax rate based on GS/
GR and other non-operating income (w/o the benefit of
P250,000 deduction) in lieu of the graduated income tax
rates and the percentage tax; since the P250,000 is
already incorporated in the first tier of the graduated
income tax rates applicable to compensation income
 (B) TP Opted to be Taxed under the
GRADUATED INCOME TAX RATE
• TP shall COMBINE THE TAXABLE INCOME from
both compensation and business/practice of
profession in computing for the TOTAL
TAXABLE INCOME and consequently, the
income tax due.
• PLUS OPT or VAT, as the case may be, for the
business tax.
 FINAL INCOME TAX RATES on Certain Passive
Income of Citizens and Resident Aliens

Interest income received by an individual TP 15%

(except non-resident individual) from a
depository bank under the expanded foreign
currency deposit system (NOTE: No amendment
in the case of NRAETB)
Winnings 20%
(except PCSO and Lotto winnings
amounting to P10,000 or less)
CG from Sale of Shares of Stock not 15%
Traded in the Stock Exchange
 For the 15% PITR of qualified NRA
employed by RHQs / ROHQs / OBUs/
• PSContractors and Subcontractors
• The 15% PITR no longer applicable W/O prejudice
to preferential tax rates under existing tax
treaties.
• Thus, all concerned employees of RHQs/ROHQs/
OBUs/PSContractors and subcontractors shall be
subject to the regular income tax rate under Sec.
24(A)(2)(a) of the Tax Code, in accordance with
the veto message of the President.
 SEC. 27(C) . Exemption of GOCCs,
Agencies or Instrumentalities
• PCSO was removed from the
list of GOCCs which are
exempt from income tax.
 Final Income Tax on Passive Income of
Domestic Corporations
Interest income received by 15%
DOMESTIC CORPORATION from a
depository bank under the expanded
foreign currency deposit system
(NOTE: No change in the case of RFC)
Capital gains from Sale of 15%
Shares of Stock not Traded in
the Stock Exchange (NOTE:
No change in the case of RFC
 SEC. 31. Taxable Income,
Defined
• It means the pertinent items of gross income under
the NIRC, less deductions, if any, authorized for
such types of income by this Code or other special
laws.
• With the repeal of Sec. 35 of the Tax Code, the term
“and/or personal and additional exemptions” was
removed from the meaning of “taxable income”.
SEC. 32(B)(7)(e) Exclusions from Gross Income. -
13th Month Pay and Other Benefits

• Gross benefits received by officials and

employees of public and private entities:
Provided, however, That the total
exclusion under this subparagraph shall
not exceed P90,000 which shall cover:
 De Minimis Benefits
DE MINIMIS BENEFITS are considered as compensation not
subject to income tax and consequently, not subject to WHT,
nor to FBT.
• (a) Monetized unused VL credits of private employees -
not exceeding 10 days during the year;
• (b) Monetized value of VL and SL credits paid to govt.
officials and employees;
• (c) Medical cash allowance to DEPENDENTS of
employees not exceeding ₱1,500 per employee per
semester or ₱250/month;
 De Minimis Benefits
(d) ) Rice subsidy of P2,000 or 1 sack (50-kg) rice/month amounting
to not more than P2,000
(e) Uniform and clothing allowance - P6,000 p.a.
(f) Actual medical assistance, e.g., medical allowance for medical
and healthcare needs, annual medical check-up, maternity
assistance, and routine consultations - P10,000 p.a.
(g) Laundry allowance - not exceeding P300/ month;
(h) Employees achievement awards , e.g., for length of service or
safety achievement in the form of a tangible personal property
other than cash or GC, with an annual monetary value not
exceeding P10,000 received by the employee under an established
written plan which does not discriminate in favor of highly paid
employees;
 De Minimis Benefits

(i) Gifts during Christmas and major anniversary

celebrations - P5,000.00 p.a.
(j) Daily meal allowance for OT work and night/
graveyard shift - not exceeding 25% of the BMW on
a per region basis.
(k) CBA Benefits and productivity incentive
schemes provided that the total annual
monetary value received from both CBA and PIB
combined do not exceed P10,000/annum per
employee .
 De Minimis Benefits
• All other benefits which are not included above shall not be
considered as “DMB”, and hence, shall be subject to income tax as
well as WHT on compensation income.
• Amount of “DMB” conforming to the ceiling shall NOT BE
CONSIDERED in determining the P90,000.00 ceiling of 13th month
pay and “other benefits”.
• Provided that, the excess of the “DMB” over their respective ceilings
will be considered as part of “other benefits” up to the P90,000.00
ceiling.
• Provided, further, that MWEs receiving “other benefits” exceeding
the P90,000.00 limit shall be taxable on the excess benefits.
 De Minimis Benefits
• G.R., any incentive given to employees shall FORM PART OF
THE COMPENSATION subject to income tax, unless specifically
exempted under a special law or considered as DMB.
• Premium on Health Card - whether given to rank and file or
manager/supervisor, under a GROUP INSURANCE shall be
included as part of OTHER BENEFITS subject to the P90,000
threshold.
• However, INDIVIDUAL PREMIUMS paid for selected managers
or supervisors are considered “fringe benefits” subject to FBT.
• Additional income/benefits as a result of the benefits provided
under the Attrition Law (employees performing well will
receive rewards, whether in the form of cash or reward in
kind(FMV) - shall form part of the taxable COMPENSATION
INCOME subject to WHT on compensation.
 SEC. 33. Special Treatment of
Fringe Benefit.
• Effective Jan. 1, 2018 and
onwards, the FBT is now 35% pf
the grossed-up monetary value
of fringe benefit furnished or
granted to the managers and
supervisors.
 SEC. 34. Deductions from Gross Income

• Deductions of the hospitalization

premium, and personal exemption and
additional exemptions are NOW
REPEALED.
• Said exemptions were replaced with the
first P250,000 taxable income subject to
the 0% rate of income tax.
 Optional Standard Deduction
(OSD)
• In lieu of the ITEMIZED DEDUCTIONS, taxpayer may
elect the OSD in an amount not exceeding 40% of its
gross sales or gross receipts, as the case may be.
• For Domestic or Resident Foreign Corporation - it may
elect OSD not exceeding 40% of its gross income.
• Unless the TP signifies in his return his intention to elect
the OSD deduction, he shall be considered as having
availed himself of ITEMIZED DEDUCTIONS. such election
when made in the return shall be IRREVOCABLE for the
TY for which the return is made:
 Optional Standard Deduction
(OSD)
• In the case of an individual who is entitled to and claimed
the OSD, HE shall not be required to submit AFS with
his tax return:
• In the case of GPP and its partners they may avail the
OSD only ONCE, either by the GPP or the partners
comprising the partnership:
• Provided, finally, That except when the CIR otherwise
permits, said individual shall keep such records pertaining
to his gross sales or gross receipts, or the said corporation
shall keep such records pertaining to his gross income
during the TY.
 SEC. 51(A)(2) Individuals
NOT Required to File ITR
(a) A compensation income earner whose taxable income
does not exceed P250,000 income.
(b) Pure compensation income earner for income derived
from sources within the Phils., the income tax on which has
been correctly withheld.
(c) An individual whose sole income has been subjected
to FWHT
(d) A MWE and SC who are considered as MWE or an
individual who is exempt from income tax under the NIRC
and other laws, general or special.
 Individuals Required to File
Income Tax Return
1. Pure compensation income earners whose taxable
income exceeds P250,000.
2. A Filipino citizen and any alien individual engaged in
business or practice of profession within the Phils.
shall file ITR, regardless of the amount of gross
income.
3. Individual deriving compensation concurrently from 2 or
more employers at any time during the TY shall file an ITR.
 Sec. 51(A)(5). Simplification of
Individual ITRs.
• Individual ITRs shall consist of a maximum of 4 pages,
and shall only contain the ff. information:
• (A) Personal profile and information;
• (B) GS/GR from compensation for services rendered,
conduct of trade or business/exercise of profession,
except income subject to FWHT.
• (C ) Allowable deductions;
• (D) Taxable income; and
• (E ) Income tax due and payable.
 SEC 51-A. Substituted Filing of Income Tax
Returns by Employees Receiving Purely
Compensation Income
• Individual TPs receiving PURELY COMPENSATION INCOME,
regardless of amount,
• from ONLY ONE EMPLOYER in the Phils. for the calendar year,
• the income tax of which has been withheld correctly by the said
employer (TAX DUE = TAX WITHHELD)
• shall NOT be REQUIRED FO FILE Annual ITR
• WHT Certificate filed by the employer, duly stamped “RECEIVED”
by the BIR, shall be TANTAMOUNT to the SUBSTITUTED FILING
OF ITRs by said employees.
 SEC. 52(A). Simplification of
Corporate ITRs.
• Every corporation, except NRFC, shall render, in duplicate, a true and
accurate quarterly ITR and final or adjustment return
• Corporate ITR shall consist of a maximum of 4 pages and shall
contain the ff. information:
• 1. Corporate profile and info;
• 2. GS/GR from services rendered, or conduct of trade or business,
EXCEPT income subject to FWHT;
• 3. Allowable deductions;
• 4. Taxable income ; and
• 5. Income tax due and payable.
 SEC. 56(A)(2). On Installment
Payments of Income Tax of Individuals

• Second installment
should be paid on or
before October 15
following the close of the
calendar year.
 SEC. 57(B). Withholding of
Creditable Tax at Source
• Beginning Jan. 1, 2019, the
CWHT rate shall
• not be less than 1% but
• not more than 15%
• of the income payment.
 EWT on Income Payments to
Professionals
On gross professional fees to
INDIVIDUAL PAYEES:
If GI for the CY did not exceed P3M 5%
If GI is more than P3M, or 10%
VAT-registered regardless of amount
On gross professional fees to
NON-INDIVIDUAL PAYEES:
If GI for the CY did not exceed P720,000 10%
If GI for the CY exceeds P720,000 15%
 Who are considered as
PROFESSIONALS?
• individuals who passed the government licensure
examinations regulated by the Supreme Court and
the Professional Regulations Commission such as
lawyers; CPAs; doctors of medicine; architects;
engineers; doctors; dentists; professional
appraisers; connoisseurs of tobacco; actuaries; and
interior decorators, designers, real estate service
practitioners, etc.
 Other individuals considered as
PROFESSIONALS for purposes of EWT
• Professional entertainers (actors, actresses, singers, etc.
)
• Professional athletes (basketball players, jockeys, etc.0
• Directors and producers of movies, stage, radio, TV, etc.
• Insurance agents and adjusters
• Management and technical consultants
• Bookkeeping agents and agencies
• Fees of directors, who are not employees of the
company
• Brokers and agents
 Other fees subject to EWT
Shall also include
• Per diems
• Allowances, and
• Any other form of income payments not subject to the
withholding tax on compensation
• In case of entertainers and professional athletes, it shall
include payment for the use of their names or pictures in
print, broadcast, or public appearances for purposes of
advertisements or sales promotion.
 In case of a LONE INCOME PAYOR
(1) If recipient of other income is EMPLOYEE
of the LONE INCOME PAYOR - such
payments considered as SUPPLEMENTAL
COMPENSATION subject to WHT on
compensation.
(2) If individual payee is subject to EWT with
ONLY ONE PAYOR, he should submit sworn
declaration, together with a copy of the
COR, to the said lone income payor.
 In case of a LONE INCOME PAYOR
(3) An individual seller/income payee MAY NOT BE SUBJECTED TO
EWHT, if the source of income COMES FROM A LONE INCOME
PAYOR IF the TOTAL GI IS LESS THAN P250,000 in a TY.
– But he needs to execute a Sworn Declaration of GR/GS that
shall be submitted to the LONE PAYOR before the initial
payment of income on or before Jan. 15 of each year,
– The income payor/WHA shall in turn execute its own Sworn
Declaration stating the number of payees who shall not be
subjected to EWHT and submit their sworn declaration and
copies of COR, which list shall be submitted by the income
payor/WHA to the BIR office on or before the Jan. 31 of each
year OR on the 15th day of the following month when a new
income recipient submitted the payee’s sworn declaration to
the LONE INCOME PAYOR/WHA.
 In case of a LONE INCOME PAYOR
(4) If the individual payee’s cumulative GR/GS
EXCEEDS P250,000, THE INCOME PAYOR/WHA
SHALL WITHHOLD THE PRESCRIBED WHT
BASED ON THE AMOUNT in excess of P250,000
despite the prior submission of the payee’s sworn
declaration.
(5) If the individual income payee failed to submit
the sworn declaration to the LONE INCOME
PAYOR/WHA, the income payment shall be
subject to the applicable WHT even though in a
taxable year, the income payment is P250,000 and
 Individuals subject to the 5% EWT

• Individual payees whose GS/GR in a TY

do not exceed P3M, are required to
submit sworn declaration of his GR/GS,
• together with a copy of the COR,
• to all the income payors/WHAs
• not later than Jan. 15 of each year or
prior to the initial payment of the
professional fee to be subject to 5%.
 Individuals subject to the 10% EWT

(1) The payee failed to provide the

income payor/WHA of the sworn
declaration; or
(2) The income payment exceeds
P3M, despite receiving the sworn
declaration from the income payee.
 Tax Treatment of Directors Fees for
Income Tax and Business Tax Purposes
(1) If the Director is also an employee of the corporation -
• For income tax purposes, Director’s fees are taxable as
compensation income when the director is an employee
of the corp which pays the same subject to WHT on
compensation income.
• This applies whenever it is established that the director
and the corp has an employer-employee relationship, i.e
President of the corp sitting as member of the Board of
Directors.
• For business tax purposes, said director’s fees received
by employees are exempt from the VAT or OPT.
 Tax Treatment of Directors Fees for
Income Tax and Business Tax Purposes
• (2) But if the Director aside from being a Director is also engaged
in business.
• Director’s fees paid to a director who is not an employee of the
corp paying such fees BUT IS ENGAGED IN THE PRACTICE OF HIS
PROFESSION, should be subject to the 5% or 10% EWHT rates, as
the case may be, including per diems, allowances and any other
form of income payment made to the director for being a director,
INCLUDING FEES received as a PROFESSIONAL.
• Said directors fees and his other income derived as a professional
shall be subject to OPT or VAT because GR derived from the
practice of profession is subject to either OPT or VAT.
 SEC. 58(A). Returns and Payment of
Taxes Withheld at Source

• The returns for FWHT and CWHT

shall be filed and the payment made
not later than the last day of the
month following the close of the
quarter during which withholding
was made.
 SEC. 74(A). Declaration of Income Tax
for Individuals.
• Self-employed individuals and those
engaged in the practice of profession
shall make and file a declaration of
their estimated income for the
current TY on or before May 15 of
the same taxable year.
 th
SEC. 74(B). Filing of the 4
Installment for Individuals
• The fourth installment shall be paid on or before
May 15 of the following calendar year when the
final adjusted income tax return is due to be
filed.
• This is CONTRAST WITH the date of filing of the
ANNUAL INCOME TAX RETURNS of PURE
COMPENSATION INCOME EARNERS under Sec.
51(C )(1) of the Tax Code which should be filed on
or before April 15 of the following year.
 Time of Filing of Individual ITR
under RR 8-2018
Individuals engaged in business/practice of profession,
regardless of GS/GR, are required to file quarterly income
tax return on or before
• May 15,
• August 15 , and
• November 15 for the first, second, and third quarters of
the current year, respectively, and
• to file an annual income tax return, not later than the 15th
day of the 4th month following the close of the calendar
year or April 15 as provided under Section 51(C)(1) of the
Tax Code, as amended.
 SEC. 79(A). Requirement of
Withholding
• Except in the case of a minimum wage earner as defined
in Section 22(HH) of this Code, every employer making
payment of wages shall deduct and withhold upon such
wages a tax determined in accordance with the rules and
regulations to be prescribed by the Secretary of Finance,
upon recommendation of the Commissioner.
• This provision should have also been amended to include
“those pure compensation income earners whose
taxable income do not exceed P250,000” since they are
only subject to 0% income tax rate.
ESTATE TAX
 SEC. 84. Rate of ESTATE TAX

• Flat rate of 6% based

on the value of the
net estate
 SEC. 85(A). Deductions for
Citizens and Resident Aliens
(1) Standard Deduction. – An amount
equivalent to P5,000,000.
• The previous standard deduction of
P1,000,000 is now raised to P5,000,000,
but the provisions on the deductibility of
funeral expenses, judicial expenses and
medical expenses were deleted.
 SEC. 85(A). Deductions for
Citizens and Resident Aliens
(7) The Family Home. – An amount
equivalent to the current fair market
value of the decedent’s family home:
Provided, however, That if the said
current fair market value exceeds
P10,000,000, the excess shall be
subject to estate tax.
 SEC. 85(B)(1). Standard Deductions
for Nonresident Aliens

An amount equivalent to P500,000;

SEC. 89. Notice of Death
to be Filed -

REPEALED
 SEC. 90(A). Requirements for filing of
Estate Tax Returns
Regardless of the gross value of the estate, where the estate consists
of
– registered or registrable property such as real property, motor
vehicle, shares of stock or other similar property for which a
clearance from the BIR is required as a condition precedent for the
transfer of ownership thereof in the name of the transferee,
– the executor, or the administrator, or any of the legal heirs, as the
case may be, shall file a return under oath in duplicate.
• The estate tax returns showing a gross value exceeding P5,000,000 shall be
supported with a statement duly certified to by a CPA.
 Time for Filing of the
Estate Tax Return

• For the purpose of determining

the estate tax, the estate tax
return shall be filed within 1 year
from the decedent's death.
 SEC. 91(C ) Payment by Installment

• In case the available cash of the estate

is insufficient to pay the total estate
tax due, payment by installment shall
be allowed within 2 years from the
statutory date for its payment without
civil penalty and interest.
 SEC. 97. Payment of Tax Antecedent to
the Transfer of Shares, Bonds or Rights
• If a bank has knowledge of the death of a person, who
maintained a bank deposit account alone, or jointly with
another, it shall allow any withdrawal from the said
deposit account, subject to a final withholding tax of 6%.
• For this purpose, all withdrawal slips shall contain a
statement to the effect that all of the joint depositors
are still living at the time of withdrawal by any one of
the joint depositors and such statement shall be under
oath by the said depositors
 Rules on the withdrawal of the
bank deposit of a decedent
• Withdrawal shall be made within 1 YEAR from the death
of the decedent.
• Bank is required to file the quarterly return on the final tax
withheld on or before the last day of the month following
the close of the quarter during which the withholding was
made.
• Bank shall issue the corresponding BIR Form 2306
certifying such withholding.
• In all cases, the FWHT shall not be refunded, or credited on
the tax due on the net taxable estate of the decedent.
• The executor, administrator, or any of the legal heirs, withdrawing
from the deposit account shall provide the bank where such
withdrawal shall be made with the TIN of the estate of the decedent.
• Bank shall require prior to such withdrawal the presentation of BIR
Form No. 1904 of the estate, duly stamped received by the BIR.
• All withdrawal slips shall contain the ff. terms and conditions:
• (a) a sworn statement by any one of the joint depositors to the effect
that all of the joint depositors are still living at the time of
withdrawal; and,
• (b) a statement that the withdrawal is subject to the FWHT of 6%.
 Rules in case the bank deposit account
is included in the gross estate
• In instances where the bank deposit accounts have been
duly included in the gross estate of the decedent and the
estate tax due thereon paid, the executor, administrator,
or any of the legal heirs shall present the eCAR issued for
the said estate prior to withdrawing from the bank deposit
account.
• Such withdrawal shall no longer be subject to the
withholding tax imposed under the law.
• RR 12-2018.
DONOR’S TAX
 SEC. 99(A). Rate of
DONOR’s TAX
• The tax for each calendar year shall be 6% based
on the total gifts in excess of P250,000.00 exempt
gift made during the calendar year.
• It means that the first P250,000 gift made during
the calendar year will be exempt from the 6%
donor’s tax regardless of relationship between
the donor and the donee, or whether the donee
is a relative or a stranger.
 SEC. 100. Transfer for Less than
Adequate and Full Consideration
• Where property, other than a real property of an individual which
is a capital asset, is transferred for less than an adequate and full
consideration in money or money's worth, the amount by which the
property’s FMV exceeded the consideration shall, for estate tax
purposes, be deemed a gift, and shall be included in computing the
amount of gifts subject to donor’s tax made during the CY.
• But a sale, exchange, or other transfer of property made in the
ordinary course of business (a transaction which is a bona fide, at
arm’s length, and free from any donative intent), will be
considered as made for an adequate and full consideration in
money or money’s worth.
 SEC. 101. Exemption of
Certain Gifts

• The exemption of dowries or gifts

made by parents to their children on
account of marriage before its
celebration or within one year
thereafter to the extent of P10,000
was removed by the TRAIN Law.
VALUE ADDED TAX
 SEC. 106(A)((2)(a)(2) and (6); and (b).
Zero-rated Sales of Goods or Properties
(2) Sale and delivery of goods to:
• (a) Registered enterprises within a separate
customs territory as provided under a special law;
and
• (b) Registered enterprises within tourism enterprise
zones as declared by the Tourism Infrastructure and
Enterprize Zone Authority (TIEZA) subject to the
provisions under RA 9593 or the Tourism Act of 2009.
 SEC. 106(A)((2)(a)(2) and (6); and (b).
Zero-rated Sales of Goods or Properties
• (6) The sale of goods, supplies, equipment
and fuel to persons engaged in
international shipping or international air
transport operations: Provided, That the
goods supplies, equipment and fuel shall
be used exclusively for international
shipping or air transport operations.
 Creation of an Enhanced
VAT Refund System
• Provided, That subpar. (3), (4), and (5) hereof, shall be subject to the
12% VAT and no longer considered export sales subject to 0% VAT rate
upon satisfaction of the following conditions:
• (1) The successful establishment and implementation of an enhanced
VAT refund system that grants refunds of creditable input tax within 90
days from the filing of the VAT refund application with the BIR:
• Provided, That, to determine the effectivity of Item No. 1, all
applications filed from Jan. 1, 2018 shall be processed and must be
decided within 90 days from the filing of the VAT refund application;
and
• (2) All pending VAT refund claims as of Dec.31, 2017 shall be fully paid
in cash by Dec. 31, 2019.
• Provided, That, the DOF shall establish a VAT refund center in
BIR and in the Bureau of Customs (BoC) that will handle the
processing and granting of cash refunds of creditable input tax.
• An amount equivalent to five percent (5%) of the total VAT
collection of the BIR and the BoC from the immediately preceding
year shall be automatically appropriated annually and shall be
treated as a special account in the General Fund or as trust
receipts for the purpose of funding claims for VAT refund:
• Provided, That any unused fund, at the end of the year shall
revert to the General Fund.
• Provided, further, That the BIR and the BoC shall be required to
submit to the COCCTRP a quarterly report of all pending claims
for refund and any unused fund.
 SEC. 108(A). VAT Sale of Services and
Use or Lease of Properties
• (4) Services rendered to persons
engaged in international shipping or
international air transport operations,
including leases of property for use
thereof; Provided, That these services
shall be exclusively for international
shipping or air transport operations;
• Xxx
 SEC. 108(B)(4), (6), and (8). - Transactions
Subject to 0% Rate.
• (4) Services rendered to persons engaged in international shipping or
international air transport operations, including leases of property for use
thereof; Provided, That these services shall be exclusively for international
shipping or air transport operations;
• Transport of passengers and cargo by domestic air or sea vessels from the Phils.
to a foreign country;
• Thus, services referred to herein shall not pertain to those made to common
carriers by air and sea relative to their transport of passengers, goods or cargoes
from one place in the Phils. to another place in the Phils., the same being subject
to 12% VAT.
• Gross receipts of international air or shipping carriers doing business in the Phils.
derived from transport of passenger and cargo from the Phils. to another country
shall be exempt from VAT; however, they are still liable to a percentage tax of 3%
based on their gross receipts derived from transport of cargo from the Phils. to
another country as provided for under Sec. 118 of the Tax Code.
 SEC. 109. Exempt Transactions
• (D) Importation of professional instruments and
implements, tools of trade, occupation or
employment, wearing apparel, domestic animals,
and personal and household effects belonging to
persons coming to settle in the Phils. or Filipinos or
their families and descendants who are now
residents or citizens of other countries,
(Overseas Filipinos), in quantities and of the class
suitable to the profession, rank or position of the
persons importing said items, for their own use
and not for barter or sale, accompanying such
• BoC may, upon, the production of satisfactory
evidence that such persons are actually coming to
settle in the Phils. and that the goods are brought
from their former place of abode, exempt such goods
from payment of duties and taxes.
• That vehicles, vessels, aircrafts, machineries and
other similar goods for use in manufacture, shall not
fall within this classification and shall therefore be
subject to duties, taxes and other charges;
 But what is meaning of
“reasonable time?”
• The phrase “arriving within 90 days before or
after the arrival upon the production of evidence
satisfactory to the CoC” was deleted by RA 10963.
• Therefore, “reasonable time” time now means “if
you can comply with the conditions set forth under
the two (2) new provisos added to this paragraph.
 P. Sale of Real Properties
Exempt from VAT
(I) Sale of RP not primarily held for sale to customers or held for
lease in the ordinary course of trade or business, or
(II) RP utilized for low-cost and socialized housing as defined by RA
7279,
(III) Residential lot valued at P1,500,000 and below,
(IV) house and lot, and other residential dwellings valued at
P2,500,000 and below
However, even if the RP is not primarily held for sale to customers or
held for lease in the ordinary course of trade or business but the same
is used in the trade or business of the seller, the sale thereof shall be
subject to VAT being a transaction incidental to the TP’s main
business.
 .
Provided, That beginning Jan. 1, 2021, the VAT
EXEMPTION SHALL ONLY APPLY TO:
(1) sale of real properties NOT primarily held for sale to
customers or held for lease in the ordinary course of
trade or business,
(2) sale of real property utilized for socialized housing,
(3) sale of house and lot, and other residential dwellings
with selling price of not more than P2,000,000: Provided,
further, That every 3 years thereafter, the amount herein
stated shall be adjusted to its present value using the CPI,
as published by the PSA;
• (Q) Lease of a residential unit with a monthly rental not exceeding P15,000.00;
• In cases where a lessor has several residential units for lease, some are leased out for a
monthly rental per unit of not exceeding P15,000, while others are leased out for more than
P15,000 per unit, his tax liability will be as follows:
• The gross receipts from rentals not exceeding P15,000 per month per unit shall be exempt
from VAT regardless of the aggregate annual gross receipts. It is also exempt from the
3% percentage tax.
• The gross receipts from rentals exceeding P15,000 per month per unit shall be subject to
VAT if the aggregate annual gross receipts from said units only exceeds P3,000,000.
Otherwise, the gross receipts will be subject to the 3% percentage tax. RR 12-2018
• In case of mixed transactions, the abovementioned rule should be observed.
• The foregoing notwithstanding, lease of residential units where the monthly rental per unit
exceeds P15,000, but the aggregate of such rentals of the lessor during the year do not
exceed P3 Million shall likewise be exempt from VAT; however the same shall be subject to
the 3% percentage tax.
 (U) Importation of fuel, goods and supplies by persons
engaged in international shipping or air transport operations:
Provided, That the fuel, goods, and supplies shall be used
for international shipping or air transport operations;
(W) Sale or lease of goods and services to Senior Citizens
and Persons with Disability, under RA Nos. 9994
(Expanded Senior Citizens Act of 2010) and 10754 (An Act
Expanding the Benefits and Privileges of Persons with
Disability), respectively;
(X) Transfer of property pursuant to Section 40(C)(2) of
the NIRC, as amended;
• (Y) Association dues, membership fees, and other assessments
and charges collected by homeowners associations and
condominium corporations;
• (Z) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
• (AA) Sale of drugs and medicines prescribed for diabetes, high
cholesterol, and hypertension beginning January 1, 2019; and
• (BB) Sale or lease of goods or properties or the performance of
services other than the transactions mentioned in the preceding
paragraphs, the gross annual sales and/or receipts do not exceed the
amount of P3,000,000.00 On a purely reimbursement basis
 SEC. 112(C ). Refunds or Tax
Credits of Input Tax
(C) Period within which Refund of Input Taxes shall be Made. -
In proper cases, the CIR shall grant a refund for creditable
input taxes within 90 days from the date of submission of
the O.R.s or invoices and other documents in support of the
application filed:
Provided, That, should the CIR find that the grant of
refund is not proper, the CIR must state in writing the
legal and factual basis for the denial.
• In case of full or partial denial of the claim for tax refund, the TP affected may,
within 30 days from the receipt of the decision denying the claim, appeal the
decision with the CTA:
• Provided, however, That failure on the part of any official, agent, or employee
of the BIR to act on the application within the 90-day period shall be
punishable under Section 269 of this Code.
• The clause “or tax credit, or the failure on the part of the Commissioner to act
on the application within the period prescribed above” was deleted under RA
10963. Thus, there is no more deemed a denial decision for failure on the part of
the CIR to act on the application.
• The phrase “or after the expiration of the 120-day period” was deleted under RA
10963.
• The term “or the unacted claim” was deleted under RA 10963.
• It means that failure on the part of ANY OFFICIAL, agent, or employee of the BIR
to act on the application within the 90-day period shall be punishable under Sec.
269 by a fine of not less than P50,000 but not more than P100,000 and
imprisonment of not less than 10 years but not more than 15 years and
additional penalty of perpetual disqualification to hold public office, to vote,
and to participate in any public election.
• The granting of “Tax Credit” was removed by R.A. 10963.
• The term ““or issue a TCC” was deleted by RA 10963.
• From the previous 120 days within which the CIR can grant a refund, it is
now 90 days from the date of submission of the ORs or invoices and other
documents in support of the claim
• The term “complete documents” was changed to “O.R.s or invoices and
other documents”.
• Previously, referring only to Subsection A, but now to both Subsections A
and B.
• A new proviso which requires that should the CIR find that the grant of
refund is NOT PROPER, he MUST state in writing the legal and factual
basis for the denial.
 SEC. 114(A) and (C ). Return and
Payment of VAT

• (A) In General. –x x x That beginning Jan.

1, 2023, the filing and payment of the
withholding VAT shall be done within
25 days following the close of each
taxable quarter
• (C) Withholding of VAT. – x x x beginning Jan. 1, 2021, the VAT
withholding system under this Subsection shall shift from final to
a creditable system:
• Provided, further, That the payment for lease or use of properties or
property rights to NONRESIDENT OWNERS shall be subject to 12%
WHT at the time of payment:
• Provided, finally, That payments for purchases of goods and
services arising from projects funded by Official Development
Assistance (ODA) under RA 8182, otherwise known as the “Official
Development Assistance Act of 1996”, as amended, shall not be
subject to the FWHT as imposed in this subsection.
• OTHER PERCENTAGE TAXES
 SEC. 116. Tax on Persons
Exempt from VAT.
• Any person whose sales or receipts are exempt
under Sec.109(BB), NIRC from the payment of
VAT, and
• who is not a VAT-registered person
• shall pay a tax equivalent to 3% of his gross
quarterly sales or receipts:
• Provided, That cooperatives, and beginning
January 1, 2019, self-employed and professionals
with total annual GS or GR not exceeding
P500,000 shall be exempt from the 3% GRT herein
imposed.
 DIRECT VETO BY the President
• By the power vested to the President of the Philippines by Article
VI, Sec. 27(2) of the Constitution, which provides that “the
President shall have the power to veto any particular item or
items in an appropriation, revenue, or tariff bills,” he vetoed the
above provision because he stated that “it will result in
unnecessary erosion of revenues and would lead to abuse and
leakages. The subject taxpayers are already exempted from the
VAT, thus, the lower three percent percentage tax on gross sales
or gross receipts is considered as their fair share in contributing
to the revenue base of the country.”
 SEC. 127(A). Tax on Sale, Barter or Exchange of
Shares of Stock Listed and Traded through the
Local Stock Exchange
• .–

• Stock Transaction Tax of ½ of

1% was changed to six-tenths
of one percent (6/10 of 1%)
 SEC. 128(A)(1). Returns and Payment
of Percentage Taxes
• Every person subject to the percentage taxes shall file a
quarterly return of the amount of his GS/GR or earnings
and pay the tax due thereon within 25 days after the
end of each taxable quarter:
• Provided, That in the case of a person whose VAT
registration is cancelled and who becomes liable to the tax
imposed in Sec. 116, NIRC, the tax shall accrue from the
date of cancellation and shall be paid in accordance with
the provisions of this Section.
Thank you!!!