Name: Gulfan, Alexa Genmary L.

Subject and Schedule: Income Taxation 1: Mon (6:00PM – 8:00PM) & Fri
(6:00PM – 7:00PM)
Chapter 5 – Final Income Taxation
1. What are the features of final income taxation?
1) Final tax
2) Tax withholding at source
3) Territorial imposition
4) Imposed on certain passive income and persons not engaged in business in the Philippines
2. Enumerate the passive income subject to final tax and their corresponding tax rates.
1. Interest or yield from bank deposits or deposit substitutes
2. Domestic dividends, in general
3. Dividend income from a Real Estate Investment Trust
4. Share in the net income of a business partnership, taxable associations, joint ventures, joint
accounts, or co-ownership
5. Royalties, in general
6. Prizes exceeding P10,000
7. Winnings
8. Informer’s tax reward
9. Interest income on tax-free corporate covenant bonds

INDIVIDUAL
Alien CORPORATION
Citizen Non-resident Foreign
RC NRC RA ETB NETB DC RFC NRFC
INTEREST
INCOME
Local Currency
Deposit
Short term 20% 20% 20% 20% 25% 20% 20% 30%
interest or yield
Long term Exempt Exempt Exemp Exempt 25% 20% 20% 30%
interest or yield t
Pre-termination
interest rate
-Less than 3 20% 20% 20% 20% 25% 20% 20% 30%
years
-3 to less than 4 12% 12% 12% 12% 25% 20% 20% 30%
years
-4 to less than 5 5% 5% 5% 5% 25% 20% 20% 30%
years
Foreign
Currency
Deposit
Interest income 15% Exempt 15% Exempt Exempt 15% 15% Exempt
from
FCDUs/OBU
depositary banks
Interest income 10% Exempt 10% Exempt Exempt 10% 10% Exempt
of EFCDU/OBU
banks
Interest income N/A N/A N/A N/A N/A N/A N/A 20%
on foreign loans
Tax-free 30% 30% 30% 30% 30% N/A N/A N/A
covenant bonds

DIVIDEND
INCOME
From domestic
corporation, in
general
- January 6% 6% 6% 20% 25% Exemp Exemp 15%*
1, 1998 t t
earnings
- January 8% 8% 8% 20% 25% Exemp Exemp 15%*
1, 1999 t t
earnings
- January 10% 10% 10% 20% 25% Exemp Exemp 15%*
1, 2000 t t
earnings
and
thereafter
From Real 10% Exempt^ 10% <10%^^ <10%^^ Exemp Exemp <10%^^
Estate t t
Investment
Trust or REIT
From foreign [< ----------------- regular income tax (RIT) rules applies ----------------- >]
corporations

SHARE IN NET 10% 10% 10% 20% 25% 10% 10% 30%
INCOME of
taxable
partnership, joint
venture and co-
ownership

ROYALTIES
Passive royalties
In general 20% 20% 20% 20% 25% 20% 20% 30%
Passive royalties 20% 20% 20% 25% 25% 20% 20%
from
cinematographic
films and similar
works
 Passive royalties 10% 10% 10% 10% 25% 20% 20% 30%
from books,
literary works &
musical
compositions
Active Royalties [< ------------- regular tax ------------- >] 25% [< ---- RIT ---- >] 30%

TAXABLE
PRIZES,
amounting to:
P10,000 and [< ------------- regular tax ------------- >] 25% [< ---- RIT ---- >] 30%
below
Above P10,000 20% 20% 20% 20% 25% [< ---- RIT ---- >] 30%

WINNINGS
In general 20% 20% 20% 20% 25% [< ---- RIT ---- >] 30%
PCSO & lotto [< --------------- 20% --------------- >] 25% [< ---- 20% ---- 30%
winnings > >]
P10,000
PCSO and lotto [< ------------- Exempt ------------- >] 25% [< --Exempt-- >] 30%
winnings ≤

INFORMER’S [< --------------- 10% --------------- >] 25% 10% 10% 30%
TAX REWARD

3. What are the two types of taxpayers who are subject to final tax rates on all income from within the
Philippines? What are the general tax rates applicable to each?

Non-resident person not engaged in trade or General final tax rate

business
Non-resident alien not engaged in trade or 25%
business
Non-resident foreign corporation 30%

4. Enumerate the requisites of the tax informer’s reward.

1) Definite sworn information which is not yet in the possession of the BIR
2) The information furnished lead to the discovery of fraud upon internal revenue laws or provisions
thereof.
3) Enforcement results in recovery of revenues, surcharges, and fess and/or conviction of the guilty
or imposition of any fine or penalty.
4) The informer must not be a:
a. BIR official or employee
b. Other public official or employee
c. relative within the 6th degree of consanguinity of those officials or employee in a. and b.