Basic formula for the computation of income tax of a RESIDENT CITIZEN from

income derived solely from compensation: PURE COMPENSATION

Gross compensation income derived from
all sources within and without the
Philippines
LESS: Personal and additional exemptions
Insurance premium for health and hospitalization
__________________________________________________
Taxable Income
MULTIPLIED BY: The schedular tax rate
__________________________________________________
Income Tax due
LESS: Taxes withheld on the
compensation Income
Tax credits
__________________________________________________
Net Income Tax payable
===================
Basic formula for the computation if the compensation income is derived from
employment in a regional or area headquarters and regional operating headquarters
of multinational companies, or from an offshore banking unit, or a petroleum service
contractor and subcontractor located in the Philippines.
Gross compensation income
MULTIPLIED BY: 15%
_________________________________________________
Income Tax due
LESS: Taxes withheld on the compensation income
Tax credits
_________________________________________________
Net Income Tax payable
===================
Basic formula for the computation of income tax of a RESIDENT CITIZEN from
mixed income derived both from compensation and from exercise and from exercise
of a profession or from engaging in trade of business.
Formula 1. Computation of income tax payable on mixed compensation income and
business/professional income
Gross compensation income derived from
all sources within and without the
Philippines
LESS: Personal and additional exemptions
Insurance premium for health and hospitalization
__________________________________________________
Taxable Compensation Income
PLUS: Net income derived from exercise of a
profession or engaging in trade or business
(See below for the formula) ***
__________________________________________________
Total mixed taxable income
MULTIPLIED BY: The schedular tax rate
__________________________________________________
Income Tax due

LESS: Withheld tax on the compensation

Quarterly income taxes paid
Tax credits
__________________________________________________
Net Income Tax payable on mixed income
================================
***Computation of net income derived from exercise of a profession or engaging in
trade or business:
Total receipts from all sources from
within and without the Philippines
LESS: Exclusions from gross income
Income subject to final taxes
__________________________________________________
Gross compensation income derived from
all sources within and without the
Philippines
LESS: Excess personal and additional exemptions
Premiums for health and hospitalization
Optional standard deduction
__________________________________________________
Net income derived from exercise of a profession
or engaging in trade or business
OR
Total receipts from all sources from
within and without the Philippines
LESS: Exclusions from gross income
Income subject to final taxes
__________________________________________________
Gross income derived from all sources
from within and without the Philippines
LESS: Personal and additional exemptions
Itemized deductions including the
Premiums for health and hospitalization and health insurance
__________________________________________________
Net income derived from exercise of a profession
or engaging in trade or business
Formula 2. Computation of income tax payable on mixed compensation income and
business/professional income, where the compensation income is subject to a final
tax.
If the compensation income is derived from employment in a regional or area
headquarters and regional operating headquarters of multinational companies, or
from an offshore banking unit, or a petroleum service contractor and subcontractor,
then the basic formula is:

Gross compensation income

MULTIPLIED BY: 15%
_________________________________________________
Income Tax due
LESS: Withheld taxes on the compensation
Tax credits
_________________________________________________
Net Income Tax payable on compensation income
=======================================
Computation of net income tax payable on gross income derived from exercise of a
profession or engaging in trade or business:
Gross compensation income derived from
all sources within and without the
Philippines
LESS: Personal and additional exemptions
Premiums for health and hospitalization
Optional standard deduction
__________________________________________________
Taxable Income
MULTIPLIED BY: The schedular tax rate
__________________________________________________
Income Tax Due
LESS: Withheld taxes on the income
Quarterly income taxes payments
Tax credits
__________________________________________________
Net Income Tax payable on the income derived from
the exercise of a profession or from trade or business
==========================================
OR
Gross income derived from all sources
from within and without the Philippines
LESS: Personal and additional exemptions
Itemized deductions including the
Premiums for health and hospitalization and health insurance
__________________________________________________
Taxable Income
MULTIPLIED BY: The schedular tax rate
__________________________________________________
Income Tax Due
LESS: Taxes withheld on the income
Quarterly income taxes payments
Tax credits
__________________________________________________
Net Income Tax payable on the income from
the exercise of a profession or from trade or business
==========================================

SUMMARY:
Net Income Tax payable on compensation income
PLUS: Net Income Tax payable on the income
from the exercise of a profession of from trade or business
__________________________________________________
Total Income Tax payable on the mixed income derived
from compensation and exercise of a profession, trade or business
===================================================

Basic formula for the computation of income tax of a NON-RESIDENT CITIZEN

from income derived solely from compensation.
Gross compensation income derived from
all sources within the Philippines
LESS: Personal and additional exemptions
Insurance premium for health and hospitalization
__________________________________________________
Taxable Income
MULTIPLIED BY: The schedular tax rate
__________________________________________________
Income Tax due
LESS: Taxes withheld on the
compensation Income
Tax credits
__________________________________________________
Net Income Tax payable
===================
Basic formula for the computation if the compensation income is derived from
employment in a regional or area headquarters and regional operating headquarters
of multinational companies, or from an offshore banking unit, or a petroleum service
contractor and subcontractor located in the Philippines.
Gross compensation income
MULTIPLIED BY: 15%
_________________________________________________
Income Tax due
LESS: Taxes withheld on the compensation income
Tax credits
_________________________________________________
Net Income Tax payable
===================
Basic formula for the computation of income tax of a NON-RESIDENT CITIZEN from
mixed income derived both from compensation and from exercise of a profession or
from engaging in trade of business.
Formula 1. Computation of income tax payable on mixed compensation income and
business/professional income
Gross compensation income derived from
all sources within the Philippines
LESS: Personal and additional exemptions
Premium for health and hospitalization insurance
__________________________________________________
Taxable Compensation Income
PLUS: Net income derived from exercise of a
profession or engaging in trade or business
(See below for the formula) ***
__________________________________________________
Total mixed taxable income
MULTIPLIED BY: The schedular tax rate
__________________________________________________
Income Tax due
LESS: Withheld tax on the compensation
Quarterly income taxes paid

Tax credits
__________________________________________________
Net Income Tax payable on mixed income
================================
***Computation of net income derived from exercise of a profession or engaging in
trade or business:
Total receipts from all sources from
within the Philippines
LESS: Exclusions from gross income
Income subject to final taxes
__________________________________________________
Gross income derived from all sources
within the Philippines
LESS: Personal and additional exemptions
Premiums for health and hospitalization
Optional standard deduction
__________________________________________________
Net income derived from exercise of a profession
or engaging in trade or business
OR
Total receipts from all sources from
within the Philippines
LESS: Exclusions from gross income
Income subject to final taxes
__________________________________________________
Gross income derived from all sources
from within and without the Philippines
LESS: Excess personal and additional exemptions
Itemized deductions including the
premiums for health and hospitalization and health insurance
__________________________________________________
Net income derived from exercise of a profession
or engaging in trade or business
Formula 2. Computation of income tax payable on mixed compensation income and
business/professional income, where the compensation income is subject to a final
tax.
If the compensation income is derived from employment in a regional or area
headquarters and regional operating headquarters of multinational companies, or
from an offshore banking unit, or a petroleum service contractor and subcontractor,
then the basic formula is:
Gross compensation income
MULTIPLIED BY: 15%
_________________________________________________
Income Tax due
LESS: Withheld taxes on the compensation
Tax credits
_________________________________________________
Net Income Tax payable on compensation income
=======================================

Computation of net income tax payable on gross income derived from exercise of a
profession or engaging in trade or business:
Total receipts from all sources from
within the Philippines
LESS: Exclusions from gross income
Income subject to final taxes
__________________________________________________
Gross compensation income derived from
within the Philippines
LESS: Personal and additional exemptions
Premiums for health and hospitalization
Optional standard deduction
__________________________________________________
Taxable Income
LESS: Withheld taxes on the income
Quarterly income taxes paid
Tax credits
__________________________________________________
Net Income Tax payable on the income derived from
the exercise of a profession or from trade or business
==========================================
OR
Total receipts from all sources from
within the Philippines
LESS: Exclusions from gross income
Income subject to final taxes
__________________________________________________
Gross compensation income derived from all sources
from within the Philippines
LESS: Personal and additional exemptions
Itemized deductions including the
Premiums for health and hospitalization and health insurance
__________________________________________________
Taxable Income
MULTIPLIED BY: The schedular tax rate
__________________________________________________
Income Tax due
LESS: Withheld taxes on the income
Quarterly income tax payments
Tax credits
__________________________________________________
Net Income Tax payable on the income from
the exercise of a profession or from trade or business
==========================================
SUMMARY:
Net Income Tax payable on compensation income
PLUS: Net Income Tax payable on the income
from the exercise of a profession of from trade or business
__________________________________________________
Total Income Tax payable on the mixed income derived
from compensation and exercise of a profession, trade or business
===================================================

ALIENS
Basic formula for the computation of income tax of a RESIDENT ALIEN from
income derived solely from compensation.
Gross compensation income derived from
all sources within the Philippines
LESS: Personal and additional exemptions
Insurance premium for health and hospitalization
__________________________________________________
Taxable Income
MULTIPLIED BY: The schedular tax rate
__________________________________________________
Income Tax due
LESS: Taxes withheld on the
compensation Income
Tax credits
__________________________________________________
Net Income Tax payable
===================
Basic formula for the computation if the compensation income is derived from
employment in a regional or area headquarters and regional operating headquarters
of multinational companies, or from an offshore banking unit, or a petroleum service
contractor and subcontractor located in the Philippines.
Gross compensation income
MULTIPLIED BY: 15%
_________________________________________________
Income Tax due
LESS: Taxes withheld on the compensation income
Tax credits
_________________________________________________
Net Income Tax payable
===================
Formula for the Computation of Income Tax of a Non-Resident Alien engaged
in trade or business in the Philippines. One who shall come to the Philippines and
stay therein for an aggregate period of more than one hundred eighty days during
calendar year.
Gross Income derived only from
sources within the Philippines
LESS: Optional Standard Deduction
__________________________________________________
Income Tax Due
LESS: Quarterly Income tax payments
Withheld taxes on the income
Tax Credits
__________________________________________________
Net Income Tax Payable
===================
OR
Gross Income derived only from
sources within the Philippines
LESS: Itemized Deductions

__________________________________________________
Income Tax Due
LESS: Quarterly Income tax payments
Withheld taxes on the income
Tax Credits
__________________________________________________
Net Income Tax Payable
===================
Formula for the Computation of Income Tax of a Non-Resident Alien not
engaged in trade or business in the Philippines
Gross Income derived only from
sources within the Philippines
MULTIPLIED BY: 25%
__________________________________________________
Income Tax Due
LESS:
Quarterly Income tax payments
Withheld taxes on the income
Tax Credits
__________________________________________________
Net Income Tax Payable
===================

DOMESTIC CORPORATIONS
Basic formula for the 30% normal income rate.
Total receipts derived from all sources
within and without the Philippines
LESS: Exclusions from gross income
Income subject to final tax
_______________________________________
Gross Income derived from all sources
from within and without the Philippines
LESS: Itemized deductions
_______________________________________
Taxable income
MULTIPLIED BY: 15%
_______________________________________
Income Tax due
LESS: Quarterly income tax payments
Taxes withheld on the income
Tax credits
_______________________________________
Net Income Tax payable
===================
Basic formula for computing the Minimum Corporate Income Tax (MCIT), for a
merchandising concern.
Gross sales from all sources
within and without the Philippines
LESS: Sales Returns, Discounts
and Allowances
Cost of Goods Sold
_______________________________________
Gross Income for MCIT
MULTIPLY: 2% Tax Rate
_______________________________________
Minimum Corporate Income Tax
=========================

FOREIGN CORPORATIONS

Basic formula for the computation of income tax of a NON-RESIDENT Foreign

Corporation.
Total receipts derived from all sources
within the Philippines
LESS: Exclusions from gross income
Income subject to final tax
_______________________________________
Gross Income derived from all sources
from within the Philippines
MULTIPLIED BY: 30%
_______________________________________
Income Tax due
LESS: Quarterly income tax payments
Taxes withheld on the income
Tax credits
_______________________________________
Net Income Tax payable
===================

Basic formula for the computation of income tax of a RESIDENT Foreign

Corporation.
Total receipts derived from all sources
within the Philippines
LESS: Exclusions from gross income
Income subject to final tax
_______________________________________
Gross Income derived from all sources
from within and without the Philippines
LESS: Itemized deductions
_______________________________________
Taxable income
MULTIPLIED BY: 15%
_______________________________________
Income Tax due
LESS: Quarterly income tax payments
Taxes withheld on the income
Tax credits
_______________________________________
Net Income Tax payable
===================

Basic formula for computing the Minimum Corporate Income Tax (MCIT), for a
merchandising concern.
Gross sales from all sources
within and without the Philippines
LESS: Sales Returns, Discounts
and Allowances
Cost of Goods Sold
_______________________________________

Gross Income for MCIT

MULTIPLY: 2% Tax Rate
_______________________________________
Minimum Corporate Income Tax
=========================

GENERAL PROFESSIONAL PARTNERSHIP

Basic formula for the determination of the income tax due on the distributive
share of a partner from a general professional partnership.
Gross income derived from all sources
from within and without the Philippines
derived from the practice of a profession ***
LESS: Itemized deductions
_______________________________________
Net income of the general professional partnership
DIVIDED BY: The number of partners
_______________________________________
Distributive share of each partner
LESS: Premium on hospitalization and
health insurance
Personal and additional exemptions
_______________________________________
Taxable income of each partner
MULTIPLIED BY: The scheduler tax rate
_______________________________________
Income tax due from each partner
LESS: Taxes withheld on the income
Tax credits
_______________________________________
Net Income tax payable by each partner
===============================
***Any income of a general professional partnership which is not derived from
practice of a profession is deemed to be income of a business partnership an is
taxable as if earned by a corporation