Business Income Tax – A tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key source of funds that the government uses to fund its activities and serve the public. Resident Citizen – A citizen of his country who has a permanent home or place of abode in his country to which he/she intends to return whenever he/she is absent for business or any vacation. Resident Alien –
A person who is not a citizen of the Philippines but whose residence is within the Philippines. Non-resident Alien – A non-resident alien engaged in trade or business is one who stays in the Philippines for more than 180 days during the calendar year. The taxable income of non-resident alien engaged in trade or business is their gross income. Another definition is, An individual who is not a citizen of the Philippines and whose residence is not within the Philippines. Table of Income tax return of Individual Annually < ? 10,000 5% ? 500 ? 10,000 – ? 30,000 10% ? 500 ? 30,000 – ? 70,000 15% ? 2,500 ? 70,000 – ?
140,000 20% ? 8,500 ? 140,000 – ? 250,000 25% ? 22,500 ? 250,000 – ? 500,000 30% ? 50,000 Over ? 500,000 32% ? 125,000 •HOW TO COMPUTE THE TAXABLE INCOME: The first step is you should answer the following questions below: I. What is Your Status? Single or Married? II. Do You Have Any Dependent? How Many? III. How much is your Monthly salary? And additional salary (Night differential, Holiday pay, Overtime & ETC) IV. Other taxes (Phil Health, SSS & ETC) V. Salary deduction (Allowances, Tardiness & ETC) General Formula: Withholding Tax = ( ( [Taxable Income] – [Bracket or Exemption] ) x [%over] ) + [Bracket Tax or Base Tax]
Taxable Income = [Gross (Basic) Monthly Income + Overtime Pay + Holiday Pay + Night Differential] – (minus) [Tardiness Deductions + Allowances + SSS Contribution + Phil health Contribution] Examples: Single at 400 pesos per day for 6 days per week, with 52 weeks payments received: 400 x 6 days = 2,400 per week 2,400 per week x 52 weeks = 124,800 per year. Tax on this is therefore in the 70,000 to 140,000 band: 8,500 peso + 20% of the Excess over 70,000 Tax on the first 70,000 is therefore: 8,500 Tax on the balance of 54,800 is at 20% = 10,960 Total tax is 8,500 + 10,960 = 19,460 Calculating this on a fortnightly basis:
4,800 Wage for 2 weeks __750 Tax for 2 weeks 4,050 Net Received after tax. Example TWO: Single at 1,000 pesos per day for 6 days per week, with 52 weeks payments received: 1,000 x 6 days = 6,000 per week 6,000 per week x 52 weeks = 312,000 per year. Tax on this is therefore in the 250,000 – 500,000: PhP 50,000 peso + 30% of the Excess over P 250,000 Tax on the first 250,000 is therefore: 50,000 Tax on the balance of 62,000 (312,000 less 250,000) is at 30% = 12,400 Total tax is 50,000 + 12,400 = 62,400 Calculating this on a fortnightly basis: 12,000 Wage for 2 weeks _2,400 Tax for 2 weeks 9,600 Net Received after tax.