1. Income Taxation on Individuals

2. Personal exemptions
arbitrary amounts allowed by the law as a deduction from the gross compensation income and/or net business income and/or professional income as the case may be, for personal, living, or family expenses

3. equivalent of the minimum subsistence
Personal exemptions
equivalent of the minimum subsistence

4. Kinds personal exemptions
Basic personal exemption
Additional exemption

5. Basic personal exemption
is a deductible allowance whose amount allowed by the law shall depend upon the status of the individual taxpayer himself

6. Basic personal exemption
basic personal exemption for individual taxpayer amounts to P50,000 whether he/she is married, head of the family or single

7. Basic personal exemption
Example:
Jash, a Filipino Citizen, and married to Aizel, an American citizen residing in USA, has compensation income of P150,000 in the Philippines. He would like to know their personal exemptions.

8. Basic personal exemption
The personal exemption of Jashobeam is P50,000.

9. Basic personal exemption
As a Filipino citizen with income derived within, only Jash is allowed to have a basic personal exemption. His wife has no personal exemption because she is not a Filipino citizen and has no income derived within the Philippines.

10. Additional personal exemption
deductible allowance in addition to the basic personal exemption allowed for qualified dependent children of an individual taxpayer

11. Additional personal exemption
The new R.A provides that the amount of additional exemption for each qualified dependent child (not exceeding four) is P25,000.

12. Additional personal exemption
Not more than 21 years old
Not gainfully employed
Seeking for chief support

13. Additional personal exemption
Example:
For the taxable year 2009, Lorenzo, married with six qualified dependent children has a compensation income of P200,000. Assuming that Mr. Cruz is a Filipino citizen, how much is his total personal exemption?

14. Additional personal exemption
The total personal exemption allowed to Lorenzo would be:
Basic personal exemption P 50,000
Add: Additional exemptions
(P25,000 x 4 children) ,000
Total personal exemptions P 150,000

15. Comprehensive example
Compute the personal exemption of Mr. Weygan, a Filipino legally separated with the following dependents:
Children: A, 30 years old and jobless; B, 19 years old student but gainfully employed; C, 22, years old mentally retarded,
55-year old father,
12 year-old illegitimate son, and
Supporting a senior citizen.

16. Comprehensive example
The total personal exemption would be;
Basic personal exemption –
head of the family P 50,000
Add: Additional exemptions P 25,000
Child – mentally
retarded , ,000
Total personal exemptions P100,000

17. Classification of Taxes
Normal (Tabular) graduated tax
Passive Income Tax
Capital Gains Tax

18. Normal (Tabular) Tax
Individual taxpayer’s taxable income subject to normal (tabular) tax is income derived from compensation, business and profession.

19. Normal (Tabular) Tax Rate on Individual Taxpayer
Not over P10,000
> P10,000 < = P30,000
> P30,000 < = P70,000
> P70,000 < = P140,000
> P140,000 <= P250,000
> P250,000 < = P500,000
Over P500,000 5%
P % of the excess over P10,000
P2, % of the excess over P30,000
P8, % of the excess over P70,000
P22, % of the excess over P140,000
P50, % of the excess over P250,000
P125, % of the excess over P500,000

20. Taxable Income
Taxable Income means the pertinent items of gross income, less the deductions and/or basic personal and additional exemptions, and special deductions, if any, authorized for such types of income by the NIRC of other special laws. The amount of taxable income is the basis of income tax rate to arrive at income tax due.

21. Income Tax Due
The income tax due of an individual taxpayer is based on his/her net taxable income. The income tax rate to be used is the normal (tabular) income tax rate. The tax due on the respective income earned by husband and wife should be computed separately.

22. Withholding Taxes on Salaries
Withholding taxes on salaries are income taxes that are temporarily based on estimate. The exact amount of taxable salary would not only be determined at the end of the year when the last pay for the year is computed and paid.

23. Withholding Taxes on Salaries
Ms. Ramirez earns Php 20,000 per month as a private employee.
On May 31, 2017, she was promoted and in effect, her salary was increased to Php 24,000 per month.

24. Withholding Taxes on Salaries
If the only source of the taxpayer’s income is from his sole employment, his annual ITR is no longer necessary. BIR 2316 reported by the employer would be enough as compliance.

25. Withholding Taxes on Salaries
Example:
Mr. Jowel Awingan is single and employed with a monthly salary of P20,140 and P2,000 Personnel Economic Relief Allowance. He pays monthly P1, for his GSIS personal share, P100 for Home Mutual Development Fund, and P 250 for Philhealth Insurance. How much is his taxable income and income tax in a year?

26. ALLOWABLE DEDUCTIONS Optional Standard Deduction Itemized Deductions
40% of net sales for individuals
40% of gross income for corporations
Itemized Deductions

27. ALLOWABLE DEDUCTIONS Itemized Deductions Depreciation Expenses
Depletion
Interest
Charitable Contributions
Losses
Research and Development
Bad Debts

28. Self-employed Individuals
Example:
Assume the Mr. Joel Yap is a single proprietor of a trading business. His proprietorship has business sales for the year of P670,000. Cost of sales was PP250,000. The operating expense amounted to P150,000. Depreciation of machines was P25,000 for the year. P30,000 of his collectibles were written off due to insolvency of the customer. Interest expenses for the year amounted to P60,000. How much is his taxable income and income tax for the year if he opted for the optional standard deduction?

29. Self-employed Individuals
Example:
Assume the Mr. Joel Yap is a single proprietor of a trading business. His proprietorship has business sales for the year of P670,000. Cost of sales was PP250,000. The operating expense amounted to P150,000. Depreciation of machines was P25,000 for the year. P30,000 of his collectibles were written off due to insolvency of the customer. Interest expenses for the year amounted to P60,000. How much is his taxable income and income tax for the year?

30. Self-employed Individuals
Mr. Joel Awingan is single and employed with a monthly salary of P20,140 and P1,000 Personnel Economic Relief Allowance. He pays monthly P1, for his GSIS personal share, P100 for HDMF, and P 250 for PHIC.
Mr. Awingan also owns a trading business. His proprietorship has business sales for the year of P870,000. Cost of sales was PP350,000. The operating expense amounted to P180,000. Personally, his expenses would amount to 175,000. Depreciation of machines was P28,000 for the year. Estate taxes paid for the inheritance this year was 10,000. Interest expenses for the year amounted to P45,000. He paid an employee of the government an amount of P13,000 as bribe for prioritizing his transactions. How much is his taxable income and income tax for the year?

31. PENALTIES AND SURCHARGES
50% of the deficiency tax
Willful neglect to file within the period prescribed.
False or fraudulent return is willfully made
20% per annum
Unpaid taxes