Kinds of Income in the Philippines
Income means all wealth which flows into the taxpayer other than as a mere return of capital wherein the Philippines have several types of income in which you have to determine for the purpose of income taxation.
There are three types of incomes subject to income tax: 1. Ordinary or regular income
2. Passive income derived from Philippine sources
3. Capital gains subject to capital gains tax
What is Ordinary Income? Ordinary income is any type of income earned by a taxpayer that is taxable using the ordinary rates or normal rates or also known as the graduated tax table. Ordinary income also refers to income such as:
Compensation income (salaries or wages)
Income from practice of profession
Income from sales and/or dealings of property
Passive income other than those subject to final taxes under Section 24(B) and capital gains tax under Sections 24(C) and (D) of the Tax Code
What is Passive Income?
Passive income as defined by Forbes, is a money which flows in regular intervals without the need for putting in a considerable amount of effort to create it. Passive income from sources within the Philippines is subject to final withholding taxes as enumerated under Section 24(B) of the Tax Code are as follows:
Cash and/or Property Dividends
What is Capital Gain?
Capital gains is a gain presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines. It is a gain being taxed and imposed on a seller’s profit from selling a property which is considered to be a capital asset. Capital assets as identified under Section 39 of the Tax Code are as follows:
Stocks held by a domestic corporation not traded in the local stock exchange
Real properties for sales in the Philippines
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