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TRAIN Tax Rates on Passive Income in the Philippines




The newly approved TRAIN tax reform law also adjusted the tax rates on certain passive income, in addition to revised personal income tax rates and new taxes imposed on oil, sugary beverages, tobacco, mining, etc.

Last February 2018, the Bureau of Internal Revenue (BIR) released Revenue Regulations No. 8-2018 which discusses the income tax provisions of the TRAIN law. The RR contains detailed rules on how taxation is to be applied and sample computations on how taxes are to be computed.

Here’s the relevant section of BIR’s RR 8-2018 which talks about the applicable tax rates on certain passive income in the Philippines.

New Income Tax Rates on Passive Income in the Philippines

Passive IncomeTax Rate
1. Interests from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements20%
2. Interest income received by an individual taxpayer (except a non-resident individual) from a depositary bank under the expanded foreign currency deposit system15%
3. Proceeds of pre-terminated long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form as prescribed by the Bangko Sentral ng Pilipinas (BSP) -- the final tax shall be based on the remaining maturity of the investment:
a. Four (4) years but less than five (5) years5%
b. Three (3) years but less than four (4) years 12%
c. Less than three (3) years 20%
4. Royalties (except royalties on books and other literary works and musical compositions) 20%
5. Royalties on books and other literary works and musical compositions10%
6. Prizes (except prizes amounting to P10,000 or less) 20%
7. Winnings (except Philippine Charity Sweepstakes and Lotto winnings amounting to P10,000 or less) 20%
8. Cash and Property Dividends10%
9. Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange15%
10. Capital Gains from sale of Real Property located in the Philippines6%

Source: BIR Revenue Regulations 8-2018 (www.bir.gov.ph)

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