COMPENSATION INCOME

Under the new tax code, individual taxpayer’s items of income are grouped together as follows:

I. Compensation – derived from employment    
II. Capital gains – derived from sales of real property and shares of stock  
III.  Passive income – derived  from   winnings,  cinematographic film  and similar  works,  prizes,
  royalty, interest, dividends and share  in  net income of  taxable or business
  partnership (W/C PRIDS)    
IV. Business income – derived from trade, business, practice of profession and other income

What is included? It includes all income arising from an employer-employee relationship (whether monetary or non-monetary), such as:

  • Salaries, wages, compensation, tips, commissions, emoluments and honoraria
  • Bonuses
  • Allowances
    1. Straight allowances, such as transportation, representation, entertainment
    2. Reimbursement or advance-type of allowance (non-taxable)
  • Fringe benefits
  • Retirement and separation benefits
  • Fees, including director’s fees
  • Pensions
  • Other income of a similar nature

Note: Payment received by a partner from a general professional partnership for services rendered shall not be considered compensation income, but rather as ordinary business income.

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About Jonathan Ruiz CPA

Newbie Mentor and one of the influential author in the Philippines setting. His also the founder of PAM Academy and Developer of PAM PSE TRACKER application.
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