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.


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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