Business Taxation 101: Capital Gains tax
Christian Andrew Labitoria Gallardo
In the previous installment of this article, we have distinguished assets that are subject to income tax and assets subject to capital gains tax. It must be emphasized that the distinction is important because capital assets are subject to special rules. The following are the special rules to be remembered in dealing with capital assets
(I) Fixed Income Tax Rate: There is a fixed value for capital gains tax under the law. For sale of house and lot, the rate is fixed at 6%. It is different however for income tax. It is “graduated” in a sense that there is a fixed percentage for a certain range of income. For example, a net taxable income of not more than P 250,000.00 is subject to 0% income tax rate. If the net taxable income is more than P 250,000.00 but not over P 400,000.00, it is subject to income tax rate of 20% in excess of P 250,000.00. This will be further discussed later.