Under Philippine law, income taxation is a critical component governed by the National Internal Revenue Code of 1997 (NIRC), as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law, R.A. No. 10963, and further streamlined by the Ease of Paying Taxes Act, R.A. No. 11976. These legislative measures aim to simplify tax compliance while optimizing revenue collection for the government. Below is a detailed and structured overview of the current provisions on income tax under these laws.

1. Scope and Definition of Income Tax

Income tax in the Philippines is a national tax imposed on all taxable income earned by individuals, corporations, and other entities. Income includes any gains or profits derived from a broad spectrum of sources, such as trade, business, the practice of a profession, or other forms of income-generating activities. It is generally assessed on a progressive basis, depending on the taxpayer's classification and the nature of income.

2. Taxpayer Classifications and Taxation Basis

The tax burden and treatment depend on the residency status of individuals and the place of incorporation for corporations:

Individual Taxpayers:
- Resident Citizens are taxed on all income from sources within and outside the Philippines.
- Nonresident Citizens and Overseas Filipino Workers (OFWs) are taxed only on Philippine-source income.
- Resident Aliens are taxed solely on Philippine-source income.
- Nonresident Aliens are further classified into non-resident alien engaged in trade or business (NRAETB) and non-resident alien not engaged in trade or business (NRANETB). The tax rates and rules differ significantly between these two classifications.
Corporate Taxpayers:
- Domestic Corporations are taxed on income derived globally, while Foreign Corporations are only taxed on Philippine-source income. Foreign corporations are classified as either resident foreign corporations or non-resident foreign corporations.

3. Income Tax Rates for Individuals under the TRAIN Law

The TRAIN Law introduced a new set of progressive tax rates that significantly altered the tax landscape for individual taxpayers:

For Resident and Non-Resident Citizens:
- Annual taxable income of ₱250,000 or below is exempt from income tax.
- For income exceeding ₱250,000, the rates are progressive, ranging from 20% to 35% depending on income brackets.
- For income above ₱8,000,000, a fixed base tax of ₱2,410,000 plus 35% on the excess applies.
For Self-Employed Individuals and Mixed-Income Earners:
- For individuals with gross sales or receipts not exceeding ₱3 million, they have the option to either follow the graduated income tax rates or avail of an 8% flat tax on gross sales or receipts exceeding ₱250,000 instead of the graduated rates and percentage tax.

4. Income Tax Rates for Corporations and Business Entities under the TRAIN Law and CREATE Act

Corporations are subject to different tax rates based on their classification:

Domestic Corporations are generally taxed at 25% on net taxable income.
- Minimum Corporate Income Tax (MCIT) of 1% is imposed on gross income if the corporate income tax (CIT) falls below this threshold.
- Qualified small businesses with net taxable income not exceeding ₱5 million and total assets below ₱100 million enjoy a reduced tax rate of 20%.
Resident Foreign Corporations are also taxed at 25% of their net taxable income from sources within the Philippines.
Non-Resident Foreign Corporations are taxed on their gross income from Philippine sources at a rate of 25% or, for interest income and other passive income, at varying final withholding tax rates.

5. Withholding Taxes on Certain Income

Withholding taxes serve as a collection method for the government to ensure timely payment. Under the TRAIN Law, income tax withheld at source includes:

Compensation Income is subject to withholding tax, with employers acting as withholding agents.
Final Withholding Tax is applied to passive income (e.g., interest, royalties, dividends) at rates from 10% to 20% for resident citizens and resident aliens, and 15% to 25% for non-resident aliens, depending on tax treaty agreements.
Expanded Withholding Tax (EWT) applies to various forms of income payments to certain payees, including professionals, lessors, and contractors.

6. Taxable and Non-Taxable Income

The NIRC outlines categories of income subject to tax and those exempted:

Taxable Income generally includes compensation income, business income, professional income, and passive income.
Exemptions are provided for de minimis benefits, mandatory contributions to SSS, GSIS, Pag-IBIG, and PhilHealth, as well as other non-taxable fringe benefits for rank-and-file employees.

7. Allowable Deductions and Personal Exemptions

For individual taxpayers, certain deductions are available to reduce taxable income:

Itemized Deductions or Optional Standard Deduction (OSD) (equivalent to 40% of gross income for self-employed individuals and professionals) can be claimed.
Personal Exemptions were repealed by the TRAIN Law, but dependents' exemptions may still apply in specific cases.

Corporations can deduct expenses deemed ordinary and necessary in carrying out business operations, such as business expenses, interest, losses, bad debts, depreciation, and charitable contributions.

8. Filing and Payment of Income Tax

Income tax filing is primarily governed by the deadlines prescribed under the NIRC and the TRAIN Law. The Annual Income Tax Return for individual taxpayers must be filed on or before April 15 of the following year, while corporations follow fiscal year schedules.

9. Reforms under the Ease of Paying Taxes Act (R.A. No. 11976)

The Ease of Paying Taxes Act was enacted to streamline tax filing, improve accessibility, and reduce compliance costs for taxpayers. Key reforms include:

Simplified Processes for filing returns and paying taxes, aiming to accommodate digital transactions and electronic submissions.
Categorization of Taxpayers based on their risk profile to tailor compliance requirements.
E-Services enhancements that allow taxpayers to file returns and make payments online through enhanced BIR platforms.
Standardized Documentary Requirements to avoid redundant submissions.

10. Penalties for Non-Compliance

The NIRC imposes various penalties on individuals and corporations for non-compliance:

Failure to File a tax return incurs a 25% surcharge on the tax due, and 50% for fraudulent cases.
Interest is imposed at 12% per annum on any unpaid amount.
Additional compromise penalties may be applied based on the nature of the offense.

11. Recent Developments and Administrative Updates

The Bureau of Internal Revenue (BIR) has issued multiple Revenue Regulations and Memorandum Circulars to clarify and implement changes introduced by the TRAIN Law and Ease of Paying Taxes Act. These issuances provide specific guidance on filing procedures, documentary requirements, and amendments to filing deadlines. Taxpayers are advised to refer to these regulatory updates to ensure compliance with the latest tax rules.

This framework represents a comprehensive overview of the core principles of income taxation in the Philippines under the NIRC, as amended by the TRAIN Law and Ease of Paying Taxes Act.