Income in Philippines is divided into the following three categories which are taxed separately, as summarized below.
Compensation employment income: This income is taxed at progressive rates on gross income after deduction of personal and additional exemptions but without deductions for expenses.
Passive income: This income, including dividends and interest, is subject to tax at 7.5%.
Business income and professional income: This income is taxed at progressive rates on net business income after deduction of certain specified expenses.