CPALE Taxation Review: NIRC, TRAIN Law, CREATE, Income Tax

CPALE Taxation Review: NIRC, TRAIN Law, CREATE, Income Tax

CPALE Taxation tests Philippine tax law as it applies to accountancy practice. The 70 items at 16% weight cover individual and corporate income tax, VAT, percentage tax, transfer taxes, and tax administration — all under the National Internal Revenue Code (NIRC) as amended by recent reform packages.

The big complexity: the TRAIN Law (RA 10963, 2017) and CREATE Act (RA 11534, 2021) changed major rates and thresholds. Reviewers using pre-2018 textbooks miss critical updates.

This post is the topic-by-topic plan that the CPALE 2026 pillar guide hands off to.

What PRC actually asks

Approximate item distribution:

Individual income tax

Drill list under TRAIN Law:

Tax rates (effective 2023+):

• ₱0 - ₱250,000: 0%
• ₱250,000 - ₱400,000: 15% of excess over ₱250,000
• ₱400,000 - ₱800,000: ₱22,500 + 20% of excess over ₱400,000
• ₱800,000 - ₱2,000,000: ₱102,500 + 25% of excess over ₱800,000
• ₱2,000,000 - ₱8,000,000: ₱402,500 + 30% of excess over ₱2,000,000
• Over ₱8,000,000: ₱2,202,500 + 35% of excess

8% optional tax for self-employed/professionals with gross income ≤ ₱3M.

Categories:

• Resident citizens: taxed on worldwide income
• Non-resident citizens: taxed only on PH-source income
• Resident aliens: taxed only on PH-source income
• Non-resident aliens engaged in trade or business: graduated rates on PH-source income
• Non-resident aliens not engaged in trade: 25% flat on PH gross income

Final taxes on passive income:

• Interest from bank deposits: 20%
• Royalties: 20% (10% on books, literary, musical compositions)
• Prizes >₱10,000: 20%
• Dividends from domestic corp: 10%

Corporate income tax (under CREATE Act)

Corporate income tax rates:

• Domestic corporations + resident foreign corporations: 25% (or 20% if net taxable income ≤ ₱5M and total assets ≤ ₱100M, excluding land)
• Non-resident foreign corporations: 25% on gross PH-source income

Minimum Corporate Income Tax (MCIT): 1% (was 2% pre-CREATE) of gross income from 4th year of operations onwards. Whichever is higher: regular CIT or MCIT.

Improperly Accumulated Earnings Tax (IAET): 10% on improperly accumulated earnings.

Branch Profit Remittance Tax: 15% on profits remitted by PH branch to head office abroad.

Final taxes on passive corporate income.

Value-Added Tax (VAT)

Drill list:

• VAT-registered persons: gross sales/receipts > ₱3M (TRAIN threshold)
• Output VAT: 12% on sales of goods/services
• Input VAT: VAT paid on purchases
• VAT payable = Output VAT - Input VAT
• Zero-rated transactions vs VAT-exempt transactions (key distinction)
• Excess input VAT: refund vs carry-forward
• Quarterly VAT returns (BIR Form 2550Q)
• Monthly VAT returns (Form 2550M) for some sectors
• VAT on importation
• VAT on services rendered to non-residents

Percentage tax + excise tax

• Percentage tax under TRAIN: 3% (some sectors); 1% temporarily reduced under CREATE for select sectors
• Persons subject to percentage tax (small business not VAT-registered)
• Excise taxes on specific goods: alcohol, tobacco, petroleum, motor vehicles, sugar-sweetened beverages
• Sin tax laws (RA 10351, RA 11346, RA 11467 amendments)

Estate tax

• 6% flat rate on net estate (under TRAIN; replaced graduated 5-20%)
• Standard deduction: ₱5M
• Family home deduction: up to ₱10M
• Other deductions: funeral expenses, judicial expenses, claims against estate, unpaid mortgages, casualty losses, vanishing deduction, transfers for public use
• Filing deadline: within 1 year from death
• Installment payment option

Donor's tax

• 6% flat rate on net gifts in excess of ₱250,000 (under TRAIN; replaced graduated rates)
• Annual exemption: ₱250,000 cumulative across all donations in calendar year
• Exempt donations: dowries, donations to qualified non-profit organisations
• Filing deadline: within 30 days of donation

Withholding tax

• Creditable withholding tax (CWT): on rentals, professional fees, contractor payments
• Final withholding tax: on passive income, dividends to non-residents
• Withholding tax on compensation: graduated based on employee's compensation
• Substituted filing for pure compensation earners
• BIR Form 2316 (employee compensation tax statement)

Tax remedies + administration

Assessment process:

• Letter of Authority (LOA)
• Pre-Assessment Notice (PAN) — 15 days to respond
• Final Assessment Notice (FAN) — 30 days to file protest
• Final Decision on Disputed Assessment (FDDA) — 30 days to appeal to CTA

Statutes of limitation:

• 3 years from filing for assessment (general rule)
• 10 years from discovery for false/fraudulent return
• 5 years from assessment for collection

Court of Tax Appeals (CTA):

• Original jurisdiction over BIR/BoC decisions on tax disputes
• Appeals to CTA en banc, then SC

Local taxes

• Real property tax (RPT): 1% basic + 1% SEF (Special Education Fund) for provinces; up to 2% basic + 1% SEF for cities
• Local business tax
• Community tax certificate (cedula)

A 6-week Taxation drilling plan

Realistic Taxation scores

Where Super Tutor fits

Super Tutor's CPALE Taxation track covers individual + corporate + VAT + transfer taxes with item drilling on current TRAIN/CREATE rates. Free tier opens individual income tax; the Focused plan (₱49/week, ₱249/month, ₱1,999/year) opens corporate + VAT + transfer + remedies + mocks.

What to read next

The CPALE 2026 pillar guide covers the full review. Other Day-2 subjects: MAS, RFBT.