#AskTheTaxWhiz: Is Manny Pacquiao’s Macau fight taxable?

Is Manny Pacquiao’s Macau fight taxable? Is there no exemption for modern-day heroes like our boxing champion?

Yes. Sarangani Representative Manny Pacquiao, as a resident citizen, will have to declare and to pay 32% income tax on all his earnings inside and outside the country. However, the taxes collected in Macau can be used as tax credit to avoid double taxation.

At Macau’s tax rate of 12%, versus our top tax rate at 32% or an effective rate of 19% under optional standard deduction (OSD), Pacquiao will still have to pay additional 7% taxes on his winnings from his Macau fight.

None. There is no provision in our tax code that exempts modern-day heroes including our “Pambansang Kamao.” Otherwise, everyone will claim exemption from income taxes as modern-day heroes like our teachers, policemen, and the likes.

Is it true that Overseas Filipino Workers (OFWs) are tax-exempt? Does it mean if they do business in the Philippines it will also be exempted?

Yes. Section 23 of the National Internal Revenue Code of 1997 states that an OFW’s income from abroad or income arising out of his overseas employment is exempt from income tax.

No. Only income from abroad is exempt from income tax.  If they decide to do business in the Philippines, it will already be subject to business and income taxes.

I am a regular employee of a small company. On the side, I also work as a talent and a host. Do I need to consolidate and file tax returns?

Yes. The classification for individual income taxpayers is either employed or self-employed. For compensation income, employees are not required to file tax returns as they are covered by the substituted filing tax system.  Employers pay and file on their behalf. As a proof of tax payment, employees receive Bureau of Internal Revenue (BIR) Form 2316 every January the following year.

On the other hand, self-employed individuals or professionals are treated like a regular businesses entity. Self-employed individuals must register with BIR and file monthly tax returns.

If you have both compensation and business income, you are considered a mixed-income earner and so you need to file monthly tax returns and consolidate all your income in your annual income tax return. Note, however, that taxes withheld by your employer (as provided in your BIR Form 2316) and by your clients (supported by BIR Form 2307) will reduce your annual income tax due.

Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at business@rappler.com. – Rappler.com

Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social consulting enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon’s tax handbook, Got a Question About Taxes? Ask the Tax Whiz! is now available in bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at consult@acg.ph.