Final Withholding Tax is a type of tax that is applied directly to specific types of income. We call this tax "final" because, once deducted, it eliminates the need for additional taxes such as regular income tax or capital gains tax on that income. Simply put, it represents a one-time tax on specific earnings, and upon payment, the income becomes fully taxed. The government establishes a specific tax rate for this, treating it differently from other income that may be subject to regular rates. Because this tax is final, equal income will not be taxed again.
Any earnings from the lotto jackpot prize that exceed a specific threshold are subject to a final tax in the Philippines, which is typically around 20% percent.
After deducting this tax, the winner will not receive the prize. However, despite the fact that this taxation is enormous, it still leaves winners with a substantial sum, which can have a huge impact on their lives.
Under the Old Tax legislation (NIRC), lotto winnings and all prizes awarded by the PCSO are exempt from taxation. If you enjoy watching the lotto jackpot prize draws every night, you will notice that the host always declares that the jackpot gains are exempt from taxation.
Furthermore, in the Old National Insurance Regulatory Commission (NIRC), awards are subject to a final tax of twenty percent, with the exception of prizes that are worth less than ten thousand pesos, in which case they are subject to the standard tax. On the other hand, regardless of the amount, winnings are subject to a 20% final tax deduction.
The new TRAIN Law imposes a final tax of twenty percent on winners, except for PCSO and lotto jackpot prize winnings of ten thousand Philippine pesos or less.
Source: Revenue Regulations No. 08-2018
| Old NIRC | TRAIN Law |
| Prizes - 20% | Prizes - 20% |
| Winnings - 20% | Winnings - 20% |
| PCSO and Lotto Winnings - Exempt | PCSO and Lotto Winnings - 20%*** |
The final tax on prizes is 20% if the sum is more than ten thousand pesos; otherwise, the prizes are subject to the standard tax.
Final tax is applied to winnings at a rate of twenty percent, regardless of the amount won.
***PCSO winnings and prizes that are greater than 10,000 Philippine Pesos are subject to a twenty percent tax.
Juan won the following lotto jackpot prize /winnings during the year:
| Prizes/Winnings | Amount Won | Final Tax |
| Singing Contest | Php 20,000 | Php 4,000 |
| Raffle Draw | Php 50,000 | Php 10,000 |
| Lottery (PCSO 6/42) | Php 200,000 | Php 40,000 |
In this example, final taxes at the rate of 20% apply to Juan's winnings from various sources, removing them from the total amount before she receives her winnings.
Prior to the TRAIN Law, PCSO Swertres lotto jackpot prize winnings were exempt from applicable taxes, regardless of the amount won.
The TRAIN bill imposed a 15% final tax on net capital gains on shares not traded on the stock exchange.
| Old NIRC | TRAIN Law |
| Net Capital Gains | Net Capital Gains |
| First Php 100,000 - 5% | First Php 100,000 - 15% |
| In excess of Php 100,000 - 10% | In excess of Php 100,000 - 15% |
The formula for calculating net capital gains is : capital gains minus capital loss
The new tax rate for net capital gains is 15% percent. No longer will there be a two-tiered rate.
Due to the fact that it is a component of the percentage taxes and not the final tax, the modifications to the tax on shares that are traded on stock exchanges will probably be discussed sooner.
According to the law, a "fringe benefit" is a product, service, or other benefit that an employer provides to an individual employee (excluding rank and file employees as defined herein) in addition to basic pay.
According to the National Internal Revenue Code, Section 33 (B) source.
Housing, an expense account, a vehicle of any type, and other similar benefits are examples of fringe benefits.
Fringe benefits are benefits that are provided to employees who are in managerial or supervisory positions. It is bestowed upon a person who possesses the authority to hire and fire employees.
According to the calculation, the gross-up monetary value of the fringe benefit that is received by non-rank and file employees should be divided by 65 percent in order to arrive at the total gross-up monetary value of one hundred percent.
The CBA Corporation provides Maria, a branch manager, with an additional cash payment of Php 20,000 per quarter to cover her personal membership costs at a Country Golf Club. This amount is provided in addition to her regular earnings.
| Monetary Value of Fringe Benefit: | 20,000 |
| Percentage Divisor Applicable: | 65% |
| Fringe Benefit Tax Rate: | 35% |
| Fringe Benefit Tax: | 10,769.23 |
Php 20,000 / 65% = Php 30,769.23 (This represents the grossed-up value of the benefit.)
Fringe Benefit Tax:
The Fringe Benefit Tax to be paid on the fringe benefit valued at Php 20,000 is Php 10,769.23.
"Foreign Currency Deposit Unit" or "FCDU" refers to a unit of a local bank or of a local branch of a foreign bank that is permitted by the Central Bank to engage in transactions denominated in foreign currency. This authorization is granted in accordance with the terms of Republic Act 6426, as amended.
The regulations were obtained from the Bangko Sentral ng Pilipinas.
Final Tax on interest income received by an individual taxpayer (with the exception of non-resident individuals) from a depository band in accordance with the expanded foreign currency deposit system is to be subject to a final tax rate of 15 %. 75% to 15% of the total
The government's sincere intention is to stay committed to the true principles of taxation, which are that they should be fair, simple, and efficient. The government has streamlined the taxation system and raised the tax rates to achieve its goal of collecting more income to support its infrastructure projects and programs. This is the most noticeable change that has taken place.
Taxes have a chance to have an impact and reduce the overall amount earned from a lotto jackpot prize win. But, the winnings that are left can still provide major chances that can completely change the winner's life. It is crucial for winners to approach their wealth with an organized plan, taking into account the taxes that they have already paid and concentrating on the management of their finances in a sustainable manner.
RA 10963 (TRAIN Law) and Revenue Regulation 08-2018 is the main source of this information.
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