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0% found this document useful (0 votes)
4K views15 pagesChapter 7
Uploaded by
Fely MaataCopyright
© © All Rights Reserved
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Available Formats
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/ 15
Chapter 7 - Introduction to Regular income Tax
CHAPTER 7
INTRODUCTION TO REGULAR INCOME TAX
chapter Overview and Objectives:
This chapter provides an overview of the regular income tax intended to acquaint
readers with the nature and tax structures of the regular income tax. It also
discusses regular tax reporting and income tax determination. Subsequent
chapters deal with specific aspects of the regular income tax.
After this chapter, readers are expected to demonstrate knowledge on the
following:
The scope of regular income and its tax model
The features of the regular income tax
‘The concept of inclusion and exclusions from gross income
‘The types of gross income subject to regular tax
‘The concept of deduction and personal exemption
‘The concept of deductions compared to personal exemptions
Measurement of gross income from employment and business and the
treatment of other income
8 The concept of operating income or revenue and the difference in tax
presentation of individuals and corporate taxpayers
9. The procedural computation of taxable income of corporations and different
individual taxpayers
10. The computation of the regular tax for individuals and corporations
11, The deadline of the regular tax returns
12. Applicability of the quarterly filing and its deadlines
None ene
CHARACTERISTICS OF THE REGULAR INCOME TAX
4. General in coverage
2. Anetincome tax
3. Anannual tax
4. Creditable withholding tax
5. Progressive or proportional tax
General coverage
The regular income tax applies to all items of income except those that are subject to
final tax, capital gains tax, and special tax regimes.
Net income taxation
‘The regular tax is an imposition on residual profits or gains after deductions for
expenses and personal exemptions allowable by law.
221 Chapter 7 - Introduction to Regular Income T=
oo
incor ‘applies on yearly profits or galt
The reel come tao ge cong method doped by pe
el ee a men Fe
seep:
redabe withholding tne
State cont re bie to ced
a age are vances
croton a deh oer
shholding tax (CWT). The
be deducted against repct
rrogesiveor prope
imposes fat oF proporuonal tax of 30% upon the taxable income of corpor
rape har he revigion ofthe corporate income tax inthe second package ofthe TRAIN
Law proposes a 25% corporate income tax,
‘THE REGULAR INCOME TAX MODEL
Pou
2x
Pos
Gross income consists ofthe major topics:
Exclusions of gross income - list of income exempt to regular income tax
Inclusions in gross income lst of income subject to regular income tax
‘Special topics ~ covers income that are either exclusion or inclusion depending
fon certain circumstances, such as:
Gross income - inclusions
Less: Allowable deductions
‘Taxable income
Dealings in properties
GROSS INCOME
Gross income constitutes all items of income that are neither excluded in gross
income nor subjected to final tax or capital gains tax. The items of gross income
subject to the regular income tax will be extensively discussed in Chapter 9.
Exclusions fr
These pertain
income tax. These
Gross income
ms of income that are excluded: hence. exempt from regular
Ibe discussed in detail in Chapter 8,
Excluded income vs. exemptincome
Excluded income is also exempt income. Excluded income are those listed by the
NIRC as exempt income from regular tax The term exempt income includes alt
income exempt from income tax whether final tax, capital gains tax or regular
m2
chapter 7 - Introducton to Regular income Tax
income tax. Exclusions from gross income are listed in the nption
income may be provided by the NRCor spec laws. NN Examen fom
ALLOWABLE DEDUCTIONS
Alone dedictions, oF simaly “deductions” are expenses of the conduct of
usiness oF exercise of profession. They are commonly known as. business
expenses » “
“The book sub-divided the vast topic of deductions as follows:
‘of Deductions - Chapter 13
able Itemized Deductions - Chapter 13-8
rable Remized Deductions & Net Operating Loss Carry-over -
4. The Standard Optional Deductions (OSD) - Chapter 13-C
For individual taxpayers there is a need to note the diference between business
‘expenses and personal expenses. Personal expenses or those that an individual
‘pends that are not connected to furtherance, maintenance or development of his
trade, business or profession are non-deductible against gross income.
Individuals that are not engage in business cannot claim deductions from gross
income. Consequently, individuals are classified as follows:
1. Pure compensation income earner
2. Pure business or professional income earner
3. Mixed income earner - an individual earning both compensation and business
oF professional income
Note on Person:
Previously, the
taxpayers. The amount of personal exemption depends on the number of
dependents who are supported by the taxpayer. Personal exemption is in lieu of
the personal, living, and family expenses of an individual taxpayer. Personal
exemption Is repealed effective January 1,2018.
In an effort the simply the tax system, the TRAIN law simply exernpts P250,000
annual income of the individual income taxpayer from regular income tax. This
‘Sxemption fs embedded in the income tax table for individual taxpayers. As such,
there is no need to separately deduct personal exemption.
xemption
provides for personal exemption of income of individual
[DETERMINATION OF TAXABLE INCOME
‘The taxable income of individuals taxpayers 1s computed using the Classification
{and Globalization rule.
23 ‘chapter 7 -noducbon to Regular income T=
‘Classification Rule
Gross income is first classified into:
‘2. Compensation income
'b. Business or professional income
m Business income
Corea me arses, orn an_employer employee
Telatnship ts characterized by 2 power to retench giving the
Service 9 terminate he arrangement when he is losing n business. B
Sere a ertong of goods or rendering of services f0r a profit. Im seryet
siagemeres where the purchaser af the service BAS NO POWET to retrench te
income realized thereon isa busines Income.
‘Treatment of other income
Income that are nether compensation income nor business income such as those
possive income are simply classified as “other taxable income” and are added ty
gross income from business and profession.
Allowable deductions
Business expenses are deducted against gross income from business or
profession. No deduction is allowed against compensation income since personal
expenses of individuals for cost of living are deemed to be included in the
250,000 blanket exemption inthe income tax table
Other income which is neither compensation nor business or professional income
1s simply added to total gross income from business ot pro
‘operating income” If the taxpayer has no business or profes
‘same shall be added to taxable compensation income as “other
‘Taxable income of pure compensation income earner
‘The taxable compensation income of employees is computed as follows:
Gross compensation income
less: Non-taxable compensation
‘Taxable compensation income
Non-toxable compensation includes legalh
* legally mandated salary deductions and items
of compensation income that are exempted by law, contracts, or treaty from
{income taxation. The
in chapter 1g. he dae tax rules on compensation income wil be discussed
24
‘Chapter 7 - Introduction to Regular Income Tax.
‘Taxable income of pure business or professional income earner
‘The taxable net mcome of businessmen or professionals 1s computed as follows:
Dusiness/profession P
200,00
—— mms
Pome x
as
Eos
rome earner from both sources is simply globalized or
\come oF net loss when deductions exceeds gross income
from business or profession shall not be offset against taxable compensation
income because deductions are expenses of business or profession and are
properly deductible only against gross income thereto whereas no expense is
deductible against taxable compensation income,
dividual tacome taxpayer
Case | Case2 | Case3 | Cased |
|? 300 008) 300,000 | P 300000
30,000 30,000 | 30.000
| #.400,000 | 400.000 | 200,000
"250.000 | 250,000 [250,000 |
20900. — 20,000 [— 20,000 {20,000
‘Taxable income shall be determined in each ofthe above case as follows:
Case 1: A compensation earner with other income
Gross compensation income
Less: Non-taxable compensation
‘Taxable compensation income
‘Add: Other gross income
Taxable income
P 300,000
30.000
P 270,000
70.090
‘B290.000
Case 2:A business income earner with other income
Gross business income
‘Add: Other gross income
‘Total gross income
Less: Allowable deductions
Net income
P 400,000
20.000
420,000
250.000
E120.000
2S Chapter 7 -nreducton to Regular Income T=
ith ocher Income
‘P 300,000
30.000
P 270000
Case 3: Amixed income earner wit
Gross compensation income
Less: Non-taxable compensation
‘Taxable compensation income
P 400,000
20.000
P 420,000
250.000
Gross business income
Other gross income
Tota gross income
Less: Deductions
‘Taxable net income
‘Taxable Income
120.009
B.s40.000
Case 4: Mixed income earner - with net loss on business or profession
Gross compensation income P 300,000
Less: Non-taxable compensation
‘Taxable compensation income
P 270,000
Gross business income
‘Add: Other gross income
Total gross income
Less: Deductions
not clearly
bbe made in accordance with such
er, clearly reflects the income,
26
‘chapler 7-Introducton to Regular income Tax
Inshort.
Determination of Gross Income from Business or Profession
Business selling goods
‘rom business on the sale of goods is computed as:
Po xxx
— as
Peas
he acquisition cost of the goods sold for merchandising or
f the goods sold mn the case of manufacturing.
Cost of sale of a trading business
or by the
Under the perpetual system, the cost of goods sold is determined through bar
Cost of sales of a manufacturing business
‘The cost of goods sold of a manufacturing business is computed in almost the
same way with those of a trading
inventories of a manufacturing bust
discussed in Chapter 13. “Chapter 7 = Introduction to Reguar income Tex ‘Chapter 7 - Introduction to Regular income Tax
Mtustration
on
towing data during the yea": ing auditor had the’
‘Ataxpayer had the following, pissin i auditor had the following come and expenses during the year
Sonics 100,000 om
ales discounts 100,000
Sales etre 200.000 1400,000
Beginning inventory 2.500.000 20.000
0
‘returns and allowances ope 250,000
‘ 420,000
—_ 800,000 0,000
. RODS issued to audit staff 50,000
les shall be computed as follows: on office properties 20.000
Beginning inventory oye 400,000
Net purchases (P2.5M ~ P1SOK) : 50,000
fre ‘odors ? 3.150000 100,000
‘Total goods avilable for sale 3
lace bate evesnory 800.000 ‘The cost of services shall include only those directly incurred or related gross revenue
Costof sales B-2350.000 from the rendition of services such as
“The business gross income shall be computed a fellows: P 1,400,000
12,000
Sales (P4M ~ PLOOK - P200K) P 3,700,000 anon
Less: Cost of sales —2Ascon0 280.000
Gross income 24330,000 50.000
Eauz000
Business selling services
‘The gross income from sale of services or exercise of a profession is measured as “The gross income shall be computed as follows:
follows:
Revenue P 4,500,000,
Less: Cost of services 2112000
Grossincome Ete.o00
INCOME TAX REPORTING FORMAT
Service provers using the accrual
basis shall eport ther gross receipts.
5s These two are separately presented under the deduction category
“Regular allowable itemized deductions”
28 ‘Chapter 7 nroducton to Reguiar Income TaX
distinguished is
sansreemeareipaarde ttl, yee oy
Reve 3 gener ot the business. Sales pertains
fee ang rm he panacea of He OER, Se rei
ee ee
reer om a of os acon em tesa 88 Fever
are commonly used to denote the income
ing rerenen
‘The terms ste or fes or simply revenes Er tra recepts is used to denote the
OT taxpayer xing te acon as
Income a expayers ing the cash bass
fevenue vs. gross income
Revenue vs gross move pearing to the ttl return ina tansaction which
includes the return of capital and the return on capital, Gross income is a net
‘concept pertaining tthe return on capital in a transaction Gross income is net of
the cost of sales or cost of services.
Other taxable income from operations
Other tarable income from operations includes revenues or receipts from
incidental or secondary operations aside from the primary operations,
a
wien pi vs bone ob i
Acoli tt Soran pecrorioe
ener etree
Se alee Ae ae
reer
LT ail he pn oi iy ci iti.
Tebelattiies
Se cin
has the receipts from passengers and baggage as
‘primary revenue, but may earn income from bus stop restaurants and washrooms
as other operating revenues.
Non-operating income
‘Non-operating income includes all other tems of gross income such as:
4. Gains from dealings in properties
Being net of costs, these are gross income items rather than revenue. They are
not part of “Sole/Kevenues/Receipts/Fees" but of “Non-operating income”
individual taxpayers
Dealings in properties pertain tothe sale, exchange and other disposition of
Properties bythe taxpayer The rules on gains in dealing in properties nat
230
‘chapter 7 - Introduction to Regular Income Tax
covered by the capital gains tax willbe discussed in Chapter 12 under regular
{income taxation.
2, Income distribution from a gen
trust or estate, or from an exemp
Income dist
income, hence
3. Casual active income
‘This includes acuve income from isolated or one-time transactions such 35
casual carpentry income of a person nat engaged in carpentry business. Any
expense on casual transactions is set off with the casual income. The net gain
‘oF income is a non-operating income.
Passive income not subject to final tax
‘income not connected with the business ofthe taxpayer
final tax such ‘onadvances to employees and
from foreign corporations. Similar to casual income, these do not
from the regular business operations, hence, classified as non-operating
income,
Professional partnership, taxable
‘venture
are not revenue, but stems of gross
-operating income of individuals
tMustration
{An individual taxpayer who is using the accrual
wn his manufacturing business
ling year:
Sales, net of returns, and discounts P 4.000.000
Cost of sales 100,000,
Dividend income, net of fina tax 36,000
Business expenses 1,600,000
Gain on sale of old equipment 100,000
Sale of scrap metals 200,000
Interest income on employee advances 435,000
Gain on sale of domestic stocks directly toa buyer 10,000
‘The business income of the individual will be presented in the income tax return as
4,000,000
200.000
P 4200000
—Lag0.000
Gross income trom Business/Profession P 2,400,000
‘Add: Non-operating income
Gain on sale of equipment P 100,000
Interest income on employee advances 45000 __14s.000
Total Gross Income 2545.00
231 chapter 7 -Inoducton to Regular income Tax
‘Total Gross income P 2,545,000
otal Gross .
Total oss ble deductions (Busines Pen )
Netincome
like the dividends and capi
neorne subject t0 FRU
[Motes income items subject te final
merSccuded in the computznon of the Bross
Renorting Format or Cormarate TAXPAvErS
P somxer
cevenves/Receipts/Fees
net saesevees/ ee
Gross income from Pwo
‘ad ter enable neon me
‘Total gross income roo
Lass Alowable deductions a
Pas
ote For corporate taxpayers revenues of ects fom secondary OF Iniden
ny Revenses/Recipes/ees”
‘operations wil be included under the cl
Other taxable income not subject to fal
ms o sme whether or not arising from the
from dealings in properties, income
and other passive income not subject to
Mlustration
Assuming the same data in
corporation, the business incor
the previous illustration except that the taxpayer is
be reported as follows:
Wet Sates/Revenues/Receipts/Fees (P4M + PO.2M) P 4,200,000
Less: Cost of sales —{g00.000
P 2,400,000
Total — Ast ene
oat P 2,545,000
Less: Allowable deductions (Business expenses) 800.000
245.000
Netincome
fence in. presentation between individuals and corporations is
i Stndar ection (05D) The bass ote OSD OF
(otal revenues or receipts from operations while the
ns 1s on total gross income subject to regular
from the regular business operations.
fncome tax whether or not they a
232
chapter 7 -Introducton to Regular Income Tax
pparate bookkeeping for business and professional practice
Individual taxpa} ged yess or exercise of a
wsactions from business
‘of the individual taxpayer must not be
5 or professional practice.
‘this is important in the tax treatmer
cannot be deducted again:
allowable perso’
the actual personal, family and cost
[TYPES OF REGULAR INCOME TAX
1. Individual income tax
7300.00
ve P2,000,000
‘Above P8,000,000
Noe: Eumineesarenaereured tomar isa tole for Board Exam purposes
sep ecogressive (ax covers all individuals inctudingtarable estates and trusts
‘except NRA NETB which is subject to 25% final taxon gross income
Illustration 1: Income Tax Computation
‘A resident cauzen with has 2 compensation Income of 1,250,000 within she
Philippines and P150,000 from abroad
“The income tax due shall be computed 25 follows:
233 ‘cnaptet 7 - Introduction to Regular income Tax
‘The 8% income
for two taxes whi
‘of tis tax system wil be exter
e-tume compliance
Wg and payments. Details
4
fly by bracket marginal rate
ea income ax v6
10% on taxable income, The
foreign corporation and FCDU
Mustration
Mlustration 2: Income Tax Computation ‘A corporation has a net income of P1,200,000 in the Philippines and P800,000 from
‘Arresdent alien has a net business net Income of P2,200,000 in the Philippines ang abroad, " ene
1,250,000 from abroad
corporation Is 2 domestic corporation, the income tax due shall be
‘The income tax due shall be computed as follows: computed as follows:
Tatu ‘Taxable income (world) P 2,000,000
‘Taxable compensation income P 2,200,000
Less: Lower lim ofthe income bracket Income tax due Ecos
& wherethe table income qualifies. — _2,000000 P 490,000
Fewcess P 200,000 [Assuming the corporation is a resident foreign corporation, the income tax due shall
P 1,200,000
ite
2 Sano09
3 x wxable on glbal income while resident foreign
Corporation is taxable on Philippine ncome.
Note: Rec thata resident sin is tacable only on Phlipioe income
‘The Optional 8% Income Tax
computed as 2% of total
i ced an optional income tax for self-employed and or tae orp os CN OE
losing in business, they are
1S-B,
Spectal Corporations
‘The 896 income tax shal bein lieu of the:
a. Progressive income tax, computed under individual tax table; and
'b. 3% percentage busines: tax on sales or receipts.
re those enjoying fower tax rates but not 096, such as such
wn-proRt hospials and PEZA or TIEZA-repstered enterprises.
corporations will be discussed thoroughly in Chapter 15-A.
2S
238 chapter 7 -voducton to Regu income TA
Exempt Corporations enjoying 0% tax rate with no tax dues 5
Exempt corporations are th uch
fempt corporations sions with no taxable int ®
5, non-profit organizat le in
government agencies, non raft ie Board of Investments (BOI) eng
‘cooperatives, and those reg! sion
income tax holiday or TH.
INCOME TAX RETURNS
Inaivduat income TaxRetuNs
(iasiteturmForm | Tndildval taxpayers ~~
Form 1700 Purely employ
Form 17014 Purely in business or profess!
opting to the 89609
Form TOL — [Mid income
[— ‘Corporate inc
Corporations siyec nk
It should be noted that exempt corporations are required to report thei
they do not have taxat
1B compliance of exempt
corporanon tax obligations and to provide for 3
‘mechanism to identify income earned by third parties.
Exempt corporations with gross income subject to the regular corporate income
tax or special rate shall file BIR Form 1702-MX,
of filing the income tax return
me tax return s due for filing on the 15% day of the fourth month
taxable year ofthe taxpayer. The income tax due shall be paid upon
Hence, an aunt for P10049 shall be entered inthe
An amount of P100.50 shall be rounded to P101, income tax return 35 FOR
236
“chapter 7 - Introduction to Regular income Tax
Required Attachment in the Annual Income Tax Return
Independent CPA - if annual sales, earnings, receipts or output
for taxpayers wit es per tax r
egime
form and financial statements (FS) showing:
services
1Rand other taxable income
ons (i taxpayer did not avail of OSD)
formation prescribed to be
of management responsi
tax payment and the return previously fled
celef/Enuitlement issued by the concerned Investment,
INCOME TAX RETURN
juals engaged in business and those engaged in the
pract e required to file three quarterly returns aside from the
Annual consolidated income tax return
Individual taxpayers engaged in business or practice of profession shall file thei
quarterly income tax returns using BIR Form 1701Q Corporations shall file thear
quarterly income tax returns using BIR Form 17020
12x payments, These quarterly tax payments
Taxpayers make est
‘to the annual consolidated income tax due
are claimed as tax creé
of the taxpayer.
Deadline of Quarterly Income Tax Returns
‘Quarterly Income
Tax Returns chapter 7-Invoducton to Regular I9com Tex
ssofindwiduals engaged in business or profes,
ion
=
arter tax recurs
atte er first three quarter whereas the quarter
due 45 days from the end of the ve
due 45 ye Feaporaeaspayesare due 60 Gays from the end ofthe guano
requency of Reporting Per Taxpayer TYPE
ee ————"] ocqueney of Wan Babs
Taxpayer _____| Freaueney of Tax Reporting
Tndiviuals
Pure compensation income earner.
in business or profession
‘Arawal
Purely engage:
Mixed income carne
‘Corporations “Quarterly & Annual
‘The substituted fling system for employees
aan erpensidon income earners may be relieved from the obligation tg
they have no taxable income from other sour,
ee ener
‘other from their lone employer.
i withhold the income tax of the employer,
_gstem wherein the employer shall
‘compensation.
aro required ithe employee bas other taxable income or has more
employer, either concurrent or successive, during the year. ‘omen
238
chapter 7-Inroducbon to Regular Income Tax
(HAPTER 7: SELF-TEST EXERCISES
piscussion Questions
Diserrecuss the scope of the regular income tax especially on passive income and
acteristics ofthe regular income tax.
in gross income?
ble deductions from personal exemption.
Pommonstrate the computation of the gross income from employment and the
igross income from business or exercise of profession ne
Frow is cost of goods sold determined?
‘What are included in cost of services?
iat arsmposes the compensation income of a rank and file employee and 2
igerial and supervisory employee?
ion of the ¢
uals and corporate taxpayers?
"from non-operating income.
exe
9, How does the tax pr
revenue from sales, fees, and receipt.
how the taxable income ofthe Following is determined:
jonal income earner
business or prot
‘imcome earner
tment of net loss from business or exercise of profession.
idlines of the quarterly regular income tax for individu
b. Purely compensation ea
©
é
13, Disc
14, What are the dea
corporations?
als and
‘True or False 1
1. There are two types of regular inco
corporations and progressive co
2, NRA-NETBs and NRFCs are also su
3. All taxpayers are subject to final
‘4. Taxable income is synonymous to net income,
S._ For all taxpayers, table income means the
Subject to capital garns tax and final tac essa
gular income tas
‘expenses from their employment as deductions
‘inal tax and capital gains tax are excluded in
oportional income tax for
als
ygome tk,
items of gross income not
fable deductions.
‘compens
: gross income subject
ross income subject to regular
150,000 income tax exemp!
ersonal and business expen:
10. Non-taxable compensation are items of compensa
gross income.
ax,
Yor individuals is designed to be in lieu of
sion that are excluded against
239 ‘chapia 7 Inoducton to Regular Income T=
‘True or False 2
1
come is computed 25 8F9S5 COMPensation Igy
me. .
the quarterly income tax return
43, Business expenses can be deducted against all types of
by multiplying their gross income,
come tax return of corporations using the cal
ixed for individual taxpayers. il
10. Every 3 taxpay from income tax on compensation up
250,000 annually but the same exemption does not apply to business income,
‘Multiple Choice - Theory: Part 1
regular income taxation.
fringe benefit taxation.
2, Active income is subject to
a regular tax.
b. capital gains tax.
Question 3 and 4 are based on the following:
A Regulartax —B.Finaltax —_C.Capitalgains tax
Which ofthe foregoing are passive incomes are subject to?
a Aonly Both Aand B
final tax,
4.any of these
b Bony 4. Either AorB
‘4. Which ofthe foregoing are capital gains
a Acnly c
‘Chapter 7 - Introducton to Regular income Tax
¢ corporate taxpayers only.
4 taxpayers engaged in business.
«corporate taxpayers only
4 taxpayers engaged in business.
ture of the regular income tax?
Annual tax
4.Creditable withholding tax
business only,
‘oportional regular income tax
corporations only. engaged in business.
‘compensation earners only. d.both individuals and corporations.
Fh of the following individual taxpayers is not subject to tax on taxable
¢.NRA.NETB
b Residentalien Non-resident alien engaged in business
16, Which of the following corporate taxpayers is not subject to tax on taxable
income?
‘2. Domestic corporation _«. Non
b. Business parmership Resi
mi wwe escent one
enonemecorane mt
i ign don rt
erm ae
—
vm nen
* ‘a Interest income from bank deposits
eo
i
© inning rom he Philipines
Feet Nenet income of general pefessional partnership
income but is nevertheless subject to
final income taxation? i
0c Merchandising income
4 Dividends from domestic corporations
Deductions from gross income
D._ Personal exemption
‘Which isnot considered in the determination of taxable income?
a AandB cDonly
%. CandD 4.BandD only
of employees maybe sujet final
al ring benefit?
yes e Ranken le employee
loyees dAand B —
Yoon n prog ne?
onincome by etal sore
B Fatstomdberendenngotsernea
22
‘chapter 7 -Introduchon to Regular Income Tax.
Interest income from advances to employees
@. Sale of serap
©.Gate recelpts of cockpits
4.Gate receipts of cinemas
9, The reporting classification of gross income into operating and non-operating 1s.
unnecessary for
‘a Corporate taxpayers
._ Individual taxpayers
Both Aand B
Neither Anor B
‘oF supervisory employees
and file employees
ired to Me quarterly declaration of 2ome?
is engaged in business
jons and individuals engaged in business CChapler7- Invocton to Regular income TAF
13, Me Jones wishes to le his 2019 income Ax FeCuT. Toateldvenly hema gy
greta on or bere, August 15,2020.
November 15, 2020.
1A: An dal eaxayer mst Re come tr Fe. OF Che third quar
019 onor before
a ap s,202, «.November 15,2020.
B pngust 15,2019, d.Novernber 15,2019.
ising ts income tax return for the quarter ending Februay
7019. The return must be fled on or before
‘2 April 18,2020 Apr 30,2019
Bb Angust 15,2019 d March 30,2019
116, Which ofthese taxpayers is required to file an income tax return?
2. Anemployee covered by the substituted filing system.
income st
. Ataxpayer deriving purely pas
fen with respect to his compensation
nt citzen who derives his entire incor
from sources outside the
17. The taxable income of corporate taxpayers isthe
a, netincone from business.
1b net income from business less personal exemption,
taxable compensation income.
taxable compensation income plus net income from business.
16, The taxable income ofa pure compensation income carner fs the
1a. net income from business less personal exemption.
taxable compensation income plusnet income from business.
taxable compensation income.
4. netincome from business.
19, Thetaxable income ofa
4 netincome from bus
b._netincome from bus
taxable compensation income.
d._ taxable compensation income plus net income from business.
sncome earners the
less personal exemption.
‘a netincome from business.
taxable compensation income
taxable compensation income plus net income from business.
net income from profession less personal exemption.
Bes
2s
Chapter 7 - Introduction to Regular Income Tax
tements is incorrect with respect to the determination
\dual taxpayers with other income?
eof pure compensation earersis simply incuded n taxable
me ofa professional Income earner fs included as part of non-
operating income and treet
The other income of
'd income earner is also treated as part of non
luded in net income.
ly ignored in the computation of taxable income.
22, Statement 1: Individuals with higher income are subject to higher tax rates.
‘Statement 2: Corporations with higher income are subject to higher tax rates.
Which is correct regarding the regular income tax?
4, Stotement tenly ——¢ Both statements { and 2
24, Which is incorrect in the determination of the taxable income of Individual
law. there is no instance where the compensation income of
taxpayers could become zero.
1b Anet operating loss is deductible against taxable compensation income.
¢._ The tanable compensation income ts added to the net income from business
4. Personal exemption isno longer deductible against compensation income.
‘24, Statement 1: Corporations with the same net income may not have the same tax
due.
Statement 2: Individuals with the same net income may not have the same tax due.
[Which statements incorrect regarding the rewslarincome tax?
a. Statement «Both statements 1 and 2
b. Statement 2 None
25. A purely engaged in business individual taxpayer shal use
a. BIRForm 17014 ¢.BIR Form 1700
b. BIR Form 1701 {BIR Form 1702,
26. BIR Form 1701 Is not intended for
a Estate ‘c Pure professional income earner
b. Trust Mixed income earner
27, BIR Form 1700 is intended for
a. Trust ‘Pure compensation lacome earner
b. Estate 4 Pure business or professional income earner
245, rrtuctan Rogue no TAS
enacts shalt
2a horn bs Fr 170.MK
ie
4 Form 17014
tna wzable income shall use
‘e Form 1702-MK
4 Form 17014
preferential special axrate shall use
30 Asoo which eau 1702-MX
1702-RT
a fom a Farmi70IA
only toa 30% income tax rate shall use
:
3 ke efor UE MK
‘Mattiple Choice ~ Problems 1
45
Form 17014
irs Sancher Mira bad a gross taxable compensation income of P400,000 She
a ean addtional 2,000 by investing her money i time deposits plus P3 oy
sare nme from lending money toa frend. Compute her taxable income,
a 7303000 1 F300,000
302,000 4.403.000
Mz Caveria had a business net income of P300,000. She also earned PSo5p
semicon fom seling cellular cards and P12,000 dividends from a domes
corporation. Compute her taxable income.
2 P300,000 ‘.P30S,000
312000 4.P317,000
Hr, Pamplona earned total gross
Pamplona?
a 490,000 «P500000
». P460.000 4.P600,000
Mr. Monreal earned 2 gross compensation income of P200,00(
865 of P170,000 during
‘compensation income? a
2 30000
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