CLASSIFICATION OF INDIVIDUAL TAXPAYERS 1. 2. 3. 4. Resident Citizen (RC) Nonresident Citizen (NRC) Resident Alien (RA) Non-resident Alien (NRA) a) Engaged in trade or business (ETB) b) Not engaged in trade or business (NETB co) New paragraph under Section 25 of the Tax Code, introduced by RA 11590, also known as “An Act taxing Philippine Offshore Gaming Operations (POGOs)": Sec. 25(G): Alien individuals employed by Offshore Gaming Licensees (OGLs) (NONRESIDENT CITIZEN ‘The 1, Zh following are considered nonresident citizens under Sec. 22 (E) of the Tax Code: ‘A citizen of the Philippines: who establishes to the satisfaction of the Commissioner of the fact of his physical presence abroad with a definite intention to reside therein. ‘A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis; ‘A citizen of thie Philippines who works and derives income from abroad and whose ‘employment thereat requires him to be physically present abroad ‘most of the time [for one hundred eighty-three days [(183) or more] during the taxable year; ‘Acttizen who has been previously considered as nonresident citizen who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall be considered a nonresident citizen for the taxable year in which he arrives in the Philippines with respect to' income derived fram sources abroad unt the date of his arrival in the Philippines. OVERSEAS CONTRACT WORKER + Overseas Contract Workers (OCW'S) refér to Filipino citizens employed in foreign Countries, commonly referred to 25 Overseas Filipino Workers (OFW), who are physically present in a foreign ‘country as a consequence of their employment thereat. ‘ «Their salaries and wages are paid by an employer abroad and entity or person in the Philippines. Is not borne by anyIediy ileal, . Tobe considered as an OCW or OFW, they must be duly registered as sy the Philippine Overseas Employ t Certfteate (OEC). (RR No. 1:2011) who Is a citizen of the Philippines and who receives © Aseaman wre ed abvoad as a member of the complement of 3 vessel = ent Administration (POEA) with a valid oe Mth Oversesn 'Sation for ee shall be treated in rade as an oversei aged 23(C), RA 8424) 95 COMIBCE worker, « Jnorder for seafarers or seamen to be considered as OCW's or OFW's sred as such with the Philippine Overseas Employment Administans® be duly regsster (POEA) with a Yn ‘valid Overseas Employment Certificate (OEC) with a valid Record Book (SIRB) or Seaman's Book tssued by the Industry Authority (MARINA). (2 for taxation purposes, OCWs are classified as nonresident citizens RESIDENT ALIEN Resdent aotizen 2 Analien, who purpose, which, by is nature, would require an extended Say maiong his home temporary in the Philippines; 3. ‘an alien who shall come to the Phillppines with no definke ‘comes to the Philippines for a definite Intention as to his stay. NON-RESIDENT ALIEN L Engaged = Anaten individual actually engas » Analien who comes in the PI in wade or business (Section 25 (A), RA'8424 = Tax Cade) ged in trade or business in the Philippines; and ines for an aggregate period of more than 180 Seafore Martine ‘Aven means an individual whose residence is within the Philippines and wh thereof (Section 22 (F), RA 8424-Tax Code). . 105 rot ‘The following are considered as resident alien: it ‘An alien actualy present in the Philippines who is not 2 mere transient of sojoumer, A person who comes to the Philippines for a define purpose which In ts nature may be promptly accomplished Is @ transient. 7 Gays during the calendar year during any calender year shall be deemed a non resident aken doing business in the Phillpiries, 2. Not engaged in trade or business ~ those NRAS not included above. 3. aben individuals employed by. (under the paragraph of the Tax Code [Sec. 25(G)] as amended by RA 11590, an Offshore Gaming Licensee (OGL) and Service ProvicersMndvidaale TAXPAYER, ‘ TAXABLE SOUPCE(s) @ RC > within and without the Phiippines: @ NRG RA OCW, NRACETB, NRA-NETB within the Prilppines onty TYPES OF INCOME TAXES; 1. asic Income Tax on regular oF ordinary income 2, nal Withholding Tax on Passive Incomes derived from Phiippine sources FINAL WITHHOLDING TAX (FWT) ON PASSIVE INCOMES + — Applicable only to Passive Incomes from ‘SOurces mithin the Philippines. Passive incomes derived from outside of the Philippines are subject to basic income tax under section 24(A) of the Tax Code, as amended, + Tels a tax deducted from the income to be paid to the payee or seller. + Tels constituted as full and final payment of the income tax lability. Hence, the income subjected to this tex ts no longer included in the Income Tax Retum (ITR) of the individual taxpayer subject wo basic income tax under Section 24(A) of the Tax Code. + Icannotbe credited/deducted against the basic Income tax due. + The lability forthe payment of the tax s primarily on the payor asthe withholding agent. ‘PASSIVE INCOME derived from Philippine sources SUBJECT TO FT: Interest income F f & Other winnings TESTS Teese SSS Na + INTEREST INCOME. TAXPAYER, 8) _ Interest from any currency bank deposit and ‘Yield orany other monetary benefit rom | Deposit subsbtutes i Trustnds fi, - Sirilar arrangements as above ceI divide [ DEPOST SUBSTITUTE ev aheranv Tom of lang Aca fam te PUBLIC thr then deposts, trough he her bigitons, or fnarcing ther own needs or the reeds of thew agent or dealer (RR 14-2012). PUBLIC is defined 8s borrowing from twenty (20) or more individual o¢ corporate lenders at any one be, Listorth py tl amor pmethde 19% “Exempt W Feud ecg cant) ed ape “Bernt (FCDS) begining Jan. 1, 2018. ‘Applicable only to resident taxpayers ‘nerestincame tromLONG-TERM bank depos Exempt Exempt 4p ank nvestnent (la yar mat fe a, “oS “The exemption is nol plicable lo NRA-NETB In case of pre-termination ofthe long-term deposit or invested pening nthe og pet: : «5 years or more Exempt Exerpl © 4 years to less than 5 years % 5% on + Syears toless hand years 12% 1% 25% *_Lessthan 3 years 20% 20% oa ° ROYALTIES TAXPAYER RC, RA, NRC NRAET _NRANETB, = Royaltes trom: 2 Lterary works . 1% 10% 25% Books Musical compositions OTHER Royalies 4 2% 20% 25% + DIVIDENDS TAXPAYER RC, RA, NRANETE NRC NRAET 2) Onidends actuily or constuctively received tom 10% my 25% 1 Domestic Corporation Kit Stock Company i burner etl hod company w. Fema cpr beatport tmulinatonal companyby Share in the dstibutable ne income ater 10% taxol a partnership (except GPP)"** ‘Share inthe net income after tax ot 10% 4, Associaton 2 qa Trealed ws dvidend income, generally Nol tealed as dividend income but an sadject fo 10% final withhokding tax. ordinary income subject to basic lak ‘SHARE IN THE NET NCONE OF A JOINT VENTURE COVENTURER iz Individual Treated as dividend income, Not treated as dividend generally subject fo 10% final income, Subject to basic tax withholding tax under Section 24(A) Corporation Treated as inter-copporate ‘Subject to basic corporate tax dividend income, hence, tax- (ot 2s dividend income) exempt ‘*NON-TAXABLE JV oint ventures of consortum organized for the foliowinig purposes: 1) Construction projects; Engaged in petroleum, coal, geohermal and other energy operations pursuant to an operating or consertum agreement under a service contract withthe Goverment, 2 PRIZES © Amounts more than P10,000 + _ Apatintis not more than P10,000In bv wale « OFMERWanngs regardess of amount) = 20% 20% Peso Winnings 0 CREATE Law (Beg. April 11, 2021) — Notmore than P10k More than 10k Exempt = Exempt 20% 20 0 TRANLaw (Prior to Apr 11,2021) © Netmore than P1Ok Bxempl —_Exerpt More than P10k 20% Exempt ‘She d te reanssiences uncer Ihe TRAIN aw which was correcied under CREATE Law. [NOT INCLUDED under Other Winnings are winnings exempt from income tax such as; under See. 126 ole TaxCode [Winnings from horse racing - subject only oP Taxol AN or 10%, 1s te case may bel Sn 0Percentagy © Prowsand ewarts made primer in recognition of religious, chartable ecient, educational, arise leery, ove echevernet bul iy It (¢Therecpient was selected without any acton on bis prt to enier the contest or preceeding (0 Therecprentis not required to render substanial future services ws a condition to receiving the prce or ower. * (Al praes and evards granted to sthetes in focal and interatonal sports compevtons and tmamurerts whether held in the Phiippines or abroad and sanctioned by ther national sports essocitons, GUL Capital Gains from Sale of Shares of Stock NOT Traded in the Stock Exchange ‘Sectons 24{C), 25(AX3) and 25(B) of the Tax Code, as amended, provide: (Legal bas for taxpayers) ‘Altai tax atthe rate offen percent (15%) is hereby imposed upon the net capital gains ‘realized durng the taxable year Fom the sale, baer, exchange or other disposition of shares fsck in a domestic corporation, EXCEPT shares sold or dsposed of through the stock exchange. ‘TAX BASE: Net capital gains realized FORMULA in computing the capital gain: . Selling Price Px od —_ . (Net Capital Gain Pex Rate 15% cer PoIudsvideale REQUISITES: To be subjected to capital gains tar: ‘The shares of stock shall be of a domestic \rporation; The shares sl shllbe dist a opal net . The shares sold are not traded in local i sand The sale resuted wa capa! gan ‘Stock exchange (sale directly to a buyer); a NOTE: 0 Sale of shares ofa domestic corporation THROUGH the Local Stock Exchange (LSE) 's not subject to Income tax but to a "business tax" under Section 127 of the Tax (Code (also known as Stock. Transaction Tax) at a rate of 6/10 of 1% of gross selling Price beginning January 1, 2018 or upon the effectivity of the TRAIN Law. GUIDE ~ Sale of Shares of stock: Exempt from Income Tar, Subject to » business tax of ‘Stock Transaction Ter of B10 of 1% of GSP Capital Gains Tax on Sale of Real Properties in the Philippines Sections 24(0), 25(A)(3) and 25(8) of the Tax Code, as amended, provide: (Legal basis for individual taxpayers) ‘Afial ta of six percen (6%) based on the gross selling price or current fair market valve. whichever is higher, & hereby mpased upon capital gain presumed fo have been realized from the sale, exchange. o other dispasion of real property located in the Philippines, classed as capital assets, inclucfng pacto de ret sales and other foms of condtiona sales, by lndviduals, lncucng estates and (rusts: Provided, That the tax labity, if any, on gains fom sales or ther dispastions of real property tothe government or any of ts polical subdvisions {or agencies o lo government onned cr contated teyperatons shal be ceterined either under ‘Section 24(A) or under this Subsection, atthe option ofthe taxpayer, REQUISITES: 1) The real property must be a capital asset; and 2). Temust be located in the Phiippines. "TAX BASE: Selling Price of Fair Market Value, whichever is higherIudinidg, L FAIR MARKET VALUE: *+ Fair market valve as provided by Oty oF Provincial OPTIONS OF THE INDIVIDUAL SELLER IN CASE OF ANY FOLTICAL SUBDIVSTONS OR AGENCIES OR Goes; "COVER op LL. * Pay 6% OGT; oF az Pay Basic Income Tax (Graduated rate) 9 NOTE: Tha optenis ret eppteable tidal persons tke SPaasors tod parser, EXEMPTION FROM CGT OF SALE OF PRIN fe : ICIPAL RESIDENCE 1. The property sold must be the principal residence of the sell: 2 Proceeds ful utlzed ly acquring or constructing 3 new pip 3. Ualuaton must be made within 18 calendar months from the cone esaene disposition; . te OF Sale oy 4. Naty the BIR Commissioner within 30 days from ‘ of the Intention to avail the: 7 Fomthe Cate of eer destin 5. The said exemption can enly be avaiied once every 10 years, PARTIAL EXEMPTION / TAXABLE PORTION:, {A Pere & no hil vuization ol the proceeds of sale or disposition, the portion of| i ‘have been alan ho he ser cpstin shale jer capa gam ene? ‘TAXATION OF NRA-NETB NRA-NETE ts Subject to: 1, 25% FWT on ALL 2. Ordinary Income b. Passive Income derived fram sources within the Philippines Including Interest {come from long-term bank deposit or Investment and PCSO winnings, except Interest income on bank deposit under FDU. 2. CGT on sale of shares of a domestic corporation directly to a buyer (cosely-held OC) 3, CGT on sale ofa real property classified as capital asset located in the PhilippinesIndbvideale + Use the graduated tax rate or ta; mended . Income subject to basic tax aren oe © Ondina ; ry income (ie, Compensation income, business income) derived © Captal gains net abjeatoceny = ’ Income subject 10 bask tax reflected inthe income tx xpayer. return of the ta: g «Incomes nay ben at HE Sey mbje to Seheaoe eatery taxes (CWTS) which may be deducted from the basic income tax due, ‘as the responsibilty to fle the return and pay the » Ib the payee (income eames) who applicable tax. Vek ove POA 000 ‘Ores P250,000 bu not over PLDC 000 BP excess or P5000 "SA cl excmes Sven P20 000 ‘Over PUOH,DCD but ne ever PROD, 00D ‘PR.GIO + 2% excess of P400 000 PEASD « 20% m exams of PAO0 000 ‘Der P9000 bu nok over FM ‘P10,000 20% in excess of P00 000 PUCZSDO + 25% excess. PEOD 000 ser P00, 00 dt re 949,000 + 4m encens of POM. PUCD.S00 + 30% excess of POM PRAN0 (00+ 25% enna ot Pd P2050 +9Nn even drt od aaa aleve De above sides shal be shed eee vey re (6) years, Uwough rues and requlatens Department of Finance, upen recommendaten of the olthe same cf the §yearcumdatve nano ale Self-Employed and/or Professionals (SEP) Sec. 24(A)(2)(B) of the Tax Code, as amended by RALO963 CTRAIN Law) provides the following rules for SEP: Reguareome Tax Regula OR 8%" axon, {come Tax Grows ‘Sales/Receipts and rata and Sec. 116 6Midivideal The opto of tobe taxed ot 6% i evalabio only SEPS who ore (pen vat stored, (Zpatengayedin al exemgt ssleyvonsacton(), ond {pote toner Percange Taxes oer an Secton 116 of ne Tax Code, a8 ameniag NOTE {Ogee 1160 abusness tx, nol an income ax. M3 corpuled as a percentage of gros and ober nen.cperatig income TS taleseceny Unies he taspayer sgn in tho 1° Quater Relum ofthe taxable year the intenton tp % naam tax, he Larpaye shall be considered as hawng avaled ofthe graduated me ee ‘Section 24(A) of fre Tax Code, #8 amended, and such election shall be imevocable. °S Ue, PROVED. tal al any tme ding a oven taxable year a tapayer’s gross sa tneeed be VAT Teel (231000 as andthe sal asad be yen gyotsaed rales under Secton 24(A2Ja) of the Tax Code, as amended, with tne ea ote The laxpayer shall be allowed an income tax credil of quarterly payments the 8% incre lax option. ‘tal ade uni Toye tes ae for bss ne) a tino name A pecan pursuant Sechon 116 of he Tax Code, as arended, shallbeimposed on he fr ereo ‘The excess of the Uveshold shall be subject to VAT. on he rst PS,000.099 0 Percentage tax due cn the R3,000,000 shall be colected without penalty, if ic dhe ate medal olowng be month be Dreshldvastreaced |" Pn be Lot Teul eM 182.5 st The term “statutory minimum nage (SMW)" earner shall refer to a worker in the prva sector paid the statutory minimum wage, or to an employee in the public sector wie qDmpersation income of not more than the statutory minimum wage in the non-agricutt sector where he/she is assigned (RR 10-2008)... MWES are exempt from income tax on; 1. Minimum wage 2. Holiday pay 3. Overtime pay 4. Night shift differential 5. Hazard pay oF tis Cade shell be exempt from the payment of income fax 0 hei tabs rome Proved futher, That he hotday pay, oerime pay, ghtshil dierent and hazard pay rcewed by such ‘minum wage earners shail kewise be exempt Irom income tax. NOTE: Based on this specific provision of the Tax Code, the Graduated Tax Rate for individuals shall not apply to MWES on their income as such, Section 24(HH) of the Tax Code, as amended by the TRAIN Law provides: —. The term ‘minimum wage earner’ sha ees to 8 worker in the prvale sector pa te ‘stalulry minum wage, 010 en employee in the public sector wih compensation income of nol more than tbe slatory minum wage in he non-agricultural sector where helshe is assigned.Tul bsidaale Basic Income Tex of Married Individuals © Married indvviduals Income tax return, 'Y etintaned to oF Kentfied as income excurively earned or realized by ether of the Spoures, the same chal be equally drdded between the spouses for purposes of determining ther taratle wear Exempt from income tax on the sax compensation income +H aggregate gross income does not exceed £250,000, he shal be exempt from Income tax and shall not be required to file income tax return. files is oer MINIMIS BENEFITS . granted by an employer In cash or in kind, in addition to basic salaries, to an Indnidual a.” Housing; b, Expense Account & Vehicle of any kind d. Household personnel, such as maid, driver and others ©, Interest on loan at less than market rate to the extent of the difference between the market rate and the actual rate granted Membership fees, dues and other expenses bome by the employer for the employee In social and athletic cubs or other similar organizations 9. Holiday and vacation expenses bh. Educational assistance to the employee or his dependents, | Ufe or health insurance and other non-ife insurance premiums or similar ‘2mounts in excess of what the law allows; and Expenses for foreign travelhubiridage ‘THE FOLLOWING FRINGE BENEFITS ARE NOTSUBJECT TO FET; ‘ Je benefits given to rank and fie employees (not subject to ) Fie cone tx) ect tO FBT but subjec 4g 2) Housing benefits/prmlege: a. Of milzary offidals of the Armed Forces of the Philippines (AFP), i Which is stuated Inside or adjacent (within SO meters from the’ perim, te bares pris) oe peas business or factory, Stet of ce are ry” for an er or for a ter three (3) months or less. MMPORIY Rousing unit oy 3) Expenses incurred by the employee which are paid by the » Faufar by Be employee bu reimbursed by RE employer eg! PEN a. The espenditures are duty receipted for and in the name of the employer, b, Tk does not partake the nature of a personal expense attributable 0 the 4). Allowances subject to liquidation (tax exempt allowances) + Allowances norsubject to liquidation are taxable. + Representation and transportation allowances which are fixed i amounes are regularly received bythe employees as pat of their monthly compensate, (exempt from FBT but subject to basic income tax). 5) Reasonable business travel expenses: * Inland wavel expenses (such as expenses for food, beverages and local transportation) during foreign travel. + Lodging cost in a hote! (or similar establishments) amounting to an average of US$300 or less per day during foreign travel, . + Cost of economy and business lass airplane ticket for “foreign” travel, + TOWof the cost of first-dass airplane ticket for foreign travel. ~ (BUSINESS travel expenses “within the Philippines” are generally assumed tobe reasonable In amount. 6) Educational assistance © 70 THE EMPLOYEE, provided: mn a, The education or study is directly Connected with the employer's trade, business or profession; and b, There is a written contract between them that the employee is under obligation to remain in the employ of the employer for a period of time they have mutually agreed upon (D0 THE DEPENDENTS OF THE EMPLOYEE, provided that the assistance was provided through a competitive scheme under the scholarship program of the Company.Jedbvideale 7) Contributions of the employer for the benefit. Of the employee on the following: . Pursuant to the provisions of existin b. Similar tions arsing hors 19 law, such as under SSS and GSIS ‘of any other exist c To retirement, Insurance and hasptalzation benett plone ea 8) The cost Of Premiums bome by the employer for the group insurance of his 9) Fringe benefits which ares: * authorized and exempted from income tax under the Tax Code or under any special law * The fringe benefit is required ‘the nature of or necessary to the trad business or profession ofthe explores : - For the convenience or advantage of the employer; DE MINIMIS BENEFITS The following are de minimis benefits undér RR 1-2015 (amending RR 8-2012, RR 5- 2011, RR 5-2008): ‘ Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year. : Monetized velue of vacation and sick leave credits Paid to government officials and employees, Medical cash allowance to dependents of employees nat exceeding P1,500 per emplayee per Semester or P250 per month (RR 11-2018; TRAIN Law); Rice subsidy of P2,000 or ane (1) sack of 50-kg. Rice per month amounting to not more than P2,000 (RR 11-2018; TRAIN Law); Uniform and clothing allowance not exceeding P6,000 per annum (RR 11-2018; TRAIN law); ‘Actual yearly medical benefits nat exceeding P10,000 per annum; Laundry allowance not exceeding P300 per month; Employees achievement awards, e.c., for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or git certificate, with an annual’monetary value not exceeding P10,000 received by the employee under ‘an established written plan which does not discriminate in favor of highly paid employees; Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 Per employee per annum; Dally meal allowance for overtime work and night/graveyard shift not exceeding twenty- five percent (25%) of the basic minimum wage.Midivideal 1 Benefts receved by an employee by vitue of a colective bargaining agreeme, and tncentive schemes, provided, that the total annual monenst (CBA) fecened from both CBA and productivity incentive schemes combined, ee” Yekur 10,000 per employee per taxable year. NOt exeseg ‘Wrof more han P10,000 ~ considered as do mums + mee tun PIDCC0— he entre Sova hl bo nde th ‘oer bene wh Pn NOTE, + Tsang shal agply only to Benetts under CBA and producinly mcenive schemes. # CBAW abo refered io 43 CNA (colective negotiation agreement) 13 MONTH PAY ANO “OTHER BENEFITS” 13 mont pay ard Other Benefits received by officals and employees of pu prrate entes nat exceeding P50,000 beginning Janvary 1, 2018 under the TRAM ae 2 exempt fram income tax and creditable withholding tax on compensation income, wa 22 “i excess of P50, 000" should form part of an individual's gross income and would beret tw income tax and applicable creditable withholding taxes. e Subject OTHER BENEFITS" under RR 2-98 as amended by RR 3-2015 include; Christmas bonus Productivity Incentive bonus Loyalty awards Gifts in cash or In kind and other benefits of similar na received by officals and employees of both goverment and na _ ee vate SAK 8 2 Gffs given during Critsemas and major anniversary Celebrations not exceeding 5,009 pes employee per annum shall be treated as “de minimis” benefits, x % [RR 10-2008 as amended by RR '5-2011, RR B-: and RR 1.2015], mean Tax Exempt: Exchded ia delemining the P90,000 ceing of“ freee 19 of “other Induced ‘in determaring the P90,000 ceiing of “ benelits 7 9 oe Amount in excess of 90,000 is subject basic income tax: MA FORMULA IN COMPUTING THE FRINGE BENEFITS TAX and MONETARY VALUE Beginning January 1, 2018 under the TRAIN Law ‘Anon ol money * Noneash property wih rantecotownessp + = @ FAVva ZV, 4 applicable + Noneashpopsry.emenhp unoltaemd = Deprecaton vave | + Enyloprinds money betes Pmopalx 12% Enployer one a recdental property fy the ARFNVin he Real propesty dedarton or Zonal used the employee ee . 3. Employer purchases residental of inerest 1 5% 250% pea Property in” Acq cost exchaive of interest 5% x 4 ERpert purchases resent property and Ag. coat or Zonal valve as dtermnedby he \ansiers ownership to employee CR. 5. Employer purchases resenal papery and fp FHVin ne ealpaperydelarson ot Zonal lransien: owner to employes on a lesser Shiba a= emer son ergyubividy, iL 8 oes Len Upiyet cont and mariana afeet of moo Acguenion . vefades bor he use of te business end lebanese died bye oT erneyre Year x Sy MH 2) Employee easetrantana 9 feet of moor ‘Amount ol rent ‘vehices for he use ofthe business and the forbusiness purpose sete fone Purposes: 50% Ue 3 Employer puthases vetadein the name ofthe equestion cost Employer prowdes employee wih cash fore Cash recened ‘partes ole vehcse, and ownership Fbenanecl beenpiore — Employer purchases the yeu on slates and owrershpis placadin be name ol he Sian OAS Tht ay, 6) Employer shukers parton of he amount cl Amcunt shoe be prise pce oleh and ower \shoddored by engoyer placed nthe name af the ep INDIVIDUALS EMPLOYED BY AN OFFSHORE GAMING LICENSEE OR PHILIPPINE OFFSHORE GAMING OPERATIN (POGO) AND ITS SERVICE Paar Cod under RA 11590 and RR 20-2021, regardless of residency and term and cass © OERS permit or visa working ‘Section 3 of RA 11590, also known as “An Act taxing Philippine Offshore Operations (POGOs)", added a new paragraph of Section 25 of the Tax Code, ae as follows: ‘ Sec. 25(G) Tax on Nonresident Alien Individuals: MA) xX “(B)xxx XK owe “(G) Alien Individuals Employed by an Offshore Gaming Licensee and Service Providers. - Alien individuals regardiess of residency and who are employed and assigned in the Philippines, regardless of term and class of working or ‘employment permit or visa, by an offshore gaming licensee or its service provider as defined in Section 22(IT) and Section 27(G) of the Tax Code, as amended.A Eee eed 25% FYT or P12,500 per month, whichever is higher Applicable Income Tax SS Gross Income®* from OGL Income from all other sources yj i within the Philippines ‘Subject to pertinent income tax imposed lunder the Tax Code, as amended ‘Gross aime (whether each or inking) + Base salayivapes, amutes, congersaton, eruneraion ard cher emclumerts, sich ‘sshonorara and Feceved fom such service pronder or cfihere gama kcenses. * OGL and Service rovers shal subi lo he Breau of nteral Revenue (IR) he onal {201 of polanzed cotract of employment deady sisting theren he aaa salary and obet , benef and enidemerts othe concemed sen” semeastey ‘The FWT shall be withheld and remitted Monthly by the employer, induding Corresponding penalties, interests and surcharges, if any, in accordance vith RR 2-98, as amended. . All foreign employees of OGLs and their Service Providers, regardless of nature of ‘employment, shall have a Tax Identfication Number (TIN). All OGLs and service: providers that employ or engage a foreign national without the foregoing shall be lable for a fine of Twenty thousand pesos: (F20,000,00) for every foreign national without such TIN and, in proper instances, revocation of their primary and other licenses ‘obtained from government agencies and/or perpetual or temporary ban in employing or engaging foreign nationals for their operations: Provided, That the foreign national concemed shall still pay, and the-employer shall remit, any corresponding taxes, penalties, Interests, and surcharges due in accordance with the Tax Code, as amended, DEFINITION OF TERMS (RR 20-2021) © PHILIPPINE OFFSHORE GAMING OPERATION (POGO) refers to the operation by an OGL of online games of chance or sporing evenls via the inlemet using a network and software program, exclusively for ofshore customersiplayers who are nor-Fpines. The term POGO shall also refer fo OGLs and Accredited Services Provider OFFSHORE GAMING LICENSEE (OGL) refers o an offshore gaming operator, whether cxgantzed in the Philippines (Philippne-based) or abroad (Ofishore or foreign-based), duly licensed and authorized through a gaming fcense issued by a POGO Licensing Authority {o conduct offshore garring operatons, including the acceptance of bets from offshore ‘customers. OGLS are also referred fo as Interactive Gaming Licensee (IGL) by other POGO Licensing Authorties. OGLs shal be considered in doing business in the Philippines. 0. ACCREDITED SERVICE PROVIDER refers to a natural person regardiess of citizenship Or residence, of urdical person regardess of place of orgarizalon, which provides ancilary services lo an OGL or any other offshore garting operator with license acquired from other jurisdictions.ON Madividerl SAMPLE ANCILLARY SERVICES (RR 20-2021) ‘Custoret and lechnicalrelatons suppod Information technology Gang sofware Data provsen Payment solutons . Lie stubo and steamng senices POGO Licensing Authonty > Refers 10 Phappine Amusement and Gamiog Corporation PAGCOR) or any, ‘speoal economic zone auhoriy, fourm zone authority oF teepod aye sutared by et epee chars tlsue gaming Kerses and eexecter POGO ents. OGL-Gamung Agent > Refers loa representative inthe Philippines ofa forelan-based OGL who shan «resident agen fr the mere purpose of receiving summons, notices and orner 2S ‘processes fr the OGL. and lo camply wit the disclosure requirements of the ING OF INCOME TAX RETURNS (ITR) 2 4. Final Withholding Tax on passive income January to November 10 day of the month following the month the withholding was made.’ December January 15 of the succeeding year, Capital Gains Tax a) Shares of stock - 30 days after each transaction 1b) Real Property ~ 30 days following each sale or other disposition Fringe Benefits Tax — shall be fled and the tax paid/remjeted not later than the last day of the month following the close of the quarter during which ‘withholding was made (TRAIN Law; RR 11-2018). Basic Income Tax + Apply calendar year : Compensation income earners: April 15 of the succeeding year, Purely 1 ‘+ For Business income eamers including Income from practice of profession and mixed income eamers: The individual taxpayer is required to file a quarterly tax return of operations) as follows May 15 3 ‘Aug. 15 (or 45 days after end of Quarter) 3* Quarter Noy. 15 (or 45 days after end of Quarter) Annual retumn _ April 15 of the succeedIndividual Taxpayers Required to File ITR: 1) 2) 3) 4) 5) 6) Iadividaale Individuals engaged | business and/or practice on, regardiess of the results of operations, S/or pri of profession, reg Individuals deriving compensation from two or more employers, concurrently or ‘successively, at any ume during . a the taxable year, Employees deriving compensation Income, regardless of the amount, whether from a ee area uring the calendar year, the income tax of which has not | withheld corre (Le. tax due Is not to the tax withheld) resultis to collectible or rennaane aes aay : " Individuals deriving other on-business, non-profession-related income in addition to compensation income not otherwise subject to final tax. Individuals receiving purely compensation income from a single employer, although the Income tax of which has been correctly withheld, but whose spouse is required to file income tax return, Non-resident alien engaged In trade or business in the Philippines deriving purely compensation income, or compensation Income and other non-business, nan- profession-related income. Persons NOT Required to File ITR (RR 98-2018): 1 ‘An individual eaming purely compensation income whose taxable Income does nit exceed P250,000, i ‘An Individual whose sole income has been subjected to final withholding tax. ‘Minimum wage earners Individual taxpayers who are qualified under “substituted filing" of income tax returns. Substituted fling applies onty i all ofthe following requirements are present: @. the employee received purely compensation income (regardless of amount) during the taxable year; 'b. the employee received the Income from only one (1) employer in the : Philippines during the taxable year; © _ the amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer; and . the employee's spouse also complies with all the three. (3) conditions: stated above, The Certificate of Withholding fied by the employer, duly stamped "Received" by the BIR, shall be tantamount to the substituted filing of income tax returns by the qualified employee, oess Tu divide, ‘Choose the letter of the correc! answer. PRINCIPLES CLASSIFICATION OF INDIVIDUAL TAXPAYERS. 1. Ftp cen anal een shins Bom by bith with father and/or mother as Filipino citizens, i ‘Bom before January 17, 1973 Fino mother whe elects Pifpgna ci ‘ upon reaching the age of majority. enship Wl Acquired Philippine citizenship after birth (naturalized) in accordance wig Phiippine laws. a. only 6, Jand I only Tend il onty @. |, Nand Ut Answer D . 2. Individual taxpayers aro 1. Natual persens wih income derived win the terial jurisdiction of a taxing authority. I Natural persons classed as ciizens and aliens a. lonly ¢. land I b. only €. None of he above © Answec | 3. Dolorminn a red claseticain tte ewig 1. Manny,a lipino businessman, went on a business trip abroad and stayed. of the time during the year. fore et 1 K2.aFipino professional singer, hold @ series of concertsin vious counties around be werd ing he crn abd oor She stayed abroad mos! ofthe tine during the year. I Effen, 2 Flipino “cue” artist went to Canada during the taxable year to train and patcipata in the wodd cup of pool. He stayed there most of he time during the year, A 8. Cc. oD. 1 NRC RC RC RC NRC NRC RC ORC mM NRC NRC NRC RC @ Answer: D ° Jobe cmsere nonresident. tha ietenton shad bet iy abroad es an inst or {or ‘employment on a permanent basis ce whose employment thereat requires hi fo be physically present abroad mos! of the time [for one hundred eighty.three days (183) or More dering the table year.: A ily uly tegistered @3 such with the Phiippine Overseas Employment ‘Administration (POEA) with valid Overseas Employment Cerificate employed in foreign counties and whosa salaries are paid oy cya ec ad ar ot oo by entesor persons inte Phage tot a veel cea fr sere endered nt of a vessel exclusively for international trade are considered Overseas Fiipino W it by ; ‘Administration ; i 'deniification Record Book (SIRB) or Seaman's Book issued by the Maritime i (MARINA), eR eet fay UN Statement 1 Tue False Tue Tru Statement? True False False True © Answer: D Bu-choy, a Mongolian national, arived in the Flipina girtriend. He planned to stay in the. year, Bu-dhoy shall be classified as a: a. Resident alien b. Nxrzesitent aon engagedin tad o business in the Piippnes c enzeldent aon not engagedin vadeor business inthe Philppines 4. Special alien employee © Answer: A Q He Wasa resient of he Phipins forthe ene 212 atl yur conie na Perse, Eng. PedoD. Magia relancer was hired bya foreign peoleun Trach Novas ant, ride tecnica asssance for to monihs from Febnany March. He was hited again br the mnths of une hl and Ocober Desenber site on taxable year. Engr. Pedro D, Magibais a Resident citizen Nonresident citizen ‘Special Filipino employee None ofthe above ange > Answer: B © Pec was hired ot or wo months (Feb. to March. he shallbe datsed os RC. be was hired only forfour mans (Feb, to March and ne bo Ju) be shal bo daceded 12 RC. However, he was ebired egnin rom Ociaber i Decenber, hence, he shal te (noe selon sind him to be physicaty present abroad ©. Engr. D Magia in Thailand requires, ‘ostel he ne dra taxable yar one hundred igh tres 183} days or more),Iulividf, 4 lp 7, Satement 41 The Intorton wih regard fo be lngh and natu of stay oy determines whether ha is @ resident or nonresident. an ‘Statement 2: A orcignor who has eoqured rosidoncy in ha Philippines 3 a nonresident whon he actually departs with tho Intention of sherri tng tte Phipps, : hs ny statoment 1 is corroct “ya Oni statement 2 is correct Both statements are correct Both statements are incorrect > Answer C - 8 On Ortoter 2021, Me. Bald Nha, an Amicon basketball coach was hreg corsa by one of th teams in tho Pipi Batatbal Assoalon ace & an conference which wills for a period of nat mao thn se (2) monn ee) og December 2021, His coning lo the Philppines was fora definite purpose. reo a \was subsequently chosen fo coach the Phiippine men's basketball leam fora Petiod oft? (2) years. The Anercan mente intends to leave the Philipines as soon oe nse fished. For 2021 taxable year, the American coach shall be classifod ae- [eb is Resident alien, ‘Nonresident alien engaged in trade of business, Nonresident afien not engaged in trade or business, Resident cilizen, ergy ° Answer: A © Avalen wha comes fe Pipes fx tbe pupos thal equns extended tccomplshment. so he makes his home temporary inthe Phippines ey 8 Bris ‘gerdess of his itenton lorem to his residence abroud. oe 8 8 reser, ‘GUIDE: ‘Aien ¢ Indefinite stay = RA ‘Alen + Extended stay (indefinite) = RA ‘Aen + Detnita sity + promptly accomplished = NRANETB Alen + Suys inthe Pris, most fhe ine ding Wa year (180 dys) = NRAETE ‘en + Nonresident oft Phis, + Engaged in business = NRAETB 20000 9. Rihanna, an American singe/, was engaged to sing for one week at the Western Philpping Ptaza ater which she relumed to USA. For income tx puposes, she shal ba classiegse Resident alien, Nonresident aien engaged in trade or business. Nonresident alien not engaged in trade or business, , Resident citizen, aege ° Answer. C © Alen +Defnite stay + promptly accomplished = NRANETB a“Iudividnale . his stay, he bought equiy investments from Alpha and Dotta Corporations (domestic corporations), Ho likewise invested in a mutual und of Banko de Isla de Pilipinas, a local bank. Mr, Mohammadi is a: a. Resident alien, b. Nonresident alien engaged in tad: or business, Nonresident aen not engagodin bade or bectass, d. Resident citzen, © Answer. . ° Rae Ait 8 rapt camped wach ha BA Cut Touran) = ° Enea x pues, ‘iden tom equity nvestnent aa walle “earat income {rom investments mutual nds are ‘Ol considered income from “business operations”. ‘azmet fom tev nvesirars ae cased as passnn neowes rer thes earns ‘noomes. SOURCE(S) OF TAXABLE INCOME 11. Itis important lo know the source Of inceme for income tax purposes (Le. from within and without the Philippines) because: a Some individuals and corporate taxpayers are taxable based on ther worldwide ‘came white ohers ar taxable coy on te income tom soutes within Le Philippines, b The Philppines imposes inom tax oly on income ftom sources win Cy Some individual axnayers are citzans while chers ae sens ‘ 4. Export sales are not subject to income tax, : > Answer. A © RCs and DCs = txable on ther © NRCS, RAS, NRAS, RFC: 12, Which of the following is correct? IL Acizen ofthe Philippines resting therein is taxable on all income derved fom ML ‘Anon-esident citizens taxable on income derived fom sources within the th, ‘An alien indvidval, whether a ic income witin and without the Phippines s,NRFCS = taxable ony on ther income wih the Phippines Ww. A 'seaman who is a citizen of a. I land only ©. lland IV only b. 1M and tv only 4. (1, Mand Iv @ Answer: D asNbiviteal income from sources within tha Philippines, except " Teron citizen ¢, Resident allan >. Nonresident cen d, Nonresident aon & Answers A ‘Shus of talon is wordlgobal taxation " A eee py Tue Fao The Tp Resden! clizen Reson aon Tre , False False Fagg Nonresident aon engaged in rade Twe___False__Falso The > Answer 15. Who of the following individual taxpayers Is taxable on income derived trom within ang without the Phiippines? 1. Pedto, a naive of Bacolod City, working as overseas contract worker in Si b. Geoge, natralzed Fipino ctizen and maried lo a Flipina. He had been ining j Pampanga since 1990. in P30 Gasu, Spanish cizen and a resident of Madd, Spain, spent a one (one) wee, vacation in Boracay. 4. Jennie, Korean singer, held a 3-day concert in Manila. © Answer: B | 0 Pedra is an OFW (NRC) (axable only on income di © Paoand Jerria Phiippnes. wed hom sraboth HRAGNETE 16. Pedro Dela Cruz, nonresident citizen, arrived in the Philippines on July 1, 2022 to reside here permanenlly afr working as @ nurse Inthe Urited.Stales for many years. Which of the following statements is correct with respect to his classification for incame tax, ? '2. He shall be classifed as nonresident ciizen forthe year 2022 with respect to his income derived from sources abroad from January 1, 2022 until the date of his arival in the Philippines. He shall be classified as nonresident citizen for the whole year of 2022. He shall be classified as resident cilizen for the whole year 2022. He shalle classified as neither resident nor nonresident clizen for the year 2022. pps @ Answer: A © AFépra ciizen may be clssifed both ax RC and NRC fr ona) taxable yeer.Vabsvideale i Year on July 1, 2022 to go abroad and owing data were provided as of December 31, 2022- a a Jan. 1 to. K') ‘Abroad ‘Abroad lo 300,000 200,000 100,000 PS0,000 uly 1t6Dee. 31 600,000“ 4on,009 150,000 50,000 L's taxable net income. (INI) should be: ‘a. 800,000 7. Li, mare, oe Phigsnes ath ed of ng 1 ek hore for ve yoo The ol ©. 1,100,000 . P950,000 4, P600,000 ® Answer: A @ w= 300,000 + 200,000 + 600,000 ~ 100,000 ~ $0,000 - 150,000 TNI= P 800,000, 18. Based on the above problem, bul assum ing he arrived from abroad on July 1, 2022 to permanently resette in tha Philippines, his, be: laxabie income as of December 31, 2022 should a. P750,000 ©. P1,100,000 b. R1,000,000 d. R600,000 > Answer: B «© TNI=P300,000 +600,000 «400,000 - ‘100,000 ~ 150,000 -50,000 ‘TNI=P1,000000 419. Assume Li did not leave Philippines, his taxable income should be: a. B782,000 ©. 1,150,000 b. P950,000 4. P600,000 > Answer ¢ C1 TWI= feta net income Philippines and abroad TAI= 1,150,000 lvestions are followir Miko received the following income during 2021 taxable year: Gross income, Philippines 3,850,000 Gross income, Canada 4,650,000, Business expenses, Philippines 2,000,000 Business expenses, Canada 725,000 Interest on bank deposi, Metrobank Taguig 50,000 Capital gain on sale of shares of closely held 180,000 domestic corporationIrllivilgy L 20. How mach the taxable not Ihoome of Miko assuming ho is: RC nC RA NRAETE a P27TS000 1850.00 PISO.ON Pr asa ae b 275,000 928,000 925,000 1,650,000 ¢ 277500) 2.775.000 1,650,000 ssp 000 4 2775000 2.775000 $2500 ses gn © Answer, A ~ Soktor note: RC; tenable bn income derived rom within and withul the . spe antral on ren dered tom maine Pinger eo i © Basin of come tax: + RCNRC, RA und NRAET ~ nel inzable income + _NRANET- Gross income 0 Taxable net income: = generally pertaining to incomes subject to ‘income | lineluded tex retum of the taxpayer se ee nthe incor & nts neo on bank depos passive income subject to fra withholding tx 4 Coptal gun on tal of shares of casey held domestc corporation i subject Cor ° Passe peoma abject oF shel leroy to those dare tom Pipe src 21. How much is the income tax due of Mike assuming he is: RC NRAETB NRA NETB a. P167,500 P167,500 167,500 b. 412,500 412,500 412,500 . e 738,000 445,000 975,000 dq. 738,000 467,500 412,500 % Answer ¢ Seton ge a Taxable income: P2775,000 P1,850,000 ‘3,850,000 Interest income on bank deposit 50,000 Income Tax Due (Graduated) P738,000 ‘445,000 FWT rate FWr P975,000 RG. NRAET: Ist POM P490,000 ‘1st P800,000 130,000 In excess of P2M In excess of P800,000 (PTT5,000x 37%) 248,000. (P1,050,000 x 30%) 315,000 Income Tax Que PT38,000 Income Tax Due P445,000Indviduate Individual laxpayers are subjoct to tha follwing Income tax: eae Basic lx based on graduated tx ube I. Final withholding tax on passive income derived from sources within the Philippines IN. Capital gains tax /, Slock transaction tax of 6/10 of 1% of gross seling price a. land!) only ¢. I, land Monty b. Handi only d. Allof the above” > Answer: © Stock transaction taxis not an income tax but a business tax other percentage tax) under ‘Section 127 ofthe Tax Code, as amended. Passive income (Phlprines) Capital gains: shares of OC + nonksted ‘Sala of RP + Capital asset « Pras Other types of capital gains ‘Alother income classified us “ncoma abroad" and Basic Tax ftom f tons 23. (Bar Question 1999) Mahertika Corporation, a Philippine comporation, has an executive (Pedro) who is a Filipino cilizen. Maharlika has a subsidiary in Singapore (Singapore Corporation) and will assign Pedro for an indefirite period to work full fme for Singapore Corporation. Pedro will bring his family to reside in Singapore and will lease out his tesidance in the Philippines. The salary of Pedro will ba shouldered 50% by Mahartika while the other 50% and housing, cost of living and educational allowances of Pedro's dependents will be shouldered by Singapore Corporation. Maharika will credit 50% of Pedro's salary to Pedro's: Philippine bank account. Pedro will sign the contract of ‘employment in the Philippines. Pedro will also be receiving rental income for the leasa of his Phiri residence. Which of the following income by Pedro be subject fo Philippine income 1. -Salaries I. Alowanoos ML Renta income a. lonly ©. lonly b. Land I! only 4. Alofihe above > Answer: C 0 The salavies and allowances are not subject to income tax in the Phibppines. Pedro is considered NRC because he leaves the Philppines for employment requiring him to be Physically prosent broad mast ofthe time during the taxable year (See.27(6), NRC). A nonresident ctizen is taxable erly on income derived from Philippine sources (Sac. 23 NNIRC). The salves and slowances are considered income abroed because these ore compensation for services rendered outside ofthe Philppines (Sec. 42 NIAC). The factON Mudivide, L {ha SON of Per’ alanen wore pad by Mahathir tevin te g ch tre "stut" cl the income received by the former, enna tay © Thaplce of wring the employment contrac also rrelavantin “pan’ of the neome recerved by Pedro. «© _Therertal nar fe he nas of Peds miderce Is an income deri tte Phigpres. the lease property beng locaied in the Phibppines| 0 tage lauable bo Pedro, = (Seance Seem 8 8am 24, Chasis aFitpno Inara ving inthe United States for more than 1S years, Hg and he camo back (0 tho Philippines as a balikbayan, Every lima he comes sou Phiipines bo stays here about month, He reguiaty recelvesa pension kom het employor in the United States, amounting to US$2,000 a month, Wie inthe Phage ‘with his persion pay from his former employer, he purchased three condominium 8, Maka wich hoi ren ou! or P25 000 month each. Does the USs2 na Sin ‘become taxable bacause he Is now in the Phiippines? we Pamsion ‘Yes, income received inthe Philippines by the non-resident citizens is laxable Yes, income received inthe Philippines or abroad by non-tesldent eizon ie No, come eamed abroad by non-resKent citizens are not taxable inthe Phige*: Wo, ie Pension is exempt trom taxaton being one of the exclusions trom are apse > Answer: C 25, Floyd an American citzen whois marie ia beat ipa owns abuldeg in he Un Site and leases the same lo busineses comed by pine resets. Poy poo reside nth Philppnes ad al is citren are studying in top Phillpine uninesgt® Which ofthe following statements is true regarding the rental income? ites, a. Taxable in the Phippines because he had his residenc in the Philippines, b. Tanabe inthe Phipins because his wile is resident zen and fey area residents of the Philippines. a Taxable in the Philippines because he derives his income from Fiipino resident lessees. 4. Exemtin he Philippines because Floyd is resident alien. As such, he is axabig ‘only on income derived from sources within the Philippines. @ Answer: 0Mndividatle PE ENE mer 26. 27. The ross income of foreign nationals or non- ‘28. The gross income of alien indi a, Basic salary or wages b. Annuities c. Compensation, remuneration and other emoluments, such as honoraria and allowances, received from OGLs and Service Providers 4. Allofthe above © Answer: Reference: RR 20-2001 25, Johnson, an American national employed by an OGL, receied the folowing on March 2022: viduals employed by POGO entiies shal incude: Basic salary 120,000 Annuities 15,000 ‘Allowances 8,000 How much is the final withholding tax due? a. R35,750 © P28,600 'b. F30,000 d. PO > Answer: A BL_— ON Iadividg, L Tél oe hoe 143,000 ENT rae — FAT On — Bassa © Thixercuntiabigher than Bho meimuen monthly FWT due of P12 509 forvign nabonal by en OGL, received P40,000 as Compensation ; * tanenn of June 200 tow ich th al withholding tx duo? °° Neon a PS,700 ¢, 12,500 b P10,000 " d. P15,000 © Answer: . + RR 202021 provides tal the misinum fral withing tax due fy ronih kom rig naorals ployed by OGL sha ol be lowering of a "2.500, Solon: ‘29% FOYT (P40,000 2 25%) 110,000 a. Manan P12.500 per month 12,500 WT dae (riimum amour) 12,500 31. ‘Aarign nana ornon Figo citzen emplyedby POGO Enities eared interest iren tumbankdepast ding 2022 table year, The interes income shal be subject 2. Graduated tax rate under Section 24(A) ofthe Tax Code, as amended, b. Fra witholdng tax of 20% = Pra witholdng tax of 25% 4. Capital gains tax © Answer: B DR 20701 pets Bath oar ame on en idler POGO rte sabe stl prin name txngsedby oe esa ss amanded, AS such, nterestincome from bank deposit su . 52. Alen nalonal non Fifa ctzen employed by POGO Enis Sold shares of so, O13 domes coperaon det lo 2 buyer fr PI0N0,000. The shares sod wes previously acquired for P200,000. The gain onsale shall be subjetto: Graduated tx ale under Section 24(A) of the Tax Code, as amended. . Final withholding tax of 20% & Final withholding tx of 25% 4. Captal gains tax © Answer’ 1 emended. AS such, sale of shares of o Classified as capil aselis ute to 15M, copa gas lax bores ‘ered forthe sale, es on sents pe 82Jubvidaale Pear |. Statement 1; Passive incomes ate subj to ta and fi 3 33. eee i Subject to separata and final tax rales, re included in the. computation of taxable income fr ‘compensation or business/professional name, “ = . A BL Cc. D. ‘Statement 1 True False True Fase Statement 2 Tre False False Tre > Answer: C ‘SUatorert 2 is False. The Kebilty of tote jected to fra! fares heey ity fe tarpyer fer passin incores subjected 34. Statement 1: Taxon certain passive income is a Capital gains tax ‘Statement 2° Other income, for ‘income tax purposes, is excluded in the determination of an individual taxpayer's retumable income, . A. 8, Cc. D. Statement 1 False Te Fase True Fase Statement 2 Tre False False True Seiement? Tue Faso Fase True > Answer: B i Certah passive incomes ar subject to fra ares 1 Otherincoresarereurebie nuded inthe computason ote expayers arable ‘income subject to graduated tax mle) . 35. Which of the following siatements is Incortect? . a abe subject fo fal lax, passive income must be rom Philippine sources. b. ‘An income which is subject to final tax is excluded from the computation of income ‘Subject to Section 24(A) of the tax code, ¢. Lotto winnings in foreign countries are ‘exempt from income tax in the Philippines, d. None of the above © Atiswerc : D Subjectto basic tax, provided the laxpayeris a resident lize. 36. Which ofthe following incomes derived trom within the Philippines are classified under the Tax Code as passive incomes subject to final withhoking lax i! received by individual taxpayers? |. Interest income from any currency bank deposit and yield or any other monetary benefit received from deposit substituies, tust funds, mutual funds and other similar arrangements, |. Dividend income from domestic comoration.Iudisi, a BL Roypty income IV. Prizes exceading P10,000 V. Other winnings a leony A lh end only b. Land Hl only 4, Allofthe above © = Anvwer. 0 0 Theater patshe hone autect FUT ia acuthe. At ett, be paahe income nate bu ot lad Inthe aumernions 1OFWWT 03 imposed under the law. Interest Income 37. Wich ofthe folowing Introst income derived within the Philippines ig Suet : Asie soreanraah income tax? Inierest Income from bank doposits Interest income from loans Inlerest Incoma from deposit substitutes Interest income from tusi funds * pres @ AnawersB; (A C end Dare sutject to 20% FHT, ‘38. Statement t:“Deposil Substiutes", as deinedin Secon 22! the Tax Cade, means an alteraive form of obtaining funds from the public other than deposits bh ‘seuance, endorsement, of sccoplance of dat insruments forthe borowars sccaun, oth purpose of reending or purchasing of rceirabes and oer op OM or francing thak own needs or the needs o! their agen or dealer, a, ‘Statement 2: "able dood es boroving om bent (20) oF mo nity ‘corporat lenders at any one time. A 8. Cc. 0. ‘Statement 1 Tne Tne The False Statement 2 Tne True False__False « ae False ___ Fae © Answer A. ‘39. Statement 1: Any income of nonresident individual taxpayers from transactions depository banks Under the expanded foreign currency deposi system shall be exemp fron, income tax. ‘Statermen! 2: Any income of nonresident individual taxpayers from wansacions with offshore banking units shall be exempl from income tax. . Only slatement 1 fs corect Only statement 2 is corect Both statements are correct Both stalements are incorrect apres ° Answer. CIndividaale 40, Which of the folowing interest incom 18 by B resident taxpayor is subject to 15%? " g, Interest income from peso bank doposils tb, _ Interest income trom deposit substitutes ¢, Interest Income trust funds d, Interest income on dollar deposits © Answer D of the following statements Is correct? a eee Income on bank doposit or investment with matunty period of atleast five (5) years Is exempt from income tax. % % tb, Interest Income on teasury-bond with maturity period of at least five (5) years is ‘exempt from Income lax. ‘The tax exemption on 'ong term bank deposit or investment extends to all types of taxpaye a ‘lof the above 6 © Answer: A 'B'ls subject fo 20% FWT, The exemption ls applicable only lo long-term ‘ben’ deposi or “Dank” iovestment. ” "Is Incoreet. The exemption ia nol applicable to NRANETBs 42. Anon-resident alien nol engaged in rade or business derived P50,000 interestincome from bis long-term bank deposit herein the Phiippines. How much isthe income tax due of the said alien? a, P10,000 * ¢, P5,000 Db. P12,500 4. nil > Answer. B ) FWT=P50,000.125%= P12, 500, ) a. Fae ree eee tears 8. Irigvest income fom a foreign cureney depostery unit in the Philippines of a non: resident alien ls not subject to fal tax b, Prizes exceedir P10.000 derived by non-resident alien not engaged in trade of business here inthe Phiippines is subject tow final tx of 20% 6 raze amingsrecelvedby nonresident an fom a domestic partnership is subject tobasictax. 4, Allo the above > Answer. A. © ‘Atiscomect he 15% FWT on interest Inca derived rom a foreign curency bank {thai under FOS or FCOU epoca ony ose xpeyor ‘Al nonresident? (expeyers ory exempl trom such tar. Bik comet Fiws(egaross of enoun)rceved by HRAGETB or sujet louw. a1. Anon esident alan derived interes income oly iis bank deposit herein Nidevidgag © Ctls hoorect_ Share in come derived rom domestic pt " 1 “vider income’ subject FWT. Puen ore, eg Wan account in @ depository bank under the foreign. jcurtancy deposit , name of 8 nonresident ciizen such as an overseas contact vorter creme UY hy ard his spouse or dependent whois a resident ofthe Phibpines ef PO deposit shall be: a. Exemptedin its entirety. b. Subject to final withholding tax of 15% in its entirely, & 50% exempt and 50% subject to final withholding tax of 15%, . Subject to regular income tax rates for individuals, te ree © Answer: C . Interest income on foreign currency deposits under Deginning January 1, 2018 uncer TRAN Law, exept fs speca a he deposi inthis particular casa is inthe Si 500 othe income sal be case, PY” mame fa restart and w nory syne ‘under the FCDU system of a domestic bark. The interest ‘amounted the income tax due of the said alien? ($1=PhpS0) ws a. PO ¢. P8000 b. P3,000 d. P10,000 {the Phitipg 500. How mung > Answer A Nenvesiden!lazpayers are exempt fom income (ax on interest come den deposit under the FCDS, —— ‘rom bank A taxpayer received during the taxable year the folowing passive inconve wahin the Phiippines: eo Interest on bank deposit under FCDU (nel) 231,250 Royalty on a software application (gross) 95,000 Dividend income RFC (gross) “450,000 Maxpayer isa nonsesient alien engaged in business, te final axon the above passive income would amount to a, P52,750 ©. P28,250 b. P19,000 d. P37,750 © Answer: B © FIT on reyalty income = P95,000 x 20% + P19,000, © Interest nceme on FCDU deposh - exempl © Dividend income rom resident foreign corporation — subject lo basic tax Which of the follwing passive income is exempt from tax when received by resident or‘ Gitizen and nonresident aliens engaged in trade or business in the Philippines but subject to 25% final tax when received by nonresident aliens not engaged in trade or business? a. Prizes of more than R10,000,Iudvidaale b, Interest income from long-term deposi of . by cnthecates prescribed by the Bangko Sentral 1g Pilpinas, Yield or any other moneta ; Other winnings, ty benefit from trust funds and similar arrangements. as > Answer B Jnlerest income derived from era le long-lerm benk depost or investment in the Philippines is exempt Nonateless, such exepton i rot appcable lo HRUCHETB. 48. Which of the following statements about interest income from Jem deposit is false? a ier income fo ingen copostrivearentivene pu fer eee lor b. {fa long-term deposit or investment is pre-terminated, the applicable tax rate on the interest income is 0% if the holding period is 5 years or more. c Ifa long-term deposit is pre-terminated, the applicable tax rate on the interest income is O% if the holding period is 4 years to less than 5 years. d, Ia long-term deposit is pre-terminated, the applicable tax rae on the inlerest income is 12% if te holding period is 3 years to less than 4 years, © Answer: C Ih case of pretermination of anger bank deposit or investment by an indidual taxpayer, the tx rata depending onthe holding pevod shat be: es * Syears ormore Exempt Exempt 25% years toless than 5 years SOM 3yearstoless than 6 years Less than 3 years ‘The next four (4) questions are based on illustrations provided in RR 14-2012, ‘Assum irument’ is pertaining to a investment issued by a bank. 49, An instrument with a maturity period of ten (10) years was held by Juan (resident citizen) for two (2) years and was transferred to Smith (resident afin), who, in tum, held it for eight (@)ye2"s. The final withhoiding tax should be as follows A 8 COD. Juan ~ 20% final tax Tue False Te False Smith - exempt Tre Fase Fase True © Answer. A Basis: RR 14-2012and RC 72015 50. Aninstrument with a maturity period of tn (10) years was held by Juan (nonresident citizen) for threa (3), years and transferred it to Smith, a resident alien, Smith held it for two (2) years bafore subsequently transferring it lo Pedro (resident citizen) who held it until the day ‘of maturity or for a period of five (5) years. The final withholding tax should be as follows:Idividerg A. Boe G o. Juan = 12% final tax Tre The Tre Tre ‘Smith - 20% final tax Tre Tue False False Pedro - exempt Twe_ False False True + ‘Answer: A r Basis: RR 14-2012 and RMC 7-2015 51. An instument with a maturity period of en (10) years was held by Smith i t i “ (reson tzen, whe pro trinated it afer four (4) yeas, Tha nal withoking tx are as oven Stn A 8 GD ‘Sith— TO fal tax Tue The Tue Tao Juan ~ 20% final tax Tne Tre False Fake James - exempt True False False True a_i Tre > Answer. B Basis: RR 14.2012 and RMC 7.2015 52. MeX.areiert ize, ppt Bank ATs Dsparien fo anogohis money ca, tough rst ageemen. Bank A—Trst Departnent ten vests sad money eae! Srgtesment(1.year corporate bond) of XYZ Corporation under the account ns? “Bank A~ Trust Department. MX dd no withkaw his money rom such vec fr atleast iv (6) yas. The ietrest oN. Xam be coresponding Wstogenmern Exempt fom income tax ° b. Subject to 15% preferential tax rate €. Subject to 20% final tax 4. Subject to basic income tax @ Answer:C Basis: RR 14-2012 and RMC 7-2015 ‘Thelong-arm deposits ox vestnert catfcatesshaud be under he rao anindvida! ry "ot under the name oa corporation or a bank ora trust departmentAmit of & bank. 53. On January 1,2021, Pedro purchased at face va 1,000 P,000 faca value bonds of San Miguel Corporation, a domestic corporation. The bonds were dated January 1, 2020 and ‘mature on January 1, 2031. The bonds pay 10% annual interest every December 31. Pedro Sold the investment directly to Juan on December 31, 2024 at 102. Which of the following statements is tue? 2. Theinlerest income from tha investments subject to a final withholding tax of 5% b ‘The interest income from the investment is subject to a final withholding tax of 1% 6. The gain on sale is subject toa final withholding tax rate of 20% d. The gain on sale is subject to basic income tax .Indwvideals @ Answer D (The interest income (derived 1) Tegan ze (ened roma epost abst) bec 20% PWT, ‘subject lo basic lax, unless qualified for exempton (sale of long-term debt secures wit matunty pend of more than five years), Since the investment was ‘cid with tes (3) years rom purchased, the gain shal be taxable. 54, On January 1,2019, Loma invested 1,000,000 to BDO's 5-year, tax-‘ree time deposit. The long-term deposit pays 10% annual interest every January 1. In need of cash, Loma pre terminated her investment on July 1, 2022. How much i the Final tax due in 2022? a, P6,000 ©. R17,500 b. 12,000 4. P42,000 © Answer: D GD FWT= PIM 10% x3.5 yoars x 12% tax rae on pre-termination = P42,000 'h case of pre-termination of long lenm bark Gepost or investment by on. individual (taxpayer, hota rate depending on the holding petiod shall be: = Syearsormore + 4 years less than Syears Exempl Exempt 25% .3years less than 4years Sh Sh + Lessthan3 years 55, Assuming the same information in the problem above, except that the investment was made by a domestic corporation, how much final lax is withheld in the year of pre-termination?: a. P2500 . 10,000 b. P6,000 4. 12,000 © Answer C FUT = Pit 10% ew tx 20% = 10000. CQ) TeFAMT walbe computed ons yearly bass, notcumuatve. —* ©) The investment is net under the name ofan individual taxpayer, hence, not subject 10 ‘es on preterminaton. PCSO Winnings Prizes and Other Winnings '56. Which ofthe folowing statements is correct pertaining to PCSO winnings received in 20227 1. PCSO winnings of not mora than P10,000 received by citzens, residents and ‘non-resident aliens engaged in trade or business are exempt from income tax. Ul. PCSO winnings of more than P10,000 received by citizens, residents and non- resident aliens engaged in trade or business are subject to 20% final withholding ax “ML PCSO winnings of not more than P10,000 received by non-esident aliens not engaged in trade or business are exempt from income tax. : 1V. PCSO winnings of mora than P10,000 received by non-esident aliens not engaged in trade or business are subject to 20% final wihholding tax.5 i] Velivideal, atey ce latvony tation @ Ald Deaton @ awe o Semen Sav Nov corns FESO merya by MRANETB 9 Sites 9 one * Fat eee vent Pat a vores shen engages hn sess 9 De PRippnes recened PESO, rasey DPS en okey § TOT, Te POO wrens sale wri feon io rom ger bias rome a Rae tha ettoting fT Saeed ra etrp m8 one o Awert were Shey Sees soe? Besse rat pare Tam PID DD) reserved by Sans, men’s and non asrfong Bs ep nose or oes oe eres fom moore anpatinnerebareaimatinpchenree reste BES EE NE SE ee Sher b 1% fal witntoking Poo rae ePID mame by ere ale at oy Tce Ses ime a bi 2 Lmy = ledMmy > le=timy a laso rn rp © ama DO veme tessa een OD Sse Forme yy HER ee te BS WT, nes, — . En eee ne re cee bo ee te Paes = Tee eee! bya recente tom a resent begn corpora, = Serre etree oz eee pose permeship receved by a resco: Zee ceva? oyster reminiain toma toneste exporaton. w + soveDfe tiowng 2 mcenved Do bowery passe remes n 222 Coto pe Ost ISTO , 1 12a tpeerest $ depost, BDO (510.000 1 P42) mm irezrest, depost in Horgan (HxS 19.000 1 P5) 52000 pros (TV) won abe tery 5000 PCSO wens 200 0 Pree won in conesin US. mmm Lom waning NUS. +m 6. ‘How much is the correct fral wthoiing tax on pane ccomes 9 22 SS TS Catois RC WRC RA REET a Paap 6p PRES bo 86950 430,000 =a esa c 5300 0.000 Eston] 2m d= Paso PPE TS © Answer. B Sor wl wees 4 ae eae pom cost LET: & 2% enor eam re emrext, USS deport 500 € 135 ens = — Fess (TV) moana teal eaery & noe 06 no | Pre (TV) wonina teal ktery Ete nsx | POSO eres § 25 Answer A © the recplentis NRANET, # shall be subject lo 25% FHT regardiess ofthe amount Jam, a resident citizen, received PCSO winnings in 2020 amounting to 100,000. What type of income tax will apply? ‘a. Final withholding tax on passive income b. Capital gains tax c. Basicincome tax d, Exempt © Answer. A; FWTO!20% 93Nidividg, L I1.Jam ino praxding numbers a nonresident alien engaged in trade or bys , 8 pool name tae ably wl app? Me, hay a. Fralwihteking lax on passive income b. Capital gains ax Basic income tax 4. Exempl © Answer, D 69, Assuring Jam in the preceding number is a nonresident alien engaged in ‘wade and the winnings was received during the effectivity of the CREATE ta, wa es income tax babi will apply? Ye of Final withholding tax on passive income Captal gains tax Basic Income tax Exempt © Answer A apogee Royalty Income 70, ‘Slatemen! 1: Al royalty income derived from sources within final withholding tax. Satement 2. Arya income dered rm sources cui of he Philp by resden!ciizens are subject to basic income tax, nes eed the Philipines are subject g Only statement 1 is comect b. Only statement 2s comect & Both statements are correct d. Both statements ara incomect © Answer: C n Uc th oloving royals etme win te Pipines is ol subject o 10% fa . Royals fram computer software . Hit gz i72, Lebron James recived royalty fee from Viva Records Corporation, Iudvideale 0 i 1,8 domestic corporation, for his musical compositions under te album Whatever Takes”, Jamva i an American ‘composer and has never sel oot in the Philippines. Tha royalty feo shal be subject to, a! 15% FWT ©. 25% FWT b. 20% FWT . 5%-32% graduated tax rate @ Answer: C; Lebron James sclassited os MRA.NETB in the Prippines. Dividend Income 73. The following laxpayers who received dividend ceceived net of 10% fina wihoking tax, except: cc 15. b c a Which of the folewing cash and/or property dividends an individual shall not be subject to inal tax but fo b. e a income from a domestic corporation will Resident citizen Non-resident citizen Resident alien ‘Non-resident alien engaged in rade or business > Answer: RENAE RA Cash sor Property Dien tom © Domestic Corporation © From Foregn Cor (RFC, NREC) GasoTax — Gase Tax S4FWT Genera rentable ‘actually of constructively received by Tegular income tax for individuals? Cash andlor property dividends from a domestic corporation or from a joint stock company i Cash andlor property dividends from insurance or mutual fund. companies Cash and/or propery dividends from regional operating headquarters of multinational companies Cash andlor property dividends from a nonresident foreign corporation @ Answer:D; (Subject to basictaxy ‘Which of the folowing income of a non-resident ctizen wil be taxed diferent i the taxpayer is non-resident alien engaged in trade or business? ‘2. Interest income b. Royalties c. * Dividends d, Prizes © Answer:¢Vudiny, 76. Wich Of tho following Incomo wil bo taxod in tho same Manner rogard Cdassifeabon of the lanpayor? loss Hy ‘8. Captal gain on salo of land andior building . Capital gain on sale of shares of stock of a domestic comporation & Ordinary gain on sal o land andor buiding 4. Ordinary gain on salo of shares of stock of a domestic corporation © Answer. B ‘Share In the Net Income of a Partnership and Joint Venture 77. Share in the nal distributable income of a general co-partnership by a fesitent ci sect: 210% final withholding tex b. 20% final withholding tax 6% capital gains tax 4, Basic income tax zen ig © Answer A © Gonoral parmerships or commerciairadng parnerhins are tested as + lmxpayers fer tax purposes. Therelore, share in income fom such partorshy eee ‘veated 1s dividend income, a 8 Shall by 78. Share in the net distributable Income of a general professional Paresh by resin Basic income tax © Answer: D ) General “professional” parmerships ere tar exempt and net treated es * \axpoyers for ax purposes. Thro, sharin Income to such ptaaine be beated as dvidend income. am 79, fa nonresident citizen received his sharin the income of a taxable joint venir, wis type of income tax that will apply on the said income? . Final withholding tax on passive income b. Capital gains tax ¢, Basicincome tax 4, Fringe benefit tax © Answer: A . The sharein income trom a taxable jin! venture Is treated a8 dividend income,Judevidanle : Basod on tha proceding numbor, excopt that the int ventura is @: from income tax, » what ype of com tax wl aply on ta tad het ene a. Final withholding tax on passive income b. Capital gains tax c. Basic Income tax d. Fringe benofit tax % Answer: ¢ (The shave in income tom tx-ecemg treated 48 vend income, Q) Twoltlhoe saceamplietvensn ems . {et venture formed forthe purpote ol underaingconstucscnpejects parm Presidential Decree (PO) No, £25 (dad 4 May 1970) lo ase tea corractos achieving competivenes wth cca contractor by pooleg te resources uncertain big consiucaen jects, x * dent verture or consorbum fr engaging in petcloum, coal, gocthermal and othe [SORTY OPeraions pursvan to an cperatng contartum agreement under a service contract withthe goverment. “61. Ld and Fermin formed a joint venture wih assets of not more than 100,000,000. They agreed to share profil of lass in the ratio of 70% and 30%, respectively. The results of ‘operations for 2022 taxable year were provided below: Joint u Fermin Gross income 5,000,000 3,000,000 2,000,000 Business expenses 3,000,000 2,000,000 1,500,000 The income tax expense of LJ in 2022 should be: . c a. 103,000 367,000 b. 302,000 , PS82,600 > Answer: B ‘Solution: : a uw Fermin Goes boom -P5,000,000 3,000,000 2,000,000 Business expenses 6.000.000) 2,000,000) _ 1,500,000) ‘Taxable Nelincome 'P2,000,000 _F1,000,000 _PS00,000 RCIT rate under CREATE Law- MSWE 20% Income Tex Due ~ Joint Venture 400,000 Income Tax Due of LJ and Fermin based on (190,000 ‘BS5,000 the Graduated Tax Rate (Page 63) Distributable income (P2U-400K) = P16 Final tax @10% on share in Income of JV LJ=PI6Mx 10% 1OKEWT 412,000 Fermin = P1.6M x 30% x 10KEWT 48.000. Total Income tax expanse ‘7400.00 F302,000 103,000 (Basle and Fina! tax) 7divide Ll 42. Assure fhe Jon ventura is nontaxablo, tha income tax due ot LJ should be: PO . , P618,000 . P357,000 4. P717,000 © Anewer: C w u Gress heome somnom — raeaeon eemla Busiess expenses 000 000, 1 sie Metlncorne F200 00.0, 060 Disrbutadie income 2,000,000 Share income of IV LJ= P2M x 70% 1,400,000 Fermin = P2M 1 30% 9, TasntnFeone ea Tacoma Tax Due [Graduated rai Faia 00 Pata Use the folowing data for the next five (5) questions: : ‘Ana has the folowing data on his passive income eamed during 2022: Philippines Interest income from long term peso bank deposits “45,000 Abroad Interest income from long term FCDU deposits S000 Royalties from books 20000 3090 Royalties from computer programs 20,000 40,000 Winnings from an electronic draw during Smart : ; Cormunicalion’s 50® anniversary (chosen randomly by the network using smart subsorbers’ sim card numbers) 30,000 Dividend income from a domestic corporation 27.000 13,006 Dividend income from a foreign corporation 33,000 22.000 83. How much is the final withholding tax if Ana is a resident cltizen?, ‘ a, P13,450 c. P14,450 b. P12,450 4. P2220 > Answer: D Long-term peso bank deposit, P45k x 20% «Exempt FCDU depost, P50,000.x 15% P7500 Royalties — books P20,000 x 10% : 2,000 Royatties - computer programs, P20,000 x 20% 4,000 Winnings, P30,000 x 20% 6,000 | Dividend income from DC, P27,000x 10% 2700 '' Total Final faxes on passive income “R200Indéev brats + 4, How much Is tho final wahhena ing lax fl Ana isa resident tien? a. P1350 ©, P12.450 b. P9700 4. P2220 © Answer: D Same computation wit Rc* 85, How much s the final wanholding taxi Anais a nonresident elizen? a. PA3,450 ©. P9,700 b. P8,700 . P14,700 © Answer:D Long-term peso benk depos Exempt FCOU deposit Exempt Royaties~ books £20,000 « 40% 2.000 Royalies- computer programs, P20,000 x 20% 4,000 Winnings, P30,000x20% 6000 Dividend income rom OC, 27,000 x 10% Total Fina! taxes on passive income $ : 14,700 Heer sido taxpayers are rot subject lo tax on te inorea: Income demed trom FCDU deposit 86. How much is the fal withhokding tax i! Ana is a non-esident alien engaged in trade of business? a. P13,450 ©, P9700 b. P17,400 d. P13,750 © | Answer: B Long term peso bank depast 5 Exempt FCDU depost Exempt Royatias ~ books P20,000 x 10%. 2.000 Royaties - computer programa’ 20,000 x 20% 4,000 Winnings, 30,000 x 20% ‘ 6,000 Dividend income fom DC, P27,0002 20% $400 Total Final taxes on passive income 17,400 87. How muchis the final withholding tax if Anaisa ‘non-resident alien not engaged in trade or business? a. P19,250 ¢. P43,000 b. PA3,750 4. P29,000 > Answer B ‘Long-term peso bank deposi, P&s,000 x 25%, 11,250 FCDU depos Exempt Royalies — books P20,000 x 25% $,000 Royalies - computer programs, P20,000 x 254, $000 : Winnings, P30,000 x 25% . 7,500 : Dividend income from DC, P27,000 x 25%, 6750 Dividend income from FC, P33,000 x 28%, 8,250 Totel Final texes.on passive income 8,750 ° TPecrompfon tm a Qn inert income derived fam long erm peso bank deposiis net appleable 5 IONRA.NETE,Mdividal, ins Tax on Shares of Stock Capital Gi . : o capital gains Lax? oho flloving sal vansacions wilbesutject ™ Weasel shares ol stocky a dealer nsecules b Sol of shares of lock dng lial Public Oferg (PO) e ai of shares of stock nol Brough te local lock exchange by 2 person whois nq doaler in securities . eo et shares of shock ough he local stock exchange By Person Win is 4 a dealer In securities > Answer ODE - Slt Sars saeco cata se w(t hares, (wo Danseckons ‘ . rae donstc pron NOT Brahe ea ck ange (near rina made Src i w buyer; end (2) sale of al propery cssfed as capa >The selec shal ro be odeatrinsocuris. the sari 8 dealer insecure, he gain on ale shal bo subject basic incre as. Ai taxpayers arn suge! lo 15% capt gais lax on gain 0 sale of shares of» cosy hy Sameste coporaion se the folowing dal ore next four 4) questions: On March 2022, Johnson sold the following shares of slock of domestic corporations which he bought for investment purposes: Usted ond Traded Not Listed and Traded 250,000 Selling price 140,000 Cost * 418,000 80,000 89, How much is the capital gains tax? a. P3,000 cc. 9,000 b, 6,000 d. P12,000 © Answer. C © Capital gin = P140,000 - P80,000 = P80,000 © CGT =P60,000.x 15% = P8,000 © The sale of fisted shares is exempt fram income tax but subject to a business tax ‘Secton 127 of the Tax Code, as amended. eabineesiene 100: AA 90, Assume thal Johnson I @ dealer in socurties, th capdal gars tax should be a. PO ¢. P6,000, , P3,000 4. P12,000 © Answer: A Qo the seer @ a dealer seartes, the shares mired are emured fo be bo ale n be Ordinary course ol rade or buanens, hence, he tle 8 sued 1b val and Oe eccrne cn beth cases filed o rot subec w base noone ax Laewae, he ale nl aye 0 capa (Gos Lax nor lo sock Wrantacton tas of 1/8 of 1% (a3 amended) of goss aching pce gf. Assume the shares sold were issued by foreign corporations, the capital gains tax should be: a. PO «. P6000 b, 3,000 4. R12,000 © Answer A CCT @ appeable cnt fo sale of shares ofa conely held domestic corcranon. Sie of shares Of foreign corporations are subyct to banc come Lax 92. Assume the shares not listed and traded in the local sock exchange were only sold for 160,000, the capital gains tax should be: a. PO - . P9,000 . 5,000 4. P12,000 @ Answer. A 0° Thebass of CGT on shares of stocks fe captal gan realand rom fe sae. Src the selng (pace slower than De cost, the ispastion resuted loloss. Corsequenty, CGT shoud rot be 93. Drei sold 10,000 shares in Alpha Corporation, a closely-held domestic corporation for 21,250,000. The shares were acquired by Drei'a year ago for 1,000,000. How much is the capital gains tax? a PO ¢. P30,000 b. 20,000 4, 37,500 ‘> Answer: D © Capital gan = Pi 250,000 PA, 900,000 = P2s0,000 © CGT =P250,0003 15% = P37,500 94. Based on the preceding number, how much is tha donor's tax, if any? a. PO ¢, F30,000 b. P20,000 d. R37,500 ’ Answer. B © Donation = Excess of FAV over SP = P2M - Pt 250,000 = P750,000 © Donerfa Tax = P750,000 250,000 ax exempt ge x 6% = P20,000, 101Nadi hdvideag 102.6 fons ofl opty cassis iil ae cae ta by ciizonissubeeo A 8. Cc. OD. Tote 2 ee RS BORD 6% capil gens tax Tue False Tue False Basic Income tax Tne Faso False True ‘© Answer.0 ‘Use the folowing data foc tha net three (3) questions: ‘Ana, a resident cizen, provided the folowing dala for year curent taxable year: Gross income from businass (gross of 12,000 CWT) 700,059 Business Expenses 300.009 . Royaty from books i ; 0m Gain on direct sale to buyer of shares of stock of domestic corporation . 70,000 held as capital asset . < Loss on sale of land in the Philippines held as capdal asset with cost of P1,500,000 when the zonal value is P1,200,000 , 500,009 103, How much isthe income tax payable of Ana? a. P12,000 .¢.P30000 ‘ . dni. {P400,000. sncome Tax Doe (hexcess of P250000@ 20%) = P30,000 Loss CWTex (12,000) Income Tax Payable 18000 © Ihe queston is income tx payable, compte ony the income taxi due on i subject to basic income ta. eae RNR cn ncn) 104, How much isthe fotl capital gains tax? 2. P3.500 © P7200 ‘b.P 10,500 . P82,500 > Answer: D . ‘i ‘© CGTon shares of slock (P70,000x 15%) 10,500 = CGT on real properties (P1.2M x 6%) 72,000 ‘SP = Cosl=Loss «PY, 6M- 5M = PIM, 2v=P1,200,000 TOTAL Capital Gans Tax Paz BOO © When shares wore sold direct to 8 buyer, shall pertain to shares of « corporation not sted inthe stock exchange, Islet, the shares shall pertain to that of a dernestc 1049Individuals ° Prrppeae ie, Nak change hal nfo cl sock echnge te © Sale of Real Property ssid as capal asset uated inthe Pulgpnies subject to 8% CGT (eperdous of whether he ransacson resled a gan orcs) 105. How much is the total income tax expense of Ana? + a.P116500 . P159,500 b.P207,500 4. P156,000 > AnswerA J Sasclncame Tax (efer compuiaton above) 630.000 . Ed Taxon Pasa eae (110 108 0 : computa abore + TOTAL heorre Tax Expense ! ae © INCOME TAX EXPENSE = Basicincome tax « FT on passive income + CTS for unt th cchidren had the following data for P50): ' Juan, mariied, supporting his three (3) The current taxable year (Exchange Rate § yy: Philppines Abroad Businoss income . 1,000,000 $20,000 Professional income 400,000 10,000 Salaries 200.000 is Business and professional expenses. 250,000 8,000 Income tax paid 7 : 4,000 106. If Juan is a resident citizen, his income tax payable should be: a, P434,000 c, P589,000 b. R570,500 d. P509,000 > Answer A Philipines Abad Toad Business Income (Phippines and abroad) 'P1,000,000 1,000,000 2,000,000 Prolessiona icame Business and prolessienal erpenses Taxable net income sncome Tat Ove Less: Income Tar Credit ‘Actual ($4,000 x PSO} = 200,000 Ws, Lint = 1,100,450 x P634,000 = F284, 653 Allowed = Lower amount 200,000) Income Tax Payable PAU 008 634,000 © NOTE: Income tax pad abroad és gonealy healed 2s income lax ere” dedcion trom the {ncomo tar due), unless te laxpayer oped eal the tame as pat ol oporang expences. 105AN Andivide wl 107, ttJuan fs a non sesidont tizen, his Income tax payable should be: 084,380 a P295,000 c f b. R3S8,020 4, 357,000 © Answer A Business came (Phiippines onl) 1.000.000 Professional hcome 400.000 . Saleroa 200.000 ‘Business and professional expenses 250, Tarabie net income 1380000 ‘come Tex Due Peytble (graduated) F295 000- ° NOTE: Income tox credit on income tax paid abvoed is licable ie {taxpayers and domeste compotion, ert tay 108. IT van isa non xesident alien not engaged in trade o business, jarding . "and business daa, the lta income tx tha shouldbe withels ere incomorgeha 8. P50,000 c, P31,500 . b. P16,500 d. P338,500 © Answer: A DD icome Tax Due = Saleries of P100,000 x 25% = P50,000 o Daregart income and expenses perting to business ero practcg of Soeean afi prcblen ier oso wheter ch temo egg Otherwise, th taxpayer wil be considered as “engaged in trade 109. Mr. and Mrs, Dela Cruz, both CPAs and residents of the Philippines, had the folowing aay for 2021 taxable year, 7 Salaries, wile ®1,200000 13* month pay and other bonuses, wife 140,000 Professional Fees, (net of 10% CWT) 1,620,000 Expenses — Practice of prolession (15% nondeducible) 800,000 Rental income (net of 5% withholding tax ~ 190,000 Rental expenses z 5 80,000 Other income, husband (20% nontaxable) 80,000 The taxable income of Mr. Dela Cruz’is: a. P4840 : . P1,870,000 b. P684,000 d, 2,554,000 © Answer: B © Reler ta the soktion in the next question, 110. The taxable income of Mrs. Dela Cruz is: a. P371,000 . Pt,870,000 : b. P359,000 di. P440,000 “@ Answer: ¢A ‘Solution: 7 Selares * extent Excass of 1 moeth pay over lax exempt . 2010 beneft (140,000-90,000) Professional fees (P1,620,000/20%)/2 900,000 900,000 * Rental ncore P190,00095% 2 101000 = 10000 Professional expenses (P800.000 x €5'6y2 (e4o.com (340,000) Rental exponses (P80,00072) (40con) (49,000) Other income (P80,000 x 80%) 64.000 Taxable Nol income heat copra © Under RA 10863 (TRAIN Lan, bend a wile, shall compute separately fer neha \ncome lai based on ther respective tal Lmatle ncome: Proveded, thal d amy income carrot be detnaly atrbuted oo denied 88 rcxme excuenaly eamed cr reaized by eater ofthe spoes, he same halle ced equaly between be pauses x Beppe of éteanng ther respecive lable nome © CWT on “Professunal Fees" under RR 11-2018 ° ° ledividual Payee Gross income fr he year 73,000 000 = 10% India payees whose goss recepa/ale 2 tazable yeu shal nat exceed PM, ae requred fo submit a seom declaration of hse gross receptusdes, oper wih ‘8 copy of Certfcale of Regaraton (COR), to al the income payortehholdeg agents ‘rot ltr than January 15 of each yer o at leat pro fo the mit payment of the Doessona feesconmasonsfaert fees, e. order lor fer fo be subject to fre petcnt (5. ‘The len percent (10%) wld tax raleshallbe appled im te tlowng cases: (1) fe Fayet fated to provide te moore payerhnnccng agent of such dedaraton (2) the incre payment exceeds PIM, despa receive fe swom decaration from the ‘ncome payee. ‘Mondndividual Payee Grass income fx the year < 2720,000 = 10% WEcasa income fx the year > R720,000 # 15% BRILD18 Ine case of non ncaa payees,¢ fhe company oF cmparaton's gress none is timated not to exaged 720,000 durng the lanable year, the authonzed officer is required o prowde al ts income payersubholing agents wth a rolanzed swom Salerento Dal eft together wit copy othe COR, not ater than January 15 of ‘ch year or prot fe mal come payment 30 thal fe come payorithokding ‘agent shal ony with fen percent (10%). ‘The teen percent (15%) withing ts rte shal be appled inthe folowng cases (1) the payte fled to provide he inca payorwihcldng agent ol such dedaraton, or (2) the ecame payment exceeds 720,000, despite receiving te sworn declaraton fom {he ince payee. The swom dedaraion shal be executed by the presidenUnanaging pare ol the coporatovcompanygenerl professional parnershps. 107Re er aS M11, Statemord 1. Sel employed is a sole proprietor or independent contractor Who frome earned trom sell-emplaymont. Site conta who She work fr, how the dane and when it's dono, : ‘Statement 2. AProlessionalis a person fomaly cotfed bya professional boy tba specte proesion by vito of haing compiled a required examination 8} studes andi practes, whose competence can usualy be measured. Ute g estabishod set of standards, Raina a, a. Only statomont 1 is correct 0. Only statoment 2is correct ¢ Bothstatements aro correct 4. Bothstatomonts aro incorect "Pan wo > Answer. C ‘12. Statement 1; ‘A Professional also refers to a person who engages in some ert cy ony, 3s a means oflivelhood, rather than as a hobby, $POM fog Satenen! 2 Prolssonal icdudes bt isnot lind to doctors, avyer, enn, archincts, CPAS, pofesonsl elaine, ail, prolessinal abet, “Mee, Producers, insurance agen, insurance adjusters, management and lechnical iq eo" Both statements are correct Both statements ere incorrect > AnswerC Use the. ng data for the next stions: f ‘Ana operates a pel shop and at he same time, offers interior design services to her cients The following data were provided by Ana for 2021 taxable year, : _ Pet Shop: Gross sales 1,800,000 Cost of sales +. 600,000 Operating expenses 200,000 ' {nlerior design services: : Gross receipts 1,150,000 Cost of direct services 120,000 Operating expenses 80,000