Chapter 5 Flashcards
(27 cards)
Enumerate the Features of Final Income Taxation
- Final Tax
- Tax Withholding at source
- Territorial imposition
- Imposed on certain passive income and persons not engaged in business in the Philippines
imposes upon the person making income payments the responsibility to withhold the tax.
Final withholding system
Under the FWS, the tax which will be deducted at source is ?
Final
The final withholding system is ?
Inherently territorial
(True or False)
Final withholding system applies only to certain passive income earned from sources outside the Philippines.
False, “‘from sources inside the Philippines”
(True or False)
All items of income earned from sources abroad, passive or active, are subject to tax under the general scope of the regular income tax.
True
It is built upon taxpayer and government convenience.
Final Withholding tax
For the govt this is the most convenient and effective system in collecting taxes on income where there is high risk of non-compliance or tax evasion on the part of taxpayer.
Final withholding tax
Items of ? are earned with very minimal involvement from the taxpayer and are generally irregular in timing and amount
Passive Income
Its existence can be difficult to predict while their actual amount may be difficult to determine when not recorded by the taxpayer.
Passive Income
They have high risk of non-compliance
- Non-resident aliens not engaged in trade or business (NRA-NETBs)
- Non-resident foreign corporations (NRFCs)
Gen Final tax rate of NRA-NETBs and NFRCs, and explain why they are taxed like that.
25%, because they have high risk of non-compliance and the govt can’t impose upon them the obligation to return due to territorial consideration.
Enumerate the Passive Income Subject to FInal Tax
- Interest or yield from bank deposits ir deposit substitutes
- Domestic dividends
- Dividend income from a real estate investment trust
- Share in the net income pf a business partnership, taxable associations, joint ventures, joint accounts,or co-ownership
- Royalties
- Prizes exceeding P10,000
- Winnings
- Informer’s tax reward
- Interest income on tax-free corporate covenant bonds
(True or False)
Interest income or yield from local currency bank deposits, deposit substitutes, trust funds and similar arrangements are subject to final tax.
True
(True or False)
Interest income or yield from local currency bank deposits, deposit substitutes, trust funds and similar arrangements are subject to final tax.
True
(True or False)
The final tax on deposits applies only to those made with banks
True
Those madefor a period less than five years
Short term deposits
Those madefor a period less than five years
Short term deposits
Refer to certificate of time deposit or investment inthe form of savings, common or individual trust funds, deposit substitutes, investment management accounts, and other investments with a maturity of not less than five years, in the formof which shall be prescribed by the BSP and issued by banks only
Long-term deposits or investment certificates
(True or False)
Corporations are not exempt but are subject to regular tax on interest income on long term deposit or investment certificates
True
(T/F)
The exemption kf individuals on interest income on long term deposits is anchored on the fact that long term deposits are usually channeled to financing long term projects
True
(T/F)
Final tax shall be applied kwith time and savings account deposit maintained by members w/ coop and by primary cooperatives w/ their federations
False, it is limited to banks and should not be applied on the items mentioned above
Alternative form of obtaining funds from the public other than deposits through the issuance, endorsement, or acceptance of debt, etc. for the purpose of relending or purchasing of receivables and other obligations
Deposit substitute
The mere flotation of a debt instrument is not considered to be a public borrowing and is not deemed a deposit substitute if there are only 19 or less individual or corporate lenders at any one time
The 19-lender rule
