Income Tax On Individuals

Question 1

The following are residents of the PH:

Answer 1

1. Those who are citizen of the PH at the time of the adoption of Constitution (Feb 2, 1987)
2. Those whose fathers or mothers are citizens of the PH
3. Those born BEFORE January 17, 1973 of Filipino Mothers, who elect PH citizenship upon reaching the age of majority
4. Those who are naturalized in accordance with law

Question 2

Non Resident Citizen

Answer 2

1. A citizen of PH with a DEFINITE INTENTION TO RESIDE IN ABROAD
2. An Immigrant or for employment on a PERMANENT BASIS (OCW-seaman, OFW)
3. WHO WORKS and Derives income from abroad which requires him to be phisically present abroad most of the time or ATLEAST 183 DAYS during taxable year (for employment dapat)

Prorata computation if they arrived in PH

Question 3

Resident Alien

Answer 3

1. An aliens who lives in PH with no definite intention as to his stay (floating intention)
2. Extended stay - makes his home TEMPORARILY in PH
3. Who acquired residence in PH until he abandons the same

Question 4

Non Rsident Alien

Answer 4

1. An alien who comes to the PH for a DEFINITE PURPOSE which in nature may be PROMPTLY accomplished
2. Either:
   a. NRAETB or
   b. NRANETB

IMPT: A NRA who come to the PH and stay for an aggregate of_____ (next card) shall be deemed NRAETB

Question 5

A NRA who come to the PH and stay for an aggregate of______shall be deemed NRAETB

Answer 5

More than 180 days!

Question 6

Taxability of Individuals In General including Estate and Trust

        Tax Base	            Tax Rate RC	         NRC		 RA	          NRAETB	   NRANETB                   ESTATE OR TRUST

Answer 6

See Answer in Tax Reviewer Pg. 173
Tax Base Tax Rate
RC : W/in and W/out, Sec. 24 A - Ordinary Income Tax
NRC: W/in only
RA : W/in only
NRAETB : W/in only
NRANETB: W/in only, FWT - 25%
ESTATE OR TRUST W/in and W/out, Sec. 24 A - OIT

Question 7

Sources of Income for Individual Taxpayers

Answer 7

1. Compensation Income
2. Business or Professional Income
3. Passive Income
4. Gains from disposition of Property

Question 8

Explain Income owned in common with the spouse.

Answer 8

Sale or disposal of property conjugally owned by spouses, the gain therefrom shall be divided equally, same with expenses.

Further, spouse can opt to report their income separately but in ONE tax return. BIR encourages spouses to file their income together in ONE RETURN

Question 9

Allowable Deductions for Individual Taxpayers
For Compensation Income and
Business or Profession Income

Answer 9

*For Compensation Income, only mandatory government contributions (SSS, PagIbig and Phil Health), union dues and exempt bonuses upto 90k. Note that the taxable income of not exceeding 250K is STILL SUBJECT TO 0% TAX

*Business or Profession Income. Allowed to claim ITEMIZED DEDUCTION (based on sec.24 of Tax code) or the OSD.

Question 10

OSD is applicable for____

Answer 10

Business Income and/or Income from profession

Question 11

What is OSD. And Explain

Answer 11

This is the optional deduction for Business and Profession Income.
Purpose: Tam*d BIR mag check ng docs
Basis of Computation: 40% of GROSS SALES OR RECEIPTS

For Mixed Income: Should NOT INCLUDE compensation income

NRA cannot be claimed OSD
Period to Elect: Kung ano napili during Q1, yun na gagamitin for the said year. Touched move

Question 12

7 Rules applicable to the 8% income tax rate:

Answer 12

1. Tax base shall be the gross sales/receipts INCLUDING other non-operating income, unlike the graduated rates which are based on taxable income (with itemized deduction or OSD)
2. For those earning PURELY from bsiness or practice of profession, the tax base shall be that in excess of P250K
3. For mixed income earner (with compensation income) the 250K exemption is not applicable. Kasi nga maavail na yan sa compensation thru graduated rates. Note: If 200k lang and compensation, hindi deductible yung 50k na kulang.
4. That 8% is in lieu of the percentage tax under Sec. 116. Hence, the taxpayer shall NOT be subject to the 3% OPT on his gross sales/receipts
5. Touch move rule. Pag napili na sa Q1, irrevocable na. No amendment of option shall be made for the said taxable year. Otherwise, pag graduated napili, ganon din (pero durog sya dito kasi may 3% OPT na)
6. FS is not required to be attached to the ITR. However, existing rules and regulations on bookkeeping and invoicing/receipting shall still apply.
7. If the taxpayer’s gross sales/receipts and other non-operating income exceeds P3M, matic subjected for graduated rates. So sample sa Q1 and Q2 8% sya, tas nung Q3 nag exceed sa P3M, graduated na gagamitin nya pero allowed sa tax credit yung mga tax sa Q1 adn Q2.

Question 13

Please provide the list of not allowed to avail the 8% flat rate of income tax (6)

Answer 13

1. Purely compensation earners (always graduated)
2. VAT-registered taxpayers, regardless of the amount of gross receipts/sales and other non-operating income
3. Non-VAT taxpayers whose gross sales/receipts exceed P3M
4. Taxpayers who are subject to percentage taxes other than the 3% OPT under Sec. 116 (common carrier’s tax, amusement tax, gross receipts tax, etc)
5. Partners of GPP
6. Individuals enjoying income tax exemption such as those registered under the BMBE, etc.

Question 14

Are Individuals earning PURELY from business and/or profession availing of the 8% flat rate allowed for Itemized Deduction, OSD or Special Allowable Deductions?

Answer 14

No. Since the tax base for 8% flat rate is the GROSS SALES/RECEIPTS.

Question 15

Please provide basic format of Computations for Taxable Income and Tax Payable for the following:

Pure Compensation Income
Business or Professional Income Availing Graduated Rates
Business or Professional Income Availing 8% FLATE RATE
Mixed Income Earners

Please answer in writing or just recite.

Answer 15

Individual answer per card

Question 16

Please provide basic format of Computations for Taxable Income and Tax Payable for the following:

Pure Compensation Income

Answer 16

*Pure Compensation Income:
Gross Compensation Income XX
Less: Non-Taxable Compensation Income XX
=Taxable Income XX (then get the tax due based on Graduated Tax Rate)

Tax Due XX
Less: Withholding Tax on Wages XX
Tax Payable (Refundable) XX

Question 17

Please provide basic format of Computations for Taxable Income and Tax Payable for the following:

Business or Professional Income Availing Graduated Rates

Answer 17

*Business or Professional Income Availing Graduated Rates:
Gross Sales/Receipts from Bus./Profession xx
Less: Costs and Allowable Deductions (OSD or Itemized)
=Taxable Income

Tax Due xx
Less: Withholding Tax xx
Creditable Tax xx
=Tax Payable (Refundable)

Question 18

Please provide basic format of Computations for Taxable Income and Tax Payable for the following:

Business or Professional Income Availing 8% FLATE RATE

Answer 18

*Business or Professional Income Availing 8% FLAT RATE
Gross Sales/Receipts xx
Add: Other Non Operating Income xx
Less: First P250K exempt from Income Tax xx
=Taxable Sales/Receipts xx
x Tax Rate 8%
Income Tax Due xx
Less: Withholding Tax xx
Creditable Tax xx
=Tax Payable (Refundable)

Question 19

Please provide basic format of Computations for Taxable Income and Tax Payable for the following:

Mixed Income Earners

Individual answer per card
Please answer in writing or just recite.

Answer 19

*Mixed Income Earners (Compensation/Bus./Profession)
-If not exceed to P3M, either:
>8% income tax rate WITHOUT THE FIRST 250K EXEMPT. Kasi ma aavail nya yan sa compensation.
So, ganon padin, SEPARATE mo lang computation then add tax due from both (comp and bus/profession) then less Withholding taxes/tax credits = Tax Payable/Refundable

Graduated rates, dito, iadd mo lang lang lahat. Ganon padin.

If more than P3M, matic Graduated Rates

Question 20

Compensation Income is always subject to Graduated Tax Rates

Answer 20

Truth

Question 21

The following are not allowed to avail of the 8% flat rate of income tax
6

Answer 21

1. Purely compensation income earners
2. VAT-registered taxpayers, regardless of the amount of gross sales/receipts and other operating income
3. Non-VAT taxpayers whose gross sales/receipts exceed P3M VAT threshold (graduated tax rates)
4. Taxpayers who are subject to percentage taxes other than the 3% OPT under Sec. 116
5. Partners of GPP
6. Individuals enjoying tax exemption such as those reqistered under the Brgy. Micro Business Enterprises (BMBEs)

Question 22

Please review Two Graduated Income Tax Rate of Individuals
Coverage and Schedule

Though it should be given in Bexam

Answer 22

January 1 2018 to December 31,2022

Effective January 1, 2023

Question 23

TRAIN MEANING

Answer 23

Tax Reform for Acceleration and Inclusion

Question 24

CREATE ACT MEANING

Answer 24

Corporate Recovery and Tax Incentives for Enterprises

Question 25

NRANETB TAX RATE?

Answer 25

Except for sale of Capital assets (shares of stock and real property), THE ENTIRE INCOME received from all sources within is subject to 25% Tax rate! Based on Gross Income!! Ofcourse, Interest Income earned from foreign currency deposit unit is exempt

Question 26

Passive Income is Subject to ____

Answer 26

Final Withholding Tax

Question 27

Who is the withholding agent in Final Withholding Tax?

Answer 27

Payor

Question 28

The___ is not required to include the income subject to FWT to hi s gross income subject to regular income tax. Further, he need need not file a return for the income subjected to Final Tax

Answer 28

Payee

Question 29

List of Income that are subject to FWT and its rates based on 5 taxpayer classification

Answer 29

Passive Income: 1. Interest 2. Prizes 3. Winnings 4. Royalties Share in net come from Partnership (GPP is exempt) Capital Gains Tax See sir Brad's App - Income Taxation for Rates or Gsheet. Must Memorize! NOTE: EARNED WTHIN LANG LAHAT YANG RATES NA YAN So all Passive Income earned OUTSIDE PH for RC, not subject to FWT but form part of regular income tax

Question 30

Explain Exempt Prizes

Answer 30

1. From religious, charitable, scientific, educational, artistic, literary or civic achievement. Provided: a. The individual was selected without any action on his part to enter the contest or proceeding, and b. not required to render future services as condition to receive the prize/reward

Question 31

Prize of 10K or less Winnings from PCSO 10K or less

Answer 31

Prize of 10K or less -Not Subject to FWT but part of gross income subject to regular income tax Winnings from PCSO 10K or less - EXEMPT

Question 32

Explain Informer's Reward

Answer 32

-May 10% sya sa revenues, surcharges o fees revovered or 1M per case, whichever is LOWER -FWT: 10% -Di kassama sa reward revenue officials or employees, public officials or kamag-anak thereof within the 6th degree of consanguinity

Question 33

Difference between Capital Assets and Ordinary Assets

Answer 33

Ordinary Assets: All property or stock used in trade or business Capital Gains - are those not falling within the definition of an ordinary business

Question 34

No gain or loss shall be recognized in pursuance of a PLAN OF MERGER OR CONSOLIDATION

Answer 34

True

Question 35

Transactions Subject to Capital Gains Tax (CGT) and its corresponding FT rates? 2

Answer 35

1. Sale of SHARES OF STOCK of a Domestic Corporation NOT listed and traded through local stock exchange (15%) Note: N/A are: a. dealer in securities b. investor in shares of stock c. other exempt 2. Sale of REAL PROPERTY located in the PH held as a capital asset (6%) Noted: APPLICAPLE TO 5 CLASSIFICATION (ANYTYPE) OF TAXPAYERS Yan lang covered for FWT, other can also be considered as Capital Gains but subject to regular income tax!

Question 36

Capital Gains Tax FWT rate for two covered?

Answer 36

Sale of SHARES OF STOCK of a Domestic Corporation NOT listed and traded through local stock exchange: 15% of net capital gain - excess of the selling price/fair value less cost to sell over cost of shares Sale of Real Property - Pag may presumed capital gain: 6% × on Selling Price, FMV, Zonal Value whichever is the highest APPLICAPLE TO 5 CLASSIFICATION (ANYTYPE) OF TAXPAYERS

Question 37

Other Transactions with CAPITAL GAINS but NOT covered by CGT, instead, regular income tax.

Answer 37

1. Retirement of Bonds 2. Short sales of property 3. Option gains and losses 4. Securities becoming worthless 5. Liquidating Dividends 6. Retirement or Redemption for Cancellation of Preferred shares

Question 38

Gross Sales in Tax means net of?

Answer 38

Sales returns allowances and discounts

Question 39

Payment of Tax to BIR is cumulative computation Q1, Q2, Q3

Answer 39

Yes

Question 40

What are the type of interests subject for FWT?

Answer 40

1. From any currency bank deposit 2. From Deposit Substitutes 3. From trust funds 4. And similar arrangements

Question 41

Dividends Tax rate from Domestic Corp? From Resident Foreign Corp?

Answer 41

Paasive Income from Domestic Corp-FWT 10% except for NRANETB (25%) From Resident Foreign Corp-Regular Income Tax rate!

Question 42

Items Exempt from Income Tax

Answer 42

1. Remunarations received as an incident of employment 2. Compensation for Services performed for foreign gov. or international org 3. Damages (actual, moral, etc) 4. Life insurance proceeds 5. Return of premium 6. Compensation for injuries or sickness 7. Income exempt under treaty 8. 13th month pay or other benefits - should not exceed 90k 9. GSIS, SSS, Medicare and other Contri 10. Deminimis Benefits (please review the detailed maximum value per year on pg. 215) 11. MWEs; a.SMW b.Holiday pay c. OT d. NSDS e. Hazard Pay

Question 43

Deminimis applies to private or public employees?

Answer 43

Private only

Question 44

Tips and Gratuities paid directly to an employee. Taxable or not?

Answer 44

Yes. Taxable income but not subject to withholding tax on compensation. So part ng gross income ng employee which subject to regular income tax

Question 45

Filing of Returns for Individuals

Answer 45

1. Annual ITR a. 1700 - for individuals Purely compensation income b. 1701 - self employed pr mixed eraners (kasama Estates and trusts) 2. Quartely ITR (1701Q) - applicable lang sa individuals who earns business or profession income. Deadline: Q1 - May 15 of the current year Q2- Aug 15 Q3 - Nov 15

Question 46

If the individuals earning purely compensation has TWO or more employers, pano ang ITR nya?

Answer 46

Required sila to file ITR on their own

Question 47

Explain Capital Gains Tax ITR:

Answer 47

Real property (1706) - 30 days after sale or dispostion Shares of stock (1707) - 30 days after each transaction

Question 48

De Minimis Benefits Maximum Value for monitized Unused VL credits?

Answer 48

10 days. Note for private only not for government

Question 49

Rule of law that a child citezenship by his or her place of birth

Answer 49

Jus Soli (right of soil)

Question 50

Rule of law that a child's citizenship is determined by its parent citizenship

Answer 50

Jus sanguinis

Question 51

A resident citizen is a citizen whose stay here in the PH is:

Answer 51

At least 183 days

Question 52

Passive income earned outside PH. FWT or Regular tax?

Answer 52

Not subjectbto FWT. But to the Regular Income Tax

Question 53

Interest Income in Gambling Debt Winnings in illegal jueteng is subject to?

Answer 53

Regular or Ordinary Income Tax

Question 54

Interest Income From Notes Payable/ Promissory Note is subject to?

Answer 54

Regular or ordinary income tax