Professional Documents
Culture Documents
Problem 11 4
1. D
2. B
3. C
4. A
5. B
6. D
7. B
8. B
9. B
10. A
Problem 11 5
1. Not in the choices. P25,000 per child (R.A. 9504)
2. Not in the choices. P50,000 basic (R.A. 9504)
3. B
4. C
5. B
5. B
6. A, B & C
7. D
8. D
9. D
10. C
Problem 11 6
A
Income from the Philippines (P10,000 x 12)
Less: Personal exemption single
Income subject to tax in the Philippines
P120,000
50,000
P 70,000
Note: It is assumed that Juan works as OFW for more than 183 days. Income earned by OFW outside the Philippines is
not subject to tax in the Philippines. The income from the sari-sari store in the Philippines is earned from January to
December of the taxable year.
Problem 11 7
C
Gross compensation income Philippines (P250,000 x 12)
Multiplied by special income tax rate
Income tax payable
Problem 11 8
A
Basic personal exemption of couple:
Husband
Wife
Additional exemptions:
4 qualified dependent children (P25,000 x 4)
Maximum amount of personal exemption
Problem 11 9
C
Only P50,000 basic personal exemption because the taxpayers category is single.
P3,000,000
15%
P 450,000
P50,000
50,000
100,000
P200,000
Problem 11 10
B
Basic personal exemption Married
Additional exemption
Total personal exemptions
P50,000
25,000
P75,000
Problem 11 11
C
Basic personal exemption
Additional exemption (a & b only) (P25,000 x 2)
Total personal and additional exemptions
P50,000
50,000
P100,000
Problem 11 12
A
Basic personal exemption married
P 50,000
Nonresident alien engaged in business in the Philippines is allowed of basic personal exemption subject to limit, but
additional exemption is not allowed. Personal exemptions for foreigners are subject to the rule of reciprocity with limit of
whichever is lower.
Problem 11 13
A
P200 per month. For the month of December only.
Problem 11 14
D
No special deduction is allowed. The family income exceeding P250,000 is not allowed for a special deduction for health
insurance.
Problem 11 15
D
Zero. Maria has no income.
Problem 11 16
A
No net tax payable at the end of the taxable year because the senior citizens income does not exceed P60,000 during the
year. The tax withheld from interest income is final tax.
Problem 11 17
1.
Subject to
Tabular tax
P240,000
500,000
60,000
40,000
P840,000
( 50,000)
P790,000
Final tax
P100,000
60,000
P160,000
A
Compensation income
Business income:
Professional income
Total net income before personal exemption
Less: Basic personal exemption single
Net income to ITR tabular tax
P240,000
300,000
P540,000
50,000
P490,000
P100,000
60,000
P160,000
Note: The problem is silent as to whether the taxpayer opted for OSD, hence, OSD should not be deducted from the
business gross income. In order to qualify for OSD, the taxpayer should indicate in his return that he is opting OSD
instead of itemized deductions. (Sec. 34 (L), NIRC)
Alternative Solution of Prob. 11-17: If X opted to use OSD
1.
Subject to
Tabular tax
Final tax
Compensation income
Business and other income:
Professional income (P300,000 + P200,000)
Interest income without
Dividend income without
Total business and other income
Less: OSD (P600,000 x 40%)
Net business income
Total net income before personal exemption
Less: Basic personal exemption single
Net income to ITR tabular tax
P240,000
500,000
60,000
40,000
P600,000
( 240,000)
P360,000
P600,000
( 50,000)
P550,000
P100,000
60,000
P160,000
P240,000
180,000
P420,000
50,000
P370,000
P100,000
60,000
P160,000
Husband
P140,000
P 22,500
20,000
P 2,500
Problem 11 19
D
Compensation as researcher
Less: Personal exemption married
Net taxable compensation income
Tax on P500,000
Tax on excess (P50,000 x 32%)
Total income tax from compensation
Dividend income tax (P120,000 x 10%)
Interest income tax (P500,000 x 7.5%)
Total income tax due
Problem 11 20
D
Capital gains tax on shares of stock (P80,000 x 5%)
Capital gains tax on sale of land (P2,000,000 x 6%)
Total capital gains tax paid
Problem 11 21
B
1.
B
Final tax on copyright royalty (P11,250/90%) x 10%
Final tax on mineral claim royalty (P12,000/80%) x 20%
Final tax on share from trading partnership as dividend (P270,000/90%) x
10%
Total final tax
2.
Wife
P250,000
P 50,000
45,000
P 5,000
P 600,000
50,000
P 550,000
P125,000
16,000
P141,000
12,000
37,500
P190,500
4,000
120,000
P124,000
P 1,250
3,000
30,000
P34,250
Problem 11 22
B
Percent of service
Add: Output VAT
Total
Less: Withholding tax
Percent of net proceeds
Net proceeds
100%
12%
112%
20%
92%
P 92,000
92%
P100,000
P 20,000
P 12,000
Problem 11 23
1. A
Salaries of assistants
Traveling expenses
Light and water, Office
Stationeries and supplies
Office rent
Total expenses before contribution
Add: Contribution subject to limit (P500,000 P176,850) x 10%
Total allowable deductions
2.
3.
C
Professional fees
Less: Allowable deductions
Net income from business
Add: Income from compensation:
Allowance as director of Corporation A
Commissions
Net income before personal and additional exemptions
D
Net income before personal and additional exemptions
Less: Personal and additional exemptions:
Basic widower
Additional exemptions (P25,000 x 3 qualified children)
Net taxable income
P 96,000
11,000
7,890
1,960
60,000
P176,850
32,315
P209,165
P500,000
209,165
P290,835
P25,000
5,000
P320,835
P 50,000
75,000
Tax on P140,000
Tax on excess (P55,835) x 30%
Income tax due
Problem 11 24
1. P164,200
Net worth, December 31, 2009
Less: Net worth, December 31, 2008
Unadjusted Net income for year 2009
Add back: Non-deductible expenses
Contributions (P20,000 + P50,000)
Total
Less: Non-taxable income
Income before contribution
Less: Contributions:
Deductible in full
With limit
Actual, P50,000
Limit, P268,000 x 10% = P26,800
Allowed
Net income before personal exemptions
Less: Personal exemptions (P50,000 +p100,000)
Net taxable income
2.
125,000
P195,835
P 22,500
13,959
P 36,459
P375,000
325,000
P 50,000
150,000
70,000
P270,000
2,000
P268,000
P 20,000
26,800
P140,000
Corrected net taxable income
Less: Reported net income subject to tax
Unreported taxable income
Problem 11 25
1. Itemized deduction
Compensation income
Gross income from business
30,000
P320,835
46,800
P221,200
150,000
P 71,200
P 71,200
24,200
P 47,000
P 20,000
P 400,000
150,000
P 50,000
100,000
150,000
P120,000
P 8,500
10,000
P 18,500
1,000
P 17,500
P 20,000
P 400,000
160,000
P 50,000
100,000
250,000
P270,000
240,000
P260,000
150,000
P110,000
P 8,500
8,000
P 16,500
1,000
P 15,500
P 600,000
P 40,000
15,000
(10,000)
P45,000
35,000
P 50,000
75,000
10,000
P 610,000
125,000
P 485,000
Note: The applicable capital loss carry-over should only be limited to P35,000, because it should not exceed the net
income from operation of such year (Sec. 39D, NIRC).
Problem 11 27
1.
Compensation income (P240,000 + P30,000)
Less: Personal exemption (P50,000 + P25,000)
Net taxable compensation
Business income
Less: Business expenses
Net loss from business
Net taxable income
2.
P270,000
75,000
P195,000
P100,000
120,000
(P20,000)
Tax on P140,000
Tax on excess (P55,000 x 25%)
Income tax due
Less: Tax credit
Income tax still due and payable
Problem 11 28
1.
Salary (P30,000 x 12)
Add: Taxable 13 th month pay (P35,000 P30,000)
Total
Less: SSS contribution
0 P195,000
P22,500
13,750
P36,250
30,000
P 6,250
P360,000
5,000
P365,000
P3,000
Medicare/Philhealth contribution
Taxable compensation income before personal exemption
Less: Personal exemption
Net taxable compensation income
2,000
5,000
P360,000
50,000
P310,000
P50,000
18,000
P68,000
12
P 5,667
P200,000
120,000
P 80,000
Tax on P70,000
Tax on excess (P10,000 x 20%)
Quarterly business income tax first quarter to third quarter
Problem 11 29
1.
Entertainment fee (P1,700,000/85%)
Business income
Philippines
Japan
Net income before personal exemption
Less: Personal exemption - basic
Additional (P25,000 x 4)
Net taxable income
8,500
2,000
P 10,500
P2,000,000
500,000
1,000,000
P3,500,000
P50,000
100,000
150,000
P3,350,000
Note: The OSD is not used because the problem is silent that the taxpayer opted to utilize it. OSD is allowed only if the
taxpayer indicated in his return that he is using it otherwise he is using itemized deduction. If the taxpayer did not
indicate that he is using OSD and at the same time he has no itemized deduction, he cannot deduct expenses from his
gross business income. (Sec. 34 (L), NIRC)
2.
Tax on P500,000
Tax on excess (P2,850,000 x 32%)
Income tax due
3.
Tax credit
Creditable withholding tax on fees
(P2,000,000 x 15%)
Business income tax paid - Philippines
Japan (P1,037,000 x 1,000,000/3,500,000))
P296,286 vs. actual P300,000, lower
4.
P 125,000
912,000
P1,037,000
P300,000
40,000
296,286
P 636,286
P 400,714
2.
Tax on P500,000
Tax on excess (P1,450,000 x 32%)
Income tax due
3.
Tax credit
Creditable withholding tax on fees
(P2,000,000 x 15%)
P2,000,000
500,000
1,000,000
P3,500,000
1,400,000
P2,100,000
P50,000
100,000
150,000
P1,950,000
P 125,000
464,000
P 589,000
P300,000
40,000
166,603
P 506,603
P 82,397
Gross receipts
Percent
Within
2,500,000
71%
Outside
1,000,000
29%
Total
3,500,000
100%
994,000
1,506,000
406,000
594,000
1,400,000
2,100,000
Problem 11 30
Gross professional income (P100,000/90%)
Rent income (P300,000/2)
Gross compensation income
Total
Less: Personal exemptions
Net taxable income
Tax on P250,000
Tax on excess:
Mr. Bravo (P86,111 x 30%)
Mrs. Bravo (P150,000 x 30%)
Income tax due
Withholding tax on compensation
Withholding tax on professional income (P111,111 P100,000)
Income tax still due and payable
Mr. Bravo
P111,111
150,000
225,000
P486,111
150,000
P336,111
Mrs. Bravo
P 50,000
P 50,000
25,833
.
75,833
25,000)
11,111)
39,722
45,000
P 95,000
( 50,000)
.
P 45,000
P
(
(
P
P150,000
300,000
P450,000
50,000
P400,000
Note: No OSD is allowed because the taxpayer did not opt to use it in lieu of itemized deduction. (Sec. 34 (L), NIRC)
Problem 11 31
1. P290,000
Compensation income
Taxable 13 th month pay and bonuses (P40,000 P30,000)
Net business income (P400,000 P300,000)
Capital gains long-term (P60,000 x 50%)
Total
Mr. Bravo
P111,111
150,000
P261,111
104,444
P156,667
225,000
P381,667
150,000
P231,667
Mrs. Bravo
P 22,500
P 50,000
22,917
.
45,417
25,000)
11,111)
9,306
27,000
P 77,000
( 50,000)
.
P 27,000
P
(
(
P
P150,000
P150,000
60,000
P 90,000
300,000
P390,000
50,000
P340,000
P300,000
10,000
100,000
30,000
P440,000
2. (P8,000)
Tax on P250,000
Tax on excess (P40,000 x 30%)
Total income tax due
Less: Income tax paid on:
Compensation
Quarterly business income
Income tax refund
150,000
P290,000
P
P
50,000
12,000
62,000
(P
70,000
8,000)
P 50,000
20,000
Problem 11 32
Gross income from business (P1,000,000 P700,000)
Operating expenses (P250,000 P60,000 P30,000)
Deductible interest expense (P30,000) (P20,000 x 12/32)
Deductible contribution (P300,000 P160,000 P22,500) x 10%
Net business income
Capital asset transactions:
Capital gains short-term (P300,000 x 100%)
Capital losses long-term (P400,000 x 50%)
Lotto winning, USA
Gambling winnings
Gambling losses (excess cannot be deducted from other income)
Gross compensation income (P180,000 + P20,000)
Taxable 13 th month pay (P35,000 P30,000)
Net taxable income before exemption
Less: Personal exemptions (P50,000 + P100,000)
Net taxable income
P 300,000
( 160,000)
( 22,500)
( 11,750)
P 105,750
P 300,000
200,000
P 200,000
250,000
200,000
5,000
P 710,750
150,000
P 560,750
Tax on P500,000
Tax on excess (P60,750 x 32%)
Total income tax due
Less: Withholding tax on compensation
Income tax still due and payable
Problem 11 33
1.
13 th month pay
Other benefits:
Excess of clothing allowance (P4,500 P4,000)
Excess of rice subsidy (P1,600 P1,500) x 12
Total (not exceeding P30,000) nontaxable
Allowable de minimis:
Clothing allowance
Rice subsidy (P1,500 x 12)
Total 13 th month pay and other benefits
2.
3.
100,000
300,000
P 125,000
19,440
P 144,440
20,000
P 124,440
P25,000
P 500
1,200
P4,000
18,000
1,700
P26,700
22,000
P48,700
P300,000
150,000
P150,000
Tax on P140,000
Tax on excess (P10,000 x 25%)
Total income tax due
P22,500
2,500
P25,000
P22,917
P150,000
P1,128,500
100,000
Tax on P500,000
Tax on excess (P678,500 x 32%)
Total income tax due
Less: Tax credits:
WTW from Jan to Nov., 2009
WT on Professional income (P224,000 P200,000)
Income tax still due and payable on December 31, 2009
1,028,500
P1,178,500
P125,000
217,120
P342,120
P22,917
24,000
46,917
P295,203
Problem 11 34
Note: OSD is not applicable unless the taxpayer signified in his ITR that he opted to use OSD in lieu of itemized
deductions. (Sec. 34 (L), NIRC)
Taxpayer is a resident citizen
Philippines
P200,000
U. S. A.
Total
P125,000
P325,000
50,000
75,000
110,000
75,000
100,000
P350,000
100,000
P610,000
50,000
P560,000
60,000
.
P260,000
P125,000
19,200
P144,200
P20,000
3,000
40,000
63,000
P 81,200
*Allowable tax credit paid outside the Philippines is lower than tax limit or actual tax paid. The tax credit is computed as
follows:
P82,738
P40,000
P15,000
12,500
10,000
2,500
P40,000
Note: The actual tax paid outside the Philippines is lower than the computed tax limit; hence, the actual tax paid
without is the allowable tax credit.
b.
P12,500
1,000
P13,500
P200,000
60,000
P260,000
50,000
P210,000
P22,500
17,500
P40,000
23,000
P17,000
P12,500
1,000
P13,500
Note: Nonresident citizens are taxable only on income derived within the Philippines.
Taxpayer is a resident alien. Solution is the same as nonresident citizen.
Taxpayer is a nonresident alien engaged in trade or business in the Philippines.
The taxpayer cannot be regarded as doing business in the Philippines because he has no business income in the
Philippines.
If the taxpayer has stayed more than 180 days in the Philippines, he is regarded as doing business. The computation of
his net income tax payable in the Philippines will be the same as in number 2 under the assumption that his country is
granting the same privilege of reciprocity to nonresident Filipino doing business in that foreign country.
Taxpayer is a nonresident alien not engaged in trade or business in the Philippines.
Nonresident aliens are subject to tax of 25% based on their gross income derived within the Philippines. In our
illustration, let us assume that the source of income has been deducted with 25% tax on the income given to the
taxpayer - that is, the amount shown in the problem is net of 25% final tax.
The income tax of Mr. Ramsay Colorado would be:
Salaries- within (P180,000/75%)
Commissions- within (P57,000/ 75%)
Interest income within (P50,000/ 75%)
Dividend income within (P9,000/ 75%)
Gross income within
Multiplied by tax rate
Income tax for the taxable year within
P240,000
76,000
66,667
12,000
P394,667
25%
P 98,667
Note: In computing the income tax, a fractional part of a peso less than P0.50 shall be disregarded. If the fractional part
is P0.50 or more, its shall be rounded up to P1.00 (R.A. 590).