TAXATION

ATTY. GERRY SEBASTIAN, CPA

ALL RIGHTS RESERVED 2017

AGS COPYRIGHT 2017

!
Philippine Copyright 2017. Atty. Gerry Sebastian, CPA. All rights reserved. No part of this may be

"
reproduced in any form or any means, electronic or mechanical, including photocopying or
xeroxing without written permission from the author. Any copy of this without the express written
consent of the author or his duly authorized representative, either proceeds from an illegitimate
source or is in the possession of one who has no authority to dispose of the same. Unauthorized
users, in addition to the penalties provided by law, shall be punished by the law of karma and
they will not pass the examinations they shall take or be unsuccessful and unhappy in life.

1
PAS

JAC

JOS
ATTY. GERRY SEBASTIAN, CPA

INDIVIDUAL
INCOME TAXPAYERS JET
AGS ALL RIGHTS RESERVED 2017

TYPES OF INCOME
INDIVIDUAL INCOME TAXPAYERS

PI
Passive Income
Income subject to
Final Passive Income Tax

BI
Business Income
Income from Trade,

CG
Business or Profession Capital Gains & Losses
Capital Transactions

CI
Compensation Income unrelated to Income
Income from

EX
Employment Services Exemptions
Transactions which
are Exempt/Excluded

AGS ALL RIGHTS RESERVED 2017 1

(04) Individual Income Taxpayers 2017 - 10 March 2017

TYPES OF INCOME
INDIVIDUAL INCOME TAXPAYERS
R
What is its
I
composition?
Individuals C
NRC
Income Tax Return
Within PH Without PH
Net Sales/Revenue S
Add: Other Taxable Income from Operations
Less: Cost of Sales BI
Gross Income from Business/Profession
Add: Non-Operating Income & Net Capital Gains
Total Gross Income
Less: Allowable Deductions
CI

Less: Exemptions
Taxable Income CG
AGS ALL RIGHTS RESERVED 2017 2

TAX BASE & RATES

INDIVIDUAL INCOME TAXPAYERS

TAX BASE TAX RATES

If Taxable Income is:
Not over P10K
Over P10K but not over P30K
Taxable Income Over P30K but not over P70K
Over P70K but not over P140K
Over P140K but not over P250K
Over P250K but not over P500K
Over P500K
Tax Due is:
5%
P500 + 10% of excess over P10K
P2,500 + 15% of excess over P30K
P8,500 + 20% of excess over P70K
P22,500 + 25% of excess over P140K
P50,000 + 30% of excess over P250K
P125K + 32% of excess over P500K

AGS ALL RIGHTS RESERVED 2017 3

BUSINESS INCOME

Taxpayer had the following INFO for the taxable year:
Gross Revenues at P3,000,000.
Cost of Sales at 60%.
Allowable Deductions, P520,000.
Passive Income subject to final taxes, P100,000.
Net Capital Gains, P70,000.
If the Taxpayer is a Resident Citizen, Single with a basic
personal exemption of P50,000, compute the taxable income
and the income tax thereon.
Tax Table
Over P140K but not over P250K P22,500 + 25% of the excess over P140K
Over P250K but not over P500K P50,000 + 30% of the excess over P250K
Over P500K P125,000 + 32% of the excess over P500K

AGS ALL RIGHTS RESERVED 2017 4

BUSINESS INCOME
A resident citizen is taxable from what sources?


What did you do with the passive income of P100,000?
What did you do with the net capital gains of P70,000?
Is the resident citizen allowed to have exemptions?
What is the taxable income?
What is the income tax?

AGS ALL RIGHTS RESERVED 2017 5

(04) Individual Income Taxpayers 2017 - 10 March 2017

EMPLOYMENT INCOME

Taxpayer is a Senior Manager of Isla Petroleum Gas
Corporation. He had the following data for the taxable year:
Gross Compensation Income, P1,200,000
Fringe Benefits subject to Fringe Benefit Taxes, P300,000
Passive Income subject to Final Taxes, P100,000
If the Taxpayer is a Resident Citizen, Single with a basic
personal exemption of P50,000, compute the taxable income
and the income tax thereon.
Tax Table
Over P140K but not over P250K P22,500 + 25% of the excess over P140K
Over P250K but not over P500K P50,000 + 30% of the excess over P250K
Over P500K P125,000 + 32% of the excess over P500K

AGS ALL RIGHTS RESERVED 2017 6

EMPLOYMENT INCOME
A resident citizen is taxable from what sources?


Is compensation income subject to any deductions?
What did you do with the fringe benefits subject to fringe benefit
taxes?
What did you do with the passive income of P100,000?
Is the resident citizen allowed to have exemptions?
What is the taxable income?
What is the income tax?

AGS ALL RIGHTS RESERVED 2017 7

EMPLOYMENT INCOME
Income Tax Return
Net Sales/Revenue Gross Compensation Income
Add: Other Taxable Income from Operations Less: Exempt/Non-Taxable CI
Less: Cost of Sales No Cost of Sales for Employment
Gross Income from Business/Profession Gross Compensation Income
Add: Non-Operating Income & Net Capital Gains No Non-Operating Income
Total Gross Income Gross Taxable Compensation Income
Less: Allowable Deductions Only PPHHI
Less: Exemptions BPEAE
Taxable Income Taxable Compensation Income

AGS ALL RIGHTS RESERVED 2017 8

PASSIVE INCOME

Taxpayer is an AVP of ICCP Group of Companies. For the taxable
year, he realized Interest income from his bank deposit with Banco de
Oro, Villar Branch, Makati City in the amount of P50,000.
If the Taxpayer is a Resident Citizen, Single with a basic
personal exemption of P50,000, compute the taxable income
and the income tax thereon.
Tax Table
Over P140K but not over P250K P22,500 + 25% of the excess over P140K
Over P250K but not over P500K P50,000 + 30% of the excess over P250K
Over P500K P125,000 + 32% of the excess over P500K

AGS ALL RIGHTS RESERVED 2017 9

(04) Individual Income Taxpayers 2017 - 10 March 2017

PASSIVE INCOME

What did you do with the passive income of P100,000?
What is the taxable income?
What is the income tax?

AGS ALL RIGHTS RESERVED 2017 10

CAPITAL TRANSACTION
Taxpayer had the following INFO for the taxable year:


Gross Revenues at P3,125,000.
Cost of Sales at 60%.
Allowable Deductions, P200,000.
Passive Income subject to Final Taxes, P100,000.
Net Capital Loss, P70,000.
If the Taxpayer is a Resident Citizen, Single with a basic
personal exemption of P50,000, compute the taxable income
and the income tax thereon.

Tax Table
Over P140K but not over P250K P22,500 + 25% of the excess over P140K
Over P250K but not over P500K P50,000 + 30% of the excess over P250K
Over P500K P125,000 + 32% of the excess over P500K

11

AGS ALL RIGHTS RESERVED 2017

CAPITAL TRANSACTION

What did you do with the capital loss of P70,000?
What is the taxable income?
What is the income tax?

AGS ALL RIGHTS RESERVED 2017 12

MIXED INCOME
Taxpayer had the following INFO for the taxable year:

For his Water & Laundry Business, (1) Gross Revenues at

P3,000,000; (2) Cost of Sales, 60%; (3) Allowable Deductions,
P520,000; (4) Passive Income, P100,000; and (5) Net Capital Gains,
P100,000.
For his position as AVP for Amdatex: (1) Gross Compensation
Income, P1,200,000; (2) Fringe Benefits subject to Fringe Benefits
Tax, P300,000.
If the Taxpayer is a Resident Citizen, Single with a basic
personal exemption of P50,000, compute the taxable income
and the income tax thereon.
Tax Table
Over P140K but not over P250K P22,500 + 25% of the excess over P140K

13
Over P250K but not over P500K P50,000 + 30% of the excess over P250K
Over P500K P125,000 + 32% of the excess over P500K

AGS ALL RIGHTS RESERVED 2017

(04) Individual Income Taxpayers 2017 - 10 March 2017

MIXED INCOME

Where does the Individual Income Taxpayer start computing his
income tax, Business Income or Employment Income?
Where is the exemption deducted?
If it is deducted from the employment income and there is something
left, can it be deducted from the business income?
Do we have separate computation for the taxpayer for different
sources of income?

AGS ALL RIGHTS RESERVED 2017 14

TAXATION
ATTY. GERRY SEBASTIAN, CPA

ALL RIGHTS RESERVED 2017

(04) Individual Income Taxpayers 2017 - 10 March 2017