Blt 134 chapter 2
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Blt 134 chapter 2 Presentation Transcript

  • 1. TAXATION OF INDIVIDUALSChapter 2
  • 2. CLASSIFICATION OF INDIVIDUALS1. Citizen a. Resident b. Non-Resident2. Alien a. Resident b. Non-Resident 1. Engaged in trade or business in the Philippines 2. Not engaged in trade or business in the Philippines 3. Employed by A. Regional or area headquarters and regional operating headquarters of multinational entities in the Philippines that are engaged in international trade with affiliates and subsidiary branch offices in the Asia-Pacific region B. Offshore banking units C. Petroleum contractors and sub-contractorsend
  • 3. CITIZENThe following shall be considered citizens of the Philippines:  Those who are citizens of the Philippines at the time of the adoption of the February 2, 1987 Constitution;  Those whose fates or mothers are citizens of the Philippines  Those born before January 17, 1972, the date of the doption of the 1973 Constitution, of Filipino mothes, who elect Philippine citizenship upon reaching the age of majority; and  Those who are naturalized in accordance with law. end
  • 4. CITIZEN (CONT’D)A. Resident Citizen is a Filipino citizen who permanently resides in the Philippines.B. Non-Resident Citizen means:  A citizen of the Philippines who establishes to the satisfaction of the Commissioner 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 taxble year to reside abroad, either as an immigrant or for employment on a permanent basis
  • 5. CITIZEN (CONT’D) A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year. “Most of the time” is interpreted to mean presence abroad for at least 183 days during the taxable year.
  • 6. CITIZEN (CONT’D) A citizen who has been previously considered as non-resident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a non-resident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines. The taxpayer shall submit proof to the Commissioner toshow his intention of leaving the Philippines to reside permenently abroad or return to and reside in the Philippines, as the case may be.End
  • 7. ALIEN1. Resident Alien – means an individual whose residence is within the Philippines and who is not a citizen thereof. He is one who is actually present in the Philippines and who is not a mere transient or sojourner.2. Non-resident Alien (NRA) – means an individual whose residence is not within the Philippines and who is not a citizen thereof.
  • 8. ALIEN (CONT’D) a. NRA engaged in trade or business (NRA-ETB)- means that the alien is carrying on a business in the Philippines. It connotes more than a single act or isolated transactions. It involves some continuity of action. The term trade, business or profession shall not include performance of services by the taxpayer as an employee but it includes the performance of the functions of a public office. A non- resident alient who has stayed in the Philippines for more than 180 days during any calendar year shall be deemed doing business in the Philippines. b. NRA not doing business in the Philippines (NRA-NETB) is an alien who stayed in the Philippines 180 days or less. end
  • 9. OFFSHORE BANKING UNIT (OBU)A branch, subsidiary or affiliate of a foreign banking corporation which is duly authorized by the BSP to transact offshore banking business in the Philippines in accordance with the provisions of Presidential Decree No. 1034 as implemnted by Central Bank (now BSP) circular No. 1389, as amended.end
  • 10. TERMS TO CONSIDER IN THE RECOGNITION OF INCOME OF CITIZENS ANDALIENSFOREIGN CURRENCY DEPOSIT SYSTEM(FCDS) shall refer to the conduct of banking transactions whereby any person, whether natural or juridical, may deposit foreign currencies forming part of the Philippine intenatinal reserves, in accordance with theprovisions of RA No. 6426 entitled “An Act Instituting a Foreign Currency Deposit System in the Philippines, and for Other Purposes”.FOREIGN CURRENCY DEPOSIT (FCD) UNIT shall refer to the unit of a local bank or a local branch of a foreign bank authorized by the BSP to engage in foreign-denominated transactions, pursuant to the provisions of RA No. 6426 as amended.
  • 11. TERMS TO CONSIDER IN THE RECOGNITION OF INCOME OF CITIZENS ANDALIENS (CONT’D)LOCAL BANK shall refer to a thrift bank or a commercial bank organized under the laws of the Republic of the Philippines.LOCAL BRANCH OF A FOREIGN BANK shall refer to a branch of a foreign bank doing business in the Philippines, pursuant to the provisions of RA No. 337, as amended.DEPOSIT IN OBU – shall mean funds in foreign currencies which are accepted and held by an OBU or Foreign currency Deposit Unit in the regular course of business, with the obligation to return an equivalent amount to the owner thereof, with or without interest.
  • 12. MIND BOGGLERS – RESIDENT ALIEN? ANSWER DESCRIPTION 1. A British computer expert was hired by a Philipppine corporation to assist in its computer system installation for which he had to stay in the Philippines for 6 months. 2. A British cultural performer was engaged to perform in the Philippines for two weeks after which he returned to his country. 3. An alien owns shares of stock in the Philippines. Is he considered NRA-ETB in the Philippines? 4. An alien temporarily serves as executive manager of an airline in Manila. Is he considered NRA-ETB in the Philippines?
  • 13. MIND BOGGLERS – RESIDENT ALIEN? (CONT’D) ANSWER DESCRIPTION 5. A resident alien left the Philippines and abandoned his residency thereof without any intention of returning. May he still be considered a resident alien? 6. A resident alien left the Philippines with a re-entry permit. Is he still a resident alient? 7. A non-resident citizen went to Manila under the Balikbayan Program. Does his return to Manila interrupt his residence abroad?
  • 14. SOURCES OF INCOMESource of income is not a place but the property, activity or service that produced the income. In the case ofincome derived from labor, it is the place where the labor is performed; in the case of income derived from the use of capital, it is the place where capital is employed; and in the case of profits from the sale or exchange of capital assets, it is the place where the sale or transaction occurs.
  • 15. RULES TO BE CONSIDERED WHETHER THE INCOME OF THEINDIVIDUAL IS TAXABLEIt is important to know the source of income of an individual taxpayer – whether from within the Philippines or without – because not all individual taxpayers are taxed on all their income. The following rules apply:1. Resident citizens are taxable on all income derived from sources within and without.2. Non-resident citizens and alien individuals – resident and non- resident – are taxable on income derived from sources within the Philippines. An oveseas contract worker is taxable only on his income from sources within.
  • 16. RULES TO BE CONSIDERED WHETHER THE INCOME OF THE INDIVIDUAL ISTAXABLE Source of Income Individual Within the Phil. Without the Phil.1. Resident Citizen √ √2. Non-Resident Citizen √3. Resident Alien √4. Non-Resident Alien √
  • 17. CATEGORIES OF INCOME AND TAX RATES Categories of Income Tax RateCompensation income. All remuneration for services Taxed at graduatedperformed by an employee for his employerr under an rates from 5% to 32%employer-employee relationship, unless specifically (revised Section 24(A)excluded by the Code. per RA 9504)Business Income – it arises from self-employment of Taxed at graduatedpractice of profession. This shall not include income rates from 5% to 32%from performance of services by the taxpayer as an (revised Section 24(A)employer. per RA 9504)
  • 18. TAX TABLE FOR INDIVIDUALS If T a x a b le In c o m e is : T a x D u e is : If T a x a b le In c o m e is : T a x D u e is :N o t o v e r P 1 0 ,0 0 0 5%O v e r P 1 0 ,0 0 0 b u t n o t P 5 0 0 + 1 0 % o f th e O v e r P 1 4 0 ,0 0 0 b u t n o t P 2 2 ,5 0 0 + 2 5 % o f th eo v e r P 3 0 ,0 0 0 e x c e s s o v e r P 1 0 ,0 0 0 o v e r P 2 5 0 ,0 0 0 e x c e s s o v e r P 1 4 0 ,0 0 0O v e r P 3 0 ,0 0 0 b u t n o t P 2 ,5 0 0 + 1 5 % o f th e O v e r P 2 5 0 ,0 0 0 b u t n o t P 5 0 ,0 0 0 + 3 0 % o f th eo v e r P 7 0 ,0 0 0 e x c e s s o v e r P 3 0 ,0 0 0 o v e r P 5 0 0 ,0 0 0 e x c e s s o v e r P 2 5 0 ,0 0 0O v e r P 7 0 ,0 0 0 b u t n o t P 8 ,5 0 0 + 2 0 % o f th e P 1 2 5 ,0 0 0 + 3 4 % o f th e O v e r 5 0 0 ,0 0 0o v e r P 1 4 0 ,0 0 0 e x c e s s o v e r P 7 0 ,0 0 0 e x c e s s o v e r P 5 0 0 ,0 0 0 end
  • 19. ALLOWABLE DEDUCTIONSAllowable deductions are items or amounts, which the law allows to be deducted from gross income in order to arrive at the taxable income.1. From compensation income a. Basic personal and/or additional exemptions; and b. Premium payments on health and/or hospitalization insurance.
  • 20. ALLOWABLE DEDUCTIONS (CONT’D)2. From business income a. Basic personal and/or additional exemptions; and b. Premium payments on health and/or hospitalization insurance. c. Itemized deductions under the Tax Code (Items A-J, Section 34); and d. Optional standard deduction. In place of the itemized deductins, the individual taxpayer may opt for the optional standard deduction (OSD) not to exceed 40% (before RA 9504, OSD was 10% only) of his gross sales or gross receipts, as the case may be.
  • 21. PERSONAL EXEMPTIONSPersonal Exemptions are arbitrary amounts allowed as deductions from gross income of the individual taxpayer from compensation, business (self- employment) or practice of profession. Personal exemptions in a sense represent the pesonal, living or family expenses of the taxpayer.Kinds of Personal Exemptions1. Basic personal exemption2. Additional exemption. This exemption is further alloed to the taxpayer by reason of his qualified dependent children.
  • 22. PERSONAL EXEMPTIONS (CONT’D) Republic Act 9504, which amended Republic Act 8424 (NIRC) was signed into law on June 17, 2008. The law allows for a basic personal exemption of FIFTY THOUSAND PESOS (P50,000) for each individual taxpayer regadless of status. In the case of married individuals where only one of the spouses is derivng gross income, only such spouse shall be allowed the personal exemption.
  • 23. ADDITIONAL EXEMPTIONTWENTY-FIVE THOUSAND PESOS (P25,000) shall be allowed an additional exemption for each dependent child not exceeding four (4) children. The additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals.A dependent means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than 21 years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self- support because of meantl or physical defect.In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children. The total amount of additional exemptions that may be claimed by both shall not exceed the maximum four (4) children.The husband shall be deemed the proper claimant of the additional exemption unless he waives his right in favor of his wife. But if the spouse of the employee is unemployed or is a non-resident citizen deriving income from foreign sources, the employed spouse within the Philippines shall be automaticaly entitled to claim the additional exemptions.In the case of married individuals where only one of the spouses is derivng gross income, only such spouse shall be allowed the basic and additional exemptions.
  • 24. RULES ON CHANGE OF STATUS1. If the employee should have additional dependents during the taxable year, he may claim the corresponding additional exemption in full for such year.2. If the taxpayer dies during the taxable year, his death shall not affect the amount of personal and additional exemptions his estate may claim. It is as if he died at the end of such year.3. If the spouse dies or any of the dependent dies or if any such dependent marries, becomes twenty-one years of age, or gets gainfully employed during the taxable year, the taxpayer may still claim the same exemtpion as if the change occurred at the end of the year.
  • 25. HEAD OF THE FAMILY- Is an individual who actually supports and maintains in one household one or more individuals, who are closely connected with him by blood relationship, relationship by mariage, or by adoption, and whose right to exercise family control and provide for these dependent individuals is based upon some moral or legal obligation.- Head of family means an unmarried or legally searated man or woman with:1. one or both parents, or2. One or more brothers or sisters whether of the whole or half blood, or3. One or more legitimate or illegitimate, recognized natural or legally adopted childrenWho meet the following qualifications:
  • 26. HEAD OF THE FAMILY (CONT’D) Parent/s Brother/s or Child/ ren Sister/sa. Living with the taxpayer √ √ √b. Depending upon the taxpayer √ √ √ for chief supportc. Not more than 21 years old √ √d. Unmarried √ √e. Not gainfully employed √ √g. Mentally or physically defective √ √ regardless of age
  • 27. HEAD OF THE FAMILY (CONT’D)Living with the person giving support does not necessarily mean actual and physical dwelling together at all times and under all circumstances. Thus, the the additional exemption applies even if a child or other dependent is away at school or on a visit. If, however, without necessity the dependent continuously makes his home elsewhere, his benefactor is not the head of a family irrespective of the question of support.Chief support means principal or main support (such as paying for the rent and spending for the food of the dependent). It is more than one half (50%) of the support required by the dependent.
  • 28. BASIC AND PERSONAL EXEMPTION RATE BEFORE JULY 6, 2008 CIVIL STATUS AMOUNTFor single individuals or married individual P 20,000 judicialy decreed as legally separated with no qualified dependentFor head of the family 25,000For each married individuals 32,000Additional exemption for each dependent child 8,000 not exceeding four (4) children
  • 29. TRANSITORY BASIC PERSONAL AND ADDITIONAL EXEMPTIONS The implementing Revenue Regulations 10-2008 was made effective on July 6, 2008 so the basic personal and additional exemptions for calendar year 2008 shall be as follows: Civil status Jan. 1 to July 5, July 6 to Dec. 2008 2008 31, 2008 TotalBasic Personal Exemption Single P 10,000 P 25,000 P 35,000 Head of the Family 12,500 25,000 37,500 Married 16,000 25,000 41,000Additional Exemption for Every Qualified Dependent Child 4,000 12,500 16,500
  • 30. INDIVIDUAL TAXPAYERS ALLOWED PERSONAL EXEMPTIONS1. Citizens2. Resident Alien3. Non-Resident Alien4. Estate and trusts, which are, for purposes of personal exemptions, treated as single individual.
  • 31. PREMIUM PAYMENT ON HEALTH AND/OR HOSPITALIZATION INSURANCEThe following conditions must be met:1. The insurance shall be taken by the individual taxpayer himself for his family;2. The amount being claimed shall not exceed P2,400 a year or P200 a month per family;3. The family has gross income of P250,000 or less for the taxable year.Total family income includes primary income and other income from sources received by all members of the nuclear family, ie. Father, mother, unmarried children living together as one household, or a single parent with children. A single person living alone is considered as a nuclear family. For married taxpayers, only the spouse entitled to claim for additional exemption is allowed this deduction.
  • 32. TAXABLE INCOME AND TAX DUETaxable Income is defined as the pertinent items of gross income less the deductions and/or personal and additional exemptions, if any, authorized for such types of income, by the Tax Code or other special laws. The taxable income is the amount or tax base upon which tax rate is applied to arrive at the tax due.1. Net Compensation Income – the compensation income arrived at after subtracting from gross compensation income derived by resident citizens or resident aliens, basic personal and additional exemptions; and premium payments, if any, on health and hospitalization insurance under certain conditions.
  • 33. TAXABLE INCOME AND TAX DUE (CONT’D)For resident citizen and resident alien earning purely compensation income:Gross compensation income xxxLess: Exemptions and Premium Payment Basic Personal Exemption xxx Add: Additional Exemptions xxx Total Exemptions xxx Add: Premium Paid on Health and/or Hospitalization Ins. xxxTotal Exemptions and Premium Payment xxxNet Compensation Income (Taxable Compensation Income) xxxTax Due (Sec. 24(A)) xxx
  • 34. TAXABLE INCOME AND TAX DUE (CONT’D)2. Gross compensation income. The gross compensation income derived by aliens including Filipinos employed by regional and area headquarters and regional operating headquarters of multinational companies, by offshore banking units, or by foreign petroleum service contractors and sub- contractors. For non-resident alien employed by such firms earning purely compensation income: Gross compensation income xxx Multiply by tax rate 15% Tax Due xxx
  • 35. TAXABLE INCOME AND TAX DUE (CONT’D)3. Net Income. The income arrived at after subtractng from the gross income (from business or professional including compensation income) of a citizen, resident alien, and non-resident alien if the latter is engaged in trade or business in the Philippines the deductions of the taxpayer, including the basic personal and additional exemptions, if any.
  • 36. TAXABLE INCOME AND TAX DUE (CONT’D)For citizen, resident alien and non-resident alien engaged in trade or business in the Philippines:a. Earning purely business or professional incomeGross Business income xxxLess: Allowable Deductions Itemized Deductions or 40% OSD xxx Basic Personal Exemption xxx Add: Additional Exemption xxx Total Exemptions xxx Premium Paid on Health and/or Hospitalization Insurance xxx Total Allowable Deductions xxx Net Income Subject to Tax xxxTax Due (Sec. 24(A)) xxx
  • 37. TAXABLE INCOME AND TAX DUE (CONT’D)b. Earning both business/professional and compensation incomeGross Business income xxxGross Compensation Income xxxTotal Gross Income xxxLess: Allowable Deductions Itemized Deductions or 40% OSD xxx Basic Personal Exemption xxx Add: Additional Exemption xxx Total Exemptions xxx Premium Paid on Health and/or Hospitalization Insurance xxx Total Allowable Deductions xxxNet Income Subject to Tax xxxTax Due (Sec. 24(A)) xxx
  • 38. TAXABLE INCOME AND TAX DUE (CONT’D)4. Entire or Gross Income. The entire or gross income (from business or profession including compensation income) without any deduction with respect to non-resident aliens not engaged in trade or business in the Philippines. For non-resident alien not engaged in trade or business (NRANETB) in the Philippines earning business or professional income, compensation income or combination of both: Gross income xxx Multiply by final tax rate 25% Tax Due xxx
  • 39. TAXABLE INCOME AND TAX DUE (CONT’D)NOTES IN THE COMPUTATION1. For married individuals, the husband and wife shall compute separately the tax due on their respective taxable income. If any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of the spouses, the same shall be divided equally btween the spouses for the purpose of determining their respective taxable income.2. In computing for the taxable income, fraction of a pesos is disregarded. For the tax due, a fraction amounting to fifty centavos or more is rounded off to a pesos while a fractiion amounting to less than fifty centavos is disregarded.3. Creditable withholding tax withheld from income and/or tax credit is deducted from the tax due; penalties, if any, shall be added to the tax due.
  • 40. ILLUSTRATIVE PROBLEM 1Liza, a single taxpayer earned a basic compensation income of P224,010.60 in year 2009. Compute her tax due as per records for year 2009 her employer had already withheld and remitted a tax in the amount of P15,725.85.Guide in computation:Step 1. Identify the taxpaying party or “entity” to which the tax computation formula applies.Taxpaying party : Liza (natural person)Civil Status : Single
  • 41. ILLUSTRATIVE PROBLEM 1 (CONT’D)Step 2. Determine the taxpayer’s “gross income”. GROSS INCOME: P224,010.60Step 3. Determine the expenses and certain other items that can be “deducted” in computing the taxpayer’s “taxable income”. PERSONAL EXEMPTION: P50,000.00 OTHER DEDUCCTIONS? HEALTH/HOSPITALIZATION INSURANCE: 2,400.00 TOTAL EXEMPTIONS P52,400.00TAXABLE INCOMEGROSS INCOME P224,010.60LESS: TOTAL EXEMPTIONS 52,400.00TAXABLE INCOME P171,610.60NOTE: APPLY THE RULES P171,611.00
  • 42. ILLUSTRATIVE PROBLEM 1 (CONT’D)Step 4. Apply appropriate “tax rate” to the taxpayer’s taxable income to find the “tax due”.FOR INDIVIDUAL TAXPAYER:USE THE NIRC(Sec. 24(A))TAXABLE INCOME P171,611.00TAX DUE FIRST P140,000 P22,500.00 EXCESS OVER P140,000 P31,611 X 25% 7,902.75 TOTAL TAX DUE P30,402.75 APPLY THE RULE (ADD P1) P30,403.00 LESS: TAX WITHHELD 15,725.85 AMOUNT STILL DUE P14,677.15
  • 43. ILLUSTRATIVE PROBLEM 1 (CONT’D)Step 5. Subtract any applicable “tax credits/payments” from the taxpayer’s tax due in finding the “tax payable”.TAX DUE P31,003.00LESS: TAX WITHHELD 15,725.85AMOUNT STILL PAYABLE P15,276.65Step 6. Increase the tax by “penalties and interests” to obtain the “total amount payable”. NOTE: NOT APPLICABLE IF THE AMOUNT DUE IS TO BE PAID ON OR BEFORE APRIL 15 OR JULY 15.
  • 44. ILLUSTRATIVE PROBLEM 1 (CONT’D)GROSS INCOME P224,010.60LESS: TOTAL EXEMPTIONS 52,400.00TAXABLE INCOME P174,010.60NOTE: APPLY THE RULES P174,010.00TAX DUEFIRST P140,000 P22,500.00EXCESS OVER P140,000 P34,010 X 25% 8,502.50TOTAL TAX DUE P31,002.50APPLY THE RULE (ADD P1) P31,003.00LESS: TAX WITHHELD 15,725.85AMOUNT STILL DUE P15,276.65
  • 45. ILLUSTRATIVE PROBLEM 2 (ACTIVITY)Ronaldo, married, earning a pure compensation income with three (3) qualified dependent has a gross income of P275,000. His wife is a full-time housewife. During the year, his employer withheld from his income the amount of P14,725.50. Compute for the tax still payable.
  • 46. ILLUSTRATIVE PROBLEM 2 (SOLUTION)Taxpayer : Ronaldo (individual, married)Applicable Tax: NIRC Sec. 24(A)Gross Income: P275,000Less: Personal/Additional Exemptions Personal P50,000 Basic 75,000 125,000Taxable Income P150,000Tax Due: First P140,000 P22,500.00 Excess P10,000 x 25% 2,500.00 Tax Due P25,000.00 Less: Tax withheld 14,725.50 Amount of Tax Payable P 10,274.50
  • 47. ILLUSTRATIVE PROBLEM 3 (ACTIVITY)Sam, a non-resident alien, employed by China Bank, an OBU has a gross compensation of P750,000. How much is his tax payable assuming his employer withheld from him a tax amounting to P90,000?Tax ComputationTaxpayer : Sam (employed by OBU)Applicable Tax Rate: NIRC for NRANETB (15%)Gross Compensation Income P750,000X Tax Rate 15%Tax Due P112,500Less: Tax withheld 90,000Tax still due P 22,500
  • 48. ILLUSTRATIVE PROBLEM 4 (ACTIVITY)Melvin, a resident alien, employed by China Bank, an OBU has a gross compensation of P750,000. He is married with three qualified dependents. How much is his tax payable assuming his employer withheld from him a tax amounting to P90,000?
  • 49. ILLUSTRATIVE PROBLEM 4 (SOLUTION)Tax ComputationTaxpayer : Melvin (employed by OBU)Applicable Tax Rate: NIRC for Resident AlienGross Compensation Income P750,000Less: Personal and Basic Exemptions Personal P 50,000 Additional 75,000 125,000Taxable Income P625,000 125,000 40,000Tax Due P165,000Less: Tax Withheld 90,000Amount Still Payable P 75,000
  • 50. ILLUSTRATIVE PROBLEM 5 (ACTIVITY)Edward, a non-resident alien not engaged in trade or business in the Philippines earns an income of P325,000. How much is his taxable income based from his income?Taxpayer : Edward (NRANETB)Applicable Tax: 25%Computation of TaxGross Income P325,000X rate of tax 25%Tax Due P 81,250
  • 51. ILLUSTRATIVE PROBLEM 6 (ACTIVITY)Marlon, a businessman, has a gross income of P782,925 with allowable itemized deductions of P485,920. For the last three quarters of the year, he remitted tax in the amount of P20,000. Compute his tax due assuming there are four qualified dependent children.Taxpayer : Individual (self-employed)Applicable Tax: NIRC Sec. 24 (A)Tax ComputationGross income P782,925.00Less: Allowable Dedeductions Itemized Deductions P485,920.00 Personal and Basic 150,000.00Total Deductions 635,920.00Taxable Income P 147,005.00
  • 52. ILLUSTRATIVE PROBLEM 6 (ACTIVITY)Taxable Income P 147,005.00Tax DueFor the 1st P140,000 P 22,500.00Excess of P7,005 x 25% 1,751.25Total Tax Due P 24,251.25APPLY THE RULE P 24,251.00Less: Tax remitted 20,000.00Amount of tax payable P 4,251.00
  • 53. OPTIONAL STANDARD DEDUCTIONSTax ComputationGross income P782,925.00Less: Allowable Dedeductions OSD (40%) P 313,170.00 Personal and Basic 150,000.00Total Deductions 463,170.00Taxable Income P319,755.00Tax Due: First P250,000 P50,000.00 Excess of P69,755 x 30% 22,321.60 Tax Due P72,321.60 APPLY THE RULE P72,322.00 Less: Tax Paid 20,000.00AMOUNT OF TAX STILL DUE P52,322.00
  • 54. CATEGORIES OF INCOME AND TAX RATES Categories of Income Tax Rate3. PASSIVE INCOME – these are subject to separate and final 5% to 25%tax. These are taxed at fixed rates ranging from 5% to 25%.Examples of passive income are interests, royalties, prizes,winnings and dividends.FINAL TAX imposed on income or gain shall no longer beincluded as taxable income subject to the graduated rates.The final tax is imposed witout any deduction and is withheldat source. The amount received by passive income earner isnet of the final tax. The final tax on passive income is remittedby the payor who serves as the withholding agent to the BIR.
  • 55. CATEGORIES OF INCOME AND TAX RATES4. CAPITAL GAINS FROM SALE OF SHARES OF STOCK, NOT TRADED THROUGH THE LOCAL STOCK EXCHANGE. Taxed at 5% and 10% final taxes on a per transaction basis. On the Net Capital Gains: Not over P100,000 5% Amount in Excess of P100,000 10%Illustration: For resident citizen Selling Price P160,000 Less: Cost 40,000 Capital Gains P120,000 On P100,000 x 5% P 5,000 On P20,000 x 10% 2,000 Capital Gains Tax P 7,000
  • 56. CATEGORIES OF INCOME AND TAX RATES5. Capital gains from sale of real propety. Taxed at 6% final tax on the gross selling price or current fair market value at the time of sale, whichever is higher. Selling Price P2,500,000 Tax Rate 6% Final Tax P 150,000
  • 57. 6. Fringe Benefits. Means any good, service, or other benefit furnished or granted by an employer in cash or in kind in addition to basic salaries, to an individual employee (except rank-and-file employee) under an employer- employee relationship. Tax Rate: 32% of gross-up monetary value Illustration: Monetary Value of the FB P198,000 Divide by 68% Grossed-up Monetary Value P291,176 Mulltiply by 32% Fringe Benefit Tax P 96,088
  • 58. DECLARATION OF INCOME TAX FOR INDIVIDUALSBusiness income and professionals Installment Date First April 15 Second August 15 Third November 15 Fourth April 15
  • 59. INDIVIDUALS EXEMPT FROM INCOME TAXA. Non-resident citizen who: 1. physically presence abroad and has intention to reside in other country 2. leaves the Phils. during the taxable year to reside abroad as immigrant or employment on permanent basis 3. employed abroad and derives income therein and requires him to be there most of the time. 4. a non-resident citizen who arrives during the taxable year, however, will reside permanently in the Phils. will still be considered non-resident citizen on that particular taxable year with respect to his income derived from abroad.
  • 60. INDIVIDUALS EXEMPT FROM INCOME TAXB. Overseas Contract Worker, Including Overseas Seaman Exempted from income derived from abroad, however, for income sourced from the Philippines, it is already taxable.B. Barangay Micro Business Enterprises (RA 9178 or BMBE Law)C. Expanded Senior Citizen Act of 2010 (RA 9504)
  • 61. TRUE OR FALSE (PAGE 2-29) 1 TRUE 11 TRUE 21 TRUE 2 TRUE 12 FALSE 22 TRUE 3 TRUE 13 TRUE 23 TRUE 4 FALSE 14 FALSE 24 FALSE 5 TRUE 15 FALSE 25 FALSE 6 TRUE 16 TRUE 26 TRUE 7 TRUE 17 FALSE 27 FALSE 8 FALSE 18 FALSE 28 TRUE 9 FALSE 19 TRUE 29 FALSE 10 TRUE 20 TRUE 30 FALSE
  • 62. TRUE OR FALSE PAGE 2-31 1 TRUE 11 FALSE 21 TRUE 2 TRUE 12 TRUE 22 TRUE 3 TRUE 13 FALSE 23 TRUE 4 TRUE 14 TRUE 24 TRUE 5 TRUE 15 FALSE 25 FALSE 6 TRUE 16 TRUE 7 TRUE 17 TRUE 8 TRUE 18 FALSE 9 FALSE 19 TRUE 10 TRUE 20 TRUE
  • 63. MULTIPLE CHOICE - THEORY (PAGE 2-33) 1 B 11 C 21 A 31 A 2 C 12 B 22 D 32 C 3 A 13 D 23 D 33 B 4 B 14 C 24 C 34 A 5 D 15 C 25 D 6 D 16 D 26 A 7 B 17 D 27 C 8 A 18 C 28 D 9 A 19 D 29 B10 A 20 D 30 D
  • 64. MULTIPLE CHOICE - CLASSIFICATION OF INDIVIDUAL TAXPAYERS(PAGE 2-40) 1 B 6 A OR B 2 C 7 A 3 B 8 D 4 B 9 D 5 B 10 C
  • 65. BASIC PERSONAL AND ADDITIONAL EXEMPTIONS (2-41) BASIC ADDITIONAL BASIC ADDITIONAL 1 50,000 50,000 14 50,000 - 2 50,000 - 15 50,000 - 3 - - 16 50,000 25,000 4 50,000 - 17 50,000 75,000 5 50,000 - 18 50,000 - 6 50,000 75,000 19 50,000 50,000 7 50,000 25,000 20 50,000 100,000 8 50,000 25,000 21 50,000 - 9 50,000 25,000 22 50,000 -10 50,000 25,000 23 50,000 -11 50,000 - 24 50,000 50,00012 50,000 75,000 25 50,000 -13 50,000 100,000
  • 66. ESSAY (PAGE 2-44)1. The husband should be the one to take the health insurance for his family. For married taxpayers, the spouse entitled to claim for additional exemptions, who is generally the husband, is allowed the health and/or hospitalization premium payment deduction. Assuming that it is the husband who take the health insurance, he is still not qualified as because the family gross income which is P780,000 (wife P180,000, husband P600,000) far exceeded the P250,000 limit.2. Sela’s annual gross income of P72,000 qualifies her for the premium payment deduction she being the sole bread winner. But she can only deduct the maximum amount of P2,400.00.3. The hospitalization insurance was not intended for Jamie’s family, hence it cannot be deducted. Assuming the amount is intended for her family, she could only claim for P2,200 premium payment.
  • 67. PASSIVE INCOME (PAGE 2-45) TAX RATE TAX DUE TAX RATE TAX DUE1 20% 30,000 6 Sec 24(A) 5% 4002 Exempt 7 20% 1M3 Exempt 8 10% 2,0004 10% 20,000 9 20% 15,0005 20% 10,000 10 Exempt
  • 68. PROBLEMS (PAGE 2-46) 1 50,000 11 91,053 21 37,500 31 50,000 2 25,000 12 426,250 22 1,132,500 32 2,226,013 3 375,000 13 75,000 23 327,400 33 106,445 4 50,000 14 148,000 24 8,800 34 - 5 75,000 15 24,500 25 2,500,000 35 556,503 6 525,000 16 - 26 720,000 7 87,500 17 - 27 150,000 8 133,000 18 - 28 - 9 167,500 19 450,000 29 1,630,00010 91,053 20 67,500 30 486,600
  • 69. COMPREHENSIVE PROBLEM (PAGE 2-49) 1 100,000 6 3,175,000 2 - 7 365,000 3 - 8 981,000 4 20,000 9 415,000 5 84,500
  • 70. MC - THEORY (PAGE 2-50) 1 C 2 B 3 C 4 B
  • 71. THANK YOU VERY MUCH, MERRY CHRISTMAS