Ch2 illustration

Question 1

British computer expert was hired by a Philippine corporation to assist in its computer system installation for which he had to stay in the Philippines ‘for 6 months. Is he a resident alien?

Answer 1

YES. One who comes to the Philippines for a definite purpose which in its nature would require an extended stay and to that end makes his home temporarily in the Philippines, becomes a resident, though it may be his intention at all times to return to his domicile (place of habitual or permanent residence) abroad when the purpose for which he came has been accomplished.

Question 2

2. A British cultural performer was engaged to perform in the Philippines for two weeks, after which he returned to his country. Is he a resident alien?

Answer 2

NO. One who comes to the Philippines for a definite purpose, which in its nature may be promptly accomplished, is a transient

Question 3

An alien owns shares of stock in the Philippines. Is he considered as engaged in business or trade in the Philippines?

Answer 3

NO. mere ownership of shares of stock in the Philippines is not enough to constitute as engaging in trade or business in the Philippines

Question 4

An alien temporarily serves as executive manager of an airline in Manila. considered engaged in trade or business in the Philippines?

Answer 4

Yes, because he is performing the functions of a public offi

Question 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?

Answer 5

NO. because he has no intention at all to return to the Philippines.

Question 6

A resident alien left the Philippines with a re-entry permit. Is he still a resident
alien?

Answer 6

Yes, his re-entry permit proves that he has not abandoned his residence in the Philippines

Question 7

A non-resident citizen went to Manila under the Balikbayan Program. Does his return to Manila interrupt his residence abroad?

Answer 7

NO. his trip to Manila did not interrupt his residence abroad. The phrase “uninterrupted period” should not be interpreted literally. His trip to Manila did not affect the continuity of his residence abroad.

Question 8

Individuals earning purely compensation income shall be taxed based on the graduated income tax rates (from 20% to 35% effective Jan. 1, 2018 to Dec. 31, 2022; from 15% to 35% effective Jan. 1, 2023 onwards) prescribed under Sec. 24(A) of the Tax Code.

Answer 8

Compensation Income.

Question 9

arises from self-employment or practice of profession. This shall not include income from performance of services by the taxpayer as an employee.

Answer 9

Business Income

Question 10

Individuals earning income purely from self-employment and/or` practice of profession whose gross sales/receipts and other non-operating income (GSRONOI) do not exceed the P3.0MVAT threshold, shall have the option to avail of:

Answer 10

a. the graduated rates under Section 24(A) of the Tax Code, as amended;

b. or 8%)tax of GSRONOI in excess of P250,000* in lieu of the graduated income tax rates under Section 24(A) and the percentage tax under Section 116 all under the Tax Code, as amended.

Question 11

Mixed Income Earners.

Answer 11

There are individuals who earn income both from compensation and from self-employment (business or practice of profession). They shall be subject to the following taxes:
a. On compensation income – at graduated rates; plus

b. On income from business or practice of profession shall be subject to the following;
b.1. If GSRONOI do not exceed the VAT threshold -
● either at graduated rates or
● 8% of GSRONOI in lieu of graduated rates and percentage tax, at the option of the taxpayer
b.2 If GSRONOI exceed the VAT threshold - at graduated rates.

Question 12

is subject to a separate and final tax. Examples of passive income are interests, royalties, prizes, winnings and dividends.

Answer 12

Passive income

Question 13

imposed on income or gain shall no longer be included as taxable income subject to the graduated rates.

Answer 13

Final Tax

Question 14

Capital Gains from Sale of Shares of Stock, Not Traded through the Local Stock Exchange.

Is taxed at?

Answer 14

Taxed at 15% final tax on a per transaction basis.

Question 15

llustration: In 2018, Uri Dangal, a resident citizen, owns and holds as capital assets, shares of stocks of Prudential Guarantee and Assurance, Inc., a domestic corporation, costing P40,000. He sold all the shares directly to Lilibeth Buen for P160,000. How much final tax must be paid?

Answer 15

Selling Price P160,000
Cost 40,000
—————
Capital Gains P120,000

Capital Gains Tax (P120,000 x 15%)

=P18,000

Question 16

Capital Gains from Sale of Real Property.

Answer 16

Taxed at 6% final tax on the gross selling price or current fair market value at the time of sale, whichever is higher

Question 17

In 2018, Nicos Luna, a resident citizen, sold his residential house and lot in Singalong Manila for P2,500,000, The cost of the house and lot three years ago when he acquired the property was P1,500,000 and the fair market value at the time of sale is P2,300,000. How much is the capital gains from the sale?

Answer 17

Selling Price P2,500,000
Tax Rate 6%
——————
Final Tax 150,000

Question 18

Fringe Benefits (tax rate/ solution)

Answer 18

Taxed at 35% final tax based on the grossed up monetary value granted to employee beginning Jan. 1, 2018. The grossed-up monetary value of the fringe benefit shall be determined by dividing the actual monetary value of the fringe benefit by 65%. The grossed up monetary value is not to be included in the gross.

(monetary value of the frihge benefits) divide to 65% = (grossed-up monetary value) × 35% = (fringe benefits tax)

Question 19

Illustration: In June 2018, Boris Del Pilar, a resident citizen, received from his employer, fringe benefit of P65,000. This fringe benefit is subject to the fringe benefit tax. Compute the tax that shall be paid by Boris’s employer.

Answer 19

Monetary Value of
the Fringe Benefit. P65,000
Divide by. 65%
——————Grossed-up Monetary. P100,000
Value Multiply by. 35%
———————
Fringe Benefit Tax. 35,000