chapter 2- part 2

Question 1

– is defined as a sole proprietor or an independent contractor who reports income earned from self employment.

Answer 1

Self Employed

Question 2

• is a “person formally certified by a professional body belonging to a specific profession

Answer 2

Professional

Question 2

HOW TO AVAIL 8% preferential tax rate

Answer 2

Beginning 2018 or upon the effectivity of RA 10963 (Tax Reform for Acceleration and Inclusion Law (TRAIN LAW) , regular income of Self- Employed and Professionals (SEP) amounting to more than P250,000 in a taxable year but with a gross sales/receipts and other non-operating income not exceeding the revised vat threshold of P3,000,000 shall have the option to avail of 8% tax on gross sales/receipts and other operating income in excess of
P250,000 IN LIEU of the graduated income tax rate and business tax.

Question 2

Requisite to avail the 8% preferential tax rate

Answer 2

1. The gross sales/receipt and other non-operating income does not exceed the vat threshold of 3,000,000.
2. The SEP shall be non-vat registered
3. The gross sales/receipts were not derived from vat-exempt sales and transactions.
4. The SEP is not subject to percentage tax other than under section 116 of the tax code as amended; and
5. The SEP signifies his/her intention to elect the 8% income tax.

Question 3

• Any person whose sales or receipts are exempt under Section 109(z) of this Code from the payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales or receipts: Provided, That cooperatives shall be exempt from the three percent (3%)gross receipts tax herein imposed.

Answer 3

SEC. 116. Tax on Persons Exempt From Value-Added Tax (VAT).

Question 4

Purely SEP with AGSR ≤ 3M

Income tax

Answer 4

Graduated rate

Question 5

Purely SEP with AGSR ≤ 3M

Business tax

Answer 5

Percentage tax under sec 116 of the tax code

Question 6

Using 8% tax
Purely SEP with AGSR ≤ 3M

Income tax

Answer 6

8% tax based on AGSR in excess of 250,000

Question 7

Purely SEP with AGSR ≥ 3M

Income tax

Answer 7

Graduated rate

Question 7

Using 8% tax
Purely SEP with AGSR ≤ 3M

BUSINESS TAX

Answer 7

None. The 8% tax is in lieu of graduated rate and percentage tax under Sec. 116 of the tax code

Question 8

Purely SEP with AGSR ≥ 3M

Business tax

Answer 8

• VAT/ VALUE- ADDED TAX

Question 9

ADDITIONAL INFO

Answer 9

In addition to the income tax, the SEP is subject to business tax. Since the AGSR and other non-operating income exceeds the VAT threshold the applicable business tax is 12%

Question 10

An individual taxpayer which is deriving income from both from self-employment and compensation (arising from employer-employee relationship).

Answer 10

Mixed income earner

Question 10

ADDITIONAL INFO

Answer 10

Under the tax code, a domestic common carrier engaged in transport of passengers by land is subject to a business tax of 3% common carriers tax under Section 117 of the tax code

Question 11

Mixed income earner with AGSR ≤ 3M

Business income opted to use 8% tax?

Answer 11

yes——————-Subject to 8% tax in lieu of graduated income tax rate and percentage taxunder sec 116

no———————-Graduated rate (Add the compensation income and business income)

Question 12

Mixed income earner with AGSR ≤ 3M

Compensation income

Answer 12

Graduated rate (Add the compensation income and business income)

Question 13

additional info

Answer 13

the business income in addition to income tax shall still be subject to percentage tax under sec 116

Question 14

are certain passive incomes from sources within the Philippines as enumerated under the Tax Code.

Answer 14

Passive income subject to FINAL WITHHOLDING TAXES

Question 15

The Five passive incomes derived from Philippine sources subject to final withholding taxes are as follows;

Answer 15

Interest income
Dividend income
Royalties
Prizes
Other winnings