chapter 2 (textbook)

Question 1

who shall be considered citizens of the Philippines

Answer 1

1.) Those who are citizens of the Philippines at the time of the adoption of the Feb. 2, 1987 Constitution,

2.) Those whose fathers or mothers are citizens of the Philippines,

3.) Those born before Jan. 17, 1973, the date of the adoption of the 1973 Constitution, of Filipino mathers, who elect Philippine citizenship upon reaching the age of majority, and لشم

4.) Those who are naturalized in accordance with law.

Question 2

Resident Citizen means…

Answer 2

a Filipino citizen who permanently resides in the Philippines

Question 3

Non-Resident Citizen means

Answer 3

1.) A citizen of the Philippines who plans to live abroad permanently

2.) A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis.

3.) A citizen of the Philippines who works abroad and requires him to be physically present abroad “most of the time” (at least 183 days) during the taxable year.

4.) A non-resident citizen who moves back to the Philippines to live permanently remains a non-resident for tax purposes on foreign income until their arrival in the country.

5.) The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines, as the case may be.

Question 4

what is Resident Alien?

Answer 4

An individual who resides in the Philippines and is not a citizen. He is actually present in the Philippines and is not a mere transient or sojourner. (not considered as a tourist or short-term visitors.

Question 5

what is Non-Resident Alien?

Answer 5

an individual who is not a resident and not a citizen of the Philippines

Question 6

what is Non-Resident Alien Engaged in Trade and Business (NRAETB)?

Answer 6

It refers to a non-resident alien who’s actively involved in running a business or providing services and stays in the Philippines for an aggregate period of MORE THAN 180 days during calendar year.

Question 7

what is Non-Resident Alien Not Engaged in Trade and Business (NRANETB)

Answer 7

refers to a non-resident alien who shall come to the Philippines and stay for an aggregate period of one hundred eighty (180) days or less during any calendar year.

Question 8

what is Compensation Income?

Answer 8

it means all remuneration for services performed by an employee for his employer under an employer-employee relationship

Question 9

what is Compensation Income Earners?

Answer 9

Individuals whose source of income is purely derived from an employer-employee relationship.

Question 10

what is Employee?

Answer 10

They perform tasks or services as directed by the employer and, in return, receive compensation such as wages, salary, or benefits. Employees are typically under the control and supervision of the employer regarding how, when, and where the work is done.

Question 11

what is Rank and File Employee?

Answer 11

regular employees who doesn’t hold managerial or supervisory position

Question 12

what is Employer

Answer 12

is a person or organization that hires individuals to perform work or services in exchange for compensation, typically in the form of wages or salary. The employer has the authority to direct and control the work and is responsible for providing compensation, benefits, and adhering to employment laws and regulations.

Question 13

Employer and Employee Relationship

Answer 13

it exists when a person for whom services were performed (employer) has the right to control and direct an individual who performs the services (employee), not only as to the result of the work to be accomplished but also as to the details, methods and means by, which it is accomplished.

Question 14

what is Fringe Benefits?

Answer 14

additional benefits provided by the employee in a high rank position

Question 15

what are the benefits that can provide by the employer to their high rank/position employee?

Answer 15

a. Housing

b. Expense account,

c. Vehicle of any kind,

d. Household personnel, such as maid, driver and others:

e. Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted;

f. Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations,

g. Expenses for foreign travel.

h. Holiday and vacation expenses;

it Education assistance to the employee or his dependents, and

j. Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows.

Question 16

Minimum Wage Earner (MWE)

Answer 16

refers to a worker in the private sector who is paid with a statutory minimum wage (SMW) rates, or to an employee in the public sector with compensation income of not more than the statutory minimum wage rates in the non-agricultural sector where the worker/employee is assigned.

Question 17

Marginal Income Earner

Answer 17

refers to an individual whose business does not realize gross sales or receipts exceeding P100,000 in any 12-month period. (small businesses)

Question 18

Mixed Income Earner

Answer 18

An individual earning compensation income from employment, and income from business, practice of profession and/or other sources aside from employment.

Question 19

OCWs or OFWs

Answer 19

are Filipino citizens working abroad, whose salaries are paid by a foreign employer, not by any entity in the Philippines. To be considered an OCW or OFW, they must be registered with the Philippine Overseas Employment Administration (POEA) and have a valid Overseas Employment Certificate (OEC).

Question 20

what is Professional?

Answer 20

is someone who has been officially certified in a certain field after passing exams or completing studies. Their skills are judged by set standards. A professional can also be a person who makes money from art or sports, not just as a hobby. Examples of professionals include doctors, lawyers, engineers, architects, CPAs, entertainers, athletes, directors, producers, consultants, insurance agents, and others who earn money for their skills or talents.

is a person certified by a professional body in a specific field after completing required exams or studies, whose competence is measured by set standards. It also refers to someone who earns a living from art or sport, rather than as a hobby. This includes doctors, lawyers, engineers, architects, CPAs, entertainers, athletes, directors, producers, consultants, insurance agents, and others receiving professional or talent fees.

Question 21

Gross Receipts

Answer 21

refer to the total amount of money or its equivalent received during the taxable period for goods sold, services rendered, or any other income-generating activities. This includes the contract price, compensation, service fees, rentals, royalties, and any amounts charged for materials supplied. It excludes returnable security deposits and, for VAT taxpayers, the VAT component.

Question 22

Gross Sales

Answer 22

refers to the total sales transactions net of VAT, if applicable, reported during the period, without any other deduction.

Question 23

Taxable Income

Answer 23

is the amount of money you earn that the government can tax. It includes wages, salaries, bonuses, and any other income, after subtracting deductions and exemptions that reduce the total amount.

Question 24

VAT Threshold

Answer 24

refers to the ceiling fixed by law to determine VAT registrable taxpayers. The VAT threshold is currently set at three million pesos (P3,000,000) and the same shall be used to determine the income tax liability of self-employed individuals and/or professionals under Sections 24(A)(2)(b) and 24(A)(2)(c)(2) of the Tax Code, as amended.

Question 25

regional or Area Headquarters (RHQs)

Answer 25

mean a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia- Pacific Region and other foreign markets.

Question 26

Regional Operating Headquarters (ROHQs)

Answer 26

shall mean a branch established in the Philippines by multinational companies which are engaged in any of the following services: general administration and planning, business planning and coordination; sourcing and procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communications; and business development.

Question 27

Deposits

Answer 27

in connection with offshore banking, shall mean funds in foreign currencies which are accepted and held by an Offshore Banking Unit 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.

Question 28

Deposit Substitutes

Answer 28

refer to an alternative means of raising funds from the public (defined as borrowing from twenty or more individual or corporate lenders) through the issuance of debt instruments for relending, purchasing receivables, or financing needs. These instruments can include bankers’ acceptances, promissory notes, and repurchase agreements with the Bangko Sentral ng Pilipinas (BSP). However, debt instruments issued for interbank call loans with a maturity of five days or less to cover reserve deficiencies are not considered deposit substitutes.

Question 29

Foreign Currency Deposit System (FCDS)

Answer 29

shall refer to the conduct of banking transactions whereby any person, whether natural or juridical, may deposit foreign currencies forming part of the Philippine international reserves, in accordance with the provisions of R.A. 6426 entitled “An Act Instituting a Foreign Currency Deposit System in the Philippines, and For Other Purposes.”

Question 30

Foreign Currency Deposit Unit (FCDU)

Answer 30

refer to that unit of a local bank or a local branch of a foreign bank authorized by the Bangko Sentral ng Pilipinas (BSP) to engage in foreign currency-denominated transactions, pursuant to the provisions of R.A. 6426, as amended. 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 R.A. 337, as amended.

Question 31

Offshore Banking System

Answer 31

shall refer to the conduct of banking transactions in foreign currencies involving the receipt of funds principally from external and Internal sources and the utilization of such fund pursuant to Presidential Decree 1034 as implemented by Central Bank (now Bangko Sentral ng Pilipinas (BSP)) Circular 1389, as amended.

Question 32

Offshore Banking Unit (OBU)

Answer 32

shall mean 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 1034 as implemented by Central Bank (now BSP) Circular 1389, as amended.