[Exercise 8-1] TRUE OR FALSE QUESTIONS Flashcards
[TRUE OR FALSE] All passive incomes are subject to final withholding tax.
Ans: True.
“Passive incomes are income subject to final withholding tax and shall not be included in the gross income of the taxpayer.”
While most passive incomes (e.g., interest, dividends, royalties) are subject to final withholding tax, certain types of income may be exempt or subject to different taxation rules depending on the circumstances.
source: solman
[TRUE OR FALSE] Husband and wife must file a joint income tax return.
Ans: False.
“For married individuals, the husband and wife shall compute separately their individual income tax based on their respective total taxable income. As a general rule, married individuals are required to file a return for each spouse.”
[TRUE OR FALSE] The cash prize received by Pia Wurtzbach as 2016 Miss Universe is subject to final withholding tax.
Ans: True.
“Prizes (except prizes amounting to P10,000 or less which shall be subject to regular tax) – 20% final withholding tax”
source: book
[TRUE OR FALSE] The cash prize received by Osang Fostanes for winning the X-Factor talent show contest in Israel is taxable in the Philippines if she is a caregiver in Israel but NOT registered with the Philippine Overseas Employment Administration (POEA).
Ans: True.
“A citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income from sources within the Philippines. However, to be considered as an OCW or OFW, they must be duly registered with the POEA with a valid Overseas Employment Certificate (OEC).”
sabi ni gpt
[TRUE OR FALSE] The cash prize received by Manny Pacquiao in a boxing fight held in the United States is exempt from income tax in the Philippines if a tax had already been paid in the U.S.
Ans: False.
“A resident citizen is taxable on income derived from sources within and without the Philippines.”
[TRUE OR FALSE] Individual taxpayers are entitled to a basic personal exemption of P50,000.
Ans: False.
“Individual taxpayers are not entitled to claim personal exemptions.”
Under the TRAIN Law, personal exemptions (including the P50,000 basic exemption) were removed starting January 1, 2018.
[TRUE OR FALSE] All income within the Philippines of NONRESIDENT citizens who are NOT engaged in trade or business in the Philippines is taxable at a rate of 25%.
Ans: False.
The 25% tax rate applies to nonresident aliens not engaged in trade or business, not to nonresident citizens.
“Non-resident aliens not engaged in trade or business in the Philippines are normally subject to final withholding tax of twenty-five percent (25%) from all sources within the Philippines only.”
[TRUE OR FALSE] Generally, the optional standard deduction will create a favorable tax outcome for a professional income earner.
Ans: False.
The optional standard deduction (OSD) is beneficial only if the professional’s actual expenses are low. If a professional incurs significant business-related expenses, itemized deductions typically result in lower taxable income.
[TRUE OR FALSE] A business income earner who failed to file a quarterly income tax return shall be presumed to have opted for the itemized deduction instead of the optional standard deduction.
Ans: True.
“If the taxpayer fails to signify the intention to elect the 8% income tax rate in the first quarter return, the taxpayer shall be considered as having availed of the graduated rates of tax.”
[TRUE OR FALSE] The optional standard deduction is NOT allowed for a pure compensation income earner.
Ans: True.
“OSD shall not also be allowed to individual taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship.”
[TRUE OR FALSE] Overseas contract workers (OCWs) are taxable only on income derived from sources within the Philippines because they are classified as nonresident Filipinos.
Ans: True.
“A citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income from sources within the Philippines.”
“To be considered as an OCW or OFW, they must be duly registered as such with the Philippine Overseas Employment Administration (POEA) with a valid Overseas Employment Certificate (OEC).”
[TRUE OR FALSE] Among all classes of individual taxpayers, only Filipinos residing in the Philippines are taxable on income from sources within and outside the country.
Ans: True.
“A resident citizen is taxable on income derived from sources within and without the Philippines.”
“A nonresident citizen is taxable only on income derived from sources within the Philippines.”
“An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines.”
[TRUE OR FALSE] NONRESIDENT citizens who are NOT engaged in trade or business in the Philippines are subject to income tax on income within the country but do not file income tax returns in the Philippines.
Ans: False.
“A nonresident citizen is taxable only on income derived from sources within the Philippines.”
“Individual taxpayers are required to file their income tax returns unless exempted.”
[TRUE OR FALSE] A millionaire child who is mentally impaired is a qualified dependent for purposes of additional personal exemption.
Ans: False.
“Individual taxpayers are not entitled to claim personal exemptions.”
Since personal exemptions were removed under the TRAIN Law, there is no longer an additional exemption for dependents, regardless of financial status or disability.
[TRUE OR FALSE] Interest on a bank deposit is NOT taxable to the account holder because he does not report the income in his income tax return.
Ans: False.
“Passive incomes are income subject to final withholding tax and shall not be included in the gross income of the taxpayer.”
“Interest from any currency bank deposit – 20% final withholding tax.”
While the taxpayer does not report it in their income tax return, the interest is still taxed at source through final withholding tax.
[TRUE OR FALSE] Lotto winnings in the United States are NOT taxable in the Philippines, even if the winner is a resident citizen.
**Ans: False. **
“A resident citizen is taxable on income derived from sources within and without the Philippines.”
[TRUE OR FALSE] Final withholding taxes are the primary responsibility of the payor.
Ans: True.
“Under the final withholding tax system, the amount of income withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on the said income. The liability for payment of the tax rests primarily on the payor as a withholding agent.”
[TRUE OR FALSE] Lotto winnings in the Philippines are subject to income tax regardless of the amount.
Ans: False.
“Philippine Charity Sweepstakes winnings and Lotto winnings in the Philippines amounting to P10,000 or less – Not taxable.”
Lotto winnings exceeding P10,000 are subject to 20% final withholding tax, but those P10,000 or below are exempt.
[TRUE OR FALSE] A pure compensation income earner may avail of the 8% income tax rate.
Ans: False.
“Individuals earning income from self-employment and/or practice of profession whose gross sales/receipts and other non-operating income do not exceed P3,000,000 shall have the option to avail of: 1. The graduated rates in Table 2 (or 3) above; or 2. An eight percent (8%) tax on gross sales or receipts and other non-operating income in lieu of the graduated income tax rates and the percentage tax (3% Non-VAT).”
Only self-employed individuals and professionals can opt for the 8% tax rate. Compensation income earners are subject to graduated tax rates.
[TRUE OR FALSE] The 8% income tax rate shall apply only to individuals with self-employment income.
Ans: True.
“The 8% income tax is in lieu of the graduated rates of tax and the percentage tax of 3% Non-VAT. The individual taxpayer who decides to choose this option shall no longer be subject to the business tax of 3% Non-VAT.”
The 8% tax rate is only for self-employed individuals or professionals earning non-VAT business income. Compensation income earners cannot use this option.
