[Exercise 8-10] MULTIPLE CHOICE THEORY Flashcards
Which of the following statements is false regarding income taxation and personal exemptions
a. A resident citizen has taxable income from sources within and without the country and is entitled to a basic personal exemption but not an additional exemption.
b. A resident alien has taxable income from sources within the country but not from sources without and is not entitled to personal exemptions.
c. A non-resident alien engaged in trade or business (NRA ETB) has taxable income from sources within the country but not from sources without and is not entitled to personal exemptions.
d. A non-resident alien not engaged in trade or business (NRA NETB) has taxable income from sources within the country but not from sources without and is entitled to a basic personal exemption but not an additional exemption.
ANSWER: a. A resident citizen has taxable income from sources within and without the country and is entitled to a basic personal exemption but not an additional exemption.
“A resident citizen is taxable on income derived from sources within and without the Philippines.”
“Individual taxpayers are not entitled to claim personal exemptions.”
Since the TRAIN Law removed personal exemptions, resident citizens no longer receive a basic personal exemption or an additional exemption. Therefore, statement (a) is false.
sabi lang ni gpt
Who among the following is a non-resident alien
a. An alien who comes to the Philippines for a definite purpose which, in its nature, may be promptly accomplished
b. An alien who comes to the Philippines for a definite purpose which, in its nature, would require an extended stay
c. An alien who has acquired residence in the Philippines
d. An alien who lives in the Philippines with no definite intention as to his stay
a. An alien who comes to the Philippines for a definite purpose which, in its nature, may be promptly accomplished
“Nonresident alien means an individual whose residence is not within the Philippines and who is not a citizen thereof.”
“A nonresident alien is classified into:
(a) Engaged in trade or business in the Philippines (ETB) – refers to a nonresident alien who shall come to the Philippines and stay for an aggregate period of more than one hundred eighty (180) days during any calendar year.
(b) Not engaged in trade or business in the Philippines (NETB) – refers to a nonresident 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.”
Who among the following taxpayers is taxed based on their gross income
a. Resident citizen
b. Resident alien
c. Non-resident citizen
d. Non-resident alien NOT engaged in business in the Philippines
ANSWER: d. Non-resident alien NOT engaged in business in the Philippines.
“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.”
A non-resident alien NOT engaged in business in the Philippines (NRA-NETB) is taxed at a flat 25% rate on their gross income from Philippine sources. They cannot claim deductions, which makes them distinct from resident citizens, resident aliens, and non-resident citizens who are taxed on net income (after allowable deductions).
Which of the following special groups of non-resident alien taxpayers is subject to a special tax rate
a. Aliens employed by regional operating headquarters of multinational companies
b. Aliens employed by offshore companies
c. Aliens employed by foreign petroleum service contractors
d. Aliens employed by offshore banking units whose country has an existing tax treaty with the Philippines
ANSWER: a. Aliens employed by regional operating headquarters of multinational companies.
“All concerned employees of the regional or area headquarters and regional operating headquarters of multinational companies, offshore banking units, and petroleum service contractors and subcontractors shall be subject to the special income tax rates in Table 2 of this chapter, without prejudice to the application of preferential tax rates under existing international tax treaties, if warranted.”
Employees of regional operating headquarters (ROHQs) of multinational companies are subject to a special tax rate of 15% on their gross income, provided they meet the qualifications under tax laws. Other groups, such as offshore banking unit employees, may have preferential rates only if their country has an applicable tax treaty.
The 8% income tax rate applies to
a. Compensation income
b. Passenger jeepney operators
c. Grocery stores with annual gross receipts ranging from P2.0 to P25 million
d. Professionals who avail of the 40% optional standard deduction
d. Professionals who avail of the 40% optional standard deduction
Which of the following is NOT subject to final tax
a. Prizes amounting to P20,000
b. Winnings in lotto amounting to P500
c. Interest on a dollar deposit with Banco de Oro
d. Cash dividends received by individual stockholders from a domestic company
ANSWER: b. Winnings in lotto amounting to P500.
“Philippine Charity Sweepstakes winnings and Lotto winnings in the Philippines amounting to P10,000 or less – Not taxable.”
Since lotto winnings of P500 fall below the P10,000 threshold, they are not subject to final tax.
Which of the following passive incomes is NOT subject to 20% final tax
a. Royalty income on musical compositions
b. Interest on a peso time deposit
c. Yield from trust funds and similar arrangements
d. Winnings in the lottery
a. Royalty income on musical compositions
“Royalties on books, literary works, and musical compositions – 10% final tax.”
Mr. Alvarez, a single Spanish citizen residing in Madrid, Spain, is engaged in trade or business in the Philippines. He requested you to file his income tax return for the taxable year 2018. His income details are as follows:
Gross income from the Philippines:
- Interest income, P 64,000
- Dividends, 30,000
- Total income in the Philippines, 94,000
- Add: Net income in Spain, 15,000
- Total net income, 109,000
The income you will report is:
a. 109,000
b. 30,000
c. 94,000
d. 64,000
ANSWER: c. 94,000.
“An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines.”
“A nonresident alien engaged in trade or business (NRA-ETB) is subject to tax only on income derived from sources within the Philippines.”
Since Mr. Alvarez is a nonresident alien engaged in trade or business (NRA-ETB), he is taxable only on his Philippine-source income.
Taxpayer, married, with one (1) dependent child, earned a gross compensation income of P200,000. He is paying a monthly premium of P250 on hospitalization insurance. Which of the following is correct?
a. He is allowed to claim optional standard deductions.
b. He can claim all the monthly premiums on hospitalization insurance as a deduction.
c. His taxable compensation income is P200,000.
d. His taxable compensation income is P125,000.
ANSWER: c. His taxable compensation income is P200,000.
Since compensation income is taxed at gross, no deductions (such as insurance premiums) apply.
Taxable compensation income remains at P200,000.
Which of the following shall be included as part of taxable income?
a. Salary of P189,000 from a private enterprise, net of withholding tax
b. Royalties received from a publisher of books in Accounting, P80,000
c. 13th-month pay of P8,000
d. Cash dividend of P6,000 received from a domestic company
ANSWER: a. Salary of P189,000 from a private enterprise, net of withholding tax.
“Salaries, wages, emoluments, and honoraria, allowances, commissions, fees including director’s fees, taxable bonuses, and fringe benefits constitute compensation income.”
Salary is always part of taxable income, whether or not withholding tax was deducted.
Mr. Juan de la Cruz, a Filipino, married with two dependent children, resides and works in Los Angeles, California, U.S.A. His income details in the United States are as follows:
Income:
- Wages, $9,600
- Tips, $900
- Interest, $3,100
- Wife’s prize in a raffle, $15,000
- Total income, $28,600
Expenses:
- Interest, $1,020
- Light and power bills, $680
- Federal income tax, $2,500
- Total expenses, $4,200
For Philippine income tax purposes, how much should be reported by Mr. Juan de la Cruz?
a. 15,000
b. 11,000
c. 12,500
d. None
ANSWER: d. None.
“A nonresident citizen is taxable only on income derived from sources within the Philippines.”
On October 1, 2018, Roque, a Filipino residing in Bermuda Island, returned to reside permanently in the Philippines. His income details for the year are as follows:
From January 1, 2018, to September 30, 2018:
Philippine income, P120,000
Bermuda Island income, $75,000
From October 1, 2018, to December 31, 2018:
Philippine income, P180,000
Bermuda Island income, $35,000
Which of the following is wrong?
a. He is considered a resident citizen on his income from October 1, 2018, to December 31, 2018.
b. He is considered a non-resident citizen on his income from January 1, 2018, to September 30, 2018.
c. He is taxable on his entire income from October 1, 2015, to December 31, 2018.
d. He is considered a resident citizen on his income from January 1, 2018, to December 31, 2018.
ANSWER: d. He is considered a resident citizen on his income from January 1, 2018, to December 31, 2018.
“A citizen who has been previously considered as a nonresident 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 nonresident 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.”
Thus, (d) is wrong because Roque is not considered a resident citizen for the entire year—only from October 1, 2018, onward.
On October 1, 2018, Roque, a Filipino residing in Bermuda Island, returned to reside permanently in the Philippines. His income details for the year are as follows:
From January 1, 2018, to September 30, 2018:
Philippine income, P120,000
Bermuda Island income, $75,000
From October 1, 2018, to December 31, 2018:
Philippine income, P180,000
Bermuda Island income, $35,000
Which is not taxable?
a. The Philippine income of P120,000.
b. The Philippine income of P180,000.
c. The Bermuda Island income of $75,000.
d. The Bermuda Island income of $35,000.
ANSWER: c. The Bermuda Island income of $75,000.
“A citizen who has been previously considered as a nonresident 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 nonresident 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.”
On October 1, 2018, Roque, a Filipino residing in Bermuda Island, returned to reside permanently in the Philippines. His income details for the year are as follows:
From January 1, 2018, to September 30, 2018:
Philippine income, P120,000
Bermuda Island income, $75,000
From October 1, 2018, to December 31, 2018:
Philippine income, P180,000
Bermuda Island income, $35,000
Assuming that Roque is a resident citizen who left the Philippines to reside in Bermuda Island, which is not taxable?
a. The Philippine income of P120,000.
b. The Philippine income of P180,000.
c. The Bermuda Island income of $75,000.
d. The Bermuda Island income of $35,000.
ANSWER: d. The Bermuda Island income of $35,000.
source: chatgpt
Which of the following is subject to income tax?
a. Minimum wage
b. De minimis benefit
c. Interest on dollar deposit
d. 13th-month pay of a rank-and-file employee
ANSWER: c. Interest on dollar deposit.
“Interest income received from a depository bank under the Expanded Foreign Currency Deposit System – 15% final tax.”
