FINALS - IDENTIFICATION Flashcards
A legal arrangement in which a trustee manages property for the benefit of a beneficiary.
TRUST
A tax on the transfer of the estate of a deceased person.
Estate Tax
The person for whose benefit a trust is created.
Beneficiary
The person who establishes a trust
Trustor / Grantor
A person or corporation that holds in trust an estate for another person.
Fiduciary
A trust that can be altered or revoked by the grantor.
Revocable Trust
The income received by an estate or trust, similar to that of individuals.
Gross Income
The arrangement created when income from an estate is shared by co-owners not under judicial settlement.
Co-ownership
Income held in trust for an unborn or unascertained beneficiary.
Income Accumulated in Trust
A trust that cannot be changed or canceled, both as to corpus and income.
Irrevocable Trust
A partnership formed by professionals to practice their common profession, not involved in any trade or business
General Professional Partnership (GPP)
The optional deduction that a GPP can claim, up to 40% of gross income, instead of itemized deductions
Optional Standard Deduction (OSD)
The tax classification of partnerships that operate as corporations, with partners regarded as stockholders
General Co-Partnership (Compania Colectiva)
A legal relationship where partners contribute money, property, or industry to divide profits.
Partnership
Income classification for the share received by partners in GPP, taxed at the individual level.
Distributive Share
Partners’ deduction method limited to either itemized deductions or OSD, based on the practice of profession.
Tax Deduction Choice
A shared ownership that is not subject to income tax unless used for profit-generating activities.
Co-ownership
Document required by GPPs to report income, deductions, and partners’ distributive shares.
Annual Information Return
The deduction choice that cannot be further claimed once distributive shares in GPP income are received
Itemized Deduction or OSD
Tax classification applied to partnerships involved in profit-based activities, resulting in corporate tax treatment.
Corporation
The total compensation received for services performed under an employer-employee relationship
Compensation Income
Income derived from the exercise of a profession or trade.
Gross Income from Trade or Business
Payments made to the owner of intellectual property for its use.
Royalties
A share of profits distributed by a corporation to its shareholders
Dividends
Payments received from tenants for the use of property.
Rents
Earnings from the sale of assets at a higher price than their purchase price.
Gains from dealings in property
Period during which compensation is ordinarily paid.
Payroll period
A partner’s share of the net income of a general professional partnership
Partner’s distributive share
A payment made periodically to retirees as part of a pension plan.
Pensions
Interest earned from financial investments.
Interest
What type of income are tips or gratuities paid directly to an employee?
Taxable income but not subject to withholding.
Who pays tips directly to employees?
Customers
Tips not reported to the employer are considered as _______.
Taxable Income
What law governs the taxation of tips in the Philippines?
National Internal Revenue Code
Define “gratuities” in tax context
Payments from customers as voluntary appreciation of services.
What type of tax applies to tips not subject to withholding?
Income Tax
What type of income includes tips or gratuities paid directly to an employee by a customer?
Taxable Income
Are tips or gratuities subject to withholding tax if paid directly to an employee?
No
What is the tax treatment of tips or gratuities not accounted for by the employee to the employer?
Considered taxable income but not subject to withholding.
A monetary gift voluntarily given by a customer to an employee.
Gratuity
Is a service charge automatically included in the computation of tips or gratuities?
No
What is the basis of taxation for tips in the Philippines?
Taxable income but not subject to withholding.
Are tips required to be declared in the employee’s income tax return?
Yes
Can gratuities be considered part of regular compensation?
No
Who pays withholding tax on gratuities?
Not applicable (not subject to withholding tax).
What documentation is required to account for employer-paid tips?
None, if tips are directly paid by customers
The final tax rate imposed on dividends distributed to resident citizens, non-resident citizens, and resident aliens.
10% final tax
The tax rate for dividends received by a non-resident alien not engaged in business in the Philippines
25% final tax
The tax rate applied to dividends distributed to a domestic corporation
Income tax exempt
The law that governs the reduced tax rate for Non-Resident Foreign Corporations (NRFC) under specific conditions
CREATE Act
The condition where a non-taxable stock dividend does not alter a stockholder’s proportionate interest in a corporation’s net assets.
Non-taxable stock dividend
The portion of an annuity payment that is taxable.
The portion representing interest
The final tax rate imposed on PCSO winnings exceeding PHP 10,000.
20% final tax
The location of income for dividends received from a domestic corporation
Within the Philippines
Tax refunds that are not considered taxable income.
Philippine income tax
The final tax rate applied to prizes and winnings from commercial contests if the amount is above PHP 10,000
20% final tax
