INCOME AND BUSINESS TAXATION

Question 1

It refers to the inherent power of the state to demand enforced contribution for
a public purpose to support the government

Answer 1

Taxation as a power

Question 2

It is the legislative act of laying a tax to raise income for the government to defray its necessary expenses.

Answer 2

Taxation as a process

Question 3

are the enforced proportional contributions, generally payable in money, levied by the law-making body of the State by its sovereignty upon the persons or property within the jurisdiction for the support of the government and all public needs.

Answer 3

Taxes

Question 3

Taxation is a means of allocating government burden to the
people.

Answer 3

Taxation as a mode of cost allocation

Question 4

Theory of Taxation

Answer 4

Lifeblood Theory

Necessity Theory or Principle of Necessity

Ability to Pay Theory

Benefits Received Theory

Question 5

Taxes are paid by the citizen to sustain the
activities and for the improvement of the government

Answer 5

Benefits Received Theory

Question 5

Taxes are the lifeblood of the government; without it, the government can neither
operate nor survive.

Answer 5

Lifeblood Theory

Question 6

Tax payments should be based relative to the ability of the taxpayers to pay.

Answer 6

Ability to Pay Theory

Question 6

Tax laws are created to support the necessity of any state.
The burden for expenses to maintain the sovereignty, services of the government, and administrative expenses must be borne by its own people.

Answer 6

Necessity Theory or Principle of Necessity

Question 6

Governing Bodies involved in Taxation

Answer 6

Department of Finance (DOF)
Bureau of Internal Revenue (BIR)
Bureau of Customs (BOC)
Tariff Commission (TC)
Land Transportation Office (LTO)
Duly Authorized Collectors
Local Offices

Question 7

It is also called the Benefits-Protection Theory, wherein the basis of taxation is the reciprocal duties of protection and support between the state and its inhabitants.

Answer 7

Benefits Received Theory

Question 8

has the main responsibility of managing the financial strength and fiscal policies of the government. It supervises and controls other agencies such as

Answer 8

Department of Finance (DOF)

Question 9

The agency is tasked to assess and collect all taxes and necessary fees imposed by regulations, policies, and tax laws.

Answer 9

Bureau of Internal Revenue (BIR)

Question 10

The office that is tasked to collect registration fees and motor vehicle
tax.

Answer 10

Land Transportation Office (LTO)

Question 10

These are persons or banks authorized by BIR, BC, TC, and LTC to collect
taxes

Answer 10

Duly Authorized Collectors

Question 10

These agencies are in charge of
implementing the policies set by the Tariff and Customs Code (TCC)

Answer 10

Bureau of Customs (BOC)
Tariff Commission (TC)

Question 11

Provincial, City, Municipal, and Barangay Treasurer, etc

Answer 11

Local Offices

Question 12

is a tax on a person’s income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions if any, authorized for such types of income, by the Tax Code, as
amended, or other special laws.

Answer 12

Income Tax

Question 13

Types of Taxable Individuals

Answer 13

Resident Citizen (RC)
Non-Resident Citizen (NRC)
Resident Alien (RA)
Non-Resident Alien (NRA)
Special Taxpayers

Question 14

A Filipino citizen who stayed permanently in the Philippines or stayed outside the
Philippines for less than 183 days during the taxable years.

Answer 14

Resident Citizen (RC)

Question 15

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.

Answer 15

Non-Resident Citizen (NRC)

Question 15

A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his
physical presence abroad with a definite intention to reside therein

Answer 15

Non-Resident Citizen (NRC)

Question 15

A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time (183 days or more) during the taxable
year.

Answer 15

Non-Resident Citizen (NRC)

Question 16

a person who is not a citizen of the Philippines but is residing within the Philippines, including foreign individuals who have stayed in the Philippines for more than one (1) year from date of
arrival

Answer 16

Resident Alien (RA)

Question 17

who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated 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

Answer 17

Non-Resident Citizen (NRC)

Question 18

An individual who shall come to the
Philippines and stay therein for an aggregate period of more than 180 days

Answer 18

Non-Resident Alien Engaged in Trade or Business (NRAETB)

Question 18

An individual who is not a citizen
nor a resident and his stay does not exceed 180 days during the calendar year, and has no business income derived within the Philippines

Answer 18

Non-Resident Alien Not Engaged in Trade or Business (NRANETB)

Question 19

An individual holding a managerial and/or technical positions employed by Regional
or Area Headquarters (RHQs), Regional Operating Headquarters (ROHQs) of Multinational Companies, Offshore Banking Units (OBU), and petroleum contractors and subcontractors.

Answer 19

Special Taxpayers

Question 20

• Provision of 15% preferential rate will be retained for alien employees and Filipino employees occupying the same position employed by RHQs, ROHQs, OBUs, and petroleum service contractors and subcontractors.
• 15% preferential rate shall not be applicable to RHQs, ROHQs, OBUs, and
  petroleum service contractors and subcontractors registered with the Securities and Exchange Commission (SEC) after January 01, 2018.
• Existing RHQs, ROHQs, OBUs, and petroleum service contractors and subcontractors for qualified employees shall continue to avail of the preferential
  tax rate for present and future qualified employees

Answer 20

R.A. No. 10963
(TRAIN Law)

Question 21

15% preferential tax rate based on gross compensation income

Answer 21

1997 Tax Code

Question 22

Those earning an annual salary of P250,000 or below will ____________ pay income tax

Answer 22

zero

Question 23

Those earning between P250,000 and P400,000 per year will be charged an income tax rate of________ on the excess over P250,000.

Answer 23

20%

Question 24

Those earning annual incomes between P400,000 and P800,000 will pay a fixed amount of __________ plus _______of the excess over P400,000

Answer 24

P30,000 plus 25%

Question 25

Those with yearly salaries between P800,000 and P2 million will be charged a fixed amount of ________ plus_____ on the excess over P800,000

Answer 25

P130,000 plus 30%

Question 26

High-income earners receiving salaries between P2 million and P8 million annually will pay a fixed amount of P________ plus ____% of the excess over P2 million

Answer 26

P490,000 plus 32%

Question 27

the highest income tier receiving salaries of at least P8 million per year will have withholding taxes of ________ million plus ______of the excess over P8 million.

Answer 27

P2,410,000 plus 35%

Question 28

Those earning between P250,000 and P400,000 per year will be charged a lower income tax rate of_________ on the excess over P250,000.

Answer 28

15%

Question 29

___________________refers to the income derived by an employee. _______________all remuneration for services performed by an employee for his employer under an employee-employer relationship unless
exempted by the NIRC and pertinent laws.

Answer 29

Compensation income

Question 30

BIR Form ______ is consistent
with the information contained in the employer’s BIR Form 1604-C.

Answer 30

2316

Question 31

Taxpayers who derived solely from compensation are required to file BIR Form _____as their income tax return
(ITR).

Answer 31

1700

Question 32

_____________ shall refer to a compensation earner who at the same time is engaged in business or practice of profession.

Answer 32

Mixed-income earner

Question 33

means that the taxpayer derives his income from both compensation and
business or practice of profession.

Answer 33

Mixed income

Question 34

is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange, or lease of goods or properties and services in the Philippines and on the importation of goods into the Philippines.

Answer 34

Value-Added Tax (VAT)

Question 35

is an indirect tax, which may be shifted or passed on to the buyer, transferee, or lessee of goods, properties, or services. The party directly liable for the payment of the tax is the seller, importer, or service
provider, although the burden of the tax may be shifted to the consumer.

Answer 35

Value-Added Tax (VAT)

Question 36

This tax means the VAT due on the sale, lease, or exchange of taxable goods or properties or services by any person registered or required to register under Section 236 of the Tax Code.

Answer 36

Output tax

Question 36

means the VAT due on or paid by a VAT-registered on the importation of goods or local purchase ofmgoods, properties, or services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive input tax, and deferred input tax from the previous period

Answer 36

Input tax