pg. 79 onwards KMA Flashcards
if TP (self-employed professional) opted 8% but exceeds the VAT threshold during the year, what are his liabilities
- for the first 3M, he now has to pay 3% percentage tax (if he hadn’t exceeded, the 8% already replaced this which is why he didn’t have to pay)
- compute the income tax on the accumulated income using 0-35%
- Deduct 8% income tax paid from previous quarter
- pay VAT on succeeding receipts
Mixed Income Eaerner (MIE)
what is his tax liabilities for 3M and exceeding 3M
3M
1. business tax 8% tax rate + 0-35% GITR of compensation income
2. business income [and] compensation income at 0-35% + 3% percentage tax
[Exceeding 3M]
1. business income [and] compensation income at 0-35% GITR + 12% VAT
requisites to avail of the 8% tax rate for business income
Revenue Memorandum Order No. 23-2018 which are:
a. Individuals (Single Proprietor or Professional or Mixed Income Earner) earning from self-employment and/or practice of profession;
b. Taxpayers whose gross sales/receipts and other non-operating income did not exceed the ₱ 3 Million VAT threshold during the taxable year;
c. Taxpayers registered and subject only to Percentage Tax under Section 116 of the NIRC, as amended; or taxpayers exempt from VAT or other Percentage Taxes; and
d. Taxpayer must have signified his/her intention to elect the 8% Income Tax rate
is passive income part of the income tax?
No, it is subject to final withholding tax such that the tax is withheld to be immediately be paid out to BIR so no computation is required
taxable or not?
dividends issued from one DC-DC
dividends issued from one DC-RFC
dividends issued from one DC-NRFC
provided it is CASH
exempt
exempt
FWT of 25%
when is stock dividends taxable?
- when it is repurchased by the corp
- when it dilutes ownership & benefits of a SH
how is diguised dividends taxed?
as part of the ordinary income of a SH
what is the tax sparing rule?
CIR v. P&G-Phil.
The Tax Sparing Rule applies to dividends paid by a DC to (NRFC). Normally, the tax rate on such dividends is 25%. However, if the NRFC’s home country allows a “deemed paid” tax credit the Philippines reduces the tax rate to 15% instead of 25%.
15% came from sec. 28(B)(5)(b)
what are the types of CAPITAL GAIN
- sale of real property w/in philippines (6% of FMV/SP whiever higher)
- sales of shares of stock (15% of net capital gain)
a. listed but not traded in LSE
b. not listed not traded in LSE - sale of other capital assets (GITR)
when does MCIT apply?
MCIT/ tax on 2% on the gross income is imposed to a corp at the 4th taxable yaer immediately ff. the year corp commenced its business operations (5 years basically starting from day 1)
2020(1), 2021(2), 2022(3), 2023(4), 2024(5)
past the 2025, if the MCIT > than RCIT, then MCIT is applied. if RCIT > than MCIT, then RCIT is applied
JKL, Inc. is a corporation authorized to engage in the business of manufacturing ultra—high density microprocessor unit packages. After its registration on July 5, 2015, GHI, Inc. constructed buildings and purchased machineries and equipment. As of December 31, 2015, the total cost of the machineries and equipment amounted to P250,000,000.00. However, GHI, Inc. failed to commence operations. Its factory was temporarily closed effective December 15, 2019 due to the COVID-19 Pandemic. With the worsening situation, the company plans to sell its machineries and equipment to JKL Integrated for P300,000,000.00 by October 30, 2020. Thereafter, GHI,Inc. will be dissolved effective November 30, 2020. May the machineries and equipment be deemed a capital asset? If yes, what is the applicable tax rate?
Yes, the machineries and equipment are capital assets. However, NIRC provides that the capital gains tax of 6% applies only to sale of land/buildings.
Although classified as CA, it is subject to RCIT (MCIT if 5 years after operation + if MCIT higher than RCIT)
SMI-ED Phil Case SC ruled that provision on CGT on individuals [and] corporation differs
individuals: real property
corp: sale of land/bldgs.
The machineries & equipment are CA because the corp failed to commence its business so it did not form part of the stocks in trade nor was it subject to depreciation
mental cue for corporate properies
GR
xpn
gr: ordinary assets (RCIT)
xpn:
1. if provided for another classification (final tax, etc)
2. not used in the business is capital
(if land/bldg = CGT 6%)
if rael property = CGT 6% only for individuals
if stocks listed not in LSE/ not in both = 15% CGT
if capital asset, but machinery then it is RCIT
fringe benefits
HEV HIMEHEL (from frieren)
- housing privilege
- expense accout
- motor vehicles
- household expenses
- interest of loan at less than market value
- membership fees, dues, other expenses in social & athletic clubs (except business associations)
- expenses for foreign travel
- holiday & vacation expenses
- educational assistance of ees/dependents
- life/health insurance & other non-insurance claims
Co-ownership You co-own a property for the purpose of enjoyment of the common property. Not to earn profit. Because if you own the property to earn property, then that is already taxable partnership.
instances where co-ownership may be taxed
- failure to divide for a certain no. of years
- investmetn &dev’t of the property IN ORDER TO EARN PROFIT
distinguish NSNP institution from Proprietary Educational Institution
NSNP EI
- constitutionally exempts them from ALL TAXES provided that the assets & properties used are ADE used for educational purposes
PEI
- exempts property tax only if property used is ADE
- can avail of the preferential interest tax rate 10% provided that it complies with the predominance test
what are the itemized deductions
ExIn TaLoPa ChaRePen DepDep
expenses
interests
taxes
losses
patents
chartiable contributions
research & dev’t
~pension~ no more
depreciation
depletion
what is the Cohan Rule?
in exceptional circumstances, if sure that you incur expenditure, but cannot send proof then BIR examiners use this rule that allow 50% and disallow 50%
