Tax Gross Income Flashcards
This is renumeration received by an employee from employment or an income earned by an individual as a result of an employer-employee relationship.
Compensation Income
This includes fixed renumerations due to be received by an employee every period such as: Salaries, Fixed Allowances
Regular Compensation
This includes performance based renumeration to an employee in addition to regular compensation with or without regard to payroll period.
Supplementary Compensation Income
What is the 13th Month Pay
13th Month is equivalent to 1 month pay
An employee subject to the regular progressive income tax
Regular Employee
An employee who is a recipient of minimum wage and is exempt from income taxation
Minimum Wage Workers/Earners
Special Aliens subject to the final tax on Compensation Income
Special Employees (This no longer exists as of today)
Allowances may either be?
Fixed - Part of Regular Compensation
Variable - Part of Supplementary Compensation
Both are taxable except if
-It is necessary and ordinary traveling expenses
-The employee is required to account/liquidate the foregoing expenses
-Any excess is returned to the employer
This supplemental compensation income are the retainer fees of consultants, talents, and directors who have no management function in the business
Fees
This supplemental compensation income is to non-employees such as independent sales agent are business income to the sales agent
Commisssions
This supplemental compensation income is just Other income of the employee
Tips and Gratuity
This supplemental compensation income refers to premium payment received for working beyond regular hours of work
Overtime Pay (usually set at 125% of the regular hourly rate (30% extra) on regular workdays, and higher percentages for holidays and rest days (often 130% on rest days and 200% on special holidays).)
This supplemental compensation income refers to the amount paid by the employer to employees who are assigned to areas with danger or expose them to great danger
Hazard Pay
This supplemental compensation income refers to pay received by an employee for every hour of work performed between 10 Pm to 6 Am
Night Differential (additional 10% of their regular hourly wage for each hour worked during this period.)
This supplemental compensation income refers to pay received by an employee on the occasion of a regular holiday/special day
Holiday Pay
What are some examples of other forms of compensation?
Property as payment of compensation
Services as payment of compensation
Debt Cancellation
Issuance of Shares/Stocks/Notes as payment of compensation
This is pay of an employee equivalent to the mandatory 1 month basic salary of officials and employees
13th month Pay
(NOT TAXABLE IF BELOW 90,000)
This means any good or service or other benefit granted in cash or in kind by an employer to an individual employee in addition to their basic salary
Fringe Benefits
(Subject to Basic/Final tax depending on who is receiving it)
This is any inflow of wealth to the taxpayer that increases net worth from whatever source, legal or illegal
Gross Income
What are the 3 elements of Gross income?
- It is a return on capital
- It is a realized benefit
- It is not exempted by law, contract, treaty
This time, give the full computation of Tax Due
Gross Income - Allowable Deductions =Net Taxable Income
Net Taxable Income x Tax Rate (%) = Income Tax Due
Income Tax Due - Tax Credit (IF ANY) = Income Tax Payable
What are the 2 types of Withholding Tax?
Final Withholding Tax (Tax Already Deducted so can’t be taxed again)
Creditable/Expanded Withholding Tax (Considered an advance tax payment, so you can plug this into the income tax model as a deduction)
Income Subject to Basic Tax may be subjected to Creditable Withholding Tax
All Income Subject to Final Tax will be subject to Final Withholding Tax
What are sir’s 6 rules
- RCitizen is globally taxed, rest is only if within PH
- NRANETB is always taxed 25% of their gross income (in the Philippines) (Its counted as final tax)
- Domestic Corporation global income is taxed
Foreign Corporation only income in PH is taxed - NRFC was taxed 30% of their gross income, but after the change they are now only taxed 25% (Also Final Tax)
- Passive Income except Rent is subject to Final Tax
- All income without the Philippines (RCitizen & Domestic Corp) are subject to Basic Tax
Why is appreciation of property and increase in the value of investments not subject to income tax?
They’ve increased in value, but in the end, they haven’t been sold and therefore not a realized benefit, removing them from income tax (for now)
