TAX MIDTERMS Flashcards
1
Q
RFERS TO THE MANAGEMENT OF THE TAX SYSTEM
A
TAX ADMINISTRATION
2
Q
Tax Administration is entrusted to?
A. Department of Finance
B. Secretary of Finance
C. BIR
D. BOC
A
BIR
3
Q
The BIR shall have a chief to be known as
A
Commissioner of Internal Revenue (CIR)
4
Q
How many assistant chiefs or Deputy Commissioners BIR have?
A
Four (4)
5
Q
The powers and duties of the BIR are: ?
Guide: AGE APIS
A
Assessment and collection of all national internal revenue taxes, fees, and charges
Enforcement of all forfeitures, penalties, and fines
Give effect to and administer the supervisory and police powers conferred to it by the NIRC or other laws
Assignment of internal revenue officers and other employees to other duties
Provision and distribution of forms, receipts, certificates, and stamps to proper officials
Issuance of receipts and clearances
Submission of annual reports to Congress and Congressional Oversight Committee
6
Q
TORF: A power of the Commissioner of Internal Revenue/CIR is to interpret the provisions of the NIRC, subject to the review of the Department of Finance
A
False. Secretary of Finance.
7
Q
In order for the CIR to decide tax cases, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals, such as: ?
Guide: DRPO
A
Disputed assessments
Refunds
Penalties imposed
Other matters arising under the NIRC or other laws administered by the BIR
8
Q
TORF: The power of the CIR is to obtain information and to summon, examine, and take testimony of persons to effect tax collection.
What is the purpose?
A
True.
Purpose: For the CIR to ascertain:
a. The correctness of any tax return in making a return when none has been made by the taxpayer
b. The tax liability of any person or in correcting such liability
c. Tax compliance of the taxpayer
9
Q
The CIR terminates the tax period when the taxpayer is:
A
a. Retiring from a business
b. Intending to leave the PH
c. Intending to remove, hide, or conceal his property
d. Intending to perform any act tending to obstruct the proceedings for the collection of the tax or render the same ineffective
10
Q
The termination of the taxable period shall be communicated through a ____________ to the taxpayer together with a ___________.
A
notice, request for immediate payment
11
Q
Returns, statements, or declarations shall not be withdrawn but may be modified, changed and amended by the taxpayer within ___________________ from the date of filing.
What is the exception?
A
Three (3) years.
Except when a notice for audit or investigation has been actually served upon the taxpayer.
12
Q
The CIR is authorized to divide the PH into zones and prescribe real property values after consultation with competent appraisers. What is this commonly referred as?
A
Zonal values
13
Q
The fair value of real property shall mean whichever is higher between:
A
Zonal value prescribed by the Commissioner; Fair market value
14
Q
TORF: The CIR accredit and register tax agents
In case of denial, to whom can it be appealed?
A
True.
Secretary of Finance
15
Q
Which is not correct?
The following are non-delegated power of the CIR:
A. To recommend the promulgation of rules and regulations
B. To issue rulings of first impression or to reverse, revoke, or modify any existing rules of the Bureau
c. tO ASSIGN AND RE-ASSIGN INTERNAL REVENUE OFFICERS TO ESTABLISHMENTS WHERE ARTICLES SUBJECT TO EXCISE TAX
D. To compromise or abate any tax obligation
A
D. To compromise or abate any tax liability
15
Q
Which is not correct?
The powers of the Commissioner of Internal Revenue or CIR are the following:
a. To compromise tax liabilities of taxpayers
b. To inquire into bank deposits
c. To refund or credit internal revenue taxes
d. To abate or cancel tax liabilities in certain cases
e. To prescribe additional procedures or documentary requirements
f. To delegate his powers to any subordinate officer with a rank equivalent to a Division Chief of an office
A
All of the following are correct.
16
Q
Exceptionally, the _____________________ may compromise tax liabilities under the following:
a. Assessments are issued by the regional offices involving basic deficiency tax of P500,000 or less
b. Minor criminal violations
Hint: REB
A
Regional Evaluation Boards
17
Q
The Regional Evaluation Board is composed of: (4)
A
Regional Director as Chairman
Assistant Regional Director
Heads of the Legal, Assessment, and Collection Division
Revenue District Officer
18
Q
TORF: Any revocation, modification, or reversal of 1 rules and regulations promulgated in accordance with the NIRC, or 2 any rulings or circulars promulgated by the CIR shall be given retroactive application if prejudicial to the taxpayers
A
False. shall NOT be given retroactive application
18
Q
Banks duly accredited by the CIR with respect to receipts of payments of internal revenue taxes authorized made through banks
A
AGDBs - Authorized Government Depositary Banks
AABs - Authorized Agent Banks
19
Q
The BOC is under the supervision and control of the _____________________
A
Department of Finance
20
Q
is tasked to administer collection of tariffs on imported articles and collection of VAT on importation
A
BOC
21
Q
The BOC is headed by:
A
Customs Commissioner
5 Deputy Commissioners
14 District Collectors
22
Q
It is tasked to supervise and monitor the granting of tax incentives under the Omnibus Investment Code
A
BOI
23
The BOI is composed of:
5 full-time governors
including: Vice-Chairman
excluding: DTI secretary; Chairman
24
is an attached agency of the DTI and enjoys income tax holiday and or preferential taxation for certain years
PEZA - PHilippine Economic Zone Authority
25
TORF: PEZA is headed by a Director-General and is assisted by three (3) Deputy Directors
True
26
TORF: Local government tax collecting units have the right to impose and collect local taxes, fees, and charges to rationalize their fiscal autonomy
True
27
It approves or disapproves grant of tax incentives to private entities and tax subsidies to the government.
FIRB - Fiscal Incentive Review Board
28
means all wealth which flows to the taxpayer other than a mere
return of capital.
Income
29
Which is not correct?
A. Income is a gain derived from labor or capital, or both labor and capital;
and includes the gain derived from the sale or exchange of capital
assets.
B. Income includes earnings, lawfully or unlawfully acquired, without
consensual recognition, express or implied, of an obligation to repay
and without restriction as their disposition.
C. Income may be received in the form of cash, property, service, or in kind, or the combination of them all.
C. Income cannot be received in kind
30
TORF: The essential difference between
capital and income is that capital is
a fund; income is a flow
TRUE
31
A fund of property existing at an
instant of time is called ________
Capital
32
TORF: Return of capital is subject to tax
False. Only income is taxable
33
Enumerate Classification of Income
CPPC
Compensation Income
Profession or Business Income
Passive Income
Capital Gain
34
What is the formula for the Regular Income Tax Model?
Gross Income- Inclusions
Less: Allowable Deductions
Equals Taxable Income
35
TORF:
Gross income consists of the following components:
a. Exclusions of gross income – list of income exempt from income tax.
b. Inclusions in gross income – list of income subject to income tax.
c. Special topics – covers income that are either considered as exclusion
or inclusion from gross income depending on the circumstance such as
fringe benefits, dealings in properties, etc.
TRUE
36
Distinguish: Gross income, Net income, and Taxable income
Gross income – The total income of a taxpayer subject to tax. It includes the
gains, profits, and income derived from whatever source, whether legal or illegal. It does not include income excluded by law, or which are exempt from income tax.
Net income – Means gross income less statutory deductions and exemptions.
Taxable income – means the pertinent items of gross income specified in the
Tax Code, less the deductions and/or personal and additional exemptions, if
any, authorized for such types of income by the Tax Code or other special laws. It is synonymous to the term “net income.”
37
TORF: The exclusion of income should not be confused with the reduction of gross income by the application of allowable deductions.
TRUE
38
TORF: The value of property acquired by gift, bequest, devise or descent is exempt from income tax on the part of the recipient because the receipt of such property is already subject to transfer taxes (estate tax or donor’s tax).
TRUE
39
Which is not correct?
Items of Exclusions because they are expressly exempt from
income tax
Under the Constitution
Under a tax treaty
Under special laws
Under a contract
Under a contract
40
Which is correct?
The term “exclusions” refers to items that are not included in the determination
of gross income because:
a. They represent return of capital or are not income, gain or profit;
b. They are subject to another kind of internal revenue tax;
c. They are income, gain or profit expressly exempt from income tax under
the Constitution, tax treaty, Tax Code, or a general or special law.
d. All of the above
e. A and C only
d. All of the above
41
Distinguish exclusions from deductions in gross income
Exclusions pertain to the computation of gross income, while deductions pertain
to the computation of net income.
Exclusions are something received or earned by the taxpayer which do not form part of gross income while deductions are something spent or paid in earning
gross income.
42
___________________ refers to amounts subtracted from the computed tax in order to arrive at taxes payable.
Tax Credit
43
Enumerate the exclusions under the tax code
1) Life Insurance.
(2) Amount Received by Insured as Return of Premium.
3) Gifts, Bequests, and Devises
(4) Compensation for Injuries or Sickness.
5) Income Exempt under Treaty.
6) Retirement Benefits, Pensions, Gratuities, etc.
(7) Miscellaneous Items. —
44
TORF:
Return of premium paid
General rule: The amount received by the insured as a return of premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract is a return of capital and not income.
This refers to the cash surrender value of the contract.
What is the exception?
TRUE
If the amounts received by the insured (when added to the amounts
already received before the taxable year under such contract) exceed the
aggregate premiums or considerations paid (whether or not paid during the
taxable year), then the excess shall be included in gross income.
45
Included or Excluded in Gross Income?
Amounts received under life insurance, endowment or annuity contracts
Excluded
46
Is Gifts, Bequests, and Devises excluded in Gross Income?
If so, what is the exception?
Yes, excluded.
Exception: Income from such property, as well as gift, bequest, devise, or descent of income from any property, in cases of transfers of divided interest, shall be included in gross income.
47
Which is not correct?
Retirement benefits, pensions, gratuities, etc.
These are:
Terminal pay
HDMF benefits
Retirement benefits under RA 7641, RA 4917, and Section 60(B) of the NIRC
Retirement Benefits from foreign government agencies
Veterans benefits
Benefits under the Social Security Act
GSIS benefits
HDMF benefits
48
Any amount received by an employee or by his heirs from the employer as a consequence
of separation of such official or employee from the service of the employer because of death,
sickness, other physical disability or for any cause beyond the control of the employee.
Terminal/Separation Pay
49
What is the exception to terminal/separation pay being excluded in gross income?
a. employee has life-threatening sickness
b. employee voluntarily or immediately resigns
c. Retrenchment of the employee due to unfavorable business conditions or financial reverses is considered as involuntary.
d. BIR Ruling 143-98: The “terminal leave pay” (amount paid for the commutation of leave credits) of retiring government employees is considered not part of the gross salary, and is exempt from taxes.
b. employee voluntarily or immediately resigns
50
Enumerate Miscellaneous Items that are excluded in Gross Income
a) Income Derived by Foreign Government.
(b) Income Derived by the Government or its Political Subdivisions
(c) Prizes and Awards
(d) Prizes and Awards in Sports Competition
(e) 13th Month Pay and Other Benefits
(f) GSIS, SSS, Medicare and Other Contributions
(g) Gains from the Sale of Bonds, Debentures or other Certificate of Indebtedness
(h) Gains from Redemption of Shares in Mutual Fund
51
Prizes and awards made primarily in recognition of religious,
charitable, scientific, educational, artistic, literary, or civic achievement but only if:(2)
"(i) The recipient was selected without any action on his part to enter the contest or
proceeding; and
"(ii) The recipient is not required to render substantial future services as a condition
to receiving the prize or award.
52
TORF: 13th Month Pay and Other Benefits. — Gross benefits received by officials and employees of public and private entities: Provided, however, That the total exclusion under this subparagraph shall not exceed Ninety thousand pesos (P90,000) which shall
cover: "(i) Benefits received by officials and employees of the national and local
government pursuant to Republic Act No. 6686;
"(ii) Benefits received by employees pursuant to Presidential Decree No. 851, as
amended by Memorandum Order No. 28, dated August 13, 1986;
"(iii) Benefits received by officials and employees not covered by Presidential
Decree No. 851, as amended by Memorandum Order No. 28, dated August 13, 1986;
and
"(iv) Other benefits such as productivity incentives and Christmas bonus."
TRUE
53
Gains from the Sale of Bonds, Debentures or other Certificate of Indebtedness. —
Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of ____________________
more than five (5) years.
54
TORF: Taxable Income are only those included in the Gross Income after deductions
TRUE
55
As to the nature of Income tax, Income tax is generally classified as _________________. It is not levied upon
persons, property, funds or profits but upon the right of a person to receive
income or profits
Excise tax
56
1. A resident citizen of the Philippines is taxable on all income derived from
sources within and without the Philippines;
2. A nonresident citizen is taxable only on income derived from sources
within the Philippines;
a. S1 is correct; S2 is incorrect
b. S2 is correct; S1 is correct
c. Both statements are incorrect
d. Both statements are correct
d. Both statements are correct
57
TORF: An individual citizen of the Philippines who is working and deriving
income from abroad as an overseas contract worker is taxable only on
income derived from sources within the Philippines
TRUE
58
TORF: An alien individual, whether a resident or not of the Philippines, is
taxable only on income derived from sources within the Philippines
TRUE
59
1. A foreign corporation is taxable on all income derived from sources
within and without the Philippines; and
2. A domestic corporation, whether engaged or not in trade or business in
the Philippines, is taxable only on income derived from sources within the
Philippines.
a. S1 is correct; S2 is incorrect
b. S2 is correct; S1 is correct
c. Both statements are incorrect
d. Both statements are correct
c. Both statements are incorrect
It's the opposite.
60
Enumerate Income Tax systems
Global and Schedular
61
Which is incorrect?
A. A schedular approach in taxation is one where the income tax treatment
varies and is made to depend on the kind or category of taxable income of
the taxpayer
B. All items of gross income, deductions, and personal and additional
exemptions, if any, are reported in one income tax return, and one set of tax
rates are applied on the tax base.
c. Both are correct
d. Both are incorrect
c. Both are correct
62
Enumerate the features of the Philippine Income Tax Law
1. Direct Tax
2. Progressive
3. Comprehensive
4. Semi-schedular or semi-global tax system
63
Enumerate criteria in imposing philippine income tax
1. Citizenship
2. Residence
3. Source
64
There are several types of income tax under the NIRC, namely: (11)
i. Graduated income tax and fixed tax on gross sales or receipts for individuals;
ii. Normal corporate income tax on corporations;
iii. Minimum corporate income tax on corporations;
iv. Special income tax on certain corporations;
v. Capital gains tax on sale or exchange of unlisted shares of stock of a domestic
corporation classified as capital assets;
vi. Capital gains tax on sale or exchange of real property located in the Philippines
classified as a capital asset;
vii. Final withholding tax on certain passive investment income paid to residents;
viii. Final withholding tax on income payments made to non-residents;
ix. Fringe benefits tax on fringe benefits of supervisory or managerial employees;
x. Branch profit remittance tax; and
xi. Tax on improperly accumulated earnings of corporations
65
___________– any person subject to tax imposed by Title II of the Tax Code.
_______________ – means an individual, a trust, estate or corporation. [Sec. 22(A), NIRC]
Taxpayer, Person
66
For income tax purposes, taxpayers are classified generally as follows:
a. Individuals
b. Corporations
c. Estates and Trusts
d. Partnerships (General Partnership and General Professional Partnerships)
67
TORF: The term ‘citizenship’ is to be understood not in its common acceptation
as referring to ‘dwelling’ or ‘habitation,’ but rather to ‘domicile’ or legal
maniefstation, that is, ‘the place where a party actually or constructively has his
permanent home, where he, no matter where he may be found at any given
time, eventually intends to return and remain
False. Residence
68
1. Engaged in trade or business within the Philippines - If the
aggregate period of his stay in the Philippines is more than 180 days
during any calendar year.
2. Not engaged in trade or business within the Philippines - If the
aggregate period of his stay in the Philippines does not exceed 180 days.
a. S1 is correct; S2 is incorrect
b. S2 is correct; S1 is correct
c. Both statements are incorrect
d. Both statements are correct
d. Both statements are correct
69
Income arising from an employer-employee relationship.
(2) Inclusions:
1. Monetary compensation
2. Regular salary/wage
70
TORF: Retirement pay is taxable
If so, What is the exception?
True.
Exceptions:
i. SSS or GSIS retirement pays
ii. Retirement benefit under R.A. 7641 provided the following requirements are met:
iii. Retirement program is approved by the Commissioner;
iv. Retirement benefit is pursuant to a reasonable private benefit plan.
v. Retiree employed for 10 years by the employer;
vi. Retiree should have been 50 years old or above at the time of retirement; and
vii. Retirement benefit availed only once
71
TORF: Separation pay taxable if voluntarily availed of.
IF so, what is the exception?
TRUE
Exception: if due to causes such as death, sickness, disability,
reorganization or bankruptcy of the company or for any other cause beyond
the control of the said employee.
72
Taxable or not?
Tips and gratuities
taxable income but not subject to withholding tax
73
Taxable or not?
13th month pay
generally exempt, except taxable only for the part which exceeds P90,000
74
Taxable or not?
Overtime Pay
Taxable income
75
Taxable or not?
Directors’ fees, allowances and bonuses
Taxable as compensation income when the recipient director
has an employee-employer relationship with the corporation which pays the
same
Exception: not taxable when recipient director’s duties is confined to attendance and participation only in the meetings of the
Board of Directors
76
measure of income subject to tax is the
equivalent value in money.
Non-monetary compensation
77
1. If the recipient of the fringe benefits is a rank and file employee, and the said
fringe benefit is not tax-exempt, then the value of such fringe benefit shall be
considered as part of taxable compensation income.
2. Where the recipient of the fringe benefit is not a rank and file employee, and the said benefit is not tax-exempt, then the value of such fringe benefit shall not be included in the taxable compensation income. It is instead levied upon the employer.
a. S1 is correct; S2 is incorrect
b. S2 is correct; S1 is incorrect
c. Both statements are incorrect
d. Both statements are correct
d. Both statements are correct
78
Taxable or not?
Convenience of the employer Rule
To not be included as compensation therefore not taxable
79
Facilities or privileges of relatively small value furnished by an employer to
his employees and are as a means of promoting the health, goodwill,
contentment, or efficiency of his employees
De minimis benefits
These are exempt from both fringe benefit tax and compensation income tax
80
Taxable or not?
13th month pay and other benefits and payments specifically
excluded from taxable compensation income
Gross benefits received by employees up to P90,000 (only amounts in excess are
considered compensation income)
81
TORF: Subject to income tax in the same manner as an individual
citizen and a resident alien individual on taxable income from all sources
within the Philippines.
TRUE
82
Non-Resident Aliens Not Engaged in Trade or Business:
There shall be levied, collected, and paid for each taxable year upon the
entire income received from all sources within the PH by every NRANETB
within the PH as interest, cash and/or property dividends, rents, salaries,
wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual or periodic or casual gains, profits, and
income, and capital gains, a tax equivalent to _______________ of such income.
25%
83
Individual Taxpayers exempt from income tax are:
a. Senior Citizens (with qualifications)
b. Minimum wage earners
c. Exemptions granted under international agreements
84
TORF:
All individuals and entities claiming exemption from imposition of taxes on income and,
consequently, from withholding taxes are required to provide a copy of a valid, current and subsisting tax exemption certificate or ruling, as per existing administrative
issuances and any issuance that may be issued from time to time, before payment of the related income.
The tax exemption certificate or ruling must explicitly recognize the grant of tax
exemption, as well as the corresponding exemption from imposition of withholding tax.
Failure on the part of the taxpayer to present the said tax exemption certificate or
ruling as herein required shall subject him to the payment of appropriate withholding taxes due on the transaction
TRUE
85
TAXABLE OR NOT?
That the holiday pay, overtime pay, night shift differential pay and hazard pay
received by such minimum wage earners
Likewise be exempt from income tax.
86
is a method of collecting income tax in advance from the
taxable income of the recipient of income.
Withholding Tax
87
TORF: The liability for payment of the tax rests primarily on the payee
False. it rests on the payor as withholding
agent.
88
89
refers to a formal report prepared by the taxpayer or his agent in a prescribed form showing an enumeration of taxable amounts and description of taxable transactions, allowable deductions, amount of tax and tax payable to the government.
Tax return
90
Examples of tax returns are:
AI ACP DE
Annual Income Tax Reurns for Individuals
Annual Income Tax Return for Corporations and Partnerships
Donor´s Tax Return
Estate tax return
91
Who are required to file Individual Return?
a. Resident citizen
b. Non-resident citizen, on income from sources within the Philippines
c. Resident alien, on income from sources within the Philippines
d. Non-resident alien engaged in trade or business or in the exercise of profession in the Philippines, on income from sources within the Philippines
92
The following shall not be required to file income tax return:
Individuals whose gross income does not exceed P250,000 except citizen and alien individuals engaged in business
Individuals with respect to pure compensation income from sources within the Philippines, the income tax on which has been withheld
Individuals whose sole income has been subjected to final withholding tax.
Minimum wage earner
Individuals who are exempt from income tax pursuant to the provisions of the Tax Code and other laws.
93
TORF: Married individuals (whether citizens, resident or nonresident aliens) who do not derive income purely from compensation, shall file only one consolidated return to cover the income of both spouses for the taxable year
True.
Exception: if deemed impractical, each spouse may file separate return but the returns so filed shall be consolidated by the BIR for verification
94
TORF: The income of married minors is a tax liability of the minor but where such income is derived from property received from a living parent, the income shall be included in the return of the parent.
FALSE. unmarried minors
Exception: (a) when the donor’s tax has been paid on such property, or (b) when the transfer of such property is exempt from the donor’s tax
95
TORF: If the taxpayer is unable to make his return, such as when he suffers from disability, the return may be made by his duly authorized agent or representative or by the guardian or other person charged with the care of the taxpayer or his property.
Who is liable for penalties for erroneous, false, or fraudulent returns?
TRUE.
The principal and his representative or guardian assuming responsibility for penalties for erroneous, false or fraudulent returns
96
Substituted filing is only applicable to individual taxpayers whom:
a. receiving purely compensation income, regardless of amount
b. from only one employer in the Philippines for the calendar year.
c. the income tax of which has been withheld correctly by the employer
97
TORF: Income tax return of an individual who is not on a substituted basis shall be filed on or before April 30 of each year covering income of the preceding taxable year.
FALSE. April 15
98
Which is not correct regarding the context of when and where to file individuals subject to capital gains tax
a. Sale of shares not traded thru a local stock exchange – file a return within 30 days from the transaction, and a final consolidated return on or before April 15 of each year covering all stock transactions of the preceding taxable year
b. Sale of real property – file a return within 30 days from each sale
c. Sale of bonds shall be filed within 30 days from each sale and on a final consolidated return too
C.
99
TORF: Where to File
Except in cases where the CIR otherwise permits, the return shall be filed with an authorized agent bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, with the Office of the Commissioner.
TRUE
100
in general, means all remuneration for services performed by an employee for his employer under an employer-employee relationship, unless specifically excluded by the Code
Compensation income
101
individuals whose source of income is purely derived from an employer-employee relationship.
Compensation Income Earners
102
means any good, service or other benefit furnished or granted in cash or in kind other than the basic compensation, by an employer to an individual employee (except rank and file employee)
Fringe benefits
103
Which is not correct?
Below are examples of Fringe benefits:
1. Housing;
2. Expense account;
3. Vehicle of any kind;
4. Household personnel, such as maid, driver and others;
5. Interest on loan at less than market rate to the extent of the difference between the market rate and
actual rate granted;
6. Membership fees, dues and other expenses borne by the employer for the employee in social and
athletic clubs or other similar organizations;
7. Expenses for foreign travels;
8. Holiday and vacation expenses;
9. Education assistance to the employee or his dependents
10.Life or health insurance and other non-life insurance premiums or similar amounts in exces
what the law allows.
11. A condominium vested 50 meters from the company
11. Benefits at the convenience of the employer is not treated as compensation therefore it is not a fringe benefit
104
In the context of fringe benefits, if interest on a loan is 6% and the market rate is 3%. What is the actual rate to be imposed on the fringe benefit?
6% - 3% = 3%
105
TORF: The list on fringe benefits is exclusive
False
106
TORF: Rank and File employees cannot provide their own opinion on the management.
true
107
TORF: Staff, Clerk, and Associate are examples of Supervisory/Managerial employees
False. Rank and File employees
108
TORF: Fringe benefits given to rank and file employees are part of gross income therefore taxable compensation
TRUE
109
TORF: Fringe benefits given to Supervisory or Managerial Employees are subject to FBT, that is paid by the payee
False. It is paid by the payor/employer
110
TORF: Supervisory employees exercise of such authority is not merely routinary or not cyclinal
TRUE
111
TORF: Tax rate is based on the grossed-up monetary value (GMV)
TRUE
112
TORF: The tax rate is genereally 35% since this is the headline or the hightest tax rate for individual taxpayers
TRUE
113
How to calculate FBT?
GMV x 35% FBT rate
114
As to the TRAIN LAW, the FBT rate for January 1, 2018 onwards is _______________, while prior to that date, the rate is ____________.
>January 1, 2018: 35%
115
represents
i. the whole amount of income realized by the employee which includes the net amount of money or net monetary value of the property that has been received; and
ii. the amount of fringe benefits tax due from the employee which has been withheld and paid by the employer for and in behalf of his employee.
GMV or Grossed-up Monetary Value
116
How to calculate GMV?
Monetary value divided by 65%
(75% if NRANETB)
117
TORF: All individuals are subject to graduated tax rates which is 0-35% except NRANETB which is fixed at 35%
False. fixed at 25%
118
What is the journal entry for Fringe benefit Expense?
Fringe benefit expense xx
Cash. xx
119
What is the journal entry for Fringe benefit tax paid by the payor/employer?
Fringe benefit tax expense xx
Fringe benefit tax payable xx
120
What is the tax implication if the employer gives ‘fringe benefits’ to rank-and-file employees?
subject to normal tax rate which is the graduated tax rate: 0-35%
121
Who is the payor of FBT?
Employer
122
TORF: In the perspective of the employer or payor, FBT is a deductable tax
TRUE
123
TORF: FBT is a final tax
TRUE
124
Which is not correct in context of valuation of fringe benefits?
a. If granted in money, the value is the amount granted.
b. If granted in property and ownership is transferred to the employee, the value is the
fair market value of the property.
c. If granted in property but ownership is not transferred to the employee, the value is
equal to the depreciation value of the property.
d. If granted in installments, the value is the maturity value
d. is incorrect. If granted in installmets, the value is the cost as cash basis
125
TORF: If the fringe benefit is given to a supervisory or managerial employee, the deduction for the employer is the monetary value of the fringe benefit.
False. the statement is for rank and file employee.
126
TORF: Fringe benefits not considered as gross income – if it is required or necessary to
the business of employer; if it is for the convenience or advantage of employer
TRUE
127
Which is not correct?
Below are fringe benefits not subject to FBT:
a. Fringe Benefits which are authorized and exempted from income tax under the Code or under special laws;
b. Contributions of the employer for the benefit of the employee for retirement, insurance and hospitalization benefit plans;
c. Benefits given to the rank-and-file employees, whether granted under a collective bargaining agreement or not; and
d. Fringe benefits not exceeding 90,000
e. Fringe benefits granted for the convenience of the employer;
f. De minimis benefits
d.
128
TORF: If the Fringe Benefit is exempted from the FBT, the same may, however, still form of the employee’s gross compensation income which is subject to income tax; hence, likewise subject to withholding tax on compensation income payment.
TRUE
129
are facilities and privileges furnished or offered by an employer to his employees that are relatively small value and are offered or furnished by the employer merely as means of promoting health, goodwill, contentment, and efficiency of his employees
De Minimis benefits
130
What is the monetary value?
Lease of residential property for residential use of employees
MV = 50% of lease payments
131
What is the monetary value?
Assignment of residential property owned by the employer for the use of employees
Fair Market value or Zonal value, whichever is higher multiplied by 50%
132
What is the monetary value?
Purchase of residential property in installment basis for the use of employees
5% x acquisition cost exclusive of interest x 50%
133
What is the monetary value?
Purchase of residential property and ownership is transferred in the name of the employee
Fair market value or Zonal value, whichever is higher
134
FBT: Taxable or not?
Housing privilege of the Armed Forces of the Philippines (AFP) officials – i.e. those of the Philippine Army, Philippine Navy, or Philippine Air Force
Not taxable
135
FBT: Taxable or not?
A housing unit, which is situated inside or adjacent to the premises of a business or factory – maximum of 50 meters from perimeter of the business premises
Not taxable
136
FBT: Taxable or not?
Temporary housing for an employee who stays in housing unit for three months or less.
Not taxable
137
What is the monetary value?
Purchased in the name of the employer
Acquisition cost (cash basis)
138
What is the mONETARY VALUE?
Cash given to employee to purchase in his own name
Cash received by employee
139
wHAT IS the monetary value?
Employee shoulders part of the purchase price, ownership in the name of employee
Amount shouldered by employer
140
What is the monetary value?
Employer owns and maintains a fleet of motor vehicles for the use of the business and of employees
Acquisition cost divided by 5 (useful life default) x 50%
141
What is the monetary value?
Emlpoyer leases and maintains a fleet or the useof the business and of employees
50% of rental payment
142
TORF: Filing Date
This quarterly withholding tax remittance return shall be filed and the tax paid/remitted not later than the last day of the month following the close of the quarter during which withholding was made.
TRUE
143
TORF: Deadline refers to both filing and payment of taxes
TRUE
144
Refer to this:
Maximum deadline for FBT
January to March: April 30
April to June: July 31
July to September: October 31
October to December: January 31
What happens if exceede the deadline?
Penalties, surcharges, and interest may be imposed
145
Constitutional Limitations
Provisions directly affecting taxation:
Prohibition against imprisonment for non-payment of poll tax;
Uniformity and equality of taxation;
Grant by Congress of authority to the President to impose tariff
rates;
Prohibition against taxation of religious, charitable entities, and
educational entities;
Prohibition against taxation of non-stock, non-profit educational
institutions;
Majority vote of Congress for grant of tax exemption;
Prohibition on use of tax levied for special purpose;
President’s veto power on appropriation, revenue, tariff bills;
Non-impairment of jurisdiction of the Supreme Court;
Grant of power to the local government units to create its own
sources of revenue;
Flexible tariff clause;
Exemption from real property taxes; and
No appropriation or use of public money for religious purposes
146
Constitutional Limitations
Provisions indirectly affecting taxation:
Due process
Equal protection;
Religious freedom;
Non-impairment of obligations of contracts;
Freedom of speech and expression;
Presidential power to grant reprieves, communications, and
pardons, and remit fines and forfeitures after conviction by final
judgement; and
No taking of private property for public use without just
compensation
147
Distinguish Substantive to Procedural due process
Substantive Due Process – An act is don under the authority of a
valid law or the Constitution itself.
Procedural Due Process – An act is done after compliance with fair
and reasonable methods or procedure prescribed by law.
148
TORF: There is constitutional prohibition against double taxation in the
Philippines. It is something not favored, provided some
other constitutional requirement is not thereby violated.
False. There is no constitutional prohibition. It is something not favored, but permissible.
